Driven By You Mobility LLP vs. The State Of Karnataka

Facts

The petitioner, Driven By You Mobility LLP, purchased a Mercedes Benz S350D in 2019. The purchase invoice from the manufacturer showed the cost as Rs. 92,99,999/- (including GST and Cess), making the Lifetime Motor Vehicle (MV) tax payable Rs. 16,73,999/-. However, the respondents (State of Karnataka and its transport authorities) considered the ex-showroom price from the dealer's invoice, which was Rs. 1,35,58,437/-, for calculating the Lifetime MV tax. This resulted in an additional demand of Rs. 7,66,520/- from the petitioner for permanent registration. The petitioner challenged this additional demand and the endorsement issued by the Regional Transport Authority, Bangalore Central, dated 07.01.2020.

Held

The Court held that the amendment to Note No. 3(a) to Part A5 of the Schedule to the Karnataka Motor Vehicles Taxation Act, 1957, which stipulated that Lifetime MV tax would be levied on the higher of the manufacturer's or dealer's invoice price, was prospective and not retrospective. Since the petitioner purchased the vehicle on November 14, 2019, which was prior to the amendment's effective date of April 1, 2020, the amended provision was not applicable. The Court found that prior to the amendment, the cost of the vehicle for levying Lifetime MV tax was based on the purchase invoice issued by either the manufacturer or the dealer. Therefore, the petitioner was liable to pay Lifetime MV tax only on the value shown in the manufacturer's invoice. The endorsement demanding additional tax was quashed, and the respondents were directed to grant permanent registration upon payment of Rs. 16,73,999/-. Liberty was reserved for the respondents to take steps for levying penalty, if any, in accordance with law.

Key Issues

1. Whether, under Section 3(1) of the Karnataka Motor Vehicles Taxation Act, 1957 (KMVT Act) and Note No. 3(a) to Part A5 of its Schedule, the Lifetime MV tax for a vehicle purchased prior to April 1, 2020, should be calculated based on the manufacturer's invoice price or the dealer's invoice price when there is a difference between the two. Petitioner's contention: The petitioner argued that for vehicles purchased before April 1, 2020, the Lifetime MV tax should be calculated based on the manufacturer's invoice price, as the amendment to Note No. 3(a) of the KMVT Act, which mandates calculation on the higher of the two invoices, was prospective and not applicable to their purchase. They relied on the pre-amendment Note No. 3(a). Respondents' contention: The respondents contended that by virtue of Section 3(1) and the amendment to Part A5 of the Schedule to the KMVT Act, effective April 1, 2020, the petitioner was liable to pay Lifetime MV tax on the higher of the manufacturer's or dealer's invoice price. Since the dealer's invoice price was higher, they were justified in demanding the additional tax.