Honda CR-V, one of the two cars cited in the judgment

New Delhi, March 28: The Supreme Court today upheld the power of the government to levy a one-time tax on new vehicles at the time of registration on the basis of their cost and weight.

A three-judge bench of Justices S.N. Variava, A.R. Lakshmanan and S.H. Kapadia said ?in the matter of collection of tax, one-time payment of tax (lifetime tax) is administratively convenient and, at the same time, it is also beneficial to the users of the vehicles? as it would save them the trouble of going to the regional transport office to pay annual taxes.

The judges allowed an appeal of the Tamil Nadu government challenging a Madras High Court order, which had quashed the scheme of levying one-time tax.

In Bengal, owners of vehicles built after 1995 pay one-time tax while those with older models have to pay annual taxes.

The apex court also agreed with Tamil Nadu?s argument that ?weight (of the vehicle) alone could not be the criterion for levying a tax? and that the cost of the vehicle should also count.

The bench cited the Honda CR-V, which weighs 1,500 kg and is priced at nearly Rs 15 lakh, while a Tata Indigo, which has almost the same weight of 1,490 kg but costs around Rs 5 lakh. ?If weight alone was taken as the criterion, then both the vehicle owners would have to pay almost the same road tax which would create an anomalous situation,? the judges contended.

?Introduction of weight-cum-value index will not make the levy non-regulatory/non-compensatory,? the bench added.

Tamil Nadu appealed to the Supreme Court after a person named M. Krishnappan, through a petition before Madras High Court, succeeded in challenging the levy of one-time tax and computing of road tax on the basis of weight-cum-cost of vehicles. The petition had also said states could not make one-time tax mandatory and the option of paying yearly tax should be given, as it was till 1998.

The Supreme Court today said lifetime tax is not discriminatory, arbitrary or unreasonable so as to violate the provisions of Article 14 of the Constitution, which guarantees ?equality before law and equal application of law? for all citizens.

Quoting Lord Wilberforce in the case of Mercantile Business Finance Ltd, the bench said: ?A tax is generally imposed by reference to economic activities or transactions which exist in the real world.?

It added: ?When an economic activity is to be valued, it is open to the law-maker to take into account various factors, including the paying capacity of the user, the value of the vehicle, the economic life of the vehicle.?

The judges concluded their observations, saying: ?Levy of lifetime tax is based on rational and reasonable classification founded on an intelligible differentia having a rational relation to the object of the impugned levy.?