The Rajasthan High Court upheld Section 4(1)(d) of the Rajasthan Motor Vehicles Taxation Act, 1951, ruling that possession of finished vehicles in the factory, not road use, is the taxable event.

A motor vehicle manufacturer is liable to tax under Section 4(1)(d) of the Rajasthan Motor Vehicles Taxation Act, 1951 on finished vehicles held in its factory before despatch to dealers, and proof that any vehicle used a road in the State is not an ingredient of the charge, the Rajasthan High Court has held [Honda Motorcycle and Scooter India Pvt. Ltd. v. Union of India & Ors., 2026-juristway.com-3446-HC(Rajasthan)-INDLAW].

The Division Bench of Justice Arun Monga, who wrote the judgment, and Justice Ashutosh Kumar decided a batch of 35 writ petitions filed by Honda and Hero MotoCorp, covering demands from 2014-15 onwards. Transport officials had assessed tax on vehicles manufactured and stocked at the factory at Bhiwadi for want of trade certificates.

The manufacturers argued that tax could not be levied unless the vehicles were shown to have used the State’s roads. They also challenged the proviso to Section 39 of the Motor Vehicles Act, 1988, Rule 33 of the Central Motor Vehicles Rules, 1989, Section 4(1)(d) and the State notification of 31 Mar 2000.

The Court held that the taxable event is possession of motor vehicles by a dealer or manufacturer in the course of business. The words “used or kept for use in the State” denote availability for use, not actual use, and cover road-worthy vehicles held in the State whatever the State to which they are later sent for sale.

It further held that Section 39 extends to driving an unregistered vehicle within private premises, and that a factory storage yard and internal roads fall within “any other place”. A trade certificate is therefore needed where possession is coupled with any movement of the vehicle. Rule 33, it said, confers an exemption rather than a burden.

On the constitutional challenge, the Bench held that the levy is not a duty of excise and is within the State Legislature’s competence. Following Jindal Stainless, it held that a compensatory character is not a condition of validity for a levy under Entry 57 of List II, so the challenge under Articles 301 and 304 failed, as did the plea under Article 14. All the provisions were declared intra vires.

The petitions were dismissed to that extent and interim orders vacated. The manufacturers were given liberty to appeal the individual assessments under Section 14 of the 1951 Act within eight weeks, limited to three grounds: denial of a hearing under Section 8A, the basis on which the number of vehicles was counted, and the computation of interest, surcharge and penalty. Where 50% of the demand has been deposited under interim orders, it will count as the statutory pre-deposit, and recovery of the balance stays until the appeal is decided.

2026-juristway.com-3446-HC(Rajasthan)-INDLAW