(i)Whether, by enacting the Himachal Pradesh Passengers and Goods (Amendment and Validation) Act of 1997, the Himachal Pradesh State Legislature had validly removed the basis of the judgment of the Division Bench of the High Court dated 27.03.1997, whereby the Himachal Pradesh Passengers and Goods Taxation Act, 1955 had been held not to include within its scope the activity of the appellants of providing gratis transport facilities for their employees and their children. (ii) Whether the activity of the appellants of providing gratis transport facilities for their employees and their children, would now be a taxable activity under Section 3(1-A) of the Amendment and Validation Act of 1997.

[2023] 12 S.C.R. 1 : 2023 INSC 810

NHPC LTD.

v.

STATE OF HIMACHAL PRADESH SECRETARY & ORS.

(Civil Appeal No.3948 of 2009)

SEPTEMBER 06, 2023

[B. V. NAGARATHNA* AND UJJAL BHUYAN, JJ.]

Issues for consideration: (i)Whether, by enacting the Himachal

Pradesh Passengers and Goods (Amendment and Validation)

Act of 1997, the Himachal Pradesh State Legislature had validly

removed the basis of the judgment of the Division Bench of the

High Court dated 27.03.1997, whereby the Himachal Pradesh

Passengers and Goods Taxation Act, 1955 had been held not to

include within its scope the activity of the appellants of providing

gratis transport facilities for their employees and their children.

(ii) Whether the activity of the appellants of providing gratis

transport facilities for their employees and their children, would

now be a taxable activity under Section 3(1-A) of the Amendment

and Validation Act of 1997.

Himachal Pradesh Passengers and Goods Taxation Act, 1955

– Himachal Pradesh Passengers and Goods (Amendment

and Validation) Act of 1997 – Validity of the Amendment and

Validation Act, 1997 and taxability of transport facility provided

by the appellant for their employees and children:

Held: By enacting the Amendment and Validation Act of 1997,

the Himachal Pradesh State Legislature has validly removed the

basis of the judgment of the Division Bench of the High Court

dated 27.03.1997, inter-alia, by amending the definition of the

term ‘business’; defining the terms ‘fare’, ‘freight’ and ‘road’;

deleting the Explanation to Section 3(1); and inserting Section

3(1A) which brought non-fare paying passengers at par with

fare-paying passengers for the purpose of levying tax under the

Act – Thus, the Amendment and Validation Act of 1997 is a valid

piece of Legislation – The activity of the appellant in providing

gratis transportation to its employees, and their children, would

be a taxable activity under Section 3(1-A) of the Amendment and

Validation Act of 1997. [Para 23(ii), (iii)]

* Author

2 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

Himachal Pradesh Passengers and Goods Taxation Act, 1955

– Himachal Pradesh Passengers and Goods (Amendment and

Validation) Act of 1997 – The Division Bench of the High Court

passed a judgment dated 27.03.1997 and pointed out lacunae

in the Act of 1955 – By way of the Amendment and Validation

Act of 1997, amendments were brought about to the Preamble

and various provisions of the Act of 1955 with retrospective

effect, viz. date of enforcement of the Act of 1955 – When a

competent legislature retrospectively removes the substratum

or foundation of a judgment to make it ineffective – Valid

legislative exercise or not:

Held: A legislature cannot directly set aside a judicial decision –

However, when a competent legislature retrospectively removes

the substratum or foundation of a judgment to make the decision

ineffective, the same is a valid legislative exercise provided it

does not transgress on any other constitutional limitation – Such a

legislative device which removes the vice in the previous legislation

which has been declared unconstitutional is not considered to be

an encroachment on judicial power but an instance of abrogation

recognised under the Constitution of India – The various decisions

of the Supreme Court show that it is open to the legislature to alter

the law retrospectively, provided the alteration is made in such a

manner that it would no more be possible for the Court to arrive at

the same verdict – In other words, the very premise of the earlier

judgment should be removed, thereby resulting in a fundamental

change of the circumstances upon which it was founded – It would

be permissible for the legislature to remove a defect in an earlier

legislation, as pointed out by a constitutional court in exercise of

its powers by way of judicial review – This defect can be removed

both prospectively and retrospectively by a legislative process and

previous actions can also be validated. [Paras 11 and 12]

Constitution of India – Alteration of law retrospectively –

Separation of powers between legislature, executive and the

judiciary – Power of Judicial Review – Power of Legislature

– Rule of Law:

Held: The role of the judiciary in galvanising constitutional

machinery characterised by institutional checks and balances, lies in

recognising that while due deference must be shown to the powers

and actions of the other two branches of the government, the power 

[2023] 12 S.C.R. 3

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

of judicial review may be exercised to restrain unconstitutional

and arbitrary exercise of power by the legislature and executive

organs – The power of judicial review is a part of the basic feature

of Constitution which is premised on the rule of law – Unless a

judgment has been set aside by a competent court in an appropriate

proceeding, finality and binding nature of a judgment are essential

facets of the rule of law informing the power of judicial review – In

that context, while it may be open to the legislature to alter the law

retrospectively, so as to remove the basis of a judgment declaring

such law to be invalid, it is essential that the alteration is made

only so as to bring the law in line with the decision of the Court

– Simply setting at naught a decision of a court without removing

the defects pointed out in the said decision, would sound the death

knell for the rule of law – The rule of law would cease to have

any meaning if the legislature is at liberty to defy a judgment of a

court by simply passing a validating legislation, without removing

the defects forming the substratum of the judgment by use of a

non-obstante clause as a technique to do so. [Para 13]

Constitution of India – Legislative device of abrogation –

Retrospective amendments – Permissibility of:

Held: The device of abrogation, by way of introducing retrospective

amendments to remove the basis of a judgment, may be employed

when a legislature is under the bonafide belief that a defect that

crept into the legislation as it initially stood, may be remedied by

abrogation – An act of abrogation is permissible only in the interests

of justice, effectiveness and good governance, and not to serve

the oblique agenda of defying a court’s order, or stripping it of its

binding nature. [Para 14]

Constitution of India – The power of abrogation is to be

exercised following principles:

Held: (i) There is no legal impediment to enacting a law to validate

a legislation which has been held by a court to be invalid, provided,

such a law removes the basis of the judgment of the court, by curing

the defects of the legislation as it stood before the amendment; (ii)

The validating legislation may be retrospective – It must have the

effect that the judgment pointing out the defect would not have been

passed, if the altered position as sought to be brought in by the

validating statute existed before the court at the time of rendering

its judgment; (iii) Retrospective amendment should be reasonable 

4 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

and not arbitrary and must not be violative of any Constitutional

limitations; (iv) Setting at naught a decision of a court without

removing the defect pointed out in the said decision is opposed to

the rule of law and the scheme of separation of powers under the

Constitution of India; (v) Abrogation is not a device to circumvent an

unfavourable judicial decision – If enacted solely with the intention

to defy a judicial pronouncement, an Amendment and Validation

Act of 1997 may be declared as ultra-vires. [Para 15]

Himachal Pradesh Passengers and Goods Taxation Act, 1955

– Himachal Pradesh Passengers and Goods (Amendment

and Validation) Act of 1997 – Import of the Act of 1955 Act

as amended by the Amendment and Validation act of 1997:

Held: The Preamble which provides that it has been enacted to

provide for levying a tax on passengers and goods carried by

road in motor vehicles – Such a tax falls within the legislative

field governed by Entry 56 of List II of the Seventh Schedule of

the Constitution – Simply for the reason that notices have been

issued to the owners or assessment orders have been passed

against the owners of the vehicles, it cannot be said that the tax

is levied on the motor vehicles – If the persons carried happen to

be employees of the owners of the buses, such employees should

pay the tax – When the employer, i.e., the owner of the vehicle,

does not collect the tax from such employees, he should himself

pay it, in discharge of the employer’s statutory duty as an agent

of the State to collect tax on the basis of the amended provision

– Whether to collect the tax payable from the passengers (the

employees and their children) or discharge the liability itself is the

prerogative of the appellants. [Para 22]

Shri Prithvi Cotton Mills Ltd. v. Broach Borough

Municipality, A.I.R 1970 SC 192 : [1970] 1 SCR 388;

State of Tamil Nadu v. Arooran Sugars Ltd., (1997) 1

SCC 326 : [1996] 8 Suppl. SCR 193 – followed.

Indian Aluminium Company Co. v. State of Kerala, A.I.R

1996 SC 1431: [1996] 2 SCR 23; Bakhtawar Trust v.

M.D. Narayan, (2003) 5 SCC 298 : [2003] 1 Suppl.

SCR 1; Madras Bar Association v. Union of India, (2022)

12 SCC 455; Dr. Jaya Thakur v. Union of India, 2023

SCC OnLine SC 813 – relied on.

[2023] 12 S.C.R. 5

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

A.S. Karthikeyan v. State of Kerala, (1974) 1 SCC

258 : [1974] 2 SCR 321; M/s Tata Engineering and

Locomotive Co. v. The Sales Tax Officer, Poona A.I.R.

1979 SC 343 : [1979] 2 SCR 357; J. K. Jute Mills Co.

Ltd. v. State of Uttar Pradesh, A.I.R. 1961 SC 1534 :

[1962] SCR 1; State of Tamil Nadu v. Board of Trustees

of the Port of Madras, (1999) 4 SCC 630 : [1999] 2

SCR 195; Commissioner of Sales Tax v. Sai Publication

Fund, (2002) 4 SCC 57 : [2002] 2 SCR 743; National

Agricultural Cooperative Marketing Federation of India

Ltd. v. Union of India, (2003) 5 SCC 23: [2003] 3 SCR

1; M/s West Ramnad Electric Distribution Co. v. State

of Madras, A.I.R. 1962 SC 1753 : [1963] SCR 747; Rai

Ramkrishna v. State of Bihar, A.I.R. 1963 SC 1667 :

[1964] SCR 897; Lohia Machines Ltd. v. Union of India,

(1985) 2 SCC 197 : [1985] 2 SCR 686; State of Himachal

Pradesh v. Yash Pal Garg, (2003) 9 SCC 92 : [2003] 3

SCR 1056; Baharul Islam v. Indian Medical Association,

2023 SCC OnLine SC 79; M/s. Tirath Ram Rajendra

Nath, Lucknow v. State of Uttar Pradesh, A.I.R. 1973

SC 405; Hindustan Gum and Chemicals Ltd. v. State

of Haryana, (1985) 4 SCC 124 : [1985] 2 Suppl. SCR

630; Cheviti Venkanna Yadav v. State of Telangana,

(2017) 1 SCC 283 : [2016] 7 SCR 689 – referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3948 of 2009.

From the Judgment and Order dated 11.12.2008 of the High Court of

Himachal Pradesh at Shimla in CWP No.725 of 1998.

With

Civil Appeal Nos. 4738-4743 and 6931 of 2009.

S.B. Upadhyay, Sr. Adv., Piyush Sharma, Anuj Sharma, Abhishek

Goyal, Shivesh Shrivastava, Yashraj Singh Deora, Priyesh Mohan

Srivastava, Abhishek Singh, M/s. Mitter & Mitter Co., Advs. for the

Appellant.

Anup Kumar Rattan, AG, Rupinder Singh Thakur, Addl. AG, Puneet

Rajta, Karan Kapur, Abhishek Gautam, Vivek Kumar, Baldev Singh,

Ms. Radhika Gautam, Kartikeya Rastogi, Ms. Inderdeep Kaur Raina,

Abhinav Mukerji, Advs. for the Respondents.

6 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

The Judgment of the Court was delivered by

NAGARATHNA, J.

These appeals have been filed assailing the final Orders of the High

Court of Himachal Pradesh dated 11 December, 2008 and 06 May, 2009,

whereby the vires of the Himachal Pradesh Passengers and Goods

Taxation Act, 1955 (hereinafter referred to as the “Act of 1955” for the sake

of brevity) as amended from time to time, particularly by the Himachal

Pradesh Passengers and Goods (Amendment and Validation), Act, 1997

(hereinafter referred to as the “Amendment and Validation Act of 1997”

for the sake of brevity) has been upheld and the writ petitions filed by the

appellants herein, i.e., Civil Writ Petition Nos. 725 of 1998, 422 of 1998,

401 of 2001, 464-467 of 2001 and 79 of 2007, have been dismissed.

Bird’s eye view of the controversy:

2. The controversy in these cases revolves around the question whether,

by enacting the Amendment and Validation Act of 1997, the Himachal

Pradesh State Legislature has validly removed the basis of the

judgment of the Division Bench of the High Court dated 27 March,

1997. In the said judgment, the Act of 1955 had been held not to

include within its scope, the activity of the appellants in providing

gratis transport facilities for their employees and their children, as

the charging provision contained therein, namely, Section 3 (1) and

the Explanation thereto were couched in very ambiguous terms.

2.1 These appeals also call for consideration of ancillary arguments

in the matter such as legislative competence of the Himachal

Pradesh Legislative Assembly to enact the Act of 1955 and the

Amendment and Validation Act of 1997, which are stated to

be enacted on the strength of Article 246, read with Entry 56

of List II of the Seventh Schedule of the Constitution of India.

2.2 Further, these appeals also call for interpretation of certain

provisions of the Act of 1955, as amended by the Amendment

and Validation Act of 1997, so as to determine whether the

activity of the appellants, would be a taxable activity under

Section 3(1-A) of the Amendment and Validation Act of 1997.

Brief facts of the case:

3. Since the controversy involved in these appeals is identical, the

appeals are being disposed of by way of this common judgment. 

[2023] 12 S.C.R. 7

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

For the sake of convenience, the facts of the lead matter, i.e., Civil

Appeal No. 3498 of 2009 shall be narrated as under:

3.1 The facts in a nutshell are that the Act of 1955 was enacted

by the Himachal Pradesh Legislative Assembly with a view to

levy tax on passengers and goods carried by road in certain

motor vehicles in the State of Himachal Pradesh. The said Act

received Presidential assent on 25 November, 1955.

3.2 The appellant, NHPC Ltd. is engaged in the generation of

electricity and has various projects in the State of Himachal

Pradesh. Many project sites are situated at different locations

in the interiors of Himachal Pradesh. These work sites are not

properly serviced by any public transport system or regular

taxis. The residential colonies of the staff employed at the

various project sites are located at far of distances from the

project sites. Therefore, as a welfare measure, the appellant,

NHPC Ltd. provides transport facilities to its employees in order

to enable them to reach their respective work sites from their

residential colonies and for their children to travel to and from

their schools, comfortably. It is to be clarified at this juncture

that the transport facilities were being provided free of cost, for

the exclusive use of the employees of the appellant and their

children and members of the public were not permitted to use

the said transport facilities. The buses utilized for such purpose

were owned and operated by the appellant-NHPC Ltd.

3.3 The Assessing Authority under the Act of 1955, Respondent

No. 3 herein, assessed the liability of the appellant-NHPC Ltd.

to pay passenger tax under the Act for the years 1984-1985

to 1986-1987 and 1987-1988 to 1990-1991 in respect of the

activity of providing transport facilities to its employees and

their children. Assessment Orders were passed on 01 October,

1992 stipulating the liability of the appellant, NHPC Ltd. to pay

passenger tax under the Act of 1955, on the premise that its

employees and their children were passengers under the Act

and therefore, the appellant was liable to pay passenger tax for

providing them with transport facilities as described hereinabove.

It is to be stated at this juncture that the Assessment Orders

were passed on the assumption that every bus of the appellant,

NHPC Ltd. was plying on every day of the relevant years; a 

8 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

passenger travelled on every seat of every bus; and every

employee travelled the full distance shown in the logbook.

3.4 The appellant filed Revision Application before the Commissioner,

Excise and Taxation, Himachal Pradesh, Respondent No. 2

herein, challenging the Assessment Orders dated 01 October,

1992. The same was dismissed on the ground that a revision

application would not be maintainable and it would be appropriate

to instead, file an appeal.

3.5 In the said background, the appellant, NHPC Ltd. filed Writ

Petition No.1733 of 1995 before the High Court, challenging

the vires of the Act of 1955, and the assessments made

in accordance with the provisions thereof. The pertinent

contentions raised by the appellant in the said Writ Petition

may be encapsulated as under:

i. That under the Act of 1955, no tax can be levied on

the appellant as its employees and their children were

being carried in the appellant’s buses, without any fare

or consideration. That passenger tax as contemplated

under the Act of 1955 was to be levied only on fare-paying

passengers against tickets issued by the owner of the

motor vehicles, who is engaged in the business of carrying

passengers for hire and reward.

ii. That no rate or fare had been specified by the competent

authority under the Motor Vehicles Act, 1939 (hereinafter

referred to as “MV Act” for short) for the routes on which the

appellant’s buses plied, nor had any contractual rate been

agreed upon between the appellants and its employees.

Therefore, the charging provision, i.e., Section 3 (1) of

the Act of 1955 and the Explanation thereto would not

be attracted.

iii. That in passing the Assessment Orders dated 01 October,

1992, erroneous and baseless assumptions had been

made to the effect that every bus of the appellant, NHPC

Ltd. was plying on every day of the relevant year; a

passenger travelled on every seat of every bus; every

employee travelled the full distance shown in the logbook;

and every passenger was paying a fare of Rs. 1.15 per

kilometer. 

[2023] 12 S.C.R. 9

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

iv. That even if the assessee was liable to pay tax under the

Act of 1955, they would not be liable to pay surcharge

under Section 3A of the Act as the said provision would

not be applicable to the appellants. Further, Section 3A

of the Act of 1955 was unconstitutional and suffered from

excessive delegation of powers to the State Government

to prescribe the rate of surcharge leviable, without laying

down any guideline on the basis of which surcharge was

to be prescribed.

3.6 By the Judgment and Order dated 27 March, 1997, the Division

Bench of the High Court allowed Civil Writ Petition No.1733 of

1995 filed by the appellant and directed the Respondents to

refund the tax collected under the provisions of the Act of 1955.

The pertinent findings of the Division Bench of the High Court

are culled out hereinunder:

i. That the scheme of the Act of 1955 was to levy a tax on

passengers of certain motor vehicles only. Intention of the

legislature could be gathered from the various definitions

contained in Section 2 of the Act, and the same was to

make the Act applicable only to persons who carried on

the business of transport. The definition of ‘owner’ would

fortify such finding, as ‘owner’ was defined to mean a

person holding a permit under the Motor Vehicles Act.

ii. That the liability of the assessee was to be determined for

the years 1984-1985 to 1986-1987 and 1987-1988 to 1990-

1991. Prior to 31 May, 1988, ‘motor vehicle’ was defined to

mean “a public service vehicle or public carrier, or private

carrier or a trailer attached to any such vehicle.” Further,

the definition of ‘passenger’ excluded from its scope the

driver, conductor and employee of the owner of the motor

vehicle. Therefore, the appellant’s buses would not be

covered under the definition of ‘motor vehicle’, as defined

at the relevant point of time. That on applying the definition

of the expressions, ‘motor vehicle’ and ‘passenger’ to the

charging provision, the appellant would not be liable for

tax under the Act of 1955.

iii. That as regards the period between 31 May, 1988 and

30 September, 1990, the scope of the definition was 

10 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

expanded only to include any vehicle used in contravention

of the provisions of the Motor Vehicles Act for carriage

of passengers or goods or both, for hire and reward.

Since the appellant’s buses were not used for carriage

of passengers for hire or reward, appellant would not be

liable to discharge tax under the Act.

iv. That from 01 October, 1990, the definition of ‘motor vehicle’

was enlarged to include any ‘transport vehicle,’ which, as

defined under the Motor Vehicles Act, 1988 (hereinafter,

“MV Act, 1988” for the sake of convenience) means “a

public service vehicle, a goods carriage, an educational

institution bus or a private service vehicle.” That although

the said definition of ‘motor vehicle’ would cover the buses

of the appellant, the Explanation to Section 3 (1) of the

Act of 1955 would not permit such an application.

v. That the Explanation to Section 3 (1) of the Act of 1955

introduced a legal fiction requiring assessments to be

made on the assumption that even passengers who did

not actually pay a fare, were being carried at the normal

rate chargeable on the concerned route. That there was

no definition of ‘route’ for the purposes of the Act and the

definition of ‘route’ under the MV Act could not be referred

to as the routes on which the appellant’s buses plied were

not ‘routes’ in the sense defined under the MV Act. Hence,

‘route’ could not be equated to any ‘road’ so as to hold

the appellant-assessee liable to pay tax under the Act of

1955. That for charging tax, by invoking the Explanation

to Section 3(1), routes were required to be prescribed,

but since no routes had been prescribed, the Explanation

could not come to the rescue of the respondent Authorities.

vi. Further, in the absence of any prescription as to what the

‘normal rate’ would be, the Respondent Authorities could

not have levied tax on the appellant based on artificial

assumptions. That there was no basis to warrant the

Authorities from taking into account the fare payable in

the adjoining areas, in calculating the ‘normal rate.’

vii. That the charging provision could not be given effect

to unless the terms ‘route’ and ‘normal rate’ had been

expressly and unambiguously defined. 

[2023] 12 S.C.R. 11

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

3.7 A Special Leave Petition filed by the Respondents before this

Court, assailing the judgment of the High Court dated 27 March,

1997 was dismissed by an Order dated 28 July, 1997.

3.8 In that background, on 13 August, 1997, the Himachal Pradesh

Passengers and Goods (Amendment & Validation) Ordinance

was promulgated. The Himachal Pradesh Legislative Assembly

passed the Amendment and Validation Act of 1997 on 27

September, 1997 with a view to remove the basis of the

judgment of the Division Bench of the High Court dated 27

March, 1997. By virtue of the Amendment and Validation Act

of 1997, definitions of the terms ‘business’, ‘fare’, ‘freight’ and

‘passenger’ were amended. Further, definitions of terms such as

‘Private Service Vehicle’, ‘road’, ‘Transport Vehicle’, came to be

introduced. Explanation (1) to Section 3 (1) of the Act of 1955,

which was the charging provision in the said Act, was omitted

and Sub-section (1A) was inserted in Section 3, which was to

serve as a charging provision. The nuances of the amendments

introduced by the Amendment and Validation Act of 1997 shall

be adverted to at a later stage.

3.9 Accordingly, the Authorities constituted under the Act, issued

notices to the appellant for recovery of tax under the provisions

of the Amendment and Validation Act of 1997, in respect of

the appellant’s activity of providing transport facilities to its

employees and their children.

3.10 The appellant challenged the vires of the Amendment and

Validation Act of 1997 and the assessments made thereunder,

as also of the Act of 1955 by filing Civil Writ Petition No. 725 of

1998 before the High Court. The primary grounds of challenge

were as under:

i. That the Act of 1955 as well as the Amendment and

Validation Act of 1997 are unconstitutional inasmuch as

they seek to levy tax on vehicles, which is contrary to Entry

56, List II of Seventh Schedule of the Constitution of India.

ii. That the definitions of ‘passenger’, ‘business’, ‘fare’ and

‘road’ are artificial and unnatural, as also contrary to the

purpose and object of the Act and hence, ultra-vires. 

12 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

iii. That employees of the appellant and their children would

not be covered by the definition of “passenger”, as

appearing in the Amendment and Validation Act of 1997,

inasmuch as they are carried free of charge.

3.11 By the impugned judgment dated 11 December, 2008, the High

Court of Himachal Pradesh dismissed Civil Writ Petition No.

725 of 1998 filed by the appellant and upheld the vires of the

Act of 1955 as amended from time to time, particularly by the

Amendment and Validation Act of 1997. The pertinent findings

of the Division Bench of the High Court may be epitomized as

under:

i. The Court did not find favour with the contention of the

Petitioner that the impugned legislations had the effect of

taxing the vehicles, carrying passengers or goods and,

hence, the State Legislature does not have the competence

to enact it. It was held that from a reading of the Preamble

of the Act and also various provisions thereof, it was clear

that the Act seeks to impose tax, not on motor vehicles,

but on the passengers and goods carried therein. That the

import of the Act could be gathered from the Preamble

which provides that it has been enacted to provide for

levying a tax on passengers and goods carried by road

in motor vehicles. That simply for the reason that notices

have been issued to the owners or assessment orders have

been passed against the owners of the vehicles, it could

not be said that the tax is levied on the motor vehicles.

ii. That the Preamble of the Act of 1955 provided that the

same was an Act to provide for levying tax on passengers

and goods carried by road in ‘certain’ motor vehicles. The

word ‘certain’ is omitted by the Amendment and Validation

Act of 1997. That this change in no way suggests that

the scope of the Act was amended to include taxation on

vehicles, instead of on the passengers and goods carried

therein.

iii. That the defect in the Explanation to Section 3(1) of the

Act of 1955, which was noted by the Division Bench of

the High Court in passing the judgment dated 27 March,

1997, had also been removed by omitting the said 

[2023] 12 S.C.R. 13

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

Explanation and inserting Section 3(1A) in the Amendment

and Validation Act of 1997, which seeks to bring non-fare

paying passengers at par with fare paying passengers.

Further, the Competent Authority as well as Schedule I to

the Amendment and Validation Act of 1997 prescribe the

fare and freight for different categories of motor vehicles

and for different roads and the higher of the two would apply.

iv. That Section 3(1A) of the Amendment and Validation Act

of 1997, when read with the amended definition of the

term ‘business’ would leave no scope for doubt that all

kinds of passengers and goods carried in private service

vehicles are subject to taxation, under the Act, irrespective

of whether such passengers or goods were being carried

for hire or reward. Therefore, the Amendment and Validation

Act of 1997, covers non-fare paying passengers (such

as the appellant’s employees and their children) as also

goods and material belonging to the appellant themselves.

Aggrieved by the aforesaid judgment of the High Court, which has been

followed by the High Court in its subsequent Order dated 21 July, 2009

in CWP 79 of 2007, the present appeals have been filed.

Submissions:

4. We have heard Sri S.B. Upadhyay, learned Senior Counsel along

with instructing counsel for the appellant(s) in Civil Appeal No. 3948

of 2009; Sri Yashraj Singh Deora, learned counsel for the appellant(s)

in Civil Appeal Nos. 4738-4743 of 2009 and Civil Appela No. 6931

of 2009 and Sri Anup Kumar Rattan, learned Advocate General for

the State of Himachal Pradesh along with instructing counsel. We

have perused the material on record.

4.1 Learned Senior Counsel Sri Upadhyay, appearing on behalf

of the appellant(s) in Civil Appeal No. 3948 of 2009 submitted

as under:

i. That the impugned judgment of the High Court of Himachal

Pradesh has not properly appreciated the import of the

Amendments made to the Act of 1955 by way of the

Amendment and Validation Act of 1997 inasmuch as the

High Court has upheld the said Act of 1997, by losing sight

of the fact that the said Act does not remove the basis of the 

14 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

judgment passed by the High Court earlier, by which, the

Explanation to Section 3 (1) of the Act of 1955 was deleted

and the further amendments were made by inclusion of

Section 3 (1A) and certain other provisions. That the

High Court has proceeded on a misplaced interpretation

of the Act of 1955, as amended by the Amendment and

Validation Act of 1997 to hold that the latter Act, seeks

to impose tax on passengers and not motor vehicles and

that the said Act covers non-fare paying passengers as

well which it cannot do so.

ii. Elaborating the aforesaid contention, learned senior

counsel submitted that the Amendments made to the Act

of 1955 do not take into consideration the fact that the

buses and other motor vehicles of the appellants herein

which are used to ferry their employees to work sites and

children of their employees to schools are free of charge

and without collecting any fare from the passengers.

They travel gratis and therefore, in that sense, are not

passengers at all. Nevertheless, the incidence of tax are

on the appellants who are the owners of the buses and

other vehicle who have been levied the tax despite the fact

that they are not collecting any tax or any fare from their

“passengers” who are none other than their employees

and children of their employees. Therefore, the Act itself

does not apply to the appellants and hence, they are not

liable to pay any tax under the Act.

iii. It was further submitted that the High Court has failed to

understand the import of the amendments made to the Act

of 1955 as the said amendments in no way can mulct any

liability to pay tax on the appellants herein. That the true

import of the Act of 1955, as amended by the Amendment

and Validation Act of 1997 is to levy and collect tax on

motor vehicles, transgressing Article 246, read with Entry

56 of List II of the Seventh Schedule of the Constitution of

India. The said legislative Entry pertains to “taxes on goods

and passengers carried by road and inland water ways.”

The said Entry therefore authorises the State Legislatures

to levy, inter-alia, passenger tax. That the incidence of a 

[2023] 12 S.C.R. 15

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

passenger tax levied on the strength of Entry 56 of List II of

the Seventh Schedule, must be on the passengers and not

on the vehicles in which passengers are carried or on the

owners of such vehicles. That it is open to the Legislature

to provide a convenient machinery or method for collection

of such tax. Therefore, the tax can be recovered from the

owner or operator of the vehicle, only when, such owner

or operator can pass on the burden of the tax to the

passengers but not otherwise. In this regard, reliance was

placed on A.S. Karthikeyan vs. State of Kerala, (1974) 1

SCC 258 with a view to bring out the differences between

a tax on the income of the operators vis-à-vis passenger

tax. That in the present case the incidence of the tax is

on the appellants who are the owners of the buses, and

not on the passengers. The appellants’ role in the present

case cannot be to collect the tax from the passengers and

deposit the same with the Respondent Authorities as no

fare is collected from the passengers, but to still discharge

the tax liability out of their own coffers.

iv. That fundamentally, ‘passenger’ means a person who

travels by paying a fare to the owner or operator of the

vehicle, vide M/s Tata Engineering and Locomotive Co.

vs. The Sales Tax Officer, Poona, A.I.R. 1979 SC 343.

Therefore, a non-fare paying employee of the operator, or

a school-going child of such employee, is not a passenger

within the meaning of the constitutional entry.

v. That the Amendment and Validation Act of 1997 had

introduced sub-clauses (ii) and (iii) to Section 2 (aa) of the

Act which defines ‘business’. That the said sub-clauses

are brought within the scope of the term ‘business’:

a) any trade, commerce, or manufacture, or any

adventure or concern in the nature of trade,

commerce, or manufacture, whether or not such

trade, commerce, manufacture, adventure or concern

is carried on with a motive to make gain of profit and

whether or not any gain or profit actually accrues

from such trade, commerce, manufacture, adventure

or concern vide Section 2 (aa) (ii); and, 

16 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

b) any transaction in connection with or incidental or

ancillary to such trade, commerce, manufacture,

adventure or concern vide Section 2 (aa) (iii).

That notwithstanding the fact that the scope of the term

‘business’ has been widened, sub-clauses (ii) and (iii) to

Section 2 (aa) are to be read in harmony with sub-clause

(i) thereof, which provides that ‘business’ includes the

business of carrying passengers and goods by motor

vehicles. That if ‘business’ is held to mean just any trade,

commerce, manufacture, adventure or concern, sub-clause

(i) of Section 2 (aa), which specifies the nature of business,

would become redundant.

vi. That if sub-clauses (ii) and (iii) to Section 2 (aa) are

interpreted to include even businesses other than the

business of carrying passengers, the said sub-clauses

would be violative of Article 14 of the Constitution on two

counts. First, a person or entity who/which does not carry

the business of carrying passengers and goods by motor

vehicles, would be treated at par with a person or entity

who/which carries on such business. Second, a person or

entity who/which does not carry on a business with a profit

motive, would be treated at par with a person or entity who/

which carries on a business with a profit motive. In both

the circumstances, unequals would be treated equally and

this is opposed to the Constitutional mandate of equality

under the law.

vii. That the definitions of ‘business’, ‘passenger’, ‘road’,

‘fare’ and ‘freight’ under the Amendment and Validation

Act of 1997 are artificial and insertion/substitution of such

definitions is an illegal attempt to bring the Amendment

and Validation Act of 1997 within the scope of Entry 56 of

List II of the Seventh Schedule to the Constitution.

viii. Reliance was placed on J.K. Jute Mills Co. Ltd. vs. State

of Uttar Pradesh, A.I.R. 1961 SC 1534 to contend that

when a statute has been enacted by a State Legislature,

outside the permissible field of legislation, merely using

artificial terminology so as to bring the legislation within

the scope of a particular legislative Entry would not save

the same from being declared to be unconstitutional. 

[2023] 12 S.C.R. 17

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

ix. That the Amendment and Validation Act of 1997 did not

remove the basis of the judgment of the Division Bench of

the High Court dated 27 March, 1997, by curing the defects

and plugging the lacunae in the Act of 1955. Rather, it has

been enacted with the oblique motive of destroying the

finality, force and effect of the said judgment of the High

Court, which has been affirmed by this Court.

4.2 Sri Yashraj Singh Deora, learned counsel for the appellants in

Civil Appeal Nos. 4738-4743 of 2009 and Civil Appeal No. 6931

of 2009 adopted the submissions of learned Senior Counsel

Sri Upadhyay and further contended as under:

i. That in order to be covered under the definition of ‘business’

provided under the Amendment and Validation Act of 1997,

the trade, commerce, manufacture of the assessee, or

the transactions connected therewith or incidental thereto

must have some connection with the business of carrying

passengers and goods by road. When the term ‘business’

is construed in such a manner, the main activities of the

respective appellants, would not amount to carrying on

business, as the same do not relate to the activity of

carrying passengers and goods by road. That in a case

where the main activity does not amount to ‘business’, then

the connected, incidental or ancillary activities would also

not amount to ‘business’ unless an independent intention

to conduct business in these connected, incidental or

ancillary activities is established by the revenue, vide

State of Tamil Nadu vs. Board of Trustees of the Port

of Madras, (1999) 4 SCC 630; Commissioner of Sales

Tax vs. Sai Publication Fund, (2002) 4 SCC 57. That

in the present case, there is no material to establish

that the ancillary activity of providing transport facilities

to their employees and their children is conducted with

an independent intention to conduct business through

such activity. Therefore, in the present case, neither the

main activity of the appellants, nor the ancillary activity of

providing transport facilities to their employees and their

children, would amount to ‘business’ as defined under the

Amendment and Validation Act of 1997. 

18 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

ii. Referring to the various amendments brought about by the

Amendment and Validation Act of 1997 and contrasting

them with the unamended provisions, it was contended that

the said Act has not removed the basis of the judgment

of the Division Bench of the High Court dated 27 March,

1997, nor has it cured the defects in the Act of 1955. That

such an enactment is simply contradictory to the decision

of the High Court, without addressing the underlying

reasoning of the Court.

iii. That the retrospective effect of forty-two years, given

to the Amendment and Validation Act of 1997 is totally

unreasonable and arbitrary. That particularly in relation to

taxation statutes, retrospectivity cannot be excessive or

harsh, vide National Agricultural Cooperative Marketing

Federation of India Ltd. vs. Union of India, (2003)

5 SCC 23. That on this ground alone, the Amendment

and Validation Act of 1997 may be struck down as being

unconstitutional.

With the aforesaid submissions, learned Senior Counsel and learned

counsel for the appellants prayed that the impugned judgments be set

aside and the Act of 1955, as amended by the Amendment and Validation

Act of 1997, be struck down as being arbitrary, illegal and unconstitutional.

5. Per contra, Sri Anup Kumar Rattan, learned Advocate General for the

State of Himachal Pradesh supported the impugned judgment and

submitted that the High Court had proceeded to pass the impugned

orders on a sound appreciation of the facts of the matter and the

applicable law and the same would not call for any interference by

this Court. It was further contended as under:

i. That the Amendment and Validation Act of 1997 has validly

addressed the deficiencies in various provisions of the Act of

1955 and has therefore removed the basis of the judgment of

the Division Bench of the High Court dated 27 March, 1997 in

accordance with law. That it is trite that if a law passed by a

Legislature is struck down or rendered inoperative by a Court,

the competent Legislature can correct the infirmities which

formed the basis of the Court’s decision to strike down the law

and make such amended law effective retrospectively, vide

M/s West Ramnad Electric Distribution Co. vs. State of 

[2023] 12 S.C.R. 19

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

Madras, A.I.R. 1962 SC 1753; Rai Ramkrishna vs. State of

Bihar, A.I.R. 1963 SC 1667; Lohia Machines Ltd. vs. Union

of India, (1985) 2 SCC 197; State of Himachal Pradesh vs.

Yash Pal Garg, (2003) 9 SCC 92; Baharul Islam vs. Indian

Medical Association, 2023 SCC OnLine SC 79.

ii. That Section 3 (1A) as incorporated by the Amendment and

Validation Act of 1997, provides that notwithstanding anything

contained in sub-section (1) of Section 3, when passengers are

carried and goods are transported by a motor vehicle and no

fare or freight, whether chargeable or not, has been charged

or fare or freight has been charged at a concessional rate, the

tax at the rates directed by a Notification by the Government

under sub-section (1), shall be levied, charged and paid as if

the passengers were carried or goods were transported, either

on fares or freights fixed by the competent authority, under the

MV Act, for different classes of roads and motor vehicles in the

State, or on fares and freights specified in Schedule I to the Act

for different classes of roads and motor vehicles, whichever is

higher. That previously, under the Act of 1955, Explanation to

Section 3(1), which provided that when passengers are carried

and goods are transported by a motor vehicle and no fare or

freight, whether chargeable or not, had been charged, the tax

was levied and paid, as if such passengers were carried or

goods transported, at the normal rate prevalent on the route. The

ambiguity in the charging provision, i.e., Section 3 (1) of the Act

of 1955 arose on account of the fact that the terms ‘normal rate’

and ‘route’ had not been defined under the said Act. Owing to

such a defect/lacuna, the charging provision could not be given

effect to as noted by the Division Bench of the High Court in the

judgment dated 27 March, 1997. That by the Amendment and

Validation Act of 1997, Explanation to Section 3(1) has been

deleted and Section 3 (1A) has been inserted, prescribing two

alternate methods to notionally determine fares or freights, when

the same has not been charged, i.e. by taking into account: (a)

fares or freights fixed by the competent authority, under the MV

Act, or (b) fares and freights specified in Schedule I to the Act

for different classes of roads and motor vehicles: the higher

of the two fares is to be adopted in every case. Further, the

terms ‘fares’, ‘freights’ and ‘roads’ have been defined, thereby

removing the defects/deficiencies in the Act of 1955. 

20 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

iii. That another reason given by the Division Bench in the judgment

dated 27 March, 1997 for holding that employees of the

appellants and their children were not covered by the Explanation

(now deleted by way of the Amendment and Validation Act of

1997) was in relation to the definition of ‘business’. ‘The term

‘business’ was defined in a narrow manner in the Act of 1955

and meant the business of carriage of passengers and goods.

Therefore, when the definitions of the terms ‘motor vehicle’ and

‘business’ were read into the charging provision, the inference

was, only those who were not in the business of carrying

passengers and goods, would not be covered by the charging

provision. This loophole has also been plugged by way of

the Amendment and Validation Act of 1997, inasmuch as the

definition of ‘business’ has been enlarged and it now includes,

besides the business of carrying passengers and goods by

motor vehicles, any trade, commerce or manufacture, or any

adventure or concern, whether or not the same is carried on

with a profit motive; and any transaction in connection with,

incidental or ancillary to such trade, commerce or manufacture.

That ‘business’ now means just any business, carried on with

or without a profit motive, or any ancillary transactions in

connection with such business. The said expression having

being widened, a macro meaning and interpretation must be

given to the same, was the submission.

iv. That simply for the reason that notices had been issued to

the owners or assessment orders had been passed against

the owners of the vehicles, it could not be said that the tax

was being levied on the motor vehicles. The tax sought to be

imposed was on the passengers and goods carried by road and

the operators/owners of the motor vehicles were simply required

to facilitate payment of tax by collecting the same from the

passengers and depositing it with the Respondent Authorities.

That the Act of 1955, as amended by the Amendment and

Validation Act of 1997, was enacted on the strength of Entry 56

of List II of the Seventh Schedule of the Constitution of India,

which pertains to “taxes on goods and passengers carried by

road and inland water ways.”

With the aforesaid submissions, it was prayed that the present appeals

be dismissed as being devoid of merit and the impugned orders of the

High Court, be affirmed. 

[2023] 12 S.C.R. 21

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

Points for Consideration:

6. Having heard learned counsel for the respective parties and on

perusal of the material on record, the following points would emerge

for our consideration:

i. Whether, by enacting the Amendment and Validation Act of 1997,

the Himachal Pradesh State Legislature had validly removed

the basis of the judgment of the Division Bench of the High

Court dated 27 March, 1997, whereby the Act of 1955 had been

held not to include within its scope the activity of the appellants

of providing gratis transport facilities for their employees and

their children?

ii. Whether the activity of the appellants of providing gratis transport

facilities for their employees and their children, would now be

a taxable activity under Section 3(1-A) of the Amendment and

Validation Act of 1997?

iii. Whether the impugned judgment of the High Court calls for

any interference?

iv. What order?

Legal Framework:

7. Before proceeding further, it would be useful to refer to the legal

framework relevant to the issues which arise in these appeals.

Entry 56 List II of the Seventh Schedule of the Constitution of India

reads thus:

“56. Taxes on goods and passengers carried by road or on inland

waterways.”

7.1 The preamble of the Act of 1955 indicates that it is an Act to

provide for levying a tax on passengers and goods carried by

road in ‘certain’ motor vehicles. Section 2(e) defined ‘motor

vehicle’ as any transport vehicle, including a motor vehicle used

for carrying passengers or goods, for hire or reward even in

contravention of the provisions of the MV Act. Section 2 (aa)

of the Act of 1955 defined ‘business’ to mean the business of

carrying passengers and goods by motor vehicles. Section

2 (g) defined ‘passenger’ to mean any person travelling in a

motor vehicle, but did not include the driver or conductor or 

22 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

any employee of the owner of the vehicle travelling in bona

fide discharge of his duties in connection with the vehicle. The

term ‘owner’ was defined under Section 2 (f) to mean the owner

of the motor vehicle in respect of which a permit had been

granted or countersigned under the provisions of the Motor

Vehicles Act, 1939.

7.2 Section 3 (1) which was and still is the charging provision

provided that a tax shall be levied and charged by the State

Government on all fares and freights in respect of all passengers

carried and goods transported by motor vehicles, at such rates

not exceeding one-sixth of the value of the fare or freight, as the

Government may, by notification, direct. The charging provision

contained an Explanation which read as under:

“When passengers are carried and goods are transported by a motor

vehicle, and no fare or freight, whether chargeable or not, has been

charged the tax shall be leviable and paid as if such passengers

were carried or goods were transported at the normal rate prevalent

on the route.”

7.3 Section 2(c) provided an inclusive definition of the term ‘fare’

which would include sums payable for a season ticket or in

respect of a contract carriage.

7.4 It was primarily the aforesaid provisions of the Act of 1955 that

formed the subject of interpretation by the Division Bench of

the High Court in Writ Petition No.1733 of 1995, which was

allowed by the judgment dated 27 March, 1997 as per the

reasons indicated above.

8. With a view to bring the employees of the appellants and their children,

travelling in the buses of the appellants without payment of fare within

the tax net under the Act of 1955 and also to validate the collection

of tax already made thereunder, the Amendment and Validation Act

of 1997 was enacted by the Himachal Pradesh Legislative Assembly.

By way of the Amendment and Validation Act of 1997, amendments

were brought about to the Preamble and various provisions of the

Act of 1955 with retrospective effect, viz. date of enforcement of the

Act of 1955. The amendments brought about, which are relevant for

the purpose of deciding these appeals are as under: 

[2023] 12 S.C.R. 23

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

i. The preamble, as amended states that it is an Act to provide

for levying a tax on passengers and goods carried by road in

motor vehicles. The word ‘certain’ which earlier preceded the

term ‘motor vehicle’ has been deleted by way of the Amendment

and Validation Act of 1997.

ii. The definition of ‘business’ has been amended and it now

includes, besides the business of carrying passengers and

goods by motor vehicles, any trade, commerce or manufacture,

or any adventure or concern whether or not the same is carried

on with a profit motive; and any transaction in connection with,

incidental or ancillary to such trade, commerce or manufacture.

iii. The definition of ‘fare’ was amended to include sums fixed by

the competent authority under the MV Act for hire of motor

vehicle for carriage of passengers and transport of goods; sums

payable for a season ticket; and where no such fare has been

paid, includes the sums specified under Schedule I.

iv. The term ‘owner’ has been defined to mean owner of the motor

vehicle used for carrying passengers or transporting goods in

or through the territory of the State of Himachal Pradesh.

v. The following provisions defining the terms ‘private service

vehicle’, ‘road’, and ‘transport vehicle’ were introduced by way

of the Amendment and Validation Act of 1997:

“2(gb) “private service vehicle” means a motor vehicle constructed

or adapted to carry more than six persons excluding the driver and

ordinarily used by or on behalf of the owner of such vehicle for the

purpose of carrying persons for, or in connection with his trade or

business;”

“2(gc) “road” means a track for travel or transportation to and fro,

serving as a means of communication, between two places;”

“2(ia) “transport vehicle” means a public service vehicle, a goods

carriage, an educational institution bus or a private service vehicle;”

vi. Sub-section (IA) has been added to Section 3 of the Act of

1955 and the Explanation to Section 3 (1) has been deleted. 

24 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

Section 3(1A) provides that notwithstanding anything contained

in sub-section (1) of Section 3, when passengers are carried

and goods are transported by a motor vehicle and no fare or

freight, whether chargeable or not, has been charged or fare

or freight has been charged at a concessional rate, the tax at

the rates directed by Notification issued by the Government

under sub-section (1), shall be levied, charged and paid as if

the passengers were carried or goods were transported, either

on fares or freights fixed by the competent authority, under

the MV Act, for different classes of roads and motor vehicles

in the State; or on fares and freights specified in Schedule I

to the Act for different classes of roads and motor vehicles,

whichever is higher.

vii. Section 9 has been inserted, which provides for validation of

assessments made under the Act of 1955.

viii. Schedule I has been added to the Act, which stipulates the

fares on which tax would be leviable, for different categories

of motor vehicles and class of roads.

9. For easy reference, as submitted by Sri Yashraj Singh Deora, learned

counsel, a comparative table of the relevant provisions of the Act of

1955 and the amendments introduced to such provisions, by way of

the Amendment and Validation Act of 1997, is provided hereinunder:

Parameters The Himachal

Pradesh Passengers

and Goods Taxation

Act, 1955

The Himachal Pradesh

Passengers and Goods Taxation

(Amendment and Validation)

Act, 1997

Preamble An Act to provide for

levying a t a x o n

passengers and goods

carried by road in

certain motor vehicles.

An Act to provide for levying a tax

on passengers and goods carried

by road in motor vehicles.

[2023] 12 S.C.R. 25

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

Definition

of the term

‘business’

2(a) “business”

means the business

of carrying

passengers and

goods by motor

vehicles.

2[(aa) “business” includes:-

i. The business of carrying

passengers and goods by motor

vehicles;

ii. Any trade, commerce or

manufacture, or any adventure

or concern in the nature of trade,

commerce, or manufacture

whether or not such trade,

c o m m e r c e m a n u f a c t u r e ,

adventure or concern is carried

on with a motive to make gain or

profit and whether or not any gain

or profit accrues from such trade,

commerce, manufacture, adventure

or concern; and

iii. Any transaction in connection

with, or incidental or ancillary

to, such trade, Commerce,

manufacture, adventure or

concern.

Definition

of the term

‘fare’

2(c) “fare” includes

sums payable for a

season ticket or in

respect of the hire of a

contract carriage;

2(c) “fare” or “freight includes

sums fixed by the competent

authority under the Motor Vehicles

Act for the hire of motor vehicles

for carriage of passengers and

the transport of goods therein

and includes the sum payable for a

season ticket, and where no such

fare or freight has been fixed, also

includes such sum as specified

in Schedule-1:

26 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

Definition

of the term

‘motor

vehicle’

2(e) “motor vehicle”

means a public

service vehicle or

public carrier, or

private carrier or a

trailer when attached

to any such vehicle;

2(d) “motor vehicle” means

any transport vehicle, which

is mechanically propelled and

adapted for use upon roads

whether the power of propulsion is

transmitted thereto from an external

or internal source, or a trailer when

attached to any such vehicle and

includes-

(i) A motor vehicle used for carriage

of passengers or goods or both for

hire or reward in contravention of

the provisions of the Motor Vehicles

Act; and

(ii) A maxi cab, which is constructed

or adapted to carry more than six

passengers, but not more than

twelve passengers;]

(ea) Motor Vehicles Act” means the

Motor Vehicle Act, 1939 (4 of 1939)

and the Motor Vehicles Act, 1988

(59 of 1988), as the case may be:]

[2023] 12 S.C.R. 27

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

Definition

of the term

‘owner’

2(f) “owner” means

the owner of the motor

vehicle in respect of

which a permit has

b e e n g r a n t e d o r

countersigned under

the provisions of the

Motor Vehicles Act,

1939 (4 of 1939) and

includes (a) the holder

of a permit in respect

of such vehicle, (b)

any person for the

time being in charge of

such vehicle, (c) any

person responsible for

the management of the

place of business of such

owner, (d) Government

o r a C o r p o r a t i o n

c o n s t i t u t e d u n d e r

the Road Transport

Corporations Act, 1950;

2(f) “owner means” the owner of

the motor vehicle used for carrying

passengers or transporting

goods in or through the territory

of the State of Himachal Pradesh,

and includes, -

(a) The de-facto and de-jure owners;

(b) Any person for the time being

incharge of such vehicle;

(c) any person responsible for

the management of the place of

business of such owners;

(d) The Government or Corporation

constituted under the road Transport

Corporation Act, 1950 (64 of 1950):

Definition

of the term

‘Private

service

vehicle’ -

(gb) “Private service vehicle” means

a motor vehicle constructed or

adopted to carry more than six

persons excluding the driver, and

ordinarily used by or on behalf of

the owner of such vehicle for the

purpose of carrying persons for,

or in connection with, his trade or

business;

28 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

Definition

of the term

‘road’ -

(ge) “road” means a track for

travel or transportation to and

fro, serving as a means of

communication, between two

places;

Definition

of the term

‘transport

vehicle’

-

(ia) “transport vehicle” means a

public service vehicle, a goods

carriage, an educational institution

bus or a private service vehicle;

Charging

provision:

3. Levy of Tax. – (1)

There shall be levied,

charged and paid to

the State Government

a tax on all fares and

freights in respect of all

passengers carried and

goods transported by

motor vehicles at such

rates not exceeding one

sixth of the value of the

fare or freight, as the

case may be, and as

the Government may,

by notification, direct,

subject to a minimum

of five paise in any one

case, the amount of

tax being calculated to

the nearest multiple of

five paise by ignoring

two paise or less and

counting more than two

paise as five paise.]

3. Levy of Tax.- (1) There shall be

levied, charged and paid to the State

Government a tax,-

(i) On all fares in respect of all

passengers carried by motor

vehicles at such rates not exceeding

fifty percent of the value of freight,

and

(ii) on all freights in respect of all

goods transported by motor vehicles

at such rates not exceeding five

percent of the value of freight,

As the Government may, by

notification, direct, subject to a

minimum of five paise in any one

case, the amount of tax being

calculated to the nearest multiple

of five paise by ignoring two paise

or less and counting more than two

paise as five paise.]

[2023] 12 S.C.R. 29

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

Explanation:- When

p a s s e n g e r s a r e

carried and goods

are transported by a

motor vehicle and no

fare or freight, whether

chargeable or not has

been charged the tax

shall be levied and paid

as if such passengers

were carried or good

transported at the

normal rate prevalent

on the route.

(2) Where any fare or

freight charged is a lump

sum paid by a person

on account of a season

ticket or as subscription

or contribution for any

privilege, right or facility

which is combined with

the right of such person

being carried or his

goods transported by a

motor vehicle, without

any further payment or

at a reduced charge,

the tax shall be levied

on the amount of such

lump sum or on such

amount as appears to

the prescribed authority

to be fair and equitable

(1A) Notwithstanding anything

contained in sub-section (1),

when passengers are carried and

goods are transported by a motor

vehicle andi. No fare or freight, whether

chargeable or not has been

charged, or

ii. fare or freight has been charged

at a concessional rate,

The tax at the rates as directed by

notification by the Government

under sub-section (1), shall be

levied, charged and paid as if

the passengers were carried or

goods were transported either

on fares and frights fixed by the

competent authority under the

Motor Vehicles Act for different

classes of roads and motor

vehicles in the State or on the

fares and freights, for different

classes of roads and motor

vehicles, specified in Schedule- I

to this Act, whichever is higher:

Provided that the State Government

may, by notification, amend

Schedule-I, and thereupon the

Schedule-1, shall stand amended

accordingly:

Provided further that every

notification amending Schedule-1,

shall be laid on the Table of the

Legislative Assembly.]

(2) Where any fare or fright charged

is a lump sum paid by

30 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

having regard to the

fare or freight fixed by

a competent authority

under the Motor Vehicles

Act, 1939.

(3) Where passengers

are carried or goods

transported by a motor

vehicle from any place

outside the State [or

from any place outside

the State to any place

outside the State but

through the State or

from any place within

the State to any other

place within the State but

through the intervening

territory of another State]

to any place within the

State, or from any place

within the State to any

place outside the State

the tax shall be payable

in respect of the distance

covered within the State

at the rate laid down

in sub-section (1) and

shall be calculated on

such amount as bears

the same proportion to

the total fare and freight

as the distance covered

in the State bears to the

a person on account of a season

ticket or as subscription or

contribution for any privilege, right

or facility which is combined with the

right of such person being carried or

his goods transported by a motor

vehicle, without any further payment

or at a reduced charge, the tax shall

be levied on the amount of such

lump sum or on such amount as

appears to the prescribed authority

to be fair and equitable having

regard to the fare or frieght fixed

by a competent authority under the

Motor Vehicles Act, 4 [1988].

(2-A) Where a motor vehicle plies

for hire or reward in contravention of

the provisions of the Motor Vehicles

Act, 1988 the owner of such vehicle

shall, without, prejudice to any action

which is or may be taken under that

Act, be liable to pay tax at the rate

specified in sub-section (1) or such

amount of fares and freights as may

be determined in the prescribed

manner by the prescribed authority.]

(3) Where passengers are carried

or goods transported by a motor

vehicle from any place outside the

State but through the intervening

territory of another State] to any

place

[2023] 12 S.C.R. 31

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

total distance of the

journey.

outside the State the tax shall be

payble in respect of the distance

covered within the State at the rate

laid down in sub-section (1) and

shall be calculated on such amount

as bears the same proportion to the

total fare and fright as the distance

covered in the state bears to the

total distance of the journey.

(Underlining by us)

9.1 Apart from the above, the salient Sections to be noticed are

Sections 5 to 9 of the Amendment and Validation Act of 1997

which read as under:

“5. In Section 3A, of the Principal Act, for the words “stage/contract

carriage”, the words “transport vehicle, excluding a goods vehicle/

carriage”, shall be substituted.

6. In Section 3B and 21A of the Principal Act, the word “Schedule”,

wherever it occurs, the word “Schedule-II” shall be substituted.

7. The existing “SCHEDULE” to the Principal Act shall be re-numbered

as “SCHEDULE-II and before the “SCHEDULE-II” so re-numbered,

the following “SCHEDULE-I” shall be inserted namely:- (not typed

in the Paperbook)

* * * * * * * *

8. The amendments to the Principal Act, made by Sections 2, 3,

4, 5, 6 and 7 of the Act shall and shall always be deemed to have

been made retrospectively from the date of the commencement of

the Principal Act.

9. (1) Notwithstanding anything contained in any judgment, decree, or

order of any court or other authority to the contrary, any assessment,

levy, charge or payment of any tax on passengers and goods

carried to have been made or any action taken or anything done

under the provisions of the Principal Act at any time on or after the

commencement of the Act, but before the commencement of the

Himachal Pradesh Passengers and Goods Taxation (Amendment 

32 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

and Validation) Act, 1997 (hereinafter referred to as this ‘Act’), shall

be deemed to be a valid action or thing had been made, taken or

done under the provisions of the said Act as amended by this Act

and accordingly-

(i) the aforesaid tax assessed, levied, charged, paid or collected

or purporting to have been assessed, levied, charged, paid

or collected under the provisions of the said Act, before the

commencement of this Act shall be deemed to be and always

be deemed to have been validly assessed, levied, charged,

paid or collected in accordance with law:

(ii) no suit or other proceeding shall be maintained or continued

in any court or before any authority for the refund of, and no

enforcement shall be made by any court or authority of any

decree or order directing the refund of any such aforesaid tax,

which has been collected;

(iii) recoveries, if any, shall be made in accordance with the provision

of the said act of all amounts which would have been collected

thereunder as such aforesaid tax if this Act had been in force

at all material times; and

(iv) anything done or any action taken (including any rule or order

made, notification issued or direction given or exemption

granted or penalty imposed) under the said Act before the

commencement of this Act shall be deemed always to have

been validly done or taken in accordance with this Act.

(2) For the removal of doubts, it is hereby declared that-

(a) nothing in sub-section (1) shall be construed in preventing any

person-

(i) from questioning, in accordance with the provisions of this

Act, the assessment, levy, charge, payment or collection of

the aforesaid tax; or

(ii) from claiming refund of the aforesaid tax paid by him in excess

of the amount due from him under this act; and

(b) no act or omission on the part of any person, before the

commencement of this act, shall be punishable as an offence which

would not have been so punishable as if this Act had not come into

force.”

[2023] 12 S.C.R. 33

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

Analysis:

“It is when things go wrong that the retroactive validating statute

often becomes indispensable as a curative measure; though the

proper movement of law is forward in time, we sometimes have to

stop and turn about and pick up the pieces.”

- Lon Fuller, The Morality of Law (1960).

10. Since these appeals concern, inter-alia, the issue, as to, whether, by

enacting the Amendment and Validation Act of 1997, the Himachal

Pradesh State Legislature has validly removed the basis of the

judgment of the Division Bench of the High Court dated 27 March,

1997, it would be useful to discuss the law on the adoption of the

legislative device of abrogation, to remove the basis of a judgment

of a Court in a legislation.

10.1 In the following decisions, this Court has laid down the law

with regard to the permissible extent and manner of removing

the material basis of a judgment, by correcting the anomalies

pointed out by a Court in a legislation:

i. In M/s. Tirath Ram Rajendra Nath, Lucknow vs. State

of Uttar Pradesh, A.I.R. 1973 SC 405, this Court held

that there is a distinction between encroachment on the

judicial power and nullification of the effect of a judicial

decision by changing the law retrospectively. The former

is outside the competence of the legislature but the latter

is within its permissible limits. In that case, the U.P. Sales

Tax Act (Amendment and Validation) Act, 1970 was upheld

by this Court.

ii. In Hindustan Gum and Chemicals Ltd. vs. State of

Haryana, (1985) 4 SCC 124, this Court held that it is

permissible for a competent legislature to overcome the

effect of a decision of a court setting aside the imposition

of a tax by passing a suitable Legislation, by amending

the relevant provisions of the statute concerned with

retrospective effect, thus taking away the basis on which

the decision of the court has been rendered and by enacting

an appropriate provision validating the levy and collection of

tax made before the decision in question was rendered. In

that decision, reliance was placed on Shri Prithvi Cotton 

34 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

Mills Ltd. vs. Broach Borough Municipality, A.I.R 1970

SC 192, a Constitution Bench decision of this Court, which

has laid down the requirements which a validating law

should satisfy in order to validate the levy and collection of

a tax which has been declared earlier by a court as illegal.

The relevant portion of the said judgment reads as under:

“When a Legislature sets out to validate a tax declared by a

court to be illegally collected under an ineffective or an invalid

law, the cause for ineffectiveness or invalidity must be removed

before validation can be said to take place effectively. The

most important condition, of course, is that the Legislature

must possess the power to impose the tax, for, if it does not,

the action must ever remain ineffective and illegal. Granted

legislative competence, it is not sufficient to declare merely that

the decision of the court shall not bind for that is tantamount to

reversing the decision in exercise of judicial power which the

Legislature does not possess or exercise. A court’s decision

must always bind unless the conditions on which it is based

are so fundamentally altered that the decision could not have

been given in the altered circumstances. Ordinarily, a court

holds a tax to be invalidly imposed because the power to tax is

wanting or the statute or the rules or both are invalid or do not

sufficiently create the jurisdiction. Validation of a tax so declared

illegal may be done only if the grounds of illegality or invalidity

are capable of being removed and are in fact removed and the

tax thus made legal. Sometimes this is done by providing for

jurisdiction where jurisdiction had not been properly invested

before. Sometimes this is done by re-enacting retrospectively a

valid and legal taxing provision and then by fiction making the tax

already collected to stand under the re-enacted law. Sometimes

the Legislature gives its own meaning and interpretation of the

law under which the tax was collected and by legislative fiat

makes the new meaning binding upon courts. The Legislature

may follow any one method or all of them and while it does

so it may neutralize the effect of the earlier decision of the

court which becomes ineffective after the change of the law.

Whichever method is adopted it must be within the competence

of the Legislature and legal and adequate to attain the object

of validation. If the Legislature has the power over the subject-

[2023] 12 S.C.R. 35

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

matter and competence to make a valid law, it can at any time

make such a valid law and make it retrospectively so as to

bind even past transactions. The validity of a validating law,

therefore, depends upon whether the Legislature possesses

the competence which it claims over the subject-matter and

whether in making the validation it removes the defect which

the courts had found in the existing law and makes adequate

provisions in the validating law for a valid imposition of the tax.”

iii. In the case of Indian Aluminium Company Co. vs. State

of Kerala, A.I.R 1996 SC 1431, the principles regarding the

abrogation of a judgment of a court of law by a subsequent

legislation were culled out in the following words:

“56. From a resume of the above decisions the following salient

principles would emerge:

(1) The adjudication of the rights of the parties is the essential judicial

function. Legislature has to lay down the norms of conduct or

rules which will govern the parties and the transaction and

require the court to give effect to them;

(2) The Constitution has delineated delicate balance in the exercise

of the sovereign power by the Legislature, Executive and

Judiciary;

(3) In a democracy governed by rule of law, the Legislature exercises

the power under Articles 245 and 246 and other companion

Articles read with the entries in the respective Lists in the

Seventh Schedule to make the law which includes power to

amend the law.

(4) The Court, therefore, need to carefully scan the law to find out:

(a) whether the vice pointed out by the Court and invalidity

suffered by previous law is cured complying with the legal and

constitutional requirements; (b) whether the Legislature has

competence to validate the law; (c) whether such validation

is consistent with the rights guaranteed in Part III of the

Constitution.

(5) The Court does not have the power to validate an invalid law

or to legalise impost of tax illegally made and collected or to

remove the norm of invalidation or provide a remedy. These are 

36 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

not judicial functions but the exclusive province of the Legislature.

Therefore, they are not the encroachment on judicial power.

(6) In exercising legislative power, the Legislature by mere

declaration, without anything more, cannot directly overrule,

revise or override a judicial decision. It can render judicial

decision ineffective by enacting valid law on the topic within its

legislative field fundamentally altering or changing its character

retrospectively. The changed or altered conditions are such

that the previous decision would not have been rendered

by the Court, if those conditions had existed at the time of

declaring the law as invalid. It is also empowered to give effect

to retrospective legislation with a deeming date or with effect

from a particular date.

(7) The consistent thread that runs through all the decisions of this

Court is that the legislature cannot directly overrule the decision

or make a direction as not binding on it but has power to make

the decision ineffective by removing the base on which the

decision was rendered, consistent with the law of the Constitution

and the Legislature must have competence to do the same.”

In the aforesaid case, the issue that arose for consideration was as

to the vires of Section 11 of the Kerala Electricity Surcharge (Levy

and Collection) Act, 1989. It was observed that the said provision

was valid and not an incursion on judicial power, notwithstanding

the fact that the effect of Section 11 was to validate collection of tax

made under an invalid law.

iv. A Constitution Bench of this Court in State of Tamil Nadu

vs. Arooran Sugars Ltd., (1997) 1 SCC 326, summarised

the law on the legislative device of abrogation, to remove

the basis of a judicial pronouncement in the following words:

“30. From the aforesaid authorities, it is settled that there is a

demarcation between legislative and judicial functions predicated

on the theory of separation of powers. The legislature has the

power to enact laws including the power to retrospectively

amend laws and thereby remove causes of ineffectiveness

or invalidity. When a law is enacted with retrospective effect,

it is not considered as an encroachment upon judicial power

when the legislature does not directly overrule or reverse a 

[2023] 12 S.C.R. 37

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

judicial dictum. The legislature cannot, by way of an enactment,

declare a decision of the court as erroneous or a nullity, but can

amend the statute or the provision so as to make it applicable

to the past. The legislature has the power to rectify, through an

amendment, a defect in law noticed in the enactment and even

highlighted in the decision of the court. This plenary power to

bring the statute in conformity with the legislative intent and

correct the flaw pointed out by the court can have a curative

and neutralizing effect. When such a correction is made, the

purpose behind the same is not to overrule the decision of the

court or encroach upon the judicial turf, but simply enact a fresh

law with retrospective effect to alter the foundation and meaning

of the legislation and to remove the base on which the judgment

is founded. This does not amount to statutory overruling by

the legislature. In this manner, the earlier decision of the court

becomes non-existent and unenforceable for interpretation of

the new legislation. No doubt, the new legislation can be tested

and challenged on its own merits and on the question whether

the legislature possesses the competence to legislate on the

subject matter in question, but not on the ground of over-reach

or colourable legislation.”

v. In Bakhtawar Trust vs. M.D. Narayan, (2003) 5 SCC 298,

this Court observed as under while laying down a threepronged test to determine the vires of a validating Act:

“14. The validity of any statute may be assailed on the ground

that it is ultra vires the legislative competence of the legislature

which enacted it or it is violative of Part III or any other provision

of the Constitution. It is well settled that Parliament and State

Legislatures have plenary powers of legislation within the fields

assigned to them and subject to some constitutional limitations,

can legislate prospectively as well as retrospectively. This

power to make retrospective legislation enables the legislature

to validate prior executive and legislative Acts retrospectively

after curing the defects that led to their invalidation and thus

makes ineffective judgments of competent courts declaring the

invalidity. It is also well settled that a validating Act may even

make ineffective judgments and orders of competent courts

provided it, by retrospective legislation, removes the cause of

invalidity or the basis that had led to those decisions.

38 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

15. The test of judging the validity of the amending and validating

Act is, whether the legislature enacting the validating Act has

competence over the subject-matter; whether by validation, the

said legislature has removed the defect which the court had

found in the previous laws; and whether the validating law is

consistent with the provisions of Part III of the Constitution.”

vi. In Cheviti Venkanna Yadav vs. State of Telangana,

(2017) 1 SCC 283, this Court considered a question

relating to the validity of an amendment with retrospective

effect after a provision of the Act was struck down by the

Court- When does it not amount to the statutory overruling

of a judgment by the legislature? This Court held that the

legislature has the power to legislate including the power

to retrospectively amend laws, thereby removing causes

of ineffectiveness or invalidity of laws. Further, when

such correction is made, the purpose behind the same

is not to overrule the decision of the court or encroach

upon the judicial turf, but simply enact a fresh law with

retrospective effect to alter the foundation and meaning

of the legislation and to remove the base on which the

judgment is founded. The order of the High Court, inter

alia, holding that the amended provisions did not usurp

the judicial power was upheld.

vii. In Madras Bar Association vs. Union of India, (2022)

12 SCC 455, L. Nageswara Rao J., speaking for the

majority (2:1) laid down the following principles, as regards

the permissibility of abrogation, to remove the basis of a

judgment:

“43. The permissibility of a legislative override in this country

should be in accordance with the principles laid down by this

Court in the aforementioned as well as other judgments, which

have been culled out as under:

a) The effect of the judgments of the Court can be nullified

by a legislative act removing the basis of the judgment.

Such law can be retrospective. Retrospective amendment

should be reasonable and not arbitrary and must not be

violative of the fundamental rights guaranteed under the

Constitution. (Lohia Machines Ltd. and Anr. v. Union of

India and Ors., (1985) 2 SCC 1987). 

[2023] 12 S.C.R. 39

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

b) The test for determining the validity of a validating

legislation is that the judgment pointing out the defect

would not have been passed, if the altered position as

sought to be brought in by the validating statute existed

before the Court at the time of rendering its judgment.

In other words, the defect pointed out should have been

cured such that the basis of the judgment pointing out the

defect is removed.

c) Nullification of mandamus by an enactment would be

impermissible legislative exercise (See: S.R. Bhagwat and

Ors. v. State of Mysore, (1995) 6 SCC 16). Even interim

directions cannot be reversed by a legislative veto (See:

Cauvery Water Disputes Tribunal, 1993 Supp (1) SCC 96

and Medical Council of India v. State of Kerala and Ors.,

(2019) 13 SCC 185).

d) Transgression of constitutional limitations and intrusion

into the judicial power by the legislature is violative of the

principle of separation of powers, the Rule of law and of

Article 14 of the Constitution of India.”

viii. In a recent judgment of this Court in the case of Dr. Jaya

Thakur vs. Union of India, 2023 SCC OnLine SC 813, this

Court held that a writ of mandamus could not be nullified

by a subsequent legislation made by the legislator. That

a binding judicial pronouncement between the parties

cannot be made ineffective with the aid of any legislative

power by enacting a provision which in substance simply

overrules a judgment unless the foundation of the judgment

is removed. Referring to several judgments of this court

on the Doctrine of Abrogation, the following principles as

to the manner in which the device of abrogation could be

employed, were identified as under:

“It could, thus, clearly be seen that this Court has held that the

effect of the judgments of this Court can nullified by a legislative

act removing the basis of the judgment. It has further been held

that such law can be retrospective. It has, however, been held

that retrospective amendment should be reasonable and not

arbitrary and must not be violative of the fundamental rights

guaranteed under the Constitution. It has been held that the 

40 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

defect pointed out should have been cured such that the basis

of the judgment pointing out the defect is removed. This Court

has, however, clearly held that nullification of mandamus by

an enactment would be impermissible legislative exercise.

This Court has further held that transgression of constitutional

limitations and intrusion into the judicial power by the legislature

is violative of the principle of separation of powers, the rule of

law and of Article 14 of the Constitution of India.”

11. What follows from the aforesaid judicial precedent is, a legislature

cannot directly set aside a judicial decision. However, when a

competent legislature retrospectively removes the substratum or

foundation of a judgment to make the decision ineffective, the same

is a valid legislative exercise provided it does not transgress on

any other constitutional limitation. Such a legislative device which

removes the vice in the previous legislation which has been declared

unconstitutional is not considered to be an encroachment on judicial

power but an instance of abrogation recognised under the Constitution

of India. The decisions referred to above, manifestly show that it

is open to the legislature to alter the law retrospectively, provided

the alteration is made in such a manner that it would no more be

possible for the Court to arrive at the same verdict. In other words,

the very premise of the earlier judgment should be removed, thereby

resulting in a fundamental change of the circumstances upon which

it was founded.

12. The power of a legislature to legislate within its field, both prospectively

and to a permissible extent, retrospectively, cannot be interfered with

by Courts provided it is in accordance with the Constitution. It would

be permissible for the legislature to remove a defect in an earlier

legislation, as pointed out by a constitutional court in exercise of its

powers by way of judicial review. This defect can be removed both

prospectively and retrospectively by a legislative process and previous

actions can also be validated. However, where a legislature merely

seeks to validate the acts carried out under a previous legislation

which has been struck down or rendered inoperative by a Court, by a

subsequent legislation without curing the defects in such legislation,

the subsequent legislation would also be ultra-vires. Such instances

would amount to an attempt to ‘legislatively overrule’ a Court’s

judgment by a legislative fiat, and would therefore be illegal and a

colourable legislation. 

[2023] 12 S.C.R. 41

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

13. At this juncture, we must highlight that separation of powers, as

crystalised under the Indian Constitution, is characterised by division

of power and functions between the legislature, executive and the

judiciary, which are the three co-equal organs of the State. The

doctrine also necessarily postulates that each institution has some

power to regulate the functions of the others; this is in the form of the

ancillary principle of “checks and balances.” The role of the judiciary in

galvanising our constitutional machinery characterised by institutional

checks and balances, lies in recognising that while due deference

must be shown to the powers and actions of the other two branches

of the government, the power of judicial review may be exercised

to restrain unconstitutional and arbitrary exercise of power by the

legislature and executive organs. The power of judicial review is a

part of the basic feature of our Constitution which is premised on the

rule of law. Unless a judgment has been set aside by a competent

court in an appropriate proceeding, finality and binding nature of a

judgment are essential facets of the rule of law informing the power of

judicial review. In that context, we observe that while it may be open

to the legislature to alter the law retrospectively, so as to remove the

basis of a judgment declaring such law to be invalid, it is essential

that the alteration is made only so as to bring the law in line with the

decision of the Court. The defects in the legislation, as it stood before

the Amendment and Validation Act of 1997 was enacted, must be

cured by way of the amendments introduced retrospectively. Simply

setting at naught a decision of a court without removing the defects

pointed out in the said decision, would sound the death knell for

the rule of law. The rule of law would cease to have any meaning if

the legislature is at liberty to defy a judgment of a court by simply

passing a validating legislation, without removing the defects forming

the substratum of the judgment by use of a non-obstante clause as

a technique to do so.

14. The legislative device of abrogation by enacting retrospective

amendments to a legislation, as a means to remove the basis

of a judgment and validate the legislation set aside or declared

inoperative by a Court, must be employed only with a view to bring

the law in line with the judicial pronouncement. Abrogation is not

a device to circumvent any and all unfavourable judicial decisions.

If enacted solely with the intention to defy judicial pronouncement, 

42 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

such an amendment Act may be declared to be ultra-vires and as

a piece of ‘colourable legislation.’ The device of abrogation, by way

of introducing retrospective amendments to remove the basis of a

judgment, may be employed when a legislature is under the bonafide

belief that a defect that crept into the legislation as it initially stood,

may be remedied by abrogation. An act of abrogation is permissible

only in the interests of justice, effectiveness and good governance,

and not to serve the oblique agenda of defying a court’s order, or

stripping it of its binding nature.

15. The Constitution of India precludes any interference by the legislature

with the administration of justice and judicial determination of the

validity of a legislation. The power of abrogation is to be exercised

in the light of the said Constitutional mandate. The legislative device

of abrogation must be in accordance with the following principles

which are not exhaustive:

i. There is no legal impediment to enacting a law to validate

a legislation which has been held by a court to be invalid,

provided, such a law removes the basis of the judgment of the

court, by curing the defects of the legislation as it stood before

the amendment.

ii. The validating legislation may be retrospective. It must have the

effect that the judgment pointing out the defect would not have

been passed, if the altered position as sought to be brought in

by the validating statute existed before the court at the time of

rendering its judgment.

iii. Retrospective amendment should be reasonable and not arbitrary

and must not be violative of any Constitutional limitations.

iv. Setting at naught a decision of a court without removing the

defect pointed out in the said decision is opposed to the rule

of law and the scheme of separation of powers under the

Constitution of India.

v. Abrogation is not a device to circumvent an unfavourable judicial

decision. If enacted solely with the intention to defy a judicial

pronouncement, an Amendment and Validation Act of 1997

may be declared as ultra-vires. 

[2023] 12 S.C.R. 43

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

Validity of the Act of 1955 as amended by the Amendment and

Validation Act of 1997:

16. We shall now proceed to consider the issue as to validity of the Act

of 1955 as amended by the Amendment and Validation Act of 1997,

in light of the principles and case law discussed hereinabove. For

the purpose of carrying out such an exercise, it is necessary to first,

identify the defects pointed out by the High Court in its judgment

dated 27 March, 1997, whereby the Act of 1955 had been held not

to include within its scope the activity of the appellants of providing

transport facilities for their employees and their children, as the

charging provision contained therein, i.e., Section 3 (1) and the

Explanation thereto was crouched in ambiguous terms.

16.1 The defects identified by the High Court in its judgment dated

27 March, 1997 are as under:

i. The High Court observed that the levy of tax on passengers

was only on certain motor vehicles and the provisions of

the Act were not applicable to entities, such as, appellants

herein. This was on a reading of a definition of ‘motor

vehicle’ and ‘owner’ as found in the Act of 1955. Further,

the definitions of ‘motor vehicle’ as well as the definition of

‘passenger’ were restricted as a result, the buses owned

by the appellants used for carriage of the appellant’s

employees and their children gratis were not covered

within the charging section. Also, the definition of ‘transport

vehicle’ was restricted.

ii. Explanation to Section 3 (1) of the Act of 1955 introduced

a legal fiction requiring assessments to be made on the

assumption that even passengers who did not pay a fare,

were being carried at the ‘normal rate’ chargeable on the

concerned route. There was no definition of ‘route’ for the

purposes of the Act and the definition of ‘route’ under the

MV Act could not be referred to as the routes on which

the appellant’s buses plied were not ‘routes’ in the sense

defined under the MV Act. Hence, ‘route’ could not be

equated to any ‘road’ so as to hold the appellant-assessee 

44 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

liable to pay tax under the Act of 1955. That for charging

tax, by invoking the Explanation to Section 3(1), routes

were required to be prescribed, but since no routes had

been prescribed, the Explanation could not come to the

rescue of the respondent Authorities.

iii. In the absence of any prescription as to what the ‘normal

rate’ would be, the Respondent Authorities could not have

levied tax on the appellant based on artificial assumptions.

There was no basis to warrant the Authorities from taking

into account the fare payable in the adjoining areas, in

calculating the ‘normal rate.’

iv. The charging provision could not be given effect to unless

the terms ‘route’ and ‘normal rate’ had been expressly and

unambiguously defined.

v. The term ‘business’ was defined in a narrow manner in

the Act of 1955 and meant the business of carriage of

passengers and goods. Therefore, when the definition of

the term ‘business’ was read into the charging provision,

the inference was that those who were not in the business

of carrying passengers and goods, would not be covered

by the charging provision.

vi. Intention of the legislature was to make the Act of 1955

applicable only to persons who carried on the business

of transport. The definition of ‘owner’ would fortify such

finding, as ‘owner’ was defined to be a person holding a

permit under the Motor Vehicles Act.

16.2 Having identified the basis for the finding of the Division Bench

of the High Court that the Act of 1955 was inapplicable to the

appellants herein, we shall now proceed to determine whether

such basis has been removed by curing the defects listed

hereinabove, by introducing the Amendment and Validation Act

of 1997. For this purpose, a tabular representation of the defects

pointed out by the High Court and details of the corresponding

provision(s) enacted/amendment introduced to remove the

defects, is as hereinunder: 

[2023] 12 S.C.R. 45

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

Sl. No. Defects identified in

the Act of 1955 by

the Division Bench

of the High Court in

the judgment dated

27 March, 1997.

Details of the corresponding

provision(s) enacted/amendment

introduced by the Amendment

and Validation Act to remove the

defects.

1. The term ‘business’

was defined in a narrow

manner in the Act of

1955 and meant the

business of carriage

of passengers and

goods.

The definition of ‘business’ has been

enlarged by way of the Amendment

and Validation Act and it now

includes, besides the business of

carrying passengers and goods

by motor vehicles, any trade,

commerce or manufacture, or any

adventure or concern whether or

not the same is carried on with a

profit motive; and any transaction

in connection with, incidental or

ancillary to such trade, commerce

or manufacture.

2. T h e e x p r e s s i o n

‘fare’ included sums

payable for a season

ticket in respect of

the hire of contract

carriage. It did not

include a case where

no fare or freight

was charged from a

passenger.

In Section 2(c) of the Amendment

and Validation Act, fare or freight

has been defined to include sums

fixed by the competent authority

under the Motor Vehicles Act for the

hirer of motor vehicles for carriage

of passengers and the transport of

goods therein and includes sum

payable for a season ticket and

where no such fare or freight has

been fixed, also includes such sum

as specified in Schedule I.

46 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

3. The meaning of the

word “Motor Vehicle”

meant a public service

vehicle or public

carrier, or private

carrier or a trailer

when attached to any

such vehicle;

The scope of the expression

“Motor Vehicle” has been extended

to mean any transport vehicle,

which is mechanically propelled

and adapted for use upon roads

whether the power of propulsion is

transmitted thereto from an external

or internal source, or a trailer when

attached to any such vehicle and

includes a motor vehicle used

for carriage of passengers or

goods or both for hire or reward in

contravention of the provisions of

the Motor Vehicles Act.

4. T h e m e a n i n g o f

‘owner’ was restricted

to those persons

holding a permit under

the Motor Vehicles

Act.

The scope of term ‘owner’ has been

enlarged to mean the owner of the

motor vehicle used for carrying

passengers or transporting goods

in or through the territory of the

State of Himachal Pradesh.

5. As per the Explanation

to Section 3(1) of the

Act of 1955, where

no fare or freight

had been charged,

tax was to be levied

on the ‘normal rate’

chargeable on a given

‘route.’ However, there

was lack of clarity

as to the meaning

of the terms ‘normal

rate’ and ‘route’, as

appearing in the

charging provision, i.e.

Section 3(1) and the

Explanation thereto,

in the absence of

i. Explanation to Section 3(1)

has been deleted and Section 3

(1A) has been inserted, prescribing

two alternate methods to notionally

determine fares or freights, when

the same has not been charged,

i.e. by taking into account: (a) fares

or freights fixed by the competent

authority, under the MV Act, or

(b) fares and freights specified in

Schedule I to the Act for different

classes of roads and motor vehicles.

The higher of the two fares is to be

adopted in every case.

ii. Schedule I to the Amendment and

Validation Act prescribes the fare

[2023] 12 S.C.R. 47

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

definitions in the Act

of 1955.

and freight for different categories

of motor vehicles, for different

roads.

iii. Section (2gc) defining the

term ‘road’ has been introduced.

16.3 It is evident from the table presented hereinabove that the

defects identified by the Division Bench of the High Court in

the judgment dated 27 March, 1997, forming the basis for

its decision to the effect that the provisions of the Act would

not be applicable to the assessees-appellants herein, have

been cured by the Amendment and Validation Act of 1997.

The manner in which the defects have been cured, may be

explained as follows:

i. The High Court had observed that for charging tax, by

invoking the Explanation to Section 3(1) of the Act of

1955, the ‘normal rate’ and ‘routes’ were required to be

prescribed, but since no normal rate or routes had been

prescribed, the Explanation could not come to the rescue

of the respondent Authorities. This defect has been cured

by introducing Section 3(1A) by way of the Amendment

and Validation Act of 1997 and omitting the Explanation

to Section 3(1). Section 3(1A) seeks to bring non-fare

paying passengers at par with fare paying passengers, by

prescribing two alternate methods to notionally determine

fares or freights, when the same has not been charged,

i.e. by taking into account: (a) fares or freights fixed by

the competent authority, under the MV Act, or (b) fares

and freights specified in Schedule I to the Act for different

classes of roads and motor vehicles, the higher of the two

fares has to be taken into account in every case. Further,

Schedule I introduced by way of the Amendment and

Validation Act of 1997 stipulates the freights and fares

which would be applicable for different classes of roads and

motor vehicles. Section (2gc) defining the term ‘road’ has

also been introduced. Therefore, the vacuum identified by

the High Court, which was making the charging provision

inoperative qua the appellants, has been removed. 

48 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

ii. Another reason given by the Division Bench in the judgment

dated 27 March, 1997 for holding that employees of the

appellants and their children were not covered by the

Explanation (now deleted by way of the Amendment and

Validation Act of 1997) was in relation to the definition of

‘business’. ‘The term ‘business’ was defined in a narrow

manner in the Act of 1955 and meant the business of

carriage of passengers and goods. Therefore, when the

definitions of the terms ‘motor vehicle’ and ‘business’

were read into the charging provision, the inference

would be that those who were not in the business of

carrying passengers and goods, would not be covered

by the charging provision. This loophole has also been

plugged by way of the Amendment and Validation Act of

1997, inasmuch as the definition of ‘business’ has been

enlarged and it now includes, besides the business of

carrying passengers and goods by motor vehicles, any

trade, commerce or manufacture, or any adventure or

concern whether or not the same is carried on with a profit

motive; and any transaction in connection with, incidental

or ancillary to such trade, commerce or manufacture.

‘Business’ now means any business, carried on with or

without a profit motive, or any ancillary transactions in

connection with such business.

iii. The High Court had further held that the intention of the

State legislature was to make the Act of 1955 applicable

only to persons who carried on the business of transport.

That the definition of ‘owner’ would fortify such finding,

as ‘owner’ was defined to be a person holding a permit

under the Motor Vehicles Act. However, the scope of term

‘owner’ has been enlarged by way of the Amendment and

Validation Act of 1997, to mean the owner of the motor

vehicle used for carrying passengers or transporting goods

in or through the territory of the State of Himachal Pradesh.

Therefore, this defect has also been cured.

16.4 In light of the aforesaid discussion, we hold that by enacting

the Amendment and Validation Act of 1997, the Himachal

Pradesh State Legislature has validly removed the basis of

the judgment of the Division Bench of the High Court dated

27 March, 1997. 

[2023] 12 S.C.R. 49

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

17. Sri Yashraj Singh Deora, learned counsel for the appellants in Civil

Appeal Nos. 4738-4743 of 2009 and Civil Appeal No. 6931 of 2009

submitted that in order to fall within the meaning of the term ‘business’

as defined under Section 2 (aa) of the Amendment and Validation

Act of 1997, the trade, commerce, or manufacture of the assessee,

or, the transactions connected therewith or incidental thereto must

have some connection with the business of carrying passengers and

goods by road. The main activity of the assessees would not amount

to carrying on business, as the same does not relate to the activity of

carrying passengers and goods by road. In a case where the main

activity does not amount to ‘business’, then the connected, incidental

or ancillary activities would also not amount to ‘business’ unless

an independent intention to conduct business in these connected,

incidental or ancillary activities is established by the revenue. In the

present case, there is no material to establish that the ancillary activity

of providing transport facilities to the employees and the children of

the assessees-appellants herein is conducted with an independent

intention to conduct business through such activity. Therefore, in

the present case, neither the main activity of the appellants, nor the

ancillary activity of providing transport facilities to their employees

and their children, would amount to ‘business’ as defined under the

Amendment and Validation Act of 1997.

18. We do not find the said argument is acceptable. As observed

hereinabove, the amended definition of the term ‘business’ includes

within the scope of the term, not only the business of carrying

passengers and goods, but also any other trade, commerce,

manufacture or concern, whether or not the same is carried on with

a motive to earn profit. Further activities incidental and ancillary to

such trade, commerce, manufacture or concern are also included

within the ambit of ‘business’. As per the amended definition, it is

not necessary for either the primary business, trade or manufacture,

or the ancillary activity to be related to the business of carrying

passengers and goods. That is the very purpose of the amendment.

The definition of ‘business’ as amended has the widest amplitude and

includes any trade, commerce, manufacture, adventure or concern.

19. Learned counsel for the appellants have contended that definitions of

‘passenger’, ‘business’, ‘fare’ and ‘road’ are artificial and unnatural,

as also contrary to the purpose and object of the Act and hence,

ultra-vires. However, no reasons have been cited to demonstrate 

50 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

how the said definitions are artificial. Therefore, we find no merit in

the said contention.

20. It is also submitted, with respect to the term ‘passenger’ that

fundamentally, ‘passenger’ means a person who travels by paying

a fare to the owner or operator of the vehicle, vide M/s Tata

Engineering and Locomotive Co. (supra). Therefore, a nonfare paying employee of the operator, or a school going child of

such employee, is not a passenger. The said submission would

also not come to the aid of the appellants. The meaning of the

term ‘passenger’ would have to be gathered in every case, having

regard to the definition of the said term in the relevant statute. The

decision of this Court in M/s Tata Engineering and Locomotive

Co. (supra) would be of no assistance to the appellants in this

regard, as the said judgment turns on its own facts. In the said

case, this Court while referring to the charging provision contained

in the Bombay Motor Vehicles (Taxation of Passengers) Act, held

that non-fare paying passengers would not fall within the purview

of the said Act. The said decision would not be relevant in the facts

of the present case, as an interpretation of the charging provision

in the Act of 1955 as amended, would not give rise to a conclusion

that a non-fare paying employee of the operator, or a school going

child of such employee, is not a passenger. The term ‘passenger’,

in the present case, has been defined under Section 2(g) of the Act

in a broad sense to mean any person travelling in a motor vehicle,

but shall not include the driver, conductor, or any employee of the

owner of the vehicle travelling in the bonafide discharge of his duties

in connection with the vehicle. The only three categories of persons

who are excluded from the definition of ‘passenger’ are: (a) driver of

the motor vehicle; (b) conductor; and (c) any employee of the owner

of the vehicle travelling in the bonafide discharge of his duties in

connection with the vehicle. The non-fare paying employees of the

appellants and their children, would not fall under any of the said

exceptions. Although, some of them are employees of the appellants,

they are not travelling in the motor vehicle in discharge of duties

“in connection with the vehicle”, their duties may be in connection

with various affairs of the appellants, but not “in connection with the

vehicle” of the appellants. Hence, ‘passengers’ in this case would

include non-fare paying employees of the appellant, or school going

children of such employees.

[2023] 12 S.C.R. 51

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

21. We shall now proceed to consider and determine the next aspect

argued by learned counsel, i.e., with respect to legislative competence

of the Himachal Pradesh Legislative Assembly to enact the Act of

1955 and the Amendment and Validation Act of 1997, which are

stated to be enacted on the strength of Article 246, read with Entry

56 of List II of the Seventh Schedule of the Constitution of India.

This argument appears to be a formal one as the High Court did not

have an occasion to consider the aspect of legislative competence

vis-à-vis the impugned Act.

22. The import of the Act of 1955, as amended by the Amendment

and Validation Act of 1997, could be gathered from the Preamble

which provides that it has been enacted to provide for levying a

tax on passengers and goods carried by road in motor vehicles. It

is therefore clear that tax is sought to be imposed on passengers

and goods, carried by road in motor vehicles. It is a no brainer that

such a tax falls within the legislative field governed by Entry 56 of

List II of the Seventh Schedule of the Constitution, which pertains

to “taxes on goods and passengers carried by road and inland

water ways.” Simply for the reason that notices have been issued

to the owners or assessment orders have been passed against the

owners of the vehicles, it cannot be said that the tax is levied on

the motor vehicles. If the persons carried happen to be employees

of the owners of the buses, such employees should pay the tax.

When the employer, i.e., the owner of the vehicle, does not collect

the tax from such employees, he should himself pay it, in discharge

of the employer’s statutory duty as an agent of the State to collect

tax on the basis of the amended provision. Whether to collect the tax

payable from the passengers (the employees and their children) or

discharge the liability itself is the prerogative of the appellants. The

incidence of the tax continues to be on the passengers who travel in

the buses or other vehicles of the appellants irrespective of whether

they travel gratis or are paying any fare. The impact or burden of

the tax however, has been assumed by the appellants-employers

owing to the fact that they wish to provide free transportation to the

employees and their children as a welfare measure. Therefore, we

do not find any substance in the contention of the appellants that the

tax was sought to be imposed on ‘motor vehicles’ and therefore, the

same is outside the legislative competence of the State Legislature

for Himachal Pradesh. It is clarified that the tax is on passengers 

52 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

and goods and the same has to be paid by the owners of the motor

vehicles whose responsibility it is to pay. Therefore, there is no

substance in the argument concerning legislative competence of

the State Legislature in enacting the Act of 1955 or the Amendment

and Validation Act of 1997.

Summary of conclusions:

23. In the result we arrive at the following conclusions:

i. The Act of 1955, as amended by the Amendment and Validation

Act of 1997, is valid. The said Act seeks to impose tax on

passengers and goods carried by road in motor vehicles and

the Himachal Pradesh Legislative Assembly possessed the

legislative competence under Article 246, read with Entry 56

of List II of the Seventh Schedule of the Constitution of India,

to enact the Act of 1955 and the Amendment and Validation

Act of 1997.

ii. By enacting the Amendment and Validation Act of 1997, the

Himachal Pradesh State Legislature has validly removed the

basis of the judgment of the Division Bench of the High Court

dated 27 March, 1997, inter-alia, by amending the definition of

the term ‘business’; defining the terms ‘fare’, ‘freight’ and ‘road’;

deleting the Explanation to Section 3(1); and inserting Section

3 (1A) which brought non-fare paying passengers at par with

fare-paying passengers for the purpose of levying tax under

the Act. Thus, the Amendment and Validation Act of 1997 is a

valid piece of Legislation.

iii. The activity of the appellant in providing gratis transportation

to its employees, and their children, would be a taxable activity

under Section 3(1-A) of the Amendment and Validation Act of

1997.

24. The next question is with regard to the liability of the appellants to

pay the tax under the Act of 1955 as amended by the Amendment

and Validation Act of 1997. The Act of 1955 was assailed in

W.P.(C)No.1733 of 1995 by the appellants herein. The High Court

of Himachal Pradesh by judgment dated 27.03.1997 struck down

certain provisions of the Act and held that the Act did not apply to

the appellants herein. The Special Leave Petition filed against the

said judgment was also dismissed by this Court on 28th July, 1997. 

[2023] 12 S.C.R. 53

NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

Thereafter, the Amendment and Validation Act of 1997 was enacted

by the legislature of the State of Himachal Pradesh. The amendments

were unsuccessfully challenged by the appellants herein by filing

writ petitions before the High Court. The impugned orders of the

High Court of Himachal Pradesh were passed in December 2008

and July, 2009. The Special Leave Petitions filed before this Court

were converted to Civil Appeals as leave was granted in them. This

Court has now upheld the Amendments made to the Act of 1955 by

virtue of the Amendment and Validation Act of 1997 and affirmed

the judgment of the High Court of Himachal Pradesh. Therefore,

the question is from when the appellants herein would have to pay

the tax as prior to 1997 they were successful in assailing the Act of

1955 and it was only thereafter that the Amendment and Validation

Act of 1997 was passed by the legislature of the State of Himachal

Pradesh. That was also challenged by the appellants herein and the

controversy has now finally been set at rest. Therefore, the question

is, whether, the appellants herein would be liable to pay the tax

from the date when the Amendment and Validation Act of 1997 was

passed or from any future date?

25. We have considered this question in the light of the fact that the

appellants are public sector organisations (and not private operators)

who are engaged in transporting their employees and their children

to the work sites and to the school and back gratis as a facility being

provided to them having regard to the location of the work sites in

remote hilly terrain and to ensure the safety of the children of the

employees of the appellant organisations.

26. As there has been a long passage of time since the enactment of the

Amendment and Validation Act of 1997, that is about twenty-six years

till date and by now there would have been replacement of the motor

vehicles or buses by the appellants and their liability to pay the said

taxes, being at large, and now set at rest, we think that, in exercise

of our powers under Article 142 of the Constitution, the appellants

should be made liable to pay the tax w.e.f. 01.04.2023, the current

financial year onwards and not for the period prior thereto. One of

the reasons for directing so is by bearing in mind that the affected

appellants herein are not private bus operators or stage carriage

operators but are public sector units engaged in hydro-power projects

and irrigation projects and as a convenience or facility, owning buses

for transporting their employees and children of the employees to 

54 [2023] 12 S.C.R.

SUPREME COURT REPORT: DIGITAL

the work sites and to schools and return to their homes as a facility

being provided to them for the reasons narrated above. That apart,

we have now held that by enacting the Amendment and Validation

Act of 1997, the lacunae pointed out by the High Court vide the

judgment and order dated 27 March, 1997 have been removed.

Therefore, saddling the appellants with any anterior demand would

not be just and proper. We order accordingly. Therefore, while

moulding the relief to be given to the appellants herein, only with

regard to the period from which the liability to pay tax under the Act

of 1955 as amended by the Amendment and Validation Act of 1997,

the appeals stand dismissed.

27. In the result, these appeals are dismissed and the final Orders of

the Division Bench of the High Court of Himachal Pradesh, dated 11

December, 2008 and 06 May, 2009 whereby the vires of the Act of

1955 as amended from time to time, particularly by the Amendment

and Validation Act of 1997 has been upheld and the writ petitions

filed by the appellants herein, i.e., Civil Writ Petition Nos. 725 of

1998, 422 of 1998, 401 of 2001, 464-467 of 2001 and 79 of 2007,

have been dismissed, are hereby affirmed, subject to what has been

clarified in Paragraph 26 above.

Parties to bear their respective costs.

Pending applications, if any, stand disposed of in the aforesaid terms.

Headnotes prepared by: Ankit Gyan Result of the case : Appeals dismissed.