Inside Supreme Court verdict on legality of State Governments levying and collecting Authorization Fee/Border Tax

Supreme Court: In a batch of 117 petitions, including four contempt petitions filed primarily by the transporters and tour operators under Article 32 of the Constitution of India assailing the legality of different State Governments levying and collecting Authorization Fee/Border Tax in violation of All India Tourist Vehicles (Permit) Rules, 2023, (‘Rules , 2023’) the division bench of Vikram Nath* and Satish Chandra Sharma, JJ. disposed of these petitions without interfering with the demands being raised by the State Governments while giving liberty to the petitioners to approach the jurisdictional High Courts for their reliefs, and said that as the State enactments, rules and regulations are not under challenge, it cannot be said that the demand of Border Tax/Authorization Fee at the borders by the respective State Governments is bad under law.

The Court noted that , it was the State of Tamil Nadu which was said to be realizing the Border Tax/ Authorization Fee but, later on, several other States were also complained of realizing similar Border Tax/ Authorization Fee despite the transporters or the vehicles entering the State having already paid the requisite tax/fee under the Rules, 2023.

The Court noted that the Rules, 2023 superseded the All-India Tourists Vehicles (Authorization/Permit) Rules, 2021. After that, the power of levying/collecting Border Tax/Authorization Fee by the State Governments at various border check posts from vehicles carrying All India Tourists Permit was to be done away with.

The Court noted that there were primarily two objects of bringing in the Rules, 2023:

• To make the movement of such tourist vehicles across the country through different States seamless and smooth;

• The revenue to be generated by the Centre to be proportionately shared with the State Governments, also taking into account their previous revenue generation, and also, keeping in mind that their earlier revenue income was not reduced in any manner.

The Court noted that the transporters started facing difficulties and harassment as alleged at the borders of different States where they were again being demanded Border Tax/Authorization Fee which has given rise to the filing of this group of petitions. Such demand of Border Tax/Authorization Fee was challenged on several grounds ranging from double taxation; levy being without legal authority; being in violation of the Rules, 2023 which had been framed under Entry 35 of List II of the Seventh Schedule to the Constitution of India, and various other grounds.

The Bench further noted that in this matter while issuing notices, interim relief was also granted that the State Governments were restrained from making any further realization of Border Tax/Authorization Fee.

The Court said that as the State enactments, rules and regulations are not under challenge, it cannot be said that the demand of Border Tax/Authorization Fee at the borders by the respective State Governments is bad under law.

The Court suggested that the petitioners, to succeed, have to consider challenging the State provision contained in the Act. Further, the petitioners should have first approached their jurisdictional High Courts to challenge their respective State enactments.

Thus, the Court disposed of these petitions without interfering with the demands being raised by the State Governments while giving liberty to the petitioners to approach the jurisdictional High Courts for their reliefs.

Further, the Court said that insofar as the tax already recovered, the same would be subject to final outcome of the petitions that may be filed before the High Courts. Insofar as the period of interim order passed by this Court is concerned, the petitioners would give undertakings before the High Courts that, in case they fail, they will make good on demands which would have been raised for the period for which the stay has been enjoyed

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