Introduction:

The Rajasthan High Court, in the case of Khuman Singh v. State of Rajasthan & Ors., and other connected matters [2025 LiveLaw (Raj) 284], delivered a significant judgment addressing the validity of a Transport Department amendment that introduced a new category of “sleeper bus” for the purposes of levying motor vehicle tax. A division bench comprising Justice Vinit Kumar Mathur and Justice Anuroop Singhi dismissed the petitions filed by bus operators, including the petitioner Khuman Singh, who had challenged the State’s competence to create this separate taxable category. The court held that the State Government was well within its legislative domain to categorize vehicles for taxation purposes, provided the categorisation was founded on intelligible differentia and had a rational nexus with the object sought to be achieved. The decision provides important clarity on the interplay between the Motor Vehicles Act, 1988, the Rajasthan Motor Vehicles Taxation Act, 1951, and the powers of the State in designing tax structures for vehicles operating within its jurisdiction.

Arguments of the Petitioner:

The petitioners, including bus operators led by Khuman Singh, argued that the 2021 notification issued by the State Transport Department was unconstitutional and beyond the legislative competence of the State. They highlighted that under the Rajasthan Motor Vehicles Taxation Act, 1951, the State was empowered to levy tax only on the basis of the “class” of motor vehicles and their seating capacity. According to them, the concept of “class” was defined strictly under the Central Motor Vehicles Act, 1988, particularly Section 41, which empowers only the Central Government to notify different classes of motor vehicles. By introducing “sleeper bus” as a separate taxable category, the petitioners argued, the State Government had overstepped its constitutional limits, encroaching upon a field reserved for the Union Government.

The petitioners further submitted that their buses were already registered as contract carriages with body type “sleeper” under valid permits and had been paying taxes under the category applicable to buses prior to the 2021 notification. Under the 2019 notification, sleeper buses had been covered under a general category based on seating capacity and were entitled to exemptions available to those buses. However, after the 2021 amendment, a separate category of “sleeper bus” was carved out, subjected to higher tax, and denied the exemptions available to similar passenger buses. The petitioners contended that this selective exclusion of sleeper buses from exemption benefits was arbitrary, discriminatory, and violative of the principle of equality under Article 14 of the Constitution.

Additionally, the petitioners submitted that even if the State was deemed competent to create such a category, it could not deny exemptions selectively without a valid justification. They argued that sleeper buses, like other passenger buses, contributed to the same transport ecosystem, and treating them differently in terms of taxation and exemptions was an unreasonable classification lacking rational nexus with any legitimate state objective.

Arguments of the Respondents:

The State, defending its 2021 notification, contended that the power to levy and structure motor vehicle tax is squarely vested in the State Legislature under the provisions of the Rajasthan Motor Vehicles Taxation Act, 1951. While the classification of vehicles into broad “classes” such as motor cars, buses, or goods vehicles is indeed governed by the Central Motor Vehicles Act, 1988, the State retains the authority to create sub-categories within those classes for the limited purpose of taxation. The State argued that sleeper buses fell squarely within the definition of “bus” under Sections 2(7) and 2(29) of the Act, but their unique body type—fitted with berths instead of conventional seats—warranted a separate categorisation in terms of tax policy.

The State further argued that Rule 7.14A of the Rajasthan Motor Vehicles Rules, 1990, already recognised “sleeper coaches” as a distinct body type. Therefore, creating a corresponding tax category for sleeper buses was not an act of creating a new “class” of vehicles, but merely an administrative step to levy tax on an existing, recognised category within the class of buses. Thus, the notification was within the competence of the State and consistent with the legislative scheme.

On the issue of exemptions, the State submitted that exemptions under the taxation law are a matter of policy discretion, guided by socio-economic objectives and public interest. The rationale behind granting exemptions to buses with seating capacity operating within Revenue Divisional Limits, while withholding it from sleeper buses, was to encourage smaller operators and promote regional connectivity. If sleeper buses were also granted exemption, it would distort competition by allowing large operators with luxury sleeper coaches to compete unfairly against local operators providing basic bus services. The differentiation, therefore, was based on intelligible differentia and had a rational nexus to the object of promoting equitable transport services.

Judgment of the Court:

After hearing both sides, the Division Bench upheld the validity of the State’s notification and dismissed the petitioners’ challenge. The court began by examining the scope of legislative competence under the constitutional and statutory framework. It noted that the definitions under Sections 2(7) and 2(29) of the Motor Vehicles Act, 1988, clearly covered buses, and that “sleeper bus” was not a new class of vehicle created by the State but rather a sub-category based on body type within the already recognised class of buses. The bench observed that Rule 7.14A of the Rajasthan Motor Vehicles Rules, 1990, expressly defined “sleeper coach” and recognised its distinct features. Therefore, creating a separate taxable category for sleeper buses was merely a fiscal decision consistent with the legislative scheme.

The court clarified that the State Government had not created a new “class” of vehicle in violation of Section 41 of the Motor Vehicles Act, 1988. Instead, it had exercised its competence under the Rajasthan Motor Vehicles Taxation Act, 1951, to determine the rate of tax payable by vehicles within its jurisdiction, based on rational sub-classifications. The insertion of “sleeper bus” as a category, therefore, could not be said to be de hors the law.

On the issue of exemptions, the bench held that taxation policy inherently allows the State to differentiate between categories of vehicles, provided the differentiation is based on intelligible differentia and has a rational nexus with the object sought to be achieved. The court referred to the State’s reasoning that exemptions were granted to promote buses operating within revenue divisional limits and to support small-scale operators, while sleeper buses were excluded from such exemptions to avoid market distortion and unfair competition. The court found this reasoning logical, rational, and in line with the principles of Article 14 of the Constitution.

The judgment underscored that taxation is a tool of social and economic policy, and courts generally refrain from interfering in such policy decisions unless there is manifest arbitrariness or violation of constitutional guarantees. In this case, the court held that the petitioners had failed to establish any arbitrariness or illegality in the State’s classification or exemption policy. Accordingly, the petitioners’ demand to declare the 2021 amendment as de hors the law was rejected.

The decision reinforces the principle that States have wide latitude in designing taxation policies, especially in sectors like transport, where local considerations, operational conditions, and socio-economic objectives must guide the fiscal framework. It also clarifies that sub-categorisation based on body type or seating arrangement is a legitimate method for taxation, as long as it operates within the umbrella of the broader class defined under central legislation.