2008 (3) TMI 466 - SC - VAT and Sales Tax

Whether the Cantonment Board has any power to levy entry tax? Held that - Appeal dismissed. What is permissible according to Act is imposing tax within the parameters of section 137 for vehicles, horses and other animals for being kept in the ordinary course within municipality and is used in the ordinary course within it than levying entry tax by the Cantonment Board. The Cantonment Board did not have any authority or competence to levy tax on the entry of vehicles in the Cantonment area under section 60 of the Cantonment Act, 1924. The conclusions arrived at by the impugned judgment of the Division Bench are quite justified and no interference is called for.

Issues Involved:
1. Power, competence, and authority of the Cantonment Board to levy entry tax on vehicles entering the cantonment area.
2. Legal provisions under the Cantonments Act, 1924 and the Bihar and Orissa Municipal Act, 1922 concerning taxation.
3. Comparison with similar cases in other states, particularly Madhya Pradesh.

Detailed Analysis:

Power, Competence, and Authority of the Cantonment Board:
The central question in this appeal is the power, competence, and authority of the Cantonment Board to levy entry tax on vehicles entering the cantonment area. The appellant, Ramgarh Cantonment Board, exercised its power under Section 60 of the Cantonments Act, 1924, to invite tenders for collecting vehicle tax. The highest bidder, respondent No. 3, was awarded the contract to collect vehicle tax at Rs. 10 per goods vehicle for six months starting from March 12, 2001. However, the Cantonment Board later restrained respondent No. 3 from collecting the tax following directions from the Deputy Commissioner, Hazaribagh.

Legal Provisions Under the Cantonments Act, 1924 and the Bihar and Orissa Municipal Act, 1922:
Section 60 of the Cantonments Act, 1924, allows the Board to impose any tax that can be imposed by a municipality in the state where the cantonment is situated, with prior sanction from the Central Government. The Division Bench held that the power to levy tax under Section 60 is not independent but is co-extensive with the corresponding power vested in the municipality. Therefore, to determine whether the Cantonment Board can levy entry tax, it is necessary to examine if the municipality has similar powers under the Bihar and Orissa Municipal Act, 1922.

Chapter IV of the 1922 Act deals with municipal taxation. Section 82 allows the imposition of taxes on vehicles, horses, and other animals as listed in the First Schedule. However, Section 137 specifies that such taxes are not payable for vehicles registered under Chapter X, which deals with vehicles plying for hire. Furthermore, Section 326 empowers municipalities to regulate motor cars and vehicles plying for hire but excludes them from taxation.

The definitions of "vehicle" and "motor car" in Sections 3(30) and 3(30A) of the 1922 Act exclude mechanically propelled vehicles from the tax. Therefore, since the municipality cannot levy entry tax on mechanically propelled vehicles, the Cantonment Board also lacks this power.

Comparison with Similar Cases in Other States:
The appellants cited the case of Cantonment Board, Mhow v. M.P. State Road Transport Corporation, where the Cantonment Board in Madhya Pradesh was permitted to levy entry tax on motor vehicles. However, this was based on specific powers granted under Section 127 of the M.P. Municipalities Act, 1961, which allows municipalities in Madhya Pradesh to levy entry tax on vehicles. No such power exists under the 1922 Act for municipalities in Bihar.

The Division Bench noted that the legislative scheme in Bihar does not permit municipalities to levy entry tax on mechanically propelled vehicles. Consequently, the Cantonment Board, Ramgarh, cannot levy such a tax. The Madhya Pradesh case does not apply here due to the absence of similar legislative provisions in Bihar.

Conclusion:
The Division Bench concluded that the Cantonment Board lacks the authority to levy entry tax on vehicles entering the cantonment area under Section 60 of the Cantonments Act, 1924. The learned counsel's reliance on cases from other states was found inapplicable due to differing legislative provisions. The appeal was dismissed with costs, and the amount deposited by respondent No. 3 was ordered to be refunded within eight weeks, considering the principles of equity, fairness, and good conscience.

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