2024 (10) TMI 973 - SC - Indian Laws

Levy of of tax/fee/royalty on advertisement(s) - demand made without any legislative sanction and is, thus, violative of Article 265 of the Constitution of India, 1950 - whether the demand is by way of a tax/levy or simply in the nature of royalty for permission for advertising through hoardings within the limits of the Corporation? HELD THAT - In the present case, it cannot be lost sight of, as also elucidated in INDSIL HYDRO POWER AND MANGANESE LIMITED VERSUS STATE OF KERALA AND ORS. 2021 (9) TMI 1561 - SUPREME COURT , especially in Paragraph 56 thereof, after considering a host of precedents, that the imposition of royalty cannot be equated with imposition of tax/levy. Even otherwise, the law is no longer res integra that conduct of the parties and acquiescence would preclude a party from turning around and assailing a decision acquiesced to, except where there is an inherent lack of jurisdiction, or the exercise of authority is perverse or malafide, in law or in fact. In the instant factual setting, the advertising companies/respective Respondents No.1 had agreed in the year 2005 to pay a royalty of Re.1 per square foot to the Corporation for putting up hoardings/advertisements. There are no hesitation to hold that such revision of rate was within the power of the Corporation. However, at this very stage, it is equally unhesitant to hold that the Resolution to charge enhanced royalty in exercise of purported power under Section 4318 of the Act was misplaced as royalty is not tax. It has been authoritatively clarified by this Court that royalty and tax are not one and same. As such, the Corporation s power to charge royalty cannot be interfered with on the ground that the same is not available, either in the Act or in the Regulations concerned, as there is no question of the said royalty being a tax. Section 431 of the Act, therefore, would not come into the picture where royalty, that too by way of and under an agreement/understanding is concerned. In order to balance equities, the Court would indicate that the enhanced rate of Rs.10 per square foot would be payable by the respective Respondents No.1/advertising companies and other similarlysituated persons in terms of the Resolution of the Corporation from the date the same was made public/communicated to the concerned parties, whichever is later, with simple interest at the rate of 6% per annum. The Corporation is directed to furnish computation of amounts due to the parties concerned within 4 weeks. Payments be made within 16 weeks thereafter by the parties concerned, failing which they shall carry interest @ 10% per annum and be recoverable as arrears under the Bihar and Orissa Public Demands Recovery Act, 1914. Needless to state, amount(s), if any, paid over and above Re.1 per square foot, for the period in question, shall be adjusted towards the final liability to be determined by the Corporation vis-a-vis the respective Respondents No.1 herein and all other similarly-situated persons. Appeal disposed off.

Summary

Issues Involved:
1. Whether the demand by the Patna Municipal Corporation was a tax or royalty.
2. The legality of the Corporation's power to levy such charges.
3. The validity of the enhancement of the rate from Re.1 per square foot to Rs.10 per square foot.
4. The imposition of penalties for non-payment.

Issue-wise Analysis:

1. Demand as Tax or Royalty:
The core issue was whether the demand by the Patna Municipal Corporation was a tax or royalty. The Supreme Court concluded that the demand was in the nature of royalty, not a tax. It was emphasized that royalty and tax have distinct legal connotations. Royalty is a payment made for the privilege of using property, often based on an agreement between parties, while a tax is a compulsory exaction imposed by statutory authority without reference to any special benefit to the payer. The Court highlighted that the arrangement between the Corporation and the advertisers was consensual and based on an agreement, thus characterizing the payment as royalty.

2. Legality of the Corporation's Power:
The Court examined whether the Corporation had the authority to levy such charges. It was determined that the Corporation's power to charge royalty was not contingent on statutory provisions or regulations, as royalty is not a tax. The Court noted that the Corporation's decision to charge royalty was based on an agreement with the advertisers, which was within its power. The Corporation's reference to Section 431 of the Bihar Municipal Act was deemed misplaced since royalty is not a tax, and thus, the provision was not applicable.

3. Validity of Rate Enhancement:
The enhancement of the rate from Re.1 per square foot to Rs.10 per square foot was challenged. The Court found the revision of rates to be within the Corporation's power, noting that the initial rate was set after a meeting with stakeholders and was revised after more than two years. The Court did not find the increase to be exorbitant or disproportionate, and it was not objected to by the advertisers at the time of the meeting. The Court held that the enhancement was not retrospective and was effective from November 2007, thus requiring no interference.

4. Imposition of Penalties:
The imposition of penalties for non-payment was addressed. The Court concluded that the Corporation did not have the power to impose penalties, as no such authority existed. However, the Court clarified that the Corporation could charge interest on delayed payments as compensation for late payment, distinguishing it from a penalty. The Court directed that future enhancements in royalty rates should only operate prospectively and not retrospectively.

Conclusion:
The Supreme Court set aside the Division Bench's judgment, upholding the Corporation's decision to charge Rs.10 per square foot as royalty. It was clarified that the demand was not a tax, and the Corporation's power to levy royalty was valid. The Court disallowed the imposition of penalties but permitted the charging of interest on delayed payments. The appeals were disposed of with directions for the Corporation to furnish computations of amounts due, and payments were to be made within specified timelines, with interest applicable for delays.