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TMI Blog2024 (10) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the Judgment and Order passed by the Single Bench dated 29.06.2012 in Civil Writ Jurisdiction Case No.5108 of 2012 (hereinafter referred to as the Single Bench Judgment ) has been set aside and it has been held that the appellant(s) herein could not raise any demand of tax/fee/royalty on advertisement(s) since it has been made without any legislative sanction and is, thus, violative of Article 2653 of the Constitution of India, 1950 (hereinafter referred to as the Constitution ). The Division Bench further directed that all amounts recovered by the appellants herein on this count i.e., by way of tax on advertisement(s), be refunded to the concerned parties, as also that, as a consequence, there was no question of any imposition of penalty by the Appellant No.1/the Patna Municipal Corporation (hereinafter referred to as the Corporation ). CONTEXT : 6. On 29.08.2005, a Meeting was called by the Appellant No.2/Municipal Commissioner-cum-Chief Executive Officer, attended by representatives of the advertising agencies (respective Respondents No.1), wherein it was resolved that if any agency puts up its advertisement(s), it will have to submit a list of advertisement(s), the place/l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal Corporation should accept the tax/royalty/rent payable by these petitioners in accordance with the 2007 rates fixed by the Patna Municipal Corporation. On 18.07.2012, the Corporation sent a Demand Notice to the Respondent No.1 to pay Rs.21,98,000/-(Rupees Twenty One Lakhs Ninety Eight Thousand) as royalty/fee/tax in light of the Single Bench Judgment, to which the Respondent No.1 replied on 28.01.2013 contending that the same was calculated wrongly and, thus, a corrected Demand Notice ought to be sent. As the Corporation did not respond to this, the Respondent No.1 continued paying royalty/fee/tax as self-assessed by it i.e. at the rate of Re.1 per square foot. 8. The Respondent No.1 and others, similarly-situated, preferred intra-Court appeal(s) before the Division Bench of the High Court assailing the Single Bench Judgment. The Division Bench, by way of the Impugned Judgment, quashed the enhancement itself, and held that the Corporation had no power to charge royalty/fee/tax under the Act, since it was necessary to frame Regulations. The Impugned Judgment reasoned that in the absence of such Regulations, there was no authority in law to levy/impose/collect tax, as sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- (Rupees Sixty Four Lakhs Fifty Thousand and Forty). Learned counsel further submitted that only at this belated stage, the Respondent No.1 preferred CWJC No.5108 of 2012, wherein Office Order dated 02.11.2007 as well as the Demand Notice dated 11.02.2012 were assailed. 11. Learned counsel submitted that by a detailed and comprehensive judgment, the learned Single Judge upheld the levy of charge by the Corporation and only the demand of penalty was interfered with. It was submitted that the learned Single Judge even observed that the writ petitioners before it, including Respondent No.1, were liable to pay the amount due to the Corporation in easy instalments in intervals of four months to be fixed by the Appellant-Corporation. Thus, learned counsel contended that in conformity with the Single Bench Judgment, the Corporation raised fresh demand on Respondent No.1 under letter dated 18.07.2012 for Rs.21,98,000/- (Rupees Twenty One Lakhs Ninety Eight Thousand). However, it was submitted that the Respondent No.1 deposited only a sum of Rs.50,000/- (Rupees Fifty Thousand) on 21.07.2012. At this juncture, learned counsel for Respondent No.1 submitted that Respondent No.1 on 28.01.2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No.1 and were made effective from 02.11.2007 at the rate of Rs.10 per square foot. 14. Learned counsel in support of the above has relied upon the decisions of this Court in Indsil Hydro Power and Manganese Limited v State of Kerala, (2021) 10 SCC 165, the relevant being Paragraphs 50 to 564; Century Spinning and Manufacturing Company Ltd. v Ulhasnagar Municipal Council, (1970) 1 SCC 582, the relevant being Paragraph 115, and; Union of India v Indo-Afghan Agencies Ltd., (1968) 2 SCR 366, the relevant being Paragraphs 10 and 24 6 . SUBMISSIONS BY THE RESPONDENT(S) NO.1: 15. Per contra, learned counsel for Respondent No.1 submitted that the Impugned Judgment has dealt with all relevant aspects and is legally and factually correct, needing no interference. 16. It was submitted that the Division Bench rightly held that tax could not be levied by the Corporation, as such power cannot be exercised by the Corporation on its own, as it is in the domain of the Legislature to confer such power, which has not been done. It was further submitted that absence of such power coupled with the fact, that no procedure was adopted before such imposition, would be fatal, as the same cannot be arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts interference. Though the Division Bench has elaborated on the law relating to imposition of tax/levy, we find that the issue was not examined in the manner required. The core question confronting us, as it was before the Division Bench, is 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. The Court, at this juncture, would clarify that there can be no issue with the proposition of law as stands settled by the various earlier decisions of this Court with regard to the power and modality of charging of tax/levy, which obviously has to be done in terms of the power conferred under/by authority by law. 23. In the present case, however, it cannot be lost sight of, as also elucidated in Indsil Hydro Power and Manganese Limited (supra), 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 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the parties, though, not referable to any statutory instrument. For such benefit or privilege conferred upon them, the agreements arrived at between the parties contemplated payment of charges for such conferral of advantage. Such charges, in our view, were perfectly justified. 9 25. The decisions pressed into service by Respondent No.1, we are afraid, are of no aid to its case. As far as the 5-Judge Bench decision in Ghaswala (supra) is concerned, the question that arose for consideration therein was whether the Settlement Commission constituted under Section 245-B of the Income Tax Act, 1961 has the jurisdiction to reduce or waive the interest chargeable under Sections 234-A, 234-B and 234-C of the Act, while passing orders of settlement under Section 245-D(4) of the Act. The Court, inter alia, reasoned that The Commission while exercising its quasi-judicial power of arriving at a settlement under Section 245-D cannot have the administrative power of issuing directions to other income tax authorities. It is a normal rule of construction that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would like to cover, is the proportionality/reasonableness in the enhancement of the rate from Re.1 per square foot to Rs.10 per square foot. Whilst at first blush, the jump may seem high, being ten times, ultimately, it is subjective. Nothing has been canvassed before us to indicate that such rate was exorbitant or disproportionate, requiring judicial interdiction. There is no dispute that in the Meeting held on 29.08.2005, the advertising companies did not object to payment of royalty, as sought by the Corporation. Hence, a challenge could, later be mounted on limited grounds to the quantum/rate of royalty, and not on the decision to charge royalty itself. Even otherwise, as we do not find that the royalty was a tax/levy, the action of the Corporation cannot be struck down merely on the ground of having quoted Section 431 of the Act (wrongly), for, quoting the wrong provision of law, when the power to do an act otherwise exists, would not invalidate or render illegal the act in question. A Bench of three learned Judges in N Mani v Sangeetha Theatre, (2004) 12 SCC 278 held: 9. It is well settled that if an authority has a power under the law merely because while exercising that po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand: Without prejudice, to the preceding paragraphs and submissions, it is submitted that till no regulations are framed by the State Government, the respondent no.1 agrees to pay royalty to the Municipal Corporation at the enhanced rate of Rs.10 per sq. ft. per annum, prospectively. However, the same may be adjustable with the future demands ought to be raised by the Municipal Corporation after the Regulations under the Bihar Municipal Act, 2007, comes into effect. 34. To the above, we only observe that payment of enhanced rate of Rs.10 per square foot was not made retrospective by the Corporation, as it was made effective from November, 2007, i.e., 10 months after the resolution which was passed in January, 2007, and thus, we do not find any occasion to interfere in such demand from the date it was made effective by the Corporation as there is no element of retrospectivity involved. 35. Yet, we hasten to add that future enhancement, if any, in the rate of royalty cannot be made to operate and/or have effect retrospectively. The same would have effect and operate only prospectively. 36. Accordingly, in view of the discussions hereinabove, the Court finds that the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons. 38. Parties shall bear their own costs. 39. Both appeals stand disposed of in terms aforesaid. POST-SCRIPT : 40. After we reserved judgment, a 9-Judge Bench of this Court in Mineral Area Development Authority v Steel Authority of India, 2024 SCC OnLine SC 1796, by a majority of 8:1, has held as under, fully supporting our view hereinabove: 126. There are major conceptual differences between royalty and a tax: (i) the proprietor charges royalty as a consideration for parting with the right to win minerals, while a tax is an imposition of a sovereign; (ii) royalty is paid in consideration of doing a particular action, that is, extracting minerals from the soil, while tax is generally levied with respect to a taxable event determined by law10; and (iii) royalty generally flows from the lease deed as compared to tax which is imposed by authority of law. xxx 128. This Court has held that royalty is not a tax, in several decisions. In State of H P v . Gujarat Ambuja Cement Ltd 11 , a three judge Bench of this Court held royalty not to be a tax. The subsequent decision in Indsil Hydro Power Manganese Ltd. v . State of Kerala 12 brought out the distinction between tax and royalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords and Phrases (6th Edn., 2000, Vol. 3, p. 2341): The word royalties signifies, in mining leases, that part of the reddendum which is variable, and depends upon the quantity of minerals gotten or the agreed payment to a patentee on every article made according to the patent. Rights or privileges for which remuneration is payable in the form of a royalty. Words and Phrases, Legally Defined (3rd Edn., 1990, Vol. 4, p. 112): A royalty, in the sense in which the word is used in connection with mining leases, is a payment to the lessor proportionate to the amount of the demised mineral worked within a specified period. Wharton's Law Lexicon (14th Edn., p. 893): Royalty. Payment to a patentee by agreement on every article made according to his patent; or to an author by a publisher on every copy of his book sold; or to the owner of minerals for the right of working the same on every ton or other weight raised. Mozley Whiteley's Law Dictionary (11th Edn., 1993, p. 243): A pro rata payment to a grantor or lessor, on the working of the property leased, or otherwise on the profits of the grant or lease. The word is especially used in reference to mines, patents and copyrights. Prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of view dead rent can be described as the minimum guaranteed amount of royalty payable to the lessor but calculated on the basis of the area leased and not on the quantity of minerals extracted or removed. In H.R.S. Murthy v. Collector [H.R.S. Murthy v. Collector, AIR 1965 SC 177 : (1964) 6 SCR 666] too the Constitution Bench of this Court had defined royalty to mean the payment made for the materials or minerals won from the land . 61. The judicial opinion as prevailing amongst the High Courts may be noticed. A Full Bench of the High Court of Orissa held in Laxmi Narayan Agarwalla v. State of Orissa [Laxmi Narayan Agarwalla v. State of Orissa, 1983 SCC OnLine Ori 16 : AIR 1983 Ori 210 : (1983) 55 CLT 362] , SCC OnLine Ori para 12 : AIR at p. 224, para 12 [R]oyalty is the payment made for the minerals extracted. It is not tax. In Surajdin v. State of M.P. [Surajdin v. State of M.P., 1959 SCC OnLine MP 19 : AIR 1960 MP 129 : 1960 MPLJ 39] a Division Bench of the High Court of Madhya Pradesh referred to Wharton's Law Lexicon and Mozley Whiteley's Law Dictionary and said (at AIR p. 130, para 7) royalties are payments which the Government may demand for the appropriation of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed thereunder. In its secondary sense, the word royalty would signify, as in mining leases, that part of the reddendum, variable though, payable in cash or kind, for rights and privileges obtained. (See Inderjeet Singh Sial v. Karam Chand Thapar [Inderjeet Singh Sial v. Karam Chand Thapar, (1995) 6 SCC 166] .) 16. It was submitted that the Division Bench rightly held that tax could not be levied by the Corporation, as such power cannot be exercised by the Corporation on its own, as it is in the domain of the Legislature to confer such power, which has not been done. It was further submitted 46. Royalty is not a tax. Simply because the royalty is levied by reference to the quantity of the minerals produced and the impugned cess too is quantified by taking into consideration the same quantity of the mineral produced, the latter does not become royalty. The former is the rent of the land on which the mine is situated or the price of the privilege of winning the minerals from the land parted with by the Government in favour of the mining lessee. The cess is a levy on mineral rights with impact on the land and quantified by reference to the quantum of mineral produced. The distinction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment Authority v. Steel Authority of India [Mineral Area Development Authority v. Steel Authority of India, (2011) 4 SCC 450] , certain questions concerning royalty as determined under the provisions of the Mines and Minerals (Development and Regulation) Act, 1957 now stand referred to a Bench of nine Judges, which reference is still pending consideration. However, none of those issues arise in the present matter. 54. On the use of the expression royalty in a contract, we may note the following observations in Inderjeet Singh Sial v. Karam Chand Thapar [Inderjeet Singh Sial v. Karam Chand Thapar, (1995) 6 SCC 166] : (SCC p. 173, paras 12-13) 12. The word royalty thus, in the deed was used in a loose sense so as to convey liability to make periodic payments to the assignor for the period during which the lease would subsist; payments dependent on the coal gotten and extracted in quantities or on dispatch. We have therefore to construe document Ext. D-5 on its own terms and not barely on the label or description given to the stipulated payments. Conceivably this arrangement could well have been given a shape by using another word. The word royalty was perhaps more handy for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all. The exhibitors contend that because they are required to enter into these agreements, any payment under the agreement is a compulsory exaction and is, therefore, tax. We do not agree. Under the terms of the agreement, the Films Division has to supply certain prints to the theatre owners at stated intervals. The Films Division is required to maintain a distribution network for this purpose. It is required to pack these films and is required to allow the exhibitors to retain these films in their possession for a certain period. The films are to be returned to the Films Division thereafter. The charge is termed in the agreement as rental for the films. It covers charges for preparing the prints of the films for distribution, and for packing them for delivery. These are clearly services rendered by the Films Division for which it is paid one per cent of the net collection as a rental. As stated earlier, the total cost of preparing prints, packing them and distributing them is much higher than the total recovery made by the Films Division by way of rental from all the exhibitors. There is a clear nexus between the services rendered and the payment to be made. The payment, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, be viewed, at the highest, as a fee and not as a tax. It is an agreed payment, and is not unreasonable. The High Court [Motion Picture Assn. v. Union of India, 1995 SCC OnLine Del 600 : (1995) 60 DLT 180] has rightly negatived the contention of the respondent exhibitors. 56. Thus, the expression royalty has consistently been construed to be compensation paid for rights and privileges enjoyed by the grantee and normally has its genesis in the agreement entered into between the grantor and the grantee. As against tax which is imposed under a statutory power without reference to any special benefit to be conferred on the payer of the tax, the royalty would be in terms of the agreement between the parties and normally has direct relationship with the benefit or privilege conferred upon the grantee. 5 11. Public bodies are as much bound as private individuals to carry out representations of facts and promises made by them, relying on which other persons have altered their position to their prejudice. The obligation arising against an individual out of his representation amounting to a promise may be enforced ex contracts by a person who acts upon the promise: when the law requires th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Crown, and the learned Judge came to the conclusion that there was no contract and no damages could be awarded. In Robertson v. Minister of Pensions [(1949) 1 KB 227] Denning, J. observed at p. 231: The Crown cannot escape by saying that estoppels do not bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, the doctrine that the Crown cannot bind itself so as to fetter its future executive action. That doctrine was propounded by Rowlatt, J., in Rederiaktiebolaget Amphitrite v. King but it was unnecessary for the decision because the statement there was not a promise which was intended to be binding but only an expression of intention. Rowlatt, J., seems to have been influenced by the cases on the right of the Crown to dismiss its servants at pleasure, but those cases must now all be read in the light of the judgment of Lord Atkin in Reilly v. King [(1954) AC 176, 179] . In my opinion the defence of executive necessity is of limited scope. It only avails the Crown where there is an implied term to that effect or that is the true meaning of the contract. Denning, J., was dealing with a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall apply for a licence or renewal of licence, as the case may be, to the Chief Municipal Officer in such Form as may be specified by the Municipality. (3) The Chief Municipal Officer shall, after making such inspection as may be necessary and within thirty days of the receipt of the application, grant or renew a licence, as the case may be, on payment of such fee as may be determined by regulations, or refuse or cancel a licence, as the case may be. (4) The Chief Municipal Officer may, if, in his opinion, the proposed site for any advertisement is unsuitable from the considerations of public safety, traffic hazards or aesthetic design, refuse to grant a licence, or to renew any existing licence, within thirty days of the receipt of the application. (5) Every licence shall be for a period of one year except in the case of sites used for any temporary congregation of whatever nature including fairs, festivals, circus, yatra, exhibitions, sports events, or cultural or social programmes. (6) The Chief Municipal Officer shall cause to be maintained a register wherein the licences issued under this Section shall be separately recorded in respect of advertisement sites- (a) on telepho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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