The Patna Municipal Corporation & Ors. Vs. M/s. Tribro Ad Bureau & Ors.
[Civil Appeal No. 11117 of 2024 @ SLP (Civil) No. 22592 of 2016]1
[A1: Patna Municipal Corporation
A2: Municipal Commissioner-cum-Chief Executive Officer
A3: Deputy Commissioner
A4: Chief Engineer
A5: Surveyor
A6: Accounts Officer]
[R1: M/s Tribro Ad Bureau
R2: State of Bihar R3: Mayor]
The Patna Municipal Corporation & Ors. Vs. M/s. Kraft & Ors.
[Civil Appeal No. 11118 of 2024 SLP (Civil) No. 24582 of 2024 @Diary No. 30152 of 2017]2
[A1: Patna Municipal Corporation
A2: Municipal Commissioner-cum-Chief Executive Officer
A3: Deputy Commissioner
A4: Chief Engineer
A5: Surveyor
A6: Accounts Officer]
[R1: M/s Kraft
R2: State of Bihar R3: Mayor]
Ahsanuddin Amanullah, J.
1. Heard learned counsel for the parties.
2. Delay condoned.
3. Leave granted in both petitions.
4. As the issue involved in both cases is same, these appeals are dealt with collectively. For the sake of convenience, facts in the Civil Appeal arising out of Special Leave Petition (Civil) No.22592 of 2016 are noticed.
5. Challenge is laid to the Final Judgment and Order passed by a Division Bench of the High Court of Judicature at Patna (hereinafter referred to as the "High Court") in Letters Patent Appeal No.1391 of 2012 dated 26.04.2016 (hereinafter referred to as the "Impugned Judgment") by which 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/location, size, etc. to the Authorised Officer of the Corporation, and that the Corporation would charge royalty at the rate of Re.1/- per square foot per year on such hoardings, which would be displayed on the land under the jurisdiction of the Corporation. The Appellants on 15.01.2007 came out with fresh rates of royalty/tax on advertisements whereby different rates of royalty for different kinds of hoardings and advertisements were prescribed, the same being Rs.10/- per square foot per year in the case of the respondent, which was made effective from 02.11.2007.
7. In the interregnum, the Patna Municipal Corporation Act, 1951 was repealed and replaced by the Bihar Municipal Act, 2007 (hereinafter referred to as the "Act"), which came into force with effect from 05.04.2007, vide Section 488(1) of the Act. Thus, the Corporation started operating under the (new) Act. By Office Order dated 02.11.2007, various rates of royalty/penalty under the provisions of the Act were prescribed and the order was made effective from 24.08.2007.
The Municipal Commissioner of the Corporation recommended that all those advertisers who had not paid their dues in terms of the order dated 02.11.2007 would be liable to be charged twice the rate fixed and further that hoardings displayed without permission should be removed and such persons would be charged a penalty five times the amount due from them. On 15.12.2010, the Council of the Corporation passed Resolution No.18 to cancel the registration of the advertising agencies that had defaulted in making payment of the enhanced royalty/fee/tax.
The same was done when it came to the notice of the Corporation that several advertising agencies had illegally displayed hoardings, with some not even having permission to do so from the Corporation and not having paid dues. On 11.02.2012, in terms of various Resolutions/decisions of the Corporation under the Act, a demand was raised towards royalty/fee/tax on the Respondent No.1 to the tune of Rs.64,50,040/- (Rupees Sixty-Four Lakhs Fifty Thousand and Forty).
This demand, as also the Office Order dated 02.11.2007 was assailed by filing a writ petition under Article 226 of the Constitution before the Patna High Court, wherein the learned Single Judge ultimately went on to quash 'the order of demand of penalty by the Patna Municipal Corporation in all the cases' and directed 'that the Patna Municipal 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 be imposed by the Corporation. Apropos the Regulations framed on 04.07.2012, published in the Gazette on 13.08.2012, the Division Bench held that the said Regulations pertain only to licensing provisions and not taxing provisions.
It added that when the Regulations were silent and do not speak of tax on advertisement, the same could not be levied by the Corporation. It further went on to hold that even the decision of the Corporation to auction-settle the right to collect advertisement tax from advertisers to private individuals is totally impermissible as the State/its instrumentalities cannot trade in taxation. The Division Bench was of the view that to levy, assess and raise any demand of tax is a sovereign function, which cannot be auction-settled to private individuals.
SUBMISSIONS ON BEHALF OF THE APPELLANTS:
9. Learned counsel for the appellants submitted that on 29.08.2005, the Corporation had taken a decision with regard to imposition of royalty in the Meeting held with representatives of advertising agency/cies. It was agreed that advertisers would make payment of royalty to the Corporation at the rate of Re.1 per square foot per annum based on the area of the hoardings concerned. Thus, it was submitted that the issue is limited only to charging of royalty and there is no imposition of any kind of tax, as has been erroneously held by the Single Bench as also by the Division Bench.
It was submitted that on 02.11.2007, the Corporation issued an Office Order whereby the rate of royalty was increased from Re.1 per square foot per annum to Rs.10 per square foot per annum. It was further submitted that on 18.07.2009, a Meeting was held between the Corporation (headed by the Appellant No.2) and representatives of advertisers, where there was no opposition to the proposal afore-noted. However, learned senior counsel contended that since the royalty was not being paid, in the year 2011, the Appellant No.2 recommended the imposition of penalty on the arrears due from the advertisers.
10. He further submitted that on 15.12.2010, in the General Meeting of the Corporation, it was decided that the registration of such defaulting advertising agency(ies) be cancelled, and this was followedup by the Corporation raising demand for payment of arrears of royalty from the concerned advertisers, including Respondent No.1, in whose case it was to the tune of Rs.64,50,040/- (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 had disputed the demand of Rs.21,98,000/- (Rupees Twenty One Lakhs Ninety Eight Thousand) and self-assessed the dues to be Rs.1,57,050/- (Rupees One Lakh Fifty Seven Thousand and Fifty) and after adjusting the amount already paid, calculated the payment to be made in three instalments of Rs.28,767/- (Rupees Twenty Eight Thousand Seven Hundred Sixty Seven) each, which Respondent No.1 paid on 28.01.2013, 29.05.2013 and 28.09.2013 by Draft(s).
Further, learned counsel for Respondent No.1 pointed out that on 30.03.2013, the Respondent No.1, on the same terms, self-assessed the royalties for the years 2012-2013, 2013-2014 and 2014-2015, as Rs.48,600/-, Rs.48,600/- and Rs.31,000/-, respectively and deposited the same on 30.03.2013, 31.03.2014 and 31.03.2015. It was also stated that, in the meantime, Respondent No.1 had approached the Division Bench against the Single Bench Judgment by instituting LPA No.1391 of 2012, leading to the Impugned Judgment.
12. Learned counsel for the appellants submitted that the simple and basic issue was the payment of royalty, as agreed to and accepted by the parties. It was stated that payments were also made, which now have been given the colour of being demand/imposition of tax, which, learned counsel contended, is absolutely not the case.
It was urged that the only issue, which at best could have been gone into by the High Court, was with regard to the quantum of enhancement from Re.1 per square foot to Rs.10 per square foot, but the imposition, on the head of "royalty", could not have been termed as "imposition of tax", as admittedly borne out from the record itself. It was further advanced that charge of royalty by the Corporation was also in terms of an agreement entered into between the parties, which was admitted by them in appellate proceedings before the Division Bench.
13. Learned counsel submitted that "royalty" and "tax" have different connotations in law and royalty, unlike tax, is not based on any statutory provision, but on agreement between the parties. Further, it was stated that the enhancement of the rate of royalty to Rs.10 per square foot from Re.1 per square foot, notified under Office Order dated 02.11.2007 was challenged by the Respondent No.1 only in the year 2012. By its advertisement issued on 15.01.2007, the Corporation came out with fresh rates of royalty on advertisements which were accepted by the Respondent 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 246.
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 arbitrarily enforced, in the absence of either a provision in law or without any procedure adopted, much less that sanctioned by Regulations, finally made/approved by the State Government as per the provisions of the Act.
17. It was emphasised that under Section 1467 of the Act, there has to be a licence for exhibition of advertisement, and it shall be in terms of the Regulations framed therein.
18. Learned counsel submitted that the Regulations for licensing for the purpose of advertisement were issued only on 13.08.2012 whereas the Demand Notice was dated 11.02.2012, i.e. much prior to the Regulations for licence being framed. Thus, it was his contention that there was no power to charge any fee prior to 13.08.2012, in view of the Regulations framed under Section 146 of the Act, which, inter alia, also provided for licence for purposes of advertisement. Moreover, it was submitted that Section 147 of the Act provides for tax on advertisement, which also is to be determined as per the Regulations.
19. However, it was contended that in the present case, there is no Regulation for levy of taxes in terms of Section 147 read with Section 423 of the Act. In absence thereof, the Corporation could not have acted in the manner it did.
20. Learned counsel submitted that there being no statutory backing of law to issue the Office Order dated 02.11.2007, the demand raised under such order is a nullity as there is neither any agreement nor statutory force to raise such demand and moreover, the said Office Order does not speak about any licence fee as licence also could not have been granted without framing the Regulations. It was further submitted that no recovery of any demand can be made by an executive order unless it has legislative backing.
21. Learned counsel submitted that the charging Rs.10 per square foot irrespective of whether such hoardings are on private or public place is also arbitrary and unsustainable. In support of his contentions, learned counsel relied upon the decisions of this Court in Commissioner of Income Tax, Mumbai v Anjum M H Ghaswala, (2002) 1 SCC 633; Punit Rai v Dinesh Chaudhary, (2003) 8 SCC 204; Union of India v Naveen Jindal, (2004) 2 SCC 510, and; State of Kerala v Chandramohanan, (2004) 3 SCC 429.
ANALYSIS, REASONING AND CONCLUSION:
22. Having given our anxious thought to the issue at hand, the Court finds that the judgment impugned warrants 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 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.
We may note that only 2 advertising companies, in praesenti, moved the High Court by way of letters patent appeals, whereas, we are informed, a majority of the advertising companies complied with making payment(s) @ Rs.10 per square foot subsequent to the decision of the Corporation dated 02.11.2007. It is also worthwhile to note that the initial rate viz. Re.1 per square foot of royalty in the year 2005 was fixed after a Meeting with all the stakeholders on 29.08.2005. The advertising companies concerned had agreed to pay Re.1 per square foot royalty per year on such hoarding. The same was merely revised on 02.11.2007 i.e., after a period of over 2 years.
24. We have no hesitation to hold that such revision of rate was within the power of the Corporation. However, at this very stage, we are also 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. As stated previously, royalty and tax cannot be equated - the nomenclatures cannot be used interchangeably in law, both carrying starkly different imports and connotations. For reasons above, we are unable to maintain as tenable the argument that the demand made by the Corporation was a compulsory exaction. Equally, we are unable to state that the demand was/bore the hallmarks of a tax.
The long and short of it is that 'Whatever be the nomenclature, the charges in the present cases were for the privilege enjoyed the basis for such charges was directly in terms of, and under the arrangement entered into 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 it only in the manner provided in the statute itself.', and held that 'the Commission in exercise of its power under Sections 245-D(4) and (6) does not have the power to reduce or waive interest statutorily payable under Sections 234-A, 234-B and 234-C except to the extent of granting relief under the circulars issued by the Board under Section 119 of the Act.' Herein, the question is whether the demand was tax or royalty, and we have arrived at the conclusion that it is royalty, traceable to the arrangement/agreement between the parties, which makes Ghaswala (supra) inapplicable in the extant facts.
26. Punit Rai (supra), decided by three learned Judges, emanated from an Election Petition filed before the High Court. In his concurring opinion, learned S. B. Sinha, J., held 'If a customary law is to be given a go-by for any purpose whatsoever and particularly for the purpose of enlarging the scope of a notification issued by the President of India under clause (1) of Article 341 of the Constitution, the same must be done in terms of a statute and not otherwise.' and 'The High Court, therefore, erred insofar as it failed to consider that for the purpose of determination of caste, the respondent could not have relied upon the circular letter dated 3-3-1978 in absence of any law.'
Eventually, this Court took exception to the approach of the High Court therein and overturned its decision. The concurring opinion clearly lays down what could not have been done therein in the absence of a law. Again, for the same reason why Ghaswala (supra) is not relevant to the instant controversy, noted above, Punit Rai (supra) would not help Respondent No.1.
27. Naveen Jindal (supra) [rendered by the same coram as Punit Rai (supra)] held that the Flag Code was not a statute. It was also held that executive instructions, which the Flag Code was, were not 'law' within the meaning of Article 13 of the Constitution. This proposition is unassailable but does not carry Respondent No.1's case further in view of our findings and analysis.
28. Similarly, in Chandramohanan (supra), the Court [three-Judge Bench] placed reliance on Punit Rai (supra) and Naveen Jindal (supra) to conclude that Government Circulars issued by the State of Kerala were not 'law' within the ambit of Article 13 of the Constitution. This issue does not arise in the instant factual backdrop.
29. The other aspect, which we 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 power the source of power is not specifically referred to or a reference is made to a wrong provision of law, that by itself does not vitiate the exercise of power so long as the power does exist and can be traced to a source available in law.'
(emphasis supplied)
30. The decision in N Mani (supra) was relied upon by two learned Judges in Ram Sunder Ram v Union of India, 2007 (9) SCALE 197, wherein this Court reiterated that quoting the wrong provision of law, when the authority concerned is otherwise empowered to carry out an act, could not vitiate the act on such ground alone. Likewise, and on taking note of N Mani (supra) and Ram Sunder Ram (supra), 2 learned Judges in P K Palanisamy v N Arumugham, (2009) 9 SCC 173 opined as under:
'27. Only because a wrong provision was mentioned by the appellant, the same, in our opinion, by itself would not be a ground to hold that the application was not maintainable or that the order passed thereon would be a nullity. It is a well-settled principle of law that mentioning of a wrong provision or non-mentioning of a provision does not invalidate an order if the court and/or statutory authority had the requisite jurisdiction therefor.'
(emphasis supplied)
31. The above principle found acceptance also, inter alia, in Mohd. Shahabuddin v State of Bihar, (2010) 4 SCC 653 and State of Haryana v Raj Kumar, (2021) 9 SCC 292.
32. Respondent No.1 placed strong emphasis on the Patna Municipal Corporation (Grant of Permission for Display of Advertisements & Similar Devices) Regulations, 2012 dated 04.07.2012 and published in the Official Gazette on 13.08.2012. We find that this relates only to grant of permission for display of advertisements and similar devices in any place within the jurisdiction of the Corporation. However, it cannot be said that these Regulations would have conferred the right to demand royalty by the Corporation, which we find was traceable to the agreement/arrangement between the parties.
33. Once again, at the cost of repetition, as there has been no serious attempt to challenge the enhancement in quantum from Re.1 per square foot to Rs.10 per square foot, we refrain from delving into that aspect, which as of now has also become very old as it pertains to the year 2007. At this juncture, the Court would refer to the Written Submissions filed on behalf of Respondent No.1, where at Paragraph No.19, following is the 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 the Corporation, to charge Rs.10 per square foot with regard to hoarding(s)/advertisement(s) as communicated at the relevant point of time to the concerned parties needs no interference.
However, the imposition of penalty for non-payment needs to be interfered with as no such power exists. It is held thus, but with the clarificatory caveat that the Corporation would not be precluded from charging interest over delayed payment(s). Obviously, interest on delayed payment(s) would not be a 'penalty' but rather, in the realm of 'compensation' for late/delayed payment of amounts which were payable on/from an earlier date. This Court expressed a similar view in Alok Shanker Pandey v Union of India, (2007) 3 SCC 545, as under:
'9. It may be mentioned that there is misconception about interest. Interest is not a penalty or punishment at all, but it is the normal accretion on capital. For example if A had to pay B a certain amount, say 10 years ago, but he offers that amount to him today, then he has pocketed the interest on the principal amount. Had A paid that amount to B 10 years ago, B would have invested that amount somewhere and earned interest thereon, but instead of that A has kept that amount with himself and earned interest on it for this period. Hence, equity demands tha t A should not only pay back the principal amount but also the interest thereon to B .'
(emphasis supplied)
37. 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.
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.
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 Kerala12 brought out the distinction between tax and royalty in the following terms:
"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 the 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."
130. In view of the above discussion, we hold that both royalty and dead rent do not fulfil the characteristics of tax or impost. Accordingly, we conclude that the observation in India Cemen t (supra)13 to the effect that royalty is a tax is incorrect.
342. we answer the questions formulated in the reference in terms of the following conclusions:
a. Royalty is not a tax. Royalty is a contractual consideration paid by the mining lessee to the lessor for enjoyment of mineral rights. The liability to pay royalty arises out of the contractual conditions of the mining lease. The payments made to the Government cannot be deemed to be a tax merely because the statute provides for their recovery as arrears;'
(emphasis supplied)
.....................J. [Vikram Nath]
.....................J. [Ahsanuddin Amanullah]
New Delhi
October 16, 2024
