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2013 DIGILAW 208 (PNJ)

Surya Adds v. State of Punjab

2013-02-18

HEMANT GUPTA, TEJINDER SINGH DHINDSA

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JUDGMENT Mr. Hemant Gupta, J.:- The petitioners have sought issuance of writ of mandamus restraining the respondents from recovering advertisement tax under the guise of the Municipal Council Control of Advertisement Bye-laws, 2003 (for short ‘the Bye-laws’), which are yet to be notified. 2. The petitioners claimed to be home advertising agencies. The petitioners are engaged in fabrication of advertisement boards and their installation at the business premises of the dealers of various products. During the year 2010, when the petitioners were in the process of installation of advertisement boards, the Tax Collection Contractors of the respondents Municipal Councils restrained the petitioners from installation of such boards, unless the desired advertisement tax under the Bye-Laws is paid to them. The petitioners paid the tax demanded, so as to facilitate release of their material, which was taken in possession by the Contractors. 3. The grievance of the petitioners is that the Bye-laws have not been notified by the Punjab Government and, therefore, the Municipal Councils cannot collect advertisement tax on the basis of mere draft Byelaws. 4. In reply on behalf of the State of Punjab, it was averred that under Section 62-A of the Punjab Municipal Act, 1911 (for short ‘the Act’), the State Government is empowered to issue direction to impose any tax by a Municipality and in case such Municipality fails to carry out any order, the State Government is empowered to impose or modify the tax itself. Along with the reply, notification dated 17.05.2005 published under sub-section (2) of Section 62-A has been appended as Annexure R-1/2 in which separate notifications i.e. No.14/80/2005-1LG1/6798 in respect of Municipal Councils of Class-I, and; No.14/80/2005-1LG1/6804 in respect of Municipal Councils of Class-II and III and Nagar Panchayats were also published. Along with the reply, notification dated 17.05.2005 published under sub-section (2) of Section 62-A has been appended as Annexure R-1/2 in which separate notifications i.e. No.14/80/2005-1LG1/6798 in respect of Municipal Councils of Class-I, and; No.14/80/2005-1LG1/6804 in respect of Municipal Councils of Class-II and III and Nagar Panchayats were also published. The relevant extracts from both the notifications read as under: “No.14/80/2005-1LG1/6798 – In exercise of powers conferred under subsection (2) of Section 62(A) of the Punjab Municipal Act, 1911, the Governor of Punjab is pleased to direct the Municipal Councils of Class-I to charge the modified rates of Advertisement tax as per detail given below: xxx xxx xxx” “No.14/80/2005-1LG1/6804 – In exercise of powers conferred under subsection (2) of Section 62(A) of the Punjab Municipal Act, 1911, the Governor of Punjab is pleased to direct the Municipal Councils of Class-II and III and Nagar Panchayats to charge the modified rates of Advertisement tax as per detail given below: xxx xxx xxx” 5. In the separate written statements, Municipal Councils, Malot, Faridkot and Rajpura have given the dates of resolutions in pursuance of notification dated 17.05.2005 imposing advertisement tax, whereas Municipal Council, Moga has averred that resolution was passed in terms of notification dated 17.05.2005 though the date of resolution is not mentioned. The Municipal Council, Abohar has referred to the auction of collection of advertisement tax conducted on 24.10.2008. 6. Learned counsel for the petitioners has vehemently argued that the State Government has directed the Municipal Councils to impose tax in terms of Section 62-A (3) of the Act though the notifications contemplate that the State Government is exercising powers under sub-section (2) of Section 62-A of the Act. It is contended that the State Government could impose tax only if any Municipal Council has failed to carry out the directions, if any, issued by the State Government, but the State Government cannot in the first instance impose or modify the rate of tax. It is also argued that the State Government cannot fix the rate of tax, which has to be fixed by the Municipal Councils. Reliance is placed upon a Single Bench judgment of this Court in Sukhjit Starch & Chemicals Ltd. Vs. It is also argued that the State Government cannot fix the rate of tax, which has to be fixed by the Municipal Councils. Reliance is placed upon a Single Bench judgment of this Court in Sukhjit Starch & Chemicals Ltd. Vs. State of Punjab & others, [2009(1) Law Herald (P&H) 188] : 2009 (1) ILR (Pun.) 711, wherein learned Single Bench has held that the State Government has no power to direct imposition of tax in terms of sub-section (2) of Section 62-A of the Act with immediate effect. 7. On the other hand, Ms. Suri has pointed out that in terms of sub-section (2) of Section 61 of the Act, a Municipal Council is competent to impose any tax with the previous sanction of the State Government, which the State Legislature has power to impose in the State under the Constitution. Since the ‘advertisement’ falls within entry 55 of List II of Schedule VII of the Constitution, therefore, the imposition of advertisement tax falls within the legislative competence of the State and the Municipal Councils are competent to levy the same in terms of sub-section (2) of Section 61 of the Act. In terms of sub-section (2) of Section 62-A of the Act, the State Government has directed the municipal councils to modify the rate of the advertisement tax already imposed. The Council is thereupon bound to modify the tax. Since in the notification dated 17.05.2005, the State Government has not fixed any period for the Municipal Councils to adopt the directions of the State Government, therefore, the tax in terms of subsection (2) can be imposed only from the date the Municipal Councils have passed the resolutions to this effect. If any Committee fails to carry out any order passed under sub-sections (1) or (2), the State Government by a suitable order impose or modify the tax. It is pointed out that such eventuality has yet not matured. It is pointed out that the State Government vide Memo dated 23.08.1977 and 27.01.1978 has instructed all Ist Class Municipality Committees to revise the rate of schedule of Advertisement Tax at the rate of 75% of the rates attached with the said memos. Therefore, the notification dated 17.05.2005 is legal and valid, so as to modify the rate of advertisement tax. 8. Before we proceed further, the relevant statutory provisions from the Punjab Municipal Act, 1911 need to be extracted. Therefore, the notification dated 17.05.2005 is legal and valid, so as to modify the rate of advertisement tax. 8. Before we proceed further, the relevant statutory provisions from the Punjab Municipal Act, 1911 need to be extracted. The same is as under: “61. Taxes which may be imposed - xx xx (2) Save as provided in the foregoing clause, with the previous sanction of the State Government any other tax which the State Legislature has power to impose in the State under the Constitution.” “62-A. Power of Government in taxation – (1) The State Government may, by special or general order notified in the official Gazette, require a Committee to impose any tax mentioned in Section 61, not already imposed at such rate and within such period as may be specified in the notification and the Committee shall thereupon act accordingly. (2) The State Government may require a Committee to modify the rate of any tax already imposed and thereupon the Committee shall modify the tax as required within such period as the State Government may direct. (3) If the Committee fails to carry out any order passed under sub-section (1) or (2) the State Government may by a suitable order notified in the official Gazette impose or modify the tax. The order so passed shall operate as if it were a resolution duly passed by the Committee and as if the proposal was sanctioned in accordance with the procedure contained in Section 62.” 9. Under sub-section (2) of Section 62-A of the Act, the State Government has jurisdiction to direct a Municipality to modify the rate of tax already imposed. The State Government is competent to fix the period during which a Municipal Council has to modify the rate of tax. But the fixation of period is not required to be mandatorily fixed in terms of subsection (2) of Section 62-A of the Act. Once the State Government has directed the Committee to modify the rate of tax by way of a notification, it is for the Committee to accept the direction, levy and collect the tax from the date a resolution in compliance of the direction of the State Government is passed. Once the State Government has directed the Committee to modify the rate of tax by way of a notification, it is for the Committee to accept the direction, levy and collect the tax from the date a resolution in compliance of the direction of the State Government is passed. However, if within the reasonable period, when no period is fixed, the Committee fails to carry out any order passed under sub-section (2) of Section 62-A of the Act, the State Government can notify the tax in terms of the directions issued in exercise of powers conferred under Section 62-A(3) of the Act. 10. In the present case, the petitioners invoked the writ jurisdiction of this Court challenging levy of advertisement tax said to be imposed in terms of the draft Bye-laws. But in fact, the source of power of levy of advertisement tax is not the Bye-laws, but sub-section (2) of Section 62-A of the Act. Four of the Municipal Councils have referred to the resolutions passed in terms of the direction of the State Government, whereas Municipal Council, Abohar has not referred to any resolution passed in terms of the direction of the State Government, but has passed a resolution of auction of the collection of the advertisement tax. The said fact includes in its ambit, the acceptance of the direction of the State Government to impose advertisement tax. But such tax can be claimed either from the date of auction or from the date the resolution, if any passed by the Municipal Council earlier. 11. In Sukhjit Starch & Chemicals Ltd. case (supra) the notification in question is dated 02.05.2003. Vide the aforesaid notification, all the Municipal Councils and Nagar Panchayats in the State were directed to increase the sewerage and water charges with immediate effect while exercising the powers under Section 62-A(2) of the Act. Considering the aforesaid notification, the learned Single Bench has observed as under: “16. Under Section 62-A of the Act power is also given to the State Government with regard to taxation. Considering the aforesaid notification, the learned Single Bench has observed as under: “16. Under Section 62-A of the Act power is also given to the State Government with regard to taxation. Section 62-A as reproduced above, stipulates that the State Government can by way of special or general order duly notified in the official gazette can ask the Municipal Committee to impose any tax mentioned in Section 61of the Act, which is not already imposed and on issuance of such order the committee is thereafter required to act accordingly i.e. to follow the procedure laid down under Section 62 of the Act. The power is also given to the State Government to require a committee to modify the rate of any tax already imposed and the committee shall thereafter modify the tax as required within such period as the State Government may direct. Section 62-A(2) of the Act, therefore, envisages that a period has to be specified within which the Committee is required to modify the rate of any tax already imposed. This again has to be done in accordance with Section 62 of the Act. However, the Committee is required to undertake the exercise within the period stipulated by the State Government. It is only on the failure of the Committee to act as per the directions of the Government that power is given to the State Government to issue suitable order duly notified in the official gazette and the notification so issued is to operate as if it were resolution duly passed by the Committee and as if the proposal were sanctioned in accordance with law i.e. procedure contained in Section 62 of the Act. 17. In the present case, it may be noticed that though notification Annexure P-5 is said to be one issued under Section 62-A(2) of the Act but the same is worded as if the said notification has been issued under Section 62-A(3) of the Act. No time has been stipulated in the notification calling upon the Municipal Committee to follow the procedure as envisaged under Section 62 of the Act within the stipulated period. Rather the tax stands modified/ enhanced straightway and the same has been ordered to be implemented with immediate effect. The notification, therefore, on the face of it is not in consonance with provisions of Section 61-A(2) of the Act. Rather the tax stands modified/ enhanced straightway and the same has been ordered to be implemented with immediate effect. The notification, therefore, on the face of it is not in consonance with provisions of Section 61-A(2) of the Act. In absence of the refusal by the Municipal Committee to act in pursuance to the order there is no jurisdiction with the State Government to straightway issue notification under Section 62-A(2) of the Act. The notification Annexure P-5, thus, being in violation of provisions of Section 62 and 62-A of the Act cannot be sustained….” 12. The principles of law enunciated by the said judgment are not in dispute. Since the tax was imposed by the State with immediate effect, the learned Single Judge was right in law to infer that such notification is, in fact, in exercise of powers conferred under sub-section (3) of Section 62-A of the Act. There was no direction to the Municipal Councils to accept the direction of the State Government in any time period rather the tax was imposed straight away. However, in the present case, the Municipal Councils in pursuance of the directions contained in the notification dated 17.05.2005, have passed resolutions accepting the direction of the State Government. The notification does not impose the advertisement tax right away. Therefore, we find that the judgment referred to by the learned counsel for the petitioners is not applicable to the facts of the present case, as the tax was not imposed by way of notification dated 17.05.2005, but was only a direction to the Municipal Councils. 13. The other argument raised by the learned counsel for the petitioners that rate could not be specified by the State Government is again not tenable. Sub-section (2) of Section 62-A empowers the State Government to “modify the rate of any tax” already imposed. Once the State Government is competent to modify the rate of tax, the State is competent to direct the Municipal Councils to impose tax at the rate so specified. The action of the State Government specifying the rate of tax is within the jurisdiction vested in the State Government under sub-section (2) of Section 62-A of the Act. 14. In view of the above, we do not find any merit in the present writ petition. The action of the State Government specifying the rate of tax is within the jurisdiction vested in the State Government under sub-section (2) of Section 62-A of the Act. 14. In view of the above, we do not find any merit in the present writ petition. We dispose of the same by observing that the advertisement tax shall be payable from the date the Municipal Councils have passed resolutions in terms of the notification of the State Government dated 17.05.2005 or from the date the contract for collection of advertisement tax was given by the Municipal Council, as such contract includes into its ambit the acceptance of the direction of the State Government in respect of imposition of tax. 15. With the said observation, the writ petition stands disposed of.