TMI Blog2017 (5) TMI 1659X X X X Extracts X X X X X X X X Extracts X X X X ..... uch controversy since, in the present case, there are no rules at all before us that have been framed and approved, published or notified in the Official Gazette by the State Government. The impugned Bye-laws, 2016 are even otherwise invalid and ultra vires the Act, 1959 having been framed without following the procedure contemplated under Sections 542 to 545 - Petition allowed. - WRIT - C No 9389 of 2017 - - - Dated:- 4-5-2017 - Dilip B Bhosale And Yashwant Varma, JJ. For petitioners : Mr W H Khan, Senior Advocate, assisted by Mr Gulrez Khan, Advocate For respondents: Mr Anil Tiwari, Advocate JUDGEMENT Dilip B Bhosale, This writ petition under Article 226 of the Constitution of India, filed by U P Advertisers Association and the Advertising Agencies, has sought the following reliefs: I. Issue a writ, order or direction in the nature of certiorari quashing Nagar Nigam (Vigyapan Par Kar Nirdharan, Pratishodh Viniyman Va Vigyapan Kar Vasooli Upvidhi, 2016 published in the official gazette U.P. on 2.4.2016 (Annexure-1 to the writ petition). (II) Issue a writ, order or direction in the nature of mandamus commanding the respondents not to interfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation may impose a tax in addition to the taxes specified in sub-section (1) for the purposes of the Act and subject to the provisions thereof, including a tax on advertisements, as contemplated by clause (h) of sub-section (2) of Section 172. Further reference to Section 172, we propose to make a little later. In this backdrop, the questions that fall for our consideration are - whether the Municipal Corporation is competent to impose an advertisement tax as contemplated by clause (h) of sub-section (2) of Section 172 of the Act, 1959 by making Bye-laws in exercise of its powers under Section 541 thereof, and whether the procedure for framing the bye-laws as contemplated under this Act has been followed. In other words, whether the procedure for making the bye-laws in exercise of the powers under Section 541 of the Act, 1959 is mandatory in nature and, if so, whether the procedure contemplated under the provisions of the Act and the relevant rules was followed and, if not, whether the Bye-laws under challenge deserve to be struck down as ultra vires the provisions of this Act. 5. The first petitioner is an association of advertisers of Kanpur. Petitioner nos 2 to 10 cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B) expressing disagreement with the judgment of another Division Bench whereby a similar challenge in a writ petition was dismissed in Taj Advertising Ors Vs State of U P Ors, [2010 (5) ADJ 272 (DB)]. The Full Bench in Anurag Bansal Vs State of U P Ors, [2011 (5) ADJ 879 (LB) (FB)], after considering the scheme of the Act and the relevant Rules, upheld the challenge to the Rules affirming the view expressed by the Division Bench in Purvanchan Advertising Association (supra), and disagreeing with the opinion expressed by the Division Bench in Taj Advertising (supra). It held that the State Government has got the legislative competence to frame Rules but subject to fulfilment of necessary conditions and procedures prescribed under Chapter IX. It was further held that the Government could not have framed the Rules, 2009 for all the Municipal Corporations without taking recourse of not only Section 206 of the Act, 1959 but also the other statutory provisions contained in Chapter IX of the Act, 1959. Thus, the Full Bench declared the Rules, 2009 as invalid and ultra vires the Act having been framed without following the provisions of Sections 199 to 203 of the Act and other statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 SCC 516. In view of above, delegation of unfettered powers to the Municipal Commissioner to impose tax in the form of penalty seems to be an instance of excessive delegation, contrary to the statutory provisions (supra). 7.1 The observations made in paragraphs 82 to 85 are also relevant, which read thus: 82. Keeping in view the statutory provisions contained in the Act under Section 172 read with Section 199 of the Act and other provisions, ultimate power to impose tax vests in the Corporation i.e. in its general body or Board constituted by the elected representatives. The Corporation can modify the proposal of executive body under Section 202 of the Act even after sanction of tax proposal by the State Government. It shall be necessary to place the matter for approval before the Corporation and the Corporation shall take final decision by special resolution with regard to imposition of tax. The State Government has got power under Section 205 of the Act to abolish or modify the tax imposed by the the Corporation. It does not mean that the State Government lacks power with regard to tax matter. Power conferred on the State Government is general power which may be exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified in clause (h) of sub-section (2) of Section 172 by framing bye-laws. He submitted that the procedure contemplated under Sections 199 to 206 for framing Rules to impose taxes under Section 172(2) being mandatory in nature and since the Corporation has not made Rules by following the said procedure, the bye-laws under which tax has been imposed cannot be sustained in law. In support of this proposition, he placed reliance upon the judgments of the Supreme Court, to which we propose to make a reference at an appropriate stage in the latter part of this judgment. He further submitted that the Bye-laws as a whole under which the impugned advertisement tax has been imposed deserve to be set aside being ultra vires the provisions of the Act. He submitted that the procedure contemplated under Sections 542 to 544 for making bye-laws was admittedly not followed by the Corporation. He submitted that the draft bye-laws were not placed before the Corporation by the Municipal Commissioner as contemplated by Section 542. He then invited our attention to Section 543 to submit that the objections were not heard by the Corporation but were heard and decided by a Sub-Committee consisting of of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of immovable property situated within the city; (f) a tax on vacant land situated within the city; (2) In addition to the taxes specified in sub-section (1) the Corporation may for the purposes of this Act and subject to the provisions thereof impose any of the following taxes, namely, - (a) a tax on callings and on holding a public or private appointment; (b) [* * *] (c) [* * *] (d) [* * *] (e) a tax on dogs kept within the City; (f) a betterment tax; (g) [* * *] (h) a tax on advertisements not being advertisements published in newspapers; (i) a theatre tax; and (j) [* * *] [* * *] (3) The Corporation taxes shall be assessed and levied in accordance with the provisions of this Act and the rules and bye-laws framed thereunder. (4) Nothing in this section shall authorize the imposition of any tax which the State Legislature has no power to impose in the State under the Constitution of India: Provided that where any tax was being lawfully levied in the area included in the City immediately before the commencement of the Constitution of India such tax may continue to be levied and applied for the purposes of this Act until provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned with the optional taxes under Section 172 (2) of the Act, 1959. Sub-section (3) of Section 172 states that the Corporation taxes shall be assessed and levied in accordance with the provisions of the Act, 1959, the Rules and Bye-laws framed thereunder. The provisions of sub-section (3), however, do not specify which of the taxes are to be assessed and levied, in accordance with Rules and which of the taxes by Bye-laws. It would, therefore, become necessary to examine whether an advertisement tax could be assessed and levied in accordance with the Bye-laws, 2016. In other words, whether advertisement tax could be imposed by framing bye-laws. 11. Section 192 states that where a Corporation imposes a tax, mentioned in clause (h) of sub-section (2) of Section 172, every person who erects, exhibits, fixes or retains upon or over any land, building, wall, hoarding or structure, any advertisement or who displays any advertisement to public view in any manner whatsoever, in any place, whether public or private, shall pay, on every such advertisement, a tax calculated at such rates and in such manner and subject to such exemptions as may be provided by the Act or rules made the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislation and it is the bounden duty of the local body to observe the procedure while exercising the delegated powers in case of taxation. It is therefore necessary in the present case to find out what is the procedure provided for in the Act either for framing rules or for framing bye-laws and then to consider the questions formulated by us in the earlier part of the judgment. 13. The provisions of Section 199 to Section 206 under the heading Imposition of Taxes in Chapter IX of the Act, 1959 provide the procedure to be adopted for imposition of taxes, for framing of proposal, subsequent procedure which is to be adopted after framing of a proposal, and also confers power on the State Government to reject, sanction or modify the proposal. The power has been conferred on the State Government to modify, abolish or decline the proposal of the Corporation with regard to imposition of taxes. The State Government has also been conferred the power under Section 206 to require a Corporation to impose taxes. In short, the provisions of Sections 199 to 206 prescribe the procedure for making rules contemplated under Section 540 in Chapter XXIII of the Act, 1959. At this stage, it would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons to be made liable, and the description of property or other taxable thing or circumstances in respect of which they are to be made liable, except where and in so far as any class or description is already sufficiently defined under clause (a) or by this Act; (c) the amount or rate leviable from each such person or class of persons; (d) any other matter referred to in Section 219 which the State Government requires by rule to be specified. (2) Upon a resolution being passed under sub-section (1) the Executive Committee shall frame the proposals and also prepare a draft of the rules which it desires the State Government to make in respect of the matters referred to in Section 219. (3) The Executive Committee shall, thereafter, publish in the manner prescribed by rule the proposals framed under sub-section (1) and the draft rules framed under sub-section (2) along with a notice in the form to be prescribed by rule. 200. Procedure subsequent to framing proposals.- (1) Any inhabitant of the City may, within two weeks from the publication of the said notice, submit to the Corporation an objection in writing to all or any of the proposals framed under the precedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 204. Procedure for altering taxes.- The procedure for abolishing a tax, or for altering a tax in respect of the matters specified in clauses (b) and (c) of sub-section (1) of Section 199 shall, so far as may be, be the procedure prescribed by Sections 199 to 202 for the imposition of a tax. 205. Power of State Government to remedy or abolish tax.- (1) Whenever it appears, on complaint made or otherwise to the State Government, that the levy of any tax is contrary to the public interests or that any tax is unfair in its incidence, the State Government may, after considering the explanation of the Corporation concerned, by order require such Corporation to take measures within a time to be specified in the order, for the removal of any defect which it considers to exist in the tax or in the method of assessing or collecting the tax. (2) Upon the failure or inability of the Corporation to comply, to the satisfaction of the State Government, with an order made under sub-section (1), the State Government, may by notification, suspend the levy of the tax, or of any portion thereof, until the defect is removed, or may abolish or reduce the tax. 206. Power of State Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicating that the proposals and rules, if any, are in modification of the proposals and rules previously published. If any objections are received to the modified proposals, they are required to be dealt with in the manner prescribed in sub-section (1) of Section 200. When the Corporation finally settles its proposal, the Municipal Commissioner is authorised to submit them with the objections, if any, made in connection therewith to the Sate Government. The State Government under Section 201 is empowered to either reject, sanction or modify the proposals submitted by the Corporation or return them for further consideration or sanction without modification or with such modification, not involving an increase in the quantum of tax to be imposed, as it deems fit. Thereafter, when the proposals have been sanctioned, the State Government, after taking into consideration the draft rules submitted by the Corporation, shall proceed forthwith to make such rules in respect of the tax as, for the time being, it considers necessary. When the rules have been made, the order of sanction and a copy of the rules is required to be sent to the Corporation, and thereupon the Corporation under sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee thereafter invited objections to the bye-laws by issuing an advertisement in daily newspapers Hindustan and Amar Ujala and also uploaded the same on the website of the Nagar Nigam. It is further stated that 29 objections were received and to deal with those objections, the deponent (Tax Officer) had constituted a Committee vide Office Memorandum/order dated 14 January 2015 consisting of the Upper Mukhya Ayukt 'Pratham' as its President; Mukhya Nagar Lekha Pareekshak, Executive Engineer (Traffic), Chief Tax Assessing Officer as its Members and the Officer Incharge (Advertisement) as Member Secretary. The Committee in its meeting dated 16 January 2015 decided to provide an opportunity of hearing to the objectors. The notices were accordingly served to all the persons who raised objections and after hearing them, the modified rules were placed before the Executive Committee on 26 February 2015. The Executive Committee considered the modified rules and resolved to constitute a three Member Sub-Committee for revising the rates. The Sub- Committee submitted its report to the Executive Committee which, in turn, placed the modified rules with the revised rates before the Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anjum M H Ghaswala Ors, (2002) 1 SCC 633; Captain Sube Singh Ors Vs Lt Governor of Delhi Ors, (2004) 6 SCC 440; Competent Authority Vs Barangore Jute Factory Ors, (2005) 13 SCC 477, and State of Jharkhand Ors Vs Ambay Cements Anr, (2005) 1 SCC 368. The provisions of Sections 199 to 206 specify/prescribe the procedure for framing rules by the State Government and on the face of it, is mandatory in nature and, therefore, for imposing taxes under sub-section (2) of Section 172 of the Act are required to be followed scrupulously. It is, thus, clear that a failure to comply with any mandatory provision prescribing the procedure for imposing a tax would vitiate the tax, though a minor and trivial deviation from the procedure to be complied with might not be considered as fatal. This principle is reiterated by the Supreme Court in Dhrangadhra Chemical Works Ltd Vs State of Gujarat Anr, (1973) 2 SCC 345. 15. The observations made by the Supreme Court in Municipal Council, Khurai Anr Vs Kamal Kumar Anr, AIR 1965 SC 1321 which are also relevant, read thus: In view of the fact that the resolution of March 3, 1963 on the basis of which the list was published had been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejudice may be caused. But if the Vice- President is of one opinion and the other two members are of a different opinion the decision of the Sub-Committee cannot be said to be that of the Vice-President at all. But to the contrary. 16. Admittedly, in the present case, the objections were not heard either by the Executive Committee or by the Corporation consisting of the elected members of the Corporation. As observed by the Supreme Court in Municipal Council, Khurai (supra), the Corporation cannot delegate its power to hear objections to a Sub-Committee. In any case, the Corporation cannot impose taxes specified in sub-section (2) of Section 172 by framing bye-laws. The procedure for making rules for imposing an advertisement tax as contemplated under this provision are mandatory and, therefore, the provisions imposing a tax under the Bye-laws deserve to be declared ultra vires the provisions of the Act, 1959, in particular the provisions contained in Chapter IX thereof. 17. The Constitution Bench of the Supreme Court in R B Sugar Co Vs Rampur Municipality, AIR 1965 SC 895, considering the question whether a particular provision of a statute which on the face of it appears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, for which, such tax shall be levied. Section 83 is thus expressly subject to Section 81 and under the latter provision no tax can be imposed for the first time unless the procedure prescribed therein is followed. Since the procedure prescribed by the first proviso to Section 81 (2) was not followed in regard to the period prior to October 1, 1970 the levy of property tax on the properties of respondents nos. 1 to 36 for that period is without the authority of law and consequently illegal. 12. It was urged on behalf of the appellant that the first proviso to Section 81 (2) would apply only when a tax was imposed for the first time and since the appellant was levying properly tax long before its imposition on the properties of respondents 1 to 36, it was unnecessary to follow the procedure prescribed by the proviso. It is not possible to accept this submission. The municipality might have been levying property tax since long on properties situated within its limits but until April 1, 1966 the villages of Ramakrishnapuram and Shriharipuram were outside those limits. Qua the areas newly included within the municipal limits, the tax was being imposed for the first time an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmittee. 21. Article 265 of the Constitution provides that no tax shall be levied or collected except by authority of law. This itself clearly implies that the procedure for imposing the liability to pay a tax has to be strictly complied with. Where it is not so complied, the liability to pay tax cannot be said to be according to law. That apart, in the present case, no rules are framed for imposing an advertisement tax as contemplated under clause (h) of sub-section (2) of Section 172 and, in the absence thereof, the Corporation has no powers to impose a tax in view of the opinion expressed by us earlier in the foregoing paragraphs, under the bye-laws. We have, therefore, no hesitation in holding that the procedure is mandatory, considering its language, the purpose for which the provisions have been enacted, the setting in which it appears and the intention of the legislature which obviously is that no tax should be imposed without hearing taxpayers. 22. Thus, it is clear that to impose a tax specified under sub-section (2) of Section 172, the procedure contemplated under Sections 199 to 203 requires to be followed scrupulously and a deviation therefrom is not permissible a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... think necessary or desirable to be made for the furtherance of any purpose of the Act, 1959. Section 543 provides the further procedure to make a bye-law. There are four stages, namely clauses (a) to (d) of Section 543 and Section 544 which provides for the publication of the bye-laws in the Official Gazette. A bare perusal of the two sets of provisions, namely Sections 199 to 206 and Sections 542 to 544, clearly demonstrates the difference in the procedure contemplated therein. The framing of Bye laws conceives of the following steps being taken before the Bye laws can take effect: A. A notice of the intention of the Corporation to take such bye law into consideration on or after a date to be specified in the notice to be published in the Gazette and the Bulletin of the Corporation; B. A printed copy of the bye laws being kept open to public inspection at the Corporation office; C. Copies thereof being furnished to any person desirous thereof and D. All objections and suggestions having been duly considered by the Corporation. It is only thereafter that they come to be published in the Gazette. As would be evident from the above, the proposal to adopt and frame bye law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a provision for recovery, being a machinery provision, cannot be read as empowering the levy of tax or fee. Secondly, it speaks of tax or fee being due to the Government without defining the same and without qualifying the word Government with Central or State, A perusal of several provisions of the Act and in particular Sections 9A, 15, 15(1-A)(a) and (g), 15(3), 17(3), 21(5) and 25 goes to show that the power of recovery is invariably given to the State Government and obviously the word Government in Section 25 refers to the State Government, which only is empowered to recover the sums due as arrears of land revenue. Power to tax must be express, else no power to tax 104. There is nothing like an implied power to tax. The source of power which does not specifically speak of taxation cannot be so interpreted by expanding its width as to include therein the power to tax by implication or by necessary inference. States Cooley in Taxation (Vol. 1, 4th Edn.): There is no such thing as taxation by implication, the burden is always upon the taxing authority to point to the act of assembly which authorises the imposition of the tax claimed. 107. Power to tax is not an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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