Summary
The Patna Municipal Corporation charged advertising agencies a per-square-foot royalty for hoardings, agreed with them in 2005 and raised in 2007, and the High Court struck it down as a tax levied without legislative authority under Article 265. The Supreme Court held the charge was royalty under an agreement, not a tax, so it needed no taxing statute or regulations; the Corporation could revise it and citing the wrong provision did not invalidate it. Penalty was set aside, but the enhanced royalty was held payable with interest.
Issues
- Whether the Corporation's charge on hoardings was a tax requiring legislative authority under Article 265, or royalty payable under an agreement.
- Whether the enhancement from Re. 1 to Rs. 10 per square foot per year was valid, and whether citing Section 431 of the Bihar Municipal Act, 2007 invalidated it.
- Whether the Corporation could impose penalty for non-payment, and on what terms arrears were recoverable.
Provisions considered
- Article 265, Constitution of IndiaNo tax may be levied or collected except by authority of law. The High Court applied this to strike down the charge. The Supreme Court accepted the principle but held it did not apply, because the charge was royalty arising from agreement, not a compulsory exaction. (¶¶ 5, 22, 24)
- Section 431, Bihar Municipal Act, 2007This section imposes a fine for displaying advertisements without paying tax under Chapter XVII. Relying on it to charge enhanced royalty was misplaced, since royalty is not tax. But citing the wrong provision does not invalidate an act that the authority otherwise has power to do (N. Mani v. Sangeetha Theatre). (¶¶ 24, 29, 30, 31)
- Section 146, Bihar Municipal Act, 2007The respondent argued that advertisement licences and fees depend on regulations under this section, which were notified only in 2012. The Court held that the 2012 Regulations govern permission to display advertisements and do not affect the Corporation's right to royalty, which arose from the arrangement between the parties. (¶¶ 17, 18, 32)
- Regulations as a whole, Patna Municipal Corporation (Grant of Permission for Display of Advertisements & Similar Devices) Regulations, 2012These regulations concern only permission to display advertisements within the Corporation's limits. Their absence before August 2012 did not defeat the royalty demand. (¶ 32)
- Recovery as arrears, Bihar and Orissa Public Demands Recovery Act, 1914Amounts not paid within the time set by the Court are to carry 10% interest and be recoverable as arrears under this Act. (¶ 37)
Held
- Royalty is compensation for rights or privileges granted, and usually originates in an agreement between grantor and grantee. A tax is imposed under statutory power without reference to any special benefit. Following Indsil Hydro Power, the two cannot be equated or used interchangeably. (¶¶ 23, 24)
- The charge on hoardings, first fixed at Re. 1 per square foot per year in a 2005 meeting with the advertising agencies, was royalty for a privilege enjoyed under the arrangement between the parties. It was neither a compulsory exaction nor a tax, so its validity did not depend on a taxing provision in the Act or regulations. (¶¶ 22, 23, 24)
- Conduct and acquiescence bar a party from later attacking a decision it accepted, unless there is an inherent lack of jurisdiction or the action is perverse or mala fide. The agencies had agreed to pay royalty, and most had paid at the revised rate. (¶¶ 23, 29)
- Revising the royalty rate was within the Corporation's power. Nothing showed the increase to Rs. 10 per square foot was exorbitant, and any challenge could go only to the rate, not to the decision to charge royalty. Citing Section 431 wrongly did not invalidate the action, because the power existed. (¶¶ 24, 29, 33)
- The enhanced rate operated from a later date than the resolution and was not retrospective. Any future enhancement must operate only prospectively. (¶¶ 34, 35)
- No power existed to impose penalty for non-payment, so the penalty was set aside. Interest on delayed payment is compensation, not penalty, and may be charged. (¶ 36)
- In a post-script, the Court noted that the nine-Judge Bench in Mineral Area Development Authority v. Steel Authority of India, decided after judgment was reserved, held by majority that royalty is not a tax, which supported its view. (¶ 40)
Result
Appeals disposed of; High Court judgment set aside to the extent it struck down the royalty; Rs. 10 per square foot payable by the respondents and similarly placed agencies from when the resolution was made public or communicated, whichever is later, with 6% simple interest; penalty set aside; Corporation to compute dues within 4 weeks and parties to pay within 16 weeks thereafter, failing which 10% interest applies and dues are recoverable under the Bihar and Orissa Public Demands Recovery Act, 1914; payments above Re. 1 per square foot to be adjusted; parties to bear own costs.