The
Cantonment Board, Mathura Vs. Krishna Bricks and Lime Factory [1996] INSC 1132 (12 September 1996)
Singh
N.P. (J) Singh N.P. (J) Majmudar S.B. (J) N.P. Singh, J
CITATION:
JT 1996 (8) 180
ACT:
HEAD NOTE:
These
appeals have been filed on behalf of the Cantonment Board, Mathura (hereinafter
referred to as the `Board') for setting aside the judgment of the Allahabad
High Court, declaring notification dated 22.11.1958, by which tax at the rate
of 0.75 p. per thousand bricks had been fixed by the Board within the
cantonment area as invalid.
The
respondent is the owner of a brick kiln and was carrying on the business of
manufacturing and selling of bricks. A suit was filed on behalf of the said
respondent for restraining the appellant-Board from realising tax from the said
respondent at the rate of 0.75 per thousand of bricks. It was alleged that
previously the Board was realising the tax from the manufacturers of bricks at
the rate of 0.19 per thousand. But by impugned notification, it raised the rate
of the tax at 0.75 per thousand of bricks.
It was
alleged and asserted that the respondent as the manufacturer of bricks was
neither deriving any advantage from the Board nor any service was being
provided by the Board. As such, the realisation of the tax at the aforesaid
rate was in contravention and in violation of Section 60 of the Cantonments
Act, 1924 read with Section 128 (1)(ii) of the U.P. Municipalities Act, 1916.
The suit filed on behalf of the respondent was dismissed by the Trial Court.
That judgment was affirmed by the Court of Appeal. However, on second appeal
being filed on behalf of the said respondent, the High Court came to the
conclusion that the ceiling and restriction imposed by Article 276 (2) of the
Constitution, as applicable to the State, any municipal, district board, local
board or other local authority within such State in respect of imposition of
taxes on professions, trades and callings, was applicable even on the Board
which had been established under the aforesaid Cantonments Act. On that finding
the notification was declared to be invalid being hit by Article 276 (2) of the
Constitution.
Section
3 of the Cantonments Act provides that the Central Government may, by
notification in the Official Gazette, declare any place or places in which any
part of the Forces is quartered or which, being in the vicinity of any such
place or places, is or are required for the service of such forces to be a
cantonment for the purposes of the said Act and may by a like notification,
declare that any cantonment shall cease to be a cantonment. In view of sub-
section (4) of Section 3 Central Government may, by notification in the
Official Gazette, direct that any place declared a cantonment under sub-section
(1) the provisions of any enactment relating to local self-Government other
than this Act shall have effect only to such extent or subject to such
modifications, or that any authority constituted under any such enactment shall
exercise authority only to such extent, as may be specified in the notification.
Section 6 provides that when by a notification under Section 3, any cantonment
ceases to be a cantonment, the local area comprised therein shall immediately
be placed under the control of a local authority, the balance of the cantonment
fund and other property vesting in the Board shall also vest in such local
authority, and the liabilities of the Board shall be transferred to such local
authority.
Similarly,
Sections 7 and 8 make provisions in respect of cantonment fund and its property
which is placed under the control of some other local authority, in view of the
notification under Section 4, because of which any local area forming part of
cantonment ceases to be under the control of a particular Board. Section 60 of
the Cantonments Act provides:
"General
power of taxation –
(1)
The Board may, with the previous sanction of the Central Government, impose in
any cantonment any tax which under any enactment for the time being in force,
may be imposed in any municipality in the State wherein such cantonment is
situated:
(2)
Any tax imposed under this section shall take effect from the date of its
notification in the Official Gazette or where any later date is specified in
this behalf in the notification, from such later date.
Because
of aforesaid Section 60 the Board may with previous sanction of the Central
Government impose in any cantonment, any tax `which under any enactment for the
time being in force, may be imposed in any municipality in the State where such
cantonment is situated'. For imposing any tax in exercise of the power under
Section 60, two conditions have to be fulfilled and complied with (i) there
must be a previous sanction of the Central Government to impose such tax and
(ii) the tax to be imposed must be such which under any enactment for the time
being in force may be imposed in any municipality in the State wherein such
cantonment is situated.
So far
the municipality within any State is concerned, its power to impose a tax in
respect of professions, trades or callings is governed and controlled by
Article 276 of the Constitution, which says:
"Taxes
on professions, trades, callings and employments - (1) Notwithstanding anything
in article 246, no law of the Legislature of a State relating to taxes for the
benefit of the State or of a municipality, district board, local board or other
local authority therein in respect of professions, trades, callings or
employments shall be invalid on the ground that it relates to a tax on income.
(2)
The total amount payable in respect of any one person to the State or to any
one municipality, district board, local board or other- local authority in the
State by way of taxes on professions, trades, callings and employments shall
not exceed two thousand and five hundred rupees per annum.
(3)
The power of the Legislature of a State to make laws as aforesaid with respect
to taxes on professions, trades, callings and employments shall not be
construed as limiting in any way the power of Parliament to make laws with
respect to taxes on income accruing from or arising out of professions, trades,
callings and employments." There is a non-obstante clause in Article 276
(1) of the Constitution saying that notwithstanding anything contained in
Article 246 no law made by the legislature of a State relating to taxes for the
benefit of the State or of a municipality, district board, local board, or
other local authority therein in respect of professions, tradings, callings or
employments shall be invalid on the ground that it relates to a tax on income.
Having said so a ceiling on the amount of tax has been imposed by Article
276(2), which was Rs.250/- earlier and has been raised to Rs.2,500/- by the
Constitution (Sixtieth Amendment) Act, 1988 with effect from 20.12.1988. In the
case of Bharat Kala Bhandar Ltd. v. Municipal Committee, Dhamangaon, AIR 1966
SC 249 = 1965 (3) SCR 499 a Constitution Bench in its majority judgment said:
"Before
we deal with these cases it is necessary to point out the rationale upon which
S.142-A of the Govt. of India Act, 1935 was enacted and on which Art.276 of the
Constitution now rests. It is that the legislative spheres of the Provinces and
the Centre came to be clearly demarcated in regard to items falling within
Lists I and II of Schedule VII of the Govt. of India Act and now to those falling
within the same lists of Schedule VII of the Constitution. Taxes on
professions. trades. callings and employments are taxes on income and are thus
outside the provincial and now State - lists and belong exclusively to
Parliament and before that to the Central Legislature. Yet under a large number
of laws enacted before the Govt. of India Act, 1935 came into force, power was
conferred on local Governments and local authorities to impose taxes on such
activities.
This
was obviously in conflict with S.100 of the Govt. of India Act.
When
this was realised S.142-A was enacted by the British Parliament which saved the
power conferred by pre-existing laws but limited the amount payable to Rs.50
after 31st March, 1939. A saving was made, however, of pre-existing laws
subject to certain conditions with which we are not concerned. The provisions
of this section have been substantially reproduced in Article 276 of the
Constitution with the modification that the upper limit of such tax payable per
annum would be Rs.250 instead of Rs.50. A tax can be recovered only if it is
`payable' and it would be payable only after it is assessed.
It is,
therefore, futile to contend that the ban placed by the aforesaid provisions
extends only to recoveries and not to an earlier stage.
(emphasis
supplied) ...................................
We may
further observe that where there is an express prohibition in a statute against
a local authority from imposing a tax, as for instance, the recovery in the
Statute construed by this Court in the Poona City Municipal Corporation case,
C.A. No.582 of 1961, dated 5-5-1964: (AIR 1965 SC 555) (supra) or where a
prohibition can be implied - whether it be with regard to an item of taxation
or with regard to the rate of tax or the quantum of tax payable by an
individual assessee - the action of a local authority or of any of its
instrumentalities in transgressing that prohibition must be regarded as being
in excess of its jurisdiction. Here there is a prohibition in S.142-A of the
Government of India Act and now in Art.276 of the Constitution, which precludes
a State Legislature from making a law enabling a local authority to impose a
tax on "professions, trades, callings and employments" in excess of
Rs.250 per annum. These provisions have to be read in the Act or to be deemed
by implication to be there as the Constitution is the paramount law to which
all other laws are subject as was the Government of India Act, 1953 before
January 26, 1950. If, therefore, after the date specified in S.142-A of the Government
of India Act or after the commencement of the Constitution a local authority or
any of its instrumentalities imposed or imposes a tax which is in excess of the
permissible amount, it would be exceeding its jurisdiction and a provision like
S.84(3) of the Act will not bar the jurisdiction of a civil Court to entertain
a suit instituted by a person from whom it is collected for the repayment of
the money recovered from him in excess of the permissible
amount.............................
Here
since the Assessing Officer had no authority to levy a tax beyond what S.142-A
of the Government of India Act, 1953 permitted or what Art.276 permits his
proceedings are void in so far as they purport to levy a tax in excess of the
permissible amount and authorise its collection and the assessment order is no
answer to the suit for the recovery of the excess amount. To this extent, even
the order of assessment cannot obtain the protection of S.84(3) of the Act and,
therefore, the appellant's suit is maintainable." Again in the case of Mahapalika
of the city of Agra v. The Agra Brick Kiln Owners
Association and Another, (1976) 3 SCC 42, the scope of Article 276(2) was
considered by this Court in connection with the aforesaid U.P. Municipalities
Act, 1916. The State Government issued a notification in the year 1947 imposing
a tax under Section 128(1)(ii) of the said Act, at the rate of 14 annas per
thousand bricks. Brick kiln owners who were effected by the said notification
filed a suit for declaration that the tax was void as such could not be realised
in view of Section 142-A of the Government of India Act, 1935 and Article 276
of the Constitution. This Court said:
"The
Government of India Act, 1935, certainly set a maximum on the tax on trades and
callings and we agree that the High Court was right in holding that the
Municipal Board's right to levy tax under the the notification Ex.H could be
valid up to Rs.50 per year and, to the extent it went beyond that limit, was
void. So, we affirm the High Court's holding for the period upto January 26, 1950 that no sum higher than Rs.50 as
set out in the Government of India Act, 1935 can be exacted under Section 128
of Act II of 1916.
From
the Raj to the Republic was a big break in constitutional law, but there was
some continuity maintained. A certain ceiling on taxes on professions, trades,
callings and employments had been set by Article 276 of the Constitution of
India, but this maximum was not, Rs.50 as in the Government of India Act, 1935
but Rs.250.
...................................
Inevitably,
it follows that during the post-Constitution period nothing by way of taxes on
trade or callings above the limit so set is recoverable and hence the maximum
levy from each person under the notification issued under Act II of 1916 rises
to Rs.250.
...................................
This
does not mean that anything beyond Rs.250 {the tax freeze under Article 276(2)}
can be levied. No.
The
constitutional maximum prevails as it covers all taxes on trade or calling even
today. Therefore, until Parliament makes any other law, as contemplated in the
proviso to Section 172 of the Adhiniyam, the maximum of Rs.250 binds. We have
to read down the notification Exhibit H for the post-Constitution period, in
tune and conformity with the Constitution and uphold its validity to the extent
of constitutional permissibility." In the case of Mahapalika of Agra v.
Agra Brick Kiln Owners Association (supra) the validity of a notification
issued under Section 128 (1)(ii) of the U.P. Municipalities Act, 1916 in
respect of Agra Municipal Board imposing a tax on brick manufacturers at the
rate of 14 annas per thousand bricks was considered by this Court and it was
held that any such notification must conform and fulfil the requirement of the
ceiling fixed by Article 276(2) of the Constitution.
In
view of Article 276, it has to be held that no law of legislature of a State
relating to imposition of taxes for the benefit of the State or of a
municipality, district board, local board, or other local authority therein in
respect of professions, trades. callings shall be valid, if it provides the
total amount payable in respect of any one person to the State or to any one
municipality, district board, local board, or other local authority in the
State, exceeding the limit fixed by Article 276(2) of the Constitution.
Now
the question which is to be answered is whether the ceiling prescribed by
Article 276(2) of the Constitution shall also be applicable to Board which has
been established under the Cantonments Act. It need not be pointed out that the
Board has been established under Cantonments Act which is a Central Act. So far
Article 276 is concerned, it relates to the power of the legislature of a State
to make law for the benefit of the State or of a municipality, district board,
local board or other local authority in respect of taxes on professions,
trades, callings saying that it shall not be invalid on the ground that it
relates to tax on income. But at the same time, by Article 276(2) a ceiling has
been fixed in respect of the amount payable to the State, or anyone
municipality, district board, local board, or other local authority in the
State. This was necessary because the power to tax on income has been provided
under Entry No.82 of List I in the Seventh Schedule and only Parliament can
enact a law in respect thereof. The State legislature cannot make a law in
respect of taxes on the income of individuals within the State. It can be said
that Article 276 of the Constitution within a prescribed limit, enables the
legislature of a State to make law for imposition of taxes on income for the
benefit of the State or municipality, district board, local board or other
local authority from professions, trade, callings saying that such law shall
not be invalid on the ground that it relates to a tax on income.
So far
the Board is concerned which has been established under the Cantonments Act,
has issued the impugned notification in exercise of the power under Section 60
of the Cantonments Act. As such the said notification shall not be deemed to
have been issued in exercise of power under a law enacted by the legislature of
a State for the objects mentioned in Article 276. To that extent, we are not in
agreement with the opinion expressed by the learned Judge of the High Court.
Whether the provisions of Article 276 shall be applicable, has to be examined
by construing the scope of Section 60 of the Cantonments Act. Section 60 of the
Cantonments Act, prescribes two conditions for imposition of tax by the Board.
Firstly, that there must be a previous sanction of the Central Government and
secondly that only such tax can be imposed within any cantonment which under
any enactment for the time being in force may be imposed in any municipality in
the State wherein such cantonment is situated. The framers of the Cantonment
Act did not desire to delegate and authorise the Board to impose any tax. The
power of the Board to impose a tax was circumscribed by prescribing a
limitation that the Board may impose in the cantonment any tax which under any
enactment for the time being in force, may be imposed in any municipality in
the State wherein such cantonment is situated.
Section
128(1)(ii) of the U.P. Municipalities Act, 1916 provides:
"A
tax on trades and callings carried on within the municipal limits and deriving
special advantages from, or imposing special burdens on, municipal
services." In exercise of power under Section 128(1)(ii), the Municipal
Board of any municipality within the State of Uttar Pradesh could impose a tax on trades and callings carried on within
the municipal limits. Therefore, any Board within the State of U.P. can also impose such tax within the cantonment area
because of Section 60 of the Cantonments Act. In view of the clear and
unambiguous provision of Section 60, the learned counsel appearing for the
appellant-Board did not contest this position. But according to him, it does
not mean, that Board is also bound by the rates of the taxes so imposed by the
municipality or the local board within that State. It can prescribe its own
rates of taxes on the trades and callings. According to us, it is difficult to
accept this contention. If the framers of the Constitution did not give this
liberty and latitude to the legislature of a State in respect of taxes on professions,
trades or callings for benefit of the State or municipality, district board,
local board or other authority under Article 276 of the Constitution, how an
unlimited power so far the rate of tax is concerned, can be conceded in favour
of the Board which is a creature and authority established under the
Cantonments Act? When Section 60 links the power to impose tax with any
enactment for the time being in force in respect of any municipality in the
State where the cantonment is situated, then it shall be deemed that it has
also prescribed the limit of the ceiling of such tax with reference to the said
enactment in force in respect of any municipality in that State. If it is held
otherwise, it will lead to an anomalous position, so far the nature of tax is
concerned, because of Section 60 the power of the Board is circumscribed with
reference to any enactment for the time being in force in respect of
municipality in that State whereas so far the rate of such tax which is more
vital, has been left to the discretion of the Board.
On
behalf of the appellant-Board it was pointed out that the Board cannot exercise
arbitrary power under Section 60 because any such tax including the rate
thereof, has to be first sanctioned by the Central Government. According to us,
because of Article 276 if the State legislature cannot tax on professions,
trades or callings for the benefit of the State, municipality, district board,
local board or other local authority, beyond the limit prescribed by Article
276(2) as it amounts to tax on income, then how it can be held that the Board
has unlimited power without any ceiling to tax on professions, trades or
callings being carried on within the cantonment area? When Section 60 provides
that Board may with previous sanction of the Central Government impose in any
cantonment any tax which under any enactment for the time being in force may be
imposed in any municipality in the State wherein such cantonment is situated,
such restriction shall not be only in respect of the nature of the tax, but
also in respect of the ceiling on rates prescribed under the enactment,
relating to the municipality.
On
behalf of the appellant, reference was made to the judgment of Allahabad High
Court in the case of M/s. Punjab Lime and Lime-stone Co., Dehradun v. Cantonment Board.
Dehradun
and another, AIR 1967 Allahabad 15. A learned Judge in connection
with Section 60 of the Cantonments Act said:
"Section
60 of the Cantonments Act nowhere says that Cantonment Boards can levy taxes
which can be levied by municipalities subject to the same limitations. It
simply provides that the taxes which are realizable by Municipal Boards are
also realizable by Cantonment Boards. This does not mean that the limitations
on the powers of Municipal Boards to levy their taxes must also be applied to
taxes levied by Cantonment Boards." A contrary view was expressed in the
case of Madan Lal v. Cantonment Board, Mathura, 1978 All L.J. 1147 by a learned
Judge of the same High Court saying that Cantonment Board while imposing a tax
on per thousand of bricks must fix the maximum limit which does not contravene
the provisions of Article 276 of the Constitution. A Division Bench of
Rajasthan High Court in the case of Narain and another v. Cantonment Board, Nasirabad,
AIR 1963 Rajasthan 190 said:
"Considering
section 60 of the Act, we may point out that the legislature empowering the
respondent to levy and collect taxes used the word "impose" only and
evidently, therefore, the term should ba taken to have been used in a wider
sense. Besides the object and purport underlying section 60 appears to be that
the taxes to be imposed by the respondent (Cantonment Board) should be
consistent with and should conform to the State laws relating to imposition or
taxes by the local authorities. Section 60 further does not refer to State laws
in force at a particular point of time but the State laws generally as might be
from time to time have been referred to. It will be hardly in keeping with the
object and policy underlying section 60 that the respondent should be permitted
to continue taxes in contravention of State laws. the term "impose"
should, therefore, be taken to have been used in wider sense in section 60 and
that being so, the respondent cannot collect taxes in contravention of State
laws." In the case of Hira Lal and another v. Union of India and another,
1972 Tax L.R. 2051, the Himachal Pradesh High Court has also come to the
conclusion that under Section 60 of the Cantonments Act, while imposing a
profession tax, Article 276(2) of the Constitution cannot be violated.
Accordingly,
the appeals fail and are dismissed. There shall be no order as to costs.
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