Cantonment Board & ANR. Vs. State of Jharkhand & Ors.  INSC 416 (11 March
Ashok Bhan & Dalveer Bhandari Dalveer Bhandari, J.
1. This appeal is directed against the judgment passed in Letters Patent
Appeal No.556 of 2001 dated 4th October, 2001 delivered by the High Court of
Jharkhand at Ranchi.
2 The central question which arises for adjudication in this appeal is
regarding the power, competence and authority of the Cantonment Board to levy
entry tax on vehicles entering into the cantonment area.
3. Appellant No.1, Ramgarh Cantonment Board, a board constituted under the
Cantonments Act, 1924 (hereinafter referred to as the Act), in exercise of the
power vested in it under section 60 of the Act invited tender for collection of
vehicle tax entering into Ramgarh Cantonment Area. Respondent no.3 in this
appeal, Mukesh Prasad being the highest bidder was awarded the contract and was
asked to realize vehicle tax at the rate of Rs.10/- from each goods vehicle
entering into the Ramgarh Cantonment Area for a period of six months starting
from 12.3.2001. Respondent no.3 deposited the earnest money. On 8.3.200, a formal agreement was executed between respondent no.3 and the
Cantonment Board. The Cantonment Board immediately after executing the said agreement
issued a letter dated 11.3.2001 restraining respondent no.3 from collecting
vehicle entry tax on the directions of the Deputy Commissioner, Hazaribagh,
4. The Secretary, Road Construction Department, Ranchi vide letter dated
30.5.2001 informed that prior permission of the Ministry of Road Transport and
the National Highway, Government of India was necessary for the purpose of
putting barriers to collect tax on the national highway. The Cantonment Board
is entitled to collect only those taxes which can be realized by the
municipality. In other words, the Cantonment Board cannot levy the tax which
cannot be levied by the Municipality.
5. On 26.7.2001, the learned Single Judge allowed the writ petition filed by
respondent No.3 by holding that the Deputy Commissioner, Hazaribagh could not
restrain the Cantonment Board from levying of entry tax on goods vehicles
passing through the Cantonment Board Area. The learned Single Judge quashed the
order by which restriction on collecting entry tax was placed by the Deputy
6. The State of Jharkhand, aggrieved by the order of the learned Single
Judge, preferred an appeal under clause 10 of the Letters Patent. The Division
Bench in the impugned judgment comprehensively examined the power, authority
and competence of the Cantonment Board in levying entry tax on vehicles
entering into the Cantonment Area. The Cantonments Act,
1924 is vested with section 60 which is the source of power, authority and
jurisdiction for imposition of levy of tax. Section 60 reads as under:- 60.
General power of taxation-
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.
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
7. A bare reading of sub-section (1) of section 60 clearly reveals that the
power to levy any tax is dependent upon and co- extensive with any such
corresponding power which may vest in the municipality being relatable to and
dependent upon legislative enactment concerning, governing or regulating the
powers of such municipality.
8. The Division Bench has rightly held that sub-section (1) of section 60 of
Act, 1924 is not totally an independent provision by itself, in the sense
that the power by itself has not been given to the Board to levy tax and the
provision is related to and dependent upon any corresponding analogous
provision in a legislative enactment of the municipality. In other words, if
the municipality in an area has the power to levy tax under a relevant
enactment, by virtue of the power created under sub-section (1) of section 60,
the same power would vest in a Cantonment Board. In order to find out whether
the Cantonment Board has any power to levy entry tax, it is necessary to find
whether the municipality has similar power to levy entry tax.
9. Chapter IV of the Bihar and Orissa Municipal Act, 1922 (for short 1922
Act) deals with the subject of municipal taxation. Part-I of Chapter IV deals with the subject of imposition of taxes. The relevant portion of section 82 reads as under:- 82. Power to impose
taxes.-(1) The Commissioners may, from time to time at a meeting convened
expressly for the purpose, of which due notice shall have been given subject to
the provisions of this Act and with the sanction of the State Government,
impose within the limits of the municipality the following taxes and fees, or
any of them xxx xxx xxx xxx xxx xxx (f) a tax on the vehicles, horses and
other animals named in the First Schedule.
xxx xxx xxx.
10. Under section 82 taxes and fees can be imposed on vehicles and other
animals named in the First Schedule. Therefore, it is imperative for us to find
out what has been incorporated in the First Schedule. First Schedule of the
Municipality Act 1922 is extracted as under:- The First Schedule TAX
ON VEHICLES, HORSES AND OTHER ANIMALS per quarter Rs. P. For every four-wheeled vehicle drawn by two horses. 10.00 For every four-wheeled vehicle other than those specified above. 5.00 For every two-wheeled vehicle including a Shampani, but excluding a
bicycle. 4.00 For every bicycle 1.00 For every cycle rickshaw 2.50 For every jin
rickshaw 2.00 For every horse other than a pony 2.00 For every pony, mule, or
donkey 1.00 For every elephant 6.00 For every camel 2.00
11. Part IV of Chapter IV deals with tax on vehicles, horses and other
animals. It would be appropriate to notice the relevant portion of section 137,
which deals with tax on vehicles, horses and other animals The relevant portion
of section 137 reproduced as under:- 137. Tax on vehicles, horses and
other animals. (1) When it has been determined that a tax on the vehicles,
horses and other animals specified in the First Schedule shall be imposed, the
Commissioners at a meeting shall, subject to the provisions of section 138,
make an order that the owner of every vehicle, horse and every other animal of
the kind specified in the said schedule, which is kept or is used in the
ordinary course within the municipality, or which is kept without the
municipality and is used in the ordinary course within it, shall pay the tax in
respect of such vehicle, horse or other animal and shall cause such order to be
published in the manner described in section 356.
(2) xxx xxx xxx (3) Such tax shall not be payable in respect of (a) xxx xxx
xxx (b) vehicles and animals registered under Chapter X; (c) xxx xxx xxx xxx xxx xxx
12. Sub-clause (3) of section 137 clearly lays down that such tax shall not
be payable in respect of vehicles and animals registered under Chapter X.
Chapter X deals with Vehicles plying for hire. Section 326 of the
1922 Act deals with power to make bye-laws to regulate motor cars and vehicles
plying for hire. Therefore, it is necessary to reproduce section 326 also. The relevant portion of section 326 reads as under:- 326. Power to make
bye-laws to regulate motor- cars and vehicles plying for hire (1) The
Commissioners at a meeting may make bye-laws to regulate motor cars and
vehicles used for the conveyance of passengers which are kept or are offered or
ply for hire within the municipality whether by times or by distance, and may
by such bye-laws provide for all matters relating to such motor cars and
vehicles in respect of which this Act makes no provision or insufficient
provision and provision is declared by the Commissioners, with the sanction of
the State Government, to be necessary :
Provided that such bye-laws shall not (a) apply to any vehicle used on a
railway or tramway; and (b) impose any fees for the registration of motor cars
or for the grant of a licence to drive a motor car.
xxx xxx xxx
13. According to section 326, all vehicles plying for hire have been
specifically excluded from levying of such tax by the municipality and
consequently the Cantonment Board also has no power or competence to levy entry
tax on vehicle which ply for hire.
14. The vehicle and motor car have been defined in
sections 3(30) and 3(30-A) respectively of the 1922 Act. The definitions
contained in sections 3(30) and 3(30A) read as under:- 3(30).
Vehicle means a wheeled conveyance, other than a motor car capable of
being used on a road and includes a tricycle, bicycle, cycle rickshaw, a
jinrickshaw and a shampani. 3(30-A). Motor car means any
mechanically propelled vehicle adopted for use upon roads whether the power of
propulsion is transmitted thereto from an external or internal source and includes
a chassis to which a body has not been attached and a trailer; but does not
include a vehicle running upon fixed rails or used solely upon the premises of
15. Therefore, from the bare reading of the relevant provisions and
definition of vehicle and motor car given in the Act, it is abundantly clear
that the municipality has no power to levy any entry tax on mechanically
propelled vehicles. When the municipality has no power or competence to levy
entry tax on mechanically propelled vehicles, obviously the Cantonment Board
cannot exercise this power because taxing power of the Cantonment Board is
dependent upon and co-extensive with any such corresponding power vested in the
16. In the impugned judgment, the Division Bench observed that a combined
reading of sections 82 and 137 and also a bare look at the First Schedule of
1922 Act clearly suggest that the Municipality in Bihar under 1922 Act has the
power, authority and jurisdiction to levy tax on the vehicles as are enumerated
in the First Schedule, but such tax is leviable only in respect of such
vehicles which are kept or are used in the ordinary course within the
municipality. This is fortified by the fact that in the First Schedule the tax
rate is with respect to per quarter.
17. Section 150 of 1922 Act defines used in the ordinary course.
The same is reproduced as under:
A vehicle, horse or other animal shall be deemed to be used in the
ordinary course within the meaning of section 137 if it is used on an average
thrice a week.
18. In section 137 it has been determined that a tax on the vehicles, horses
and other animals specified in the First Schedule alone can be imposed and the
First Schedule, as extracted above clearly excludes all mechanically propelled
19. According to section 137, the words that the tax can be levied on every
vehicle, horse or other animal of the kind specified in the Schedule which is
kept or is used in the ordinary course within the municipality, means that the
vehicle, horse or other animal which is kept or used in the ordinary course
within the municipality would be obliged to pay such tax. This obviously does
not include levy of entry tax for mechanically propelled vehicles. Thus,
Sections 82 and 137 or any other provision of the 1922 Act does not permit the
municipality to levy any entry tax on mechanically propelled vehicles. Since
the municipality has no such power, competence or authority to levy tax on
entry of mechanically propelled vehicles, the Cantonment Board, Ramgarh, Bihar
obviously cannot exercise those powers.
20. The learned counsel for the appellants placed reliance on the case of
Cantonment Board, Mhow & Another v. M.P. State Road Transport Corporation
(1997) 9 SCC 450. This case was cited for the proposition that since the
Cantonment Board in Madhya Pradesh has been permitted to levy entry tax on
motor vehicles, therefore, the Cantonment Board, Ramgarh, Bihar in the instant
case, is also justified in levying entry tax on motor vehicles. In order to
avoid any confusion or misunderstanding, we deem it appropriate to deal with
the said case of Madhya Pradesh in detail.
21. The Madhya Pradesh State Legislature has specifically given power under
section 127 of the M.P. Municipalities Act, 1961 to the municipalities of Madhya
Pradesh to levy entry tax on the vehicle. It may be pertinent to observe that
no power to levy entry tax has been given to the municipalities in Bihar under
the 1922 Act.
22. Relevant portion of section 127 of the M.P. Municipalities Act, 1961
reads as under:- 127. Taxes which may be imposed.(1) A Council may, from
time to time, and subject to the provisions of this Chapter, and any general or
special order which the State Government may make in this behalf, impose in the
whole or in any part of the Municipality any of the following taxes, for the
purposes of this Act, namely:
(i) * * * (ii) * * * (iii) a tax on vehicles, boats and animals used as
aforesaid entering the limits of the Municipality but not liable to taxation
under clause (ii).
23. Therefore, the vehicle entry tax levied by the municipalities in Madhya
Pradesh is because of the specific power given by the Legislature to the
municipalities in Madhya Pradesh to levy such tax. Once the municipality is
invested with the power to levy entry tax, the Cantonment Board can also
exercise the same power. No such power is given to the municipalities in Bihar
under the 1922 Act and consequently, the Cantonment Board, Ramgarh, Bihar
cannot levy vehicle entry tax for the vehicles entering into the Ramgarh
Cantonment Board area. On the analogy of the Madhya Pradesh case, it cannot be
concluded that the Ramgarh Cantonment Board is also justified in levying the
vehicle entry tax.
24. We make it clear that levying tax on motor vehicle used or kept for use
is entirely different from levying vehicle entry tax.
We deem it appropriate to extract para 14 of the judgment of Madhya Pradesh
case (supra) which will further clarify the legal position.
14. The tax leviable on motor vehicles when used or kept for use under
Section 3(2) of the Madhya Pradesh Motor Vehicles Taxation Act is different
from the tax leviable on motor vehicles entering the limits of the Municipality
under Section 127(1)(iii) of the Madhya Pradesh Municipalities Act, 1961 and
there is no repugnancy between the two and both the provisions can therefore
operate in their own fields. Since under Section 127(1)(iii) of the
Municipalities Act, Municipality could levy a tax on motor vehicles entering
the limits of the Municipality, the same could be levied by the Cantonment
Board in exercise of its power under Section 60 of the Cantonments Act
with the previous sanction of the Central Government.
Consequently, notifications issued by the Cantonment Boards of Mhow,
Jabalpur and Saugor were valid notifications issued under Section 60 of the Cantonments Act
and imposition of tax on motor vehicles entering into the limits of the
Cantonment Boards cannot be said to be invalid or inoperative. The High Court
in our opinion committed error in striking down those notifications on the
ground of repugnancy with this special legislation, namely, the Madhya Pradesh
Motor Vehicles Taxation Act.
25. In the said judgment this court held that the Cantonment Board is
entitled to levy entry tax on motor vehicles within the limits of the
Cantonment Board. This was justified on the ground that similar power was
vested in the concerned municipality. It is again reiterated that, in the
instant case, the Bihar legislature has not given powers to the municipalities
to levy entry tax, therefore, the Cantonment Board, Ramgarh lacks an authority
or competence to levy entry tax on motor vehicles entering into the Cantonment
Board area. In this view of the matter, Madhya Pradesh case (supra) has no
application as far as the instant case of the appellants is concerned.
26. The learned counsel for the appellants has also placed reliance on
Avinash & Others v. State of Maharashtra &
Others [2004(2) Mah. L.J. 511] and The Secunderabad Cantonment Board,
Secundereabad v. M/s Allied Trading Corporation & Another [1997 (1) Andhra
Weekly Reporter 160].
Since we have already dealt with the Madhya Pradesh case in detail,
therefore, it is not necessary to deal with the facts of the aforementioned
cases in detail, but on the same analogy it is reiterated that these cases have
no application to the controversy involved in the present case. The Division
Bench in the impugned judgment rightly observed that the Deputy Commissioner,
Hazaribagh was fully justified in objecting to levy of impugned tax by the
Cantonment Board since similar powers were not given to the concerned
municipalities in Bihar to levy vehicle entry tax. In view of the legislative
scheme, the Cantonment Board was precluded from levying such an entry tax.
27. We have heard the learned counsel for the parties at length and perused
the relevant provisions. It is abundantly clear that the power to levy tax
under section 137 for vehicle which is used in the ordinary course within the
municipality or which is kept without the municipality and is used in the
ordinary course within it, is different from levying vehicle entry tax. What is
permissible according to Act is imposing tax within the parameters of section
137 for vehicles, horses and other animals for being kept in the ordinary
course within municipality and is used in the ordinary course within it than
levying entry tax by the Cantonment Board. The Cantonment Board did not have
any authority or competence to levy tax on the entry of vehicles in the
Cantonment area under section 60 of the Cantonment Act, 1924. The conclusions
arrived at by the impugned judgment of the Division Bench are quite justified and
no interference is called for.
28. Before we part with the judgment we would like to observe that,
according to respondent No. 3, the Cantonment Board authorised respondent no.3
vide order dated 3.3.2001 to realize the vehicle entry tax and in pursuance to
an agreement between the Cantonment Board and respondent no.3, respondent no.3
deposited Rs.25,000/- and in the auction respondent no.3, being the highest
bidder, deposited Rs.3.35 lacs as per the resolution of the Board of the
Cantonment Board dated 28.2.2001. In the peculiar facts and circumstances of
this case, whatever amount has been deposited by respondent no.3 shall be
refunded to him within eight weeks because according to respondent no.3 in view
of the restraint order, respondent no.3 could not collect any amount towards
the levy of entry tax on vehicles. This direction is given while keeping the
well known Legal Principle of equity, fairness and good conscience in view. No
further directions are necessary.
29. This appeal is accordingly dismissed with costs.
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