'Royalty' Imposed By Municipal Corporation For Putting Hoardings/Advertisement Can't Be Termed 'Tax' : Supreme Court

The Supreme Court today (Oct. 16) observed that the 'royalty' imposed by the Municipal Corporation on the advertising companies for putting up hoardings/advertisements could not be termed as 'tax'.

The bench comprising Justices Vikram Nath and Ahsanuddin Amanullah set aside the Patna High Court's Division Bench decision which directed the Patna Municipal Corporation to refund the 'royalty' collected from the advertising companies on the note that the Corporation has no legislative competence to levy & collect 'royalty' under Article 265 of the Constitution.

The Court observed that imposition of 'royalty' by the Municipal Corporation could not be called as 'compulsory exaction' to term it as 'tax'. The Court referred to the recent nine judge bench decision in Mineral Area Development Authority v Steel Authority of India to hold that royalty is not tax.

“It has been authoritatively clarified by this Court that royalty and tax are not one and same. As such, the Corporation's power to charge royalty cannot be interfered with on the ground that the same is not available, either in the Act or in the Regulations concerned, as there is no question of the said 'royalty' being a tax… As stated previously, royalty and tax cannot be equated – the nomenclatures cannot be used interchangeably in law, both carrying starkly different imports and connotations. For reasons above, we are unable to maintain as tenable the argument that the demand made by the Corporation was a compulsory exaction. Equally, we are unable to state that the demand was/bore the hallmarks of a tax.”, the judgment authored by Justice Amanullah said.

According to the Court, the conduct of the parties and acquiescence to pay 'royalty' would preclude a party from turning around and assailing a decision acquiesced to, except where there is an inherent lack of jurisdiction, or the exercise of authority is perverse or malafide, in law or in fact.

In the present case, since the advertising company/Respondent no.1 agreed to the payment of the 'royalty', therefore, it would not be permissible for the Respondent No.1 to assail the imposition of royalty. The Court reasoned that it was not the case where the Appellant/Corporation lacks jurisdiction to levy and collect royalty, and it would be unjustified to label royalty as tax.

“we are also equally unhesitant to hold that the Resolution to charge enhanced royalty in exercise of purported power under Section 431 of the Act (Patna Municipal Corporation Act, 1951) was misplaced as royalty is not tax. It has been authoritatively clarified by this Court that royalty and tax are not one and same. As such, the Corporation's power to charge royalty cannot be interfered with on the ground that the same is not available, either in the Act or in the Regulations concerned, as there is no question of the said 'royalty' being a tax. Section 431 of the Act, therefore, would not come into the picture where royalty, that too by way of and under an agreement/understanding is concerned.”, the court observed.

Accordingly, the Court allowed the Corporation's appeal, and ordered as follows:

“In order to balance equities, the Court would indicate that the enhanced rate of Rs.10 per square foot would be payable by the respective Respondents No.1/advertising companies and other similarly-situated persons in terms of the Resolution of the Corporation from the date the same was made public/communicated to the concerned parties whichever is later, with simple interest at the rate of 6% per annum. The Corporation is directed to furnish computation of amounts due to the parties concerned within 4 weeks. Payments be made within 16 weeks thereafter by the parties concerned, failing which they shall carry interest @ 10% per annum and be recoverable as arrears under the Bihar and Orissa Public Demands Recovery Act, 1914. Needless to state, amount(s), if any, paid over and above Re.1 per square foot, for the period in question, shall be adjusted towards the final liability to be determined by the Corporation vis-a-vis the respective Respondents No.1 herein and all other similarly-situated persons.”

Appearances:

For Petitioner(s) Mr. Brijender Chahar, Sr. Adv. Mr. Rudreshwar Singh, Adv. Mr. Kaushik Poddar, AOR

For Respondent(s) Mr. Sanjay Singh, Sr. Adv. Dr. Manish Singhvi, Sr. Adv. Ms. Sarvshree, Adv. Ms. Somyashree, Adv. Mr. Rudrank Shivam Singh, Adv. Ms. Adya Rao, Adv. Mr. D. K. Devesh, AOR Mr. Abhinav Mukerji, AOR Mrs. Bihu Sharma, Adv. Ms. Pratishtha Vij, Adv. Mr. Akshay C. Shrivastava, Adv.

Case Title: THE PATNA MUNICIPAL CORPORATION & ORS. Vs. M/S TRIBRO AD BUREAU & ORS., CIVIL APPEAL NO. 11117 OF 2024

Citation : 2024 LiveLaw (SC) 806

Click here to read/download the judgment