2015 (1) TMI 1497 - HC - Indian Laws

Court Quashes Improper 'Advertisement Tax' Notices; Orders Reassessment by Municipal Corporation Under 1978 Byelaws

The HC ruled partially in favor of the petitioners, quashing the demand notices issued by the private contractor for the 'advertisement tax' due to ... Advertisement tax - requirement to follow byelaws for levy, assessment and collection - byelaws as part of the Act - quasi judicial assessment under Sections 173-175 - delegation of recovery under Section 189A - assessment and levy as sovereign function - prohibition on coercive recovery by contractorDelegation of recovery under Section 189A - prohibition on coercive recovery by contractor - assessment and levy as sovereign function - Whether a Municipal Corporation may entrust a private contractor with powers to assess, levy and forcibly recover advertisement tax under Section 189A. - HELD THAT: - The Court held that Section 189A permits leasing out the recovery of taxes by public auction or private contract but does not confer upon the contractor the sovereign powers of levy or coercive recovery. Levy and assessment remain functions for the Corporation exercised through the statutory/quasi judicial machinery; the contractor's role is limited to recovery of amounts as determined by the Corporation and subject to the Act, Rules and Byelaws. The Court emphasised that a contractor cannot unilaterally assess tax, issue demands as if a statutory assessing authority, or undertake coercive measures such as removal or forced sale; such coercive powers must be exercised only through the statutory procedures and authorities under the Act. [Paras 15, 23, 33, 46, 49]Section 189A may be used to lease recovery but does not empower the contractor to assess the tax or to undertake coercive recovery; assessment and coercive recovery remain with the Corporation and statutory authorities.Requirement to follow byelaws for levy, assessment and collection - byelaws as part of the Act - quasi judicial assessment under Sections 173-175 - Whether the levy, assessment and collection of advertisement tax must be effected in accordance with the Byelaws of 1978 and related provisions of the Act. - HELD THAT: - The Court reiterated that the Byelaws framed under Section 427 and confirmed under Section 430-431 form part of the statutory scheme and prescribe the procedure for assessment and collection. Where Byelaws exist for assessment and collection, those Byelaws govern the process; the quasi judicial procedures in Sections 173-175 operate where separate byelaws are absent or to the extent they are applicable. The Court found that the Byelaws contemplate an application, intimation of tax payable, payment and a considered order permitting the advertisement, and that these steps must precede any valid recovery. [Paras 6, 9, 20, 48]Levy, assessment and collection of advertisement tax must conform to the Byelaws of 1978 (which form part of the Act); the procedure contemplated by those Byelaws must be followed before recovery is effected.Advertisement tax - prohibition on coercive recovery by contractor - Validity of demands and actions taken by the contractor (respondent No.3) issuing invoices and removing advertisements without prior determination under the Byelaws. - HELD THAT: - The Court found that respondent No.3 issued bills and in some instances undertook physical removal of signboards without the Municipal Corporation first determining levy/assessment in accordance with the Byelaws and without the Corporation's participation in quasi judicial determination. Such unilateral demands and coercive acts by the contractor were held to be without jurisdiction, violative of principles of natural justice and contrary to the statutory scheme. The Municipal Corporation acknowledged that coercive recovery had not been taken by it and that private respondent had carried out illegal coercive action in at least one instance. [Paras 12, 24, 32, 44]The demands and any coercive actions by the contractor made prior to statutory determination under the Byelaws are invalid and without jurisdiction.Requirement to follow byelaws for levy, assessment and collection - Remedy and further course to be adopted by the Municipal Corporation in respect of the quashed demands. - HELD THAT: - Having found that the procedure under the Byelaws was not followed, the Court quashed the existing demands and directed the Municipal Corporation to re examine and issue fresh demands strictly in accordance with the Byelaws. Only after the Corporation finalizes demand following the prescribed procedure may the recovery be entrusted to the contractor, and then the contractor must recover amounts in accordance with the Byelaws and the contract, without exercising coercive powers. The matter was therefore remitted to the competent authorities of the Municipal Corporation for fresh consideration consistent with these directions. [Paras 49, 50]Demands quashed; matter remitted to the Municipal Corporation to reissue demands and follow Byelaws; contractor may recover only after finalization and without coercive powers.Final Conclusion: Demands and consequential actions based on the contractor's invoices are quashed. The Byelaws of 1978 form part of the Act and their procedures for levy, assessment and collection must be followed; Section 189A permits leasing recovery but does not authorize a contractor to assess or to undertake coercive recovery. The Municipal Corporation is directed to re examine and issue fresh demands in accordance with the Byelaws, after which recovery may be effected in the manner prescribed; the contractor shall not exercise coercive powers. All writ petitions are allowed in part and disposed of on these terms. Issues Involved:1. Imposition of 'advertisement tax' by the Municipal Corporation, Indore.2. Validity of Resolution No.167 and Resolution No.233 passed by the Mayor-in-Council.3. Legality of the work order issued to M/s. Shauryaditya Advertise for the collection of 'advertisement tax'.4. Authority and procedure for the assessment, collection, and recovery of 'advertisement tax'.5. Delegation of powers to a private contractor under Section 189A of the Madhya Pradesh Municipal Corporation Act, 1956.6. Compliance with the Byelaws of 1978 for the assessment and collection of 'advertisement tax'.7. Right to take coercive action for recovery of 'advertisement tax'.8. Determination of whether the glowsign board/signage constitutes an advertisement.9. Validity of demand notices and invoices raised by the private contractor.10. Constitutional mandate under Article 265 of the Constitution of India.Detailed Analysis:1. Imposition of 'advertisement tax' by the Municipal Corporation, Indore:The petitions challenge the imposition of 'advertisement tax' under Section 132(6)(l) of the Madhya Pradesh Municipal Corporation Act, 1956, by the Municipal Corporation, Indore. The court affirmed that the Corporation is empowered to levy such a tax under the Act of 1956. The procedure for imposition is detailed in Section 133 of the Act, while the assessment and collection are governed by the Byelaws of 1978.2. Validity of Resolution No.167 and Resolution No.233 passed by the Mayor-in-Council:The petitioners challenged these resolutions and the subsequent work order issued on 20.10.2011, which granted the contract for the recovery of 'advertisement tax' to M/s. Shauryaditya Advertise. The court found no grounds to quash these resolutions, as they were within the Corporation's powers under the Act of 1956.3. Legality of the work order issued to M/s. Shauryaditya Advertise for the collection of 'advertisement tax':The court upheld the work order issued to M/s. Shauryaditya Advertise, finding that the Corporation had the authority to delegate the recovery of 'advertisement tax' to a private contractor under Section 189A of the Act of 1956. However, the court emphasized that the contractor could only recover the tax after it had been properly assessed by the Corporation.4. Authority and procedure for the assessment, collection, and recovery of 'advertisement tax':The court highlighted that the authority to assess and levy 'advertisement tax' lies with the Municipal Corporation, as detailed in Sections 173, 174, and 175 of the Act of 1956. The Byelaws of 1978 provide the specific procedures for assessment and collection. The court noted that the Corporation must follow these procedures before any recovery can be made by the contractor.5. Delegation of powers to a private contractor under Section 189A of the Madhya Pradesh Municipal Corporation Act, 1956:The court clarified that Section 189A allows the Corporation to delegate the recovery of taxes to a private contractor but does not extend to the assessment or levy of taxes. The contractor can only collect taxes that have been properly assessed and demanded by the Corporation.6. Compliance with the Byelaws of 1978 for the assessment and collection of 'advertisement tax':The court found that the Municipal Corporation had not followed the prescribed procedures under the Byelaws of 1978 for assessing and collecting 'advertisement tax'. The demand notices issued by the contractor were therefore invalid. The court directed the Corporation to follow the proper procedures for assessment and then delegate the recovery to the contractor.7. Right to take coercive action for recovery of 'advertisement tax':The court held that the contractor does not have the authority to take coercive action for the recovery of 'advertisement tax'. Such powers are reserved for the Municipal Corporation under the Act of 1956. Any coercive action taken by the contractor was deemed illegal and without jurisdiction.8. Determination of whether the glowsign board/signage constitutes an advertisement:The court noted that the determination of whether a glowsign board or signage constitutes an advertisement must be made by the Municipal Corporation before any tax can be levied. This involves verifying the ownership, location, and content of the advertisement.9. Validity of demand notices and invoices raised by the private contractor:The court quashed the demand notices and invoices issued by the contractor, as they were not based on a proper assessment by the Municipal Corporation. The court emphasized that any demand for 'advertisement tax' must be preceded by a quasi-judicial assessment process by the Corporation.10. Constitutional mandate under Article 265 of the Constitution of India:The court reiterated that Article 265 mandates that no tax shall be levied or collected except by authority of law. The assessment and collection of 'advertisement tax' must comply with the statutory provisions and the Byelaws of 1978. The court found that the current process followed by the Corporation and the contractor did not meet this constitutional requirement.Conclusion:The court allowed the writ petitions in part, quashing the demand notices issued by the contractor and directing the Municipal Corporation to reassess the 'advertisement tax' following the Byelaws of 1978. The contractor can only recover the tax after it has been properly assessed by the Corporation. The court emphasized that no coercive action for tax recovery can be taken by the contractor.