2023 (9) TMI 1746 - SC - Indian Laws

Municipal terminal tax in Scheduled Areas upheld where no Governor notification excludes or modifies state municipal laws.

In Scheduled Areas, state municipal statutes and rules, including a municipal terminal tax, apply unless the Governor issues a public notification under ... Levy “a terminal tax” on goods and animals exported from the limits of the Corporation - Power of the Governor under Paragraph 5 of the Fifth Schedule to exclude or modify application of laws to Scheduled Areas - inapplicability of Part IXA to Scheduled Areas under Article 243-ZC - power of State Legislature to authorise Municipalities to levy taxes under Article 243-X - validity of municipal terminal tax levied within municipal limits in Scheduled Areas - precedent on municipal taxing power (Central India Spinning and Weaving & Manufacturing Co. Ltd. v. Municipal Committee, Wardha) - HELD THAT:- The High Court in the present case has observed that the appellant did not produce any notification indicating that the statutes in question would not apply to the Scheduled Areas in the State of Madhya Pradesh or that their provisions would apply with exceptions and modifications disabling the power of the municipality to levy a tax. Even before this Court, no such notification has been produced. The consequence of paragraph 5(1) of the Fifth Schedule is that it enables the Governor to direct either that a parliamentary or state law shall not apply to a Scheduled Area in the State or that it would apply subject to exceptions and modifications. Therefore, unless a notification has been issued by the Governor indicating that (I) a parliamentary or state law shall have no application to the Scheduled Area; or (ii) the parliamentary or state legislation would apply subject to exceptions or modifications, there would be no hindrance in the application of the law to the State. The impact of Article 243-ZC is that Part IXA has no application to a Scheduled Area. The inapplicability of article 243X did not denude the state legislature to enact legislation for the State. A Scheduled Area governed by Article 244 of the Constitution is subject to the provisions contained in the Fifth Schedule which govern the administration and control of Scheduled Areas or Scheduled Tribes. Paragraph 5 confers a power on the Governor, as noted above, to direct either that parliamentary or state law shall not apply in the Schedule Area or that it would apply subject to such exceptions or modifications as may be specified. As the High Court noted, no such notification has been produced and none, we may add, has been produced before this Court other than the notification dated 29 February 2003 specifying the Scheduled Areas. In this view of the matter, the conclusion of the High Court cannot be faulted. On the second aspect, it needs to be noted that the Additional Solicitor General has fairly drawn the attention of this Court to the judgment of the Constitution Bench in Central India Spinning and Weaving & Manufacturing Co. Ltd. The Empress Mills, Nagpur v. The Municipal Committee, Wardha [1957 (12) TMI 23 - SUPREME COURT], (particularly paragraph 33). Since he fairly concedes that the issue which was sought to be raised has been concluded in the above decision of the Constitution Bench, no further submissions have been urged in that regard. Thus, we are of the view that only two issues which have been raised in the course of the present appeals are lacking in substance. Appeals shall accordingly stand dismissed. Issues: (i) Whether municipal terminal tax levied under the Madhya Pradesh municipal statutes and the 1996 Rules is inapplicable to Scheduled Areas in the absence of a notification by the Governor under Paragraph 5 of the Fifth Schedule; (ii) Whether Article 243-X and Part IXA's provisions (municipal taxing power) are inapplicable to Scheduled Areas so as to render the municipal terminal tax ultra vires.Issue (i): Whether the municipal terminal tax applies to lands in Scheduled Areas absent a Governor's notification under Paragraph 5 of the Fifth Schedule directing that a parliamentary or state law shall not apply or shall apply with exceptions and modifications.Analysis: Paragraph 5(1) of the Fifth Schedule contains a non obstante provision empowering the Governor to direct by public notification that any Act of Parliament or of the State Legislature shall not apply to a Scheduled Area or shall apply subject to specified exceptions and modifications. The court examined whether any such notification excluding or modifying the application of the municipal statutes or Rules to the Scheduled Areas had been produced; none was produced before the High Court or this Court. In the absence of a Governor's notification under Paragraph 5(1), state legislation and rules continue to apply to Scheduled Areas subject to the Fifth Schedule framework. The High Court's finding that no notification had been issued was upheld.Conclusion: The municipal terminal tax applies to the lands in question; absent a Governor's notification under Paragraph 5 of the Fifth Schedule excluding or modifying the application of the statutes or Rules, the levy is not precluded.Issue (ii): Whether Article 243-X and the inapplicability of Part IXA to Scheduled Areas (Article 243-ZC) operate to deprive the State or municipalities of power to enact or enforce municipal taxing statutes in Scheduled Areas.Analysis: Article 243-ZC provides that Part IXA does not apply to Scheduled Areas, but Article 244 and the Fifth Schedule establish the special regime for Scheduled Areas, including the Governor's power under Paragraph 5 to exclude or modify application of laws. Article 243-X confers power on State Legislatures to authorise municipalities to levy taxes; the inapplicability of Part IXA does not, by itself, negate the State's competence to enact legislation. In the absence of a Paragraph 5 notification disapplying or modifying the state statutes, the municipal taxing provisions remain operative. The court also noted relevant precedent of the Constitution Bench bearing on municipal taxing powers.Conclusion: Article 243-X/Part IXA's inapplicability to Scheduled Areas does not automatically render municipal taxation statutes inoperative; the State legislation continues to apply unless the Governor issues a Paragraph 5 notification excluding or modifying its operation.Final Conclusion: The challenges to the municipal terminal tax lack substance; since no Governor's notification under Paragraph 5 of the Fifth Schedule was produced to exclude or modify the operation of the municipal statutes or Rules in the Scheduled Areas, the levy of the terminal tax is valid and the appeals are dismissed.Ratio Decidendi: In the absence of a Governor's notification under Paragraph 5(1) of the Fifth Schedule directing that a parliamentary or state law shall not apply to a Scheduled Area or shall apply only with specified exceptions or modifications, state legislation and rules (including municipal taxing provisions) apply in Scheduled Areas; the inapplicability of Part IXA by Article 243-ZC does not itself displace state legislative competence to enact municipal taxation laws.