TaxTMI 
TaxTMI 
2017 (5) TMI 1659
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.... the petitioners before the enforcement of Rules, 2016. (III) Issue a writ, order or direction in the nature of mandamus commanding the respondents not to enforce the aforesaid Rules of 2016 and the amount realized by the respondents from the petitioners under new Rules, 2016 be directed to be refunded to the petitioners." 2. Though, in the prayer clause as also in the body of the writ petition, "Rules, 2016" are referred to as Rules, which are placed on the record as Annexure-1, from a perusal thereof, it is clear and is also not in dispute that these are not Rules framed under Section 540 of the Uttar Pradesh Municipal Corporation Act, 1959 (for short, "Act, 1959") but are Bye-laws made under Section 541 being the Kanpur Nagar Nigam Vigyapan Par Kar Nirdharan, Pratisedh, Viniyaman Va Vigyapan Kar Vasooli Upvidhi, 2016 (for short, "Bye-laws, 2016"). 3. Section 540 of the Act, 1959 empowers the State Government to make rules or model rules to carry out the purpose of the Act, whereas Section 541 confers powers on the Corporation to make bye-laws, not inconsistent with the Act and the rules, with respect to the matters mentioned therein, including in relation to fixin....
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.... of advertisement tax before the State Government and Kanpur Nagar Nigam and its authorities. They are also advertising agencies and carry on business of advertisement within the limits of the Nagar Nigam, Kanpur Nagar by displaying hoardings, kiosks, glow signs etc at the Nagar Nigam sites and private sites in accordance with the provisions of the Act, 1959. Petitioner nos. 11 to 13 are owners of the buildings/sites who have let out their land/building to the petitioner - advertiser under agreements to install hoardings and display advertisements on rent. They are not directly engaged in the business of advertisement. 6. Before the Bye-laws, 2016 were framed, the State Government, in pursuance of powers conferred under Section 227 read with Section 192, 219, sub-section (1) of Section 540 and Section 550 of the Act, 1959 and Section 21 of the Uttar Pradesh General Clauses Act and in supersession of all previous rules and orders with regard to advertisements, had notified the Municipal Corporation (Assessment and Collection of Tax on Advertisement) Rules, 2009 (for short, "Rules, 2009") on 27 February 2008. The Rules, 2009 were enforced from the date of its publication in the Of....
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....ner of the buildings to face penal consequences, as invalid and violative of Section 195 of the Act. 7. In Anurag Bansal (supra), the Full Bench considered, in depth, the relevant provisions of the Act, Rules and the Constitution and, in paragraphs 67 and 68, observed thus: "67. Accordingly, the power conferred on the State Government under Section 540 of the Act is subject to Sections 172, 192, 193, 194, 195 and 196 and 199 of the Act. However, the government has right to frame model rules or issue direction under Section 206 of the Act to impose certain taxes by publication in official gazette. Thus, the impugned rules seem to have been framed in contravention of statutory provision contained in the Act. Hence, the judgment in Taj Advertising (supra) seems to not lay down a correct law. 68. The other aspect of the matter is that the provisions contained in the Act with regard to imposition of tax seem to be an instance of conditional legislation. Consistent with their sovereign character, Legislatures in India have been held to possess wide power of delegation. This power is, however, subject to one important limitation. The Legislation cannot delegate essent....
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....overnment may, by notification, under Section 206 of the Act by general or special order published in official gazette, required corporations to impose any tax mentioned in sub-section (2) of Section 172 of the Act, not already imposed at a specified rate. The Government may also increase, modify or vary the rate of tax in case the Corporation fails to carry out the order. 83. The Government may pass suitable order imposing, increasing, modifying, or varying the tax thereupon and in such event the order of the State Government shall operate as if it had been a resolution duly passed by the Corporation. 84. In view of above, the tax imposed by the State Government straightaway without exercising the power conferred by the Act i.e. issuance of direction by notification in gazette to impose tax seems to be an act of exceeding of jurisdiction. Impugned Rules have been framed by the Government in contravention of statutory provisions (supra) contained in the Act. By framing the impugned Rules, the State Government seems to have acted treating the Corporations of the State as its department which seems to not the aim and object of Article 243 (Q) of the Constitution. ....
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....s deserve to be set aside being ultra vires the mandatory provisions of the Act. Learned Senior Counsel for the petitioner did not make any other submissions though, in the writ petition, he has made reference to several rules to demonstrate on merits that the Bye-laws deserve to be set aside. He did not make any submissions and confined his challenge only on the ground as aforestated. 8.1 On the other hand, Mr Anil Tiwari, learned counsel appearing for the Nagar Nigam fairly submitted that the procedure contemplated under the provisions of Sections 199 to 206 of the Act, 1959 was not followed for making rules to impose a tax specified in sub-section (2) of Section 172. He submitted that for framing the Bye-laws, the procedure contemplated under this provision was followed and, therefore, the Corporation was justified in imposing tax by framing bye-laws under Section 541 of the Act, 1959. With his assistance, we have gone through the counter affidavit and the other material, to which he invited our attention in support. 9. We now proceed to look into the relevant provisions of the Act, 1959. Chapter IX of the Act, 1959 dealing with corporation taxation consists of Sections 17....
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....s Act until provision to the contrary is made by Parliament. 192. Tax on advertisements. - Where a Corporation imposes a tax mentioned in clause (h) of sub-section (2) of Section 172, every person who erects, exhibits, fixes or retains upon or over any land, building, wall, hoarding or structure any advertisement or who displays any advertisement to public view in any manner whatsoever, in any place whether public or private, shall pay on every advertisement which is so erected, exhibited, fixed, retained or displayed to public view, a tax calculated at such rates and in such manner and subject to such exemptions as may be provided by the Act or rules made thereunder: Provided that no tax shall be levied under this section on any advertisement or a notice- (a) of public meetings, or (b) of an election to any legislative body or the Corporation, (c) of a candidature in respect of such an election: Provided also that no such tax shall be levied on any advertisement which is not a sky-sign and which- (a) is exhibited within the window of any building, or (b) relates to the trade or business carried on within the l....
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....s and in such manner and subject to such exemptions as may be provided by the Act or rules made thereunder. The expression used in Section 192 "as may be provided by the Act or rules", if read with the expression "in accordance with the provisions of this Act and the Rules and bye-laws framed thereunder" in sub-section (3) of Section 172, makes it clear that a tax should be calculated at such rates and in such manner as may be provided by the Act or Rules made thereunder. Insofar as advertisement tax under Section 172 (2) (h) is concerned, the legislature has consciously deleted the word "bye-laws" from Section 192 of Act, 1959 thereby making its intent clear, that such a tax cannot be imposed by framing bye-laws. Section 193 empowers the Municipal Commissioner not to grant any permission in case an advertisement contravenes any bye-law made by the Corporation. Section 194 provides that a permission granted under Section 193 shall be void in case it contravenes any bye-law made by the Corporation. Section 196 provides that for contravention of any provision contained in the Act, as provided under Sections 192 and 193, the beneficiaries shall be held responsible for whom or for whos....
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....g rules contemplated under Section 540 in Chapter XXIII of the Act, 1959. At this stage, it would be relevant to reproduce Section 540, which reads thus: "540. Making of rules by State Government. - (1) In addition to the power conferred upon the State Government under the preceding Chapters of this Act to make rules the State Government may make rules to carry out the purposes of the Act and may also make model rules for the guidance of a Corporation in any matter connected with the carrying out of the provisions of this or any other enactment. Explanation.- The power conferred by this sub-section includes the power to make rules regulating the holding of meetings of the Corporation and its Committees and the conduct of business at such meetings till bye-laws are framed under the Act for the purpose. (2) The power of the State Government to make rules under this Act shall be subject to the condition of the rules being made after previous publication and of not taking effect until they have been published in the official Gazette. (3) Any rule made by the State Government may be general for all Corporations or may be special for any one o....
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....Any inhabitant of the City may, within two weeks from the publication of the said notice, submit to the Corporation an objection in writing to all or any of the proposals framed under the preceding section, and the Corporation shall take any objection so submitted into consideration and pass orders thereon by special resolution. (2) If the Corporation decides to modify the proposals of the Executive Committee, or any of them the Municipal Commissioner shall publish the modified proposals and, if necessary, revise draft rules along with a notice indicating that the proposals and rules (if any) are in modification of proposals and rules previously published for objection. (3) Any objections which may be received to the modified proposals shall be dealt with in the manner prescribed in sub-section (1). (4) When the Corporation has finally settled its proposals, the Municipal Commissioner shall submit them along with the objections (if any) made in connection therewith to the State Government. 201. Power of State Government to reject, sanction or modify proposal.- Upon receipt of the proposals and objection under the preceding section the St....
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....ion to comply, to the satisfaction of the State Government, with an order made under sub-section (1), the State Government, may by notification, suspend the levy of the tax, or of any portion thereof, until the defect is removed, or may abolish or reduce the tax. 206. Power of State Government to require Corporation to impose taxes.- (1) The State Government may, by general or special order, published in the official Gazette, require a Corporation to impose any tax mentioned in sub-section (2) of Section 172 not already imposed, at such rate and within such period as may be specified in the notification, and the Corporation shall thereupon act accordingly. (2) The State Government may require a Corporation to increase, modify or vary the rate of any tax already imposed and thereupon the Corporation shall increase, modify or vary the tax as required. (3) If the Corporation fails to carry out the order passed under sub-section (1) or (2), the State Government may pass suitable order imposing, increasing, modifying or varying the tax and thereupon the order of the State Government shall operate as if it had been a resolution duly passed by the Corpo....
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....raft rules submitted by the Corporation, shall proceed forthwith to make such rules in respect of the tax as, for the time being, it considers necessary. When the rules have been made, the order of sanction and a copy of the rules is required to be sent to the Corporation, and thereupon the Corporation under sub-section (2) of Section 202 shall, by special resolution, direct imposition of the tax with effect from a date to be specified in the resolution. A copy of the resolution passed under Section 202, as provided for under Section 203, shall be submitted to the State Government which, in turn, shall notify the same in the Official Gazette and the imposition of the tax from the appointed date, shall, in all cases, be subject to the condition that it has been so notified. A notification of the imposition of a tax under sub-section (2) shall be conclusive proof that the tax has been imposed in accordance with the provisions of this Act. In the present matter, we are not concerned with Sections 204, 205 and 206 though we have reproduced them to only indicate the scheme of the provisions regarding imposition of taxes. 13.3 From the language employed in these provisions, in particu....
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....Committee on 26 February 2015. The Executive Committee considered the modified rules and resolved to constitute a three Member Sub-Committee for revising the rates. The Sub- Committee submitted its report to the Executive Committee which, in turn, placed the modified rules with the revised rates before the Corporation on 25 March 2015. The draft rules were accordingly placed before the special meeting of the Corporation which vide its resolution dated 1 May 2015 again decided to place the draft rules before the Executive Committee. The Executive Committee thereafter once again on 21 May 2015 considered all the proposals and suggestions and ultimately decided to place the same before the Corporation. The Corporation ultimately accepted the proposal/draft rules in its meeting held on 21 November 2015 and forwarded the same to the State Government for seeking its approval with its letter dated 18 January 2016. The affidavit states that the State Government has approved the rules vide its order dated 28 January 2016. 14.1 We have perused both the letters dated 18 January 2016 and 28 January 2016. Both the letters, as seen earlier, do not make any reference to 'Rules' as such....
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....te of Gujarat & Anr, (1973) 2 SCC 345. 15. The observations made by the Supreme Court in Municipal Council, Khurai & Anr Vs Kamal Kumar & Anr, AIR 1965 SC 1321 which are also relevant, read thus: "In view of the fact that the resolution of March 3, 1963 on the basis of which the list was published had been revoked, the particulars mentioned in the second and the third of the above items would necessarily be different from those which would be arrived at after taking into account the resolution of April 28, 1963. Under Art. 265 of the Constitution no tax shall be levied or collected except by authority of law. This clearly implies that the procedure for imposing the liability to pay a tax has to be strictly complied with. Where it is not so complied with the liability to pay the tax cannot be said to be according to law. The objections which the assessees had filed in pursuance of the notification actually published by the Chief Municipal Officer were based upon the list published under S. 136 and not in pursuance of what the liability would be under the Resolution of the Municipal Council, dated April 28, 1963. Therefore, it cannot he said that the opportunity as contem....
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....e to be declared ultra vires the provisions of the Act, 1959, in particular the provisions contained in Chapter IX thereof. 17. The Constitution Bench of the Supreme Court in R B Sugar Co Vs Rampur Municipality, AIR 1965 SC 895, considering the question whether a particular provision of a statute which on the face of it appears mandatory inasmuch as it uses the word "shall" or is merely directory, observed that the issue cannot be resolved by laying down any general rule and depends upon the facts of each case and for that purpose the object of the statute in making the provision is the determining factor. The purpose for which the provision has been made and its nature, the intention of the legislature in making the provision, the serious general inconvenience or injustice to the persons resulting from whether the provision is read one way or the other, the relation of the particular provision to other provisions dealing with the same subject and other considerations which may arise on the facts of a particular case including the language of the provision, have all to be taken into account in arriving at a conclusion whether a particular provision is mandatory or directory. App....
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....ible to accept this submission. The municipality might have been levying property tax since long on properties situated within its limits but until April 1, 1966 the villages of Ramakrishnapuram and Shriharipuram were outside those limits. Qua the areas newly included within the municipal limits, the tax was being imposed for the first time and therefore it was incumbent on the municipality to follow the procedure prescribed by the first proviso to Section 81 (2). Residents and taxpayers of those areas, like respondent nos. 1 to 36, never had an opportunity to object to the imposition of the tax and that valuable opportunity cannot be denied to them. It is obligatory upon the municipality not only to invite objections to the proposed tax but also to consider the objections received by it within the specified period. Such period has to be reasonable, not being less than one month. The policy of the law is to afford to those likely to be affected by the imposition of the tax a reasonable opportunity to object to the proposed levy." 19. We also would like to look at the provisions prescribing the procedure for framing rules under Section 540 from another angle. If the provisions of....
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....s and the intention of the legislature which obviously is that no tax should be imposed without hearing taxpayers. 22. Thus, it is clear that to impose a tax specified under sub-section (2) of Section 172, the procedure contemplated under Sections 199 to 203 requires to be followed scrupulously and a deviation therefrom is not permissible and if there is any, the rules framed would be rendered illegal or ultra vires the procedure contemplated under these provisions. We are not entering into such controversy since, in the present case, there are no rules at all before us that have been framed and approved, published or notified in the Official Gazette by the State Government. 23. We would now look into the provisions which provide for the procedure to be followed for making bye-laws under Section 541. This provision empowers a Corporation to make bye-laws with respect to the matters mentioned therein including "prohibition and regulation of advertisements". Sections 542, 543 and 544 provide the procedure for making bye-laws. It would be relevant to reproduce those provisions, which read thus: "542. Municipal Commissioner to lay draft bye-laws before the Corporation fo....
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....B. A printed copy of the bye laws being kept open to public inspection at the Corporation office; C. Copies thereof being furnished to any person desirous thereof and D. All objections and suggestions having been duly considered by the Corporation. It is only thereafter that they come to be published in the Gazette. As would be evident from the above, the proposal to adopt and frame bye laws is mooted by the Municipal Commissioner initially. The Corporation is then obliged to effect notice of its intention to take such bye laws into consideration on or after a date to be specified in the said notice. Objections and suggestions are invited to the same and are to be considered by the Corporation. It is upon a culmination of the aforesaid processes that a valid bye law comes into existence and is entitled to be enforced under the provisions of the Act. From the narration of facts noticed above and the averments taken in the counter affidavit it is evident that even this procedure was not followed. The bye laws dealing with subjects other than the levy of tax must also fall on this account. 25. At the cost of repetition, it needs to be noted that Section 541 of the 1959 ....