PETITIONER:
THE CANTONMENT BOARD, MATHURA
Vs.
RESPONDENT:
KRISHNA BRICKS AND LIME FACTORY
DATE OF JUDGMENT: 12/09/1996
BENCH:
SINGH N.P. (J)
MAJMUDAR S.B. (J)
CITATION:
JT 1996 (8) 180
ACT
HEADNOTE
JUDGMENT
JUDGMENTN.P. SINGH, J
These appeals have been filed on behalf of the Cantonment Board, Mathura (hereinafter referred to as the ‘Board’) for setting aside the judgment of the Allahabad High Court, declaring notification dated 22.11.1958, by which tax at the rate of 0.75 p. per thousand bricks had been fixed by the Board within the cantonment area as invalid.
The respondent is the owner of a brick kiln and was carrying on the business of manufacturing and selling of bricks. A suit was filed on behalf of the said respondent for restraining the appellant-Board from realising tax from the said respondent at the rate of 0.75 per thousand of bricks. It was alleged that previously the Board was realising the tax from the manufacturers of bricks at the rate of 0.19 per thousand. But by impugned notification, it raised the rate of the tax at 0.75 per thousand of bricks. It was alleged and asserted that the respondent as the manufacturer of bricks was neither deriving any advantage from the Board nor any service was being provided by the Board. As such, the realisation of the tax at the aforesaid rate was in contravention and in violation of Section 60 of the Cantonments Act, 1924 read with Section 128 (1)(ii) of the U.P. Municipalities Act, 1916. The suit filed on behalf of the respondent was dismissed by the Trial Court. That judgment was affirmed by the Court of Appeal. However, on second appeal being filed on behalf of the said respondent, the High Court came to the conclusion that the ceiling and restriction imposed by Article 276 (2) of the Constitution, as applicable to the State, any municipal, district board, local board or other local authority within such State in respect of imposition of taxes on professions, trades and callings, was applicable even on the Board which had been established under the aforesaid Cantonments Act. On that finding the notification was declared to be invalid being hit by Article 276 (2) of the Constitution.
Section 3 of the Cantonments Act provides that the Central Government may, by notification in the Official Gazette, declare any place or places in which any part of the Forces is quartered or which, being in the vicinity of any such place or places, is or are required for the service of such forces to be a cantonment for the purposes of the said Act and may by a like notification, declare that any cantonment shall cease to be a cantonment. In view of subsection (4) of Section 3 Central Government may, by notification in the Official Gazette, direct that any place declared a cantonment under sub-section (1) the provisions of any enactment relating to local self-Government other than this Act shall have effect only to such extent or subject to such modifications, or that any authority constituted under any such enactment shall exercise authority only to such extent, as may be specified in the notification. Section 6 provides that when by a notification under Section 3, any cantonment ceases to be a cantonment, the local area comprised therein shall immediately be placed under the control of a local authority, the balance of the cantonment fund and other property vesting in the Board shall also vest in such local authority, and the liabilities of the Board shall be transferred to such local authority. Similarly, Sections 7 and 8 make provisions in respect of cantonment fund and its property which is placed under the control of some other local authority, in view of the notification under Section 4, because of which any local area forming part of cantonment ceases to be under the control of a particular Board. Section 60 of the Cantonments Act provides:
"General power of taxation -
(1) 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:
(2) 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 later
date. Because of aforesaid Section 60 the Board may with 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 where such cantonment is situated’. For imposing any tax in exercise of the power under Section 60, two conditions have to be fulfilled and complied with (i) there must be a previous sanction of the Central Government to impose such tax and (ii) the tax to be imposed must be such which under any enactment for the time being in force may be imposed in any municipality in the State wherein such cantonment is situated.
So far the municipality within any State is concerned, its power to impose a tax in respect of professions, trades or callings is governed and controlled by Article 276 of the Constitution, which says:
"Taxes on professions, trades,
callings and employments -
(1) Notwithstanding anything in
article 246, no law of the
Legislature of a State relating to
taxes for the benefit of the State
or of a municipality, district
board, local board or other local
authority therein in respect of
professions, trades, callings or
employments shall be invalid on the
ground that it relates to a tax on
income.
(2) The total amount payable in
respect of any one person to the
State or to any one municipality,
district board, local board or
otherlocal authority in the State
by way of taxes on professions,
trades, callings and employments
shall not exceed two thousand and
five hundred rupees per annum.
(3) The power of the Legislature of
a State to make laws as aforesaid
with respect to taxes on
professions, trades, callings and
employments shall not be construed
as limiting in any way the power of
Parliament to make laws with
respect to taxes on income accruing
from or arising out of professions,
trades, callings and employments." There is a non-obstante clause in Article 276 (1) of the Constitution saying that notwithstanding anything contained in Article 246 no law made by the legislature of a State relating to taxes for the benefit of the State or of a municipality, district board, local board, or other local authority therein in respect of professions, tradings, callings or employments shall be invalid on the ground that it relates to a tax on income. Having said so a ceiling on the amount of tax has been imposed by Article 276(2), which was Rs.250/- earlier and has been raised to Rs.2,500/- by the Constitution (Sixtieth Amendment) Act, 1988 with effect from 20.12.1988. In the case of Bharat Kala Bhandar Ltd. v. Municipal Committee, Dhamangaon, AIR 1966 SC 249 = 1965 (3) SCR 499 a Constitution Bench in its majority judgment said:
"Before we deal with these
cases it is necessary to point out
the rationale upon which S.142-A of
the Govt. of India Act, 1935 was
enacted and on which Art.276 of the
Constitution now rests. It is that
the legislative spheres of the
Provinces and the Centre came to be
clearly demarcated in regard to
items falling within Lists I and II
of Schedule VII of the Govt. of
India Act and now to those falling
within the same lists of Schedule
VII of the Constitution. Taxes on
professions. trades. callings and
employments are taxes on income and
are thus outside the provincial and
now State - lists and belong
exclusively to Parliament and
before that to the Central
Legislature. Yet under a large
number of laws enacted before the
Govt. of India Act, 1935 came into
force, power was conferred on local
Governments and local authorities
to impose taxes on such activities.
This was obviously in conflict with
S.100 of the Govt. of India Act.
When this was realised S.142-A was
enacted by the British Parliament
which saved the power conferred by
pre-existing laws but limited the
amount payable to Rs.50 after 31st
March, 1939. A saving was made,
however, of pre-existing laws
subject to certain conditions with
which we are not concerned. The
provisions of this section have
been substantially reproduced in
Article 276 of the Constitution
with the modification that the
upper limit of such tax payable per
annum would be Rs.250 instead of
Rs.50. A tax can be recovered only
if it is ‘payable’ and it would be
payable only after it is assessed.
It is, therefore, futile to contend
that the ban placed by the
aforesaid provisions extends only
to recoveries and not to an earlier
stage.
(emphasis supplied)
...................................
We may further observe that where
there is an express prohibition in
a statute against a local authority
from imposing a tax, as for
instance, the recovery in the
Statute construed by this Court in
the Poona City Municipal
Corporation case, C.A. No.582 of
1961, dated 5-5-1964: (AIR 1965 SC
555) (supra) or where a prohibition
can be implied - whether it be with
regard to an item of taxation or
with regard to the rate of tax or
the quantum of tax payable by an
individual assessee - the action of
a local authority or of any of its
instrumentalities in transgressing
that prohibition must be regarded
as being in excess of its
jurisdiction. Here there is a
prohibition in S.142-A of the
Government of India Act and now in
Art.276 of the Constitution, which
precludes a State Legislature from
making a law enabling a local
authority to impose a tax on
"professions, trades, callings and
employments" in excess of Rs.250
per annum. These provisions have to
be read in the Act or to be deemed
by implication to be there as the
Constitution is the paramount law
to which all other laws are subject
as was the Government of India Act,
1953 before January 26, 1950. If,
therefore, after the date specified
in S.142-A of the Government of
India Act or after the commencement
of the Constitution a local
authority or any of its
instrumentalities imposed or
imposes a tax which is in excess of
the permissible amount, it would be
exceeding its jurisdiction and a
provision like S.84(3) of the Act
will not bar the jurisdiction of a
civil Court to entertain a suit
instituted by a person from whom it
is collected for the repayment of
the money recovered from him in
excess of the permissible
amount.............................
Here since the Assessing Officer
had no authority to levy a tax
beyond what S.142-A of the
Government of India Act, 1953
permitted or what Art.276 permits
his proceedings are void in so far
as they purport to levy a tax in
excess of the permissible amount
and authorise its collection and
the assessment order is no answer
to the suit for the recovery of the
excess amount. To this extent, even
the order of assessment cannot
obtain the protection of S.84(3) of
the Act and, therefore, the
appellant’s suit is maintainable."
Again in the case of Mahapalika of the city of Agra v. The Agra Brick Kiln Owners Association and Another, (1976) 3 SCC 42, the scope of Article 276(2) was considered by this Court in connection with the aforesaid U.P. Municipalities Act, 1916. The State Government issued a notification in the year 1947 imposing a tax under Section 128(1)(ii) of the said Act, at the rate of 14 annas per thousand bricks. Brick kiln owners who were effected by the said notification filed a suit for declaration that the tax was void as such could not be realised in view of Section 142-A of the Government of India Act, 1935 and Article 276 of the Constitution. This Court said:
"The Government of India Act, 1935,
certainly set a maximum on the tax
on trades and callings and we agree
that the High Court was right in
holding that the Municipal Board’s
right to levy tax under the the
notification Ex.H could be valid up
to Rs.50 per year and, to the
extent it went beyond that limit,
was void. So, we affirm the High
Court’s holding for the period upto
January 26, 1950 that no sum higher
than Rs.50 as set out in the
Government of India Act, 1935 can
be exacted under Section 128 of Act
II of 1916.
From the Raj to the Republic was a
big break in constitutional law,
but there was some continuity
maintained. A certain ceiling on
taxes on professions, trades,
callings and employments had been
set by Article 276 of the
Constitution of India, but this
maximum was not, Rs.50 as in the
Government of India Act, 1935 but
Rs.250.
...................................
Inevitably, it follows that during
the post-Constitution period
nothing by way of taxes on trade or
callings above the limit so set is
recoverable and hence the maximum
levy from each person under the
notification issued under Act II
of 1916 rises to Rs.250.
...................................
This does not mean that anything
beyond Rs.250 {the tax freeze under
Article 276(2)} can be levied. No.
The constitutional maximum prevails
as it covers all taxes on trade or
calling even today. Therefore,
until Parliament makes any other
law, as contemplated in the proviso
to Section 172 of the Adhiniyam,
the maximum of Rs.250 binds. We
have to read down the notification
Exhibit H for the post-Constitution
period, in tune and conformity with
the Constitution and uphold its
validity to the extent of
constitutional permissibility." In the case of Mahapalika of Agra v. Agra Brick Kiln Owners Association (supra) the validity of a notification issued under Section 128 (1)(ii) of the U.P. Municipalities Act, 1916 in respect of Agra Municipal Board imposing a tax on brick manufacturers at the rate of 14 annas per thousand bricks was considered by this Court and it was held that any such notification must conform and fulfil the requirement of the ceiling fixed by Article 276(2) of the Constitution.
In view of Article 276, it has to be held that no law of legislature of a State relating to imposition of taxes for the benefit of the State or of a municipality, district board, local board, or other local authority therein in respect of professions, trades. callings shall be valid, if it provides the total amount payable in respect of any one person to the State or to any one municipality, district board, local board, or other local authority in the State, exceeding the limit fixed by Article 276(2) of the Constitution.
Now the question which is to be answered is whether the ceiling prescribed by Article 276(2) of the Constitution shall also be applicable to Board which has been established under the Cantonments Act. It need not be pointed out that the Board has been established under Cantonments Act which is a Central Act. So far Article 276 is concerned, it relates to the power of the legislature of a State to make law for the benefit of the State or of a municipality, district board, local board or other local authority in respect of taxes on professions, trades, callings saying that it shall not be invalid on the ground that it relates to tax on income. But at the same time, by Article 276(2) a ceiling has been fixed in respect of the amount payable to the State, or anyone municipality, district board, local board, or other local authority in the State. This was necessary because the power to tax on income has been provided under Entry No.82 of List I in the Seventh Schedule and only Parliament can enact a law in respect thereof. The State legislature cannot make a law in respect of taxes on the income of individuals within the State. It can be said that Article 276 of the Constitution within a prescribed limit, enables the legislature of a State to make law for imposition of taxes on income for the benefit of the State or municipality, district board, local board or other local authority from professions, trade, callings saying that such law shall not be invalid on the ground that it relates to a tax on income.
So far the Board is concerned which has been established under the Cantonments Act, has issued the impugned notification in exercise of the power under Section 60 of the Cantonments Act. As such the said notification shall not be deemed to have been issued in exercise of power under a law enacted by the legislature of a State for the objects mentioned in Article 276. To that extent, we are not in agreement with the opinion expressed by the learned Judge of the High Court. Whether the provisions of Article 276 shall be applicable, has to be examined by construing the scope of Section 60 of the Cantonments Act. Section 60 of the Cantonments Act, prescribes two conditions for imposition of tax by the Board. Firstly, that there must be a previous sanction of the Central Government and secondly that only such tax can be imposed within any cantonment which under any enactment for the time being in force may be imposed in any municipality in the State wherein such cantonment is situated. The framers of the Cantonment Act did not desire to delegate and authorise the Board to impose any tax. The power of the Board to impose a tax was circumscribed by prescribing a limitation that the Board may impose in the 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.
Section 128(1)(ii) of the U.P. Municipalities Act, 1916 provides:
"A tax on trades and callings
carried on within the municipal
limits and deriving special
advantages from, or imposing
special burdens on, municipal
services." In exercise of power under Section 128(1)(ii), the Municipal Board of any municipality within the State of Uttar Pradesh could impose a tax on trades and callings carried on within the municipal limits. Therefore, any Board within the State of U.P. can also impose such tax within the cantonment area because of Section 60 of the Cantonments Act. In view of the clear and unambiguous provision of Section 60, the learned counsel appearing for the appellant-Board did not contest this position. But according to him, it does not mean, that Board is also bound by the rates of the taxes so imposed by the municipality or the local board within that State. It can prescribe its own rates of taxes on the trades and callings. According to us, it is difficult to accept this contention. If the framers of the Constitution did not give this liberty and latitude to the legislature of a State in respect of taxes on professions, trades or callings for benefit of the State or municipality, district board, local board or other authority under Article 276 of the Constitution, how an unlimited power so far the rate of tax is concerned, can be conceded in favour of the Board which is a creature and authority established under the Cantonments Act? When Section 60 links the power to impose tax with any enactment for the time being in force in respect of any municipality in the State where the cantonment is situated, then it shall be deemed that it has also prescribed the limit of the ceiling of such tax with reference to the said enactment in force in respect of any municipality in that State. If it is held otherwise, it will lead to an anomalous position, so far the nature of tax is concerned, because of Section 60 the power of the Board is circumscribed with reference to any enactment for the time being in force in respect of municipality in that State whereas so far the rate of such tax which is more vital, has been left to the discretion of the Board.
On behalf of the appellant-Board it was pointed out that the Board cannot exercise arbitrary power under Section 60 because any such tax including the rate thereof, has to be first sanctioned by the Central Government. According to us, because of Article 276 if the State legislature cannot tax on professions, trades or callings for the benefit of the State, municipality, district board, local board or other local authority, beyond the limit prescribed by Article 276(2) as it amounts to tax on income, then how it can be held that the Board has unlimited power without any ceiling to tax on professions, trades or callings being carried on within the cantonment area? When Section 60 provides that Board may with 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, such restriction shall not be only in respect of the nature of the tax, but also in respect of the ceiling on rates prescribed under the enactment, relating to the municipality.
On behalf of the appellant, reference was made to the judgment of Allahabad High Court in the case of M/s. Punjab Lime and Lime-stone Co., Dehradun v. Cantonment Board. Dehradun and another, AIR 1967 Allahabad 15. A learned Judge in connection with Section 60 of the Cantonments Act said:
"Section 60 of the Cantonments
Act nowhere says that Cantonment
Boards can levy taxes which can be
levied by municipalities subject to
the same limitations. It simply
provides that the taxes which are
realizable by Municipal Boards are
also realizable by Cantonment
Boards. This does not mean that the
limitations on the powers of
Municipal Boards to levy their
taxes must also be applied to taxes
levied by Cantonment Boards."
A contrary view was expressed in the case of Madan Lal v. Cantonment Board, Mathura, 1978 All L.J. 1147 by a learned Judge of the same High Court saying that Cantonment Board while imposing a tax on per thousand of bricks must fix the maximum limit which does not contravene the provisions of Article 276 of the Constitution. A Division Bench of Rajasthan High Court in the case of Narain and another v. Cantonment Board, Nasirabad, AIR 1963 Rajasthan 190 said:
"Considering section 60 of the
Act, we may point out that the
legislature empowering the
respondent to levy and collect
taxes used the word "impose" only
and evidently, therefore, the term
should ba taken to have been used
in a wider sense. Besides the
object and purport underlying
section 60 appears to be that the
taxes to be imposed by the
respondent (Cantonment Board)
should be consistent with and
should conform to the State laws
relating to imposition or taxes by
the local authorities. Section 60
further does not refer to State
laws in force at a particular point
of time but the State laws
generally as might be from time to
time have been referred to. It will
be hardly in keeping with the
object and policy underlying
section 60 that the respondent
should be permitted to continue
taxes in contravention of State
laws. the term "impose" should,
therefore, be taken to have been
used in wider sense in section 60
and that being so, the respondent
cannot collect taxes in
contravention of State laws." In the case of Hira Lal and another v. Union of India and another, 1972 Tax L.R. 2051, the Himachal Pradesh High Court has also come to the conclusion that under Section 60 of the Cantonments Act, while imposing a profession tax, Article 276(2) of the Constitution cannot be violated.
Accordingly, the appeals fail and are dismissed. There shall be no order as to costs.