{"file_name": "2024_10_1381_1403_EN.pdf", "text": "[2024] 10 S.C.R. 1381 : 2024 INSC 784\n\nThe Patna Municipal Corporation & Ors. \nv. \nM/s Tribro Ad Bureau & Ors. \n\n(Civil Appeal No. 11117 of 2024)\n\n16 October 2024\n\n[Vikram Nath and Ahsanuddin Amanullah,* JJ.]\n\nIssue for Consideration\n\nThe Division Bench of the High Court set aside the judgment of the \nSingle Judge of the High Court and held that the appellant(s) herein \ncould not raise any demand of tax/fee/royalty on advertisement(s) \nsince  it  has  been  made  without  any  legislative  sanction  and  is, \nthus, violative of Article 265 of the Constitution of India. The core \nquestion confronting this Court, as it was before the Division Bench, \nis  whether  the  demand  is  by  way  of  a  tax/levy  or  simply  in  the \nnature of royalty for permission for advertising through hoardings \nwithin the limits of the Corporation.\n\nHeadnotes†\n\nBihar Municipal Act, 2007 – s. 431 – Royalty on advertisements – \nPower  of  Corporation  to  charge  royalty  –  On  29.08.2005,  in \na  meeting  it  was  resolved  that  if  any  agency  puts  up  its \nadvertisement(s), the Corporation would charge royalty at the \nrate of Re.1/- per square foot per year on such hoardings – \nThereafter,  appellants  came  out  with  fresh  rates  of  royalty/\ntax  on  advertisements,  the  same  being  Rs.10/-  per  square \nfoot per year in the case of the respondent, which was made \neffective  from  02.11.2007  –  The  Municipal  Commissioner \nof  the  Corporation  recommended  that  all  those  advertisers \nwho  had  not  paid  their  dues  in  terms  of  the  order  dated \n02.11.2007 would be liable to be charged twice the rate fixed \nand  further  that  hoardings  displayed  without  permission \nshould  be  removed  and  such  persons  would  be  charged  a \npenalty five times the amount due from them – A demand was \nraised towards royalty/fee/tax on the respondent no.1 – A writ \npetition was filed by the respondent no.1 – The Single Judge \nof the High Court quashed the order of demand of penalty – \nHowever, the Division Bench of the High Court set aside the \n\n* Author\n\n\f1382 \n\n[2024] 10 S.C.R.\n\njudgment of the Single Judge of the High Court and held that \nthe appellant(s) herein could not raise any demand of tax/fee/\nroyalty  on  advertisement(s)  since  it  has  been  made  without \nany legislative sanction – Correctness:\n\nHeld:  In  the  instant  factual  setting,  the  advertising  companies/\nrespective Respondents No.1 had agreed in the year 2005 to pay \na  royalty  of  Re.1  per  square  foot  to  the  Corporation  for  putting \nup  hoardings/advertisements  –  There  is  no  dispute  that  in  the \nMeeting  held  on  29.08.2005,  the  advertising  companies  did  not \nobject to payment of royalty, as sought by the Corporation – Only \n2 advertising companies, in praesenti, moved the High Court by \nway of letters patent appeals, whereas, a majority of the advertising \ncompanies  complied  with  making  payment(s)  @  Rs.10  per \nsquare foot subsequent to the decision of the Corporation dated \n02.11.2007  –  The  revision  of  rate  was  within  the  power  of  the \nCorporation – The Corporation’s power to charge royalty cannot \nbe  interfered  with  on  the  ground  that  the  same  is  not  available, \neither in the Act or in the Regulations concerned, as there is no \nquestion of the said ‘royalty’ being a tax – Section 431 of the Act, \ntherefore, would not come into the picture where royalty, that too by \nway of and under an agreement/understanding is concerned – As \nroyalty  and  tax  cannot  be  equated  – The  nomenclatures  cannot \nbe  used  interchangeably  in  law,  both  carrying  starkly  different \nimports  and  connotations  – As  far  as  enhancement  of  the  rate \nfrom Re.1 per square foot to Rs.10 per square foot is concerned, \nthere has been no serious attempt to challenge the enhancement \nin quantum from Re.1 per square foot to Rs.10 per square foot, \nhence,  this  Court  refrains  from  delving  into  that  aspect  –  The \npayment  of  enhanced  rate  of  Rs.10  per  square  foot  was  not \nmade retrospective by the Corporation, as it was made effective \nfrom  November,  2007,  this  Court  does  not  find  any  occasion  to \ninterfere in such demand from the date it was made effective by \nthe Corporation as there is no element of retrospectivity involved –  \nTherefore,  the  decision  of  the  Corporation,  to  charge  Rs.10 \nper  square  foot  with  regard  to  hoarding(s)/advertisement(s)  as \ncommunicated  at  the  relevant  point  of  time  to  the  concerned \nparties needs no interference – However, the imposition of penalty \nfor  non-payment  needs  to  be  interfered  with  as  no  such  power \nexists  –  It  is  held  thus,  but  with  the  clarificatory  caveat  that  the \nCorporation  would  not  be  precluded  from  charging  interest  over \ndelayed payment(s). [Paras 23, 24, 29, 33, 36]\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R.  \n\n1383\n\nPrinciple of Law – Quoting wrong provision of law:\n\nHeld:  It  is  settled  that  quoting  the  wrong  provision  of  law,  when \nthe authority concerned is otherwise empowered to carry out an \nact, could not vitiate the act on such ground alone. [Para 30]\n\nCase Law Cited\n\nMineral Area  Development Authority  v.  Steel Authority  of  India \n[2024] 8 SCR 540 : 2024 SCC OnLine SC 1796 – followed.\n\nCommissioner  of  Income  Tax,  Mumbai  v. Anjum  M  H  Ghaswala \n[2001] Supp. 4 SCR 303 : (2002) 1 SCC 633; Punit Rai v. Dinesh \nChaudhary [2003] Supp. 2 SCR 743 : (2003) 8 SCC 204; Union \nof  India  v.  Naveen  Jindal  [2004]  1  SCR  1038  :  (2004)  2  SCC \n510 – held inapplicable.\n\nIndsil  Hydro  Power  and  Manganese  Limited  v.  State  of  Kerala \n[2021] 13 SCR 136 : (2021) 10 SCC 165; Century Spinning and \nManufacturing  Company  Ltd.  v.  Ulhasnagar  Municipal  Council \n[1970]  3  SCR  854  :  (1970)  1  SCC  582;  State  of  Kerala  v. \nChandramohanan [2004] 1 SCR 1155 : (2004) 3 SCC 429; N Mani \nv. Sangeetha Theatre (2004) 12 SCC 278; Ram Sunder Ram v. \nUnion  of  India  [2007]  8  SCR  292  :  2007  (9)  SCALE  197;    P  K \nPalanisamy v. N Arumugham [2009] 11 SCR 342 : (2009) 9 SCC \n173;  Mohd.  Shahabuddin  v.  State  of  Bihar  [2010]  3  SCR  911  : \n(2010) 4 SCC 653; State of Haryana v. Raj Kumar [2021] 8 SCR \n320 : (2021) 9 SCC 292; Alok Shanker Pandey v. Union of India \n[2007] 2 SCR 737 : (2007) 3 SCC 545 – referred to.\n\nBooks and Periodicals Cited\n\nMozley  &  Whiteley's  Law  Dictionary  (11th  Edn.,  1993,  p.  243); \nAnson's English Law of Contract, 22nd Edn., p. 174.\n\nList of Acts\n\nPatna  Municipal  Corporation  Act,  1951;  Bihar  Municipal  Act, \n2007;  Bihar  and  Orissa  Public  Demands  Recovery Act,  1914; \nPatna Municipal Corporation (Grant of Permission for Display of \nAdvertisements & Similar Devices) Regulations, 2012.\n\nList of Keywords\n\nTax;  Fee;  Royalty;  Advertisement;  Demand  of  tax/fee/royalty \non  advertisement; Article  265  of  the  Constitution;  Power  of  the \nCorporation  to  charge  royalty;  Principles  of  law;  Quoting  wrong \nprovision of law.\n\nThe Patna Municipal Corporation & Ors. v.  M/s Tribro Ad Bureau & Ors.\f1384 \n\n[2024] 10 S.C.R.\n\nCase Arising From\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 11117 of 2024\n\nFrom the Judgment and Order dated 26.04.2016 of the High Court \nof Judicature at Patna in LPA No. 1391 of 2012\n\nWith\n\nCivil Appeal No. 11118 of 2024\n\nEmanating from LPA No. 1436 of 2012 arising from CWJC No. 5369 \nof 2012 (Patna High Court)\n\nAppearances for Parties\n\nBrijender  Chahar,  Sr. Adv.,  Rudreshwar  Singh,  Kaushik  Poddar, \nAdvs. for the Appellants.\n\nSanjay  Singh,  Dr.  Manish  Singhvi,  Sr.  Advs.,  Ms.  Sarvshree,   \nMs.  Somyashree,  Rudrank  Shivam  Singh,  Ms. Adya  Rao,  D.  K. \nDevesh, Abhinav Mukerji, Mrs. Bihu Sharma, Ms. Pratishtha Vij, \nAkshay C. Shrivastava, Advs. for the Respondents.\n\nJudgment / Order of the Supreme Court\n\nJudgment\n\nAhsanuddin Amanullah, J.\n\nHeard learned counsel for the parties.\n\n2.  Delay condoned.\n\n3. \n\nLeave granted in both petitions.  \n\n4.  As  the  issue  involved  in  both  cases  is  same,  these  appeals  are \ndealt  with  collectively.  For  the  sake  of  convenience,  facts  in  the \nCivil Appeal arising out of Special Leave Petition (Civil) No. 22592 \nof 2016 are noticed.\n\n5.  Challenge  is  laid  to  the  Final  Judgment  and  Order  passed  by  a \nDivision Bench of the High Court of Judicature at Patna (hereinafter \nreferred to as the “High Court”) in Letters Patent Appeal No. 1391 \nof 2012 dated 26.04.2016 (hereinafter referred to as the “Impugned \nJudgment”) by which the Judgment and Order passed by the Single \nBench dated 29.06.2012 in Civil Writ Jurisdiction Case No.5108 of \n2012 (hereinafter referred to as the “Single Bench Judgment”) has \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R.  \n\n1385\n\nbeen  set  aside  and  it  has  been  held  that  the  appellant(s)  herein \ncould  not  raise  any  demand  of  tax/fee/royalty  on  advertisement(s) \nsince it has been made without any legislative sanction and is, thus, \nviolative of Article 2651 of the Constitution of India, 1950 (hereinafter \nreferred to as the “Constitution”). The Division Bench further directed \nthat all amounts recovered by the appellants herein on this count i.e., \nby way of ‘tax’ on advertisement(s), be refunded to the concerned \nparties, as also that, as a consequence, there was no question of \nany imposition of penalty by the Appellant No.1/the Patna Municipal \nCorporation (hereinafter referred to as the “Corporation”).\n\nCONTEXT:\n\n6.  On 29.08.2005, a Meeting was called by the Appellant No.2/Municipal \nCommissioner-cum-Chief Executive Officer, attended by representatives \nof the advertising agencies (respective Respondents No.1), wherein \nit was resolved that if any agency puts up its advertisement(s), it will \nhave to submit a list of advertisement(s), the place/location, size, etc. \nto the Authorised Officer of the Corporation, and that the Corporation \nwould  charge  royalty  at  the  rate  of  Re.1/-  per  square  foot  per  year \non such hoardings, which would be displayed on the land under the \njurisdiction  of  the  Corporation. The Appellants  on  15.01.2007  came \nout with fresh rates of royalty/tax on advertisements whereby different \nrates  of  royalty  for  different  kinds  of  hoardings  and  advertisements \nwere prescribed, the same being Rs.10/- per square foot per year in \nthe case of the respondent, which was made effective from 02.11.2007.\n\n7. \n\nIn the interregnum, the Patna Municipal Corporation Act, 1951 was \nrepealed and replaced by the Bihar Municipal Act, 2007 (hereinafter \nreferred  to  as  the  “Act”),  which  came  into  force  with  effect  from \n05.04.2007,  vide  Section  488(1)  of  the Act. Thus,  the  Corporation \nstarted  operating  under  the  (new)  Act.  By  Office  Order  dated \n02.11.2007,  various  rates  of  royalty/penalty  under  the  provisions \nof  the  Act  were  prescribed  and  the  order  was  made  effective \nfrom  24.08.2007.  The  Municipal  Commissioner  of  the  Corporation \nrecommended that all those advertisers who had not paid their dues \nin terms of the order dated 02.11.2007 would be liable to be charged \ntwice  the  rate  fixed  and  further  that  hoardings  displayed  without \npermission should be removed and such persons would be charged \n\n1 \n\n‘265. Taxes not to be imposed save by authority of law. – No tax shall be levied or collected except \nby authority of law.’\n\nThe Patna Municipal Corporation & Ors. v.  M/s Tribro Ad Bureau & Ors.\f1386 \n\n[2024] 10 S.C.R.\n\na  penalty  five  times  the  amount  due  from  them.  On  15.12.2010, \nthe Council of the Corporation passed Resolution No.18 to cancel \nthe  registration  of  the  advertising  agencies  that  had  defaulted  in \nmaking  payment  of  the  enhanced  royalty/fee/tax.  The  same  was \ndone  when  it  came  to  the  notice  of  the  Corporation  that  several \nadvertising  agencies  had  illegally  displayed  hoardings,  with  some \nnot even having permission to do so from the Corporation and not \nhaving paid dues. On 11.02.2012, in terms of various Resolutions/\ndecisions  of  the  Corporation  under  the Act,  a  demand  was  raised \ntowards  royalty/fee/tax  on  the  Respondent  No.1  to  the  tune  of \nRs.64,50,040/- (Rupees Sixty-Four Lakhs Fifty Thousand and Forty). \nThis demand, as also the Office Order dated 02.11.2007 was assailed \nby filing a writ petition under Article 226 of the Constitution before \nthe Patna High Court, wherein the learned Single Judge ultimately \nwent  on  to  quash  ‘the  order  of  demand  of  penalty  by  the  Patna \nMunicipal Corporation in all the cases’and directed ‘that the Patna \nMunicipal  Corporation  should  accept  the  tax/royalty/rent  payable \nby these petitioners in accordance with the 2007 rates fixed by the \nPatna Municipal Corporation.’ On 18.07.2012, the Corporation sent \na  Demand  Notice  to  the  Respondent  No.1  to  pay  Rs.21,98,000/- \n(Rupees Twenty One Lakhs Ninety Eight Thousand) as royalty/fee/\ntax in light of the Single Bench Judgment, to which the Respondent \nNo.1 replied on 28.01.2013 contending that the same was calculated \nwrongly  and,  thus,  a  corrected  Demand  Notice  ought  to  be  sent. \nAs  the  Corporation  did  not  respond  to  this,  the  Respondent  No.1 \ncontinued  paying  royalty/fee/tax    as  self-assessed  by  it  i.e.  at  the \nrate of Re.1 per square foot.\n\n8.  The Respondent No.1 and others, similarly-situated, preferred intra-\nCourt appeal(s) before the Division Bench of the High Court assailing \nthe  Single  Bench  Judgment.  The  Division  Bench,  by  way  of  the \nImpugned Judgment, quashed the enhancement itself, and held that \nthe Corporation had no power to charge royalty/fee/tax under the Act, \nsince it was necessary to frame Regulations. The Impugned Judgment \nreasoned  that  in  the  absence  of  such  Regulations,  there  was  no \nauthority in law to levy/impose/collect tax, as sought to be imposed \nby the Corporation. Apropos the Regulations framed on 04.07.2012, \npublished  in  the  Gazette  on  13.08.2012,  the  Division  Bench  held \nthat the said Regulations pertain only to licensing provisions and not \ntaxing provisions. It added that when the Regulations were silent and \ndo not speak of tax on advertisement, the same could not be levied \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R.  \n\n1387\n\n9. \n\nby the Corporation. It further went on to hold that even the decision \nof the Corporation to auction-settle the right to collect advertisement \ntax from advertisers to private individuals is totally impermissible as \nthe State/its instrumentalities cannot trade in taxation. The Division \nBench was of the view that to levy, assess and raise any demand \nof  tax  is  a  sovereign  function,  which  cannot  be  auction-settled  to \nprivate individuals.\n\nSUBMISSIONS ON BEHALF OF THE APPELLANTS:\n\nLearned counsel for the appellants submitted that on 29.08.2005, the \nCorporation had taken a decision with regard to imposition of royalty \nin the Meeting held with representatives of advertising agency/cies.  \nIt was agreed that advertisers would make payment of royalty to the \nCorporation  at  the  rate  of  Re.1  per  square  foot  per  annum  based \non  the  area  of  the  hoardings  concerned.  Thus,  it  was  submitted \nthat the issue is limited only to charging of royalty and there is no \nimposition of any kind of tax, as has been erroneously held by the \nSingle Bench as also by the Division Bench. It was submitted that \non 02.11.2007, the Corporation issued an Office Order whereby the \nrate of royalty was increased from Re.1 per square foot per annum \nto Rs.10 per square foot per annum. It was further submitted that on \n18.07.2009, a Meeting was held between the Corporation (headed by \nthe Appellant No.2) and representatives of advertisers, where there \nwas  no  opposition  to  the  proposal  afore-noted.  However,  learned \nsenior counsel contended that since the royalty was not being paid, \nin the year 2011, the Appellant No.2 recommended  the imposition \nof penalty on the arrears due from the advertisers.\n\n10.  He further submitted that on 15.12.2010, in the General Meeting of \nthe Corporation, it was decided that the registration of such defaulting \nadvertising agency(ies) be cancelled, and this was followed-up by the \nCorporation raising demand for payment of arrears of royalty from \nthe  concerned  advertisers,  including  Respondent  No.1,  in  whose \ncase it was to the tune of Rs.64,50,040/- (Rupees Sixty Four Lakhs \nFifty Thousand and Forty). Learned counsel further submitted that \nonly  at  this  belated  stage,  the  Respondent  No.1  preferred  CWJC \nNo.5108 of 2012, wherein Office Order dated 02.11.2007 as well as \nthe Demand Notice dated 11.02.2012 were assailed.\n\n11.  Learned counsel submitted that by a detailed and comprehensive \njudgment, the learned Single Judge upheld the levy of charge by the \n\nThe Patna Municipal Corporation & Ors. v.  M/s Tribro Ad Bureau & Ors.\f1388 \n\n[2024] 10 S.C.R.\n\nCorporation and only the demand of penalty was interfered with. It \nwas submitted that the learned Single Judge even observed that the \nwrit petitioners before it, including Respondent No.1, were liable to \npay the amount due to the Corporation in easy instalments in intervals \nof  four  months  to  be  fixed  by  the  Appellant-Corporation.  Thus, \nlearned counsel contended that in conformity with the Single Bench \nJudgment, the Corporation raised fresh demand on Respondent No.1 \nunder letter dated 18.07.2012 for Rs.21,98,000/- (Rupees Twenty \nOne Lakhs Ninety Eight Thousand). However, it was submitted that \nthe Respondent No.1 deposited only a sum of Rs.50,000/- (Rupees \nFifty Thousand) on 21.07.2012. At this juncture, learned counsel for \nRespondent No.1 submitted that Respondent No.1 on 28.01.2013 \nhad disputed the demand of Rs.21,98,000/- (Rupees Twenty One \nLakhs  Ninety  Eight  Thousand)  and  self-assessed  the  dues  to  be \nRs.1,57,050/- (Rupees One Lakh Fifty Seven Thousand and Fifty) \nand after adjusting the amount already paid, calculated the payment \nto be made in three instalments of Rs.28,767/- (Rupees Twenty Eight \nThousand  Seven  Hundred  Sixty  Seven)  each,  which  Respondent \nNo.1 paid on 28.01.2013, 29.05.2013 and 28.09.2013 by Draft(s). \nFurther, learned counsel for Respondent No.1 pointed out that on \n30.03.2013, the Respondent No.1, on the same terms, self-assessed \nthe royalties for the years 2012-2013, 2013-2014 and 2014-2015, as \nRs.48,600/-, Rs.48,600/- and Rs.31,000/-, respectively and deposited \nthe same on 30.03.2013, 31.03.2014 and 31.03.2015. It was also \nstated that, in the meantime, Respondent No.1 had approached the \nDivision  Bench  against  the  Single  Bench  Judgment  by  instituting \nLPA No.1391 of 2012, leading to the Impugned Judgment.\n\n12.  Learned  counsel  for  the  appellants  submitted  that  the  simple  and \nbasic issue was the payment of royalty, as agreed to and accepted \nby the parties. It was stated that payments were also made, which \nnow have been given the colour of being demand/imposition of tax, \nwhich, learned counsel contended, is absolutely not the case.  It was \nurged that the only issue, which at best could have been gone into \nby the High Court, was with regard to the quantum of enhancement \nfrom Re.1 per square foot to Rs.10 per square foot, but the imposition, \non the head of “royalty”, could not have been termed as “imposition \nof tax”, as admittedly borne out from the record itself. It was further \nadvanced  that  charge  of  royalty  by  the  Corporation  was  also  in \nterms of an agreement entered into between the parties, which was \nadmitted by them in appellate proceedings before the Division Bench.\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R.  \n\n1389\n\n13.  Learned  counsel  submitted  that  “royalty”  and  “tax”  have  different \nconnotations  in  law  and  royalty,  unlike  tax,  is  not  based  on  any \nstatutory provision, but on agreement between the parties. Further, it \nwas stated that the enhancement of the rate of royalty to Rs.10 per \nsquare foot from Re.1 per square foot, notified under Office Order \ndated 02.11.2007 was challenged by the Respondent No.1 only in the \nyear 2012. By its advertisement issued on 15.01.2007, the Corporation \ncame out with fresh rates of royalty on advertisements which were \naccepted  by  the  Respondent  No.1  and  were  made  effective  from \n02.11.2007 at the rate of Rs.10 per square foot.\n\n14.  Learned counsel in support of the above has relied upon the decisions \nof  this  Court  in  Indsil  Hydro  Power  and  Manganese  Limited  v \nState of Kerala (2021) 10 SCC 165, the relevant being Paragraphs \n50  to  56;2  Century  Spinning  and  Manufacturing  Company  Ltd. \n\n2 \n\n‘50. In State of W.B. v. Kesoram Industries Ltd. [State of W.B. v. Kesoram Industries Ltd. (2004) 10 SCC 201] \n, another Constitution Bench of this Court explained certain observations in India Cement Ltd. v. State of T.N. \n[India Cement Ltd. v. State of T.N. (1990) 1 SCC 12] , and stated as under : (Kesoram Industries case [State \nof W.B. v. Kesoram Industries Ltd. (2004) 10 SCC 201] , SCC pp. 293-95 & 297, paras 59-61 & 71)\n“59. First we will refer to certain dictionaries oft-cited in courts of law:\nWords and Phrases, Permanent Edn. (Vol. 37-A, p. 597):\n‘“Royalty” is the share of the produce reserved to owner for permitting another to exploit and use property. \nThe  word  “royalty”  means  compensation  paid  to  landlord  by  occupier  of  land  for  species  of  occupation \nallowed by contract between them. “Royalty” is a share of the product or profit (as of a mine, forest, etc.) \nreserved by the owner for permitting another to use his property.’\nStroud’s Judicial Dictionary of Words and Phrases (6th Edn., 2000, Vol. 3, p. 2341):\n‘The word “royalties” signifies, in mining leases, that part of the reddendum which is variable, and depends \nupon the quantity of minerals gotten or the agreed payment to a patentee on every article made according \nto the patent. Rights or privileges for which remuneration is payable in the form of a royalty.’\nWords and Phrases, Legally Defined (3rd Edn., 1990, Vol. 4, p. 112):\n‘A royalty, in the sense in which the word is used in connection with mining leases, is a payment to the lessor \nproportionate to the amount of the demised mineral worked within a specified period.’\nWharton’s Law Lexicon (14th Edn., p. 893):\n‘Royalty.—Payment to a patentee by agreement on every article made according to his patent; or to an \nauthor by a publisher on every copy of his book sold; or to the owner of minerals for the right of working the \nsame on every ton or other weight raised.’\nMozley & Whiteley’s Law Dictionary (11th Edn., 1993, p. 243):\n‘A pro rata payment to a grantor or lessor, on the working of the property leased, or otherwise on the profits \nof the grant or lease. The word is especially used in reference to mines, patents and copyrights.’\nPrem’s Judicial Dictionary (1992, Vol. 2, p. 1458):\n‘Royalties are payments which the Government may demand for the appropriation of minerals, timber or \nother property belonging to the Government. Two important features of royalty have to be noticed, they are, \nthat the payment made for the privilege of removing the articles is in proportion to the quantity removed, and \nthe basis of the payment is an agreement.’\nBlack’s Law Dictionary (7th Edn., p. 1330):\n‘Royalty.—A share of the product or profit from real property, reserved by the grantor of a mineral lease, in \nexchange for the lessee’s right to mine or drill on the land.\nMineral royalty.—A right to a share of income from mineral production.’\n60. In D.K. Trivedi & Sons v. State of Gujarat [D.K. Trivedi & Sons v. State of Gujarat, 1986 Supp SCC 20] \na Bench of two learned Judges of this Court dealt with “rent”, “royalty” and “dead rent” and held as follows \n\nThe Patna Municipal Corporation & Ors. v.  M/s Tribro Ad Bureau & Ors.\f1390 \n\n[2024] 10 S.C.R.\n\n: (SCC pp. 53-54, paras 38-39)\n‘38. Rent is an integral part of the concept of a lease. It is the consideration moving from the lessee to \nthe lessor for demise of the property to him.…\n***\n39. In a mining lease the consideration usually moving from the lessee to the lessor is the rent for the \narea  leased  (often  called  surface  rent),  dead  rent  and  royalty.  Since  the  mining  lease  confers  upon \nthe  lessee  the  right  not  merely  to  enjoy  the  property  as  under  an  ordinary  lease  but  also  to  extract \nminerals from the land and to appropriate them for his own use or benefit, in addition to the usual rent \nfor the area demised, the lessee is required to pay a certain amount in respect of the minerals extracted \nproportionate  to  the  quantity  so  extracted.  Such  payment  is  called  “royalty”.  It  may,  however,  be  that \nthe mine is not worked properly so as not to yield enough return to the lessor in the shape of royalty. In \norder to ensure for the lessor a regular income, regardless of whether the mine is worked or not, a fixed \namount is provided to be paid to him by the lessee. This is called “dead rent”. “Dead rent” is calculated \non  the  basis  of  the  area  leased  while  royalty  is  calculated  on  the  quantity  of  minerals  extracted  or \nremoved. Thus, while dead rent is a fixed return to the lessor, royalty is a return which varies with the \nquantity of minerals extracted or removed. Since dead rent and royalty are both a return to the lessor in \nrespect of the area leased, looked at from one point of view dead rent can be described as the minimum \nguaranteed amount of royalty payable to the lessor but calculated on the basis of the area leased and \nnot on the quantity of minerals extracted or removed.’\nIn H.R.S. Murthy v. Collector [H.R.S. Murthy v. Collector, AIR 1965 SC 177 : (1964) 6 SCR 666] too the \nConstitution Bench of this Court had defined “royalty” to mean ‘the payment made for the materials or \nminerals won from the land’.\n61. The judicial opinion as prevailing amongst the High Courts may be noticed. A Full Bench of the High \nCourt of Orissa held in Laxmi Narayan Agarwalla v. State of Orissa [Laxmi Narayan Agarwalla v. State \nof Orissa, 1983 SCC OnLine Ori 16 : AIR 1983 Ori 210 : (1983) 55 CLT 362] , SCC OnLine Ori para 12 : \nAIR at p. 224, para 12 ‘[R]oyalty is the payment made for the minerals extracted. It is not tax.’ In Surajdin \nv. State of M.P. [Surajdin v. State of M.P., 1959 SCC OnLine MP 19 : AIR 1960 MP 129 : 1960 MPLJ 39] \na Division Bench of the High Court of Madhya Pradesh referred to Wharton’s Law Lexicon and Mozley & \nWhiteley’s Law Dictionary and said (at AIR p. 130, para 7) ‘royalties are payments which the Government \nmay demand for the appropriation of minerals, timber or other property belonging to the Government’. \nThe High Court opined that there are two important features of royalty : (i) the payment is in proportion \nto the quantity removed; and (ii) the basis of the payment is an agreement.\n***\n71. We have clearly pointed out the said error, as we are fully convinced in that regard and feel ourselves \nobliged constitutionally, legally and morally to do so, lest the said error should cause any further harm \nto the trend of jurisprudential thought centring around the meaning of “royalty”. We hold that royalty is \nnot tax. Royalty is paid to the owner of land who may be a private person and may not necessarily be \na State. A private person owning the land is entitled to charge royalty but not tax. The lessor receives \nroyalty as his income and for the lessee the royalty paid is an expenditure incurred. Royalty cannot be \ntax. We declare that even in India Cement Ltd. [India Cement Ltd. v. State of T.N. (1990) 1 SCC 12] it \nwas not the finding of the Court that royalty is a tax. A statement caused by an apparent typographical \nor inadvertent error in a judgment of the Court should not be misunderstood as declaration of such law \nby the Court. We also record our express dissent with that part of the judgment in Mahalaxmi Fabric \nMills Ltd. [State of M.P. v. Mahalaxmi Fabric Mills Ltd., 1995 Supp (1) SCC 642] which says (vide para \n12 of SCC report) that there was no “typographical error” in India Cement [India Cement Ltd. v. State \nof T.N. (1990) 1 SCC 12] and that the said conclusion that royalty is a tax logically flew from the earlier \nparagraphs of the judgment.”\n51. In State of H.P. v. Gujarat Ambuja Cement Ltd. [State of H.P. v. Gujarat Ambuja Cement Ltd. (2005) 6 \nSCC 499] , a Bench of three Judges of this Court observed : (SCC pp. 530-31, paras 44-46)\n“44. “Royalty” is not a term used in legal parlance for the price of the goods sold. It is a payment reserved \nby the grantor of a patent, lease of a mine or similar right, and payable proportionately to the use made \nof the right by the grantee as held in Titaghur Paper Mills Co. Ltd. case [State of Orissa v. Titaghur Paper \nMills Co. Ltd., 1985 Supp SCC 280 : 1985 SCC (Tax) 538] .\n45. In its primary and natural sense “royalty” in the legal world, is known as the equivalent or translation \nof “jura regalia” or “jura regia”. Royal rights and prerogatives of a sovereign are covered thereunder. In \nits secondary sense, the word “royalty” would signify, as in mining leases, that part of the reddendum, \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R.  \n\n1391\n\nvariable though, payable in cash or kind, for rights and privileges obtained. (See Inderjeet Singh Sial v. \nKaram Chand Thapar [Inderjeet Singh Sial v. Karam Chand Thapar (1995) 6 SCC 166] .)\n46. “Royalty” is not a tax. Simply because the royalty is levied by reference to the quantity of the minerals \nproduced and the impugned cess too is quantified by taking into consideration the same quantity of the \nmineral produced, the latter does not become royalty. The former is the rent of the land on which the \nmine is situated or the price of the privilege of winning the minerals from the land parted with by the \nGovernment in favour of the mining lessee. The cess is a levy on mineral rights with impact on the land \nand quantified by reference to the quantum of mineral produced. The distinction, though fine, yet exists \nand is perceptible. (See State of W.B. v. Kesoram Industries Ltd. [State of W.B. v. Kesoram Industries \nLtd. (2004) 10 SCC 201] )”\n52. On the essential characteristics of a tax, the following observations of Banumathi, J. in the concurring \nopinion in Jindal Stainless Ltd. v. State of Haryana [Jindal Stainless Ltd. v. State of Haryana (2017) 12 \nSCC 1] cull out the essence : (SCC p. 297, para 334)\n“334. The essential characteristics of a tax are that : (i) it is imposed under a statutory power without the \ntaxpayer’s consent and the payment is enforced by law; (ii) it is an imposition made for public purpose \nwithout reference to any special benefit to be conferred on the payer of the tax; and (iii) it is part of the \ncommon burden. In Commr., Hindu Religious Endowments v. Sri Lakshmindra Thirtha Swamiar of Sri \nShirur  Mutt[Commr.,  Hindu  Religious  Endowments  v.  Sri  Lakshmindra  Thirtha  Swamiar  of  Sri  Shirur \nMutt, 1954 SCR 1005 : AIR 1954 SC 282] , the Constitution Bench has laid down the characteristics of a \ntax which has since been consistently followed and it is as under : (AIR p. 295, para 43)\n‘43. … “A tax” … “is a compulsory exaction of money by a public authority for public purposes enforceable \nby law and is not payment “for services rendered”.”\nThis definition brings out, in all opinion, the essential characteristics of a tax as distinguished from other \nforms of imposition which, in a general sense, are included within it. It is said that the essence of taxation \nis compulsion, that is to say, it is imposed under statutory power without the taxpayer’s consent and the \npayment is enforced by law.…\nThe second characteristic of tax is that it is an imposition made for public purpose without reference to \nany special benefit to be conferred on the payer of the tax. This is expressed by saying that the levy of \ntax is for the purposes of general revenue, which when collected forms part of the public revenues of the \nState. As the object of a tax is not to confer any special benefit upon any particular individual there is, as \nit is said, no element of “quid pro quo” between the taxpayer and the public authority,… Another feature \nof taxation is that as it is a part of the common burden, the quantum of imposition upon the taxpayer \ndepends generally upon his capacity to pay.’ ”\n53. It is true that as a result of order passed by this Court in Mineral Area Development Authority v. Steel \nAuthority of India [Mineral Area Development Authority v. Steel Authority of India (2011) 4 SCC 450] , \ncertain  questions  concerning  “royalty”  as  determined  under  the  provisions  of  the  Mines  and  Minerals \n(Development and Regulation) Act, 1957 now stand referred to a Bench of nine Judges, which reference \nis still pending consideration. However, none of those issues arise in the present matter.\n54.  On  the  use  of  the  expression  “royalty”  in  a  contract,  we  may  note  the  following  observations  in \nInderjeet Singh Sial v. Karam Chand Thapar [Inderjeet Singh Sial v. Karam Chand Thapar (1995) 6 SCC \n166] : (SCC p. 173, paras 12-13)\n“12.  …  The  word  “royalty”  thus,  in  the  deed  was  used  in  a  loose  sense  so  as  to  convey  liability  to \nmake periodic payments to the assignor for the period during which the lease would subsist; payments \ndependent on the coal gotten and extracted in quantities or on dispatch. We have therefore to construe \ndocument Ext. D-5 on its own terms and not barely on the label or description given to the stipulated \npayments. Conceivably this arrangement could well have been given a shape by using another word. \nThe  word  “royalty”  was  perhaps  more  handy  for  the  authors  to  be  employed  for  an  arrangement  like \nthis, so as to ensure periodic payments. In no event could the parties be put to blame for using the word \n“royalty” as if arrogating to themselves the royal or sovereign right of the State and then make redundant \nthe rights and obligations created by the deed.\n13. The commodity goes by its value; not by the wrapper in which it is packed. A man is known for his \nworth;  not  for  the  clothes  he  wears.  Royal  robes  worn  by  a  beggar  would  not  make  him  a  king. The \ndocument is weighed by its content, not the title. One needs to go to the value, not the glitter. All the \nsame, we do not wish to minimise the importance of the right words to be used in documents. What we \nmean to express is that if the thought is clear, its translation in words, spoken or written, may, more often \nthan not, tend to be faulty. More so in a language which is not the mother tongue. Those faulted words \n\nThe Patna Municipal Corporation & Ors. v.  M/s Tribro Ad Bureau & Ors.\f1392 \n\n[2024] 10 S.C.R.\n\ncannot bounce back to alter the thought. Thus in sum and substance when the contracting parties and \nthe draftsman are assumed to have known that the word “royalty” is meant to be employed to secure for \nthe State something out of what the State conveys, their employment of that word for private ensuring \nwas not intended to confer on the assignor the status of the sovereign or the State, and on that basis \nhave the document voided.”\n55. We may also note the following observations from the decision of a Bench of three Judges of this \nCourt in Union of India v. Motion Picture Assn. [Union of India v. Motion Picture Assn. (1999) 6 SCC 150] \n, where the payment of fee was under the terms of a contract between the parties : (SCC pp. 169-71, \nparas 31-32)\n“31. The exhibitors also contend that the charge of one per cent on the net recoveries is a compulsory \nexaction in the form of a tax. Neither the Act nor the provisions of the licence stipulate payment of any \nsuch tax. Hence imposition of this amount is in violation of Article 265 of the Constitution. It is true that \nneither  the  relevant Act  nor  the  notification  nor  the  rules  nor  the  terms  and  conditions  of  the  licence \nstipulate the payment of any rental. This amount is required to be paid under an agreement which the \nexhibitors  individually  enter  into  with  the  Films  Division  for  the  supply  of  these  films.  It  is  a  payment \nunder the terms of a contract between the two parties. It cannot, therefore, be viewed as a tax at all. The \nexhibitors contend that because they are required to enter into these agreements, any payment under \nthe agreement is a compulsory exaction and is, therefore, tax. We do not agree. Under the terms of the \nagreement, the Films Division has to supply certain prints to the theatre owners at stated intervals. The \nFilms Division is required to maintain a distribution network for this purpose. It is required to pack these \nfilms and is required to allow the exhibitors to retain these films in their possession for a certain period. \nThe films are to be returned to the Films Division thereafter. The charge is termed in the agreement as \nrental for the films. It covers charges for preparing the prints of the films for distribution, and for packing \nthem for delivery. These are clearly services rendered by the Films Division for which it is paid one per \ncent of the net collection as a rental. As stated earlier, the total cost of preparing prints, packing them and \ndistributing them is much higher than the total recovery made by the Films Division by way of rental from \nall the exhibitors. There is a clear nexus between the services rendered and the payment to be made. \nThe payment, therefore, is in the nature of a fee rather than a tax though there may not be an exact quid \npro quo. Nevertheless the element of quid pro quo is very much present.\n32. The exhibitors relied upon a number of cases which distinguish a tax from a fee. We will only refer \nto some of them. In District Council, Jowai Autonomous District v. Dwet Singh Rymbai [District Council, \nJowai Autonomous District v. Dwet Singh Rymbai (1986) 4 SCC 38 : 1986 SCC (Tax) 768] this Court \nheld that a compulsory exaction for public purposes would amount to a tax while a payment for services \nrendered would amount to a fee. On the facts in that case, the Court said that there was no element of \nquid pro quo which will justify the imposition of royalty as a fee. In Commr., Hindu Religious Endowments \nv.  Sri  Lakshmindra  Thirtha  Swamiar  of  Sri  Shirur  Mutt  [Commr.,  Hindu  Religious  Endowments  v.  Sri \nLakshmindra  Thirtha  Swamiar  of  Sri  Shirur  Mutt,  1954  SCR  1005  : AIR  1954  SC  282]  this  Court  as \nfar back as in 1954, laid down the distinction between a tax and a fee. This Court has described a tax \nas  a  compulsory  exaction  for  public  purposes  which  does  not  require  the  taxpayer’s  consent;  while \nfee is a charge for specific service to some, and it must have some relation to the expenses incurred \nfor the service. In Ahmedabad Urban Development Authority v. Sharadkumar Jayantikumar Pasawalla \n[Ahmedabad Urban Development Authority v. Sharadkumar Jayantikumar Pasawalla (1992) 3 SCC 285] \nthis  Court  has  said  that  an  express  authorisation  for  the  levy  of  a  fee  is  necessary.  In  the  present \ncase, however, the rental is charged by the Films Division by virtue of an agreement between the Films \nDivision  and  the  individual  exhibitor.  This  is  in  consideration  of  the  Films  Division  supplying  films  to \nthe exhibitor, packing the film and arranging for its delivery. This is clearly an agreed fee charged for \nrendering  services.  It  cannot  be  viewed  as  a  compulsory  exaction  or  as  a  tax.  There  is  a  statutory \nobligation which is cast on the exhibitors to exhibit certain films. To carry out this statutory obligation, \nif the exhibitors enter into an agreement with the Films Division and agree to pay a certain amount of \nrental for procuring the films from the Films Division to comply with the statutory obligation, the levy must, \nsince it is correlated with the Films Division discharging certain obligations under the contract, be viewed, \nat the highest, as a fee and not as a tax. It is an agreed payment, and is not unreasonable. The High \nCourt [Motion Picture Assn. v. Union of India, 1995 SCC OnLine Del 600 : (1995) 60 DLT 180] has rightly \nnegatived the contention of the respondent exhibitors.”\n56. Thus, the expression “royalty” has consistently been construed to be compensation paid for rights \nand  privileges  enjoyed  by  the  grantee  and  normally  has  its  genesis  in  the  agreement  entered  into \nbetween the grantor and the grantee. As against tax which is imposed under a statutory power without \nreference to any special benefit to be conferred on the payer of the tax, the royalty would be in terms \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R.  \n\n1393\n\nv Ulhasnagar Municipal Council (1970) 1 SCC 582, the relevant \nbeing Paragraph 11,3 and; Union of India v Indo-Afghan Agencies \nLtd. (1968) 2 SCR 366, the relevant being Paragraphs 10 and 24.4\n\n3 \n\n4 \n\nof the agreement between the parties and normally has direct relationship with the benefit or privilege \nconferred upon the grantee.’\n\n‘11. Public bodies are as much bound as private individuals to carry out representations of facts and \npromises made by them, relying on which other persons have altered their position to their prejudice. The \nobligation arising against an individual out of his representation amounting to a promise may be enforced \nex contracts by a person who acts upon the promise: when the law requires that a contract enforceable \nat law against a public body shall be in certain form or be executed in the manner prescribed by statute, \nthe obligation may if the contract be not in that form be enforced against it in appropriate cases in equity. \nIn Union of India v. Indo-Afghan Agencies Ltd. [(1968) 2 SCR 366] this Court held that the Government \nis not exempt from the equity arising out of the acts done by citizens to their prejudice, relying upon the \nrepresentations  as  to  its  future  conduct  made  by  the  Government. This  Court  held  that  the  following \nobservations made by Denning, J., in Robertson v. Minister of Pensions [(1949) 1 KB 227] applied in \nIndia:\n“The Crown cannot escape by saying that estoppels do not bind the Crown for that doctrine has long \nbeen exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, \nthe doctrine that the Crown cannot bind itself so as to fetter its future executive action.”\nWe are in this case not concerned to deal with the question whether Denning, L.J., was right in extending \nthe rule to a different class of cases as in Falmouth Boat Construction Co. Ltd. v. Howell [(1950) 1 All ER \n538] where he observed at p. 542:\n“Whenever Government officers in their dealings with a subject take on themselves to assume authority \nin a matter with which the subject is concerned, he is entitled to rely on their having the authority which \nthey assume. He does not know, and cannot be expected to know, the limits of their authority, and he \nought not to suffer if they exceed it.”\nIt may be sufficient to observe that in appeal from that judgment (Howell v. Falmouth Boat Construction \nCo. Ltd.) Lord Simonds observed after referring to the observations of Denning, L.J.:\n“The illegality of an act is the same whether the action has been misled by an assumption of authority on \nthe part of a Government officer however high or low in the hierachy.\n* * *\nThe question is whether the character of an act done in force of a statutory prohibition is affected by \nthe fact that it had been induced by a misleading assumption of authority. In my opinion the answer is \nclearly: No.”’\n\n‘10.  This  observation  is,  “clearly  very  wide  and  it  is  difficult  to  determine  its  proper  scope”  : Anson’s \nEnglish Law of Contract, 22nd Edn., p. 174. It may also be noticed that before Rowlatt, J., the applicants \nclaimed enforcement of a contract against the Crown, and the learned Judge came to the conclusion that \nthere was no contract and no damages could be awarded. In Robertson v. Minister of Pensions [(1949) \n1 KB 227] Denning, J. observed at p. 231:\n“The Crown cannot escape by saying that estoppels do not bind the Crown for that doctrine has long \nbeen exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that \nis, the doctrine that the Crown cannot bind itself so as to fetter its future executive action. That doctrine \nwas propounded by Rowlatt, J., in Rederiaktiebolaget Amphitrite v. King but it was unnecessary for the \ndecision  because  the  statement  there  was  not  a  promise  which  was  intended  to  be  binding  but  only \nan  expression  of  intention.  Rowlatt,  J.,  seems  to  have  been  influenced  by  the  cases  on  the  right  of \nthe Crown to dismiss its servants at pleasure, but those cases must now all be read in the light of the \njudgment of Lord Atkin in Reilly v. King [(1954) AC 176, 179] . … In my opinion the defence of executive \nnecessity is of limited scope. It only avails the Crown where there is an implied term to that effect or that \nis the true meaning of the contract.”\nDenning, J., was dealing with a case of a serving army officer, who wrote to the War Office regarding a \ndisability and received a reply that his disability had been accepted as attributable to “military service”. \nRelying  on  that  assurance  he  forbore  to  obtain  an  independent  medical  opinion.  The  Minister  of \nPensions later decided that the appellant’s disability could not be attributed to war service. It was held \nthat as between subjects such an assurance would be enforceable because it was intended to be binding \nintended  to  be  acted  upon,  and  was  in  fact  acted  upon;  and  the  assurance  was  also  binding  on  the \nCrown because no term could be implied that the Crown was at liberty to revoke it.\nxxx\n\nThe Patna Municipal Corporation & Ors. v.  M/s Tribro Ad Bureau & Ors.\f1394 \n\n[2024] 10 S.C.R.\n\nSUBMISSIONS BY THE RESPONDENT(S) NO.1:\n\n15.  Per  contra,  learned  counsel  for  Respondent  No.1  submitted  that \nthe Impugned Judgment has dealt with all relevant aspects and is \nlegally and factually correct, needing no interference.\n\n16. \n\nIt was submitted that the Division Bench rightly held that tax could not \nbe levied by the Corporation, as such power cannot be exercised by \nthe Corporation on its own, as it is in the domain of the Legislature to \nconfer such power, which has not been done. It was further submitted \nthat absence of such power coupled with the fact, that no procedure \nwas  adopted  before  such  imposition,  would  be  fatal,  as  the  same \ncannot be arbitrarily enforced, in the absence of either a provision \nin law or without any procedure adopted, much less that sanctioned \nby Regulations, finally made/approved by the State Government as \nper the provisions of the Act.\n\n17. \n\nIt was emphasised that under Section 1465 of the Act, there has to \n\n5 \n\n24. Under our jurisprudence the Government is not exempt from liability to carry out the representation \nmade by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity \nor expediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own \nobligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has \narisen. We agree with the High Court that the impugned order passed by the Textile Commissioner and \nconfirmed by the Central Government imposing cut in the import entitlement by the respondents should \nbe set aside and quashed and that the Textile Commissioner and the Joint Chief Controller of Imports \nand Exports be directed to issue to the respondents import certificates for the total amount equal to 100% \nof the f.o.b. value of the goods exported by them, unless there is some decision which fails within clause \n10 of the Scheme in question.’\n\n‘146. Licence for use of site for purpose of advertisement.-(1) Except under, and in conformity with, such \nterms and conditions of a licence as the Municipality may, by the regulations, provide, no person being \nthe owner, lessee, sub-lessee, occupier or advertising agent shall use, or allow to be used, any site in \nany land, building or wall, or erect, or allow to be erected, on any site any hoarding, frame, post, kiosk, \nstructure, vehicle, neon-sign or sky-sign for the purpose of display of any advertisement.\n(2) For the purpose of advertisement, every person-\n(a)  using  any  site  before  the  commencement  of  this  Act,  within  ninety  days  from  the  date  of  such \ncommencement, or\n(b) intending to use any site, or\n(c) whose licence for use of any site is about to expire.\nshall apply for a licence or renewal of licence, as the case may be, to the Chief Municipal Officer in such \nForm as may be specified by the Municipality.\n(3) The Chief Municipal Officer shall, after making such inspection as may be necessary and within thirty \ndays of the receipt of the application, grant or renew a licence, as the case may be, on payment of such \nfee as may be determined by regulations, or refuse or cancel a licence, as the case may be.\n(4)  The  Chief  Municipal  Officer  may,  if,  in  his  opinion,  the  proposed  site  for  any  advertisement  is \nunsuitable from the considerations of public safety, traffic hazards or aesthetic design, refuse to grant a \nlicence, or to renew any existing licence, within thirty days of the receipt of the application.\n(5) Every licence shall be for a period of one year except in the case of sites used for any temporary \ncongregation  of  whatever  nature  including  fairs,  festivals,  circus,  yatra,  exhibitions,  sports  events,  or \ncultural or social programmes.\n(6) The Chief Municipal Officer shall cause to be maintained a register wherein the licences issued under \nthis Section shall be separately recorded in respect of advertisement sites-\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R.  \n\n1395\n\nbe a licence for exhibition of advertisement, and it shall be in terms \nof the Regulations framed therein.\n\n18.  Learned counsel submitted that the Regulations for licensing for the \npurpose of advertisement were issued only on 13.08.2012 whereas \nthe  Demand  Notice  was  dated  11.02.2012,  i.e.  much  prior  to  the \nRegulations  for  licence  being  framed.  Thus,  it  was  his  contention \nthat there was no power to charge any fee prior to 13.08.2012, in \nview of the Regulations framed under Section 146 of the Act, which, \ninter  alia,  also  provided  for  licence  for  purposes  of  advertisement. \nMoreover, it was submitted that Section 147 of the Act provides for \ntax  on  advertisement,  which  also  is  to  be  determined  as  per  the \nRegulations.  \n\n19.  However,  it  was  contended  that  in  the  present  case,  there  is  no \nRegulation for levy of taxes in terms of Section 147 read with Section \n423 of the Act. In absence thereof, the Corporation could not have \nacted in the manner it did.\n\n20.  Learned counsel submitted that there being no statutory backing of \nlaw to issue the Office Order dated 02.11.2007, the demand raised \nunder such order is a nullity as there is neither any agreement nor \nstatutory force to raise such demand and moreover, the said Office \nOrder does not speak about any licence fee as licence also could \nnot  have  been  granted  without  framing  the  Regulations.  It  was \nfurther submitted that no recovery of any demand can be made by \nan executive order unless it has legislative backing.\n\n21.  Learned counsel submitted that the charging Rs.10 per square foot \nirrespective of whether such hoardings are on private or public place is \nalso arbitrary and unsustainable. In support of his contentions, learned \ncounsel  relied  upon  the  decisions  of  this  Court  in  Commissioner \nof  Income  Tax,  Mumbai  v Anjum  M  H  Ghaswala  (2002)  1  SCC \n633; Punit Rai v Dinesh Chaudhary (2003) 8 SCC 204; Union of \nIndia v Naveen Jindal (2004) 2 SCC 510, and; State of Kerala v \nChandramohanan (2004) 3 SCC 429.\n\n(a) on telephone, telegraph, tram, electric or other posts or poles erected on or along public or private \nstreets or public places,\n(b) in lands or buildings, and\n(c) in cinema-halls, theatres or other places of public resort.’\n\nThe Patna Municipal Corporation & Ors. v.  M/s Tribro Ad Bureau & Ors.\f1396 \n\n[2024] 10 S.C.R.\n\nANALYSIS, REASONING AND CONCLUSION:\n\n22.  Having  given  our  anxious  thought  to  the  issue  at  hand,  the  Court \nfinds  that  the  judgment  impugned  warrants  interference.  Though \nthe Division Bench has elaborated on the law relating to imposition \nof tax/levy, we find that the issue was not examined in the manner \nrequired.  The  core  question  confronting  us,  as  it  was  before  the \nDivision  Bench,  is  whether  the  demand  is  by  way  of  a  tax/levy  or \nsimply in the nature of royalty for permission for advertising through \nhoardings  within  the  limits  of  the  Corporation.  The  Court,  at  this \njuncture, would clarify that there can be no issue with the proposition \nof law as stands settled by the various earlier decisions of this Court \nwith regard to the power and modality of charging of tax/levy, which \nobviously has to be done in terms of the power conferred under/by \nauthority by law.\n\n23. \n\nIn  the  present  case,  however,  it  cannot  be  lost  sight  of,  as  also \nelucidated in Indsil Hydro Power and Manganese Limited (supra), \nespecially  in  Paragraph  56  thereof,  after  considering  a  host  of \nprecedents,  that  the  imposition  of  royalty  cannot  be  equated  with \nimposition  of  tax/levy.  Even  otherwise,  the  law  is  no  longer  res \nintegra that conduct of the parties and acquiescence would preclude \na party from turning around and assailing a decision acquiesced to, \nexcept where there is an inherent lack of jurisdiction, or the exercise \nof authority is perverse or malafide, in law or in fact. In the instant \nfactual setting, the advertising companies/respective Respondents \nNo.1 had agreed in the year 2005 to pay a royalty of Re.1 per square \nfoot to the Corporation for putting up hoardings/advertisements. We \nmay  note  that  only  2  advertising  companies,  in  praesenti,  moved \nthe  High  Court  by  way  of  letters  patent  appeals,  whereas,  we  are \ninformed,  a  majority  of  the  advertising  companies  complied  with \nmaking  payment(s)  @  Rs.10  per  square  foot  subsequent  to  the \ndecision of the Corporation dated 02.11.2007. It is also worthwhile \nto note that the initial rate viz. Re.1 per square foot of royalty in the \nyear  2005  was  fixed  after  a  Meeting  with  all  the  stakeholders  on \n29.08.2005. The advertising companies concerned had agreed to pay \nRe.1 per square foot royalty per year on such hoarding. The same \nwas merely revised on 02.11.2007 i.e., after a period of over 2 years.\n\n24.  We have no hesitation to hold that such revision of rate was within \nthe power of the Corporation. However, at this very stage, we are also \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R.  \n\n1397\n\nequally  unhesitant  to  hold  that  the  Resolution  to  charge  enhanced \nroyalty in exercise of purported power under Section 4316 of the Act \nwas misplaced as royalty is not tax. It has been authoritatively clarified \nby this Court that royalty and tax are not one and same. As such, the \nCorporation’s  power  to  charge  royalty  cannot  be  interfered  with  on \nthe ground that the same is not available, either in the Act or in the \nRegulations  concerned,  as  there  is  no  question  of  the  said  ‘royalty’ \nbeing a tax. Section 431 of the Act, therefore, would not come into \nthe picture where royalty, that too by way of and under an agreement/\nunderstanding is concerned. As stated previously, royalty and tax cannot \nbe  equated  –  the  nomenclatures  cannot  be  used  interchangeably  \nin  law,  both  carrying  starkly  different  imports  and  connotations.  For \nreasons above, we are unable to maintain as tenable the argument \nthat the demand made by the Corporation was a compulsory exaction. \nEqually,  we  are  unable  to  state  that  the  demand  was/bore  the \nhallmarks of a tax. The long and short of it is that ‘Whatever be the \nnomenclature, the charges … in the present cases were for the privilege  \nenjoyed …. … the basis for such charges was directly in terms of, and \nunder the arrangement entered into between the parties, though, not \nreferable to any statutory instrument. … For such benefit or privilege \nconferred upon them, the agreements arrived at between the parties \ncontemplated  payment  of  charges  for  such  conferral  of  advantage. \nSuch charges, in our view, were perfectly justified.’7\n\n25.  The  decisions  pressed  into  service  by  Respondent  No.1,  we  are \nafraid, are of no aid to its case. As far as the 5-Judge Bench decision \nin  Ghaswala  (supra)  is  concerned,  the  question  that  arose  for \nconsideration therein was ‘whether the Settlement Commission … \nconstituted  under  Section  245-B  of  the  Income  Tax Act,  1961  … \nhas the jurisdiction to reduce or waive the interest chargeable under \nSections 234-A, 234-B and 234-C of the Act, while passing orders of \nsettlement under Section 245-D(4) of the Act.’ The Court, inter alia, \nreasoned  that  ‘The  Commission  while  exercising  its  quasi-judicial \npower of arriving at a settlement under Section 245-D cannot have \nthe  administrative  power  of  issuing  directions  to  other  income  tax \n\n6 \n\n‘431.  Fine  for  not  paying  tax  under  Chapter  XVII.-  If  any  person  erects,  exhibits,  fixes  or  retains  any \nadvertisement referred to in chapter XVII, without paying any tax under that chapter, he shall be punished \nwith fine which – shall not be less than an amount equal to two times of such tax depending upon the \ngravity of the breach may extend up to an amount equal to five times the amount payable as such tax.’\n\n7 \n\nParagraph 57 of Indsil Hydro Power and Manganese Limited (supra).\n\nThe Patna Municipal Corporation & Ors. v.  M/s Tribro Ad Bureau & Ors.\f1398 \n\n[2024] 10 S.C.R.\n\nauthorities.  It  is  a  normal  rule  of  construction  that  when  a  statute \nvests  certain  power  in  an  authority  to  be  exercised  in  a  particular \nmanner then the said authority has to exercise it only in the manner \nprovided  in  the  statute  itself.’,  and  held  that  ‘the  Commission  in \nexercise  of  its  power  under  Sections  245-D(4)  and  (6)  does  not \nhave the power to reduce or waive interest statutorily payable under \nSections 234-A, 234-B and 234-C except to the extent of granting \nrelief under the circulars issued by the Board under Section 119 of the \nAct.’ Herein, the question is whether the demand was tax or royalty, \nand  we  have  arrived  at  the  conclusion  that  it  is  royalty,  traceable \nto  the  arrangement/agreement  between  the  parties,  which  makes \nGhaswala (supra) inapplicable in the extant facts.\n\n26.  Punit Rai (supra), decided by three learned Judges, emanated from \nan  Election  Petition  filed  before  the  High  Court.  In  his  concurring \nopinion,  learned  S.  B.  Sinha,  J.,  held  ‘If  a  customary  law  is  to  be \ngiven  a  go-by  for  any  purpose  whatsoever  and  particularly  for \nthe  purpose  of  enlarging  the  scope  of  a  notification  issued  by  the \nPresident of India under clause (1) of Article 341 of the Constitution, \nthe same must be done in terms of a statute and not otherwise.’ and \n‘The High Court, therefore, erred insofar as it failed to consider that \nfor the purpose of determination of caste, the respondent could not \nhave  relied  upon  the  circular  letter  dated  3-3-1978  in  absence  of \nany law. …’ Eventually, this Court took exception to the approach of \nthe High Court therein and overturned its decision. The concurring \nopinion  clearly  lays  down  what  could  not  have  been  done  therein \nin the absence of a law. Again, for the same reason why Ghaswala \n(supra) is not relevant to the instant controversy, noted above, Punit \nRai (supra) would not help Respondent No.1.\n\n27.  Naveen Jindal (supra) [rendered by the same coram as Punit Rai \n(supra)] held that the Flag Code was not a statute. It was also held \nthat executive instructions, which the Flag Code was, were not ‘law’ \nwithin the meaning of Article 13 of the Constitution. This proposition \nis unassailable but does not carry Respondent No.1’s case further \nin view of our findings and analysis.  \n\n28.  Similarly, in Chandramohanan (supra), the Court [three-Judge Bench] \nplaced reliance on Punit Rai (supra) and Naveen Jindal (supra) to \nconclude that Government Circulars issued by the State of Kerala \nwere not ‘law’ within the ambit of Article 13 of the Constitution. This \nissue does not arise in the instant factual backdrop. \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R.  \n\n1399\n\n29.  The other aspect, which we would like to cover, is the proportionality/\nreasonableness in the enhancement of the rate from Re.1 per square \nfoot  to  Rs.10  per  square  foot.  Whilst  at  first  blush,  the  jump  may \nseem high, being ten times, ultimately, it is subjective. Nothing has \nbeen canvassed before us to indicate that such rate was exorbitant \nor disproportionate, requiring judicial interdiction. There is no dispute \nthat in the Meeting held on 29.08.2005, the advertising companies \ndid not object to payment of royalty, as sought by the Corporation. \nHence, a challenge could, later be mounted on limited grounds to \nthe quantum/rate of royalty, and not on the decision to charge royalty \nitself. Even otherwise, as we do not find that the ‘royalty’ was a tax/\nlevy,  the  action  of  the  Corporation  cannot  be  struck  down  merely \non  the  ground  of  having  quoted  Section  431  of  the Act  (wrongly), \nfor,  quoting  the  wrong  provision  of  law,  when  the  power  to  do  an \nact otherwise exists, would not invalidate or render illegal the act in \nquestion. A Bench of three learned Judges in N Mani v. Sangeetha \nTheatre (2004) 12 SCC 278 held: \n\n‘9. It is well settled that if an authority has a power under \nthe  law  merely  because  while  exercising  that  power  the \nsource of power is not specifically referred to or a reference \nis made to a wrong provision of law, that by itself does not \nvitiate the exercise of power so long as the power does \nexist and can be traced to a source available in law.’\n\n(emphasis supplied)\n\n30.  The  decision  in  N  Mani  (supra)  was  relied  upon  by  two  learned \nJudges  in  Ram  Sunder  Ram  v  Union  of  India,  2007  (9)  SCALE \n197, wherein this Court reiterated that quoting the wrong provision of \nlaw, when the authority concerned is otherwise empowered to carry \nout an act, could not vitiate the act on such ground alone. Likewise, \nand on taking note of N Mani (supra) and Ram Sunder Ram (supra), \n2  learned  Judges  in  P  K  Palanisamy  v  N Arumugham  (2009)  9 \nSCC 173 opined as under:\n\n‘27.  …  Only  because  a  wrong  provision  was  mentioned \nby the appellant, the same, in our opinion, by itself would \nnot  be  a  ground  to  hold  that  the  application  was  not \nmaintainable or that the order passed thereon would be a \nnullity. It is a well-settled principle of law that mentioning \n\nThe Patna Municipal Corporation & Ors. v.  M/s Tribro Ad Bureau & Ors.\f1400 \n\n[2024] 10 S.C.R.\n\nof  a  wrong  provision  or  non-mentioning  of  a  provision \ndoes not invalidate an order if the court and/or statutory \nauthority had the requisite jurisdiction therefor.’\n\n(emphasis supplied)\n\n31.  The  above  principle  found  acceptance  also,  inter  alia,  in  Mohd. \nShahabuddin  v  State  of  Bihar  (2010)  4  SCC  653  and  State  of \nHaryana v Raj Kumar (2021) 9 SCC 292.\n\n32.  Respondent No.1 placed strong emphasis on the Patna Municipal \nCorporation  (Grant  of  Permission  for  Display  of Advertisements  & \nSimilar Devices) Regulations, 2012 dated 04.07.2012 and published \nin the Official Gazette on 13.08.2012. We find that this relates only to \ngrant of permission for display of advertisements and similar devices \nin  any  place  within  the  jurisdiction  of  the  Corporation.  However,  it \ncannot be said that these Regulations would have conferred the right \nto demand royalty by the Corporation, which we find was traceable \nto the agreement/arrangement between the parties.\n\n33.  Once again, at the cost of repetition, as there has been no serious \nattempt  to  challenge  the  enhancement  in  quantum  from  Re.1  per \nsquare foot to Rs.10 per square foot, we refrain from delving into that \naspect, which as of now has also become very old as it pertains to \nthe year 2007. At this juncture, the Court would refer to the Written \nSubmissions filed on behalf of Respondent No.1, where at Paragraph \nNo.19, following is the stand:\n\n“Without  prejudice,  to  the  preceding  paragraphs  and \nsubmissions,  it  is  submitted  that  till  no  regulations  are \nframed  by  the  State  Government,  the  respondent  no.1 \nagrees to pay royalty to the Municipal Corporation at the \nenhanced rate of Rs.10 per sq. ft. per annum, prospectively. \nHowever,  the  same  may  be  adjustable  with  the  future \ndemands ought to be raised by the Municipal Corporation \nafter the Regulations under the Bihar Municipal Act, 2007, \ncomes into effect.”\n\n34.  To  the  above,  we  only  observe  that  payment  of  enhanced  rate  of \nRs.10 per square foot was not made retrospective by the Corporation, \nas it was made effective from November, 2007, i.e., 10 months after \nthe resolution which was passed in January, 2007, and thus, we do \nnot find any occasion to interfere in such demand from the date it \n\nDigital Supreme Court Reports\f[2024] 10 S.C.R.  \n\n1401\n\nwas  made  effective  by  the  Corporation  as  there  is  no  element  of \nretrospectivity involved.\n\n35.  Yet, we hasten to add that future enhancement, if any, in the rate of \nroyalty cannot be made to operate and/or have effect retrospectively. \nThe same would have effect and operate only prospectively.\n\n36.  Accordingly, in view of the discussions hereinabove, the Court finds \nthat  the  decision  of  the  Corporation,  to  charge  Rs.10  per  square \nfoot  with  regard  to  hoarding(s)/advertisement(s)  as  communicated \nat  the  relevant  point  of  time  to  the  concerned  parties  needs  no \ninterference.  However,  the  imposition  of  penalty  for  non-payment \nneeds to be interfered with as no such power exists. It is held thus, \nbut  with  the  clarificatory  caveat  that  the  Corporation  would  not  be \nprecluded from charging interest over delayed payment(s). Obviously, \ninterest on delayed payment(s) would not be a ‘penalty’ but rather, \nin the realm of ‘compensation’ for late/delayed payment of amounts \nwhich were payable on/from an earlier date. This Court expressed \na similar view in Alok Shanker Pandey v Union of India (2007) 3 \nSCC 545, as under:\n\n‘9. It may be mentioned that there is misconception about \ninterest.  Interest  is  not  a  penalty  or  punishment  at  all, \nbut it is the normal accretion on capital. For example if A \nhad to pay B a certain amount, say 10 years ago, but he \noffers that amount to him today, then he has pocketed the \ninterest on the principal amount. Had A paid that amount \nto  B  10  years  ago,  B  would  have  invested  that  amount \nsomewhere  and  earned  interest  thereon,  but  instead  of \nthat  A  has  kept  that  amount  with  himself  and  earned \ninterest on it for this period. Hence, equity demands that \nA should not only pay back the principal amount but also \nthe interest thereon to B.’\n\n(emphasis supplied)\n\n37. \n\nIn order to balance equities, the Court would indicate that the enhanced \nrate  of  Rs.10  per  square  foot  would  be  payable  by  the  respective \nRespondents No.1/advertising companies and other similarly-situated \npersons in terms of the Resolution of the Corporation from the date \nthe same was made public/communicated to the concerned parties, \nwhichever is later, with simple interest at the rate of 6% per annum. \n\nThe Patna Municipal Corporation & Ors. v.  M/s Tribro Ad Bureau & Ors.\f1402 \n\n[2024] 10 S.C.R.\n\nThe Corporation is directed to furnish computation of amounts due to \nthe parties concerned within 4 weeks. Payments be made within 16 \nweeks thereafter by the parties concerned, failing which they shall \ncarry interest @ 10% per annum and be recoverable as arrears under \nthe Bihar and Orissa Public Demands Recovery Act, 1914. Needless \nto  state,  amount(s),  if  any,  paid  over  and  above  Re.1  per  square \nfoot, for the period in question, shall be adjusted towards the final \nliability to be determined by the Corporation vis-a-vis the respective \nRespondents No.1 herein and all other similarly-situated persons.\n\n38.  Parties shall bear their own costs.\n\n39.  Both appeals stand disposed of in terms aforesaid.\n\nPOST-SCRIPT:\n\n40.  After we reserved judgment, a 9-Judge Bench of this Court in Mineral \nArea  Development  Authority  v  Steel  Authority  of  India,  2024 \nSCC OnLine SC 1796, by a majority of 8:1, has held as under, fully \nsupporting our view hereinabove:\n\n‘126.  There  are  major  conceptual  differences  between \nroyalty  and  a  tax:  (i)  the  proprietor  charges  royalty  as  a \nconsideration  for  parting  with  the  right  to  win  minerals, \nwhile a tax is an imposition of a sovereign; (ii) royalty is \npaid in consideration of doing a particular action, that is, \nextracting  minerals  from  the  soil,  while  tax  is  generally \nlevied  with  respect  to  a  taxable  event  determined  by \nlaw; 8 and (iii) royalty generally flows from the lease deed \nas compared to tax which is imposed by authority of law.\n\nxxx\n\n128. This Court has held that royalty is not a tax, in several \ndecisions. In State of H P v. Gujarat Ambuja Cement Ltd,9 \na three judge Bench of this Court held royalty not to be \na  tax.  The  subsequent  decision  in  Indsil  Hydro  Power \n&  Manganese  Ltd.  v.  State  of  Kerala10  brought  out  the \ndistinction between tax and royalty in the following terms:\n\n8 \n\n9 \n\nGoodyear India Ltd. v State of Haryana (1990) 2 SCC 71\n\n(2005) 6 SCC 499\n\n10 \n\nIndsil Hydro Power and Manganese Limited (supra).\n\nDigital Supreme Court Reports\f[2024] 10 S.C.R.  \n\n1403\n\n“56. Thus, the expression “royalty” has consistently been \nconstrued to be compensation paid for rights and privileges \nenjoyed  by  the  grantee  and  normally  has  its  genesis  in \nthe agreement entered into between the grantor and the \ngrantee. As against tax which is imposed under a statutory \npower  without  reference  to  any  special  benefit  to  the \nconferred on the payer of the tax, the royalty would be in \nterms of the agreement between the parties and normally \nhas direct relationship with the benefit or privilege conferred \nupon the grantee.”\n\nxxx\n\n130.  In  view  of  the  above  discussion,  we  hold  that  both \nroyalty and dead rent do not fulfil the characteristics of tax \nor impost. Accordingly, we conclude that the observation \nin India Cement (supra)11 to the effect that royalty is a tax \nis incorrect.\n\nxxx\n\n342.  …  we  answer  the  questions  formulated  in  the \nreference in terms of the following conclusions:\n\na. Royalty is not a tax. Royalty is a contractual consideration \npaid by the mining lessee to the lessor for enjoyment of \nmineral rights. The liability to pay royalty arises out of the \ncontractual conditions of the mining lease. The payments \nmade to the Government cannot be deemed to be a tax \nmerely  because  the  statute  provides  for  their  recovery \nas arrears;’\n\n(emphasis supplied)\n\nResult of the case: Appeals disposed of.\n\n†Headnotes prepared by: Ankit Gyan\n\n11 \n\n[1989] Suppl. 1 SCR 692 : (1990) 1 SCC 12.\n\nThe Patna Municipal Corporation & Ors. v.  M/s Tribro Ad Bureau & Ors.\f"}