Karnataka High Court
Tuppadahalli Energy India Private ... vs Malhal Grama Panchayat on 20 December, 2021
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 20TH DAY OF DECEMBER, 2021
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.3130 OF 2018 (LB- RES)
C/W
WRIT PETITION No.3131 OF 2018 (LB- RES)
IN WRIT PETITION No.3130 OF 2018
BETWEEN:
TUPPADAHALLI ENERGY
INDIA PRIVATE LIMITED
HAVING REGISTERED OFFICE
AT UNIT 402, TOWER -C, 4TH FLOOR,
THE MILLENIA, NO.1 & 2 MURPHY ROAD,
ULSOOR, BENGALURU - 560 008
REPRESENTED BY ITS
AUTHORIZED SIGNATORY.
... PETITIONER
(BY SRI DEEPAK BHASKAR, ADVOCATE (PHYSICAL HEARING))
AND:
MALHAL GRAMA PANCHAYAT
CHANNAGIRI TALUKA
DAVANAGERE DISTRICT
KARNATAKA - 577 213
REPRESENTED BY
THE PANCHAYAT DEVELOPMENT OFFICER.
... RESPONDENT
(BY SRI AIYAPPA K.G., ADVOCATE (PHYSICAL HEARING))
2
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH THE FINAL DEMAND
NOTICE DATED 10.01.2018 AT ANNEX-A AND PROHIBIT THE
RESPONDENT FROM TRESPASSING UPON THE PREMISES OF, AND
/ OR INTERFERING WITH THE PETITIONER'S OPERATIONS IN
RESPECT OF ITS WIND FARM;
IN WRIT PETITION No.3131 OF 2018
BETWEEN:
TUPPADAHALLI ENERGY
INDIA PRIVATE LIMTIED
HAVING REGISTERED OFFICE AT
UNIT 402, TOWER -C, 4TH FLOOR
THE MILLENIA NO.1 & 2
MURPHY ROAD, ULSOOR
BENGALURU - 560 008
REPRESENTED BY ITS
AUTHORIZED SIGNATORY.
... PETITIONER
(BY SRI DEEPAK BHASKAR, ADVOCATE (PHYSICAL HEARING))
AND:
KANCHIGANAL GRAMA PANCHAYAT
CHANNAGIRI TALUKA
DAVANAGERE DISTRICT
KARNATAKA
REPRESENTED BY
THE PANCHAYAT DEVELOPMENT OFFICER.
... RESPONDENT
(BY SRI AIYAPPA K.G., ADVOCATE (PHYSICAL HEARING))
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH THE FINAL DEMAND
NOTICE DTD:10.1.2018 AT ANNEXURE-A AND PROHIBIT THE
RESPONDENT FROM TRESPASSING UPON THE PREMISES OF,
AND/OR INTERFERING WITH THE PETITIONER'S OPERATIONS IN
RESPECT OF ITS WIND FARM.
3
THESE WRIT PETITIONS HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 17.11.201, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE
FOLLOWING:-
ORDER
The petitioner who is common in these writ petitions seeks issuance of a writ in the nature of certiorarified mandamus to quash the demand notices both are even dated 10.01.2018.
2. The demand notices are against the common petitioner in both these cases but issued by different Panchayats, namely, Malhal Grama Panchayat and Kanchiganal Grama Panchayat (hereinafter referred to as 'Panchayats' for short), under whose precincts the Windmills of the petitioner - Tuppadahalli Energy India Private Limited are operating.
3. Brief facts of the case leading to the filing of the petitions, as borne out from the pleadings, are as follows:
The petitioner claims to be a subsidiary of Acciona Group, an international group of companies, having its headquarters in Spain, which is in the business of development and management of infrastructure and renewable energy inter alia. The petitioner 4 owns and operates a 56.1 MW Windfarm comprising of 34 turbines located in Davanagere District of the State, which comes within the precincts of the respondents - Panchayats.
The windfarm is put into operation pursuant to a development agreement entered into between the petitioner and the Spanish company along with other ancillary agreements with Vestas Wind Technology India Private Limited and another.
4. The issue is not with regard to setting up of the windmills or the windmasts as is pleaded. The issue in the petitions is with regard to the demand notices issued by the respective Panchayats. In both these cases, the Panchayats are demanding certain amount of tax to be paid on running of windmills in the precincts of Panchayats and tax to be paid to the Panchayats. This is called in question by the petitioner on the score that imposition of impugned impost by way of demand notice is contrary to law.
5. This Court entertaining these petitions has granted an interim order of stay on 18.01.2018 of the impugned impost 5 demanded from the hands of the petitioner and the same is in operation even as on date.
6. Heard Sri Deepak Bhaskar, learned counsel for the petitioner and Sri Aiyappa K.G., learned counsel appearing for the respondents - Panchayats.
7. Sri Deepak Bhaskar, learned counsel for the petitioner would submit that the impugned demand notices issued are contrary to law. He would urge that the demand notices travel beyond the financial years 2010-11 and 2017-18 and upto 2015-16, no demand can be made for the usage of windmills in the precincts of the Panchayats as tax for the windmills was for the first time introduced by way of an amendment to the Karnataka Gram Swaraj and Panchayat Raj Act, 1993 (for short 'the Act'), on 25-02-2016. The Act mandates that the penalty can be imposed only in the event of demand not being satisfied by the recipients within 30 days. The impugned notices are both amalgam of penalty and demand of tax, which is contrary to the concept of imposition of penalty. The demand made is with 6 regard to windmast and 30 W transmission. This is also contrary to the Act as the amended Act clearly mandates that it can have any number of turbines and imposition of tax on the windmast, is erroneous. He would place reliance upon the following judgments.
a. Deputy Commissioner and others Vs. S. Venkata Ramanaiah and others [(1995) 6 SCC 545]; b. K.C.Arora And Others Vs. State of Haryana and Others [(1984) 3 SCC 281];
c. Controller of Estate Duty, Gujarat I. Ahmedabad Vs. M.A.Merchant and Others (AIR 1989 SC 1710);
d. Reliance Jute and Industries Ltd. Vs. Commissioner of Income Tax, West Bengal (AIR 1980 SC 251);
e. Govind Das and Others Vs. The Income Tax Officer and Others (AIR 1977 SC 552);
f. Shyam Sunder and Others Vs. Ram Kumar and Others (AIR 2001 SC 2472);
g. State of West Bengal Vs. Kesoram Industries [(2004) 10 SCC 201] and 7 h. Commissioner of Trade Tax, U.P. Vs. S.S.Ayodhya Distillery and Others [(2008) 15 SCC 259].
8. On the other hand, learned counsel, Sri Aiyappa K.G., representing the respondents would vehemently argue and refute the submissions made by the learned counsel for the petitioner. He would urge that the windmill has to be brought under the definition of 'building' under the Act as the windmill has a plinth and a construction. Therefore, imposition of tax on windmill cannot be held to be erroneous. Windmills were brought under the ambit of tax by the Government by way of an amendment Act in the year 2015, which was by way of substitution and being by way of substitution, it dates back to the original enactment and has to be presumed that it always existed in the statute and his emphatic submission is that, the company having not paid any tax for the use of windmills right from 2011, imposition of penalty is justifiable as Panchayats have to survive and auger their income for usage of public purpose. The method of imposition of such tax against such 8 companies is by way of a circular issued by Government on 27-09-2016 and the method of taxation with regard to windmasts or turbines is in terms of circular and cannot be found fault with. He has placed reliance on the following decisions:
a. Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar and Company and others [(2018) 9 SCC 1];
b. Government of India and Others Vs. Indian Tobacco Association [(2005) 7 SCC 396]; c. Commissioner of Income Tax (Central) - 1, New Delhi Vs. Vatika Township Private Limited [(2015) 1 SC 1);
d. Shankarappa and Others Vs. The Co- operative Election Commission and Others [(2014) 3 KCCR 2693) and e. S. Muppidathi Vs. Chief Engineer, Non Conventional Energy Sources, TNEB [(2012) 3 MLJ 6);
9. I have given my anxious consideration to the submissions made by the learned counsel for the parties and perused the material on record.
9
10. Before embarking upon consideration of the facts leading to filing of the present petitions, I deem it appropriate to notice the provisions of the Act as it is the interpretation of these provisions that are necessary for resolution of the issue in the lis. Section 2(3) defines a 'building' and reads as follows:
"Section 2 (3) : "building" includes a house, out-house, shop, stable, warehouse, workshop, canopy, shed, hut, or other enclosure whether used as a human dwelling or otherwise and shall include a wall, compound wall, fencing, verandah, platform, plinth, doorstep and the like;
Section 199 of the Act deals with levy of taxes, rates, etc., by Panchayats, which reads as follows:
"Section 199. Levy of taxes, rates, etc., by Grama Panchayats.-
(1) Every Grama Panchayat shall in such manner and subject to such exemptions as may be prescribed and not exceeding the maximum rate specified in Schedule IV levy tax upon buildings and lands based on capital value of the property which 10 are not subject to agricultural assessment, within the limits of the panchayat area:
Provided that where an owner of the building or land has left the Panchayat area or cannot otherwise be found, the occupier of such building or land shall be liable for the tax leviable on such owner.
(2) A Grama Panchayat may levy water rate for supply of water for drinking and other purposes.
(3) A Grama Panchayat may also levy all or any of the following taxes and fee at such rates as the Grama Panchayat may by bye-laws determine but not exceeding the maximum specified in Schedule IV and in such manner and subject to such exemptions as may be prescribed, namely:-
(a) tax on entertainment other than cinematograph shows;
(b)tax on vehicles, other than motor vehicles; [XXX]
(d) pilgrim fee on person attending the jatras, festivals, etc., where necessary arrangements for water supply, health and sanitation are made by the Grama Panchayats;11
(e) market fee on persons who expose their goods for sale in any market place;(f)fee on the registration of cattle brought for sale in any market place;
(g) fee on buses and taxies and auto-stands provided adequate facilities for the travellers by the Grama panchayat; and(h)fee on grazing cattle in the grazing lands.
(i) tax and fee shall be as specified in schedule IV.
(j) such other fees as may be prescribed.
Section 199A - Revision of taxes and rates:
The Gram Panchayat may revise the taxes and rates leviable under section 199, atleast once in two years in respect of building and lands and at least once in a year on other items specified in schedule-IV."
Schedule IV appended to Section 199 of the Act, undergoes an amendment w.e.f. 25.02.2016, by an amendment Act namely, Karnataka Panchayat Raj (Second Amendment) Act, 2015. It is here where the tax on buildings comes about by amendment of Schedule IV of Section 199 of the Amendment Act.12
11. It is germane now to notice the comparison of Schedule IV of Section 199 of the Act, which deals with property and building in the Panchayats that stood prior to the amendment and reads as follows:
"SCHEDULE-IV TO SECTION 199:
A Tax on property. Maximum rate of tax
1. Tax on buildings; 10% of the annual letting value (per annum) Explanation: "Annual letting value"
means the "annual rent for which any building or land, exclusive of furniture or machinery contained or situated therein or thereon, might reasonably be expected to be let from year to year."
For every one
2. Tax, on lands not subject to hundred square
agricultural assessment. meter, one rupee per
annum
Twenty rupees per
entertainment
B. Tax on entertainments
C. Vehicle tax Rupees per year
i. For every four 25
wheeled vehicle with
springs constructed to be
drawn by two or more
horses, bulls or bullocks
13
ii. For every two wheeled
vehicle with springs 10
constructed to be drawn
by one or more horses,
bulls or bullocks
10
iii. For every other vehicle with
springs
5
iv. For every cart or other
vehicle without springs
v. For every bicycle or tricycle
Two rupees per bus
per day
D. Fees on bus stands
E. Fee on markets Fifty Paise per day
i. For every plot measuring
not more than one square Twenty- five paise meter per day Eight rupees per month ii. For every additional plot of one square meter or part Twenty- five paise thereof iii. Per basket or bag of any Five rupees per commodity month iv. Per cart load bag of any commodity F. Tax on advertisement and Five rupees per hoardings; month For every square meter or part thereof G. Fee on registration of cattle: One rupee 14 For every head of cattle brought for sale in shandies or fairs Schedule IV after the amendment, reads as follows:
"SCHEDULE-IV TO SECTION 199:
Tax on property Tax on buildings
A Tax on property. Rate per annum
(i) Residential buildings; Not less than 0.05%
but not more than
0.10% on Capital
Value of the
Property.
(ii) Commercial Buildings ;
[(a) Small Scale
Industry -0.40
percent(b)Medium
Scale Industry -
0.50 percent(c) Large
Scale Industries
-0.60 percent]3On
the capital value of
the property
(iii) Industries, factories, IT
Parks, Hardware Park, Textile
Park, Bio-Tech Park, Power
plants Hydro, Thermal, Solar Not less than 0.4%
Plants Wind Mills & Airport but not more than 1
including connected area etc. % on Capital Value
(in the KIADB Industrial area, of the Property.
SEZ and other Industrial area
or zones notified by the
Government from time to
time).
15
B. Vacant land measuring : -
(a)Not more than 1000 square meter. Not less than 0.05% but not more than 0.1% on Capital Value of the Property.
(b)More than 1000 sq. mtr. But not
more than 4000 sq.mtr. Not less than
0.025% but not more
than 0.05% on
Capital Value of the
c)Vacant land measuring above 4000 Property.
sq. mtrs.
XXX
C. (1) Run way area of an Airport XXX
0.10 percent on the
(b) In case of vacant Land in Airport Capital value of the or Industrial area where property plantations are grown.
No tax D. Tax on mobile towers.
Twelve Thousand E.Tax on wind mill. rupees per tower per Annum.
0.5 to 1 lakh per F.Tax on solar park annum depending upon turbine.
Not less than 0.50%
16
but not more than
1.50% on Capital
Value of the
Property.
(emphasis supplied)
As extracted hereinabove, the Amendment Act viz., the
Karnataka Panchayat Raj (Second Amendment) Act, 2015, which was published in the Karnataka Gazette on 31-12-2015, came into force from 25-02-2016. If pre-amendment Schedule IV to Section 199 of the Act is juxtaposed to post amendment of Schedule IV to Section 199 of the Act, it becomes unmistakably clear that tax on windmill as an item for tax was for the first time introduced in the Amendment Act (supra) with effect from 25-02-2016. It is admitted that tax is imposed from 0.5 to 1 lakh per annum depending upon turbine. This entry in the Schedule to Section 199 of the Act, which empowers Panchayat to impose tax on properties and buildings coming within its precincts was not existent upto the date of amendment. In the teeth of the afore-extracted Amending Act, insofar as it pertains to Schedule-IV, the impugned demand notices is required to be 17 considered. The impugned demand notice dated 10.01.2018 in writ petition No.3130/2018, read as follows:
"MlÄÖ vÉgÉUÉ ªÀÄvÀÄÛ ±ÀÄ®Ì ºÁUÀÆ zÀAqÀzÀ MlÄÖ ªÉÆvÀÛzÀ «ªÀgÀ 2010- 11jAzÀ 2017- 18gÀªÀgÉUÉ PÀæ ªÀµÀ𠫪ÀgÀ vÀjUÉ ªÉÆvÀÛ zÀAqÀzÀ ªÉÆvÀÛ MlÄÖ µÀgÁ ¸ÀA.
2010-11 vÉgÉUÉ ¨Á§ÄÛ T23,
2011-12 T24, T25, T14,&
2012-13 T15, MlÄÖ
2013-14
5 l¨ÉÊð£ï (1.6 ªÉÄUÁ 625000=00
1 2014-15 1250000=00 18.75000=00
ªÁåmï) UÀ¼À£ÀÄß ªÀÄvÀÄÛ (±ÉÃ%10gÀAvÉ)
MAzÀÄ «Aqï ªÀiÁ¸ïÖ 5
* 5000 *5 (ªÀµÀðUÀ¼ÀÄ)
2015-16 vÉgÉUÉ ¨Á§ÄÛ T23,
2-16-17 T24, T25, T14,&
2017-18 T15, MlÄÖ
5 l¨ÉÊð£ï (1.6 ªÉÄUÁ
3455000=00
2 ªÁåmï) UÀ¼À£ÀÄß ªÀÄvÀÄÛ 1500000=00 18.45000=00
(±ÉÃ%10gÀAvÉ)
MAzÀÄ «Aqï ªÀiÁ¸ïÖ 5
* 5000 *5
(ªÀµÀðUÀ¼ÀÄ)
3 DqÀ½vÀ ªÀÄAqÀ½vÀ
PÀbÉÃj ªÀÄvÀÄÛ «Aqï
ªÀiÁ¸ïÌ
ºÁUÀÆ 33 PÉ.«.mÁæ£ïì 350000=00 245000=00 5.95000=00
«ÄµÀ£ï 7 ªÀµÀðPÉÌ
J¯Áè ¥Àæwà ªÀµÀðPÉÌ
50000/ gÀÆ
18
vÉgÉUÉAiÀÄ£ÀÄß
¤UÀ¢ü¥Àr¹zÉ.
4 MlÄÖ ªÉÆvÀÛ 3100000=00 1245000=00 4315000=00
(£À®ªÀvÉÛöÊzÀÄ ®PÀëUÀ¼ÀÄ
ªÀiÁvÀæ)
F ªÉÄîÌAqÀ £À®ªÀvÀÛ ªÀÄÆgÀÄ ®PÀëzÀ ºÀ¢£ÉÊzÀÄ ¸Á«gÀ gÀÆ.UÀ¼À£ÀÄß F rªÀiÁåAqï £ÉÆÃnøï vÀ®Ä¦zÀ 3 ¢£ÀUÀ¼ÉƼÀUÁV UÁæªÀÄ ¥ÀAZÁ¬Äw PÀbÉÃj ¸ÀªÀÄAiÀÄzÀ°è RÄzÀÄÝ ºÁdgÁV ¥ÀAZÁ¬Äw C©üªÀÈ¢Þ C¢üPÁjAiÀÄ ¸ÀªÀÄÄäRzÀ°è ¥ÁªÀw¹ gÀ²Ã¢ ¥ÀrzÀÄPÉƼÀÄîªÀÅzÀÄ JAzÀÄ PÉÆ£ÉAiÀÄ PÀqÀPï JZÀÑjPÉAiÉÆA¢UÉ w½¹zÉ.
ºÁUÀÆ F £ÉÆÃnøï vÀ®¦zÀ ªÉÄÃ®Æ ¤AiÀĪÀiÁ£ÀĸÁgÀ vÉjUÉ ¥ÁªÀw¸À¢zÀÝ°è ¥ÀAZÁAiÀÄvï gÁeï C¢ü¤AiÀĪÀÄ 199, 199J ºÁUÀÆ C£ÀĸÀÆa £Á®ÌgÀ°è w½¹gÀĪÀAvÉ £ÀªÀÄä UÁæªÀÄ ¥ÀAZÁ¬Äw ªÁå¦ÛUÉ §gÀĪÀ J®è l¨ÉÊð£ï UÀ¼À GvÁàzÀ£ÉAiÀÄ£ÀÄß ¸ÀÜVvÀUÉƽ¹ ¤AiÀĪÀiÁ£ÀĸÁgÀ UÁæªÀÄ ¥ÀAZÁ¬Äw ªÀÄ®ºÁ¼ï ¥ÀAZÁ¬Äw ¸ÀÄ¥À¢ðUÉ ¥ÀqÉzÀÄPÉƼÀî¯ÁUÀÄvÀÛzÉ JAzÀÄ F ªÀÄÆ®PÀ vÀªÀÄUÉ ¸ÀÆZÀ£É ¤ÃqÀÄvÁÛ rªÀiÁåAqï £ÉÆÃnøÀ£ÀÄß 2£Éà ¨Áj eÁjUÉƽ¸À¯ÁVzÉ."
(emphasis added) A very perusal of the demand notice dated 10.01.2018, clearly indicates that the demand is made from the financial year 2010- 11 and travels upto the financial year 2017-18. In terms of what is noticed hereinabove, three illegalities emerge from the impugned demands viz., (i) that the demand raised from the years 2010-11 to 2015-16, for which no entry existed in the Schedule to Section 199 of the Act, which empowers Panchayats to impose tax on windmills as imposition of tax comes about 19 only after 25.02.2016; (ii) that the demand notices already impose penalty presuming that the recipient of the notices would not pay the amount. This is again contrary to law as Section 199 of the Act, itself mandates that the penalty would be imposed, if demand is not met within 30 days of its issue; and
(iii) that tax is imposed on windmast and not on turbines. The amendment clearly directs imposition to be per annum on number of turbines. Therefore, the afore-quoted demand notice does suffer from the aforesaid illegalities as the demand notices run counter to the Act. It is now germane to consider the submissions made by the learned counsel appearing for the Panchayats.
12. The contention of the learned counsel for the respondents/Panchayats in both the petitions is that, the windmills have a plinth and to erect such windmill, there should be construction and such construction comes within the definition of 'building' and the word 'building' has been defined right from the inception on the promulgation of the Act. 20 Therefore, imposition of tax is justified, is unacceptable. The definition of 'building' though contains a plinth or construction cannot be elaborated or stretched to an unimaginable extent to cover a windmill under the said definition. If such submission is accepted, every amendment can be construed to be brought within the purview of the word 'building', which would have a cascading effect of imposition of tax.
13. The issue is imposition of tax. If there is no express provision under the Act for such imposition, the imposition cannot be inferred by interpretation, as taxing statutes is to receive strict construction and not an imaginable or liberal construction as is contended by the learned counsel. This view of mine, in this regard, is fortified by the judgments of the Apex Court rendered by interpreting taxing statutes, it is germane to quote few of them.
14. The Apex Court in the case of SHYAM SUNDER v. RAM KUMAR1, has held as follows:
1
(2001) 8 SCC 24 21 "21. It was also argued that the amending Act being retrospective, whatever the right the plaintiff possessed on the date of adjudication of the suit, the same stood extinguished during pendency of appeal and therefore, the plaintiff's suit must fail. Since both the arguments are overlapping, we shall consider the effect of the decision in Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri [AIR 1941 FC 5:
1940 FCR 84] slightly later. Before that, it is necessary to consider the effect of substituted Section
15 introduced by the amending Act of 1995 on the substantive rights of the parties. We would now proceed to examine whether the said provision of the amending Act is retrospective as urged by learned counsel for the appellant.
22. In Maxwell on the Interpretation of Statutes, 12thEdn., the statement of law in this regard is stated thus:
"Perhaps no rule of construction is more firmly established than thus -- 'that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matters of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only'. The rule has, in fact, two aspects, for it, 'involves another and subordinate rule, to the effect that a statute is not to be construed so as to have greater retrospective operation than its language renders necessary'."22
23. In Francis Bennion's Statutory Interpretation, 2nd Edn., the statement of law is stated as follows:
"The essential idea of a legal system is that current law should govern current activities. Elsewhere in this work a particular Act is likened to a floodlight switched on or off, and the general body of law to the circumambient air. Clumsy though these images are, they show the inappropriateness of retrospective laws. If we do something today, we feel that the law applying to it should be the law in force today, not tomorrow's backward adjustment of it. Such, we believe, is the nature of law. Dislike of ex post facto law is enshrined in the United States Constitution and in the Constitution of many American States, which forbid it. The true principle is that lex prospicit non respicit (law looks forward not back). As Willes, J. said retrospective legislation is 'contrary to the general principle that legislation by which the conduct of mankind is to be regulated ought, when introduced for the first time, to deal with future acts, and ought not to change the character of past transactions carried on upon the faith of the then existing law'."
24. In GarikapatiVeeraya v. N. Subbiah Choudhry [AIR 1957 SC 540 : 1957 SCR 488] this Court observed as thus: (AIR p. 553, para 25) "The golden rule of construction is that, in the absence of anything in the enactment to show that it is to have retrospective operation, 23 it cannot be so construed as to have the effect of altering the law applicable to a claim in litigation at the time when the Act was passed."
... ... ... ...
34. During the course of argument, a half- hearted argument was raised that a substituted section in an Act introduced by an amending Act is to be treated having retroactive operation. According to the learned counsel for the appellant, the function of a substituted section in an Act is to obliterate the rights of the parties as if they never existed. This argument is noted only to be rejected. A substituted section in an Act is the product of an amending Act and all the effects and consequences that follow in the case of an amending Act, the same would also follow in the case of a substituted section in an Act.
35. Coming to the next question, learned counsel for the appellants after characterising the right of pre- emption as archaic and feudal, argued that substituted Section 15 being a beneficial legislation enacted for the general benefit of citizens, this Court while construing it, is required to apply the rule of benevolent construction and on application of the said rule of construction the substituted Section 15 has to be given retroactive operation. Generally rules of interpretation are meant to assist the court in advancing the ends of justice. It is, therefore, true in the case of application of rule of benevolent construction also. If on application of the rule of benevolent construction, the court finds that it would be doing justice within the parameters of law there appears to be no reason why such rule of construction 24 be not applied in the present case. But there are limitations on the powers of the court, in the sense that courts in certain situations often refrain themselves from applying the rule of benevolent or liberal construction. The judicial precedents have laid down that, ordinarily, where and when the rule of benevolent construction is required to be applied and not to be applied. One of the situations is, when the court finds that by application of the rule of benevolent construction it would be relegislating a provision of statute either by substituting, adding or altering the words used in the provision of the Act. In such a situation, generally courts have refrained themselves from applying the rule of benevolent construction. Under the cover of application of the rule of benevolent construction, a court is not entitled to relegislate a provision of a statute and to do violence to the spirit of the provision of the Act so construed. The second situation is when the words used in a statute are capable of only one meaning. In such a situation, the courts have been hesitant to apply the rule of benevolent construction. But if it is found that the words used in the statute give rise to more than one meaning, in such circumstances, the courts are not precluded from applying such rule of construction. The third situation is when there is no ambiguity in a provision of a statute so construed. If the provision of a statute is plain, unambiguous and does not give rise to any doubt, in such circumstances the rule of benevolent construction has no application. However, if it is found that there is a doubt in regard to the meaning of a provision or word used in the provisions of an enactment, it is permissible for the court to apply the rule of benevolent construction to advance the object of the Act. Ordinarily, the rule of benevolent construction has been applied while construing welfare legislations or provisions relating to the 25 relationship between weaker and stronger contracting parties. Assuming that the amending Act is for the general good of the people, we do not find the presence of the aforestated situations which may call for application of such rule while construing substituted Section 15 introduced by the amending Act. A reading of substituted Section 15 would show that the words used therein are plain and simple and there is no ambiguity in them. The words used in the section do not give rise to more than one meaning. Further, we do not find that the amending Act either expressly or by necessary implication is retrospective. If we hold that the amending Act is retrospective in operation, we would be relegislating the enactment by adding words which are not to be found in the amending Act either expressly or by necessary intendment and it would amount to doing violence to the spirit of the amending Act. For these reasons, the application of the rule of benevolent construction is wholly inapplicable while construing substituted Section 15.
(emphasis supplied) In the case of STATE OF W.B. v. KESORAM INDUSTRIES LIMITED2, the Apex Court holds as follows:
"Power to tax must be express, else no power to tax
104. There is nothing like an implied power to tax. The source of power which does not specifically speak of taxation cannot be so interpreted by expanding its width as to include therein the power to tax by implication or by 2 (2004) 10 SCC 201 26 necessary inference. States Cooley in Taxation (Vol. 1, 4th Edn.):
"There is no such thing as taxation by implication. The burden is always upon the taxing authority to point to the act of assembly which authorizes the imposition of the tax claimed." (para 122 at p. 278)
105. Justice G.P. Singh in Principles of Statutory Interpretation (8th Edn., 2001) while dealing with general principles of strict construction of taxation statutes states:
"A taxing statute is to be strictly construed. The well-established rule in the familiar words of Lord Wensleydale, reaffirmed by Lord Halsbury and Lord Simonds, means:'The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words.' In a classic passage Lord Cairns stated the principle thus:'If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the 27 words of the statute.' Viscount Simon quoted with approval a passage from Rowlatt, J. expressing the principle in the following words:'In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.' " (at p.
635)
106. The judicial opinion of binding authority flowing from several pronouncements of this Court has settled these principles : (i) in interpreting a taxing statute, equitable considerations are entirely out of place. Taxing statutes cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute so as to supply any deficiency; (ii) before taxing any person it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject. There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly. (See Justice G.P. Singh, ibid., pp. 638-39.)
107. Power to tax is not an incidental power. According to Seervai, although legislative power includes all incidental and subsidiary power, the power to impose a tax is not such a power under our Constitution. It is for this reason that it was held that the power to legislate in respect of inter-State trade and 28 commerce (Entry 42 List I Schedule 7) did not carry with it the power to tax the sale of goods in inter-State trade and commerce before the insertion of Entry 92-A in List I and such power belonged to the States under Entry 54 in List II.
Entry 97 in List I also militated against the contention that the power to tax is an incidental power under our Constitution (See Seervai, H.M.: Constitutional Law of India, 4th/Silver Jubilee Edn., Vol. 3, para 22.20.)"
(emphasis supplied) The other contention of the learned counsel appearing for the respondent that the definition of 'building' covers windmill and therefore, they can be imposed tax, will fall foul of the law laid down by the Apex Court in the case of CIT v. NATIONAL INDUSTRIAL CORPORATION LIMITED3, holds as follows:-
"17. Imposition of tax is permissible only in terms of the provisions of the statute. Reasonable taxation is a part of the doctrine of good governance. In Mumbai Agricultural Produce Market Committee v. Hindustan Lever Ltd. [(2008) 5 SCC 575] this Court referring to this Court's decision in Jindal Stainless Ltd. (2) v. State of Haryana [(2006) 7 SCC 241] stated the law, thus : (Mumbai Agricultural case [(2008) 5 SCC 575] , SCC p. 579, para 15) 3 (2008) 15 SCC 259 29 "15. A finding of fact has been arrived at by the High Court that no service was being rendered by the State. If no service is being rendered, even no fee could have been levied. It has been so held by a Constitution Bench of this Court in Jindal Stainless Ltd. (2) v. State of Haryana [(2006) 7 SCC 241] in the following terms : (SCC p. 267, para 40) '40. Tax is levied as a part of common burden. The basis of a tax is the ability or the capacity of the taxpayer to pay. The principle behind the levy of a tax is the principle of ability or capacity. In the case of a tax, there is no identification of a specific benefit and even if such identification is there, it is not capable of direct measurement. In the case of a tax, a particular advantage, if it exists at all, is incidental to the State's action. It is assessed on certain elements of business, such as, manufacture, purchase, sale, consumption, use, capital, etc. but its payment is not a condition precedent. It is not a term or condition of a licence. A fee is generally a term of a licence. A tax is a payment where the special benefit, if any, is converted into common burden.' "
18. If an entry contained in a notification imposing tax is ambiguous, the assessee cannot suffer therefor.
... ... ... ... Our view
20. As paddy and rice are considered to be the separate commodities, paddy husk cannot be treated to be rice husk.
30
21. Not only in the Notification dated 7-9-1981 but also in the Notification dated 5-6-1985 paddy husk is not mentioned. By reason of Notification dated 6-6-1996 "paddy husk" was inserted. Even then, the rice husk was not deleted. No explanation was offered therefor. Both rice husk and paddy husk, thus, found place in the notification. Indisputably, therefore, paddy husk was subjected to tax for the first time by reason of the said Notification dated 6-6-1996. Yet again, while giving a purported new look to the entry in the Notification dated 15-1-2000, the words "rice husk" and "paddy husk" have respectively been mentioned. Even then, no attempt was made to issue any clarification.
22. Two expressions having been used, ordinarily two different meanings should be assigned thereto. If by reason of a notification, taxes are sought to be imposed upon a new commodity applying Heydon's Rule [(1584) 3 Co Rep 7a : 76 ER 637] , it must be held that the mischief was sought to be remedied thereby. It is, therefore, difficult to agree with Mr Gupta that rice husk and paddy husk denote the same commodity.
23. We may place on record that Schedule was annexed to the notification prescribing rate to the U.P. Value Added Tax Ordinance, 2007 specifying the exempted goods, Item 4 whereof is as under:
"4. Acquatic feed; poultry feed including balanced poultry feed; cattle feed including balanced cattle feed; and cattle fodder including green fodder, chuni, bhusi, chhilka, chokar, javi, gowar, de-oiled rice polish, de-31
oiled paddy husk or outer covering of paddy; acquatic, poultry and cattle feed supplement, concentrate and additives thereof; wheat bran and de-oiled cake but excluding oil-cake; rice polish; rice bran and rice husk."
(emphasis supplied) It is, therefore, evident that rice husk is still considered by the Government of Uttar Pradesh to be a different commodity.
24. Even from the perusal of Chordia Kavelu Udyog v. State of M.P. [(1988) 69 STC 49 (MP)] it would appear that A Class Book of Botany was referred to therein which indicated that on removing the husk, a brownish membraneous layer is seen adherent to the grain and that this layer is made up of the seed-coat and the wall of the fruit fused together. If, according to the Government of Uttar Pradesh, rice husk is this cover which further requires husking, no exception thereto can be taken. When paddy is dehusked, it becomes paddy husk and when rice is dehusked, it becomes rice husk.
25. There are two other aspects of the matter which cannot be lost sight of. If something is included in the Schedule which is non-existent, no tax can be levied thereupon. Furthermore, if there is a doubt or dispute as to whether paddy husk or the rice husk denotes the same commodity or not, the benefit thereof shall be given to the assessee. Furthermore, it is not the case of the appellant that the respondent extracts any oil out of "paddy husk".
26. There are many other fruits which have two layers; for example pista, cashew nut and 32 groundnut, etc. One may only remove the outer cover and take the fruit or grain with the inner cover but one may like to take out the inner cover also which will depend upon the taste of the person concerned. Some persons may like to take "brown rice" but some other may like to take "white rice".
(emphasis supplied) In the light of the afore-extracted judgments of the Apex Court, wherein the Apex Court clearly holds that if there is no power to tax there is no tax. Power to tax must be express and not implied. Therefore, the submission that the definition 'building' always existed and windmills require construction and such would come within the ambit of taxation under the pre-amended Schedule to Section 199 of the Act, if accepted, would fall foul of the afore-quoted judgments of the Apex Court.
15. The other submission of the learned counsel is that, the amendment is by way of substitution and if it is by way of substitution, it always exists in the statute, is again unacceptable, as the very judgments of the Apex Court in the very paragraphs quoted supra deal with the concept of 33 substitution as well. Substitution, particularly in taxing statutes cannot have a retrospective or retro-active effect, unless the statute itself expressly directs that the statute has the retrospective effect. Implied tax on account of amendment by way of substitution is also unsustainable as is held by the Apex Court in the afore- extracted judgments. Therefore, both the submissions of the learned counsel for the respondents that windmills would come within the definition of 'building' and the amendment by way of substitution made in justification of the demand, deserves to be rejected.
16. The other submission of the learned counsel for the petitioner is with regard to the imposition of penalty and the demand being calculated on the basis of windmast and not on the basis of turbines, also deserves to be accepted, for the reason that the penalty can be levied only if the demand raised is not satisfied and the demand can be calculated only in terms of what charging section empowers such calculation. The demand notice does contain an amount of Rs.2,45,000/- 34 towards penalty which amount will have to be excluded from the purview of demand and that will have to be imposed after the demand not being complied with despite passing of 30 days from raising such demand. The other erroneous calculation of total demand is to bring in the calculation with regard to windmast and not turbine. This again runs counter to the Amending Act as Schedule-IV to Section 199 of the Act, under which, the windmills are taxed, clearly depicts that from 0.5 to 1 lakh per annum on the number of turbines. Therefore, imposition of tax taking windmast as the basis, is erroneous. The entire demand will have to be reworked in the light of the observations made in the course of the order.
17. Therefore, the demand made from the years 2010-11 to 2015-16, is unsustainable. The demand made post 2015-16, is sustained only insofar as the right to demand and not insofar as the calculation made as found in the demand notices. The respondents - Panchayats shall now rework and then raise the demand. Imposition of penalty which forms a part of the 35 demand, is rendered unsustainable. Since the demand is an amalgam of all the aforesaid illegalities, the entire demand notices require to be obliterated.
18. For the aforesaid reasons, I pass the following:
ORDER
(i) Writ petitions are allowed in part.
(ii) The impugned demand notices both dated 10.01.2018, in these writ petitions stand quashed.
(ii) The matters are remitted back to the respective respondents - Panchayats to raise such demand strictly in terms of the Amending Act and its calculation again strictly in terms of, what is depicted under the Amending Act.
(iii) The above exercise shall be completed by both the Panchayats within 3 months from the date of receipt of a copy of this order.
Sd/-
JUDGE nvj/CT:MJ