KRBL Limited vs State of Punjab - 2013 Supreme(P&H) 52

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2013 Supreme(P&H) 52

IN THE HIGH COURT OF PUNJAB AND HARYANA
[DIVISION BENCH]
Before
The Hon’ble Mr. Justice Surya Kant
The Hon’ble Mr. Justice R.P. Nagrath
CWP No. 12965 of 2012
KRBL Limited
v.
State of Punjab & Ors.
{Decided on 25/01/2013}

For the Petitioner(s):Mr. K.L. Goyal, Senior Advocate with Mr. Rishab Singla and Mr. Joginder Singh, Advocates.
For the Petitioners(s) in CWP No.15294 of 2012:Mr. Rajiv Atma Ram, Senior Advocate with Mr. Arjun Partap Atma Ram, Advocate.
For the Respondent: Ms. Munisha Gandhi, Additional AG, Punjab.

Headnote:Building Tax--Charging of--Notification prescribing uniform rate of tax @ Rs.1/- per square feet of covered area without considering relevant factors distinguishing different buildings--Notification not valid--Full of discrimination--Notification set aside.
       (A) Punjab (Institutional and Other Buildings) Tax Act, 2011, S.3--Levy of Tax on 'buildings' or 'institutions' which are predominantly meant for commercial, business, vocational and/or professional purposes except the building of a school up to senior secondary level, and are located outside the municipal area(s), have been brought within the purview of the Statute--No illegality--Act held to be valid--Constitution of India, 1950, Art.14 & 265. (Para 31)
       (B) Punjab (Institutional and Other Buildings) Tax Act, 2011, S.3--Building Tax--Charging of--Discrimination--Reasonable classification--State Legislature, has chosen not to prescribe the actual rate of tax to be levied--Rather, it has consciously decided to fix only the maximum rate of tax, leaving it for the State Government to notify different rates for different 'buildings' or 'institutions'--Legislature, while prescribing no minimum rate of tax but a maximum cap thereupon, has thus eliminated the scope of arbitrary or discriminatory exercise of power by its delegate--The fact that the charging Section of the Punjab Act is not a statistic provision with fixed rate of tax leviable on the 'buildings' or 'institutions', completely erases the element of 'inequality' and 'arbitrariness' from Section 3 of the 2011 Act. (Para 40)
       (C) Punjab (Institutional and Other Buildings) Tax Act, 2011, S.3--Building Tax--Charging of--Notification prescribing uniform rate of tax @ Rs.1/- per square feet of covered area without considering relevant factors distinguishing different buildings--Notification not valid--Full of discrimination--Notification set aside. (Para 44)
       There can indeed be no doubt that irrespective of (i) the location of the building; (ii) nature of its user; (iii) its proximity to the nearby urban area(s); (iv) the commercial potentiality of the building(s); (v) the estimated rental value of the building(s); (vi) the cost of construction incurred on such building(s), and (vii) the value of the land where such buildings or institutions have been setup etc., the State Government has chosen to fix a uniform rate of tax @ Re.1/- per square feet of the 'covered area'--It simply means that the evil which the Legislature successfully prevented from entering into and hurting the doctrine of equality embodied in Section 3 (1) of the 2011 Act, has been injected through backdoor entry by the Executive in exercise of its delegated powers--The notification also suffers from the disability of unreasonable classification as it sweeps everyone with same broom--Conversely, it treats unequals as equals in total disregard to the principles laid down by the Supreme Court in Kerala's case--The notification dated 2.2.2011 thus neither satisfies the test of 'equality' nor is it consistent with Section 3 (1) of the 2011 Act--The notification is full of the sin of discrimination and it must take toll for its sins. (Para 44)

JUDGMENT

Mr. Surya Kant, J.: - This order shall dispose of Civil Writ Petitions No.12965, 12977, 12983, 16656, 20522 and 15294 of 2012. The petitioners in these cases assail Constitutional validity of Section 3 of Punjab (Institutional and Other Buildings) Tax Act, 2011 as according to them, it is ultra-vires Articles 13, 14 and 265 of the Constitution of India read with Entry No.49 contained in Schedule VII of its List-II in so far as the charging of tax on ‘institutions’ and ‘buildings’ on the basis of a fixed floorage area irrespective of other considerations like construction, location or the purpose for which it is used etc. is concerned. The petitioners also seek quashing of the Notification dated 2.2.2011 published on 3.2.2011, issued in purported exercise of the powers exercisable under the afore-said Act, which is allegedly discriminatory and violative of Article 14 of the Constitution. In addition, the petitioners seek to strike down the public notice dated 10.6.2011 followed by individual notices like the one dated 12.7.2011 directing them to inform the ‘covered area’ of their respective establishments.

2. For convenience, the facts are being extracted from Civil Writ Petition No.12965 of 2012.

3. The petitioner-Company runs an industrial unit for extraction of Basmati rice which is sold within and outside the country under the brand name of ‘India Gate’. The petitioner’s rice shelling plant is located at village Bhasur near Dhuri, District Sangrur and is outside the municipal limits. The plant has a built-up area of 9,00,000 square feet . Since the petitioner has been served with a notice dated 12.7.2011 (Annexure P-9) calling upon it to intimate about the ‘covered area’ of its establishment which is more than 500 square ft. and since the aforesaid information has been sought for imposition of ‘institutional tax’, that the petitioner questions the constitutionality of Section 3 of Punjab (Institutional and Other Buildings) Tax Act, 2011 (for short the ‘2011 Act’) as well as the notification dated 2/3.2.2011 (Annexure P-7) issued in purported exercise of powers vested under Section 3 of 2011 Act coupled with the public notice dated 10.6.2011 (Annexure P-8) informing the owners/occupiers of the taxable buildings regarding levy and collection of institutional tax and the mandatory steps required to be taken by such owners/occupiers for registration of premises, measurement of area, calculation of tax and its consequential deposits in the treasury on or before 31.8.2011.

4. The respondents have filed their reply-affidavits, interalia, maintaining that the competent legislature has enacted the Act to impose property tax “on all the buildings and institutions on the basis of covered area of the property, irrespective of its location, construction, utility, profitability and usage” and the tax is levied uniformly taking into consideration the elements existing with the ‘building’ and ‘institution’ as defined under Act No.9 of 2011. The respondents have also defended the notifications dated 2/3.2.2011 fixing the rate of tax at Re.1/- per square ft. of the ‘covered area’ of the institution or building, which also authorizes the officers of Excise and Taxation Department to act as the Assessing or the Appellate Authorities under this Act. Section 22 of the Punjab General Clauses Act, 1897 and some decisions of the Hon’ble Supreme Court have been relied upon to contend that the notifications issued under the Ordinance of 2010 are valid under the 2011 Act also as there is no inconsistency between the provisions contained in the Ordinance or the Act. It is denied that the tax levied on the basis of ‘floorage’ is discriminatory. It is also claimed that the property tax of Re.1/- per square ft. of the covered area is at a very nominal rate and since it has been applied uniformly, it does not violate Article 14 of the Constitution.

BRIEF HISTORY AND RELEVANT PROVISIONS OF 2011 STATE ACT.

5. The State of Punjab notified Punjab Ordi

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2013 Supreme(P&H) 52

IN THE HIGH COURT OF PUNJAB AND HARYANA [DIVISION BENCH]Before The Hon’ble Mr. Justice Surya Kant The Hon’ble Mr. Justice R.P. NagrathCWP No. 12965 of 2012 KRBL Limited v. State of Punjab & Ors. {Decided on 25/01/2013}

Cases Referred (4)

IN THE HIGH COURT OF PUNJAB AND HARYANA
[DIVISION BENCH]
Before
The Hon’ble Mr. Justice Surya Kant
The Hon’ble Mr. Justice R.P. Nagrath
CWP No. 12965 of 2012
KRBL Limited
v.
State of Punjab & Ors.
{Decided on 25/01/2013}