LPA Nos. 255/2007 & 357/2007 1 * IN THE HIGH COURT OF DELHI AT NEW DELHI + LETTERS PATENT APPEAL NOS. 255 OF 2007 & 357/2007 % Date of Decision : May 27th , 2009. COL. T. PRASAD ....Appellant in LPA No. 255/2007. Through Mr. Sanjiv Sharma, Advocate. S.S. PANDAY ....Appellant in LPA No. 357/2007. Through Ms. Rekha Palli, Advocate. VERSUS UNION OF INDIA & ORS. .... Respondents. Through Mr. Neeraj Kishan Kaul, Sr. Advocate with Mr. Sudhir Sharma, Mr. Ajit Warrier and Mr. Ritesh Kumar, Advocates for respondent No. 4. CORAM: HON’BLE MR. JUSTICE AJIT PRAKASH SHAH, CHIEF JUSTICE HON'BLE MR. JUSTICE SANJIV KHANNA 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not ? 3. Whether the judgment should be reported in the Digest ? SANJIV KHANNA, J: 1. The appellants, Colonel T. Prasad and Capt. S.S. Panday are serving Indian Army Officers and have by this intra Court appeal impugned judgment dated 6th March, 2007 passed by the learned LPA Nos. 255/2007 & 357/2007 2 single Judge dismissing their writ petitions. The appellants rely upon Indian Tolls (Army and Air Force) Act, 1901 (hereinafter referred to as the 1901 Act, for short) and claim exemption from payment of toll tax and claim right to free access and utilization of Delhi-NOIDA Direct Flyway (hereinafter referred to as the DND Flyway, for short). 2. DND Flyway has been constructed by M/s NOIDA Toll Bridge Company Limited pursuant to a concessionaire agreement dated 12th November, 1997 between Noida Toll Bridge Co. Ltd.- Respondent no. 4 and New Okhla Industrial Development Authority (NOIDA)- respondent no. 3. The question and the issue involved in the present case relate to interpretation of both 1901 Act, Concessionaire Agreement and the New Okhla Industrial Development Area (Levy of Infrastructure Fee) Regulations, 1998 framed under Uttar Pradesh Industrial Area Development Act, 1976. 3. The relevant provisions of the 1901 Act, which require interpretation is as under:- “2. Definitions: (b) “Carriage” means a vehicle for carriage or haulage other than one specially constructed for use on rails; x x x x x (i) “Public Authority” means the Central Government or a State Government or a local authority; and, so far as regards tolls levied by a railway company under section 4 of the Indian Guaranteed Railways Act, 1879 or LPA Nos. 255/2007 & 357/2007 3 section 51 of the Indian Railways Act, 1890, includes such a railway company; and (j) “tolls” includes duties, dues, rates, fees and charges, but does not include custom duties levied under the Indian Tariff Act, 1934, octroi duties or town duties on the import of goods, or fares paid for the conveyance of passengers on a tramway. 3. Exemptions from tolls:- The following persons and property, namely:- (a) all officers, soldiers and airmen of – (i) the Regular forces (ii) any irregular corps, (b) all members of the Territorial Army or of the National Cadet Corps when on duty or when proceeding to or returning from duty. (c) all officers, soldiers and airmen of the Indian Reserve Forces when proceeding from their place of residence on being called out for service, training or, muster or when proceeding back to their place of residence after such service, training or muster, (d) all authorized followers of – (i) the Regular Forces (ii) the Territorial Army or the National Cadet Corps. (iii) any Irregular Corps. (e) all members of the families of officers, soldiers, airmen or authorized followers of – (i) the Regular Forces, or (ii) any Irregular Corps when accompanying any body of troops, or any officer, soldier, airmen or authorized follower thereof on duty or on the march. (f) all prisoners under military or air force escort, LPA Nos. 255/2007 & 357/2007 4 (g) the carriages, horses and baggage, and the persons (if any) employed in driving the carriages or in carrying the baggage, of any persons exempted under any of the foregoing clauses, when such carriages, horses, baggage, or persons accompanying the persons so exempted under the circumstances mentioned in those clauses respectively. (h) all carriages and horses belonging to government or employed in the Indian military for air force service and all persons in charge of or accompanying the same, when conveying any such persons as hereinbefore in this section mentioned or when conveying baggage or stores, or when returning, unladen from conveying such persons, baggage or stores; (i) all carriages and horses when moving under the orders of military or air-force authority for the purpose of being employed in the Indian military or air force service; (j) all animals accompanying any body of troops which are intended to be slaughtered for food or kept for any purpose connected with the provisioning of such troops, and (k) all persons in charge of any carriage, horse or animal exempted under any of the foregoing clauses when accompanying the same under the circumstances mentioned in those clauses respectively. Shall be exempted from payment of any tolls – (i) On embarking or disembarking, or on being shipped or landed, from or upon any landing-place, or (ii) in passing along or over any turnpike or other road or bridge, or (iii) On being carried by means of any ferry, Otherwise demandable by virtue of any Act, Ordinance, Regulation, order or direction of any legislature or other public authority in India. LPA Nos. 255/2007 & 357/2007 5 Provided that nothing in this section shall exempt any boats, barges or other vessels employed in conveying the said persons or property along any canal from payment of tolls in like manner as other boats, barges and vessels. Explanation:- The persons or property exempted under clause (d), (e), (g) and (j) shall be deemed to accompany the Forces, troops, persons or property concerned, when the move of the former is the direct result of, or is connected with the move of the latter, irrespective of the interval of space and time between the two moves. 6. Compensation: (1) if any owner or lessee, or any company, railway administration or local authority claims compensation for any loss alleged to have been incurred to the operation of this act, the claim shall be submitted to the Central Government. (2) On receiving any such claim, the central government shall pass such order thereon as justice requires, and shall give all necessary directions for the purpose of ascertaining the facts of the case and of assessing the compensation, if any, to be paid.” (emphasis supplied) 4. The term “public authority” has been defined to mean Central Government, State Government or Local Authority. Section 6 of the 1901 Act makes it clear that the provisions of the said Act will equally apply where a toll is imposed by a owner or lessee, any company, Railway administration or local authority, and in such circumstances, the said person can claim compensation from the Central LPA Nos. 255/2007 & 357/2007 6 Government for the loss on account of exemption provided under the 1901 Act from payment of toll tax/fee. The word “toll” has been broadly defined to include duties, dues, rates, fees, etc. except duties under the Indian Tariff Act, 1934, octroi duties, town duties on import of goods or fares paid for the conveyance of passengers on a tramway. 5. Section 3 of 1901 Act consists of two parts. The first part deals with the persons, who are exempted in clauses (a) to (f) or entitled to benefit under the Act. The second part in sub-clauses (g) to (K) deals with carriages, animals, horses etc and stipulates when they are exempt from payment of toll tax. In the present case, we are more concerned with the interpretation of the substantive portion of Section 3 which exempts payment of tolls on persons mentioned in clauses (a) to (f) read with carriage, animals etc. mentioned in clauses (g) to (k). To be precise, we are concerned with the words “shall be exempted from payment of any tolls otherwise demandable by virtue of any Act, Ordinance, Regulation, order or direction of any legislature or any other public authority in India”. The words “by virtue of”, mean by force of or authority of or because of. Thus the toll or fee demandable for the purpose of 1901 Act must be because of, by force or by authority of Act, ordinance, regulation, order or direction of any legislation or other public authority. Only tolls LPA Nos. 255/2007 & 357/2007 7 demandable by virtue of any Act, Ordinance etc. as per the said exemption clause cannot be levied on persons mentioned in clauses (a) to (f) read with carriages, animals etc. mentioned in clauses (g) to (k) of Section 3. Tolls not demandable by virtue of any Act, ordinance, regulation, order or direction of any legislature or public authority in India are payable by persons mentioned in clauses (a) to (f) read with Carriages etc mentioned in Clauses (g) to (k). Tolls or fee charged by a private person from third party who travels through his land or land over which he has rights are not exempt and can be charged if the same is not demandable by virtue of any Act, Ordinance, etc. The legislature in Section 3 has used the words “otherwise demandable” with reference to Act, Ordinance, Regulation, order or direction of any legislature or public authority in India. 6. As per the counsel for the appellants, the word “demandable” refers only to imposition or levy or charge of fee under any Act, ordinance, regulation, order or direction. It does not refer to quantification or computation of fee. The respondent-NOIDA as well as the respondent no.4 Company had argued to the contrary. 7. We have considered the arguments raised by both sides and feel that the word “demandable” used in Section 3 of the 1901 Act refers to both „right to charge a fee or toll‟ as well as quantification LPA Nos. 255/2007 & 357/2007 8 and computation of the fee or toll. A fee cannot be demanded without it being computed and calculated. An amount can be demanded after assessment and not before. Demand can only be made once a figure has been quantified. An enactment, rule, etc. may provide for „right to charge a toll‟ as well as how the toll is to be computed, calculated and then demanded from the person using the road or the bridge or the conveyance or may only authorise imposition or a charge but leave the question of quantum and computation to a contractual agreement. The word “demandable” as used in Section 3 is applicable when an enactment provides for „right to charge a fee or toll‟ and provides for computation and calculation of the toll. It is only when an Act, ordinance, regulation, order or direction, etc provides for both aspects, that the toll becomes demandable by virtue of an Act, Ordinance, regulations etc. When an enactment merely permits imposition of toll but does not deal with or provide for computation, calculation or quantum of toll and leaves these questions open to be determined by a contract or any other manner, it is not an amount “demandable” under Section 3. To demand an amount, the amount should be quantified and for purpose of Section 3 of 1901, the amount demanded should be by virtue of an Act, Ordinance, Regulation, Order or direction. LPA Nos. 255/2007 & 357/2007 9 8. In A.N. Lakshmana Shenoy Vs. The Income Tax officer, 1958 (34) ITR 275 SC, the Supreme Court was concerned with the definition of the word “assessment” and it was observed that the said term is comprehensive enough to include the charging section and the whole procedure for imposing the tax liability on the tax payer, which implies two further steps, i.e., determination of taxable income and then the sum payable by assessee as tax on the computation made. In National Mineral Development Corporation Limited versus State of M.P.and Another, (2004) 6 SCC 281, the Supreme Court was concerned with the question of levy of royalty and whether it includes merely charge or also the computation thereof and it was observed as under:- “23. Section 9 is not the beginning and end of the levy of royalty. The royalty has to be quantified for purpose of levy and that cannot be done unless the provisions of the Second Schedule are taken into consideration. For the purpose of levying any charge, not only has the charge to be authorised by law, it has also to be computed. The charging provision and the computation provision may be found at one place or at two different places depending on the draftsman‟s art of drafting and methodology employed. In the latter case, the charging provision and the computation provision, though placed in two parts of the enactment, shall have to be read together as constituting one integrated provision. The charging provision and the computation provision do differ qualitatively. In case of conflict, the computation provision shall give way to the charging provision. In case of doubt or ambiguity the computing provision shall be so interpreted as to act in aid of charging provision. If the two can be read together homogeneously then both shall be given effect to, more so, when it is clear from LPA Nos. 255/2007 & 357/2007 10 the computation provision that it is meant to supplement the charging provision and is, on its own, a substantive provision in the sense that but for the computation provision the charging provision alone would not work. The computing provision cannot be treated as mere surplusage or of no significance; what necessarily flows therefrom shall also have to be given effect to. 24. Applying the abovestated principle, it is clear that Section 9 neither prescribes the rate of royalty nor does it lay down how the royalty shall be computed. The rate of royalty and its computation methodology are to be found in the Second Schedule and therefore the reading of Section 9 which authorises charging of royalty cannot be complete unless what is specified in the Second Schedule is also read as part and parcel of Section 9.” 9. Thus, it is clear that charging Section/provisions may be different from computation or provisions relating to rate of tax and these can be part of a single enactment or parts of two separate enactments. An enactment may only provide a charging section and leave the computation or calculation portion outside the enactment. Taxing statutes have a charging section, provisions relating to rate of tax, provisions for calculation of the amount payable including assessment and procedure for collection of the amount payable. These provisions may not necessarily be part of one statute. Levy of tax includes both the charging section as well as computation and assessment. 10. In Assistant Collector Central Excise, Calcutta versus National Tabacco Company of India Limited, AIR 1972 SC 2563, the Supreme Court held that the word “levy” is of wide import and includes imposition of tax as well as assessment. The term LPA Nos. 255/2007 & 357/2007 11 “imposition” is generally used for the levy of a tax or duty by legislative provisions indicating subject matter of the tax and the rates at which taxes are charged. The term “assessment” is generally used for actual procedure adopted in fixing the liability to pay tax and determining its amount. The collection of tax is at the third stage. The term levy it was stated includes both imposition as well as assessment but does not include collection. Reference was made to N. B. Sanjana v. Elphinstone Spg. & Wvg. Mills Co. Ltd. , AIR 1971 SC 2039, wherein it was observed as under:- “14. We are not inclined to accept the contention of Dr Syed Mohammad that the expression “levy” in Rule 10 means actual collection of some amount. The charging provisions Section 3(i) specifically says “There shall be levied and collected in such a manner as may be prescribed the duty of excise....” It is to be noted that sub-section (i) used both the expressions “levied and collected” and that clearly shows that the expression „levy‟ has not been used in the Act or the Rules as meaning actual collection.” 11. The said judgment was followed by the Gauhati High Court in Bishnauth Tea Co. Vs. Supdt Customs & Central Excise 1976 Tax L.R. 1605 and it was observed that terms „levy‟ and „assessment‟ do not extend to collection. Similar view has been taken by a Division Bench of Madhya Pradesh High Court in Hind Syntex Ltd. Vs. Union of India & others, 1985 (19) E.L.T. 35 (M.P.), holding that the term „levy‟ includes both imposition of tax indicating the LPA Nos. 255/2007 & 357/2007 12 subject matters of the tax and the rates at which the tax is to be charged. The term “assessment” on the other hand is part of levy and is generally used for actual procedure adopted for fixing liability to pay tax or on account of particular good or property. Process of assessment, determines whether the levy is short or complete. However, as observed above by the Supreme Court, the levy itself not only means imposition of tax but also provisions relating to quantification thereof. Thus the term “demandable” means both „right to impose‟ or „charge‟ and the rate including the assessment of the quantum of fee or toll i.e. the quantified amount which is to be recovered. 12. The second question is whether the toll or fee for using the DND flyway is demandable by virtue of any Act, Ordinance, regulation, and/or direction of any legislature or other public authority. 13. The NOIDA authority has been created under Uttar Pradesh Industrial Area Development Act, 1976 and is a local authority as defined in Section 3(31) of the General Clauses Act, 1897 and is therefore a public authority. Section 11 of the Uttar Pradesh Industrial Area Development Act, 1976 authorises imposition of taxes. The said section reads :- “Section 11 (1) For the purposes of providing, maintaining or continuing any LPA Nos. 255/2007 & 357/2007 13 amenities in the industrial development area, the Authority may with the previous approval of the State Government, levy such taxes as it may consider necessary in respect of any site or building on the transferee or occupier thereof, provided that the total incidence of such tax shall not exceed twenty five percent of the annual value of such site or building. Explanation: In this sub-section, the expression “annual value” shall have the same meaning as in Section 174 of the U.P. Nagar Mahapalika Adhiniyam, 1959. (2) if the state Government considers it necessary or expedient in the public interest it may, by a general or special order, exempt wholly or partly – any such transferee or occupier or any such class thereof from the taxes levied under sub section (1).” 14. Under Section 11 of the said Act, previous approval of the State Government is required for levy of tax. The aforesaid Section provides for charging of tax in respect of annual value of a site or building. The said provision is not applicable. The said Act does not provide for imposition of any toll tax by an authority under the Act. It cannot be said that toll tax is collected or is chargeable or levied under Section 11 of the said Act. 15. Under Section 6 of the Uttar Pradesh Industrial Area Development Act, 1976, NOIDA Authority is to provide infrastructure for residential and commercial purposes. NOIDA Authority has framed the New Okhla Industrial Development Area (Levy of LPA Nos. 255/2007 & 357/2007 14 Infrastructure Fee) Regulations. The regulations provide and permit NOIDA Authority to enter into an agreement with third parties for collection of fee or even develop, construct, maintain and provide infrastructure and collect fee. Thus, the NOIDA Authority is entitled to enter into an agreement to collect levy of fees. It can also enter into agreement with a third party to develop, construct and maintain infrastructure, which are commonly called built, operate and transfer projects (BOT projects). In such cases, of the public private partnership, the developer does retains buildings, infrastructure and operates to recoup the expenses incurred and earn profit and thereafter transfers the infrastructure/project after a period to the Government. The relevant provisions of the said Regulations read as under:- “2. Definitions (e) „Developer‟ means a person who constructs, develops, maintains or provides an infrastructure or collects fee therefore in the area on the basis of an agreement made before or after the commencement of these regulations, providing or maintaining or continuing to provide or maintain any infrastructure in the New Okhla Industrial Development Area, (f) „Fee‟ in relation to an infrastructure means an amount levied upon or payable by a person under these regulations for the use of an infrastructure in the Area, LPA Nos. 255/2007 & 357/2007 15 3. (a) The authority may either itself or through a Developer on the basis of an agreement, develop, construct, provide or maintain or continue to provide or maintain an infrastructure in the Area, (b) In particular, and without prejudice to the generality of the powers of the Authority in this behalf the agreement may provide for any or all of the following matters: - (i) xxx (ii) Right and obligations of the parties to the agreement; (iii) standards and specifications for the design, construction and maintenance of an infrastructure; (iv) fee to be levied and collected for an infrastructure in the area; (v) Process of computing the reasonable return for the Developer; (vi) Procedure for surrender, release or extinguishing of the rights of the Developer or otherwise the transfer of an infrastructure; (vii) rights of the lenders of the Developer in relation to an infrastructure; (viii) termination of the agreement; (ix) mechanism for settlement of disputes; and (x) any other terms and conditions as may be agreed upon by the Authority, Developer or lender of the Developer. 4. (i) Every agreement by and on behalf of the Authority shall be made and executed by such officer of the Authority as may be authorised by the Authority in this regard. (ii) No agreement made by and on behalf of the Authority in contravention of the provisions of sub-regulation (i) shall be binding on it. LPA Nos. 255/2007 & 357/2007 16 5(1) For the purpose of providing or maintaining or continuing to provide or maintain an infrastructure in the Area either by itself or through a Developer the Authority may levy and collect at the rate determined on the basis of a formula prescribed and notified by the authority. In case an infrastructure is developed, constructed or maintained or provided under an agreement such formula shall be such as may be determined and agreed to between the Authority and the Developer. The formula prescribed may provide for different rates for different classes of infrastructure. (2) The authority shall have the powers to authorise the developer to collect and appropriate the fee levied under sub-clause (1) in accordance with the Agreement. Developer‟s rights to collect or appropriate the fee may be assignable to the lenders of the Developer. (3) Where the authority authorizes the Developer to collect and appropriate the Fee in accordance with sub-regulation (2), the agreement shall provide for a mechanism for determination, revision, and publication of the rate of fee. (4) xxx (5) A developer shall maintain and keep such registers and other records as may be directed by the Authority.” (emphasis supplied) 16. The term “developer” includes a person, who constructs, develops and maintains and provides infrastructure and collect fee on the basis of agreement before or after commencement of the LPA Nos. 255/2007 & 357/2007 17 regulations. The definition of the term “fee” means amount levied or payable by a person under the regulations. Further regulation 3 (b) (iv) states that the fee is to be levied and collected for the infrastructure in the area. The computation provisions are provided and regulated by regulation 5. They are the most crucial and relevant