The Supreme Court examined the legality of levying charges on advertisements. The Court distinguished between "royalty" and "tax," ruling that the demand made by the Corporation was not a tax but a royalty for granting advertising rights on municipal land. The Court held that although royalty collection is permissible, penalties imposed without proper statutory authorization were invalid. The judgment emphasized that the demand for royalty was based on an agreement between the parties, and not legislative action. However, the Court rejected the imposition of penalties for non-payment, citing the absence of legislative support.

1. Background (Para 1–7):

   • Patna Municipal Corporation had decided to impose charges on advertising agencies for hoardings based on the area used. Initially, the rate was Re.1 per square foot, later revised to Rs.10 per square foot.
   • The demand notice for royalty was issued in 2012, but the Corporation had not framed regulations under the new Bihar Municipal Act, 2007 at the time.

2. Issues (Para 8–9):

   • The core issue was whether the demand for charges constituted a "tax" or "royalty." Additionally, the validity of penalties imposed for non-payment of these charges was questioned.

3. Royalty vs. Tax (Para 10–17):

   • The Court distinguished royalty from tax, holding that royalty is compensation for rights granted by a property owner, while a tax is a sovereign exaction imposed by law. The Corporation’s charges were based on agreements made with advertising agencies, not statutory imposition.

4. Legislative Requirement (Para 18–20):

   • While the Corporation was within its rights to collect royalty, the penalties imposed lacked legislative backing. The Court pointed out that penalties could not be levied through executive orders without regulatory support under the Act.

5. Decision on Penalty (Para 21–29):

   • The Court invalidated the penalties for non-payment, but upheld the revised royalty rate of Rs.10 per square foot as a reasonable fee for advertising rights.

6. Ratio Decidendi (Para 30–39):

   • The Court’s decision clarifies that while Patna Municipal Corporation could collect royalties from advertisers based on their agreements, any penalties for non-payment or retrospective levies require statutory backing. The decision also outlined that future rates must be applied prospectively, not retrospectively.

Key Acts and Sections Discussed:

• Article 265 of the Constitution of India – No tax shall be levied or collected except by authority of law.
• Bihar Municipal Act, 2007 – The framework under which municipalities operate, including the levying of taxes and royalties.
• Section 146 & 147 of the Bihar Municipal Act, 2007 – Pertaining to advertisement regulations and the imposition of taxes on advertisements.

Subjects:

Municipal Law, Advertisement Royalty, Constitutional Law, Taxation, Patna Municipal Corporation, Bihar Municipal Act, Supreme Court Judgment