ORDER
S. Ananda Reddy, J
1. These three writ petitions are filed by the employees of Military Engineering Service Welfare Committee and one of the employees of the Military Engineering Service. As the relief sought for in all the three writ petitions is the same and the factual situation is also common, they are disposed of by this common order.
2. These writ petitions are filed praying for the issue of a writ of mandamus declaring the action of the respondents 1 and 2 in recovering profession tax from the salaries of the employees working in the 3rd respondent establishment as illegal, arbitrary and contrary to Regulation 288-A of the Financial Regulations framed under the Army Act, 1950 and that the employees working under the control of the 3rd respondent establishment are not liable to pay profession tax under Act 22 of 1987 and consequently direct the 3rd respondent not to recover the profession tax from the employees working under its controland to refund the profession tax already collected from the salaries of the employees working in the 3rd respondent.
3. The brief facts leading to filing of these writ petitions are :
The members of the writ petitioners are working in the office of the 'Garrison Engineer (1), R&D;, Chandrayangutta, Hyderabad, the 3rd respondent. They are members of the Military Engineering Service (for short 'MES') under the over all control of Engineer-in-Chief, Army Headquarters, New Delhi. The members of the petitioners are covered by the Defence Service Regulations. The executive powers of the Government of India with regard to sanction of expenditure towards salaries etc., are exercised by the President of India, through the Ministry of Defence in accordance with the provisions of the Constitution of India. The financial powers in respect of MES expenditure are laid down in MES Regulations. The Government of India has issued general rules with regard to expenditure towards the defence services and such rules provide that the persons, subject to the Army Act, are exempted from the tax on Professions, Trades, Callings, offices or appointments, levied by the Municipal or Cantonments. According to the petitioners, the MES undertakes works services for Armed Forces including Army, Navy, Air Force, DRDO, Ordinance Factories etc. All the maintenance responsibility of the Military Engineering Installations within the defence services devolves on the MES. Although the majority of the staff working in MES are civilians, they work on par with the Armed Force personnel. Their service conditions and pay scales are governed by the MES Regulations under the control of Engineer-in-Chief, Army Headquarters, New Delhi in the Ministry of Defence. Thus for all the purposes, their services are defence services, according to the petitioners. Therefore, the exemptionsthat are available to the armed forces have to be extended even to the members of the petitioners.
4. While so, the 2nd respondent issued directions to the 3rd respondent for getting itself registered for the purpose of collection/ deduction of tax from the salaries of its employees under the provisions of A.P. Tax on Professions, Trades, Callings and Employees Act, 1987 (for short 'the Act'). According to the petitioners they are not liable to pay the profession tax under the provisions of the said Act. Therefore, 'mandamus' is sought to declare the action of the 2nd respondent and consequently the proposed deduction or deductions by the 3rd respondent as illegal, void and without jurisdiction.
5. The learned Counsel for the petitioners Sri Vidya Sagar contended that the regulations framed under the provisions of the Army Act, exempts the army personnel from the liability to pay the tax. The members of the petitioners are on par with the army personnel. Therefore, in terms of Regulation 288-A they are entitled for the exemption. It is also stated that the loss caused to the Cantonment Board/Municipalities/Councils by granting exemption to the services personnel shall be made good from the defence services estimates. Therefore, the local authorities are in no way affected by such exemption. The learned Counsel also referred to the provisions of Section 2(e), which defines the term 'employee' and contended that the members of the petitioners would not fall under any of the three clauses of Section 2(e) of the Act. Therefore, there is no obligation on the part of the members of the petitioners to pay any tax under the Act. The learned Counsel also contended that though the levy of profession tax was originally provided in the Municipalities or Cantonments Acts, later the consolidated Act was passed by the A.P. Legislaturereplacing the levy by the local authorities and in its place the State Government is empowered to levy professional tax, for the benefit of the local bodies. Though the provisions of the local authorities Acts were replaced by the Act passed by the State Legislature, still the exemptions that are contemplated under the regulations framed under the Army Act, 1950, holds good and therefore there is no liability on the members on the petitioners to pay the tax. The learned Counsel also referred to the provisions of Section 32 as well as Section 35 in support of his contention that the profession tax levied under the present Act is only for the benefit of the local bodies. Therefore the exemption that is contemplated under the Regulation 288-A framed under the Army Act holds good and if so, the members of the petitioners are entitled for such exemption. Hence, the petitioners have sought for the relief of declaration that the respondents 1 and 2 are not entitled to levy the professional tax on the members of the petitioners and consequently the 3rd respondent is not obligated to deduct from the salaries of the members of the petitioners to pay over to the 2nd respondent.
6. The learned Special Government Pleader for Taxes, on the other hand, opposed the contention of the petitioners. The learned Government Pleader would contend that the State of A.P., has competence to enact law to impose professional tax as provided under Article 276 of the Constitution of India, read with Entry 60 of the List-11 of the Seventh Schedule. Under the said Article the State or other local authority in the State are the authorities to levy tax on profession etc. It is stated that though prior to the enactment of Act 22 of 1987, the levy of profession tax was provided under the Municipalities and Cantonment Acts, but however, the State thought it fit to consolidate all the provisions contained in various local Acts and thus enacted 'theA.P. Tax on Professions, Trades, Callings and Employments Act, 1987' and under the provisions of the said Act it is only the State Government, which authorised to levy and collect the tax on profession, trades, calling and employments. The learned Counsel contended that the members of the writ petitioners would come within the term 'employee' as defined under Section 2(e) of the Act. As per Section 4, there shall be levied and collected a tax on professions, trades, callings and employments for the benefit of the State. Therefore, it is contended that it is not correct on the part of the petitioners to contend that the tax was collected for the benefit of the local authorities. The learned Counsel also contended that under Section 5 of the Act it is the employer's liability to deduct and pay tax on behalf of the employees. Therefore, the 2nd respondent has rightly directed the 3rd respondent to get itself registered and deduct tax from the employees under its control. The learned Counsel also contended that the Regulations relied upon by the petitioners are framed under Section 192 of the Army Act, 1950 and those regulations have no overriding effect over the provisions of the Act. It is also contended that though Regulation 288-A relied upon the petitioners, refers to exemption of tax leviable by the local authorities, there is no corresponding provision providing the exemption of the tax that is being levied by the State under the Act. In the absence of any such corresponding provisions in the Act, the members of the petitioners are liable to pay professional tax.
7. Heard both sides and considered the material on record.
8. In order to appreciate the rival contentions, it is relevant to extract the relevant provisions of the Act.
Section 2(e) 'Employee' means a person employed on salary or wages andincludes,--
(i) an employee of the Central Government or any State Government to whom the salary is paid either from the Consolidated Fund of India or of a State;
(ii) a person in the service of a body, whether incorporated or not, which is owned or controlled by the Central Government or any State Government where the body operates in any part of the State, even though its headquarters may be situated outside the State; and
(iii) a person engaged in any employment of an employer not covered by items (i) and (ii) above;
Section 2(f)- 'Employer' in relation to an employee earning any salary or wages on regular basis under him, means the person or the officer who is responsible for disbursement of such salary or wages; and includes the head of the office or any establishment as well as the Manager or agent of the employer;
Section 2(h)- 'Local authority' means-
(i) in the city of Hyderabad and in the city of Secunderabad, excluding the Cantonment Area, the Municipal Corporation of Hyderabad and in the city of Vijayawada, the Municipal Corporation of Vijayawada and in the city of Visakhapatnam and in any other Municipality, the Municipal Council concerned;
(ii) in any area which is comprised within the jurisdiction of Gram Panchayat, the Gram Panchayat concerned; and
(iii) in any other area, the authority legally entitled or entrusted by the Government with the control or management of a profession tax;
Section 4. Levy and charge of tax :--
(1) There shall be levied, and collected atax on professions, trades, callings and employments for the benefit of theState.
(2) Every person engaged in an profession, trade, calling, employment in the State falling under any one or other of the classes specified in column (2) of the First Schedule, shall be liable to pay a tax at the rate specified in the corresponding entry in column (3) thereof.
Section 5. Employer's liability to deduct and pay tax on behalf of employees :--(1) The tax payable under this Act, by any person earning a salary or wage, shall be deducted by his employer from the salary or wage payable to such person, before such salary or wage is paid to him, and such employer shall, irrespective of whether such deduction has been made or not, when the salary or wage is paid to such persons, be liable to pay tax on behalf of all such persons :
Provided that, where the employer is an officer of the State Government, or the Central Government, the manner in which such employer shall discharge the said liability shall be such as may be prescribed;
Provided further that, where any person earning a salary or wage-
(a) is also covered by one or more entries other than Entry 1 in the First Schedule and the rate of tax under any such other entry is more than the rate of tax under Entry 1 in that Schedule; or
(b) is simultaneously engaged in employment under more than one employer;
and such person furnishes to his employer or employers a certificate in the prescribed form declaring, inter alia, that he shall get enrolled under sub-section (2)of Section 6 and pay the tax himself; then the employer or employers of such person shall not deduct the tax from the salary or wage payable to such person and such employer or employers, as the case may be, shall not be liable to pay tax on behalf of such person.
Section 31. Power to exempt :--The Government may, by notification, make an exemption or reduction in the rate of tax payable under this Act by any specified class of assessees subject to restrictions and conditions as may be specified in the notification.
Section 32. Local authorities not to levy profession tax :--Notwithstanding anything in any enactment, governing the constitution of establishment of a local authority, no local authority shall, on or after the commencement of this Act, levy any tax on professions, trades, callings or employments.
Section 35. Grant to local authorities for loss of revenue :--Out of the proceeds of the tax, penalties, interest or other amounts recovered under this Act, there shall be paid annually to such local authorities as were levying a tax on profession, trades, callings and employments, immediately before the commencement of this Act, such amounts on the basis of the highest collections of such taxes, penalties and interest made by them in any year during the period of three years immediately preceding such commencement as may be determined by the Government in this behalf.
9. A perusal of the above provisions shows that the term 'employee', as defined, covers almost all employees. The learned Counsel for the petitioners contended that clause (i) of Section 2(e) covers only an employee of the Central Government or State Government to whom the salary ispaid either from the Consolidated Fund of India or of a State. According to him, clause (ii) is not applicable. So also clause (iii) has no application. Clause (iii) refers a person engaged in any employment of an employer not covered by items (i) and (ii). It refers to as residuary, covering almost all persons engaged in any employment of an employer. The definition of employer also shows it need not be either the Central Government or the State Government or other authority. But, even a person or the Officer, who is responsible for the distribution of such salary or wages; and includes the head of the office or any establishment as well as the Manager or agent of the employer. Therefore, we do not find any merit in the contention of the learned Counsel for the petitioner that the members of the petitioners would not fall in any of the clauses of Section 2(e).
10. A reference to Section 4, which is a charging section, makes it clear that what is levied and collected as a tax on professions, trades, callings and employments is for the benefit of the State and not for any local authorities. Therefore it is clear that every employee within the State is liable to pay tax that is contemplated under the Act.
Though the learned Counsel referred to and relied upon the provisions of Sections 32 and 35, Section 32 provides that the local authorities should not levy the profession tax and Section 35 provides for the grant to the local authorities for loss of revenue on account of loss of revenue, as they are excluded from collecting profession tax. These provisions are not of any assistance to the petitioners.
11. Coming to the regulations relied upon by the learned Counsel, Regulation 288-A reads :--
'A person subject to the Army Act, 1950 (Act XLVI of 1950) the Navy Act, 1957/the Air Force Act, 1950, who is compelled by the exigencies of Army/ Navy/Air Force duty to reside within the limits of the Municipality or a Cantonment, is exempted from the taxes of the following kinds:-
(i) Municipal or Cantonment taxes on salaries;
(ii) Municipal or Cantonment taxes on profession, trades, callings, offices or appointments;
(iii) Municipal or Cantonment taxes on animals or vehicles in respect of-
(a) any animal which such person is required by the Regulations of the service to which he belongs to keep; and
(b) any vehicle which such person is permitted to keep in lieu of any animal which the said Regulations would require him to keep.
A perusal of the above Regulation no doubt provides that no person subject to the Army Act and who is compelled by the exigencies of the Army/Navy/Air Force duty to reside within the limits of the Municipality or a Cantonment is exempted from the taxes, such as taxes on salaries, profession, trades, callings, offices or appointments etc. No doubt this Regulation may be of some assistance to the petitioners, as long as the levy that was contemplated under the provisions of the Municipal or Cantonments Acts. By virtue of the enactment of Act 22 of 1987 corresponding provisions in the local authorities Acts, which contemplate levy and collection of profession tax were amended by omitting the same, which are shown in the second schedule to the Act. Therefore, the question of getting any exemption or reimbursement of the loss caused to the local authorities does not arise. Insofar as the present Act is concerned Section 31 gives the power to theGovernment to exempt by notification, specified class of assessees. It is not the case of the petitioners that the State Government has issued any notification under Section 31 of the Act. In fact, there is no provision granting exemption even in respect of the armed forces.
12. Though the learned Counsel for the petitioners has stated that similar questions were raised before the High Court of Mumbai and a batch of writ petitions were allowed, but the order in respect of the writ petitions referred to in the affidavit, was not placed before us. However, the learned Counsel relied upon a judgment of the same Court in U.S. Rant v. State of Maharashtra, 1992 Mh. LJ 360. The issue in that case no doubt arose under the Maharashtra State tax on professions, trade, callings and employment Act (Act 16 of75). The issue was exemption under Section 27-A of that Act. The relevant provisions of Section 27-A, as extracted reads :-
'Nothing contained in Section 3 and other provisions of this Act shall apply to-
(a) the members of the armed forces of the Union, that is to say, to whom the provisions of the Army Act, 1950, the Air Force Act, 1950, or the Navy Act, 1957 apply serving in any part of the State.....'
Under the above provision the members of the armed forces of the Union, that is to say to whom the provisions of the Army Act, 1950, Air Force Act and the Navy Act, 1957 apply serving in any part of the State are exempted from the application of Section 3, which is a charging section. The issue in that case was whether the term 'members of the armed forces of the Union' would include the employees, such as clerks, superintendents, meter readers, electricians, drivers, stenographers, librarians, storekeepers, education instructors,carpenters, draftsmen, senior mechanics, cooks, watchmen etc., and whether they would fall within the exempted category of employees under Section 27-A. After considering elaborately with reference to the provisions of the Army Act the Court held that the petitioners therein would come within the purview of the members of the armed forces and therefore they are entitled for the exemption contemplated under Section 27-A. Under the present Act, there is no such provision as stated earlier, granting exemption even with reference to the members of the armed forces of the Union. When once there is no such provision with reference to the members of the armed forces, we are unable to appreciate the contention of the learned Counsel that the members of the petitioners are entitled for any exemption. The learned Counsel for the petitioner did not bring to our notice any provision in the present Act similar to Section 27-A of the Maharashtra Act. In the absence of any such provision, the said judgment of the Mumbai High Court is of any assistance to the petitioners.
The learned Counsel also contended that under Regulation 288-A the loss on account of the exemption granted in respect of the members of the petitioners would be reimbursed. Therefore, there is no loss either to the State Government or the local authorities. We do not find any merit in this contention also as there is no reference under the Regulations to the present Act.
13. Under the above circumstances, we do not find any merit in the present writpetitions and accordingly they are dismissed. No costs.