MUNICIPAL CORPN. OF GREATER MUMBAI versus HARISH LAMBA OF BOMBAY, INDIAN INHABITANT & ORS. on 22 October 2019

[2019] 13 S.C.R. 1006

SUPREME COURT REPORTS

[2019] 13 S.C.R.

AMUNICIPAL CORPN. OF GREATER MUMBAI

v.

HARISH LAMBA OF BOMBAY,INDIAN INHABITANT & ORS.

(Civil Appeal No.142 of 2009)

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OCTOBER 22, 2019

[A. M. KHANWILKAR AND AJAY RASTOGI, JJ.]

Mumbai Municipal Corporation Act, 1888:

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Css. 139, 140, 141 and 169 – Water tax and water benefit tax– Demand of arrears – Non-payment on the ground that watersupply was disconnected – Warrant of attachment – Writ petition –High Court set aside the demand holding that the tax can be leviedonly in respect of water supplied and consumed by the consumer –Appeal to Supreme Court – Held: Water Tax or Water Benefit Tax isDone of the components of Property Tax in terms of ss. 139, 140 and141 – Liability to pay such tax arises irrespective of disconnectionof water supply/water meter, being a compulsory imposition – Suchlevy is distinct from Water Charges ascribable to s. 169 – Thedemand is also not barred by limitation – The respondent is liableEto pay such tax.

Allowing the appeal, the Court

HELD: 1.1 The concept of water tax and water benefit taxand that of water charges is qualitatively distinct. By its verynature, the former has been made part of the property tax inFterms of Section 140 of the Mumbai Municipal Corporation Act,1888, in sub-section 1(a) (i) & (ii) thereof. Section 141 permitslevy of water tax and water benefit tax concerning prescribedpremises. The water benefit tax is determined on prescribed percentum of rateable value of specified premises or its capital value,Gas the case may be. The levy of water benefit tax being a propertytax, however, has been made subject to Section 169 of the Act.[Para 18][1017-G; 1019-F; 1020-D]

1.2 Section 169 is an enabling provision which empowersthe standing committee to make rules for supply of water and for H

charging for the supply of water and for any fittings, fixtures orservices rendered by the corporation. The extent to which suchcharges can be levied has been delineated in Section 169 of theAct. This provision envisages levy of charges for the supply ofwater and further that if such supply materialises, water chargesbe levied in lieu of a tax (water tax/water benefit tax) prescribedunder Section 140 of the Act. Concededly, the primary liability topay property tax in the form of water benefit tax is co-extensivewith meeting the whole or part of the expenditure incurred or tobe incurred on capital works for making and improving thefacilities of water supply and for maintaining and operating suchworks, as the case may be in terms of Sections 140 and 141 ofthe Act. The levy towards property tax fructifies on fulfilment ofconditions stipulated therefor in Section 139 read with Sections140 and 141 of the Act. The extent of such levy is also predicatedin Sections 140 and 141 of the Act. It is a compulsory imposition.[Para 19][1021-C-E]

1.3 If it is a compulsory imposition, the fact that the wateris de facto utilised by the occupants or the owners of the buildingbecomes insignificant. Water Tax or Water Benefit Tax, in law, isa property tax and described by the legislature as being one ofthe component of property tax. That becomes payable as soon asthe owner/occupant of the premises is in a position to avail ofwater connection to his premises in the prescribed manner. Thatliability is inevitable in terms of Section 141 of the Act, even ifthe water supply/water meter is later on disconnected. [Para20][1021-F-H]

1.4 However, in case of disconnection of water supply/watermeter the corporation cannot recover water charges underSection 169 of the Act. For, the water charges can be recoveredcommensurate to the quantity of water actually supplied andconsumed from the connection of communication pipes ormunicipal water works to the premises concerned. [Para 21][1022-A-B]

1.5 On a bare perusal of the demand notices issued by theappellant, it is amply clear that the demand is towards propertytax in the form of water benefit tax and sewerage benefit tax. It isnot a notice for payment of water charges ascribable to Section169 of the Act as such. [Para 17][1017-F]

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A1.6 The High Court misread the impugned demand noticesas being under Section 169 of the Act, when in fact the samewere for recovery of property tax in the form of water benefit taxunder Section 139 read with Sections 140 and 141 of the Act.The liability to pay such tax arises irrespective of disconnectionBof water supply/water meter including due to non-payment oftaxes, being a compulsory imposition. However, if the owner/occupant of the premises were to utilise the water supply facilitymade available to the premises through connection by means ofcommunication pipes or municipal water works, as the case may be, the liability would be to pay only water charges on the basis ofCthe quantity of water actually consumed, in lieu of property tax inthe form of water tax or water benefit tax by virtue of Section 169of the Act and in particular sub-section (2) thereof. [Para 24][1024- D-F]

Municipal Corporation of Greater Bombay v. M/s.DNagpal Printing Mills and Another (1988) 2 SCC 466 :[1988] 3 SCR 274 – distinguished.

2. The challenge on the ground of limitation is limited toperiod prior to 10[th] January, 1994, i.e., between 1[st] October, 1993to 9[th] January, 1994. This period falls within the official year 1993-E94 (from 1[st] April, 1993 to 31[st] March, 1994). In that sense, theamount towards property tax had become due and payable uponcompletion of official year 1993-94 i.e., 31[st] March, 1994. Threeyears limitation period, therefore, would have expired on 30[th]March, 1997. However, the impugned demand notice(s) haveFbeen issued on 10[th] January, 1997. Thus, the challenge to theimpugned demand notice(s) being barred by limitation, is devoidof merits. No other averment is found in the writ petition filedbefore the High Court to reinforce the plea under consideration.Resultantly, the challenge to the impugned demand notice(s)being barred by limitation or having the effect of retrospectiveGtax demand, is rejected. [Para 26][1025-D-G]

Kalyan Municipal Council and others v. Usha PaperProducts (P) Ltd. and another (1988) 3 SCC 306 :[1988] 3 SCR 832; Municipal Corporation of City ofHubli v. Subha Rao Hanumatharao Prayag and OthersH

MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OFBOMBAY, INDIAN INHABITANT

(1976) 4 SCC 830 : [1976] 3 SCR 883 – heldinapplicable.

Sumer Builders v. Municipal Corporation of GreaterMumbai 2012 (114) BOM. L.R. 3400; State Bank ofIndia v. Brihanmumbai Municipal Corporation ofGreater Bombay and Others 2004 (4) Mh.L.J. 773 –referred to.

3.1 The respondents may be relieved from the liability topay statutory interest for the period spent by them in pursuingthe proceedings in good faith before the High Court and thereafterbefore this Court. Inasmuch as, time so spent is not attributableto the inaction or neglect of respondents in making payment;more so because of the interim orders operating in favour of therespondents during the pendency of writ petition before the HighCourt and also because the impugned demand notices were setaside by the High Court. [Para 27][1025-H; 1026-A-B]

3.2 It would be appropriate to quantify the interestcomponent at the rate of 18% per annum on the outstandingprincipal tax amount or the statutory interest as may have beenprescribed under the extant Regulations, whichever is less, forthe period during the pendency of writ petition and the presentappeal, as the case may be. For rest of the default period, fromthe date of demand notices until payment of the outstandingamount mentioned therein, the respondents shall be liable to payinterest at the rate as prescribed in the extant Regulationsapplicable in that regard. This would meet the ends of justice.[Para 27][1026-C-D]

State of Rajasthan and Another v. J.K. Synthetics Limitedand Another (2011) 12 SCC 518 : [2011] 10 SCR 993;Kanoria Chemicals and Industries Ltd. and Others v.

U.P. State Electricity Board and Others (1997) 5 SCC772 : [1997] 2 SCR 844 – relied on.

3.3 The impugned demand notice(s) were issued on 10[th]January, 1997, when the principal tax amount had become dueand payable forthwith. The interest at the statutory rate, therefore,

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Awould commence from that date. However, for the period fromthe date of filing of the writ petition on 21[st] April, 1999 till thejudgment of the High Court dated 21[st] November, 2006, theinterest be reckoned as aforestated. Similarly, for the periodduring pendency of special leave petition in this Court from 27[th]BAugust, 2007 till the pronouncement of this judgment. Exceptthese two periods, the rate of interest payable by the respondentsfor the delayed payment would be as prescribed in the governingRegulations. [Para 28][1026-E-G]

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 142 ofE2009.

From the Judgment and Order dated 21.11.2006 of the High Courtof Judicature at Bombay in Writ Petition No. 1206 of 1999.

Atul Y. Chitale, Sr. Adv., Ms. Tanvi Kakar, Mrs. Suchitra AtulChitale, Advs. for the Appellant.F

Anirudh Joshi, Ms. Vandana Sehgal, Hardeep Singh Anand,Praveen Kumar Rai, Hemal Kiritkumar Sheth (for M/S. J S Wad AndCo.), Ashish Wad, Mrs. Jayashree Wad, Sidharth Mahajan, Ms. SukritiJaggi (for M/S. Lawyer S Knit & Co.), Advs. for the Respondents.

GThe Judgment of the Court was delivered by A.M. KHANWILKAR, J.

1. This appeal takes exception to the judgment and order dated21[st] November, 2006 of the High Court of Judicature at Bombay in WritPetition No.1206 of 1999, whereby the bills/demand raised by appellant H

including towards water benefit tax and the Warrant of Attachment inrespect of the premises belonging to the respondents came to bequashed and set aside being illegal.

2. The appellant is a corporate body constituted under the provisionsof the Mumbai Municipal Corporation Act, 1888 (for short, “1888 Act”or “the Act”) and respondent No.1 is a sole proprietor in the business,which was carried on by him in the name and style of Volga FrozenFoods and Ice Cream Company, hereinafter referred to as the “saidfirm”. The stated business was located at Volga House, 1-C, K.K. Marg,Mahalaxmi, Bombay-400034, hereinafter referred to as the “saidpremises”. The respondent No.2 is the landlord of respondent No.1 inrespect of the said premises. The respondent No.3 is the tenant ofrespondent No.2 in respect of the remainder area of the said buildingother than the area in possession of respondent No.1. The respondentNo.1’s firm required 10 lakh gallons of water for its frozen food and icecream business, which was being supplied by the appellant (under thefixed quota of 10 lakh gallons of water) till October, 1983. On 29[th] October,1983, an illegal strike call was given by the workmen in the factory ofrespondent No.1, due to which the production work in the factory wassuspended by the management. Therefore, the respondent No.1 wroteto the appellant on 2[nd] February, 1987 and 15[th] October, 1987, requestingto discontinue the water quota allotted and then charge them on actualconsumption basis, as they did not require the large quantity of waterany more due to shut down of the production. Besides, a new watermeter came to be installed on 15[th] October, 1987. Later on, the appellantinformed respondent No.1 vide letter dated 27[th] January, 1992, that hiswater connection will be cut off as requested by the company. That wasfinally done on 25[th] October, 1993. Since then, respondent No.1 isdependent on water supply by private water tankers.

3. Accordingly, respondent No.1 wrote to the appellant vide letterdated 10[th] December, 1993 that since the water connection to thepremises has been disrupted/cut off by the Water Department and hehaving paid all the dues until then amounting to Rs.46,794/- (RupeesForty Six Thousand Seven Hundred Ninety Four Only), the appellantought to install a new water meter. Upon receipt of this communication,the appellant demanded a deposit of Rs.72,000/- (Rupees Seventy TwoThousand Only) for processing the request for a new water meter.However, respondent No.1 did not pay the said amount on the ground of A

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Afinancial crisis because of closure of the factory. The respondent No.1in turn requested the appellant to accept the deposit amount in installmentsof Rs.5,000/- (Rupees Five Thousand Only), which request was declinedby the appellant. Therefore, there was no water connection/meter in thepremises of respondent No.1 since 25[th] October, 1993.

B4. The appellant thereafter in 1997 started raising bills for theperiod from 1[st] October, 1993 including towards water benefit tax inrespect of the subject premises. In January, 1997, seven bills of watertax and water benefit tax were raised in respect of the said building (forthe period from 1[st] October, 1993 to 30[th] September, 1998) aggregatingto Rs.10,60,312/- (Rupees Ten Lakh Sixty Thousand Three HundredCTwelve Only). The respondent No.3 paid his share of the bill in protestbut respondent No.1, on advice, refused to pay his prorata share of thebill.

5. Resultantly, on 5[th] August, 1998, the appellant issued Warrantof Attachment and levied an attachment upon the said premises andDbuilding for the arrears of stated tax being property tax amounting toRs.9,11,708/- (Rupees Nine Lakh Eleven Thousand Seven Hundred EightOnly) and further penalty of Rs.1,48,503/- (Rupees One Lakh FortyEight Thousand Five Hundred Three Only). Thus, the aggregate demandwas for Rs.10,60,312/-(Rupees Ten Lakh Sixty Thousand Three HundredETwelve Only), against respondent No.1. Further, vide letter dated 18[th]November, 1999, issued by the Legal Department of the appellant,respondents were informed that if the arrears of taxes were not paid,the appellant would proceed to advertise the public auction relating topremises occupied by respondent No.1.

F6. Being aggrieved, respondent No.1 filed Writ Petition No.1206of 1999 before the High Court of Judicature at Bombay to quash/setaside the bills and demand raised by the appellant and the Warrant ofAttachment dated 5[th] August, 1998 for recovery of the amount. TheHigh Court was pleased to quash and set aside the bills/demands alongwith the Warrant of Attachment dated 5[th] August, 1998, vide impugnedGorder dated 21[st] November, 2006. For that, the High Court relied uponthe judgment of this Court in Municipal Corporation of GreaterBombay Vs. M/s. Nagpal Printing Mills and Another[1]. The High Courtheld that the corporation can levy charge only in respect of water suppliedto and consumed by the consumer and to be levied on the basis ofH1 (1988) 2 SCC 466

measurement or estimated measurement. It concluded that as, admittedly,supply of water to the premises was stopped from 25[th] October, 1993,there was no consumption by the respondents and hence they were notliable for any water charge or tax, as the case may be.

7. The appellant has assailed the view so taken by the High Courton the ground that the demand in question was towards property tax inthe form of water benefit tax and not referable to demand under Section169 of the Act, as such. In case of a tax, which is ascribable to Sections139 and 140 of the Act, it is in the nature of a compulsory imposition orlevy to be used for general public good. Had it been a demand for chargestowards water actually consumed, it would come within the sweep ofSection 169 of the Act. In that case alone it need to be commensuratewith the quantity of water actually consumed. If the consumer avails thewater supply facility extended by the corporation, the liability would betowards charges in lieu of water tax, as predicated in Section 169 of theAct and the Rules framed thereunder namely, Water Charges Rules inforce at the relevant time. In the present case, the dispute relates to thebills raised by the appellant towards property tax in the form of waterbenefit tax in respect of the premises of respondent No.2 (Owner) andof which respondent No.1 is the tenant.

8. It is submitted that water tax or water benefit tax is a propertytax and is determinable as a percentage of rateable value of the land orbuilding as prescribed in Section 154 of the Act. Section 141 of the Actpostulates that such tax shall be levied in respect of premises (i) to whicha private water supply is furnished from OR (ii) which are connected bymeans of communication pipes with any municipal water works. In thepresent case, even though the water connection was disconnected on25[th] October, 1993, the premises in question were still connected bymeans of communication pipes with the municipal water works. Theterm “communication pipes” is defined in Section 260A (a) of the Act tomean a pipe extending from a municipal water main up to and includingmunicipal stop-cock. Hence, the demand raised by the appellant againstthe respondents towards water benefit tax under Section 141 of the Actwas just and proper. It was not a recovery of charges under Section 169of the Act as such, which could be limited to the quantity of consumedwater. If the respondents had continued to consume the water suppliedby the appellant through communication pipes connecting the premisesin question, they would have become liable only to pay water charges A

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Aunder Section 169 of the Act, commensurate with the quantity of waterconsumed in lieu of water tax or water benefit tax. Having stoppedconsuming water and by the act of cutting off the water connection on25[th] October, 1993, whilst continuing the communication pipes connectedto the premises, the respondents became liable to pay property tax in theform of water benefit tax under Section 141 of the Act.B

9. It is contended that the scheme of the provisions in questionand the interplay of Sections 140, 141, and 142 of the Act on the onehand and Sections 160 and 169 on the other hand, the Bombay HighCourt in its recent decision in Sumer Builders Vs. MunicipalCorporation of Greater Mumbai[2]opined that water charges recoveredCunder Section 169 of the Act are not synonymous to the demand towardsproperty tax in the form of water tax or water benefit tax under Section141 of the Act. The appellant would adopt the exposition in the saiddecision to buttress the ground urged before this Court. It is thencontended that the High Court erroneously placed reliance upon NagpalDPrinting Mills (supra) although it was a case dealing with interpretationof Rule III (d) (i) of the Water Charges Rules which provided for deemedcharges where a quota of water had been fixed. It is urged that the saidcase was a case of water charges levied under Section 169 (1) (ii),which has no application to the facts of the present case.

E10. The appellant has also countered the argument canvassed byrespondent No.1 in particular to the effect that the demand raised by theappellant was invalid being retrospective in nature. According to theappellant, the decision in Kalyan Municipal Council and others Vs.Usha Paper Products (P) Ltd. and another[3]as well as MunicipalCorporation of City of Hubli Vs. Subha Rao HanumatharaoFPrayag and Others[4]dealt with question of levy of property tax afteralteration in the assessment list and about the power to levy tax afterauthentication of the assessment list. These decisions, according to theappellant, have no bearing on the present case. For, the same is foundedon the singular plea taken in ground (d) of the writ petition that theGdemand towards water benefit tax is for period prior to 10[th] January,1994 and is barred by limitation. However, no material fact has beenpleaded in the writ petition filed by the respondents before the High H

2 2012 (114) BOM. L.R. 3400

3 (1988) 3 SCC 306

4 (1976) 4 SCC 830

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2 2012 (114) BOM. L.R. 3400

3 (1988) 3 SCC 306

4 (1976) 4 SCC 830

Court so as to demonstrate that the demand raised by the appellant wasafter expiry of limitation period, consequent to alteration in the assessmentlist or authentication of the assessment list, as the case may be. Nofactual foundation was laid before the High Court that the authenticationof the assessment list had occurred 3 (three) years preceding the issuanceof the impugned demand notices in January 1997. Admittedly, the demandof property tax in the form of water benefit tax dues issued in January1997 was for official year 1993-94 (1[st] April, 1993 to 31[st] March, 1994).For that reason, the demand raised in January, 1997 going back onlyupto 1[st] October, 1993 cannot be considered as being barred by limitation.The appellant would, therefore, urge that the impugned judgment be setaside and the appellant be permitted to proceed with the enforcement ofthe impugned demand notices and the Warrant of Attachment.

11. Per contra, the respondents would contend that the demandwas nothing but water charges recoverable under Section 169 of theAct. It ought to have been commensurate to the quantity of water suppliedand consumed by the respondents. Admittedly, after disconnection ofwater supply on 25[th] October, 1993, no water supply was continued tothe premises. For that very reason, it was not open for the corporationto levy any charges, be it in the name of water tax or water charge. It isurged that the demand is nothing but water charges for supply of waterto the premises and not in the nature of tax. Even in case of a tax, thecorporation cannot recover the same in absence of supply of water tothe premises, which in the present case, admittedly, was disconnectedw.e.f. 25[th] October, 1993. It is urged that the principle underlying thedictum in Nagpal Printing Mills (supra) would squarely apply, as isapplicable to Section 169 of the Act towards water tax.

12. It is then urged that in any case, the impugned demand noticewas barred by limitation and had the inevitable effect of levy of propertytax with retrospective effect qua the premises in question. Therespondents would invite our attention to the term ‘official year’ definedin the Act and the interplay of Sections 156, 160, 163, 165, 166, 168 and169, to contend that the Commissioner is required to prepare assessmentbook for every official year and on authentication of assessment bookunder Section 166 of the Act, the assessee can be made liable to pay theproperty tax for such official year. Reliance is placed on the decision ofthis Court in Municipal Corporation of City of Hubli (supra) andKalyan Municipal Council (supra) to buttress this contention. It is then A

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Aurged that it must be presumed that for the official year 1993-94, theassessment book was finalised and authenticated in due course of officialbusiness, within prescribed time. However, no demand followed despitefinalisation of assessment book for the concerned years in particularofficial year 1993-94. If the appellant had issued demand notices for theBconcerned year towards property tax in due course, the respondentswould have paid the same subject to just exceptions. In other words, theimpugned demand notices issued in January, 1997 for the periodcommencing from 1[st] October, 1993, being after expiry of three years,are barred by limitation. The appellant cannot be allowed to raise anydemand which is inherently barred by limitation. Resultantly, the appellantCcannot be permitted to pursue the impugned demand notices. Takingany other view would legitimize retrospective levy, that cannot becountenanced. As a matter of fact, it must be presumed that the watertaxes were never shown in the assessment book for the official year1993-94 until January, 1997. Keeping in view the exposition in the relied Dupon decisions of this Court, the High Court order quashing the impugneddemand notices be upheld on this count alone.

13. Lastly, it is contended that even if, the respondents fail topersuade this Court to uphold the decision of the High Court, the Courtmay grant reasonable time to the respondents to pay the dues in suitableEinstallments. Further, the Court may extricate the respondents from theirliability to pay interest on the outstanding dues. This is so because therespondents had filed the writ petition before the High Court in April,1998 immediately after receiving the impugned demand notices and havealso succeeded before the High Court. Due to reasons beyond theircontrol the matter had remained pending in this Court, which delay is notFattributable to the respondents. It is urged that had the High Court rejectedtheir writ petition, they would have had no option but to pay the outstandingdues long back. Taking into account these facts and circumstances, it isurged that the respondents be absolved from the liability of interest onthe principal amount. The other respondents have adopted the argumentGpursued on behalf of respondent No.1.

14. We have heard Mr. Atul Y. Chitale, Senior Advocate for theappellant and Mr. Anirudh Joshi, Advocate for the contesting respondent(respondent No.1), Mr. Praveen Kumar Rai, Advocate for the respondentNo.2 and Mr. Ashish Wad for the respondent No.3.

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MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OFBOMBAY, INDIAN INHABITANT [A.M. KHANWILKAR, J.]

15. The main issue is whether: the impugned notices can be styledas demand towards water charges or stricto sensu demand towardsproperty tax in the form of water benefit tax. That can be answered byadverting to the impugned demand notices (Annexure R-5 collectively).It may be apposite to reproduce one such notice pertaining to officialyear 1993-94. The same reads thus:

16. The impugned demand notices for subsequent official yearsare more or less similar except variation in the figures, as applicable forthe concerned official year.

17. On a bare perusal of these demand notices, it is amply clearthat the demand is towards property tax in the form of water benefit taxand sewerage benefit tax. It is not a notice for payment of water chargesascribable to Section 169 of the Act as such.

18. The concept of water tax and water benefit tax and that ofwater charges is qualitatively distinct. By its very nature, the former hasbeen made part of the property tax in terms of Section 140 of the Act, insub-section 1(a) (i) & (ii) thereof. Section 140 reads thus:

“140. Property taxes leviable on rateable value, or on capitalvalue, as the case may be, and at what rate.

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[2019] 13 S.C.R.

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(1) The following property taxes shall be leviable on buildings andlands in Brihan Mumbai, namely:- (a) (i) the water tax of so many per centum of their rateablevalue, or their capital value, as the case may be, as theStanding Committee may consider necessary for providingwater supply; B

(ii) an additional water tax which shall be called ‘the waterbenefit tax’ of so many per centum of their rateable value,or their capital value, as the case may be, as the StandingCommittee may consider necessary for meeting the wholeor part of the expenditure incurred or to be incurred oncapital works for making and improving the facilities of watersupply and for maintaining and operating such works; C

Provided that all or any of the property taxes may be imposed ona graduated scale.

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(b) (i) the sewerage tax of so many per centum of their rateablevalue, or their capital value, as the case may be, as the StandingCommittee may consider necessary for collection, removal anddisposal of human waste and other wastes;

(ii) an additional sewerage tax which shall be called the “sewerageEbenefit tax” of so many per centum of their rateable value, ortheir capital value, as the case may be, as the Standing Committeemay consider necessary for meeting the whole or a part of theexpenditure incurred or to be incurred on capital works for makingand improving facilities for the collection, removal and disposal ofFhuman waste and other wastes and for maintaining and operatingsuch works; E

General tax

(c) a general tax of not less than eight and not more than fifty percentum of their rateable value, or of not less than 0.1 and notmore than 1 per centum of their capital value, as the case may be,together with not less than one-eighth and not more than five percentum of their rateable value or not less than 0.01 and not morethan 0.2 per centum of their capital value, as the case may be,added thereto in order to provide for the expense necessary forfulfilling the duties of the corporation arising under clause (k) ofsection 61 and Chapter XIV; G

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MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OFBOMBAY, INDIAN INHABITANT [A.M. KHANWILKAR, J.]

“Provided that, the Corporation shall not levy property tax leviableunder this clause, on residential buildings or residential tenements,having carpet area of 46.45 sq. meter (500 sq. feet) or less.

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Explanation. – For the purposes of the above proviso, the term“residential buildings or residential tenements, having carpet areaof 46.45 sq. meter (500 sq. feet) or less” means the residentialbuildings or residential tenements, existing on the date of cominginto force of the Mumbai Municipal Corporation (Amendment)Act, 2019, having carpet area of 46.45 sq. meter (500 sq. feet) orless and recorded with such area in the Municipal records on the1[st] January 2019 or in respect of which the permission to occupyhas been granted by the Corporation permitting such area to beoccupied after such date of coming into force of the said Act.”.

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Education cess

(ca) the education cess leviable under section 195E; D

(cb) the street tax leviable under section 195G.

(d) betterment charges leviable under Chapter XII-A.

(2) Any reference in this Act or in any instrument to a water taxor a halalkhor tax shall after the commencement of the BombayMunicipal Corporation (Amendment) Ordinance, 1973, beconstrued as a reference to the water tax or the water benefit taxor both, or the sewerage tax or the sewerage benefit tax, or bothas the context may require.”

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It may be useful to advert to Section 141, which permits levy ofwater tax and water benefit tax concerning prescribed premises. Thesame reads thus:

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“141. Water taxes on what premises to be levied.

(1) Subject to the provisions of section 169, the water tax shall belevied only in respect of premises–

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(a) to which a private water supply is furnished from or whichare connected by means of communication pipes with, anymunicipal water works; or (b) which are situated in a portion of Brihan Mumbai in which theHCommissioner has given public notice that sufficient water is Aavailable from the municipal water works for furnishing areasonable supply to all the premises in the said portion.

(2) Subject to the provisions of section 169, the water benefittax shall be levied in respect of all premises situated inBrihan Mumbai, except the buildings and lands or partsBthereof vesting in, or in the occupation of, any consul decarriers, whether called as a consul general, consul, vice-consul, consular agent, pro-consul or by any other name ofa foreign State recognised as such by the Government ofIndia, or of any members (not being citizens of India) ofstaff of such officials, and such buildings and lands or partsCthereof which are used or intended to be used for anypurpose other than for the purpose of profit.”

The water benefit tax is thus determined on prescribed per centumof rateable value of specified premises or its capital value, as thecase may be. The levy of water benefit tax being a property tax,however, has been made subject to Section 169 of the Act. Section169 of the Act reads thus:

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“169. Rules for water taxes and charges.

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(1) Notwithstanding anything contained in section 128, the StandingCommittee shall, from time to time, make such rules as shall benecessary for supply of water and for charging for the supply ofwater and for any fittings, fixtures or services rendered by theCorporation under Chapter X and shall by such rules determine - F

(i) the charges for the supply of water by a water tax and awater benefit tax levied under section 140 of a percentageof the rateable value or the capital value, as the case maybe, of any property provided with a supply of water; or

(ii) a water charge in lieu of a water tax, based on aGmeasurement or estimated measurement of the quantity of watersupplied; or

(iii) combined charges under clauses (i) and (ii); or

(iv) a compounded charge in lieu of charges under clauses

(i) and (ii).

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(2) A person who is charged for supply of water under clause (ii)or (iv) of sub-section (1) shall not be liable for payment of thewater tax, but any sum payable by him and not paid when itbecomes due shall be recoverable by the Commissioner as if itwere an arrear of property tax due.

(3) Notwithstanding anything contained in section 146, the watertaxes and charges shall be primarily recoverable from person orpersons actually occupying the premises.”

19. Section 169 is an enabling provision which empowers thestanding committee to make rules for supply of water and for chargingfor the supply of water and for any fittings, fixtures or services renderedby the corporation. The extent to which such charges can be levied hasbeen delineated in Section 169 of the Act. This provision envisages levyof charges for the supply of water and further that if such supplymaterialises, water charges be levied in lieu of a tax (water tax/waterbenefit tax) prescribed under Section 140 of the Act. Concededly, theprimary liability to pay property tax in the form of water benefit tax isco-extensive with meeting the whole or part of the expenditure incurredor to be incurred on capital works for making and improving the facilitiesof water supply and for maintaining and operating such works, as thecase may be in terms of Sections 140 and 141 of the Act. The levytowards property tax fructifies on fulfilment of conditions stipulatedtherefor in Section 139 read with Sections 140 and 141 of the Act. Theextent of such levy is also predicated in Sections 140 and 141 of the Act.It is a compulsory imposition.

20. If it is a compulsory imposition, the fact that the water is defacto utilised by the occupants or the owners of the building becomesinsignificant. It is not a tax on income where the levy is linked to income.We are concerned with property tax, which becomes payable in respectof specified property. Water Tax or Water Benefit Tax, in law, is aproperty tax and described by the legislature as being one of the componentof property tax. That becomes payable as soon as the owner/occupantof the premises is in a position to avail of water connection to his premisesin the prescribed manner. That liability is inevitable in terms of Section141 of the Act, even if the water supply/water meter is later ondisconnected.

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A21. Indeed, in case of disconnection of water supply/water meterthe corporation cannot recover water charges under Section 169 of theAct. For, the water charges can be recovered commensurate to thequantity of water actually supplied and consumed from the connectionof communication pipes or municipal water works to the premisesconcerned.B

22. Reverting to the view taken by the High Court, we agree withthe appellant that the High Court has palpably misapplied the decision inNagpal Printing Mills (supra) by erroneously assuming that the presentcase was also a case of levy of ‘water charges’ referable to Section 169of the Act. The High Court completely glossed over the distinctionCbetween the concept of property tax in the form of water benefit tax on the one hand; and water charges in respect of the quantity of wateractually consumed on the other hand. In the former case, being a propertytax, it is a compulsory imposition and liability to pay the same accruesirrespective of the quantity of water supplied and consumed in theDpremises concerned. That liability flows from Sections 139 read with140 and 141 of the Act. The quantum of tax payable is specified by thestanding committee from time to time on the basis of per centum ofrateable value of premises or its capital value. The impugned demandnotices, ex facie, are ascribable to Section 141 of the Act. The same inno manner can be construed as having been issued under Section 169 of Ethe Act.

23. Had it been a case of demand under Section 169 of the Act,the principle stated in Nagpal Printing Mills (supra) would have comeinto play. We agree with the appellant that the decision in Nagpal PrintingMills (supra) is in reference to interpretation of Rule (3) (d) (1) of WaterFCharges Rules framed under Section 169 of the Act. The principle statedin that decision, therefore, can have no application to a demand notice(s)towards property tax in the form of water tax or water benefit tax,payable in respect of the premises by virtue of Section 139 read withSections 140 and 141 of the Act. The appellant has justly relied on theGexposition of the High Court of Bombay in Sumer Builders (supra),wherein the Court after considering the interplay between the relevantprovisions of the Act, observed as follows:

“7. Conjoint reading of the above provisions and Sections 142 and170 is required, to understand levy of the two taxes and chargesby respondent No. 1. Section 140 of the M.M.C. Act states H

different components of the property taxes. They are, water tax,water benefit tax, sewerage tax, sewerage benefit tax, generaltax, education cess, street tax and betterment charges. The watertax/ sewerage tax and water benefit/sewerage benefit tax arequantified by certain per centum of the rateable value of theproperty on which the property taxes are to be levied. The rateablevalue of any property is to be determined under Section 154 ofthe M.M.C. Act. As stated in that provision, the factors relevantfor determination of the rateable value are (i) nature and type ofland and structure of the building, (ii) area of the land or carpetarea of the building, (iii) the different categories of use of theproperty, (iv) the age of the building and (v) such other factors asmay be specified by the rules made for the purpose. It is obviousfrom Section 140 that water tax or sewerage tax payableunder it, has no connection whatsoever with the actualsupply of the services therefor. Another aspect thatbecomes clear from the provision is that the water/seweragetaxes run along with the property, whether constructed uponor not, also whether put to actual use or not. Even an openpiece of land is subject to property tax, the components ofwhich include water/sewerage tax, water benefit/seweragebenefit tax. Sections 141 and 142, though refer to onlywater/sewerage taxes, as such, make it clear that the sameare subject to the provisions of Section 169 and 170respectively. Therefore, Sections 169 and 170, the controllingsections would be the most relevant provisions. They provide forrules for water/sewerage taxes and water/sewerage charges andto determine the charges. They empower the Standing Committeeof the Municipality to make such rules as may be necessary for,supply and for charging for the supply of water etc., and for supplyof service of removing human wastes, polluted matters, effluentsetc. Sections 169 and 170 provide for four modes of paymentof the charges. The first mode is by payment of water/sewerage tax and water/sewerage benefit tax under Section140 by way of a percentage of a rateable value. The secondmode is payment of water/sewerage charge in lieu of water/sewerage tax based on measurement or estimatedmeasurement of the quantity of the water supplied or ofthe quantity of water discharged from the premises. The AB

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Athird mode is of combined charges under the first two modesi.e. partly by way of taxes and partly by way of charges. Thefourth mode is a compounded charge in lieu of the first twomodes i.e. a fixed sum to be paid in lieu of the taxes andcharges. These modes, in particular the first and the secondmode, make it very clear that water/sewerage charges areBnot synonymous with water/sewerage taxes and there is noscope for confusing one for the other. Therefore, I findsubstance in the submission of Mr. Pakale that even if there is nowater supply given to the property for which no charges can berecovered by the Municipality, there is no escape from paymentCof water taxes/ sewerage taxes by a property owner, which issolely dependent upon the rateable value of the property fixed.”

24. Having said this, we must conclude that the High Court misreadthe impugned demand notices as being under Section 169 of the Act,Dwhen in fact the same were for recovery of property tax in the form ofwater benefit tax under Section 139 read with Sections 140 and 141 ofthe Act. The liability to pay such tax arises irrespective of disconnectionof water supply/water meter including due to non-payment of taxes,being a compulsory imposition. However, if the owner/occupant of theEpremises were to utilise the water supply facility made available to thepremises through connection by means of communication pipes ormunicipal water works, as the case may be, the liability would be to payonly water charges on the basis of the quantity of water actuallyconsumed, in lieu of property tax in the form of water tax or waterbenefit tax by virtue of Section 169 of the Act and in particular sub-sectionF(2) thereof.

25. That takes us to the next plea of the respondents about thedemand for the period preceding 10[th] January, 1994, i.e. 1[st] October,1993 to 9[th] January, 1994, being barred by limitation. It is also urged thatthe impugned demand notices entail in levy of taxes retrospectively. ThisGargument has been justly rejected by the High Court by relying on thedictum of the same High Court in State Bank of India Vs. BrihanmumbaiMunicipal Corporation of Greater Bombay and Others[5]. In similarsituation, the Court had observed thus:

5 MANU/MH/0667/2004=2005 (1) Bom. C.R. 296, 2005 (107(1)) BOM.L.R.H271, 2004 (4) Mh.L.J. 773

“7. Insofar as the first contention is concerned, there is really nomerit in the contention. The respondents have not imposed anytax with retrospective effect. All that the respondents have doneis issuance of bills for the period previous to the date of the bills.In other words the bills are issued for the period for which theyare payable by sending a bill after that period. There is no provisioneither under the Act or rules by which claim for sewerage charges/sewerage tax can be anticipated or made in advance. That canonly be done subsequent to the charge/taxes becoming due andpayable. Retrospectivity in levying tax would mean that a law hasbeen enacted with retrospective effect. That is not the case overhere. All that the respondents have done is to merely make demandsfor charges which had become due prior to issuance of the bills.That cannot be said to be levying of tax with retrospective effect.The first contention must therefore, be rejected.”

26. Indisputably, the challenge on the ground of limitation is limitedto period prior to 10[th] January, 1994, i.e., between 1[st ]October, 1993 to 9[th]January, 1994. This period falls within the official year 1993-94 (from 1[st]April, 1993 to 31[st] March, 1994). In that sense, the amount towardsproperty tax had become due and payable upon completion of officialyear 1993-94 i.e., 31[st] March, 1994. Three years limitation period,therefore, would have expired on 30[th] March, 1997. However, theimpugned demand notice(s) have been issued on 10[th] January, 1997.Thus, the challenge to the impugned demand notice(s) being barred bylimitation, as asseverated in ground (d) of the memo of writ petition filedby the respondents, is devoid of merits. No other averment is found inthe writ petition filed before the High Court to reinforce the plea underconsideration. In our opinion, therefore, the decisions of this Court inKalyan Municipal Council (supra) and Municipal Corporation ofCity of Hubli (supra) will have no bearing on the matter underconsideration. Resultantly, the challenge to the impugned demandnotice(s) being barred by limitation or having the effect of retrospectivetax demand, is rejected.

27. The next question is: whether the respondents should be calledupon to pay statutory interest on the delayed payment of principal amountstated in the impugned demand notices. We find merits in the submissionof the respondents that they be relieved from the liability to pay statutory A

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Ainterest for the period spent by them in pursuing the proceedings in goodfaith before the High Court and thereafter before this Court. Inasmuchas, time so spent is not attributable to the inaction or neglect of respondentsin making payment; moreso because of the interim orders operating infavour of the respondents during the pendency of writ petition beforeBthe High Court and also because the impugned demand notices were setaside by the High Court. As the said notices will be revived in terms ofthis order, therefore, the respondents are entitled to an equitablearrangement to meet the ends of justice. Somewhat similar situation hasbeen dealt with in State of Rajasthan and Another Vs. J.K. Synthetics Limited and Another[6]and Kanoria Chemicals and Industries Ltd.Cand Others Vs. U.P. State Electricity Board and Others[7]. Applyingthe principle underlying these decisions, we deem it appropriate to quantifythe interest component at the rate of 18% per annum on the outstandingprincipal tax amount or the statutory interest as may have been prescribedunder the extant Regulations, whichever is less, for the period during theDpendency of writ petition and the present appeal, as the case may be.For rest of the default period, from the date of demand notices untilpayment of the outstanding amount mentioned therein, the respondentsshall be liable to pay interest at the rate as prescribed in the extantRegulations applicable in that regard. This would meet the ends of justice.

E28. It is seen from the records that impugned demand notice(s)were issued on 10[th] January, 1997, when the principal tax amount hadbecome due and payable forthwith. The interest at the statutory rate,therefore, would commence from that date. However, for the periodfrom the date of filing of the writ petition on 21[st] April, 1999 till thejudgment of the High Court dated 21[st] November, 2006, the interest beFreckoned as aforestated. Similarly, for the period during pendency ofspecial leave petition in this Court from 27[th] August, 2007 till thepronouncement of this judgment. Except these two periods, the rate ofinterest payable by the respondents for the delayed payment would beas prescribed in the governing Regulations. The respondents shall payGthe outstanding amounts including interest within three months from today,failing which it will be open to the appellant- corporation to proceedagainst the respondents in accordance with law.

6 (2011) 12 SCC 518 (paragraph nos.12, 23, 41 & 42)H7 (1997) 5 SCC 772

29. For the view that we have taken, it is unnecessary to dilate onthe efficacy of the provisions contained in Water Charges Rules asapplicable at the relevant time framed under Section 169 of the Act.

30. The appeal is allowed in the aforementioned terms. Impugnedjudgment of the High Court is set aside. No order as to costs.

31. All pending applications are also disposed of in the above terms.

Kalpana K. Tripathy

Appeal allowed.

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