Corporation of The City of Nagpur Vs.
The Nagpur Handloom Cloth Market Co. Ltd. [1962] INSC 353 (7 December 1962)
SHAH, J.C.
SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR,
P.B.
WANCHOO, K.N.
GUPTA, K.C. DAS
CITATION: 1963 AIR 1192 1963 SCR Supl. (2)
796
ACT:
Municipal Corporation-Levy of taxes-Water
ratesConservancy and property taxes-Individual shop-keepers-Liability-Building,
if includes part of a building Residential and
non-residential-Liability-Connotation of 'family'-If postulates
relationship-City of Nagpur Corporation Act, 1948 (C.P. and Berar 2 of 1950),
s. 5 (7) City of Nagpur Corporation Rules, r. 10 (a) (b) (c).
HEADNOTE:
The Nagpur Handloom Cloth Market Company Ltd.
constructed in the City of Nagpur on plots owned by it a number of buildings
with two floors, the ground floor intended to be used as shops and the first
floor to be used for residential purposes. For the use of the shops lavatories
connected with the sewers of the corporation drainage system were constructed
and water supply for the shops was obtained from a corporation water standards
The corporation levied among other taxes, under s. 114 of the City of Nagpur
Corporation Act, 1948, conservancy tax and water rates on the is of the letting
value of 797 the buildings. Most of the shops were occupied by shopkeepers and
in the year 1953 the corporation served notices of assessment on individual'
shop-keepers of the respective shops. Some of the shop-keepers filed objections
against the notices served on them and on rejection of these objections filed
appeals under. ss. 387 and 130 of the Act but without success. Nearly two years
after these proceedings the company and one of the shopkeepers filed a writ
petition in the High Court of Bombay to quash the order of demand dated
February 2, 1958, and to prohibit the Corporation from applying r. 10 (a) of
the Assessment Rules.
The High Court allowed the writ petition
holding that r. 10 (a) applied only to residential houses and not to houses
occupied for non-residential purpose-; and therefore separate assessment of the
shops in the occupation of the shop. keepers was invalid. The contention of the
Corporation that in view of the great delay in filing the petition, the
petition should fail was rejected by the High Court. The present appeal came
before this Court by way of special leave.
Held, that the expression
"building" in s. 5 (7) of the Act would include a part of a building.
By reason of s. 5 (7) and the implication of r. 10 (a) and r. 10 (c) the
Corporation is competent to treat each tenement occupied by a different person
as a separate building for levy of tax.
The expression 'family' in r. 10 (a) does not
in the setting of the rules postulates the existence of relationship either by
blood or by marriage between the persons residing in the tenement. Even a
single person may be regarded for the purpose of the rule as a family and a
master and servant would also be so regarded. The expression
"occupying" in r.
10 (a) applies equally to uses residential
and nonresidential.
CIVIL APPELLATE, JURISDICTION : Civil Appeal
No. 288 of 1960.
Appeal by special leave from the judgment and
order dated, August 8, 1958, of the Bombay High Court in Special Civil
Application No. 174 of 1958.
G. S. PathakS. M. Hajarnavis, O. C. Mathur,
J. B. Dadachanji and Bavinder Narain, for the appellant.
M. C. Setalvad, Attomey-General of India, Al.
Y. Phadke and Naunit Lal, for the respondents.
798 1962. December 7. The judgment of the
Court was delivered by SHAH, J.-The Nagpur Handloom Cloth Market Company Ltd.hereinafter
called 'the Company ‘constructed on certain plots owned by it, two houses-each
house consisting of a ground floor, intended to be used as shops and an upper
floor intended to be used for residential purposes. For the use of the
occupants of the shops, 20 flush lavatories with underground sewers connected
with the drainage system of the Nagpur Corporation were constructed by the
Company. The Corporation of Nagpur had also erected a municipal public water
Standard within 200 yards of the houses. Among the taxes levied by the
Municipal Corporation under s. 114 of the City of Nagpur Corporation Act,
1948-hereinafter called "the Act' were the conservancy tax and the
water-rate which under the rules applicable thereto were leviable as rates on
the annual letting value of buildings' and lands within the Corporation area.
It is common ground that the shops which in the aggregate number 201, are
occupied by shop-keepers under a scheme under which on payment of stipulated amounts,
the occupants will be full owners of the shops, and on the liability of all the
occupants being discharged the Company will be dissolved. However the scheme
under which this arrangement was made has not been placed before us and it is
not possible on the material before us to ascertain what the true relation
between the shop-keepers and the Company is.
For the year 1953-54 the Corporation of
Nagpur proposed to assess the shop-keepers numbering one hundred and fifty five
who occupied the shop built by the Company to private conservancy tax water
rate and property tax on each shop as a, separate unit of assessment, and
assessment notices in that behalf were issued to the Managing Director of 799
the Company on September 26, 1953. The Company requested the Corporation by
letter dated September 30, 1953 that the assessment notices be served on the
'individual shopkeepers of the respective shops regarding the assessment made
by the Corporation'. The Corporation thereupon served the individual shop-keepers
with notices of assessment. 120 out of 155 shop-keepers served with the notice
of assessment preferred objections submitting inter alia that the taxes could
be assessed only on the Company. These objections were heard before the
Objection Officer appointed by the Corporation. The Managing Director of the
Company and a representative of the shop-keepers submitted their respective
cases on behalf of the Company and the shopkeepers. By his order dated April
19, 1954 the objection Officer held that the Company be treated as owner of the
houses and the shop-keepers as occupants and that the demand for tax be
'primarily made from the occupants'. No proceeding challenging this order were
initiated by the shop-keepers or the Company and the assessment list was authenticated
as required by the relevant rules. The Corporation thereafter served demand
notices upon the shopkeepers calling upon them to pay the taxes due by them
pursuant to the assessment list.
On December 16, 1954 some of the occupants
appealed to the Chief Executive Officer under s. 387 of the Act challenging the
validity of the assessment. The Deputy Chief Executive Officer rejected the
appeals against the order passed by the Objection Officer to the Chief
Executive Officer as incompetent and observed that in any event the anneals
which were not presented within the period of limitation prescribed by s. 379
of' the Act, were barred. The shopkeepers and the Company preferred separate
appeals to the District Judge, Nagpur, against the order of the Objection
Officer. The District judge by his order dated October 28, 1955 held that the
800 appeals were barred by the law of limitation and the appellants before him
had made out no ground for condonation of delay. The shop-keepers again moved
the Chief Executive Officer to reconsider the order of assessment of tax. That
Officer by his order dated April 18, 1956 held that even though the order
passed by the Deputy Chief Executive Officer dismissing the previously filed
appeals' as ,not maintainable, and observing that the proper remedy of the
shop-keepers and the, Company aggrieved was an appeal under s. 130 of the Act
was erroneous, the appeals before him being barred by the law of limitation.,
he was unable to grant any redress to the appellants. The Chief Executive
Officer also opined that the houses having been divided into separate shops and
allotted to the Company's shareholders who carried on their business
independently and each such allotted having a separate source of income within
the meaning of rule 10 (a) of the assessment rules, the Objection Officer was
right in holding that each shop be treated as an independent unit, and be
separately assessed for the conservancy cess and water rate.
Nearly two years thereafter the Company and
one Sitaram-One of the shop-keepers-preferred a writ petition in the High Court
of Bombay at Nagpur for writs of certiorari quashing the order of demand dated
February 19, 1958 and also bills for the assessment years 1956-57 and 1957-58
and for a writ of mandamus prohibiting the Corporation from applying the
provisions of rule 10 (a) for the purposes of conservancy tax and water rate,
and directing the Corporation not to treat the individual shops on the ground
floor of the two houses as separate units of assessment for purpose of
conservancy tax and water rate. The High Court held that rule 10 (a) of the
assessment rules applied only to residential houses and not to houses occupied
for nonresidential purposes and therefore separate assessment of the shops 801
in the occupation of the shop-keepers was, under the provisions of the Act,
read with the relevant rules, invalid. The High Court accordingly allowed the
petition and quashed the notice of demand dated February 19, 1958 made by the
Corporation for levy of tax. The Corporation has, with special leave, appealed
to this Court.
Three principal contentions are raised by
counsel for the Corporation in support of the appeal :(1) That under the Act
there are three distinct stages dealing with the liability of taxpayers to pay
tax-imposition of tax authorised by a statute according to the procedure
prescribed in that behalf, assessment or levy of tax according to the
provisions of the statute and the rules framed there under; and collection of
tax. Each stage being self contained, if no objection is made to assessment as
prescribed by the statute and the rules made there under and in the manner
provided in that behalf, in a proceeding for recovery of tax, the validity of
the assessment cannot be challenged.
(2) The objection raised by the Company was
only against the demand and not against the assessment, and that in any event
there was gross delay in the commencement of proceedings in the High Court for
obtaining relief by an application for a writ, and on that account the company
had disentitled itself to relief.
(3) That even on the merits the
interpretation placed by the High Court upon rule:10(a) of the assessment rules
was erroneous and therefore each occupant of the shops whose 802 name was
entered in the assessment list as framed was liable to pay the conservancy tax
and the water rate in respect of the shop in his occupation.
Part IV of the Act deals with taxation i.e,
imposition, assessment and recovery of taxes. Sections 114 and 115 set out the
taxes which the Corporation is obliged to impose or may impose and the
procedure in that behalf. Sections 1 16 to 140 deal with the assessment of
property tax and ss. 154 to 169 deal with recovery of taxes. Section 130
provides for a right of appeal to the District Court against a dispute as to
the liability of any land or building to assessment of property tax or as to
the basis or principle of assessment of property tax. Section 164 provides for
an appeal against a notice of demand for tax due under subsection (1) of s. 155
This appeal lies to a Magistrate by whom under the direction of the District
Magistrate such class of cases is to be tried. A general right of appeal is
granted by s. 387. Any person aggrieved by an order passed under the Act or
under any rule or bye-law made there under failing to obtain redress may appeal
to any Corporation Officer appointed by the Chief Executive Officer to hear
such appeals, or failing such appointment, to the Chief Executive Officer.
The procedure for assessment of conservancy
tax and water rate is prescribed not by the provisions of the Act, but by the
rules framed under the C. P. & Berar Municipalities Act of 1922 which by
virtue of s. 3(2) of the Act are to be deemed to have been made under the
provisions of the Corporation Act of 1948. The procedure for recovery is
however governed by the provisions of ss. 154 to 167 of the Act. The subject of
taxation in the matter of conservancy tax and water rate is therefore found
distributed in the Act and the Rules under three heads of 803 2 imposition,
assessment and recovery of taxes.
For the purpose of the pro-sent case it is
unnecessary to express any opinion on the plea raised by Mr. Pathak for the
Corporation that the tax-payer cannot challenge the correctness of an order of
assessment, in a proceeding for recovery of tax, though it may appear that
under the analogous provisions contained in the Bombay District Municipal Act
III of 1901 and the Bombay Municipal Boroughs Act, XVIII of 1925, in an appeal
against a notice of demand to a Magistrate the correctness or propriety of the
assessment may, be challenged. See The Municipal Borough of Ahmedabad v. The
Aryodaya Ginning and Manufacturing Company Ltd. (1) and The Municipality of
Ankleshwar v. Chhotalal Ghelabhai Gandhi (2).
There has undoubtedly been great delay in
moving the High Court by a petition under Art. 226 of the Constitution. The
order of the Objection Officer was made on April 19, 1954 and the appeal
against that order was dismissed on April 22, 1955. Even the second order by
the Chief Executive Officer was made on April 18, 1956 and for nearly two years
thereafter no proceeding was commenced in the High Court challenging the
validity of that order. The High Court was, however, of the view that because
the Chief Executive Officer in the first instance held that the appeal filed
before him was not competent and the remedy of the tax payer was to move the
District Court under s. 130 of the Act and that in the appeal preferred in the
year 1956 he held that the appeal was maintainable and dismissed it on the
merits while observing that it was barred by limitation, there was some ground
for not regarding the shop-keepers and the Company as guilty of laches. The
High Court also observed that after the order passed by the Chief Executive
Officer in 1956 the Corporation was moved by an application (1) 1. L. R. (1941)
Bom. 658, (2) (1954) 57 Bom. L. R. S 547, 804 under s. 143 of the Act, and
since the decision of the Corporation on the application, the petition was
filed without delay. This ground may appear to us inadequate but the High Court
has exercised its discretion in holding that the petition notwithstanding the
delay should be entertained and we are unable in a matter essentially of
discretion to set aside the judgment of the High Court on this ground alone,
especially when the petitioners have claimed relief not only in respect of the
assessment for the year 1953-54 but also in respect of assessment of tax for
the years 195657 and 1957-58.
The question that falls then to be determined
is about the true interpretation of rule 10 (a) of the assessment rules
relating to the conservancy tax and water rate. Section 114 of the Act requires
the Corporation to levy, amongst others, a property tax, a latrine or
conservancy tax payable by the occupier or owner upon private latrines,,
privies or cesspools or upon premises or compounds cleansed by Corporation
agency and a water rate where water is supplied by the Corporation. For
assessment of the property tax, machinery is prescribed in the Act itself, but
no such machinery is prescribed in the Act in respect of the conservancy tax
and water rate. Under the C.P. & Berar Municipalities Act, II of 1922, by
s. 66 various taxes could be imposed by the Municipalities governed thereby (and
the Municipality of Nagpur was governed by that Act) and latrine or conservancy
tax and water rate were two out of the many taxes leviable. By s. 71 of the Act
of 1922 power was conferred upon the State Government to make rules under the
Act, inter alia, regulating the assessment of tax' In exercise of the powers
the Government of Madhya Pradesh framed diverse sets of rules dealing with
assessment, levy and collection of taxes. Rules were made on August 19, 1941
declaring liability of buildings and lands for conservancy tax in respect of
private latrines, and Rule 2 thereof, in so far as it is 805 material, provided
that"2. There shall be imposed(i) x x x x (ii) On every building or land
to which a private latrine., privy or cesspool is attached, or any resident
whereof uses a private latrine, privy or cesspool, which is either cleansed by
municipal agency or is connected with the municipal underground sewer' or the
premises or compounds of which are cleansed by municipal agency, a tax payable
by the owner under section 66 (1) (h) according to the following scale on its
gross annual letting value." A similar set of rules in respect of water
rate came to be promulgated on September 28, 1949, It was provided by Rule 1,
in so far as it is material, that"1. There shall be imposed(1) (a) x x x x
(b) On every building or land which has no private supply from municipal
service pipes or the resident thereof does not use water from such supply and
which is situated within 200 yards from public water standard or a service
pipe, a tax leviable from the owners or occupiers under section 66(l) (k)
according to the following scales on its gross annual letting value : " In
1941 rules were made for assessment of conservancy tax.
The tax was to be levied on the 806 gross annual
letting value of the building. By rule 5 it was provided that on the completion
of the assessment, notices shall be given to the persons affected by the
preparation of the assessment list. Any person affected by the entries in the
list was by rule 6 entitled to file objections against assessment or valuation
or both as shown in the register at any time within thirty days of the
publication or service. This rule also provided for affording a hearing to the
objectors. Rule 8 provided that after the objections under rule 6 had been
disposed of and all consequential amendments were made in the assessment list
it shall be authenticated and the register shall be valid from the date of the
authentication and shall continue to be valid until the beginning of the
half-year next following the authentication of a new register. Rule 10(a)
provided :
"Where more than one family having
separate sources of income, occupy separate portions of the same building or
range of buildings, each of such portion shall be deemed a building under these
rules and assessed according to its gross annual letting value as determined in
accordance with rule 1." Clause (b) provided :
"The Committee may, at a special meeting
if it thinks fit, assess the tax on such building on the aggregate gross annual
letting value of all the portions instead of assessing each portion
separately." Clause (c) provided "Detached building, even when
occupied by the same person or family, shall, where any road or pathway over
which the public have a right of way, or any land belonging to any 807 other
person separate them from one another,' be separately assessed as independent
units.
Similar rules were made in respect of the
assessment list for water rate. The water rate was also to be imposed as a rate
on the gross annual letting value and provisions of rule 10 (a), (b)and (c)
were in terms identical with the assessment rules framed in respect of the
conservancy tax assessment and for the sake of brevity we will only refer to
assessment rules relating to conservancy tax. These rules remained in force
even after the C. P. & Berar Municipalities Act, 1922 was repealed by
virtue of s. 3 (2) of the Act of 1948, and -applied to assessment of liability
to conservancy tax and water rates as if the rules were framed under the latter
Act.
'Building' is defined in the Act by s. 5 (7)
as including "a house, outhouse, stable, hut, shed or other enclosure,
whether used as a human dwelling or otherwise and shall include verandahs,
fixed platforms, plinths, door-steps , walls and the like." The definition
is an inclusive definition, and contains inherent indication that a part of a
building would be a building for the purposes of imposition of liability to pay
rates, and assessment of such liability. It is manifest that under the scheme
of the Act read with the rules, conservancy tax and water rate are to be levied
as rates on the gross annual letting value and a rate can only be levied from a
person in respect of the tenement or premises occupied as an independent unit.
The assessment rules provide for levy of rate on the gross annual letting value
of the building. and in as much as the expression "building' according to
the definition given in s. 5 (7) of the Act would include a part of a building,
the Corporation is competent to frame a list in respect of several tenements
occupied by different persons treating each tenement as a separate building for
levy of tax. That is implicit in rule 10 (b) and also in rule 10 (c) of the
assessment rules, 808 By the rules, liability to pay conservancy tax and water
rate is imposed in respect of a building provided certain conditions specified
in the rule are fulfilled, and this liability arises whether the building is
used for residential purposes or non-residential purposes. Rule 10 (a) also
clearly authorises the Corporation to levy water rate and the conservancy tax
in respect of separate tenements occupied by different persons as if each such
tenement is a building. In the view of the High Court use of the expression
'family' in rule 10 (a)-indicated that the rule did not apply to buildings
occupied for non-residential purposes. But by the rules imposing the
conservancy tax and the water rate, all buildings to which are attached
latrines cleansed by municipal agency and all buildings which are connected
with the water distribution system, or which are situate within the prescribed
distance of water standard, are liable to pay the conservancy tax and the water
rate irrespective of the nature of the use to which the building is put. It is
implicit in the view of the High Court that a building occupied for
non-residential use can be taxed as one unit, even if the building is occupied
by tenants or licencees, carrying on their separate or individual trades or
businesses. But this view does not appear to be supported by the scheme of the
Act and rules. If a building is partly occupied for residential and partly for
nonresidential purposes the portions occupied for residential purposes would,
in the view of the High Court, be regarded as separate buildings and each
occupant having a separate source of income would be liable to pay conservancy
tax and water rate but the portions occupied for nonresidential purposes would
not be regarded as separate buildings. The High Court reached its conclusion
that rule 10 (a) did not apply to portions of buildings when they were occupied
for non-residential purposes merely because of the use of the expression
"family' in the rule. But the expression 'family' has according 809 to the
context in which it occurs a variable connotation.
It does not in the setting of the rules
postulate the existence of relationship either of blood or by marriage between
the persons residing in the tenement. Even a single person may be regarded as a
family, and a master and servant would also be so regarded. The word 'occupy'
used in rule 10 (a) is not restricted either expressly or by anything contained
in the context of the rule suggesting that the occupation is to be only for
residential purposes, and in the absence of any such implication the rule must
be deemed to be of general application i.e., it applies to uses non-residential
as well as residential. The expression 'family' must therefore take colour from
the expression "occupy' used in the same rule. In our view the expression
`family' in the context in which it occurs, means no more than a person or a
group of persons.
Mr. Pathak appearing on behalf of the
Corporation submitted that there was a drafting error in rule 10 (a), and as a
matter of interpretation the Court would be justified in reading the expression
'family' in that rule as meaning 'family or person' -which is the expression
used in rule 10 (c). He submits that rule 10(a) and rule 10 (c) deal with the
same subject-matter and, therefore, the Court would be justified in holding
that the expression 'one family' used in rule 10 (a) and the expression
"person or family' in rule 10 (c) must have the same meaning. Prima facie,
there is substance in this contention, but we do not think it necessary to base
our decision on that ground. In our view the expression 'family' has not a
restricted meaning as suggested by the High Court, and under the rules imposing
liability to pay conservancy tax and water rate liability is imposed upon every
building, which expression includes a part of a building occupied as an
independent unit irrespective of the nature of the user, The learned Attorney
General appearing on 810 behalf of the Company submitted that under the
Corporation Act the owner and not the occupier is liable for the conservancy
tax and water rate and therefore separate assessments of different units
occupied by the shop-keepers could not be made. This plea was not raised in the
High Court. Even apart from this infirmity, there is no substance in the plea.
Under s. 114 of the Act a latrine or conservancy tax payable by the occupier or
the owner may be imposed. Similarly water rate may be imposed, when water is
supplied by the Corporation. By the rules framed under s. 71 of the C. P. Berar
Municipality Act of 1922, and continued under the Act of 1948 liability imposed
for payment of the conservancy tax and the assessment rules is not restricted
to owners only. By rule 4 of the assessment rules the Corporation is required
to prepare an assessment list containing the names of the persons liable to pay
the tax. The assessment rules therefore clearly indicate that the occupier of
the premises may be rendered liable to pay the conservancy tax and the water
rate. Section '165 of the Act makes all sums due from any person in respect of
taxes on any land or building, a first charge upon the said land or building
and upon any movable property found within or upon such land or building and
belonging to the said person, provided that no arrears of any such tax shall be
recoverable from any occupier who is not the owner, if such arrears are for a
period during which the occupier was not in occupation. It is implict in s. 165
that an occupier of the premises may be liable to pay the tax even though he is
not the owner. It is also necessary to point out that the scheme under which
the shop-keepers are occupying the premises has not been produced before this
Court. It is admitted, however, that the shop-keepers will be owners of the
premises occupied by them as soon as the amounts which they have agreed to pay
are fully paid and their liability discharged. 'The 811 Company treated the
shop-keepers as owners (vide their letter dated September 30, 1953). Manifestly
they have a substantial interest in the tenements in their occupation and it
would be difficult not to call them owners for purposes of municipal taxation.
According to the definition in s. 5 (37) of the Act an 'owner' ""when
used with reference to any land or -building includes the person for the time
being receiving the rent of the land or building or of any part of the land or
building whether on his own account or an agent or trustee for any person or
society or for any religious or charitable purpose, or as a receiver who would
receive such rent if the land, building or part thereof were let to a
tenant". There is nothing on the record to show that the shop-keepers
would not be entitled to let out the premises in their occupation and if they
can.
they would be regarded as owners within the
meaning of cl. (37) of s. 5.
In our view, therefore, the High Court was in
error in holding that rule 10 (a) applied only to building occupied for
residential purposes. The rule in our judgment applies to buildings occupied
for nonresidential as well as residential purposes, and to every part of a
building occupied by a person or a group of persons having a separate source of
income, whether the occupation is for residential or non-residential purposes
and such person or group of persons would be liable to pay the conservancy tax
and the water rate.
The appeal therefore is allowed and the
petition filed by the Company and the tax payer Sitaram Upasrao dismissed with
costs in this Court and the High Court.
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