Visakhapatnam Municipality Vs.
Kandregula Nukaraju & Ors [1975] INSC 186 (29 August 1975)
CHANDRACHUD, Y.V.
CHANDRACHUD, Y.V.
RAY, A.N. (CJ) MATHEW, KUTTYIL KURIEN
CITATION: 1975 AIR 2172 1976 SCR (1) 544 1975
SCC (2) 773
CITATOR INFO :
E 1984 SC 583 (20,21)
ACT:
Andhra Pradesh District Municipalities Act (6
of 1965) ss. 3, 81, 83 and Schedule 9, Clause 12 Scope of Inclusion of new
areas within municipality Imposition of property tax on residents of those
areas without following procedure in s. 81 Property.
HEADNOTE:
Under s. 4(1)(c) of the District
Municipalities Act, 1920, the State Government declared its intention to
include within the limits of the appellant municipality the local areas
comprised in two villages. 'The 1920 Act was repealed by the Andhra Pradesh
Municipalities Act, 1965 which came into force on April 2, 1965. Section
3(1)(b) of the 1965 Act corresponds to s. 4(1)(c) of the repealed Act. Under
s.3(3), the Government may include within a municipality a local area after
considering any objections submitted by the residents of the local are: Under
s. 3(4) the provisions of the 1965-Act come into force in that area on the
first April, if that is the date of the notification under sub-s.
(3) and in any other cases the first day of
April immediately succeeding. The State Government, in exercise of its power
under s. 3(3) of the 1965-Act, issued the notification in March 1966 including
within the limits of the appellant municipality the areas comprised in the two
villages with effect from April 1, 1966. In 1971, the Municipal Council after
considering objections, passed a resolution for levying property tax on land
and buildings in the two villages with effect from October 1, 1970, but, The
municipality issued notices to the respondents, who were residents of those two
villages, demanding the property tax from them from April 1, 1966 the date of
inclusion of the villages. The respondents thereupon challenged the levy and
the High Court upheld the challenge.
In appeal to this Court, it was contended
that the appellant municipality was entitled to demand the tax even from April
1, 1966, under cl. 12 of Schedule 9 of the 1965- Act. This clause provided that
any tax which was being lawfully levied by the municipal council at the
commencement of the 1965-Act and which may be lawfully levied under that Act
shall continue to be levied by the council unless the Government by general or
special order directs otherwise.
Dismissing the appeal to this Court,
HELD :(1) The inclusion of the two villages
within the limits of the appellant municipality is in order, because, under cl.
13 of Schedule 9 of the 1965-Act the notification issued under s. 4(1) of the
1920-Act must be deemed to have been issued under s. 3 (1) of the 1965-Act.
[547 D-F] (2) However, clause 12 of Schedule 9 cannot justify the imposition of
the tax under the repealed Act of 1920, from April 1, 1966, on property situate
in the newly included areas. [548 B-C] (a) The clause is of a transitional
nature and its object is to authorise the levy of taxes which, at the
commencement of the 1965-Act were levied under the repealed law. That is, in
the present case, if any tax etc. was being lawfully levied by the appellant on
April 1, 1966, (which was the date of commencement of the Act in the two
villages) and if it can be lawfully levied under the 1965-Act, it can continue
to be levied. But on April 1, 1966, no tax at all.
was being levied by or on behalf of the
appellant on the property situate in the two villages included within the
municipality on that date. Therefore, the appellant had no occasion or power to
direct that a property tax may continue to be levied on those properties, and
hence cl. 12 has no application. [548 C-E] (b) It cannot be urged that because
the appellant was levying property tax on property situate within its limits
(other than the 2 villages) the property tax was not being levied for the first
time. Qua the two villages newly 545 included in the municipal limits, the tax
was being imposed for the first time, and therefore, it was incumbent upon the
municipality to follow the procedure prescribed by the first proviso to s.
81(2), because, the residents of these areas had no opportunity to object lo
the imposition of tax or for the municipality to invite objections and consider
them.
[549 C-E] (3) The first proviso to s. 81
requires that before passing a resolution imposing a tax for the first time the
council shall publish a notice, invite objections and consider the objections
received within the stipulated time.
Since the procedure was not followed in
regard to the period prior to October 1, 1970 the levy of property tax on the
properties of the respondents for that period is without authority of law and
consequently illegal. By s. 83 when a council determines to levy any tax for
the first time or at a new rate the Secretary shall forthwith publish a
notification in the prescribed manner specifying the rate and the date from
which the tax shall be levied. Section 83 is expressly subject to s. 81 and
under the latter provision no tax can be imposed for the first time unless the
procedure prescribed therein is followed [548G-549 B] (4) When the State
Government issued the notification declaring its intention to include the two
villages within the limits of the municipality the residents had an opportunity
to object, not to the imposition of the tax but only to "any thing
contained therein", meaning anything contained in the notification, that
is to the inclusion within the municipality. The question of imposition of a
tax within the included areas, arises only after the final notification under
s. 3(3) followed by a resolution under s.
81 (1) . [547F-550 B] (5) It could not also
be contended that mere inclusion of two villages with in the municipal area
automatically attracts the tax. On the contrary, what s. ..(4) provides is that
once a notification including any area within a municipality is published under
s. 3(3), the provisions of the Act, that is, ss. 81 and 83, shall come into
force in that area from the first day of April, and hence, the procedure
prescribed therein will have to be followed.[550 F-H] Atlas Cycle Industries
Ltd. v. State of Haryana & Anr.
[1972] 1 S.C.R. 127, explained.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1157 of 1974.
Appeal by special leave from the judgment and
order dated the 20th June, 1973 of the Andhra Pradesh High Court in Writ Appeal
No. 411 of 1973.
F.S. Nariman and P. P. Rao, for the
appellant.
A. Subba Rao, for respondents Nos. 1-10,
12-31, 33 and 36.
The Judgment of the Court was delivered by
CHANDRACHUD, J.-The Andhra Pradesh Municipalities Act.
VI of 1965, (hereinafter called "the
Act") came into force on April 2, 1965. Section 3(1)(a) of the Act
empowers the State Government to constitute a local area as a municipality.
Section 3(1)(b) empowers the Government, by notification in the Gazette
"to declare its intention to include within a municipality any local area
in the vicinity thereof and defined in such notification". Section 3(1)(c)
confers power on the Government to exclude from a municipality any local area
comprised therein and defined in such notification. Under section 3(2), any
resident of a local area or taxpayer of a municipality, in respect of which a
notification under section 3(1) is published, may, if he desires to object to
anything therein contained, submit his objection in writing to the Government
within six weeks from the 546 publication of the notification and the
Government is under an obligation to take all such objections into
consideration. Under section 3(3) after the expiry of the aforesaid period o
six weeks and on considering the objections, the Government may by notification
in the Gazette declare to be a municipality or include in or exclude from a
municipality, the local area or any portion thereof. By section 3(4), the
provisions of the Act come into force in or cease to apply to and municipality
or part thereof, as the case may be, on the date of publication of notification
under sub-section (3) if such date is the first day of April, or in any other
case, on the first day of April immediately succeeding the 'date of publication
of such notification.
Respondents 1 to 36 are residents of two
villages called Ramakrishnapuram and Sriharipuram. Prior to the year 1966, the
area comprised in these villages was not included within the municipal limits
of the Visakhapatnam Municipality. Most of these respondents own properties
situated within the limits of the two villages but they were not assessed to
property tax under the Andhra Pradesh (Andhra Area) District Municipalities Act
1920 which was in force until the introduction of the Act. They used to pay
taxes to the village Panchayat. .
In exercise of the powers conferred by the
corresponding provision of the District Municipalities Act, 1920, namely
section 4(1)(c), the Government of Andhra Pradesh declared its intention to
include within the limits of Visakhapatnam Municipality the local area
comprised in the villages of Ramakrishnapuram and Sriharipuram. The district
Municipalities Act, 1920 was repealed by section 391(1) of the Act which, as
stated earlier, came into force on April 2, 1965. On March 24, 1966 the
Government of Andhra Pradesh acting in the exercise or powers conferred by
section 3(3) of the Act issued a notification including within the limits of
the Visakhapatnam Municipality the area comprised in the villages of
Ramakrishnapuram and Sriharipuram with effect from April 1, 1966.
on March 24, 1970 and June 10, 1970 the
Municipal Council declared its intention to levy property tax in the areas
newly included within the municipal limits. After considering the objections,
the Council passed a resolution on August 28, 1970 confirming the levy of
property tax on buildings and lands situated within the municipal limits, with
effect from October 1, 1970. However, the municipality issued notices to
respondents 1 to 36 demanding property tax from them not from October 1, 1970
but from April 1, 1966, that is to say, with effect from the date when the
villages of Ramakrishnapuram and Sriharipuram were included within the
municipal limits. These notices would appear to have been issued on the
supposition that taxes leviable under the District Municipalities Act, 1920
could be levied under clause 12, Schedule IX of the Act, unless the Government
directed otherwise.
On January 24, 1971 respondents 1 to 36 filed
writ petition 442 of 1971 in the High Court of Andhra Pradesh against the State
of 547 Andhra Pradesh and the Visakhapatnam Municipality asking for a
declaration that the levy of property tax on their properties for the period
prior to October 1, 1970 was illegal. The writ petition was dismissed by a
learned Single Judge on the view that it was competent to the municipality,
under the District Municipalities Act 1920, to levy property tax on properties
situated in the newly included areas from April 1, 1966 to October 1, 1970.
Respondents 1 to 36 filed writ appeal 411 of
1972 against the decision on the Single Judge, which was allowed by a Division
Bench of the High Court by its judgment dated June 13, 1972. lt held that the
provisions contained in clause 12 of Schedule IX had no application and that it
was incompetent to the municipality to impose the property tax on the newly
included areas without following the procedure prescribed by sections 81 and 83
of the Act. The correctness of that view is challenged by the Visakhapatnam
Municipality in this appeal by special leave. The State of Andhra Pradesh is
respondent No. 37 to the appeal.
The circumstance that whereas the preliminary
notification declaring the intention of the State Government to include new
areas within the municipal limits was issued under the District Municipalities
Act 1920, the final notification confirming that intention was issued under the
Act presents no difficulty. In so far as relevant, Schedule IX clause 13 of the
Act, read with clause 1, provides that any action taken under the District
Municipalities Act, 1920 by any authority before the commencement of the Act
shall, unless inconsistent with the Act be deemed to have been taken by the
authority competent to take such action under the Act. The preliminary
notification, though issued under section 4(1) (c) of the 1920 Act must
therefore be deemed to have been issued under section 3(1)(b) of the Act. The
inclusion of the villages of Ramakrishnapuram and Sriharipuram within the
limits of the Visakhapatnam Municipality is accordingly in order.
The true question for our consideration is
whether the property tax which could lawfully be levied under the District
Municipalities Act, 1920 can be levied, after the repeal of that Act, on
properties situated in the areas included within the municipal limits after the
constitution of the municipality. Section 391(1) of the Act expressly appeals
the District Municipalities Act, 1920 from which it must follow that
ordinarily, no action can be taken under the Act of 1920 after April 1,1966
when the repeal became effective on the coming into force of the Act.
But counsel for the appellant municipality
contends that clause 12 of Schedule IX of the Act keeps the repealed enactments
alive for tax purposes and therefore the municipality has authority to impose
the property tax under the Act of 1920, notwithstanding its repeal by the Act.
Schedule IX appears under the title
"Transitional Provisions" and clause 12 thereof reads thus:
548 "12. Continuance of existing taxes,
etc. Any tax, cess or fee which was being lawfully levied by or on behalf of
any council at the commencement of this Act and which may be lawfully levied
under this Act, shall, notwithstanding any change in the method or manner of
assessment or levy of such tax, cess or fee, continue to be levied by or on
behalf of the council for the year in which this Act is brought into . force,
and unless the Government by general or special order otherwise direct, for
subsequent years also." This provision cannot justify the imposition of
tax under the repealed Act of 1920 on properties situated in the newly included
areas. In the first place, as the very title of Schedule IX shows, the
provisions contained in the Schedule are of a transitional nature. They are
intended to apply during the period of transition following upon the repeal of
old municipal laws and the introduction of the new law. Some time must
necessarily elapse before a municipality can act under the new law but taxes
have all the same to the imposed and collected during the interregnum. The
object of clause 12 of Schedule IX is to authorise the levy of taxes which, on
the commencement of the Act, were levied under the repealed laws. The material
date for this purpose is the date of the commencement of the Act, namely April
1, 1966 and the legality of the exercise of the power conferred by clause 12 is
to be judged in reference to that date. In other words, if any tax, cess or fee
was being lawfully levied by or on behalf of any council on April 1, 1966 and
if it can be lawfully levied under the Act, it can continue to be levied
notwithstanding any change in the method or manner of assessment or levy of
such tax, cess or fee. On April 1, 1966 no tax at all was being levied by or on
behalf of any council on properties situated in Ramakrishnapuram and
Sriharipuram and therefore the appellant municipality had no occasion or power
to direct that the property tax may "continue to be levied" on those
properties. "Continuance of existing taxes", after the commencement
of the Act being the theme of clause 12 and since the property tax was not
levied by or on behalf of any council at the commencement of the Act on the
properties situated in the two villages, clause 12 has no application.
Imposition of certain kinds of taxes is an
obligatory function of municipal councils, under the Act. Section 81(1)(a)
provides that every council shall, by resolution, levy a property tax, a profession
tax, a tax on carriages and carts and a tax on animals. under. section 81(2) a
resolution of a council determining to levy tax shall specify the rate at which
and the date from which the tax shall be levied. The first proviso to this
sub-section requires that "before passing a resolution imposing a tax for
the first time" or increasing the rate of an existing tax, the council
shall publish a notice in the prescribed manner declaring the requisite
intention The council has further to invite objections and it is under an
obligation to consider the objections received within the stipulated time. By
section 83, when a council determines, subject to the provisions of section 81,
to levy any tax for the first time or at a new rate, the Secretary shall forthwith
publish a 549 notification in the prescribed manner specifying the rate at
which, the date from which and the period of levy, it any, for which, such tax
shall be levied. Section 83 is thus expressly subject to section 81 and under
the latter provision no tax can be imposed "for the first time"
unless the procedure prescribed therein is followed. Since the procedure
prescribed by the first proviso to section 81(2) was not followed in regard to
the period prior to October 1, 1970 the levy of property tax on the properties
of respondents 1 to 36 for that period is without the authority of law and
consequently illegal.
It was urged on behalf of The appellant that
the first proviso to section 81(2) would apply only when a tax was imposed for
the first time ' and since appellant was levying properly tax long before its
imposition on the properties of respondents 1 to 36, it was unnecessary to
follow the procedure prescribed by the proviso. It is not possible to accept
this submission. The Municipality might have been levying property tax since
long on properties situated within its limits but until April 1, 1966 the
villages of Rarmakrishnapuram and Shriharipuram were outside those limits. Qua
the areas newly included within the municipal limits, the tax was being imposed
for the first time and therefore it was incumbent on the Municipality to follow
the procedure prescribed by the first proviso to section 81(2). Residents and
taxpayers of those areas, like respondents 1 to 36, never had an opportunity to
object to the imposition of the tax and that valuable opportunity cannot be
denied to them. It is obligatory upon the Municipality not only to invite
objections to the proposed tax but also to consider the objections received by
it within the specified period. Such period has to be reasonable, not being
less than one month. The policy of the law is to afford to those likely to be
affected by the imposition of the tax a reasonable opportunity to object to the
proposed levy.
According to the appellant, the residents of
Ramakrishnapuram and Sriharipuram had an opportunity to object to the
imposition of the tax when the State Government issued a notification under
section 3(1)(b) of the Act declaring its intention to include the two villages
within the limits of the municipality. It is not possible to accept this
submission either. When the State Government issues a notification under any of
the clauses of section 3(1), any resident of the local area concerned or any
tax payer of the municipality can "object to anything therein
contained" meaning thereby, anything contained in the notification. A
notification issued under section 3 (1) (b) contains only the declaration of
the Government's intention "to include within a municipality any local
area in the vicinity thereof and defined in such notification". The right
of objection would therefore be limited to the question whether a particular
area should, as proposed, be included within the municipal limits. It would be
premature at that stage to offer objections to the imposition of any tax
because it is only after the final Notification is issued under section 3(3)
that the question would at all arise as regards the imposition of a tax on the
newly included areas. A notification under section 3(3) has to be followed by a
550 resolution under section 81(1) if the municipality wants to impose a tax,
and for the resolution to be effective, the procedure prescribed by the first
proviso to section 81(2) has to be followed. The appellant municipality short-
circuited this mandatory procedure and thereby deprived respondents 1 to 36 of
the valuable right of objecting to the imposition of the tax.
Finally, relying on section 3(4) of the Act,
learned counsel for the appellant contended that the inclusion of the two
villages within the municipal area attracts of its own force every provision of
the Act with effect from the date on which the final notification is published
by the Government under section 3(3). This argument is said to find support in
a decision of this Court in Atlas Cycle Industries Ltd. v. State of Haryana
& Anr.(1). Far from supporting the argument, we consider that the decision
shows how a provision like the one contained in Section 3(4) cannot have the
effect contended for by the "appellant in the Atlas Cycle case, section
5(4) of the Punjab Municipality Act. 1911 provided that when any local area was
included in a municipality, "this Act and............... all rules, bye
laws, orders, directions and powers made, issued or conferred under this Act
and in force throughout the whole municipality at the time, shall apply to such
areas".
The industrial area within which the factory
of the Atlas Cycle was situated was by a notification included within the
municipality of Sonepat. The municipality thereafter purported to impose octroi
duty on the goods manufactured, by the company without following the procedure
corresponding to that prescribed by sections 81 and 83 of the Act. It was held
by this Court that since section 5(4) of the Punjab Act did not, significantly,
refer to notifications and since section 62(10) of the Punjab Act spoke of
"notification" for the imposition of taxes, it was not competent to
the municipality to levy and collect octroi from the company on the strength
merely of the provision contained in section 5(4) of the Punjab Act. Tn the
instant case, what section 3(4) provides is that once a notification including
any area within a municipality is published under section 3(3), "The
provisions of this Act shall come into force into ........
any municipality or part thereof.. .....on
the date of publication of the notification under sub-section (3), if such date
is the first day of April, or in any other case, on the first day of April
immediately succeeding the date of publication of such notification".
Thus. by section 3(4), once a notification is issued under section 3(3), all
the provisions of the Act come into force. That means that sections 81 and 83,
which are a part of the act, would also apply to the entire Municipal area. It
would then be obligatory for the municipality to follow the procedure
prescribed in these sections. Taxes can be imposed under the Act only by
passing appropriate resolutions under section
81. Section 3(4) does not provide that on the
inclusion of a new area within a municipality, the resolutions passed by the
municipal council before such inclusion will automatically apply to the new
area. Plainly, such could not be the intention of the legislature in (1) [1972]
1 S.C.R. 127.
551 view of the importance which it has
attached to the right of the citizens to object to the imposition of a proposed
tax.
Though, therefore, by reason of section 3(4)
the provisions of the Act would apply to the new areas included within a
municipality, it is not competent to the municipality to take resourse to the
resolution passed for imposing tax on the old areas for the purpose of levying
taxes on new areas.
The procedure prescribed by section 81 and 83
must be followed if a tax is proposed to be levied on the new areas.
For these reasons we confirm the judgment
rendered by the Division Bench of the High Court and dismiss this appeal with
costs.
V.P.S. Appeal dismissed.
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