Anant Mills Co. Ltd. Vs. State of
Gujarat & Ors [1975] INSC 9 (21 January 1975)
ACT:
Constitution of India, 1950, Art.
14--Treating pending cases as a class different from decided cases, if a
permissible classification.
Constitution of India, 1950, .Art. 14--Duty
of the person challenging a provision of the Act as
discriminatory--Constitutional validity, if could be decided on the basis of
supposed existence of certain facts by raising a presumption.
Bombay Provincial Municipal Corporations Act
(Bombay Act 59 of 1949) as amended by Gujarat Acts No. 8 of 1968 and No. 5 of
1970, Sections 129 and 137--Conservancy tax for different categories of
properties--Tax, it should be related only to the expense for conservancy
service for that particular category.
Bombay Provincial Municipal Corporations Act
(Bombay Act 59 of 1949) as amended by Gujarat Act Nos. 8 of 1968 and No. 5 of
1970, proviso to section 129(b)--Corporation to determine different rates for
different classes of properties--Proviso, if suffers from the vice of excessive
delegation of legislative power.
Bombay Provincial Municipal Corporations Act
(Bombay Act 59 of 1949) as amended by Gujarat Acts No. 8 of 1968 and No. 5 of
1970, Section 406(2) (e) rule 42 of Taxation--Appeal against a tax or rateable
value--Deposit of amount claimed condition precedent to entertaining
appeal--Appellate judge empowered to remove undue hardship to
appellant--Requirement of deposit, if nullifies right of appeal--Provision if
makes invidious distinction.
Constitution of India, 1950, Entry 49, List
II, Schedule VII-"Land", if includes underground strata.
HEADNOTE:
The assessment of properties to property tax
in Ahmadabad was made under the Bombay Provincial Municipal Corporations Act by
making entries in the assessment books in accordance with the procedure
prescribed in the Taxation Rules set out in Chapter VIII of Schedule A of the
Corporations Act, A separate section of the assessment book was prepared by the
Commissioner of the Corporation for each official year in respect of the
assessment of property tax on certain kinds of properties like textile mills,
factories and buildings of University. These properties were classified as
special properties. There was some increase in the rateable value fixed by the
Commissioner for the year 1964-65 and 1965-66.
The Commissioner also made initial entries in
assessment book in respect of those properties for the year 1966-67. A number
of writ petitions under Art. 32 of the Constitution were filed in this Court
challenging the validity of the assessments for the years 1964-65 and 1965-66
as well as initial entries for the year 1966-67. The Supreme Court in the
judgment New Manek Spinning & Weaving Mills Co. Ltd. & Ors. v.
Municipal Corporation of City of Ahmadabad & Ors.
[1967] 2 S.C.R. 69, allowed the writ
petitions and held the relevant entries in the assessment books to be invalid.
Rules 7(2) and (3) were also held to be
invalid on account of excessive delegation of powers by the legislature. The
taxation on the basis of floor area as adopted by the Corporation was held to
violate Art. 14 of the Constitution.
When the Corporation initiated steps to make
fresh assessment for the years 1964-65, 1965-66 and 1966-67, it was unable to
do so in view of the decision of the High Court in the case of Ahmadabad
Municipality v. Keshavlal 6 G.L.R. 228 wherein it was held that the Corporation
had no power to assess and levy property tax for any official year after that
year had ended. in order to get over this difficulty, the legislature enacted
Gujarat Act 8 of 1968.
New Sec. 152A 221 and new rules 7 and 21B
were inserted. When notices were served on the petitioners to furnish return of
the particulars, the petitioners filed petitions in the High Court challenging
the validity of those notices. Those petitions were allowed by the High Court
as per judgment dated July 3, 1969 on the ground that the demand for certain
particulars contained in the notices was beyond the scope of r. 8(1). In the
appeal filed by the Corporation against the judgment dated 3rd July, 1969, the
Supreme Court, in its judgment in Municipal Corpora. lion of the City of Ahmadabad,
etc. v. New Sherock Spg. & Wvg. Co. Ltd. etc.
[1971] 1 S.C.R. 288, held that, as the
assessments were not in accordance with law, the Corporation was not entitled
to retain that amount. The Court also struck down subsection (3) of s. 152-A
which gave power to the Corporation to refuse to refund the amount illegally
collected de-spite the order of the Court.
For the official year 1967-68 the Corporation
determined the rate of conservancy tax to be 3 per cent and a special rate of 9
per cent for the large premises like textile mills and factories. The
petitioners preferred appeals against the order of the Deputy Commissioner
determining the amount of property tax to the Chief Judge of the Court of Small
Causes, Ahmadabad. The Chief Judge was, however, precluded from hearing those
appeals since the amount of tax was not deposited by the petitioners as
required by s. 406 (2) (e) of the Corporations Act. The petitioners thereafter
filed petitions in the High Court challenging the validity of the assessments
made by the Deputy Municipal Commissioner for the, official years 1966-67,
1967-68 and 1968-69. Those writ petitions were allowed by the Gujarat High
Court as per judgment dated October 27, 1969. The ordinance dated December 23,
1969. was replaced by Gujarat Act No. 5 of 1970 which came into effect from
March 31, 1970. This Act brought about material changes in the Corporations
Act.
The High Court held (i) Section 2(IA) Clause
(i) is valid so far as it is applicable to the official year 1969-70 but it is
null and void in so far as it applies to the official years from the
commencement of the Corporations Act up to and including the official year 1968-69,
on account of infraction or Art. 14; (ii)Section 406(2) (e) and s. 411 (b) are
null and void as being in contravention of Art.
14; Rule 42 of the Taxation Rules is also
ultra vires and void in so far as it provides that if an appeal is preferred or
entertained against the tax, warrant shall not issue for the recovery of the
amount of tax; and (ii)The Resolutions passed by the Corporation for the
official year 1967-68, 1968-69, 1969-70 and 1970-71 to the extent to which they
fix the rate of conservancy tax at 9 per cent inter alia in respect of textile
mills and factories belonging to the petitioners are ultra vires the proviso to
s. 129(b) and the rate of conservancy tax applicable in respect of these
textile mills and factories must, therefore, be taken to be the general rate of
3 per cent. The High Court upheld the constitutional validity of proviso (e) to
s. 2(IA) clause (ii) and sections 49, 129(b), 406(2)(e) and 411(bb) of the Act
and s. 13(1) and 13 (2) of the Act 5 of 1970.
Civil Appeals Nos. 489 to 513 and 752 to 755
of 1973 have been filed in this Court by the petitioners before the High Court
against the Judgment of that Court in so far as the Court had upheld the
constitutional validity of the impugned provisions. Civil Appeals Nos. 643 to 684
of 1973 have been filed by the Municipal Corporation of the City of Ahmadabad
and others against the above judgment in so far as the High Court has struck
down the impugned provisions and the Resolutions. Civil Appeals No. 389 to 430
of 1974 have been filedby the State of Gujarat against the judgment in so far
as the High Court hasstruck down the impugned provisions. Writ Petitions Nos.
51, 60 to 73, 87 to91.
197, 492 to 503, 533, 534 and 583 of 1972 as
also writ petitions Nos. 1866 to 1877 and 2046 of 1973 which have been filed by
the Aryodaya Sp-. & Wvg. Mills Co. Ltd. and other parties involve
substantially the same question which arises in appeals, though some of these
writ petitions relate to the subsequent period of 1971-72. Writ Petition No. 74
of 1972 filed by the Ahmadabad Electricity Co. Ltd. involves an additional
point regarding its liability to pay property tax which ha% been levied on the
ground that it occupies land below the surface for underground cables.
222 Reversing the decision of the High Court,
HELD : (i) As the affidavit filed on behalf
of the respondents discloses that ,the factual position as it existed before
the promulgation of Ordinance 6 of 1969 was that the provisions of ,he Bombay
Rent Act were not taken into account in determining the rateable value, there
would be no escape from the conclusion that no differential treatment has been
meted out to pending cases in clause (i) of s. 2(IA). There is a presumption of
the constitutional validity of a statutory provision. In case any party assails
the validity of any provision on the ground that it is violative of Art. 14 of
the Constitution. it is for that party to make the necessary averments and
adduce material to show discrimination violative of Art 14. No averments were
made in the petitions before the High Court by the petitioners that the
assessments before the coming into force of Ordinance. 6 of 1969 had been made
by taking into account he rent restriction provisions of the Bombay Rent Act.
It is extremely hazardous to decide the question of constitutional validity of
a provision on the basis of the supposed existence, of certain facts by raising
a presumption. it is very clear that the High Court has acted on an incorrect
assumption. [236G-237E] Assessment Committee of the Metropolitan BoRough of
Poplar v. Roberts [1922] 2 A.C. 93, Gulam Ahmed Rogey v. Bombay Municipality
A.I.R. 1951 Bom. 320 and The Corporation of Calcutta v. Sn. Padma Devi and Ors.
[1962] 3 S.C.R. 49, referred to (ii)Classification by treating decided cases as
belonging to one category and pending cases as belonging to another category is
reasonable and not per se offensive to Art 14 of the Constitution. [238H-239A]
Ram Krishna Dalmia v. Shri Justice S. R. Tanadolkar, [1959] S.C.R. 279,
Khandige Shah Bhav v. Agricultural Income-tax Officer, [1963] 3 S.C.R. 809, Rao
Shiv Bahadur Singh v.
State of Vindhya Pradesh [1953] S.C.R. 1188,
1197, Hathisingh Manufacturing Co. Ltd. v. Union of India [1960] 3 S.C.R. 528
and Jain Bros. and Ors. v. The Union of India & Ors. [1970] 3 S.C.R. 253.
referred to.
(iii)The scheme of the Corporation Act
appears to be that in the case of premises used solely for public purposes and
not intended to be used for purposes of profit or in the case of premises
intended to be used for residential or charitable or religious purposes in
respect of which conservancy tax is payable 'by the Government, the rate of
conservancy tax should be lower compared to the rate of general conservancy
tax. What is required by s. 129 is that before determining the rates of
conservancy tax for different categories of properties the Corporation should
find out the total expense it would have to incur for the various purposes
mentioned in clause (b) of that section.
After having ascertained the total expense it
would be permissible to the Corporation to fix different rates of conservancy
tax for various categories of properties. It is ,not essential except in cases
mentioned in sub-sections (2) and (3) of s. 137 that the rate of conservancy
tax for a particular category of properties should be such as would be related
only to the expense for conservancy service for that particular category of
properties. Clause (b) of s. 129 also takes into account the expense required
for efficiently maintaining and repairing the municipal drains and for finding
out the total expenditure for conservancy service.
The High Court was, therefore, in error in
striking down the resolution passed by the Corporation. [242E-F; 244F-H; 245BC]
(iv)The "opinion of Corporation" mentioned in clause (b) of section
129 ,is formed after budget estimates are prepared in accordance with Ss. 95.
96 and 100 of the Corporations Act. The entire procedure provides built-in safeguards
and lays down adequate guidelines in the matter of taxation. It cannot,
therefore, be said that the legislature has not prescribed any guiding
principle for the Corporation for determining the rates of conservancy tax.
[245F-G. H-246A] (v)The bar created by s. 406(2)(e) to the entertainment of the
appeal by a person who has not deposited the amount of tax due from him and who
is not 223 able to show to the appellate judge that the deposit of the amount
would cause him undue hardship arises out of his own omission and default. A
disability or disadvantage arising out of a party's own default or omission
cannot be taken to be tantamount to the creation of two classes offensive to
Art. 14 of the Constitution. especially when that disability or disadvantage
operates upon all persons who make the default or omission. Section 406(2)(e)
is constitutionally valid and, in as much as 'the validity of s. 41 1 (bb) and
r. 42 hinges on the validity of sec. 406(2)(e) all the three provisions are
constitutionally valid, [247D-248C, F-G] Hannah Cohen, Ex. of Sol. Cohen,
Deceased, and David E. Cohen, Intervener, Petitioners & .Anr.. v.
Beneficial Loan Corporation & Ors. 37 U.S. 539, referred to.
(vi)There can be no doubt that land in entry
49 of List II would include underground Strata. The word "land" has
also been defined in clause (30) of s. 2 of the Corporations Act to include
land which is being built upon or is built upon or covered with water, benefits
to arise out of land, things attached to the earth or permanently fastened to
anything attached to the earth or permanently fastened to anything attached to
the earth and rights created by legislative enactment over any street. This
definition is of inclusive nature and does not exclude from its ambit the
underground strata of the land. The petitioner-company is in occupation of the
land wherein underground supply line is laid. [249EF. 25OD-E] Electric
Telegraph Co. v. Salford Overseers, [1855] 11 Ex.
181, 186, Mysore Aldermen and Councillors of
the City of Westminster Ors. v. The Southern Railway Company, The Railway
Assessment Authority and W. H.Smith & Son, Limited & Ors. 1936 A.C.
511, The Assessment Committee of Holywell Union & Anr. v. Halkyn District
Mines Drainage Col, [1895] A.C. 117 Rex. v. Chelsea Waterworks Company. 5 B.
& Ad. 156 and Reg v. West Miiddlesex Waterworks, 1 E. & E, at p. 720,
referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeals
Nos. 752 to 755, 489 to 513, 643 to 684 of 1973 & 389 to 430 of 1974.
From the Judgment and order dated the 4th
December, 1972 of the Gujarat High Court in Spl. Civil Appeals. Nos. 233,
239-241, 339, 488, 1634, 1635 and 1636 of 1971, and Writ Petitions Nos. 51, 60
to 74, 87 to 91, 157, 492 to 503, 533534 and 583 of 1972 and 1866 to 1877 &
2040 of 1973.
Y.M. Tarkunde (In C. As, Nos. 752, 489, 643,
389 and W.P.
Nos. 51 and 74/72), C. T. Daru and Ravinder
Narain, P. C.
Bhartari, K. M. Desai and K. J. John, for the
petitioners, (In all the W.Ps.) and Appellants (In C.As. Nos. 489-513,
752-755/73) and respondent No. 1 (C.As. Nos. 643-47, 650654, 658-664, 667-671,
674, 678, 679 and 681-684/73).
F.S. Nariman, Additional Solicitor General of
India, S.
B. Vakil and 1. N. Shroff, for appellants (In
C.As. Nos.
643-684/73) and for respondent No. 3 (In all
the W.Ps.) for respondents Nos. 2-4 (In C.As. Nos. 489-497) respondent Nos.
1-4 (In C.As. Nos. 498-511) respondent Nos.
2-5 (In C.As.
Nos. 512-513) respondent No. 2-4 (In C.A. No.
752) respondent Nos. 1-4 (In C.A. Nos. 753-754) respondent Nos.
2-5 (In C.A. No. 755) and for respondent Nos.
1-3 (In C.As.
Nos. 389-430/74).
224 M.C. Bhandare and M. N. Shroff, for the
appellants (In C.As. Nos. 389-430) respondent No. 7. (In C.A. No. 389-497,
512-513) respondent No. 5 (In C.As. Nos. 498-510) respondent No. 2. (In C.A.
Nos. 643-678, 681-684) respondent No. 3 (in C.As. Nos. 679680) respondent No. 1
(In C.As. Nos. 752-755) respondent No. 5 (In C.As. Nos. 753) respondent No. 6
(In C.A. No. 754) and respondent No. 4 (In all the W.Ps.) C. S. S. Rao, for
respondent No. 5 (In C.A. No. 752/73).
R. H. Dhebar and B. V. Desai, for respondent
No. 4. (In C.As. Nos. 417-418/74) and In C.As. No. 656-657 of 1973).
The Judgment of the Court was delivered by
KHANNA, J.-Questions relating to the constitutional validity of the different
provisions of the Bombay Provincial Municipal Corporations Act (Bombay Act 59
of 1949) (hereinafter referred to as the Corporations Act) as amended by
Gujarat Acts No. 8 of 1968 and No. 5 of 1970 arise for determination in these
appeals and the connected writ petitions. The Corporations Act was enacted by
the Bombay legislature in December 1949 for the establishment of municipal
corporations in the cities of Ahmadabad and Poona.
It was applied to Ahmadabad on July 1, 1950.
The assessment of properties to property tax
in Ahmadabad was made under the Corporations Act by making entries in the
assessment books in accordance with the procedure prescribed in the Taxation
Rules set out in Chapter VIII of Schedule A of the Corporations Act. A separate
section of the assessment book was prepared by the Cornmissioner of. the
Corporation for each official year in respect of the assessment of property tax
on certain kinds of properties like textile mills, factories and buildings of
university.
These properties were classified special
properties. The rateable value of properties included in the Special Property
Section was previously determined on a flat rate for every 100 sq. ft. of the
floor area. In arriving at the figure of the rateable value, the plants and
machinery situate upon lands and buildings were also taken into account as
provided in clauses (2) and (3) of rule 7 of the Taxation Rules. There was some
increase in the rateable value fixed by the Commissioner for the years 1964-65
and 1965-66. The Commissioner also made initial entries in assessment book in
respect of those properties for the year 1966-67. A number of writ petitions
under article 32 of the Constitution were filed in this Court challenging the
validity of the assessments for, the years 1964-65 and 196566 as well as the
initial entries for the year 1966-67.
Those writ petitions were disposed of by this
Court by a judgment delivered on February 21, 1967 and reported as New Manek
Chok Spinning & Weaving Mills Co. Ltd. & Ors. v. Municipal Corporation
of the City of Ahmadabad & Ors.(1) This Court allowed the writ petitions
and held the relevant entries in the assessment books to be invalid. It was
held in that case that the State Legislature had no competence under entry 49
of the State List in the Seventh Schedule to the Constitution to make a law for
taxing plant and machinery. Rule 7 (2) was held to be beyond the legislative
competence of the State. Rules 7 (2) and (1) [1967]2 S.C.R. 679.
225 (3) were also held tobe invalid on
account of excessive delegation of powers by thelegislature. Under those rules.
the specification (A. the classes of machinery for the, purpose of taxation was
to be made, by the Commissioner with the approval of the Corporation
irrespective of the question as to where they were to be found. This Court
found that it depended upon the arbitrary will of the Commissioner as to what
machinery he would specify and what he would not and that he was the only
person who could examine this question as there,was no right of appeal.
Dealing with the method of levy of tax on the
basis of floor area, this Court observed that it was against the provisions of
the Act and the rules made thereunder and that it had not been shown that
conditions prerequisite for determination of the annual value on that basis had
existed at the relevant time. The above method of taxation on the basis of
floor area, it was held, was violative of article 14 of the Constitution as it
would in the absence of classification of factories on any rational basis give
rise to inequalities.
Although the Supreme Court directed the
Corporation to prepare fresh assessment lists relating to properties in the
Special Property Section for the official years 1964-65, 1965-66 and 1966-67,
the Corporation was unable to do so in view of the decision of the High Court
in the ease of Ahmadabad Municipality v. Keshavlal(1) wherein it was held that
the Corporation had no power to s and levy property tax for any official year
after that year had ended. The legislature in order to get over this difficulty
enacted Gujarat Act 8 of 1968 and by this amending Act inserted inter alia new
section 152A in the Corporations, Act. The new section conferred power on the
Corporation to assess or reassess property taxes if the original assessment was
affected by a decree or order of a court on either of the grounds on which the
Supreme Court had set aside the assessment for the official years 1964-65,
1965-66 and 196667 in New Manek Chowk Mills case (supra). The amending Act also
substituted new rule 7 for the old rule which contained the offending clauses
(2) and (3). Rule 21B was also inserted by the amending Act and the said rule
permitted the Municipal Commissioner to make fresh valuation of properties
after the expiry of the official year if preparation or completion of the
assessment before the expiry of the official year were or would be affected on
account of any order of a court.. After the amending Act had come into force,
the Corporation initiated proceedings for reassessment of lands and buildings
of the petitioners to property tax for the official years 1964-65, 1965-66 and
1966-67. When notices were served on the petitioners to furnish return of the
particulars, the petitioners filed petitions in the High Court challenging the
validity of those notices. Those petitions were allowed by the High Court as per
judgment dated July 3, 1969 on the ground that the demand for certain
particulars contained in the notices was beyond the scope of rule 8(1). The
contention of the petitioners in those petitions that no assessment could be
made after the expiry of the official year was repelled and it was held that
the Corporation had the power under section 152A to reassess lands and
buildings of the petitioners to property tax for the official years 1964-65.
1965-66 and 1966-67 notwithstanding the expiration of those (1) 6 G.L.R. 228.
16L379SupCI/75 226 years. The High Court also
held that the new section did not stand in the way of the petitioners getting
refund of the property tax already paid.. Appeal was filed in this Court
against the above judgment by the Corporation.
The Ahmadabad Corporation, it may be stated,
used to pass a resolution under section 99 of the Corporations Act determining
the rate at which property tax would be levied for the particular official
year. So far as conservancy tax was concerned, the rate determined by the
Corporation was 3 per cent. A special rate of conservancy tax of 7-1/2 per cent
was, however, fixed by the Corporation for the official year up to 1966-67 for
hotels, clubs, stables, theaters or cinemas or other large premises including
mills and factories registered under the Factories Act and where fifty or more
workmen were employed ill manufacture for all the shifts. For the official year
1967-68 the Corporation determined the rate of conservancy tax to be 3 per cent
and a special rate of 9 per cent for the large premises mentioned above the
rate of general tax for ordinary property was fixed on a graduated scale but on
properties used by textile mills the rate was uniform at 30 per cent.
The powers of the Commissioner under the Taxation
Rules were entrusted to the Deputy Municipal Commissioner by virtue of an
office order issued under section 49(1). The Deputy Commissioner thereafter
determined the rateable value of the lands and buildings of the petitioners.
The petitioners preferred appeals against the order of the Deputy Commissioner
determining the amount of property tax to the Chief Judge of the Court of Small
Causes Ahmadabad. The Chief Judge, was, however, precluded from hearing those
appeals since the amount of tax was not deposited by the petitioners as
required by section 406 (2) (e) of the Corporation Act. The petitioners
thereafter filed petitions in the High Court challenging the validity of the
assessments made, by the Deputy Municipal Commissioner for the official years
1966-67, 1967-68 and 1968-69. Those writ petitions were allowed by the Gujarat
High Court as per judgment dated October 27, 1969. it was held that section 49
of the Corporation Act did not contemplate delegation of judicial or
quasi-judicial powers by the Municipal Commissioner under taxation rule 18 and
that disposal of complaints by the Deputy Commissioner was not permissible.
The High Court also declared section 406(2)
(e) violative of article 14. Part of rule 42 which related to distress or
attachment for default in payment of tax was also struck down on the ground
that it could not stand independently of section 406 (2) (e). The fixation of
special rate of 9 per cent for conservancy tax in respect of large premises
including mills and factories was also held to be illegal and void.
The official year 1969-70 having in the
meantime commenced, the Municipal Commissioner adopted under taxation rule 21
the entries of the official year 1968-69 as the entries for the official year
1969-70. Complaints were then filed by the petitioners against the amount of
rateable value entered in the assessment books. During the pendency of those
complaints, the Governor of Gujrat promulgated Ordinance No. 6 of 1969 on
December 23, 1969. The ordinance was replaced by Gujarat Act No. 5 of 1970
which came into force with effect from March 31, 1970. The ordinance amended
the definition of rateable 227 value as well as section 49 with retrospective
effect. It also contained ,tam validating provisions. Gujarat Act 5 of 1970 was
on the line Ordinance No-. 6 of 1969, except in the matter of definition of
rateable value. A number of petitions in the meantime were filed to challenge
the validity of the provisions of Ordinance No. 6 of 1969 and :)se of Act 5 of
1970.
For the official year 1970-71, the valuation
was made in accordance with Gujarat Act 5 of 1970. A number of writ petitions
were A before the Gujarat High Court challenging the provisions of Gujarat Act
5 of 1970 as well as the valuation for the year 1970-71.
In the meantime, on April 17, 1970 appeal
filed by the Corporation against judgment dated July 3, 1969 of Gujarat High
Court was ;missed by this Court. The decision of this Court was given in
Municipal Corporation of the City of Ahmadabad, etc. v. New Shorock vg. &
Wvg. Co. Ltd. etc.(1).
It was held by this Court that under
conviction 152A before the Corporation can retain an amount collected property
tax, there must be assessment according to law. As the impugned assessments
were not in accordance with law, the Corporation was not entitled to retain
that amount. This Court also struck own subsection (3) of section 152A which
had been added by ordinance 6 of 1969 and which gave power to the Corporation
to fuse to refund the amount illegally collected despite the order of the
Court.
It may be stated that the dispute with which
we are concerned in be present appeals and writ petitions relates to assessment
to property x of large premises like textile mills, and factories. One writ
petition dates to an electricity company.
Before setting out the findings of the High
Court and dealing with the questions which arise for determination in the
appeals and writ petitions before us, we consider it appropriate to refer to
some of the relevant provisions.
Section 127(1) of the Corporations Act
requires the Corporation to impose inter alia property taxes. "Property
taxes" according to section 129, shall comprise(a) water tax, (b)
conservancy tax, and (c) a general tax. Clause (b) and the relevant part if
clause (c) of that section read as under :
For the purpose of sub-section (1) of section
127 property taxes shall comprise the following taxes which shall, subject to
the exceptions, limitations and conditions hereinafter provided, be levied on
buildings and lands in the City (a)................
(b) a conservancy tax at such percentage of
their rateable value as will in the opinion of the Corporation suffice to
provide for the collection, removal and disposal, by municipal agency, of all
excrementitious and polluted matter from privies, urinals and cess-pools and
for efficiently maintaining and repairing the municipal drainsconstructed or
used for the receipition or (1) [1971] 1 S.C.R. 288.
228 conveyance of such matter, subject
however to the provisos that the minimum amount of such tax to be levied in
respect of any one separate holding of land or of any one building or of any
one portion of a building which is let as a separate holding shall be eight
annas per mensem and that the amount of such tax to be levied in respect of any
hotel, club or other large premises may be specially fixed under section 137;
(c) a general tax of not less than twelve per
cent. of their rateable value, which may be levied,if the Corporation so
determines, on a graduated scale Provided.............
According to section 99 the Corporation
shall, on or before the twentieth day of February,, after considering the
Standing Committee's proposals in this behalf,, determine inter alia subject to
limitations an( conditions prescribed in Chapter XI, the rates at which
municipal taxes referred to in sub-section (1) of section 127 shall be levied
in the next ensuing official year. "Official year" has been defined
in section 2(44) to mean the year commencing on the first day of April. Section
137 reads as under :
"(1) The Commissioner may, whenever he
thinks fit, fix the conservancy tax to be paid in respect of any hotel, club,
stable or other large premises at such special rate as shall be generally
approved by the Standing Committee in this behalf, whether the service in
respect of which such tax is leviable be performed by human labour or by
substituted means or appliances.
(2)In the case of premises used solely for
public purposes and not used or intended to be used for purposes of profit or
for residential or charitable or religious purposes in respect of which the
conservancy tax is payable by the Government the Commissioner shall fix the
said tax at a special rate approved as aforesaid.
(3)In any such case the amount of the
conservancy tax shall be fixed with reference to the cost or probable cost of
the collection, removal and disposal, by the agency of municipal conservancy
staff, of excrementitious and polluted matter from the premises." Section
150 relates to supplementary taxation. Clause (1) of section 49 enables a
Deputy Municipal Commissioner, subject to the orders of the Commissioner, to
exercise such of the powers and perform such of the duties of the Commissioner
as the Commissioner shall from time to time depute to him. Section 406 deals
with appeals. According to clause (1) of section 406, subject to the provisions
hereinafter contained, appeals against any rateable value or tax fixed or
charged under the Act shall be heard and determined by the Judge.
"Judge" has been defined in clause (29) (as amended by Act 8 of 229
1968) of section 2 to mean in the city of Ahmadabad the Chief Judge of the
Court of Small Causes. Clause (e) of sub section (2) of section 406 states that
no appeal shall be heard against a tax, or in the case of an appeal made
against a rateable value after a bill for any property tax a assessed upon such
value has been presented to the appellant, unless the amount claimed from the
appellant has been deposited by him with the Commissioner. Section 411 (as
amended by Act 8 of 1968) makes provision for appeal to the High Court from a
decision of the Judge in an appeal in certain contingencies. Clause (54) of
section 2 defines "rateable value" to mean the value of any building
or land fixed in accordance with the provisions of the Act and the rules for
the purpose of assessment to property taxes.
According to section 453, the rules in the
schedule as amended from time to time shall be deemed to be part of the Act.
Chapter VIII of the schedule contains the Taxation Rules. According to clause
(1) of rule 7, in order to fix the rateable value of any building or land
assessable to a property-tax there shall be deducted from the amount of the
annual rent for which such land or building might reasonably be expected to let
from year to year a sum equal to ten per cent of the said annual rent, and the
said deduction shall be in lieu of all allowance for repairs or on any other
account whatever. Clauses (2) and (3) of that rule need not be set out as they
were struck down by this Court in the case of New Manak Chowk Mills (supra).
Rule 9 relates to the keeping of an assessment book in which shall be entered
inter alia every year the rateable value of buildings and lands in the city of Ahmadabad
determined in accordance with the provisions of the Act and the rules as also
the names of persons primarily liable for the payment of property taxes, if
any, leviable on each such building or land' Clause (i) of rule 42 reads as
under (1) If the person on whom a notice of demand has been served under rule
41 does not within fifteen days from such service pay the sum demanded or shows
sufficient cause, for nonpayment of the same to the satisfaction of the
Commissioner and if no appeal is preferred against the said tax, a,,
hereinafter provided, such sum, with all costs of the recovery, may be levied
under a warrant in Form H or to the like effect, to be issued by the
Commissioner, by distress and sale of the movable property of the defaulter or
the attachment and sale of the, immovable property' of the defaulteror, if the
defaulter be the occupier of any premises in respect of which a property-tax is
due, by distress and sale of any movable property found on the said premises
or. if the, tax be due in respect of any vehicle, boat or animal by distress
and sale of such vehicle, boat or animal in whomsoever'.,, ownership,
possession or control, the same may be.', We may now set out the material
changes brought out in the Corporations Act by Gujarat Act No. 5 of 1970.
Sections 2, 4, 6, 7, 10, 11, 12 and 13 of (2) of the amending Act read as under
:
"2. In the Bombay Provincial Municipal
Corporations Act, 1949 (hereinafter referred to as 'the principal Act'), in
section 2,230 (1)before clause (1) the following clause shall be, and shall be
deemed always to have been, inserted, namely (1A) 'annual letting value' means(i)in
relation to any period prior to 1st April, 1970, the annual rent for which any
building or land or premises, exclusive of furniture or machinery contained or
situate therein or thereon, might, if the Bombay Rents, Hotel and Lodging House
Rates Control Act, 1974 were not in force, reasonably be expected to let from
year to year with reference to its use :
(ii)in relation to any other period, the
annual rent for which any building or land or premises, exclusive of furniture
or machinery contained or situate there in or thereon, might reasonably be
expected to let from year to year with reference to its use;
and shall include all payments made or agreed
to be made to the owner by a person (other than the owner) occupying the
building or land or premises on account of occupation, taxes, insurance or
other charges incidental thereto Provided that, for the purpose of sub clause
(ii),(a) in respect of any building or land or premises the standard rent of
which has been fixed under section 11 of the Bombay Rents, Hotel and Lodging
House Rates Control Act, 1.947, the annual rent thereof shall not exceed the
annual amount of the standard rent so fixed;
(b) in the case of any land of a class not
ordinarily let, the annual rent of which cannot in the opinion of the
Commissioner be easily estimated, the annual rent shall be deemed to be six per
cent of the estimated market value of the land at the time of assessment;
(c) in the case of any building of a class
not ordinarily let, or in the case of any industrial or other premises of a
class not ordinarily let, or in the case of a class of such premises the
building or buildings in which are not ordinarily let, if the annual rent
thereof cannot in the opinion of the Commissioner be easily estimated, the
annual rent shall be deemed to be six per cent of the total of the estimated
market value, at the time of the assessment, of the land on which such building
or buildings stand or, as the case may be. of the land which is comprised in
such premises, and the estimated cost, at the time of the assessment, of
erecting the building, or as the case may be, the building or buildings
comprised in such premises;' 231 (2)for clause (54), the following shall be,
and shall be deemed always to have been, substituted, namely (54)'rateable
value' means the value of any building or land fixed, whether with reference to
any given premises or otherwise, in accordance with the provisions of Act and
the rules for the purpose of assessment to property taxes; 4. In section 49 of
the principal Act, in sub-section (1),(1)for the words 'such of the duties of
the Commissioner' the words 'such of the duties of the Commissioner, including
powers and duties of a judicial or quasi-judicial nature, shall be, and shall
be deemed always to have been, substituted;
(2)after the first proviso, the following
further proviso shall be, and shall be deemed always to have been, added,
namely :'Provided further that nothing in this subsection " be deemed to
empower the Commissioner to issue any order regulation the exercise of powers
or performance of duties of a judicial or quasi-judicial nature deputed by
him., 6.In section 129 of the principal Act, to clause (b), the following proviso
shall be, and shall be deemed always to have been, added, namely :'Provided
that when determining under section 99 or section 150 the rate at which
conservancy tax shall be levied for any official year or part of an official
year, the Corporation may determine different rates for different classes of
pro7.In section 137 of the principal Act, to subsection (1) the following
proviso shall be added, namely ."Provided that if the Corporation shall
have determined for any official year any different rate of conservancy tax for
any class of properties to which any of the properties referred to in this
sub-section belongs, the Commissioner shall not, without the previous approval
of the Corporation, fix, for such official year or part thereof, the conservancy
tax to be paid in respect of any property belonging to such class for which
such different rate may have been determined by the Corporation, at any other
different rate under this subsection.'
10. In section 406 of the principal Act, in
sub-section (2),(1)for the words 'shall be heard' the words 'shall be
entertained' shall be substituted;
and (2)the following proviso shall be added
after clause (e), namely :'Provided that where in any particular case the Judge
is of opinion that the deposit of the amount by the appellant 232 will cause
undue hardship to him the, Judge may in his discretion dispense with such
deposit or part thereof, either unconditionally or subject to such conditions
as he may deem fit.' 11.in section 411 of the principal Act, after clause (a),
the following clause shall be inserted, namely :'" (b) from any order of
the Judge under the proviso to sub-section (2) of section 406;
and;"
12. In Schedule A to the principal Act, in
Chapter VIII,(i)in sub-rule (3) of rule 7, for the words annual rent for which
such building, land or premises might reasonably be expected to let from year
to year a sum equal to ten per cent of the said annual rent' the words 'annual
letting value of such building, land or premises a sum equal to ten per cent of
such annual letting value' shall be, and shall be deemed always to have been
substituted; and (ii)in sub rule (1) of rule 42, for the words is preferred'
the words 'is preferred or entertained' shall be substituted.
13.Notwithstanding anything contained in any
judgment, decree or order of any court or tribunal or any other authority,(1)................
(2)no determination of any special or
different rate, of conservancy tax by a Municipal Corporation constituted by or
under the principal Act in respect of any hotel, club, stable, industrial
premises or other large premises in exercise or purported exercise of its
powers under any of the provisions of the principal Act, at any time before the
commencement of the said Ordinance, shall be deemed to have been invalidly made
by reason of the Corporation having no power to determine such rate at the time
when such determination was made; and any such determination shall be deemed to
be valid and shall be deemed always to have been validly made under the
provisions of the principal Act as amended by this Act as if this Act had been
in force at the time when such determination was made; and no such
determination of different or special rate of conservancy tax, or any entry of
tax made in any assessment book pursuant thereto, or any levy of such tax or
bill or notice of demand or distress or attachment issued or executed for
collection of such tax, shall be called in question in any court or before any
tribunal or authority merely on the ground that the Corporation had no power or
authority to determine such different or special rate of conservancy tax in
respect of any hotel, club, stable, industrial premises or other large premises
or on any ground Consequential hereto." 233 The High Court after protracted
hearing we given to understand lasted for 21 days besides 4 days for judgment
while partly allowing the petitions filed before it under article 226 of
constitution made the following declaration :
"(i) Section 2 1A) clause (i) is valid
so far as it is applicable to the official year 196970 but it is null and void
in so far as it applies to the official years from The commencement of the
Corporations Act upto and including the official year 1968-69, on account of
infraction of article 14.
(ii) Proviso (c) to section 2(1A) clause (ii)
is not violative of article14 and is constitutionally valid.
(iii) Section 49 does not suffer from the
vice of unreasonableness and is constitutionally valid and so_ also is section
13(1) of Gujarat Act 5 of 1970.
(iv)The proviso to section 129(b) is not
violative of article 14 nor does it suffer from the vice of excessive
delegation of legislative power.
(v)Section 13(2) of Gujarat Act 5 of 1970 is
not violative of article 14 or article 19(1)(f) and cannot be challenged as
constitutionally invalid.
(vi)Section 406(2)(e) and section 411(bb) are
null and void as being in. contravention of article 14 : Rule 42 of the
Taxation Rules is also ultra vires and void in so far as it provides that if an
appeal is preferred or entertained against the tax, warrant shall not issue for
the recovery, of the amount of tax.
(viii) The Resolutions passed by the
Corporation for the official years 1967-68, 1968-69, 1969-70 and 1970-71 to the
extent to which they fix the rate of conservancy tax at 9 per cent inter alia
in respect of textile, mills and factories belonging to the petitioners are
ultra vires the proviso to section 129(b) and the rate of conservancy tax
applicable in respect of these textile mills and factories must, therefore be
taken to be the general rate of 3 per cent." Civil appeals Nos. 489 to 513
and 752 to 755 of 1973 have been filed in this Court by the petitioners before
the High Court against the judgment of that court in so far as the court has
upheld the constitutional validity of the impugned provisions. Civil appeals
Nos. 643 to 684 of 1973 have been filed by the Municipal Corporation of the
City of Ahmadabad and others against the above judgment in so far as the High
Court has struck down the impugned provisions and the Resolutions. Civil
appeals No. 389 to 430 of 1974 have been filed by the State of Gujarat against
the judgment in so far as the High Court has struck down the impugned
provisions.
Writ petitions Nos. 51, 60 to 73, 87 to 91,
157, 492 to 503, 533, 534 and 583 of 1972 as also writ petitions Nos. 1866 to
1877 and 2046 of 1973 which have been filed by the Aryodaya Spg. & Wvg.
Mills Co. Ltd. and other parties involve substantially the same question Which
arises in 234 appeals, though some of these writ petitions relate to the
subsequent period-of 1971-72. Writ petition No. 74 of 1972 filed by the Ahmadabad
Electricity Co. Ltd. involves an additional point regarding its liability to
pay property tax which has been levied on the ground that it occupier. land
below the surface for underground cables. This judgment would dispose of all
the appeals and writ petitions.
The first important question which arises for
determination is whether clause (i) of section 2(1A) is violative of article
14. According to this clause, "annual letting value" means in
relation to any period prior to 1st April, 1970 the annual rent for which any
building or land or premises, exclusive of furniture or machinery contained or
situate therein or thereon, might, if the Bombay Rents, Hotel and Lodging House
Rates Control Act, 1947 were not in force, reasonably be expected to let from
year to year with reference to its use. According to the petitioners, the
operation of this clause affected only the assessment proceedings pending on December
23, 1969 when Ordinance 6 of 1969 (which was subsequently replaced by Act 5 of
1970) came into force and did not affect the assessments which were final and
completed before that date. The said provision war, thus said to create an
arbitrary and irrational classification which had no reasonable nexus with the
object of levying the tax. As against the above, the following four contentions
were advanced on behalf of the Corporation : (1) There is no discrimination in
the matter of completed assessments and pending assessment because the prior
law did not require valuation to be restricted to standard rent. The impugned
provision is merely declaratory of previous state of law.
(2) There is no discrimination in the matter
of completed assessment,% pending assessments because as a matter of fact
valuation assessments finalised before December 23, 1972 were in disregard of
the provisions of the Rent Act.
(3) Pending cases constitute a class by
themselves and any law which makes a distinction between decided cases and
pending cases is not violative of article 14 of the Constitution as the above
distinction is based upon rational classification.
(4) In any case so far as the year 1969-70 is
concerned, there is no discrimination or violation of article 14.
The High Court rejected the first three
contentions urged can behalf of the Corporation but accepted the fourth
contention. Accordingly, it held that clause (i) of section 2(1A) was valid in
so far a,,, it was applicable to the official year 1969-70, but was null and
void in so far as it applied to the previous years on account of the infraction
of article 14.
Regarding clause (c) of the proviso to
sub-clause (2) of clause (1A) of section 2 of the Act, the High Court held that
it is only if 235 the annual rent having regard to the provisions of the Bombay
Rent Act cannot be easily estimated that the Commissioner can adopt the basis
of the valuation set out in proviso to clause (c). Mr. Tar under learned
counsel for the petitioners has not pressed the attack on the constitutional
validity of clause (c) because, according to him, it is not known as to which
property would be covered by that clauses as construed by the High Court.
Likewise, so far as the constitutional
validity of section 49 of the Act is concerned, the attack has not been pressed
on behalf of the petitioner-appellants. Mr. Tarkunde has also pointed out that
despite the decision of this Court in Manek Chowk Spg. & Wvg. Mills case
(supra) in making assessments attempts are being made by the Corporation to
include some structures which constitute plant and machinery as part of
building. The learned counsel, however, concedes that this would be question of
fact depending upon each case. He accordingly states that his clients would if
necessary agitate the matter in appeal.
It has been argued before us by the
Additional Solicitor General, Mr. Vakil and Mr. Bhandare on behalf of the
Corporation as well as the State Government that the High Court was in error in
holding that clause (i) of section 2(1A) was violative of article 14 in respect
of the_years prior to the official year 1969-70. As against that, Mr.
Tarkunde on behalf of the petitioners (the
word "petitioners" would cover not only the petitioners in this Court
but also those who were the petitioners in the High Court) has supported the
finding of the High Court in this.
respect. Mr. Tarkunde in his own turn has
mailed the finding of the High Court in so far as it has held that clause (i)
of section 2(1A) is not violative of article 14 in respect of the year 1969-70.
After hearing the learned counsel for the parties we find considerable force in
the submission made on behalf of the Corporation and the State Government.
The first questionwhich arises for
consideration in the above context is whether thereis any discrimination in
relation to the assessments for the periodprior to April 1, 1970 between
pending cases and the cases in which assessment had already been completed. So
far as this aspect is concerned, we find that in the case of Assessment
Committee of the Metropolitan Borough of Poplar.V.
Hobberis(1) the House of Lords held by
majority that in arriving at the valuation for this purposes of the Valuation
(Metropolis) Act, 1969, of a hereditament to which the Increase of Rent and
Mortgage interest (Restriction) Act 1920 applies, the maximum gross value to be
assigned to that hereditament is not limited to the standard rent of the
creditament together with the additions thereto permitted by the latter Act. It
was further held that the above mentioned Act of 1920 is not to be taken into
account in determining the valuation for rating purposes of the hereditaments
to which it applies. Following the above decision of the House of Lords a
Division Bench of the Bombay High Court held in the case of Gulam Ahmed Rogay
v. Bombay Municipality(1), (1) [1922] 2 A.C. 93.
236 That in arriving at the rateable value
for purposes of section 154(1) ,of the City of Bombay 'Municipal Act, 18 8 8 of
property to which the Bombay Rents, 'Hotel & 'Lodging house Rates Control
Act, 1947 applies the maximum value to be assigned to the property is not to'be
limited,to the maximum standard rent of the property together with additions
thereto permitted by the latter Act. Similar question there-after arose in the
case of The Corporation of Calcutta v. Sm. Padma Debi & ors (2) . This
Court in that case was concerned with the provisions of section 127(a) of the
Calcutta Municipal Act, according to which the annual rental value of land and
the annual value of any building erected for letting purposes or ordinarily
act, shall be deemed to be the gross annual rent at which the land or building
might at the time of assessment reasonably be expected to let from year to
year, less, in the case of a building, an allowance of ten per cent for the
cost of repairs and for all other expenses necessary to maintain the building
in a state to command such gross rent. I was held by this Court that on a fair
reading of the above provision the rental value ,cannot be fixed higher than the
standard rent under the Rent Control Act. It was further held that the words
"gross annual rent at which the land. or building might at the time of
assessment reasonably be expected to let from year to year" imply that the
rent which the landlord might realise if the house was let is the basis for
fixing the annual value of the building. The criterion is the rent realisable
by the landlord and not the value of the holding in the wards of the tenent.
The value of the property to the owner is the standard in making the
assessment. The Corporation, it was accordingly concluded, had no power to fix
the annual value of the premises higher than the $tandard rent.
It was argued on behalf of the Corporation
before the High Court that no averment had been made by the petitioners in the
petitions that the assessments which had been completed before the coming into
force of Ordinance 6 of 1969 were made having regard to the provisions of the
Bombay Rent Act and that in the absence of such averments no case of discrimination
could be said to have been made by the petitioners. The High Court rejected
this contention because in its opinion it would be reasonable to presume that
the assessments were made keeping in view the rent restriction provisions of
the Bombay Rent Act. We are unable to agree with the above approach of the High
Court.
There is a presumption of the constituticonal
validity of a statutory provision. In case any party ass-ails the validity of
any provision on the ground that it is violative of article 14 of the
Constitution, it is for that party to make the necessary averments and adduce
material to show discrimination violative of article 14. No averments were made
in the petitions before the High Court by the petitioners that the .assessments
before the coming into force of Ordinance 6 of 1969 bad been made by taking
into account the rent restriction provisions of the Bombay Rent Act. Paragraph
2B and some other paragraphs of petition No. 233 of 1970 before the High Court,
to which our attention was invited by Mr. Tarkunde, also do not contain that
averment. No material on this factual aspect was in the circumstances produced
either on behalf of the petitioners or the Corporation. The High Court, as
already observed, decided the matter merely on the basis of a presumption. It
is, in our opinion, extremely hazardous to decide the question of the
constitutional validity of a provision on the basis of the supposed existence
of certain facts by raising a presumption. The facts about the supposed
existence of which presumption was raised by the High Court were of such a
nature that a definite averment could have been made in respect of them and
concrete material could have been produced in support of their existence or
non-existence. Presumptions are resorted to when the matter does not admit of
direct proof or when there is some practical difficulty to produce evidence to
prove a particular fact. When, however, the fact to be established is of such a
nature that direct evidence about its existence or nonexistence would be
available, the proper course is to have the direct evidence rather than to
decide the matter by resort to presumption. A pronouncement about the
constitutional validity of a statutory provision affects not only the parties
before the Court, but all other parties who may be affected by the impugned
provision. There would, therefore, be inherent risk in striking down an
impugned provision without having the complete factual data and full material
before the court. It was therefore, in our opinion, essential for the High
Court to ascertain and field out the correct factual position before recording
a finding that the impugned provision is violative of article 14. The fact that
the High Court acted on an incorrect assumption is also borne out by the
material which has been adduced before us in the writ petitions filed under
article 32 of the Constitution.
In the affidavit of Jayantilal Maneklal Shah,
Assessor and Collector of the Corporation, filed on behalf of, the respondents
in these petitions, the factual position has been brought out at length.
According to the affidavit, after the Corporation had been constituted with
effect from July 1, 1950 the Commissioner kept for every official year an
assessment book as contemplated by rule 9 of the Taxation Rules. The rateable
value of lands and buildings in Special Property Section were first determined
by the municipal valuers on Contractor's Theory in accordance with the methods
prevailing under the English law of rating. The owners of lands avoid buildings
which were valued on' Contractor's Theory filed appeals. During the pendency of
the appeals,. the authorities concerned agreed to refer the question of
determination of the rateable values to the arbitration of the arbitrators, one
appointed by the Corporation and the other appointed by the taxpayers. On
disagreement between the two arbitrators the matter was referred in 1953 to
Shri H. V. Divetia, a former Judge of.
the High Court of Judicature at Bombay as
umpire. Shri Divetia held that flat rate floor area method which was being
adopted by the Municipal Corporation of the city of Bombay in similar cases was
the proper method. The municipal authorities consequently adopted that method.
The award of Shri Divetia was effective only till the official year 1954-55,
but its application was extended by agreement between the parties up to the
year 1958-59. The municipal authorities continued to value the lands;
238 and buildings aforesaid on the flat rate
floor area method for the year 1959-60 and onwards to prevent any dispute being
raised. The affidavit further shows that notwithstanding decision in Padma
Devi's case (supra) the Corporation continued as before to value the properties
included in the Special Property Section on the flat rate floor area method.
Both the valuers as well as the persons liable to pay property taxes were not
conscious of any impact of rent restriction for the purposes of property taxes.
The Collector has denied that in determining the rateable value the Municipal
Commissioner had been taking into account the standard rent of the building or
land of was following the principle that the rent restricted by law was the
measure of the true rent of the building.
There is no material before us to show that
the factual position is in any way different from that brought out in the
affidavit of the Assessor and Collector of the Corporation. Mr. Tarkunde has
referred to three orders dated March 22, 1969 of the Deputy Municipal Commissioner
whereby the rateable value as initially fixed was reduced on complaint filed by
the ratepayers It would appear from the orders that in reducing the rateable
value the Deputy Municipal Commissioner took into account the rental value.
The above three orders, in our opinion, can
hardly be of any help to the petitioners because there is nothing to show that
the Deputy Municipal Commissioner while making those orders took into account
the standard rent and the restrictions placed on the increase in rent by the
Bombay Rent Act.
Mr. Tarkunde then urges that the material
which has been placed before this Court regarding the factual position was not
before the High Court and as such this Court should not disturb the finding of
the High Court on the constitutional validity of clause (i) of section 2(1A).
We are unable to accede to this submission. The validity of the above clause
has also been assailed in the writ petitions filed before us and in deciding
those writ petitions, we cannot refuse to take into account the material which
has been placed before us. As that material discloses that the factual position
as it existed before the promulgation of Ordinance 6 of 1969 was that the
provisions of the Bombay Rent Act were not taken into account in determining the
rateable value, there would be no escape from the conclusion that no
differential treatment has been meted, out to pending cases in clause (i). It
is plain that the impugned provision cannot be held to be violative of article
14 in the appeals filed against the judgment of the High Court and
constitutionally valid in the writ petitions. As the High Court decided the
matter without having the full and complete data before it and as such data is
available to us, the contention that we should not take that data into account,
in our opinion, is wholly untenable. We would, therefore hold that there is no
material on record as might justify the inference that a differential hostile
treatment has been meted out in pending cases. The very basis of striking down the
impugned provisions on the ground of being violative of article 14 would thus
disappear.
Apart from the above. We are of the opinion
that classification by treating decided cases as belonging to one category and
pending cases 239 as belonging to another category is reasonable and not per se
offensive to article 14.
It is well-established that article 14
forbids class legislation but does not forbid classification. Permissible
classification must be founded on an intelligible differentia which distinguishes
persons or things that are grouped together from others left out of the group,
and the differentia must have a rational relation to the object sought to be
achieved by the statute in question. In permissible classification mathematical
nicety and perfect equality are not required. Similarity, not identity of
treatment, is enough. If there is equality and uniformity within each group,
the law will not be condemned as discriminative, bought due to some fortuitous
circumstances arising out of a peculiar situation some included in a class get
an advantage over others, so long as they are not singled out for special
treatment. Taxation law is not an exception to this doctrine. But, in the
application of the principle the courts, in view of the inherent complexity of
fiscal adjustment of diverse elements, permit a larger discretion to the
legislature in the matter of classification, so long as it adheres to the
fundamental principles underlying the said doctrine. The power of the
legislature to classify is of wide range and flexibility so that it can adjust
its system of taxation in all proper and reason-able ways (see Ram Krishna
Dalmia v. Shri Justice S. R. Tendolkar(1) and Khandige Shah Bhat v.
Agricultural Income-tax Officer, Kasaragod(2). Keeping the above principles in
view, we find no violation of article 14 in treating pending cases ;as a class
different from decided cases. It cannot be disputed that so far as the pending
cases covered by clause (i) are concerned, they have been all treated alike. In
the case of Rao Shiv Bahadur Singh v.
State of Madhya Pradesh(") this Court
observed :
"But there is no reason why pending
proceedings cannot be treated by the legislature as a class by themselves
having regard to the exigencies of the situation which such pendency itself
call,, for. 'Mere can arise no question as to such a saving provision
infringing article 14 so long as no scope is left for any further
discrimination inters seas between persons affected by such pending
matters." In Hathising Manufacturing Co. Ltd. v. Union of India(4) the
constitutional validity of section 25FFF of the Industrial Disputes Act, 1947 was
assailed. That section made a distinction between employers who had closed
their undertakings on or before November 28, 1956 and those who closed their
undertakings after that date. It was urged that the above provision was.
violative of article 14 of the Constitution. The above contention was rejected
and it was observed "When Parliament enacts a law imposing a liability as
flowing from certain transactions prospectively, it evidently makes a
distinction between those transactions which are covered by the Act and those
which are not covered by the Act, because they were completed before the date
on which (1) [1959] S.C.R. 279.
(2) [1963] 3 S.C.R. 809.
(3) [1953] S.C.R. 1188. 1197.
(4) [1960] 3 S.C.R. 528.
240 the Act was enacted. This differentiation,
however, does not amount to discrimination which is liable to be struck down
under article 14. The power of the legislature to impose civil liability in
respect of transactions completed even before the date on which. the Act is
enacted does not appear to be restricted. If, as is conceded-and in our
judgment rightly by a statute imposi ng civil liability in respect of post
enactment transactions, not discrimination is practiced, by a statute which
imposes liability in respect of transactions which have taken place after a
date fixed by the statute, but before its enactment, it cannot be said that
discrimination is practiced." in the case of fain Bros. & Ors. v. The
Union of India & Ors. (1) it was urged on behalf of the appellants that
clause (g) of section 297(2) of the Income-tax Act, 1961 was violative of
article 14 inasmuch as in the matter of 'imposition of penalty, it
discriminated between two sets of assesses with reference to a particular date,
namely, those whose assessment had been completed before 1st day of April, 1962
and others whose assessment was completed on or after that date. While
upholding the validity of the above provision, this Court observed "Now
the Act of 1961 came into force on first April 1962. It repealed the prior Act
of 1922. Whenever a prior enactment is repealed and new provisions are enacted
the legislature invariably lays down under which enactment pending proceedings
shall be continued and concluded. Section 6 of the General Clauses Act 1897
deals with the effect of repeal of an enactment and its provisions apply unless
a different intention appears in the statute.
It is for the legislature to decide from
which date a particular law should come into operation. It is not disputed that
no reason has been suggested why pending proceedings cannot be treated by the
legislature as a class for the purpose of Art. 14. The date first April 1962 which
has been selected by the legislature for the purpose of cls. (f) and (g) of s.
297 (2) cannot be characterised as arbitrary or fanciful." We would,
therefore, hold that clause (i) of section 2(1A) is constitutionally valid and
not violative of article 14 in respect of all the years to which it has been
made applicable. , Leamed Additional Solicitor-General and Mr. Vakil on behalf
of the Corporation have assailed the finding of the High Court in so far as it
has held the resolutions passed by the Corporation for the, four years from
1967-68 to 1970-71 fixing the rate of conservancy tax at 9 per cent in respect
of textile mills, factories and other large premises instead of the general
rate of 3 per cent to be ultra vires the proviso to section 129(b). We may in
this context.set out the material part of the impugned resolution for the
assessment year 1971-72 taking it to been specimen for the four years in
question (1) [1970] 3 S.C.R. 253.
241 (c) Conservancy tax at 3% of the rateable
value of the premises liable to tax under provisions of section 131 of the Act,
subject, however, to the proviso that the minimum amount to such tax to be
levied in respect of any one separate holding of land or of any one portion of
a building which is let as a separate holding shall be eight annas per month,
and that the amount of such tax to be levied in respect of any hotel, club,
stable or other large premises may be specially fixed under section 137.
(d)As per the provisions of section 137,
hotel, club, stables, theatres or cinemas or other large premises including
mills and factories registered under the Factories Act, and where 50 or more
workmen are employed in manufacture in all the shifts, shall be subject to a
conservancy tax at 9% of the rateable value." The High Court in striking
down the four resolutions in so far as the rate of conservancy tax in respect
of the large premises had been fixed at 9 per cent instead of 3 per cent,
observed that the power to fix different rates of conservancy tax for different
classes of properties is limited by the actual cost element and the
differential rate of conservancy tax fixed for a particular class of properties
must be related to the actual cost involved in supplying conservancy service to
that class. The High Court agreed that large premises could be treated as a
class and given differential treatment in the matter of fixation of conservancy
tax. On the question, however, as to what rate of conservancy tax should be
fixed for large premises, the High Court. observed that there was nothing in
the affidavits filed on behalf of the Corporation which might show that the
Corporation was guided by the actual cost of conservancy service supplied to
each class.
We may at this stage advert to the scheme of
the Corporation Act in the matter of levy of conservancy tax. Clause (b) of
section 129 states that the rate of conservancy tax shall be such percentage of
rateable value as will in the opinion of the Corporation suffice to provide the
collection, removal and disposal, by municipal agency, of all excrementitious
and polluted matter from privies, urinals and cesspools and for efficiently
maintaining and repairing the municipal drains constructed or used for the
reception or conveyance of such matter. It is further provided that the minimum
amount of such tax to be levied in respect of any one separate holding of land
or of any one building or of any one portion of a building which is let as a
separate holding shall be eight annas per mensem and that the amount of such
tax to be levied in respect of any hotel, club or other large premises may be
specially fixed under section 137.
Sub-section (1) of section 137 provides that
the Commissioner may, whenever he thinks fit, fix the conservancy tax to be
paid in respect of any hotel, club, stable or other large premises at such
special rate as shall be generally approved by the Standing Committee in this
behalf, whether the service in respect of which such tax is leviable be
performed by human labour or by substituted means or appliances Subsection (2)
of section 137 directs the Commissioner to fix a special rate of conservancy
tax in the case 17-L379Sup CI/75 242 of premises used solely for public
purposes and not used or intended to be used for purposes of profit or for
residential or charitable or religious purposes in respect of which the
conservancy tax is payable by the Government.
According to sub-section (3) of section 137,
in any such case the conservancy tax shall be, fixed with reference to the cost
or probable cost of the collection, removal and disposal, by the agency of
municipal conservancy staff, of excrementitious and polluted matter from the
premises.
One of the questions which has been agitated
before us is as to whether sub-section (3) of section 137 deals only with cases
mentioned in sub-section (2) or whether it applies to cases covered both by
sub-section (1) as well as sub-section (2) of section 137. Put differently, the
question is as to what is the significance of the opening words 'In any such
case" in sub-section (3).
After giving the matter our consideration, we
are of the view that sub-section (3) deals only with cases mentioned in
sub-section (2) of section 137 and is not attracted in cases mentioned in
sub-section (1).
Sub-section (3) provides for a concessional
rate of conservancy tax because the amount of such conservancy tax has to be
fixed with reference to the cost or probable cost of the collection, removal
and disposal, by the agency of municipal conservancy staff, of excrementitious
and polluted matter from the premises. The rate of conservancy tax .covered by
section 137(3) would be lower compared to the general rate of conservancy tax
under clause (b) of section 129 which would be fixed after taking into account
not only the cost or probable cost referred to in section 137(3) but also the
expenses for efficiently maintaining and repairing the municipal drains
constructed or used for the receiption or conveyance of excrementitious and
polluted matter. The scheme of the Corporations Act appears to be that in the
case of premises used solely for public purposes and not intended to be used
for purposes of profit or in the case of premises intended to be used for
residential or charitable or religious purposes in respect of which conservancy
tax is payable by the Government, the rate of conservancy tax should be lower
compared to the rate of general conservancy tax. Sub-section (1) deals with
large premises like hotels, clubs and stables which in the very nature of
things require greater conservancy service, and it hardly stands to reason that
the Legislature would contemplate the fixing of lower concessional rate of
conservancy tax in the case of such premises. The opening words of sub-section
(3) of section 137, viz. "In any such case" make it clear that its concessional
provisions apply only to the immediately preceding clause, namely, section
137(2).
Act 5 of 1970 added a proviso to clause (b)
of section 129.
According to that proviso, when determining
under section 99 or section 150 the rate at which conservancy tax shall be
levied for any official year or part of an official year, the Corporation may
determine different rates for different classes of properties. A proviso was
also added to section 137(1) by the said Act that if the Corporation shall have
determined for any official year any different rate of conservancy tax for any
class of properties to which any of the properties referred to in 243 this
subsection belongs, the Commissioner shall not, without the previous approval
of the Corporation, fix, for such official year or part thereof, the
conservancy tax to be paid in respect of any property belonging to such class
for which such different rate may have been determined by the Corporation.
Perusal of the different provisions shows
that the rate of conservancy tax can be fixed under the following three
provisions :
(1)A rate of conservancy tax (which for the
sake of convenience may be described as general rate of conservancy tax) to be
fixed by the Corporation under clause (b) of section 129. This is, however,
subject to the proviso that it would be open, to the Corporation to determine
different rates for different classes of properties.
(2)A special rate of conservancy tax to be
fixed by the Commissioner in respect of certain large premises under subsection
(1) of section 137. Such rate shall not without the previous approval of the
Corporation be different from the rate of conservancy tax for that class of
properties in case the Corporation has determined the rate of conservancy tax
for that class.
(3)A special rate of conservancy tax in
respect of premises mentioned in section 137(2) to be fixed by the
Commissioner.
The following affidavit was filed on behalf
of the Corporation in justification of the higher rate of conservancy tax of 9
per cent for large premises mentioned in the resolution :
"I submit that the properties in respect
of which the Corporation has determined the rate of conservancy tax at 9 per
cent are properties belonging to a class the cost of providing conservancy
services to which is proportionately higher than corresponding cost in respect
of other properties. I state that it is not necessary for the purpose of
determining such higher rate that the Corporation or the Commissioner should
separately work out the expenditure involved in dealing with these properties.
I deny that there is no valid justification for providing a higher rate of
conservancy tax in respect of such properties. I submit that it is competent to
the Corporation to take notice of the higher cost of conservancy services
required to be incurred in respect of these properties and to form an opinion
on general facts-that the cost of providing conservancy services to these
properties would be higher and to what extent. I submit that matters of this
type do not demand an arithmetical accuracy and broad compliance in matters of
this type is sufficient for complia nce with law. I submit that according to
the estimate of the Municipal Corporation, to meet the total expenditure of
conservancy services, if a unit rate of conservancy tax was to be provided, it
was necessary to determine the rate of conservancy tax at 41 per cent of the
rateable value. The Corporation has, however, sought to distribute the
incidence of conservancy tax equitably among all the lands and buildings,
determine the general rate of conservancy tax at 3 per cent L379Sup.CI/75 244
and determine a higher rate of conservancy tax at 9 per cent in respect of
industrial premises and other properties as provided in the said resolution. I
submit that the use of the premises has a material relation to the cost of
providing conservancy services and to the maintenance and repairs thereof I
submit that the hotels, clubs, industrial premises and: other large premises
referred to in section 129(b) as well as in section 137 are premises which need
relatively larger conservancy services." The question with which we are
concerned in the present cases is whether it is sufficient, as has been argued
on behalf of the Corporation, to find out the total expense to be incurred for
conservancy service and thereafter to fix different rates for different
categories of properties so that the tax raised is sufficient to meet the total
expense, or whether, as has been held by the High Court, the different rate of
conservancy tax fixed for a particular class of property under the proviso to
clause (b) of section 129 must be related to the actual cost involved in
supplying conservancy service to that class. In other words the question is
whether the Corporation in determining the rates of conservancy tax has to find
out the total expense it would have to incur for the various purposes mentioned
in section 129(b) in connection with the conservancy service and 'thereafter to
raise that amount by fixing different rates of conservancy tax for various
categories of properties or whether the Corporation would have to find out
separately the expense required in respect of conservancy service for each
category of property and thereafter to fix such rate of conservancy tax for a category
of property as would be sufficient to meet the expense on the conservancy
service for that particular category. To put it differently is the rate of
conservancy tax for a class of property to be determined by taking into account
the total expense which the Corporation has to meet for conservancy service in
any official year or is it to be determined by taking into account the expense
which the Corporation has to meet for conservancy service for that particular
class of property ? After giving the matter our consideration, we are of the
view that what is required by section 129 is that before determining the rates
of conservancy Tax for different categories of properties the Corporation
should find out the total expense it would have to incur for the various
purposes mentioned in clause (b) of that section. After having ascertained the
total expense it would be permissible to the Corporation to fix different rates
of conservancy tax for various categories of properties. It is not essential,
except in cases mentioned in sub-sections (2) and (3) of section 137 that the
rate of conservancy tax for a particular category of properties should be such
as would be related only to the expense for conservancy service for that
particular category of properties. According to the proviso which has been
added to clause (b) of section 129 of the Corporations Act by Act 5 of 1970,
when determining under section 99 or section 150 the rate at which conservancy
tax shall be levied for any official year or part of an official year, the
Corporation may determine different rates for different classes of properties.
There is nothing in the above proviso which makes it obligatory 245 for the
Corporation to take into account separately the cost of conservancy service for
each class of property for which conservancy tax is fixed. Apart from the fact
that there is no statutory obligation for the Corporation to have separate
estimates of the costs of conservancy service for various classes of properties
referred to in the above proviso with a view to allocate the cost amongst
different classes of properties, it would not even be feasible to do so for
there would not be separate municipal drains for different classes of
properties. As already mentioned clause (b), of section 129 also takes into
account the expense required for efficiently maintaining and repairing the
municipal drains for finding, out the total expenditure for conservancy
service. The High Court, in our-opinion, was in error in striking down the
resolutions passed by the Corporation for the official years 1967-68, 1968-69,
1969-70 and 1970-71 to the extent to which they fixed the rate of conservancy
tax at 9 per cent in respect of textile mills and factories because of the
absence of sufficient data to show as to what would be the cost of conservancy
service for that particular category of properties. The affidavit filed on
behalf of the Corporation, extract from which has been reproduced above, shows
that the rates of conservancy tax for the different category of properties have
been fixed after taking into account the total expense for the conservancy
service. It is not possible to insist upon arithmetical accuracy in such
matters. A broad and general estimate of the cost of conservancy service and
the tax receipts. after taking into account the relevant factors would satisfy
the requirement of law.
We are unable to accede to the submission of
Mr. Tarkunde that in view of the construction which we are placing upon the
proviso to section 129(b), the proviso would be violative of article 14 of the
Constitution on account of excessive delegation of legislative power. As
already mentioned, the Corporation must keep in view the total expense it would
have to incur for the conservancy service before fixing the various rates of conservancy
tax. The different rates of conservancy tax have thus to be related to the
total cost of conservancy service to be borne by the Corporation. The
"opinion of the Corporation" mentioned in clause (b) of section 129
is formed after budget estimates are prepared in accordance with sections 95,
96 and 100 of the Corporations Act. According to the above provisions the
Commissioner is to make a statement of proposals as to the taxation which would
in his opinion be necessary or expedient to impose under the provisions of the
Act in the Annual Budget estimate of the next official year. The Standing
Committee then considers the estimates and proposals of the Commissioner, and
after having obtained from the Commissioner further details and information as
they think fit, the Committee frames the budget estimates.
The budget estimates contain proposals of
rates and extents of municipal taxes. The budget estimates are then printed and
the printed copies are sent to each municipal councillor. The budget estimates
are thereafter laid before the Corporation which then considers the same. In
considering the budget estimates the Corporation is entitled to refer them back
to the Standing Committee for further consideration or to adopt them us they
stand or subject to alterations. The entire procedure provides built-in
safeguards and lays down adequate guidelines in the matter of taxation. It
therefore cannot be said 246 that the legislature has not prescribed any
guiding principle for the Corporation for determining the rates of conservancy
tax. We agree with the High Court that the proviso to clause (b) of section 129
does not suffer from the vice of excessive delegation of legislative power.
Mr. Bhandare on behalf of the State of
Gujarat has assailed the finding of the High Court that section 406 (2) (e) and
section 411 (bb) are violative of article 14 and that rule 42 of the Taxation
Rules is void in so far as it has provided that if an appeal is preferred or
entertained against the tax, warrant shall not be issued for the recovery of
the amount of tax. The High Court in striking down section 406(2)(e) and
section 411(bb) relied upon its earlier judgment dated October 27, 1969 which
had been given before the addition of the proviso to section 406(2) (e) of by
Act 5 of 1970. According tothe earlier judgment, clause (e) of sub-section (2)
of section 406 classified the appellant filing appeals against tax and rateable
value into two clauses : (1) those who deposited the amount of tax assessed by
the Commissioner. and (2) those who did not. It was held that the above
classification had no rational nexus with 'the object of the provision for
appeal and that there was no reasonable justification for giving a right of
appeal to one class and denying it to the other. After referring to the
observations in the earlier judgment, the, High Court expressed the opinion in
the judgment under appeal that the addition of the proviso to section 406(2)
(e) by Act 5 of 1970 did not make any material difference as far as the
constitutional validity of the above provision was concerned. According to the
High Court, the proviso merely carves out an exception from the main provision
in section 406 (2) (e) and limits the applicability of themain provision to
appellants who can deposit the amount of tax without undue hardship. The
result, in the opinion of the High Court, was that the discrimination between
the appellants who deposited the amount of tax and the appellant who did not,
Which is the necessary consequence of the condition requiring deposit of the
amount of tax, still persists, though it is now limited to the class of
appellants who can deposit the amount of tax without undue hardship.
After bearing the learned counsel for the
parties, we are unable to subscribe to the view taken by the High Court.
Section 406 (2) (e) as amended states that no
appeal against a rateable value or tax fixed or charged under the Act shall be
entertained by the Judge in the case of an appeal against a tax or in the case
of an appeal made against a rateable value after a bill for any property tax
assessed upon such value has been presented to the appellant unless the amount
claimed from the appellant has been deposited by him with the Commissioner.
According to-the proviso to the above clause. where in any particular case the
Judge is of opinion that the deposit of the amount by the appellant will cause
undue hardship to him, the Judge may in his discretion dispense with such
deposit or part thereof, either unconditionally or subject to such conditions
as he may deem fit. The object of the above provision apparently is to ensure
the 247 deposit of the amount claimed from an appellant in case he, seeks to
file an appeal against a tax or against a rateable value after a bill for any
property tax assessed upon such value has been presented to him. power at the
same time is given to the appellate judge to relieve the appellant from the
rigour on the above provision in case the judge is of the opinion that it would
cause undue hardship to the appellant. The requirement about the deposit of the
amount claimed as a condition precedent to the entertainment of an appeal
which. seeks to engage the imposition or the quantum of that tax, in our
opinion, has not the effect of nullifying the right of appeal, especially when
we keep in view the fact that discretion is vested in the appellate judge to
dispense with the compliance of the above requirement. All that the, statutory
provision seeks to do is to regulate the exercise of the, right of appeal. The
object of the above provision is to keep in balance the right of appeal, which
is conferred upon a person who is aggrieved with the demand of tax made from
him, and the right of the Corporation to speedy recovery of the tax. The
impugned provision accordingly confers a right of appeal and at the same time
prevents the delay in the payment of the tax. We find ourselves unable to
accede to the argument that the impugned provision has the effect of creating a
discrimination as is offensive to the principle of equality enshrined in
article 14 of the Constitution. it is significant that the right of appeal is
conferred upon all persons who are aggrieved against the determination of tax
or rateable value. The bar created by section 406(2)(e) to the entertainment of
the appeal by a person who has not deposited the amount of tax due from him and
who is not able to show to the appellate judge that the deposit of the amount
would cause him undue hardship arises out of his own commission and default.
The above provision, in our opinion, has not the effect of making invidious
distinction or creating two classes with the object of meting out differential
treatment to them; it only spells out the consequences flowing from the
omission and default of a person who despite the fact that the deposit of the
amount found due from him-would cause him no hardship, declines of his own
volition to deposit that amount. The right of appeal is the creature of a
statute. Without a statutory provision creating such a right the aggrieved is
not entitled to file an appeal. We fail to understand as to why the legislature
while granting the right of appeal cannot impose conditions for the exercise of
such right. In the absence of any special reasons there appears to be no legal
or constitutional impediment to the imposition of such conditions. It is
permissible, for example. to prescribe a condition in criminal cases that
unless a convicted person is released on bail, he must surrender to custody
before his appeal against the sentence of imprisonment would be entertained.
Likewise, it is permissible to enact a law that no appeal shall lie against an
order relating to an assessment of tax unless the tax had been paid. Such a
provision was on the statute bookin section 30 of the Indian Income-tax Act,
1922. The proviso to that section provided that " . . . . . no appeal
shall lie against an order under sub-section (1) of section 46 unless the tax
had been paid".
248 the same is not abused by a recalcitrant
party and there is no difficulty in the enforcement of the order appealed
against in case the appeal is ultimately dismissed. It is open to the
legislature to impose an accompanying liability upon a party upon whom a legal
right is conferred or to prescribe conditions for the exercise of the right.
Any requirement for the discharge of that liability or the fulfillment of that
condition in case the party concerned seeks to avail of the said right is a
valid piece of legislation, and we can discern no contravention of article 14
in it. A disability or disadvantage arising out of a party's own default or
omission cannot be taken to be tantamount to the creation of two classes
offensive to article 14 of the Constitution, especially when that disability or
disadvantage operates upon all persons who make the default or omission.
Observations in the case of Hannach Cohen,
Exrx. of Sol Cohen, Deceased. and David E. Cohen, Intervener, Petitioners &
Anr. vs.Ben Industrial Loan Corporation & Ors. (1) lend some support to the
view we have taken. Headnote 10 which is based upon the observations in the
body of the judgment reads as under :"10. A State statute which requires
that in a stockholder's derivative action a plaintiff who owns less than 5 per
cent of the defendant corporation's outstanding shares, or shares having marked
value not exceeding $ 50,000, give security for the reasonable expenses,
including counsel fees, incurred by the corporation and by other parties
defendant, and which makes the plaintiff liable for such expenses if he does
not make good his claims, and subjects the amount of security to increase if
the progress of the litigation reveals that it is inadequate or to decrease if
it is proved to be excessive, does not violate the contract clause, or the due
process clause, or the equal protection clause of the Federal
Constitution." SO far as the constitutional validity of section 411(bb)
and rule 42 is concerned, it is the common case of the parties that it hinges
upon the validity of section 406(2) (e) and that in case we uphold the validity
of the last mentioned provision, the validity of the other two provisions would
have to be upheld. We accordingly uphold the constitutional validity of all the
three provisions.
The Ahmadabad Electricity Co. Ltd. petitioner
in writ petition No. 74 of 1972 is a licensee under the Indian Electricity Act,
1910. It has laid underground supply lines under most of the roads and public streets
in the city of Ahmadabad. The Corporation has in that connection assessed
property tax and made the petitioner-company liable to pay that tax on the
ground that the underground supply lines occupy space below the surface and
that the said space constitutes 'and. Section 12 of the Indian Electricity Act
confers a right upon a licensee to open and break up the soil and pavement of
any street, railway or tramway for laying down and placing electric supply
lines (1) 337 U.S. 539.
249 and other works. Although the roads and
public streets under which the petitioner-company has laid down underground
supply lines vest in the, Corporation under section 202 of the Corporation Act,
the liability to pay property tax in respect of the space in which supply lines
are laid is sought to be fastened upon the petitioner-company in view of the
provisions of section 139(1) of the Corporations Act.
According to section 139(1), subject to the
provisions of sub-section (2), with which we are not concerned, property taxes
assessed upon any premises shall be primarily leviable if the premises are held
immediately from the Government or from the Corporation, from the actual
occupier thereof. The word "premises" as defined in section 2(46)
includes land.
The case of the Corporation as set out in the
affidavit of Shri Narendra R. Desai, Town Development Officer of the
Corporation is that only such area of the land as is occupied by the underground
supply lines that is valued for the purposes of assessing property taxes. It is
stated that for the purpose of laying supply lines, the petitioner digs
trenches and lays down bricks to serve as bedding for the supply' lines. The
petitioner-company, it is urged, occupies by means of the supply lines that
area of land which is occupied by the bedding prepared for laying down the
supply lines.
Mr. Tarkunde on behalf of the
petitioner-company has urged that under entry 49 of the State List in the
Seventh Schedule to the Constitution, the State Legislature is empowered to
enact a law relating to taxes on lands and buildings. It is submitted that the
State Legislature has no competence under the above entry to enact a law for
levying tax in respect of the area occupied by the underground supply lines.
The word "land", according to the learned counsel, denotes the
surface of the land and not the underground strata. We are unable to accede to
the above submission. Entry 49 of List II contemplates a levy of tax on lands
and buildings or both as units. Such tax 'is directly imposed on lands and
buildings and bears a definite relation to it. Section 129 makes provision for
the levy of property tax on buildings and lands. Section 139 merely specifies
the persons who would be primarily responsible for the payment of that tax. The
'word "land" includes not only the face of the earth, but everything
under or over it. and has in its legal signification an indefinite extent
upward and downward, giving rise to the maxim, Cujus eat solumejus est usque ad
coelum (see p. 263 72 Corpus Juris Secondum).
According to Broom's Legal Maxims. 10th ed.,
P. 259, not only has land in its legal signification an indefinite extent
upwards, but in law it extends also downwards. so that whatever is in a direct
line between the surface and the centre of the earth by-the common law belongs
to the owner of the surface (not merely the surface, but all the land down to
the centre of the earth and up to the heavens) and hence the word
"land" which is nomen generalissimum, includes, not only the face of
the earth, but everything under it or over it.
In Rade on Rating, 11th ed.. it is stated on
page 14 "By far the largest number of persons rated are as 'occupiers of
land or houses'. The word 'land' as used in the 250 statute, must be understood
in the widest possible sense it includes not only the surface of the earth. but
everything under it, or over it. In Electric Telegraph Co. v. Salford
Overseers(1). Pollock, C. B. said 'There is no distinction between the occupying
land, by passing through a fixed point of space in the air to another fixed
point, or by passing in the same manner through land or water. Land extends
upwards as well as downward.
In the case of Mayor, Aldermen and
Councillors of the City of Westminster & Ors. v. The Southern Railway
Company, the Railway Assessment Authority and W. H. Smith & Son, Limited
& Ors.(2) Lord Russel of Killowen observed "Subject to special
enactments, people are rated as occupiers of land, land being understood as including
not only the space of the earth but all strata above or below." There can,
therefore, be no doubt that land in entry 49, of List It would include the
underground strata.
It may be stated that the word
"land" has also been defined in clause (30) of section 2 of the
Corporations Act to include land which is being built upon or is built upon or
covered with water. benefits to arise out of land. things attached to the earth
or Dermanently fastened to anything attached to the earth and rights created by
legislative enactment over the street. The definition is of inclusive nature
and does not exclude from its ambit the underground strata of the land.
It has been argued by Mr. Tarkunde that the
right to lay down supply lines under section 12 of the Indian Electricity Act
is in the nature of a statutory licence and is not a right in land. Hence the
right does not constitute land within entry 49 and is not taxable by the State
legislature.' This submission is wholly misconceived because what is taxed
under the Corporation Act is land. Section 139, as already mentioned earlier,
merely fastens the liability and states that the person primarily liable to pay
that tax would be the actual occupier. It is not the case of the Corporation
that the right of the petitioner company of laying and placing electric supply
lines constitutes land and as such the petitioner company is liable to pay
property tax. On the contrary, the liability is sought to be fastened on the
petitioner company because of the company being in occupation of the land
wherein electric supply lines have been laid and placed. Section 52 of the
Indian Easement Act, 1882, to which reference ha,; been made on behalf of the
petitioner-company. merely defines "license" and has no bearing on
the question with which we are concerned.
It cannot, in our opinion, be doubted that
the petitioner company is in occupation of the land wherein underground supply
line is laid.
(1) (1855) 11 Ex. 181, at p. 186, (2) [1936]
A.C. 511.
251 In England also a similar view was taken.
We may refer in this context to the case of The Assessment Committee of the
Holywell Union & Anr. v. The Halkyn District Mines Drainage Co.(1) The
Headnote of this case which was decided by the House of Lords, reads as under :
"Land may be occupied for the purpose of
and in connection with the enjoyment of an easement in such a manner as to make
the person so occupying rateable to the relief of the poor. , Such a person may
be rateable, though his occupation is exclusive only for certain purposes, and
though the owner of the soil has reserved to himself rights of possession
subordinate to the paramount right granted to the other. The test of
rateability is not whether the rights granted are corporeal or incorporeal, but
whether there is an occupation-which is a question of fact.
Where in pursuance of a statute the owner of
land granted to a drainage company the exclusive right of drainage through a
tunnel and water-course in his land, with the right of placing works in the
tunnel and watercourse, and of making other tunnels in connection therewith,
reserving to himself mineral and other rights :Held, reversing the decision of
the Court of Appeal, that the statute and grant gave the company not merely an
easement but possession of the tunnels and water-course, that the right
reserved to the owner were subordinate to the rights granted to the company,
and that the company were de facto in occupation of the tunnels and
water-course and rateable to the poor in respect thereof." "Along the
tunnel for a considerable distance the company have placed iron tubbing; in
parts they have placed brick arches, it seems to me that in these parts they
occupy land precisely in the same sense as a water company does by its pipes or
a tramway company by its rails, or a telephone company by the supports for its
wires." It was further observed :
"The question whether a person is an occupier
or not within the rating law is a question of fact, and does not depend upon
legal title.
The person legally possessed may not occupy.
On the other hand, a person may be occupier
either with or without the consent of the owner." Lord Herschell also
relied upon the case of Rex v. Chelsea Waterworks romnany (2) wherein a water
comnany to whom the Crown granted the right to lay down its pipes was held by
the Court of King's (1) [1895] A.C. 117.
(2) 5 D. & Ad. 156, 252 Bench to be
occupier of land and liable to be rated. Lord Macnaghteo in the above case
observed "Now, putting aside for a moment the reservations contained in
the deed of grant, can there be, any doubt as to the position of the company
for rating purposes as regards their authorized works ? The numerous cases
relating to gas companies, water companies, and tramways, place the matter
beyond question." Lord Davey observed in the above case "My Lords, I
agree with the learned judges in the Court of Appeal that the drainage company
are not owners of the soil of the tunnels of water-course. But that does not
seem to me conclusive on the question of their rateability in respect of their
occupation.
The right of the company may be an easement
or incorporeal right; but the assessment may be of such a character as requires
the occupation of land for its exercise, and confers upon the company a right
to occupy land during its continuance. According to a long course of authority,
the occupation of land under such circumstances is sufficient for rating
purposes, though unaccompanied by ownership of any portion of the soil. The law
was thus stated by Wightman J. in Reg. v. West Middlesex Waterworks(1) : In
this case', says the learned Judge, 'the first question is whether the company
are rateable for their mains, which are laid under the surface of the highway,
without any freehold or leasehold interest in the soil thereof being vested in
the company. We think they are. These mains are fixed capital vested in land.
The company is in possession, of the mains burred in the soil, and so is de
facto in possession of that space in the soil which the mains fill, for a
purpose beneficial to itself, The decisions are uniform in holding gas
companies to be rateable in respect of their mains, although the occupation of
such mains may be de facto merely, and without any legal or equitable estate in
the land where the mains lie, by force of some statute." Nothing cogent
has been argued before us as may induce us to take a view different from that
we have arrived at and which is also in accord with the view of the House of
Lords. We would, therefore, hold that the petitioner-company is in occupation
of the underground strata of the land through which their electric supply lines
had been laid.
It has been argued by Mr. Tarkunde that even
if the petitioner electricity company may be held to be actual occupier of the
underground space on which its supply line has been laid the petitioner company
does not hold the said space from the Corporation. It is urged that the petitioner-company
is in occupation of that space under a statute and not from the Corporation. In
order to hold that space from the Corporation, it was essential, according to
the learned counsel.
(1) I F,. & P. at P. 720, 253 that there
should have been some agreement between the petitioner company and the
Corporation or that the Corporation should have given its consent for that
purpose.
We are unable to accede to the above
submission Clause (a) of section 139(1) of the Corporations Act fastens the
liability for payment of property tax on the actual occupier of the premises
held immediately from the Government or from the Corporation. In order to
attract the liability under the above clause, it is not essential that there
should have been an agreement between the actual occupier and the Government or
the Corporation for the holding of the premises or that the holding must be
with the consent of the Government or the Corporation. The liability would
accrue even if the premises vesting in the Government or the Corporation are
occupied in pursuance of a statutory provision. The words "held
immediately from the Government or from the Corporation signify only the party
in whom the premises vest which are held by the actual occupier thereof.
Contention has also been advanced by Mr.
Tarkunde regarding the quantum of tax levied on and the extent of the land
alleged to have been occupied by the petitioner-company for the underground
supply lines. This is essentially a question of fact and would have to be
agitated before the authorities concerned, including the appellate authority.
As a result of the above, we dismiss writ
petitions Nos. 51, 60 to 74, 87 to 91 157, 492 to 503, 533, 534 and 583 of 1972
as also writ petitions Nos. 1866 to 1877 and 2046 of 1973 with costs. One
hearing fee. We also dismiss civil appeals Nos. 489 to 513 and 752 to 755 of
1973. We accept civil appeals Nos. 643 to 684 of 1973 and civil appeals Nos.
389 to 430 of 1974 and set aside the judgment of the High Court in so far as it
has struck down section 2(lA) (i), section 406 (2) (e), section 411 (bb) and
rule 42 of the Taxation Rules in Schedule A to the Corporations Act. We also
set aside the judgment of the High Court to the extent it has struck down
resolutions passed by the Corporation for official years 1967-68, 1968-69,
1969-70 and 1970-71 fixing the rate of conservancy tax at 9 per cent in respect
of textile mills and factories. 'The writ petitions which were filed in the
High Court by the respondents concerned are dismissed. The appellants shall be
entitled to their costs in these two sets of appeals. One hearing fee.
V. M. K.
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