Bombay High Court
Mrs. Rubabai Widow Of Abdul-Hussein ... vs Municipal Corporation Of Gr. Bom. And ... on 9 June, 1993
Equivalent citations: 1994(1)BOMCR322
Author: Sujata Manohar
Bench: Sujata Manohar
JUDGMENT Sujata Manohar, J.
1. The petitioner are the owners of a building bearing Ward No. 4874(1-2), Street No. 68-70, situated at Clive Road, Bombay-400 009. The building consists of a basement, a ground floor, a mezzanine floor and five upper floors. The ground floor and the mezzanine floor of this building were let out by the petitioners to the Post and Telegraph Department of the Union of India up to 30-6-1985.
2. Under the Maharashtra Education and Employment Guarantee (Cess) Act, 1962, the Government of Maharashtra has levied with effect from 1st April, 1975 an Education Cess and an Employment Guarantee Cess on the said building. The petitioners received bills for property taxes including Education Cess and Employment Guarantee Cess for the period 1-4-1983 to 31-3-1985 from the 1st respondents. Despite notices of demand the petitioners did not pay the said bills and hence a warrant of attachment dated 11-12-1984 was issued and attachment levied on the said property for non payment of the said bills. The warrant of attachment sets out that the warrant of attachment is for non payment of a sum of Rs. 1,41,530.50 ps which sum consists of property taxes amounting to Rs. 1,35,429/-, penalty of Rs. 16,086.40 ps., notice fee of Rs. 15/- and Warrant cost of Rs. 10/- amounting in all to Rs. 1,41,540.40 ps. This warrant of attachment has been challenged in the present petition. According to the petitioners, the demand for Education and Employment Guarantee cess is not correctly calculated on the said building and that the portion of the building which is occupied by the Post and Telegraph Department of the Government of India is exempt from the payment of Education Cess and Employment Guarantee Cess. The petitioners claim credit for the Cess paid by them under these heads right from 1st April, 1975 up to 1st April, 1983. The petitioners have, after the warrant of attachment, deposited with the respondents an amount of Rs. 86,740.51 ps in respect of the said claims made by the respondents. According to the petitioners, if credit is given to the petitioners for the Education and Employment Guarantee Cesses mistakenly paid earlier by the petitioners for the period 1-4-1975 to 31-3-1983, which, according to the petitioners, amount to Rs. 75,138/-, nothing is now due and payable by the petitioners to the respondents and hence the warrant of attachment should be set aside.
3. In order to examine the contentions raised by both the sides, it is necessary to look at the relevant provisions of the Maharashtra Education and Employment Guarantee (Cess) Act, 1962. Under section 2(a) of this Act, annual letting value of the property in question will have to be determined with reference to the Bombay Municipal Corporation Act of 1888. Similarly under section 2(g) of this Act, the terms "lands and buildings" have the same meanings assigned to them in the relevant Municipal Law i.e. the Bombay Municipal Corporation Act, in the present case. Under section 3(r) of the Bombay Municipal Corporation Act, 1888 the word "lands" is defined extensively 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 and rights created by legislative enactment over any street. Under section 3(s) of the Bombay Municipal Corporation Act, 1888, the term "buildings" is also defined extensively to include a house, out-house, stable, shed, hut ............ and every other such structure, whether of masonry, bricks, wood, mud, metal or any other material whatever.
4. Chapter II of the Maharashtra Education and Employment Guarantee (Cess) Act, 1962, deals with Education Cess. Under section 4 of the said Act which falls under Chapter II, there shall be levied and collected "(a) with effect from the 1st day of April 1974, a tax on lands and buildings in a municipal area at the rates specified in Schedule A hereto annexed. Schedule A provides for Slabs of annual letting value, rate to be charged in respect of land or building used or intended to be used for residential purpose and for non residential purpose. Different rates are provided for residential and non residential buildings. Explanation 2 to Schedule A provides that where any land or building is used partly for residential purpose and partly for non-residential purpose, then for the purpose of determining the rate of tax specified in Schedule A (which is related to the annual letting value of the building), the annual letting value of the entire land or building is to be taken into account; but for calculating the actual amount of tax at this rate, the annual letting value of the portion of land or building used or intended to be used for residential purpose only, or for non-residential purpose only, (as the case may be) shall be taken into account. In other words, by virtue of this Explanation, if a building is used both for residential and non-residential purposes, the tax will have to be calculated separately on the residential portion of the building and the non-residential portion of the building at the rates specified in Schedule A in respect of each. However, the rate of tax in respect of each of these portions will be determined with reference to the annual letting value of the entire building. For example if the annual letting value of the entire building is Rs. 3000 or more but less than Rs. 6000, then as per Schedule-A, the rate to be charged for the portion of the building used for residential purpose will be 5% of the annual letting value of the portion which is used for residential purpose, while it will be 10% of the annual letting value of the portion which is used for non-residential purpose. Similarly if the annual letting value of the entire building is more than Rs. 6000 then the rate for the residential portion goes up to 6% and the rate for the non-residential portion goes up to 12%. Clearly, therefore, the annual letting value of the residential and non-residential portions has to be calculated and Education Cess is required to be calculated on these portion separately as per Schedule A.
5. Chapter II-A of the said Act deals with Employment Cess. Section 6-B which falls under this Chapter provides that there shall also be levied and collected "(a) with effect from 1st day of April 1975, a further tax on lands and buildings in a municipal area used or intended to be used for non-residential purpose at the rates specified in Schedule C hereto annexed. Schedule C provides for the slabs of annual letting value and the rate of tax to be levied. Section 6C(1) & (2) are as follows :
"Section 6C(1) For the purposes of Clause (a) of section 6-B, lands or buildings used for a non-residential purpose means lands or buildings used for a non-residential purpose (as defined in Explanation 1 in Schedule A.) (2) Where any land or building is used partly for a residential purpose and partly for a non-residential purpose, then for the purpose of determining the rate of tax specified in Schedule C, the annual letting value of the entire land or building shall be taken into account; but for calculating the actual amount of the tax at the rate aforesaid, the annual letting value of the portion of the land or building used or intended to be used for non-residential purpose only shall be taken into account."
Therefore, section 6C(2) covers cases where a building may be used partly for residential purpose and partly for non-residential purpose. It provides that for determining the rates of tax the annual letting value of the entire building shall be taken into account but the actual tax has to be calculated only on the portion of the land or building used or intended to be used for non-residential purpose by taking into account the annual letting value of this portion. In other words, the Employment Guarantee Cess has to be calculated only on that portion which is used for non-residential purpose on the basis of its annual letting value although the rate of tax has to be calculated on the basis of the annual letting value of the entire building.
6. Section 7 is as follows :
"Section 7. The following lands and buildings shall be exempted from payment of the tax on lands and buildings, that is to say :---
(a) lands and buildings vesting in the Central Government;
(b) lands and buildings vesting in the State Government or belonging to a municipality, a Zilla Parishad or Cantonment Board and used exclusively for public purposes, and not used or intended to be used for purposes of profit;
(c) .................................................
(d) ..................................................
(e) lands and buildings or portions thereof belonging to a public trust registered under the Bombay Public Trusts Act, 1950 (or a wakf registered under the Wakf Act, 1954) and exclusively occupied for public worship or for charitable puposes."
Under section 7(a) therefore lands and buildings vesting in the Central Government are, inter alia, exempt from payment of Education and Employment Guarantee Cess. Similarly, under section 7(b), lands and buildings vesting in the State Government and used exclusively for public purposes are also exempt from payment of Education and Employment Guarantee Cess. Section 7(b) has been interpreted by a Division Bench of this Court at Nagpur in the case of Akola Municipal Council v. Nilkanth Anant Athalye, 1977 Mh.L.J. at page 773. The Division Bench has held that the words "vesting in" in section 7(b) also cover a case where the building is taken by the State Government on lease and the State Government is in possession of that building under such lease. The Division Bench negatived the contention that only those buildings which are owned by the State Government shall be so exempted. The same phrase occurs in section 7(a) and the ratio of the Division Bench in this case is directly applicable to the interpretation of section 7(a) also. In view of the judgment of the Division Bench, the Government of Maharashtra has issued a Circular dated 18-2-1980 bearing No. EDC-4978/24770-1-2 setting out that the Education Cess as well as Employment Guarantee Cess "should not be levied on the premises taken on lease by the State Government/Central Government Department." The Circular also clearly contemplates a portion of a building being taken on lease by the State or Central Government since it refers to premises and not the entire building.
7. It is urged by the respondents that this Circular will only apply from 18-2-1980 and that exemption is not available for any period prior to 18-2-1980. This submission is not correct. The Circular merely sets out the legal position as laid down in the judgment of the Division Bench of this Court in Akola Municipal Council v. Nilkanth, (supra). It does not confer any new exemption or any new benefit upon the assessee. The Circular merely clarifies the provisions of law as set out in section 7 of the said Act as interpreted by the Division Bench. Therefore, this exemption is available and has always been available to the assessee. Therefore, lands and buildings which are leased by the Central Government are also exempt from Education and Employment Gurantee Cess.
8. It is, however, urged by the respondents that this exemption is available only in those cases where the entire building or land is leased by the Central Government. If only a portion of the building is leased by the Central Government, as in the present case, this exemption is not available. This argument does not appeal to me. Section 7 does not say that entire land or building should vest in the Central Government. The words used are "lands and buildings vesting in the Central Government". Under section 4 also which is a charging section for Education Cess, the same phrase "a tax on lands and buildings" is used. Schedule A, however, clearly makes a distinction between different portions of the building which may be used for residential or non-residential purposes and tax at different rates is charged on these portions. Similarly under section 6-B which is the charging section for Employment Guarantee Cess, also the same phrase "a tax on lands and buildings" is used. It deals with tax on lands and buildings used or intended to be used for non-residential purpose. If the interpretation put by the respondents on the phrase "lands and buildings" is to be accepted, then the charging section 6-B levies tax only on lands and buildings which are used entirely for non-residential purpose. A portion of a building which is used for non-residential purpose would not be covered by the charging section. This is clearly not the intention of the legislature and this is made clear by the section which follows immediately thereafter namely section 6-C. Section 6-C(2) refers to buildings partly used for residential purpose and partly for non-residential purpose. Therefore, clearly such buildings also fall within the ambit of the charging section 6-B. Therefore, the phrase "lands and buildings" which is used throughout the Act in its charging sections as well as in the exemption section refers to a portion of such buildings and lands also, and not merely to cases where the entire building or the entire land is used for the purpose which may be required by the relevant sections. The argument, therefore, that section 7 which confers an exemption, will only cover those cases where the entire land or building is vested in the Central Government or leased by it and not cases where only a portion thereof is vested in the Central Government or leased by it, cannot be accepted. Even portions of buildings which vest in the Central Government are covered by section 7(a). In fact even the clarificatory circular referred to earlier states that "premises" let out to the Central Government/State Government are exempt. Therefore, in the present case, the ground and mezzanine floors which were let out to the Post and Telegraph Department of the Central Government at the material time are exempt from payment of Education and Employment Guarantee Cess. The rest of the building is, of course, not so exempt.
9. The petitioners, have, therefore, rightly claimed credit for the payment of Education and Employment Guarantee Cess in respect of the ground and mezzanine floors of the said property from 1-4-1975 to 31-3-1985, as this amount is collected from the petitioners without the authority of law. It is, however, urged by the Ld. Advocate for the 1st respondents that the petitioners have not made any application for refund of this amount. Hence this amount cannot be adjusted against their pending bills. The only section relied upon by the learned Advocate for the respondents is section 179 of the Bombay Municipal Corporation Act. Under section 179 of the Bombay Municipal Corporation Act, it is in the discretion of the Commissioner to disallow any claim for refund of any property tax unless an application therefor is made to him in writing within thirty days after the expiry of the half year to which the claim relates, accompanied by the bill presented to the applicant under section 200 for the amount of the tax from which the refund is claimed. Even under this section there is no complete bar from claiming refund if no application is made. The matter is left to the discretion of the Commissioner. Moreover, it is pointed out by the petitioners that sections 174 to 179 deal only with refund of property taxes for vacancies in any buildings or lands or any portion thereof. Obviously, in respect of any portion of the building or land which is vacant, the petitioners would have to make an application to the Commissioner for refund; but in case like the present one where the Cess is collected without the authority of law, the question of making any application under section 179 does not arise. Sections 174 to 179 all deal with applications for refund where there are vacancies. These sections would not apply in the present case. Even if they did, the Commissioner can, in his discretion, allow a refund. Looking to the fact that both the petitioners and the respondents were under a mistaken notion of law that the said Cess was payable in respect of these floors, this is a fit case where adjustment can be allowed.
10. The petitioners have also submitted that in view of the fact that an excess amount had been collected in the past from them in respect of Education and Employment Guarantee Cess, they should not be charged any penalty in respect of non-payment of property taxes for the period 1-4-1983 to 31-3-1985. This submission, however, cannot be accepted. Section 207-A of the Bombay Municipal Corporation Act, deals with levy of penalty which provides that if the person liable for the payment of any tax in respect of which a notice of demand has been served under section 202 does not pay the sum due within 3 months of the service of such notice and if no appeal is preferred against the said tax, he shall be liable to pay such amount by way of penalty as may be determined by the Commissioner not exceeding twenty per cent of the amount of the tax. The provisions of this section are attracted in the present case. The petitioners have not disputed service of the notice of demand or non payment of the amount due within 3 months of the service of such notice, nor have they preferred any appeal. Hence the petitioners are liable to pay the penalty amount. The penalty amount, however, will have to be calculated by excluding from the amounts due and payable by the petitioners, the Education and Employment Guarantee Cess in respect of the portions rented out to the Post and Telegraph Department of the Central Government.
11. In the premises, the respondents are directed to recalculate the amount due and payable by the petitioners to the respondents by way of general taxes, Education and Employment Guarantee Cess (by excluding the portion of the property rented out to the Post and Telegraph Department from levy of Education and Employment Guarantee Cess for the period in question) and penalty, after giving credit to the petitioners for the amount already paid by them for the said period. They are directed to give credit to the petitioners in respect of the Education and Employment Guarantee Cess already collected by the respondents in respect of the portion rented out to the Post and Telegraph Department for the earlier periods. The respondents shall serve on the petitioners a fresh notice of demand for the amount so found due and payable by the petitioners to the respondents. Upon service of such notice, the petitioners shall pay the said amount within 2 weeks thereafter. If the amount is not paid within 2 weeks, respondents will be at liberty to realise the said amount by the sale of the said building.
12. Rule is also made absolute in terms of prayers (b) and (d). The first respondents shall give a notice to the petitioners before recalculating the amount of taxes and penalty due and payable by the petitioners to the respondents for the said period and give an opportunity to the petitioner to make a representation to the 1st respondents if they so desire. No order as to costs.