Bombay High Court
Chennai Network Infrastructure Ltd. ... vs The Kalyan Dombivli Municipal ... on 18 April, 2017
Author: S.C Gupte
Bench: M.S. Sanklecha, S.C. Gupte
sat
wp 1275-2017.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 1275 OF 2017
Chennai Network Infrastructure Ltd. & Anr. ...Petitioners
vs.
The Kalyan Dombivli Municipal Corporation
& Ors. ...Respondents
Mr.V. Tulzapurkar, Senior Advocate with Mr.Nikhil Sakhardande, Rati
Lodha, Arun Sharma for Petitioners.
Mr.A.S. Rao for Respondents.
CORAM : M.S. SANKLECHA &
S.C. GUPTE, JJ.
RESERVED ON : 30 MARCH 2017
PRONOUNCED ON : 18 APRIL 2017
JUDGMENT (Per Gupte S.C. J.):
This petition, filed under Article 227 of the Constitution of India, challenges demand notices including a final demand notice concerning property tax in respect of the Petitioners' cellular sites situate within the municipal limits of the Respondent Corporation.
2. The Petitioners carry on business inter alia of providing infrastructure services including installation and maintenance of mobile towers and passive infrastructure therein. The Petitioners have installed and have been maintaining several cellular sites within the limits of Respondent No.1 municipal corporation. Respondent No.1 has raised demand notices for the Assessment Years 2015-16 and 2016-17, respectively, for sums of Rs.3,75,33,415/- and Rs.1,55,35,314/- towards 1 / 12 ::: Uploaded on - 19/04/2017 ::: Downloaded on - 20/04/2017 00:52:07 ::: wp 1275-2017.doc nineteen and four such sites of the Petitioners towards levy of property taxes including arrears. These have been followed by final demand notices under Section 41 of the Maharashtra Municipal Corporations Act ("Act") inter alia threatening to attach movable and immovable properties of Petitioner No.1.
3 One of the main challenges in the petition concerns the exigibility of mobile towers to property tax to be levied by municipal corporations. That issue has since been settled by the Supreme Court in its judgment in the case of Ahmedabad Municipal Corporation vs. G.T.L. Infrastructure Ltd.1, holding them to be exigible to property tax. The Petitioners do not dispute this position. They, however, persist in their challenge to the individual items of the demand raised on them, offering to pay the undisputed amount.
4 There are, in all, eleven items of tax claimed by the Respondent in its demand notices. The dispute pertains to five items in particular. These are (i) conservancy tax, (ii) water supply benefit tax, (ii) conservancy benefit tax, (iv) shasti on illegal constructions and (v) penalty. Of these, the Petitioners press their submissions only in respect of items (i),
(iv) and (v). The Petitioners state that they shall pursue their challenge in respect of items (ii) and (iii) before the appellate forum under Section 406 of the Act. The statement is accepted. All rights and contentions of the parties on merits of these items are kept open.
5 Let us now take up the three individual items pressed before us. The first item is conservancy tax levied by Respondent No.1. Section 1 AIR 2007 SC 597 2 / 12 ::: Uploaded on - 19/04/2017 ::: Downloaded on - 20/04/2017 00:52:07 ::: wp 1275-2017.doc 131 of the Act provides for such levy. The section is in the following terms :
"131. Conservancy tax or sewerage tax and sewerage benefit tax on what premises to be levied.
(1) The conservancy tax or sewerage tax shall be levied only in respect of premises,--
(a) situated in any portion of the City in which, public notice has been given by the Commissioner that the collection, removal and, disposal of all excrementious and polluted matter from privies, urinals and cesspools, will be undertaken by municipal agency; or
(b) in which, wherever situate, there is a privy, water-closet, cess-
pool, urinal, bathing place or cooking place connected by a drain with a municipal drain:
Provided that the said tax shall not be levied in respect of any premises situate in any portion of the City specified in clause (a), in or upon which, in the opinion of the Commissioner, no such matter as aforesaid accumulates or is deposited.
(2) Premises in respect of which the Commissioner has directed that a separate water-closet, privy or urinal need not be provided shall be deemed to be liable to the levy of conservancy tax if, but for such direction, the tax would be leviable in respect thereof.
(3) The sewerage benefit tax shall be levied in respect of all premises situated in the City."
Whereas conservancy tax (or sewerage tax) can be claimed only in respect of premises which are covered under clause (a) or clause (b) of sub-section (1) (in case of clause (a) subject to the proviso to sub-section (1), conservancy benefit tax (or sewerage benefit tax) can be levied in respect of all premises situated in the city. Clause (a) requires that the premises, in respect of which conservancy tax is to be levied, must be situated in any portion of the city in which a public notice has been given by the Commissioner that the collection, removal and disposal of all excrementious and polluted matter from privies, urinals and cesspools, will be undertaken by municipal agency. No such tax can, however, be levied if 3 / 12 ::: Uploaded on - 19/04/2017 ::: Downloaded on - 20/04/2017 00:52:07 ::: wp 1275-2017.doc the Commissioner is of the opinion that no such matter as aforesaid accumulates or is deposited in or upon such premises. For the purposes of clause (b), the premises may be situated anywhere in the municipal limits but there should be a privy, water-closet, cess-pool, urinal, bathing place or cooking place in such premises which must be connected by a drain with a municipal drain.
6 The argument of Mr.Tulzapurkar for the Petitioners is that there is no public notice as provided in clause (a) in respect of the portion of the city in which the subject premises, namely, the Petitioners' mobile towers, are situated. In any event, it is submitted that no such matter, as referred to in clause (a), accumulates or is deposited in or upon the subject premises. Alternatively, it is submitted that there is no privy, water-closet, cess-pool, urinal, bathing place or cooking place connected by drain with a municipal drain in the subject premises. The argument sounds attractive but then it could very well be addressed to the appellate forum under Section 406 of the Act. Any tax fixed or charged under the Act can, after all, be challenged by way of an appeal under Section 406. Mr.Tulzapurkar, however, submits that the error here is jurisdictional and calls for an interference under Article 227. Every levy, which is not supported by law, can always be termed as wanting in authority or jurisdiction. There is no reason why it should not be left to the appellate forum under the taxing statute. The Corporation in the present case has the requisite power to tax the subject if it finds that the requisite conditions of the taxing provision are satisfied. The grievance really is that the authority has come to an erroneous finding as to the existence of these conditions. That ordinarily should be a subject matter of a statutory appeal provided for by the legislature.
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7. Coming now to the last two items, namely, shasti on illegal constructions and penalty, Mr.Tulzapurkar has a two fold submission to offer. Firstly, it is submitted that there is no hearing given to the Petitioner before levying shasti (which is nothing but penalty provided for in Section 267A of the Act) or penalty, which is implicit in Section 267A of the Act. Secondly, it is submitted that there is no compliance on the part of the Respondent corporation of the order passed by this court on 7 May 2013, when the matter was carried by the Petitioners before this court in the first round of litigation. Originally, when demands were raised by the Corporation for levying shasti and penalty, the Petitioners had challenged the incidence of shasti and penalty (Writ Petition No.2377 of 2012) contending inter alia that these levies could be ordered only if the Petitioners' structures were unauthorized. It was submitted that there were deemed permissions for the construction of the mobile towers and their construction could not be termed as unauthorized. This court, in its order dated 7 May 2013, held that for levying any penalty (including shasti) the provisions of Section 267A of the Act have to be followed and that there was no such compliance in the present case. The court also observed that there was no finding recorded by the corporation that the structures were constructed unlawfully. This court accordingly set aside the demand with liberty to the corporation to follow the procedure in accordance with law and levy the penalty.
8 Before the merits of the levy are considered by this court at the instance of the Petitioners, the Petitioners will have to cross one important hurdle. The Act provides for a statutory remedy by way of an appeal under Section 406 of the Act. The Petitioners will have to satisfy this court as to 5 / 12 ::: Uploaded on - 19/04/2017 ::: Downloaded on - 20/04/2017 00:52:07 ::: wp 1275-2017.doc why their petition should be entertained despite the availability of an adequate alternative statutory remedy. Mr.Tulzapurkar submits that Section 406 of the Act provides for appeals against "any ratable value or capital value, as the case may be, or tax fixed or charged under the Act". Learned Counsel submits that the subject matter in the present case, being shasti or penalty, which is charged under Section 267A of the Act, is not "tax". It is submitted that no appeal lies under Section 406 to the appellate forum from such penalty. Mr.Tulzapurkar relies on judgments of the Supreme Court in the cases of Joint Commissioner of Income-tax, Surat vs. Saheli Leasing and Industries Ltd. 2 and Pratibha Processors vs. Union of India3, and the judgment of our court in the case of Commissioner of Income-tax vs. Jagdishprasad Ramnath 4 in support of his contentions. It is submitted, on the other hand, by learned Counsel for the Respondent Corporation that any penalty levied under Section 267A is included within the expression "tax" used in Section 406.
9 In Jagdishprasad Ramnath's case, our court considered the question as to whether there is a right of appeal against an order imposing penalty by way of interest calculated in the manner laid down under Section 18A of the Income Tax Act, 1931. Such interest was payable in a case where after the regular assessment had been paid, the Income-Tax officer discovered that no advance tax had been paid. The assessee in that case had not paid advance tax and accordingly, penal interest was imposed by the ITO under Section 18A. Though there was no specific provision of an appeal against an order passed under Section 18A, the argument of the assessee was that the general words used in the appellate provision of 2 (2010) 6 SCC 384 3 (1996) 11 SCC 101 4 1954 SC OnLine 93 : AIR 1955 Bom 255 6 / 12 ::: Uploaded on - 19/04/2017 ::: Downloaded on - 20/04/2017 00:52:07 ::: wp 1275-2017.doc Section 30(1) (i.e. that an assessee denying his liability to be assessed under the Act can appeal against the order of the Income-Tax Officer) covered the imposition of interest under Section 18A. The court held that the liability referred to in Section 30(1) was the liability to pay 'tax' and not liability to pay a 'penalty'. The Court distinguished between a tax and a penalty in this context. It held that the main purpose of a taxing statute was to lay down a machinery for recovery of tax. The court observed as follows :
"As assessee is liable to pay tax if he has a taxable income. An assessee is not liable to pay a penalty unless he commits a default and the object of a taxing statute is not to recover a penalty from the assessee but to recover tax. The recovery of penalty is merely incidental and only arises when there is a default on the part of the assessee."
The court followed up these observations by holding further that the scheme of the Act was that penal interest must follow upon the regular assessment; the appeal should be against the regular assessment; and in the regular assessment it should be open to the assessee to take all points including the point that the income of the assessee did not qualify for application of Section 18A or that such income should be reduced so that as a consequence even penal interest under Section 18A would also get reduced. The Court, in the premises, observed that the legislature did not think it necessary that a separate right of appeal should be given to the assessee to appeal against the quantum of penal interest.
10. In Saheli Leasing & Industries Ltd. (supra), the Supreme Court brought out the distinction between 'tax' and 'penalty' in the context of a question posed to it regarding leviability of penalty under Section 7 / 12 ::: Uploaded on - 19/04/2017 ::: Downloaded on - 20/04/2017 00:52:07 ::: wp 1275-2017.doc 271(1)(c) of the Income Tax Act, 1961, even if reassessed income was loss/nil. The court held that the purpose behind Section 271(1)(c) was to penalise the assessee for (a) concealing particulars of income and/or (b) furnishing inadequate particulars of such income. The section, accordingly, provided for penalty not only in a case where, after addition of the concealed income, the assessment yields positive income, but also in a case where addition does not so yield positive income, as in the case of such addition reducing the returned loss but still showing the reassessed income to be in the negative. Whilst holding that even if no tax was payable, penalty was still leviable, the court observed that both provisions, i.e. penalty and charging provisions, had "different objects and consequences". They operated in different fields qua the assessee. In Pratibha Processors's case (supra), the Supreme Court was concerned with "interest" payable on duty under Section 61(1) of the Customs Act, 1962 in the case of late clearance of goods. The Act provided for a specified period for clearance of warehoused goods. The court held that interest for delayed clearance was payable on the amount of duty "payable or due" on the warehoused goods for the period from the expiry of period specified or granted till the date of clearance of the goods from the warehouse. If on account of the goods not being exigible to duty on the date of their clearance, there was no duty payable, there was no question of payment of any interest under Section 61(1), such interest being "a mere 'accessory' of the principal and if the principal is not recoverable / payable, so is the interest on it." The following observations of the Supreme Court are in this particular context:
"13. In fiscal Statutes, the import of the words -- "tax', 'interest', "penalty", etc. are well known They are different concepts. Tax is the amount payable as a result of the charging provision. It is a compulsory exaction of money by a public authority for public purposes, the payment of which is 8 / 12 ::: Uploaded on - 19/04/2017 ::: Downloaded on - 20/04/2017 00:52:07 ::: wp 1275-2017.doc enforced by law. Penalty is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of the particular statute. Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty-- which is penal in character."
11 What is important to notice from the law laid down by our court as well as the Supreme Court, as above, is that there is a clear distinction between the terms 'tax', 'interest' and 'penalty' used in fiscal statutes, but such distinction must be understood in the context in which these terms are used in the statute. Whilst 'tax' is a compulsory exaction of money by a public authority for public purposes, the payment of which is enforced by law, 'penalty' is ordinarily levied for some contumacious conduct or deliberate violation of any provision of the particular statute. Interest, on the other hand, is compulsory in nature and imposed on the assessee for withholding payment of tax as and when it is due and payable. These are the ordinary connotations of the terms. But, though these ordinary connotations may be well known, it is clearly permissible to the legislature to use the terms interchangeably. It may well be that the term 'interest' in a particular fiscal statute is used in the sense of 'penalty' or the word 'penalty' is used in the sense of a 'tax', namely, compulsory exaction of money by a public authority for public purposes.
12 Let us now consider the words "penalty" (used in Section 267A of the Act) and "tax" (used in Section 406 of the Act) in our case. In the first place, it is important to remember that we are concerned here with a statute providing for municipal taxation. Municipal taxes are compulsory exactions by local bodies for the public purpose of municipal governance.
9 / 12 ::: Uploaded on - 19/04/2017 ::: Downloaded on - 20/04/2017 00:52:07 :::wp 1275-2017.doc These taxes, which generally go by the name 'property taxes', are leviable on properties coming within the municipal limits. In our case, Sections 128A and 129 provide for property taxes on structures within the city, which are legally erected, whereas Section 267A provides for penalty on structures within the city which are unauthorisedly erected. Both are compulsory exactions. Is it then to be supposed that the former exaction is a 'tax', whilst the latter is not, merely because the term used in the latter case is 'penalty' as opposed to 'tax' in the former. The subject matter of taxation is 'property' within the city limits. It is perfectly permissible for a municipal corporation to levy different rates of taxes on authorized property and unauthorized property. If the statute means to tax both properties, would the tax on unauthorised property be any less the 'tax' simply because the term used to describe it is 'penalty'. It is also important to remember that 'penalty' provided for in this case (under Section 267A) is not for breach of the statute or for some contumacious conduct concerning taxation under the statute, but for an altogether different taxing subject, namely, unauthorized structures within the city limits. Secondly, it is important to note that determination and collection of such penalty is to be "as if the amount thereof were a property tax" by virtue of sub-section (2) Section 267A of the Act. If for determination and collection, a penalty is to be treated as 'tax', is it to be supposed that it is not to be treated as 'tax', when it comes to appeal under Section 406. Any 'tax' levied by a local body is appealable under Section 406. Any appeal naturally bears on the determination and collection of such tax. If the assessee is right in the present case, we would have to come to a startling conclusion that though for determination and collection under the Act, there is no difference between 'tax' under Sections 128A and 129, and 'penalty' under Section 267A, such determination and collection are subject to appeal in the case of 10 / 12 ::: Uploaded on - 19/04/2017 ::: Downloaded on - 20/04/2017 00:52:07 ::: wp 1275-2017.doc tax under Sections 128A and 129 but not in the case of penalty under Section 267A. These reasons may be good enough to hold the term 'tax' under sub-section (1) of Section 406 to be inclusive of 'penalty' under Section 267A, but that is not all. A clincher comes in sub-section (2) of Section 406, which provides for conditions for entertaining appeals filed under sub-section (1) of Section 406. Sub-section (1) inter alia provides that subject to the provisions which are contained after it, appeals against 'tax' fixed or charged under the Act shall be heard and determined by the judge (defined under Section 2(29) of the Act). Sub-section (2) inter alia provides that no such appeal shall be entertained in the case of an appeal against any tax including interest and penalty imposed in respect of which provision exists under the Act for a complaint to be made to the Commissioner against the demand, unless such complaint has previously been made and disposed of. That clearly gives away the intention of the legislature to treat penalty as tax for the purposes of Section 406 and make any fixation or charge of penalty appealable. Mr.Tulzapurkar contends that this provision merely deals with those cases where a provision exists under the Act for a complaint to be made to the Commissioner against the demand of interest or penalty charged. That is not the point. The provision is clearly to provide for the cases suggested by Mr.Tulzapurkar. But the corollary is that interest or penalty charged under the Act, by definition, comes within the expression 'tax' used in sub-section (1) of Section 406. Appeals merely lie against the matters provides for in sub-section (1), which include 'tax'. Sub-section (2) carves out certain cases from out of the larger class of appealable matters, where special conditions for filing of appeals are provided. There is no reason to specially provide for cases of appeals from interest or penalty charged (where there is a provision of complaint to the Commissioner), if such cases were not to fall, in the first 11 / 12 ::: Uploaded on - 19/04/2017 ::: Downloaded on - 20/04/2017 00:52:07 ::: wp 1275-2017.doc place, in the category of appealable cases. For all these reasons, it is obvious that any interest or penalty charged is included in the expression 'tax' used in Section 406(1) and is appealable as such.
13 Once we come to the conclusion that penalty charged under Section 267A is appealable, we see no reason not to relegate the aggrieved assessee to the statutory appellate forum. We have already discussed this aspect in the order above whilst dealing with conservancy tax under Section 131 of the Act. All contentions of the Petitioner on merits of the levy, some of which have been noted above, are open to it, to be urged before the appellate forum. We express no opinion on them.
14 In the premises, the petition cannot be entertained and is dismissed. In the facts of the case, there will be no order as to costs.
(S.C. GUPTE, J.) (M. S. SANKLECHA, J.) 12 / 12 ::: Uploaded on - 19/04/2017 ::: Downloaded on - 20/04/2017 00:52:07 :::