Punjab-Haryana High Court
Vinod Paper Mills Limited vs The Municipal Committee And Ors. on 6 October, 2004
Equivalent citations: (2005)139PLR575
Author: Ajay Kumar Mittal
Bench: Ajay Kumar Mittal
JUDGMENT Ajay Kumar Mittal, J.
1. This is a petition under Article 226 of the Constitution of India seeking to quash orders Annexures P3 and P7, the former being passed on 9.2.1983 by the Executive Officer of the Municipal Committee, Maierkotla (hereinafter to be referred as "Committee") and the latter being passed on 10.12.1984 by the Secretary to Government of Punjab, Department of Local Government, Chandigarh.
2. The petitioner-Company is engaged in the manufacture of paper as its factory in Maierkotla. For the purpose of levy of house tax, the premises of the petitioner's factory were assessed by the Committee at the annual value of Rs. 1.80 lacs for the year 198081. Originally, these premises were assessed at annual value of Rs. 3.80 lacs, but on objections being filed by the petitioner, the assessment was reduced to Rs. 1.80 lacs which was duly accepted by the petitioner and was maintained for the year 1981-82 and accordingly a sum of Rs. 27,000/- per annum was levied as house tax. The Committee issued a notice (Annexure P1) under Section 67 of the Punjab Municipal Act, 1911 (for short "the 1911 Act") whereby assessment of the annual value of the petitioner's premises was proposed to be increased to Rs. 3.96 lacs for the year 1982-83. The petitioner filed objections dated 5.1.1983 (Annexure P2) against the proposed increase of assessment of the annual value. The objections of the petitioner were dismissed by the Committee by order dated 9.2.1983 (Annexure P3). Being aggrieved by the said order, the petitioner preferred appeal under Section 84 of the 1911 Act raising a primary plea that no new construction had been made in the building and the alleged report of the Tax Inspector, on the basis of which increase in the assessment of the annual value has been sought, was wholly wrong. The appeal of the petitioner was accepted by the Deputy Commissioner, Sangrur by order dated 16.11.1983 (Annexure P5) whereby order Annexure P-3 passed by the Committee was set aside. The matter did not rest there and the Committee filed a revision before the State Government under Section 237 of the 1911 Act challenging the order Annexure P5 passed by the Deputy Commissioner. The revision was accepted by the Secretary to Government of Punjab, Department of Local Government by order Annexure P7 observing that the assessment was enhanced not because of the additions in the property reported by the Tax Inspector but because of the reason that the previous assessment had been erroneously undervalued by the Committee.
3. This is how the petitioner has challenged in this petition the orders Annexures P3 and P7 on various grounds set out in the writ petition.
4. Learned counsel for the petitioner submitted that the annual value of the property has to be assessed under Section 3(1 )(b) of the 1911 Act and in case it cannot be determined under clause (b) of sub-section (1) of Section 3, then only recourse can be had to clause (c) of sub-section (1) of Section 3. According to the learned counsel for the petitioner, the annual value under Section 3(1 )(b) of 1911 Act has to be determined on the basis of fair rent as has been held in Devon Daulat Rai Kapoor Etc. etc. v. New Delhi Municipal Committee and Anr. etc. etc., A.I.R. 1980 S.C. 541 and Dr. Balbir Singh and Ors. etc. v. M/s M.C.D. and Ors. etc., A.I.R. 1985 S.C. 339. The counsel further submitted that there cannot be any revision of the annual value unless it is shown that some additions or alterations had been made in the building after the preparation of the last assessment list. He further submitted that there is no addition or alteration in the building in question after the assessment list was last prepared and therefore, the action of the respondents in enhancing the annual value is legally not sustainable. Learned counsel, also submitted that under Section 67 of the 1911 Act, a change in the assessment list can be made only if the property was earlier erroneously valued or assessed through fraud, accident or mistake, and not otherwise and the burden lies upon the Municipal Committee to establish this pre-condition in exercise of powers conferred by the above section. The exact nature and detail of the fraud, accident or mistake which had resulted in under-valuation at the time of previous assessment, must be proved by a positive evidence. Failure to provide such proof or an increase in the assessment for any other reason would render the exercise of power under this section as bad in law. The counsel then submitted that as per the facts of the present case, the Municipal Committee has failed to discharge its burden which lay upon it, viz. to establish fraud or mistake on the basis of which it wanted to re-determine the correct annual value of the property.
5. Learned counsel for the respondents by referring to the written statement filed on behalf of the respondents by the Executive Officer. Municipal Committee, Malerkotla, tried to justify the action of the respondents and defended the orders Annexures P3 and P7. In the written statement filed by the respondents, all that has been stated is that aggregate value of the building and the land of the mill came to Rs. 79.20 lacs and the assessment at the rate of 5% of the value of the factory building and the land under Section 3(1) (c) of the 1911 Act would thus come to Rs. 3.96 lacs. The Municipal Committee, however, reduced the proposed assessment value to Rs. 2.80 lacs and after allowing 10% deductions, determined the same to be Rs. 2.52 lacs. Thus, the assessment had been under valued.
6. I have heard learned counsel for the parties and have perused the records as well as the relevant provisions of the 1911 Act.
7. The Municipal Committee has sought to enhance the assessment for the year 1982-83 on the ground that the annual value was under valued as under Section 3(1)(c) of the 1911 Act, the annual value would be Rs. 2.52 lacs. The Municipal Committee has done this without first following procedure under Section 3(1)(b) of the 1911 Act. The action of the respondents is contrary to the Full Bench decision of this Court, reported in Banarsi Dass Mahajan v. The State of Punjab and Anr., (1990-1)97 P.L.R. (F.B.) page 1 wherein, while interpreting the provisions of Sections 93(b) and 93(c) of the Punjab Municipal Corporation Act, 1976, which are in pari materia with Sections 31(1)(b) and 3(1)(c) of the 1911 Act, in paras 21 and 27, it was laid down as under:-
Para 21:- "Before leaving this aspect of the case it is significant to note that clause (c) of Section 93 of the Corporation Act has an identical provisions as in the Municipal Act and the Supreme Court in Devan Daulat Rai Kapoor's case (supra) was not unaware of that provision when examining the whole provision. Repeatingly and summingly, we hold that the Commissioner must first do the exercise under clause (b) to determine at what figure the building may reasonably be expected to let in accordance with the principles of the Rent Laws, give permissible deductions in the light of the Explanations, deviate to sub-clause (ii) of the first proviso if he can but keep foothold on his deliberations under clause (b), apply both the provisos in the above manner and then determine the annual rateable value. If he is unable to do so for any substantive reason, then he may take resort to clause (c) again keeping a foothold thereon and applying the provisos when applicable so as to arrive at a just figure. In so far as clause (c) is concerned, it provides determining the estimated present cost of erection of the building minus depreciation and adding to it estimated market value of the site and of any land attached to the building, from which 5 per cent of the sum total represents the gross annual amount. Now it is known that the cost of erection of buildings keeps rapidly changing, the rates of depreciation are minimal and the estimated market value of the site and any land attached to the building goes sky rocketing. The whole thing is inchoate in clause (c). The employment of this clause, as preferred by learned counsel for the Corporation, on the prospect of legitimate expectancies of a higher revenue dividend, and a justified measure to meet the cost of running day to day affairs of the Corporation which, at the Bar, were stated to be bordering on bankruptcy, cannot be permitted. The Legislature designedly made clause (c) apply only in the situation when the gross annual value of a building cannot be determined under clause (b). As stated before, to both clauses do the provisos apply but as an integral part the said two clauses and that too as safeguards, so that neither the Corporation nor the tax-payer is dealt with unjustly. In the event of conflict between two successful determinations, the determination which is favorable to the tax-payer would normally have to govern the field, and we hold it so, well settled as it is as a principle.
Para 27:- Even if there is a tenancy or there is not, the concept of the hypothetical tenant still has a brooding influence in the determination of the fair rent. To repeat we say that cause (b) of Section 93 has first to be exhausted and when gross annual letting value can in no event be determined under the said clause, then the gross annual value may be determined under clause (c), and both the provisos, and in particular the first proviso cannot be read in isolation so as to render otiose the main provisions of clauses (b) and (c). Viewed in this light, we are of the confirmed view that Punjab Concast Steel Ltd's case, (1985-1)87 P.L.R. 757 (supra) was rightly decided and the decisions to the contrary i.e. A.R. Skinner's (1969)71 P.L.R. 205 and Hukam Chand's 1979(1) L.L.R. 124 cases (supra) and other cases of the kind are no good law in view of Devan Daulat Rai Kapoor's A.I.R. 1980 S.C. 541 case (supra)."
8. In view of the above settled legal position, it is held that the respondent - Municipal Committee has erred in taking recourse to the provisions of Section 3(1)(c) without first taking recourse to the provisions of Section 3(1)(b) of the 1911 Act and therefore, the action of the respondent is legally not sustainable.
9. Accordingly, the orders Annexures P3 and P7 passed by respondents Nos.l and 3 respectively are set aside and the case is remitted to respondent No. 1 for fresh adjudication in the light of the observations made above. It shall be open for the Municipal Committee, Malerkotla to determine the rateable value of the property for the year 1982-83 under clause (b) of the sub-section (1) of Section 3 of the 1911 Act and if for any justifiable reason, the Municipal Committee, Malerkotla cannot determine such value under clause (b), it may then resort to the provisions of clause (c) of the said Section. It is further directed that a reasonable opportunity should be given to the petitionercompany of being heard in the matter. The writ petition is disposed of in these terms. There shall, however, be no order as to costs.