PETITIONER: CORPORATION OF THE CITY OF NAGPUR Vs. RESPONDENT: THE NAGPUR HANDLOOM CLOTH MARKETCO. LTD. DATE OF JUDGMENT: 07/12/1962 BENCH: SHAH, J.C. BENCH: SHAH, J.C. SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR, P.B. WANCHOO, K.N. GUPTA, K.C. DAS CITATION: 1963 AIR 1192 1963 SCR Supl. (2) 796 ACT: Municipal Corporation-Levy of taxes-Water rates- Conservancy and property taxes-Individual shop-keepers-- Liability-Building, if includes part of a building- Residential and non-residential-Liability-Connotation of 'family'-If postulates relationship-City of Nagpur Corporation Act, 1948 (C.P. and Berar 2 of 1950), s. 5 (7) City of Nagpur Corporation Rules, r. 10 (a) (b) (c). HEADNOTE: The Nagpur Handloom Cloth Market Company Ltd. constructed in the City of Nagpur on plots owned by it a number of buildings with two floors, the ground floor intended to be used as shops and the first floor to be used for residential purposes. For the use of the shops lavatories connected with the sewers of the corporation drainage system were constructed and water supply for the shops was obtained from a corporation water standards The corporation levied among other taxes, under s. 114 of the City of Nagpur Corporation Act, 1948, conservancy tax and water rates on the is of the letting value of 797 the buildings. Most of the shops were occupied by shop- keepers and in the year 1953 the corporation served notices of assessment on individual' shop-keepers of the respective shops. Some of the shop-keepers filed objections against the notices served on them and on rejection of these objections filed appeals under. ss. 387 and 130 of the Act but without success. Nearly two years after these proceedings the company and one of the shopkeepers filed a writ petition in the High Court of Bombay to quash the order of demand dated February 2, 1958, and to prohibit the Corporation from applying r. 10 (a) of the Assessment Rules. The High Court allowed the writ petition holding that r. 10 (a) applied only to residential houses and not to houses occupied for non-residential purpose-; and therefore separate assessment of the shops in the occupation of the shop. keepers was invalid. The contention of the Corporation that in view of the great delay in filing the petition, the petition should fail was rejected by the High Court. The present appeal came before this Court by way of special leave. Held, that the expression "building" in s. 5 (7) of the Act would include a part of a building. By reason of s. 5 (7) and the implication of r. 10 (a) and r. 10 (c) the Corporation is competent to treat each tenement occupied by a different person as a separate building for levy of tax. The expression 'family' in r. 10 (a) does not in the setting of the rules postulates the existence of relationship either by blood or by marriage between the persons residing in the tenement. Even a single person may be regarded for the purpose of the rule as a family and a master and servant would also be so regarded. The expression "occupying" in r. 10 (a) applies equally to uses residential and non- residential. JUDGMENT:
CIVIL APPELLATE, JURISDICTION : Civil Appeal No. 288 of
1960.
Appeal by special leave from the judgment and order
dated,August 8, 1958, of the Bombay High Court in Special
Civil Application No. 174 of 1958.
G. S. Pathak- S. M. Hajarnavis, O. C. Mathur, J. B.
Dadachanji and Bavinder Narain, for the appellant.
M. C. Setalvad, Attomey-General of India, Al. Y. Phadke and
Naunit Lal, for the respondents.
798
1962. December 7. The judgment of the Court was delivered
by
SHAH, J.-The Nagpur Handloom Cloth Market Company Ltd.-
hereinafter called ‘the Company’constructed on certain plots
owned by it, two houses-each house consisting of a ground
floor, intended to be used as shops and an upper floor
intended to be used for residential purposes. For the use
of the occupants of the shops, 20 flush lavatories with
underground sewers connected with the drainage system of the
Nagpur Corporation were constructed by the Company. The
Corporation of Nagpur had also erected a municipal public
water Standard within 200 yards of the houses. Among the
taxes levied by the Municipal Corporation under s. 114 of
the City of Nagpur Corporation Act, 1948-hereinafter called
“the Act’ were the conservancy tax and the water-rate which
under the rules applicable thereto were leviable as rates on
the annual letting value of buildings’ and lands within the
Corporation area. It is common ground that the shops which
in the aggregate number 201, are occupied by shop-keepers
under a scheme under which on payment of stipulated amounts,
the occupants will be full owners of the shops, and on the
liability of all the occupants being discharged the Company
will be dissolved. However the scheme under which this
arrangement was made has not been placed before us and it is
not possible on the material before us to ascertain what the
true relation between the shop-keepers and the Company is.
For the year 1953-54 the Corporation of Nagpur proposed to
assess the shop-keepers numbering one hundred and fifty five
who occupied the shop built by the Company to private
conservancy tax water rate and property tax on each shop as
a, separate unit of assessment, and assessment notices in
that behalf were issued to the Managing Director of
799
the Company on September 26, 1953. The Company requested
the Corporation by letter dated September 30, 1953 that the
assessment notices be served on the ‘individual shopkeepers
of the respective shops regarding the assessment made by the
Corporation’. The Corporation thereupon served the
individual shop-keepers with notices of assessment. 120 out
of 155 shop-keepers served with the notice of assessment
preferred objections submitting inter alia that the taxes
could be assessed only on the Company. These objections
were heard before the Objection Officer appointed by the
Corporation. The Managing Director of the Company and a
representative of the shop-keepers submitted their
respective cases on behalf of the Company and the shop-
keepers. By his order dated April 19, 1954 the objection
Officer held that the Company be treated as owner of the
houses and the shop-keepers as occupants and that the demand
for tax be ‘primarily made from the occupants’. No
proceeding challenging this order were initiated by the
shop-keepers or the Company and the assessment list was
authenticated as required by the relevant rules. The
Corporation thereafter served demand notices upon the shop-
keepers calling upon them to pay the taxes due by them
pursuant to the assessment list.
On December 16, 1954 some of the occupants appealed to the
Chief Executive Officer under s. 387 of the Act challenging
the validity of the assessment. The Deputy Chief Executive
Officer rejected the appeals against the order passed by the
Objection Officer to the Chief Executive Officer as
incompetent and observed that in any event the anneals which
were not presented within the period of limitation
prescribed by s. 379 of’ the Act, were barred. The shop-
keepers and the Company preferred separate appeals to the
District Judge, Nagpur, against the order of the Objection
Officer. The District judge by his order dated October 28,
1955 held that the
800
appeals were barred by the law of limitation and the
appellants before him had made out no ground for condonation
of delay. The shop-keepers again moved the Chief Executive
Officer to reconsider the order of assessment of tax. That
Officer by his order dated April 18, 1956 held that even
though the order passed by the Deputy Chief Executive
Officer dismissing the previously filed appeals’ as ,not
maintainable, and observing that the proper remedy of the
shop-keepers and the, Company aggrieved was an appeal under
s. 130 of the Act was erroneous, the appeals before him
being barred by the law of limitation., he was unable to
grant any redress to the appellants. The Chief Executive
Officer also opined that the houses having been divided into
separate shops and allotted to the Company’s shareholders
who carried on their business independently and each such
allotted having a separate source of income within the
meaning of rule 10 (a) of the assessment rules, the
Objection Officer was right in holding that each shop be
treated as an independent unit, and be separately assessed
for the conservancy cess and water rate.
Nearly two years thereafter the Company and one Sitaram-One
of the shop-keepers-preferred a writ petition in the High
Court of Bombay at Nagpur for writs of certiorari quashing
the order of demand dated February 19, 1958 and also bills
for the assessment years 1956-57 and 1957-58 and for a writ
of mandamus prohibiting the Corporation from applying the
provisions of rule 10 (a) for the purposes of conservancy
tax and water rate, and directing the Corporation not to
treat the individual shops on the ground floor of the two
houses as separate units of assessment for purpose of
conservancy tax and water rate. The High Court held that
rule 10 (a) of the assessment rules applied only to
residential houses and not to houses occupied for non-
residential purposes and therefore separate assessment of
the shops
801
in the occupation of the shop-keepers was, under the
provisions of the Act, read with the relevant rules,
invalid. The High Court accordingly allowed the petition
and quashed the notice of demand dated February 19, 1958
made by the Corporation for levy of tax. The Corporation
has, with special leave, appealed to this Court.
Three principal contentions are raised by counsel for the
Corporation in support of the appeal :-
(1) That under the Act there are three
distinct stages dealing with- the liability of
taxpayers to pay tax-imposition of tax autho-
rised by a statute according to the procedure
prescribed in that behalf, assessment or
levy of tax according to the provisions of the
statute and the rules framed thereunder; and
collection of tax. Each stage being self-
contained, if no objection is made to
assessment as prescribed by the statute and
the rules made thereunder and in the manner
provided in that behalf, in a proceeding for
recovery of tax, the validity of the
assessment cannot be challenged.
(2) The objection raised by the Company was
only against the demand and not against the
assessment, and that in any event there was
gross delay in the commencement of proceedings
in the High Court for obtaining relief by an
application for a writ, and on that account
the company had disentitled itself to relief.
(3) That even on the merits the
interpretation placed by the High Court upon
rule:10(a) of the assessment rules was
erroneous and therefore each occupant of the
shops whose
802
name was entered in the assessment list as
framed was liable to pay the conservancy tax
and the water rate in respect of the shop
in his occupation.
Part IV of the Act deals with- taxation i.e, imposition,
assessment and recovery of taxes. Sections 114 and 115 set
out the taxes which the Corporation is obliged to impose or
may impose and the procedure in that behalf. Sections 1 16
to 140 deal with the assessment of property tax and ss. 154
to 169 deal with recovery of taxes. Section 130 provides
for a right of appeal to the District Court against a
dispute as to the liability of any land or building to
assessment of property tax or as to the basis or principle
of assessment of property tax. Section 164 provides for an
appeal against a notice of demand for tax due under sub-
section (1) of s. 155 This appeal lies to a Magistrate by
whom under the direction of the District Magistrate such
class of cases is to be tried. A general right of appeal is
granted by s. 387. Any person aggrieved by an order passed
under the Act or under any rule or bye-law made thereunder
failing to obtain redress may appeal to any Corporation
Officer appointed by the Chief Executive Officer to hear
such appeals, or failing such appointment, to the Chief
Executive Officer.
The procedure for assessment of conservancy tax and water
rate is prescribed not by the provisions of the Act, but by
the rules framed under the C. P. & Berar Municipalities Act
of 1922 which by virtue of s. 3(2) of the Act are to be
deemed to have been made under the provisions of the
Corporation Act of 1948. The procedure for recovery is
however governed by the provisions of ss. 154 to 167 of the
Act. The subject of taxation in the matter of conservancy
tax and water rate is therefore found distributed in the Act
and the Rules under three heads of
803
2 imposition, assessment and recovery of taxes.
For the purpose of the pro-sent case it is unnecessary to
express any opinion on the plea raised by Mr. Pathak for the
Corporation that the tax-payer cannot challenge the
correctness of an order of assessment, in a proceeding for
recovery of tax, though it may appear that under the
analogous provisions contained in the Bombay District
Municipal Act III of 1901 and the Bombay Municipal Boroughs
Act, XVIII of 1925, in an appeal against a notice of demand
to a Magistrate the correctness or propriety of the
assessment may, be challenged. See The Municipal Borough of
Ahmedabad v. The Aryodaya Ginning and Manufacturing Company
Ltd. (1) and The Municipality of Ankleshwar v. Chhotalal
Ghelabhai Gandhi (2).
There has undoubtedly been great delay in moving the High
Court by a petition under Art. 226 of the Constitution. The
order of the Objection Officer was made on April 19, 1954
and the appeal against that order was dismissed on April 22,
1955. Even the second order by the Chief Executive Officer
was made on April 18, 1956 and for nearly two years
thereafter no proceeding was commenced in the High Court
challenging the validity of that order. The High Court was,
however, of the view that because the Chief Executive
Officer in the first instance held that the appeal filed
before him was not competent and the remedy of the tax payer
was to move the District Court under s. 130 of the Act and
that in the appeal preferred in the year 1956 he held that
the appeal was maintainable and dismissed it on the merits
while observing that it was barred by limitation, there was
some ground for not regarding the shop-keepers and the
Company as guilty of laches. The High Court also observed
that after the order passed by the Chief Executive Officer
in 1956 the Corporation was moved by an application
(1) 1. L. R. (1941) Bom. 658,
(2) (1954) 57 Bom. L. R. S 547,
804
under s. 143 of the Act, and since the decision of the
Corporation on the application, the petition was filed
without delay. This ground may appear to us inadequate but
the High Court has exercised its discretion in holding that
the petition notwithstanding the delay should be entertained
and we are unable in a matter essentially of discretion to
set aside the judgment of the High Court on this ground
alone, especially when the petitioners have claimed relief
not only in respect of the assessment for the year 1953-54
but also in respect of assessment of tax for the years 1956-
57 and 1957-58.
The question that falls then to be determined is about the
true interpretation of rule 10 (a) of the assessment rules
relating to the conservancy tax and water rate. Section 114
of the Act requires the Corporation to levy, amongst others,
a property tax, a latrine or conservancy tax payable by the
occupier or owner upon private latrines,, privies or
cesspools or upon premises or compounds cleansed by
Corporation agency and a water rate where water is supplied
by the Corporation. For assessment of the property tax,
machinery is prescribed in the Act itself, but no such
machinery is prescribed in the Act in respect of the
conservancy tax and water rate. Under the C.P. & Berar
Municipalities Act, II of 1922, by s. 66 various taxes could
be imposed by the Municipalities governed thereby (and the
Municipality of Nagpur was governed by that Act) and latrine
or conservancy tax and water rate were two out of the many
taxes leviable. By s. 71 of the Act of 1922 power was
conferred upon the State Government to make rules under the
Act, inter alia, regulating the assessment of tax’ In
exercise of the powers the Government of Madhya Pradesh
framed diverse sets of rules dealing with assessment, levy
and collection of taxes. Rules were made on August 19, 1941
declaring liability of buildings and lands for conservancy
tax in respect of private latrines, and Rule 2 thereof, in
so far as it is
805
material, provided that-
“2. There shall be imposed-
(i) x x x x
(ii) On every building or land to which a
private latrine., privy or cesspool is attach-
ed, or any resident whereof uses a private
latrine, privy or cesspool, which is either
cleansed by municipal agency or is connected
with the municipal underground sewer’ or the
premises or compounds of which are cleansed by
municipal agency, a tax payable by the owner
under section 66 (1) (h) according to the
following scale on its gross annual letting
value.”
A similar set of rules in respect of water rate came to be
promulgated on September 28, 1949, It was provided by Rule
1, in so far as it is material, that-
“1. There shall be imposed-
(1) (a) x x x x
(b) On every building or land which has no
private supply from municipal service pipes or
the resident thereof does not use water from
such supply and which is situated within 200
yards from public water standard or a service
pipe, a tax leviable from the owners or
occupiers under section 66(l) (k) according to
the following scales on its gross annual
letting value : ”
In 1941 rules were made for assessment of conservancy tax.
The tax was to be levied on the
806
gross annual letting value of the building. By rule 5 it
was provided that on the completion of the assessment,
notices shall be given to the persons affected by the
preparation of the assessment list. Any person affected by
the entries in the list was by rule 6 entitled to file
objections against assessment or valuation or both as shown
in the register at any time within thirty days of the
publication or service. This rule also provided for
affording a hearing to the objectors. Rule 8 provided that
after the objections under rule 6 had been disposed of and
all consequential amendments were made in the assessment
list it shall be authenticated and the register shall be
valid from the date of the authentication and shall continue
to be valid until the beginning of the half-year next
follow. ing the authentication of a new register. Rule
10(a) provided :
“Where more than one family having separate
sources of income, occupy separate portions of
the same building or range of buildings, each
of such portion shall be deemed a building
under these rules and assessed according to
its gross annual letting value as determined
in accordance with rule 1.”
Clause (b) provided :
“The Committee may, at a special meeting if it
thinks fit, assess the tax on such building on
the aggregate gross annual letting value of
all the portions instead of assessing each
portion separately.”
Clause (c) provided
“Detached building, even when occupied by the
same person or family, shall, where any road
or pathway over which the public have a right
of way, or any land belonging to any
807
other person separate them from one another,’
be separately assessed as independent units.
Similar rules were made in respect of the assessment
list for water rate. The water rate wasalso to be imposed
as a rate on the gross annual letting value and
provisions of rule 10 (a), (b)and (c) were in terms
identical with the assessment rules framed in respect of the
conservancy tax assessment and for the sake of brevity we
will only refer to assessment rules relating to conservancy
tax. These rules remained in force even after the C. P. &
Berar Municipalities Act, 1922 was repealed by virtue of s.
3 (2) of the Act of 1948, and -applied to assessment of
liability to conservancy tax and water rates as if the rules
were framed under the latter Act.
‘Building’ is defined in the Act by s. 5 (7) as including “a
house, outhouse, stable, hut, shed or other enclosure,
whether used as a human dwelling or otherwise and shall
include verandahs, fixed platforms, plinths, door-steps ,
walls and the like.” The definition is an inclusive
definition, and contains inherent indication that a part of
a building would be a building for the purposes of
imposition of liability to pay rates, and assessment of such
liability. It is manifest that under the scheme of the Act
read with the rules, conservancy tax and water rate are to
be levied as rates on the gross annual letting value and a
rate can only be levied from a person in respect of the
tenement or premises occupied as an independent unit. The
assessment rules provide for levy of rate on the gross
annual letting value of the building. and in as much as the
expression “building’ according to the definition given in
s. 5 (7) of the Act would include a part of a building, the
Corporation is competent to frame a list in respect of
several tenements occupied by different persons treating
each tenement as a separate building for levy of tax. That
is implicit in rule 10 (b) and also in rule 10 (c) of the
assessment rules,
808
By the rules, liability to pay conservancy tax and water
rate is imposed in respect of a building provided certain
conditions specified in the rule are fulfilled, and this
liability arises whether the building is used for
residential purposes or non-residential purposes. Rule 10
(a) also clearly authorises the Corppration to levy water
rate and the conservancy tax in respect of separate
tenements occupied by different persons as if each such
tenement is a building. In the view of the High Court use
of the expression ‘family’ in rule 10 (a)-indicated that the
rule did not apply to buildings occupied for non-residentia
purposes. But by the rules imposing the conservancy tax and
the water rate, all buildings to which are attached latrines
cleansed by municipal agency and all buildings which are
connected with the water distribution system, or which are
situate within the prescribed distance of water standard,
are liable to pay the conservancy tax and the water rate
irrespectivc of the nature of the use to which the building
is put. It is implicit in the view of the High Court that a
building occupied for non-residential use can be taxed as
one unit, even if the building is occupied by tenants or
licencees, carrying on their separate or individual trades
or businesses. But this view does not appear to be
supported by the scheme of the Act and rules. If a building
is partly occupied for residential and partly for non-
residential purposes the portions occupied for residential
purposes would, in the view of the High Court, be regarded
as separate buildings and each occupant having a
seperate source of income would be liable to pay conservancy
tax and water rate but the portions occupied for non-
residential purposes would not be regarded as separate
buildings. The High Court reached its conclusion that rule
10 (a) did not apply to portions of buildings when they were
occupied for non-residential purposes merely because of the
use of the expression “family’ in the rule. But the
expression ‘family’ has according
809
to the context in which it occurs a variable connotation.
It does not in the setting of the rules postulate the
existence of relationship either of blood or by marriage
between the persons residing in the tenement. Even a
single person may be regarded as a family,and a master
and servant would also be so regarded. The word ‘occupy’
used in rule 10 (a) is not restricted either expressly or by
anything contained in the context of the rule suggesting
that the occupation is to be only for residential purposes,
and in the absence of any such implication the rule must
be deemed to be of general application i.e., it applies to
uses non-residential as well as residential. The expression
‘family’ must therefore take colour from the expression
“occupy’ used in the same rule. In our view the expression
`family’ in the context in which it occurs, means no more
than a person or a group of persons.
Mr. Pathak appearing on behalf of the Corporation submitted
that there was a drafting error in rule 10 (a), and as a
matter of interpretation the Court would be justified in
reading the expression ‘family’ in that rule as meaning
‘family or person’ -which is the expression used in rule 10
(c). He submits that rule 10(a) and rule 10 (c) deal with
the same subject-matter and, therefore, the Court would be
justified in holding that the expression ‘one family’ used
in rule 10 (a) and the expression “person or family’ in rule
10 (c) must have the same meaning. Prima facie, there is
substance in this contention, but we do not think it
necessary to base our decision on that ground. In our view
the expression ‘family’ has not a restricted meaning as
suggested by the High Court, and under the rules imposing
liability to pay conservancy tax and water rate liability is
imposed upon every building, which expression includes a
part of a building occupied as an independent unit
irrespective of the nature of the user, The learned Attorney
General appearing on
810
behalf of the Company submitted that under the Corporation
Act the owner and not the occupier is liable for the
conservancy tax and water rate and therefore separate
assessments of different units occupied by the shop-keepers
could not be made. This plea was not raised in the High
Court. Even apart from this infirmity, there is no
substance in the plea. Under s. 114 of the Act a latrine or
conservancy tax payable by the occupier or the owner may be
imposed. Similarly water rate may be imposed, when water is
supplied by the Corporation. By the rules framed under s.
71 of the C. P. Berar Municipality Act of 1922, and
continued under the Act of 1948 liability imposed for
payment of the conservancy tax and the assessment rules is
not restricted to owners only. By rule 4 of the assessment
rules the Corporation is required to prepare an assessment
list containing the names of the persons liable to pay the
tax. The assessment rules therefore clearly indicate that
the occupier of the premises may be rendered liable to pay
the conservancy tax and the water rate. Section ‘165 of the
Act makes all sums due from any person in respect of taxes
on any land or building, a first charge upon the said land
or building and upon any movable property found within or
upon such land or building and belonging to the said person,
provided that no arrears of any such tax shall be
recoverable from any occupier who is not the owner, if such
arrears are for a period during which the occupier was not
in occupation. It is implict in s. 165 that an occupier of
the premises may be liable to pay the tax even though he is
not the owner. It is also necessary to point out that the
scheme under which the shop-keepers are occupying the
premises has not been produced before this Court. It is
admitted, however, that the shop-keepers will be owners of
the premises occupied by them as soon as the amounts which
they have agreed to pay are fully paid and their liability
discharged. ‘The
811
Company treated the shop-keepers as owners (vide their-
letter dated September 30, 1953). Manifestly they have a
substantial interest in the tenements in their occupation
and it would be difficult not to call them owners for
purposes of municipal taxation. According to the definition
in s. 5 (37) of the Act an ‘owner’ “”when used with
reference to any land or -building includes the person for
the time being receiving the rent of the land or building or
of any part of the land or building whether on his own
account or an agent or trustee for any person or society or
for any religious or charitable purpose, or as a receiver
who would receive such rent if the land, building or part
thereof were let to a tenant”. There is nothing on the
record to show that the shop-keepers would not be entitled
to let out the premises in their occupation and if they can.
they would be regarded as owners within the meaning of cl.
(37) of s. 5.
In our view, therefore, the High Court was in error in
holding that rule 10 (a) applied only to building occupied
for residential purposes. The rule in our judgment applies
to buildings occupied for nonresidential as well as
residential purposes, and to every part of a building
occupied by a person or a group of persons having a separate
source of income, whether the occupation is for residential
or non-residential purposes and such person or group of
persons would be liable to pay the conservancy tax and the
water rate.
The appeal therefore is allowed and the petition filed by
the Company and the tax payer Sitaram Upasrao dismissed with
costs in this Court and the High Court.
Appeal allowed,
812