Posted On by &filed under High Court, Patna High Court.


Patna High Court
Tata Iron And Steel Co. Ltd. And … vs The State Of Bihar And Ors. on 29 September, 2000
Equivalent citations: AIR 2001 Pat 130
Author: R Prasad
Bench: R Prasad, S Pathak


JUDGMENT

R.N. Prasad, J.

1. In both the cases similar question of law and facts are involved. They have been heard together and are being disposed of by a common judgment.

2. In C.W.J.C. No. 1659(R) the petitioners have challenged the demand made vide letter dated 17-11-1985, Annexure-9, directing to deposit arrear of rent and cess for the period 1-1-1956 to 31st March, 1985 by 11th December, 1985 and also revised demand made vide letter dated 21-11-1985 directing to pay arrears of rent and cess by the aforesaid date i.e. 11th December, 1985. By amendment the petitioners have also challenged the order dated 2-1 -1986 passed by respondent No. 2, Annexure-15, by which the representation of the petitioners has been rejected.

3. In C.W.J.C. No. 1671/91 (R) the petitioners have challenged the order dated 10-6-1991 directing to pay cess for the period 11-4-1985 to 21-3-1990 by 20-6-1991, Annexure-30, pursuant to the order dated 29-5-1991 passed in certificae case No. 3/ 90-91, Annexure-29. However, during the course of argument learned counsel for the petitioners did not challenge the demand with respect to payment of arrear of rent.

4. In both the cases petitioner No. 1 is Tata Iron and Steel Company Ltd. hereinafter referred to for the sake of brevity Tisco’ incorporated under the Companies Act, 1956 and petitioner No. 2 is share holder of petitioner No. 1.

5. The elevant facts of the cases are that the land comprising the town of Jamshedpur was acquired for the petitioner company under the Land Acquisition Act and was conveyed to the petitioner company by Conveyance deed dated 19-1-1912 and 23-9-1929 for establishing steel industry. After coming into force of Bihar Land Reforms Act, 1950 a dispute arose whether the land of Jamshedpur held by the petitioner company was an estate and vested in the State of Bihar. By Act 2 of 1961 the Land Reforms Act was amended and Section 2B was substituted whereby certain industrial undertakings including petitioner company were exempted from the operation of the Bihar Land Reforms Act. However, in the case of Tisco v. State of Bihar, 1963 BLJR 921 it was held that the petitioner company is an estate and vested in the State of Bihar after coming into force of the Bihar Land Reforms Act. The substituted provision 2B by Act No. 2 of 1961 was repealed by Act 5 of 1972 retrospectively and Section 7D was inserted wherein it was provided that the land and building acquired for industrial undertaking and utilised for civic amenities namely, Health, Housing, Welfare, power-house etc. shall be deemed to have been leased out by the State Government in favour of the company for which the same was acquired. The petitioner company challenged the Amending Act 1972 in the Supreme Court in writ petition No. 201 of 1973 and the operation of the Amending Act was stayed. However, by mutual agreement between the petitioner company and the State the writ petition was withdrawn and on 4-8-1984 an agreement was executed between the petitioner company and the State of Bihar for granting lease to the petitioner company with respect to the land in question, Annexure-1. Subsequently statutory registered lease was executed on 1-8-1985, Annexure-2, granting lease with effect from 1-1-1956, incorporating the clauses of the agreement, Annexure-1. In Clause 12 of the agreement, Annexure-1 it has been stated that in respect of the period from 1-1-1956 to 31-3-1984 all rents and dues from the company to the Government shall be paid in three equal annual instalments with interest at the rate of 9.5% from 1 -1 -1956 to 31 -12-1974 and at the rate of 13% from 1 -1 -1975 to 31 -3-1984. Details of the land leased out to the petitioner company were mentioned in five schedules of the lease. At the bottom of each schedule attahed to the lease deed note was made “the lessee has approached the State Government for exemption from payment of cess. In the event of the State Government deciding not to exempt the lessee from realisation of cess, the lessee, if unwilling to pay the same, shall be free to opt out of the lease. Similarly, the less or will also be free to cancel the lease in case the lessee does not pay the same within the prescribed period. In either case, 6 (six) months’ notice shall be necessary.” After execution of the lease vide letter dated 17-11-1985 the petitioner company was asked to pay arrears of rent and cess by llth December, 1985, Annexure-9. However, vide letter dated 21 -11 -1985 the petitioner company was asked to pay revised arrear of rent and cess by the aforesaid date i.e. 11-12-1985 failing which action for termination of lease shall be taken.

6. In C.W.J.C. No. 1659/85(R) levy of cess under different heads for the period 1-1-1956 to 31-3-1985 is involved. While the writ petition was pending the court directed the petitioner company to file representation before the Deputy Commissioner, Singhbhum and the Deputy Commissioner was directed to dispose of the representation by speaking order. The petitioner pursuant to the aforesaid order filed representation which was rejected on 2-1-1986, Annexure-15. By amendment the order, Annexure-15 was also challenged and as such in this writ application the demand, Annexures-9 and 10 and the order, Annexure-15 have been challenged. in C.W.J.C. No. 1671/91(R) the levy of cess under different heads for the period 1-4-1985 to 21-3-1990 is involved. In this writ application the order contained in Annexures 29 and 30 are under challenge. The legislative competence of the Cess Act, 1880 is not under challenge whereas legislative competence of Bihar Health Cess Act, 1977 and Bihar and Orissa Primary Education Act, 1919 is under challenge.

7. The claim of the petitioners is that since the land held by petitioner company vested in the State of Bihar with effect from 1 -1 -1956 it has no liability to pay cess under the Cess Act, 1880. The terms and condition of the lease including note at the bottom of five schedules attached to the lease deed cannot create liability to pay cess. The liability can be created only by legislation. Validity of imposition of cess can be challenged at any time. Invalidity cannot be validated by waiver or estoppel. The demand of respondents under the Cess Act, 1880 is barred by limitation as under Section 45 of the Cess Act. 1880 the cess may be recovered at any time within three years after it became due. The interest as has been calculated at the rate of 9.5% per annum with effect from 1 -1 -1956 to 31-12-1974 and at the rate of 13% per annum from 1-1-1975 is contrary to Section 45 of the Cess Act. 1880. Under the aforesaid provision cess may be recovered with interest at the rate of 6.25% per anum till 1981 and thereafter 12% per annum as per the amendment in the year 1981. With respect to the levy of cess under the Bihar Health Cess Act, 1977 and Bihar and Orissa Primary Education Act, 1919 the claim of the petitioners is that State of Bihar has no legislative competence. Besides, under the aforesaid Acts levy of cess is to be made on holding tax but in the town of Jamshedpur no holding has been created by the Notified Area Committee and as such no cess can be levied under the aforesaid Act. With respect to agricultural development cess it has been claimed that such cess has been provided under Chapter IX of Bihar Finance Act, 1982 which is levy on the land held by the raiyat. The petitioner company is not raiyat. Therefore, it has no liability to pay agricultural development cess.

8. in the counter-affidavit the stand of the respondents is that after coming into force of the Bihar Land Reforms Act, 1950 the dispute arose as to whether the petitioner company is an estate and vested in the State of Bihar. In the year 1961 Section 2D was inserted in the Bihar Land Reforms Act and the petitioner company was saved from the operation of the Act. However, Section 2B was repealed in the year 1972 with retrospective effect and Section 7 D and Section 7E were inserted in the Bihar Land Reforms Act by Act 5 of 1972 wherein it has been provided that the lands and buildings acquired for an industrial undertaking and utilised for providing civic amenities such as health, housing welfare, power house etc. shall be deemed to have been leased out by the State Government in favour of the company for which the same was acquired. The petitioner company assailed the amending Act, 1972 by filing a writ petition bearing No. 201/73. The Supreme Court stayed the operation of the amending Act so far as the petitioner company was concerned. The stay granted continued till the withdrawal of the writ petition by the petitioner company. There was an agreement on 4-8-1984, Annexure-1, between the State of Bihar and the petitioner company whereunder it was agreed that the petitioner company would pay rent and other dues with regard to the land in question and subsequently statutory registered lease dated 1-8-1985, Annexure-2, was executed by and between the State of Bihar and the petitioner company with respect to the land in question. The terms of the agreement were included in the lease, The bottom of the schedules appended to the registered lease contained a note that the petitioner company approached the State Government for exemption from payment of cess, in the event the petitioner company is unwilling to pay the cess it shall be free to opt out of the lease. His request for exemption was turned down by the Government in the first part of November, 1985 and, thus, demands for payment of cess, Annexure-9, and Anncxure-10 were issued against the petitioner company. The questions raised in support of the writ petitions are wholly misconceived and erroneous as the petitioner company vested in the State of Bihar with effect from 1-1-1956 and agreed to pay the rent and other dues with effect from 1-1-1956. The petitioner company continued to enjoy the possession of the leased properly for its benefit. This Court had occasion to test legislative competence of the State of Bihar of the Bihar Health Cess Act, 1977 and the Bihar and Orissa Primary Education Act 1919 in the cases of Project and Development India Ltd. and Fertilizer Corporation of India Ltd. v. State of Bihar in C.W.J.C. 893/ 94 (R) and C.W.J.C. No. 2055/92 (R) respectively which were disposed of on 27-3-1996. The Division Bench of this Court affirmed legislative competence of the State of Bihar and held that the State is competent to levy health cess and education cess under the provision of the aforesaid Acts. Section 3 (1)(c) of Bihar Health Cess Act, 1977 and Section 13(1)(c) of Bihar and Orissa Primary Education Act, 1919 make it clear that cess may be levied on the land beyond the municipal area and rate of cess has also been provided under the aforesaid provisions and as such the State Government is competent to levy health and education cess under the aforesaid provisions. With respect to the levy of agricultural development cess it has been stated in para 19 of the counter-affidavit that the same is under consideration of the State Government and the State Government is examining detailed facts and shall take necessary decision in this regard.

9. The contention of learned counsel for the petitioners with respect to levy of cess under the Cess Act, 1880 is that since the estate of the petitioners company vested in the State of Bihar with effect from 1-1-1956 it has no liability to pay cess. To resolve the issue raised by learned counsel for the petitioners it is necessary to mention herein that after coming into force of Bihar Land Reforms Act, 1950 the dispute arose as to whether the petitioner company is an estate and has vested in the State of Bihar. By amendlng Act 1961 Section 2B was inserted and the petitioner company was saved from the operation of the Act. However, the amendment as indicated above was repealed with retrospective effect vide Act 5 of 1972 and Section 7D was substituted. Section 7D was again amended vide Act 17 of 1983 which reads as follows :–

“7D. Land and buildings, etc. acquired for an industrial undertaking and utilised for providing civic amenities, namely, health, housing, welfare, power house, and educational facilities to be deemed settled with it by the State– (1) If any land has been acquired for an industrial undertaking under the Land Acquisition Act, 1894 (Act 1 of 1894) so much of such land and buildings and structures thereon in possession of the industrial undertaking as are being utilised for providing civic amenities, namely, health, housing, welfare, power house and education facilities to its employees and so much of the remaining portion of such land and building and structures thereon as are found essential on enquiry by the State Government for production processes of the industrial undertaking shall be deemed to have been leased out by the State Government with the owner of the industrial undertaking for period as determined by the State Government subject to payment of such fair and equitable rent as determined by the State Government.

(4) The provisions of Sub-section (1) shall be deemed to have been inserted in this Act from the commencement thereof.”

10. From the aforesaid provision it is evident that the land acquired for industrial undertakings under the Land Acquisition Act. such land and buildings and structures thereon in possession of the Industrial undertaking shall be deemed to have been leased out by the State Government with the owner of the industrial undertakings. The agreement was executed on 4-8-1984 and lease was executed on 1-8-1985 i.e. after coming into force of Section 7D of the Bihar Land Reforms Act and lease was made effective with effect from 1-1-1956. Sub-section (4) of Section 7D made it clear that Subsection (1) of Section 7 D was retrospective. Therefore, it can safely be said that lease is statutory lease under Section 7D of the Bihar Land Reforms Act and is enforceable with retrospective effect.

11. Section 5 of the Cess Act, 1880 is charging section which reads as follows :–

“5. All immovable property to be liable to alocal cess– From and after the commencement of this Act in any district or part of a district, all immovable property situate therein except otherwise in Section 2 provided shall be liable to the payment of a local cess.”

12. Immovable property has been defined in Section 4 of the Cess Act, 1880 which reads as follows ;–

“immovable property”– “immovable property” includes lands and all benefits to arise out of land and things attached to the earth, or permanently fastened to anything which is attached to the earth, but does not include crops of any kind, or houses, shops or other buildings :

13. It is thus obvious that cess is chargeable over the immovable property and immovable property includes land and other benefits to arise out of the land. Admittedly the petitioner company was in possession on the day of coming into force of the Bihar Land Reforms Act and deriving benefits from the land and is continuing to be in possession of the land and deriving benefits from the land. Therefore, even if estate of the petitioner company vested in the State of Bihar the petitioners cannot deny the liability to pay cess over the land in occupation. The cess is tax over the land. From the lease deed, Annexure-2, itself it is obvious that petitioner company is paying rent to the State of Bihar. Under the Act cess is to be levied on the person in occupation of the land. Therefore, in any view of the matter the petitioner company is liable to pay cess under the Cess Act, 1880.

14. In the case of Someshwar Prasad v. State of Bihar, 1974 BLJR 348 the petitioner entered into an agreement with the Forest Department of the State of Bihar in respect of forest coupes as also in respect of bamboos for purposes of felling, conversion, collection, extraction, removal and transport of the forest produce and dispute was raised with respect to payment of cess. The Court held that the petitioner was not merely a licencee but was also grantee of benefit arising out of the land in question and was occupier within the meaning of the Act and liable to pay cess. The ratio decided in the aforementioned case was affirmed by Full Bench in the case of The Western India Match Co. Ltd. v. The Deputy Collector, Cess, Bettiah, 1981 Pat LJR 440 : (AIR 1981 Patna S09). Thus on consideration I find no substance in the submission of learned counsel for the petitioners.

15. Learned counsel for the petitioners next contended that the petitioner company is providing civic amenities i.e. maintaining road, school in Jamshedpur town and, therefore, is not liable to pay cess under the cess Act. In the counter-affidavit it has been stated that in Jamshedpur town the petitioner company is running 12 Primary schools whereas State Government is running 34 schools. Higher educational institutions are either aided or run by the State Government and none of the institutions of the petitioner company is imparting higher education. Moreover, submission of learned counsel for the petitioners appears to be misconceived as cess assessed in a particular area and income derived therefrom is meant for the public utility and not only for the said area. From the Cess Act itself it is evident that it is a kind of tax levied on the immovable property situated within the local area with the object of utilising the fund collected for construction and maintenance of district road and other means of communication and provincial public works. Therefore, such fund is to be used for the entire district and not for the area from where cess is collected.

16. Learned counsel for the petitioners next contended that demand of cess for the period prior to three years from the date of demand is barred by limitation. In support of his contention learned counsel drew our attention to Section 45 of the Cess Act, 1880. To appreciate the question involved Section 45 of the Cess Act, 1880 is quoted herein below :–

“45. Penalty for default of instalments– If any instalment of (local cess) or part thereof payable to the Collector shall not be paid within fifteen days from the date on which the same becomes due, the amount of such instalment or part thereof may be recovered at any time within three years after it became due with interest at the rate of (twelve per centum per annum) calculated from the date on which such instalment became due, and with all cost of recovering the same.”

17. The aforesaid provision deals with penalty for defaulting payment of instalment and it says that if any instalment of local cess or part thereof is not paid within 15 days from the date on which the same became due it shall be recovered with interest within three years after it became due. Therefore, apparently it appears that section deals with penalty in case of non-payment of Instalment due and not with respect to recovery of the cess amount. Even if it is taken that provision deals with limitation of recovery of the cess the other provision of Limitation Act will apply in view of Section 29 of the Limitation Act which says that where any special or local law prescribes limitation different from the period prescribed by the schedule, the provision of Section 3 shall apply as if such period were the period prescribed by the schedule and for the purpose of determining any period of limitation but the provisions contained in Sections 4 to 24 shall apply in so far as, and to the extent to which they are not expressly excluded by such special or local law, The Cess Act except as Section 45 does not exclude expressly any other provision of Limitation Act. Therefore, in my opinion, the other provision i.e. Sections 4 to 24 of the Limitation Act will apply even it is taken that Section 45 of the Cess Act prescribes limitation for recovery of the amount of cess. In this regard it would not be out of place to mention herein that after coming into force of Bihar Land Reforms Act dispute arose as to whether petitioner company is an estate and vested in the State of Bihar. In the case of Tata iron and Steel Co. Ltd., Jamshedpur v. State of Bihar, 1963 BLJR 921 the Division Bench of this Court held that petitioner company is an estate and vested in the State of Bihar. However, by Act 2 of 1961 Section 2B was inserted whereby certain industrial undertakings including petitioner company were exempted from the operation of Bihar Land Reforms Act. However, the said provision Section 2B was repealed by Act 5 of 1972 retrospectively and Section 7D was inserted wherein it was provided that the land acquired for industrial undertaking under the Land Acquisition Act. the land and building and structure thereon in possession of the industrial undertaking shall be deemed to have been leased out by the State Government with the owner of industrial undertaking. Act 5 of 1972 was challenged by the petitioner company in C.W.J.C. No. 201/73 before the Supreme Court and the Supreme Court stayed the operation of amending Act with respect to the petitioner company. However, the said writ petition was withdrawn and an agreement was executed on 4-8-1984 between petitioner company and the State of Bihar to execute deed of lease. Consequently statutory lease under Section 7 D was executed on 1-8-1985 which was made enforceable with effect from 1-1-1956 and the terms of the agreement were incorporated in the said lease. As per terms of the lease petitioner company agreed to pay rent and other dues with effect from 1-1-1956 in instalment with interest. In the bottom of the schedule containing details of the land attached to the lease deed specific note was incorporated that lessee had approached the State Government for exemption from payment of cess, in case Government refused to exempt petitioner company from payment of cess, the petitioner company shall be at liberty to opt out of the lease. The aforesaid fact is not in dispute nor any question has been raised during course of argument by the learned counsel for the petitioners. Therefore, it can be said that there was bona fide dispute between the parties with respect to the vesting of estate of petitioner company, there was litigation between parties and also amending Act was under challenge before the Supreme Court in which stay of operation of amending Act, 1972 was granted and as such the principle of Section 14 of the Limitation Act can be applied in such situation and the period under dispute can be excluded for the purpose of computation of limitation. In this regard reference may be made to a decision in the case of Prem Lata Agarwal v. Lakshman Prasad Gupta, AIR 1970 SC 1525. Moreover, the dues has been acknowledged in Clause 12 of the agreement, Annexure-1, as well as specific note has been made at the bottom of the schedule acknowledging the dues under the Cess Act. The demand was made vide letter dated 17-11-1985 and 21-11-1985 thereafter. Therefore, in my view, it is not possible to hold that demand under the Cess Act is barred by limitation as has been contended by the learned counsel for the petitioners.

18. Learned counsel for the petitioners next contended that interest has been calculated at the rate of 9.5% from 1-1-1956 to 31-12-1974 and at the rate of 13% from 1-1-1975 as has been provided in Clause 12 of the deed of agreement. But it is contrary to the provision of Section 45 of the Cess Act. According to the learned counsel interest was to be calculated at the rate of 61/4% with effect from 1-1-1956 to 1981 and at the rate of 12% thereafter. In this regard it is pertinent to mention herein that if the rate of interest is prescribed in the statute the same cannot be altered by the term of the lease deed. The provision of the Statute will prevail over the agreement in case it is contrary to the statutory provision. In the counter-affidavit it has been stated that since the rate of interest has been prescribed in the lease deed, therefore, respondent-State is entitled for the same interest. In view of the discussion as made above I am of the view that the respondent-State is entitled to interest as provided in the Act.

19. With respect to the Health Cess and Education Cess under the Bihar Health Cess Act, 1977 and the Bihar and Orissa Primary Education Act, 1919, the contention of learned counsel for the petitioner is that State Government has no legislative competence. In this regard it would not be out of place to mention herein that the question raised has already been decided by a Division Bench of this Court in the case of Projects and Development India Ltd. A Government of India Undertaking and Fertilizer Corporation of India Ltd. v. The State of Bihar, in C.W.J.C. No. 893/94(R) and C.W.J.C. No. 2055/92(R) disposed of on 27-3-1996 and it has been held that State Government has legislative competence to legislate under Entry-49 List-II of the 7th Schedule of the Constitution of India. Learned counsel for the petitioners also admitted the position. Therefore, in my view, there is no need of saying any further in this regard.

20. Learned counsel for the petitioners further contended that Jamshedpur town is under Notified Area Committee. No holding has been created by Jamshedpur Notified Area Committee. The education and health cess can be levied only on holding tax. Since no holding has been created and as such cess cannot be levied over the land leased out to the petitioner company. In this regard it would be pertinent to mention herein that Section 3 of the Bihar Health Cess Act, 1977 is a charging Section. Sub-section (c) of Section 3 is relevant for the purpose which is quoted hereinbelow :–

“3. Levy of health cess–(1)

(c) by every raiyat in any other area other than a Cantonment, at the rate of forty per cent of the total rent which is payable by a raiyat or, if no rent is actually payable. would on a reasonable assessment be payable, during the year, for any land held by a raiyat or by any other person in actual use or occupation thereof and shall be recoverable in the same manner as if it were such rent.”

21. Similarly Section 13of the Bihar and Orissa Primary Education Act, 1919 is charging section and relevant for the purpose. Sub-section (c) of Section 13 (1) reads as follows :–

“13. Rate of free primary education cess–(1)

(c) in any other area, other than a Cantonment, be six and a quarter per cent of the total rent which is payable by a raiyat, or if no rent is actually payable, would, on a reasonable assessment, be payable, during the year for any land by a raiyat or by any other person in actual use or occupation thereof and shall be recoverable in the same manner as if it were such rent.”

22. From perusal of aforesaid provision it is manifest that levy of Health cess and education cess is not limited to the Municipal area where holding has been created rather such cess is leviable beyond the Municipal area as in the aforesaid provision it has categorically been stated that cess is leviable from the person in actual use or occupation of the land in question, it is undisputed fact that petitioner company is in actual use and occupation of the land in question and as such the petitioner company is liable to pay cess under the Bihar Health Cess Act, 1977 and Bihar & Orissa Primary Education Act, 1919. However, itis made clear that cess under the aforesaid head cannot be levied prior to coming into force of the Act rather it shall be levied after coming into force of the Act.

23. Learned counsel for the petitioners lastly contended that the petitioner company is not a raiyat and as such Agricultural Development Cess cannot be imposed against the petitioner. Agricultural Development Cess has been provided under Chapter IX of the Bihar Finance Act, 1882. Section 13(1) is charging section which is quoted hereinbelow :–

“13. Imposition of agricultural development cess — (1) Every raiyat shall, on account of the use and occupation of land for agricultural purposes, held by him in any agricultural year under the State, be liable to pay agricultural development cess at the rate of twenty per cent of the land rent paid by him during the agricultural year :

Provided that the amount of cess shall not be less than twenty paise.”

24. In para 19 of the counter-affidavit it has been stated that demand of Agricultural Development Cess is under consideration of the Government. To appreciate the stand of the respondents the statement in the said paragraph is quoted hereinbelow :

“19. That the deponent further states and submits that the demand under the agricultural development cess is under consideration of the Government and the State Government is examining the detailed facts and shall take necessary decision in this regard. However, it is submitted that part of the land which has been settled with the petitioner is being used for the agricultural purposes by the petitioner. The fact that the area is being used for agricultural purposes by the petitioner is to be determined by the local enquiry and the Government is considering this aspect and in this connection detailed facts are being collected and examined.”

25. In view of the averment as quoted above, it is not necessary to decide the question with regard to the Agricultural Development Cess as it is under consideration and enquiry is being made by the respondents itself.

26. Thus on consideration as discussed above I find no merit in the writ applications, Accordingly, both the writ applications are dismissed in view of the observations and findings recorded in the judgment but without cost.

S.N. Pathak, J.

27. I agree.


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