Case: Solapur Municipal Corporation Vs. Shivaji Works Limited

M.L. PENDSE, J. ( 1 ) THE respondents are a company registered under the Companies Act and its office, factory and residential quarters were initially situated in the local limits of a revenue village known as Kumathe in North Solapur taluka of Solapur district. There was an existing village panchayat constituted under the Bombay Village Panchayat Act, 1958 for revenue village Kumathe. The State Government by notification dated 26/08/1976 extended the limits of Solapur city covering the limits of Kumatha village with effect from 1/09/1977. The notification excluded the village from the village panchayat. Prior to 1/09/1976, the company was paying taxes to the village panchayat. On the area of the company being brought within the limits of Solapur city, the company was liable to pay municipal taxes to Solapur Municipal Corporation. ( 2 ) SECTION 127 of the Bombay Provincial Municipal Corporations Act, 1949 enables the Corporation to impose diverse taxes including property tax. Sub-Section (3) of Section 127 provides that the municipal taxes shall be assessed and levied in accordance with the provisions of the Act and the Rules. Chapter VIII of the Schedule to the Act deals with taxation rules. Rule 7 states the manner of derecognition of the value of any building or the land assessable to property tax. Rule 8 confers power upon the Commissioner to call upon the owner or occupier of building or land to furnish information or with a return stating out the name and place of the owner, dimensions of the building or land, actual cost or other specified details connected with determination of the value etc. Rule 9 provides that the Commissioner shall keep a book to be called "assessment book" in which shall be entered every official year (a) a list of all buildings and lands in the city; (b) the rateable value of each such building and land; (c) the name of the person primarily liable to make payment of property taxes, if any; and (d) if any such building or land is not liable to be assessed to the general tax, the reason of such non-liability. Rule 13 reads as follows: -"13 (1) When the entries required by clauses (a), (b), (c) and (d) of Rule 9 have been completed, as far as practicable, in any ward assessment-book, the Commissioner shall give public notice thereof and of the place where the ward assessment-book, or a copy of it, may be inspected. 13 (2) Such public notice shall be given by advertisement in the local newspapers and also by posting placards in conspicuous places throughout the ward. " Rule 14 provides that the assessment-book shall be open for inspection and the owner or any person desirous of securing extract can obtain the same. Rule 15 reads as follows: -"15 (1) The Commissioner shall, at the time and in the manner prescribed in Rule 13, give public notice of day, not being less than fifteen days from the publication of such notice, on or before which complaints against the amount of any rateable value entered in the ward assessment-book will be received in his office. 15 (2) In every case in which any premises have for the first time been entered in the assessment-book as liable td the payment of property-taxes, or in which the rateable value of any premises liable to such payment has been increased, the Commissioner shall, as soon as conveniently may be after the issue of the public notice under sub-rule (1), give a special written notice to the owner or occupier of the said premises specifying the nature of such entry and informing him that any complaint against the same will be received in his office at any time within fifteen days from the service of the special notice."( 3 ) ON 27/09/1976, the Solapur Municipal Corporation called upon the respondent company to furnish the information about the buildings owned by the company. On 5/10/1976, the company submitted a return. Thereafter, the special notice under Rule 15 (2) was issued by the Corporation to the company on 24/01/1977 and the company was informed that the properties would be assessed from 1/09/1976 and the rateable value was fixed at Rupees 5,39,725/ -. Rule 16 enables the property owner to lodge a complaint against fixation of rateable value. The complaint filed by the company was rejected and thereafter a bill was forwarded to recover Rs. 42,176. 00 towards property tax for the period commencing from September 1, 197 6/03/1977. The company, being aggrieved by the rateable value fixed by the Corporation preferred an appeal under Section 406 of the Bombay Provincial Municipal Corporations Act before Civil Judge, Senior Division, Solapur. The appeal was allowed by order dated 11/08/1980 on the ground that the Corporation failed to carry out the procedure required under the rules before levying assessment of the properties of the company. The Civil Judge held that the Corporation had not given public notice as required under Rule 13 and that being a mandatory provision, the entire process of levy of rateable value was without any authority. The Corporation preferred Civil Appeal No. 2 of 1981 before the District Court, Solapur but the appeal ended in dismissal by judgment dated Sep 27/09/1983 delivered by Assistant Judge, Solapur. The decision of the Assistant Judge is under challenge in this petition filed under Article 227 of the Constitution. ( 4 ) SHRI Naik, learned counsel appearing on behalf of the Municipal Corporation, submitted that both the authorities below were in error in holding that the failure to give public notice under Rule 13 vitiated the entire proceedings of levy of rateable value. The learned counsel submitted that the conclusion of the two authorities below that public notice under Rule 13 is mandatory is incorrect. We find considerable merit in the submission of the learned counsel. As mentioned hereinabove, the determination of rateable value in respect of the properties of the company was undertaken for the first time after the area of village Kumathe was included within the limits of Municipal Corporation. As rateable value was determined for the first time, it was incumbent upon the Corporation to follow taxation rules set out in Chapter VIII of the Schedule to the Act. It is not in dispute that the Commissioner had published a notice under sub-rule (1) of Rule 15 to enable the owners of the property including company to lodge a complaint against the amount of rateable value entered into assessment book. It is also not in dispute that the special notice contemplated under sub-rule (2) of Rule 15 was served on the company and the premises of the company were assessed for property tax on the first occasion and the rate of tax was more than a tax which the company was paying to the village panchayat. The sole grievance of the company is that the entire procedure of levy of rateable value and recovery of tax was vitiated for failure to strictly comply with the requirement of sub-rule (1) of Rule 13. In our judgment, the two authorities below were clearly in error in proceeding to strike down the exercise carried out by the Corporation to levy property tax on assumption that the requirements of sub-rule (1) of Rule 13 are mandatory. The plain reading of the sub-rule makes it clear that after the entries required to be made by clauses (a), (b), (c) and (d) of Rule 9 have been completed, the Commissioner shall give public notice thereof and of the place where the ward assessment-book may be inspected. The public notice contemplated under this sub-rule is to give notice to the owners of various properties that an assessment book prepared under Rule 9 is available for inspection at a particular place. The public notice is required to be given by advertisement in the local newspapers and also by posting placards in conspicuous places. The two authorities below proceeded to hold that the requirement of giving public notice is mandatory because of the use of expression shall. The conclusion reached by the authorities below is clearly erroneous. It is now well settled by catena of decisions of the Supreme Court and this Court that whether the provision is mandatory or directory is not dependent upon the use of expression shall or may. What is required to be ascertained is the purpose or the object of the rule and whether any breach in following the rule affects substantial right of the person concerned. Applying this well settled test, it is obvious that the requirement of giving public notice under Rule 13 cannot be held to be mandatory. The object of giving public notice is informing the owners of buildings or land about the preparation of assessment-book under Rule 9 and to enable the property owners to inspect the same if so desired. There is no obligation cast upon the property owners to inspect the same because the failure to do so does not result into any consequences adversely affecting the owners. The rule is merely an enabling one and the Commissioner is required to give public notice only to inform the owners about the preparation of assessment-book. In our judgment, the rule cannot be held to be a mandatory one and it is obviously directory one and consequently, the breach thereof cannot vitiate the entire process of assessment of rateable value. In this connection, it would be appropriate to distinguish between the provisions of Rule 13 and Rule 15. Rule 15 also demands that the Commissioner shall give a public notice and this notice is to be given to the property owners to enable them to lodge complaints against the amount of rateable value. Sub-rule (2) of Rule 15 demands the Commissioner to serve special notice in case the rateable value is increased. The failure to give public notice under Rule 15 (1) or special notice under sub-rule (2) of Rule 15 clearly affects the right of a property owner to lodge complaint and in that case the requirement of public notice has to be treated as mandatory. In our judgment, the two authorities below overlooked the object and the purpose of Rule 13 and erroneously proceeded to conclude that requirements of Rule 13 are mandatory because of the use of the expression shall. The decision of the two authorities below holding that the entire process of determination of rateable value is null and void for failure to give notice contemplated under Rule 13, therefore cannot be sustained. It would not be out of place to state that the failure to give public notice under Rule 13 has in no manner adversely affected the interest of the company. The learned counsel for the company very fairly stated that notice under sub-rule (2) of Rule 15 was served and consequently the company did lodge co plaint against the amount of rateable value. In by the Corporation in determining rateable value in respect of properties which were originally situated within village Kumathe and which were subsequently included within the city limits of Corporation cannot be faulted with.( 5 ) SHRI Chandrachud, learned counsel appearing on behalf of the company, referred to the decision of Supreme Court reported in AIR 1975 SC 2172 : (1975 Tax LR 2110) (Vishakhapatnam Municipality v. Kandregula Nukraju and others) to urge that the requirement of Rule 13 is obligatory. The submission is not correct and the reliance on the decision of the Supreme Court is not appropriate. The Supreme Court was examining provisions of Sections 81 and 83 of Andhra Pradesh Municipalities Act which provided for levy of tax for the first time. The proviso to Sub-Section (2) of Section 81 prescribes that before passing a resolution imposing a tax for the first time, the council shall publish a notice in the prescribed manner declaring the requisite intention. The council has to invite objections and to consider the objections received within the stipulated time. While considering the ambit of this proviso, the Supreme Court held that it is obligatory upon the council to invite objections and consider the same before proceeding to levy tax for the first time. The decision of the Supreme Court has no bearing to the facts of the present case. As mentioned hereinabove, the requirement of giving public notice was not a basis for levy of tax, nor failure to give such notice has affected any interest of any property owner. In the case before the Supreme Court, the power to levy tax for the first time arose only after the objections were invited and determined. Such is not the case in respect of Rule 13 and therefore, the decision of the Supreme Court has no application to the facts of the present case. Shri Chandrachud then submitted that for a part of the assessed area, the company had already paid property tax to Kumathe Village panchayat. The learned counsel pointed out that the transitory provisions in Appendix IV of the Schedule prescribes that during the period the taxes are determined by the municipal corporation, the liability of the company to pay taxes to the village panchayat is not superseded and accordingly the company had paid taxes demanded by village panchayat. Shri Chandrachud submitted that it is not open for the corporation to demand taxes for the official year ignoring the amount paid by the company to the village panchayat. The submission is correct and deserves acceptance. The company is entitled to the credit of the amount of tax which was paid to the village panchayat and the companys liability is limited only to the excess amount determined by the Corporation. Shri Chandrachud also made a faint attempt to urge that the corporation cannot recover taxes for the expired period of the official year. We are unable to find any merit in this submission. It is now well settled that the right of Corporation to demand property taxes cannot travel beyond the current official year or in other words, the tax cannot be recovered with retrospective effect. It is not open for the tax payer to claim that the tax cannot be recovered for the period of the official year. The tax payer is given facility to pay the tax by instalment but that cannot enable the tax payer to claim that the Corporation cannot recover the tax for the expired period of the official year. In our judgment, the claim of Shri Chandrachaud on this count cannot be accepted.

Decision:
1[ds]As mentioned hereinabove, the determination of rateable value in respect of the properties of the company was undertaken for the first time after the area of village Kumathe was included within the limits of Municipal Corporation. As rateable value was determined for the first time, it was incumbent upon the Corporation to follow taxation rules set out in Chapter VIII of the Schedule to the Act. It is not in dispute that the Commissioner had published a notice under(1) of Rule 15 to enable the owners of the property including company to lodge a complaint against the amount of rateable value entered into assessment book. It is also not in dispute that the special notice contemplated under(2) of Rule 15 was served on the company and the premises of the company were assessed for property tax on the first occasion and the rate of tax was more than a tax which the company was paying to the village panchayat. The sole grievance of the company is that the entire procedure of levy of rateable value and recovery of tax was vitiated for failure to strictly comply with the requirement of(1) of Rule 13. In our judgment, the two authorities below were clearly in error in proceeding to strike down the exercise carried out by the Corporation to levy property tax on assumption that the requirements of(1) of Rule 13 are mandatory. The plain reading of themakes it clear that after the entries required to be made by clauses (a), (b), (c) and (d) of Rule 9 have been completed, the Commissioner shall give public notice thereof and of the place where the wardmay be inspected. The public notice contemplated under thisis to give notice to the owners of various properties that an assessment book prepared under Rule 9 is available for inspection at a particular place. The public notice is required to be given by advertisement in the local newspapers and also by posting placards in conspicuous places. The two authorities below proceeded to hold that the requirement of giving public notice is mandatory because of the use of expression shall. The conclusion reached by the authorities below is clearly erroneous. It is now well settled by catena of decisions of the Supreme Court and this Court that whether the provision is mandatory or directory is not dependent upon the use of expression shall or may. What is required to be ascertained is the purpose or the object of the rule and whether any breach in following the rule affects substantial right of the person concerned. Applying this well settled test, it is obvious that the requirement of giving public notice under Rule 13 cannot be held to be mandatory. The object of giving public notice is informing the owners of buildings or land about the preparation ofunder Rule 9 and to enable the property owners to inspect the same if so desired. There is no obligation cast upon the property owners to inspect the same because the failure to do so does not result into any consequences adversely affecting the owners. The rule is merely an enabling one and the Commissioner is required to give public notice only to inform the owners about the preparation ofIn our judgment, the rule cannot be held to be a mandatory one and it is obviously directory one and consequently, the breach thereof cannot vitiate the entire process of assessment of rateable value. In this connection, it would be appropriate to distinguish between the provisions of Rule 13 and Rule 15. Rule 15 also demands that the Commissioner shall give a public notice and this notice is to be given to the property owners to enable them to lodge complaints against the amount of rateable value.(2) of Rule 15 demands the Commissioner to serve special notice in case the rateable value is increased. The failure to give public notice under Rule 15 (1) or special notice under(2) of Rule 15 clearly affects the right of a property owner to lodge complaint and in that case the requirement of public notice has to be treated as mandatory. In our judgment, the two authorities below overlooked the object and the purpose of Rule 13 and erroneously proceeded to conclude that requirements of Rule 13 are mandatory because of the use of the expression shall. The decision of the two authorities below holding that the entire process of determination of rateable value is null and void for failure to give notice contemplated under Rule 13, therefore cannot be sustained. It would not be out of place to state that the failure to give public notice under Rule 13 has in no manner adversely affected the interest of the company. The learned counsel for the company very fairly stated that notice under(2) of Rule 15 was served and consequently the company did lodge co plaint against the amount of rateable value. In by the Corporation in determining rateable value in respect of properties which were originally situated within village Kumathe and which were subsequently included within the city limits of Corporation cannot be faultedcouncil has to invite objections and to consider the objections received within the stipulated time. While considering the ambit of this proviso, the Supreme Court held that it is obligatory upon the council to invite objections and consider the same before proceeding to levy tax for the first time. The decision of the Supreme Court has no bearing to the facts of the present case. As mentioned hereinabove, the requirement of giving public notice was not a basis for levy of tax, nor failure to give such notice has affected any interest of any property owner. In the case before the Supreme Court, the power to levy tax for the first time arose only after the objections were invited and determined. Such is not the case in respect of Rule 13 and therefore, the decision of the Supreme Court has no application to the facts of the present case. Shri Chandrachud then submitted that for a part of the assessed area, the company had already paid property tax to Kumathe Village panchayat. The learned counsel pointed out that the transitory provisions in Appendix IV of the Schedule prescribes that during the period the taxes are determined by the municipal corporation, the liability of the company to pay taxes to the village panchayat is not superseded and accordingly the company had paid taxes demanded by village panchayat. Shri Chandrachud submitted that it is not open for the corporation to demand taxes for the official year ignoring the amount paid by the company to the village panchayat. The submission is correct and deserves acceptance. The company is entitled to the credit of the amount of tax which was paid to the village panchayat and the companys liability is limited only to the excess amount determined by the Corporation. Shri Chandrachud also made a faint attempt to urge that the corporation cannot recover taxes for the expired period of the official year. We are unable to find any merit in this submission. It is now well settled that the right of Corporation to demand property taxes cannot travel beyond the current official year or in other words, the tax cannot be recovered with retrospective effect. It is not open for the tax payer to claim that the tax cannot be recovered for the period of the official year. The tax payer is given facility to pay the tax by instalment but that cannot enable the tax payer to claim that the Corporation cannot recover the tax for the expired period of the official year. In our judgment, the claim of Shri Chandrachaud on this count cannot be accepted.