IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 11.03.2008 C O R A M THE HONOURABLE Mr.JUSTICE P.JYOTHIMANI W.P.Nos.6823 & 3036 of 1999 Tamilnadu Warehousing, represented by its Chairman cum Managing Director, No.100, Anna Salai, Guindy, Chennai – 600 032. ... Petitioner in both the WPs. -Vs- The Commissioner, Panruti Municipality, Villupuram District. ... Respondent in W.P.No.6823/99 The Commissioner, Cuddalore Municipality, Cuddalore – 607 001. ... Respondent in W.P.No.3036/99 Prayer in writ petition No.6823 of 1999: Writ Petition filed under Article 226 of the Constitution of India for the issuance of a Writ of Certiorari calling for the records relating to the demand notice issued by the respondent enhancing the property tax from Rs.8,442/- per annum to Rs.1,31,532/- per annum from the 2nd half year of 1987-88 to 1st half year of 1993-94 and subsequently enhancing the property tax from Rs.1,31,532/- per annum to Rs.3,71,612/- per annum with effect from 2nd half year of 1993-94 for the petitioner's warehousing building situate at Kumbakonam road, Panruti, Villupuram District and quash the same. Prayer in writ petition No.3036 of 1999: Writ Petition filed under Article 226 of the Constitution of India for the issuance of a Writ of Certiorari calling for the records relating to the letter bearing No.A.1.12209/86 dated 31.05.1994 on the file of the Commissioner, Cuddalore Municipality, Cuddalore-607 001 the respondent herein and quash the same. For Petitioner : Mr.A.J.Abdul Razak. For Respondents : Mr.N.Subbarayalu. https://hcservices.ecourts.gov.in/hcservices/ C O M M O N O R D E R These writ petitions are filed by the same petitioner viz., Tamilnadu Warehousing Corporation against Cuddalore Municipality and Panruti Municipality challenging the demand made by the said Municipalities in respect of property tax for the year 1987-88 to 1993-94 and upto 1998-99 retrospectively. Since common grounds are raised in challenging the impugned order, both these writ petitions were heard together. 2. The impugned orders which are the final notices issued by the respective municipalities, in assessing property tax for the above said period, by which, the amount of tax has been enhanced from Rs.8,442/- per annum to Rs.1,31,532/- per annum in respect of Panruti Municipality and the Cuddalore Municipality has enhanced the property tax from Rs.16,109/- to Rs.1,07,982/- per half year. 3. The challenge is on various grounds including that the procedure contemplated under Section 82(1) and 82(2) of the Tamil Nadu District Municipalities Act, 1920 which stood before the Tamil Nadu Amendment Act LXV of 1997 were not followed. Under Section 82, which stood before the amendment, the annual value of lands and buildings were deemed to be the gross annual rent at which the person is expected to let on from month to month or from year to year by deducting 10% in case of buildings from that portion of the annual rent and separate procedure has been contemplated in respect of Government or Railway buildings, wherein, the annual value of the premises is deemed to be six per cent of the total of the estimated value of the land and the estimated present cost of the building after deducting for depreciation a reasonable amount which is not less then 10% of such cost. 4. It is the case of the petitioner that as per G.O.Ms.No.1755 dated 31.08.1968, the Government has directed that in respect of Tamilnadu Warehousing Corporation, the property tax on an annual rental value has to be fixed as per Section 82 of the Tamil Nadu District Municipalities Act, 1920 and that was reiterated subsequently by another G.O.Ms.No.1334, dated 30.06.1972. According to the petitioner, while the municipalities have enhanced the property tax, no basis has been stated for such enhancement and the enhancement is more than eight times, which is illegal. It is also his further case that such enhancement giving retrospective effect from 1987-88 is not allowed as per law. 5. It is the further case of the petitioner that under Rule 4 of Schedule IV of the Tamil Nadu District Municipalities Act, which relate to Taxation Rules, the property assessment tax has to be furnished and as and when any amendment has to be made, the same can https://hcservices.ecourts.gov.in/hcservices/ only be done after reasonable opportunity is given to the persons concerned and according to the petitioner while making such enhancement no such opportunity has been given as per the Rules. It is also the further case of the petitioner that as per Rule 9-A (1) (ii) of the Taxation Rules, in the case of buildings used for non- residential purposes, the enhancement of property tax shall not exceed three hundred per centum of the property tax payable immediately before 1st October 1987. 6. It is their further case that in respect of fixing of annual value, as laid down in (A.I.R. 1993 SC 1507) the procedure contemplated under Section 4 of the Tamilnadu Buildings (Lease and Rent Control) Act, 1960 has to be followed. 7. The further case of the petitioner is that under Section 345 of the Tamil Nadu District Municipalities Act, the period of limitation has been prescribed for recovery of dues makes it clear that any distraint action can be taken only for claim in respect of three years before the action taken and in the present case the respondent municipalities is claiming enhancement from 1987-88. 8. On the other hand, it is the case of the respondent municipalities that the revised assessment tax has been done on the basis of fair rent fixed under the provisions of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. It is the further case of the respondents that in fact the municipalities have issued notice demanding property tax stating that distraint proceedings will be initiated. It is the admitted case of the respondents that the enhancement tax has been given effect to from 1993-94 retrospectively and before that the property tax was fixed at lesser amount. It is admitted case in both the petitions that while admitting the writ petitions, this Court has directed 50% of the amount to be deposited and in fact the same has been deposited. 9. Heard Mr.A.J.Abdul Razak, learned counsel appearing for the petitioner and Mr.N.Subbarayalu, learned counsel appearing for the respondents, who reiterated the contentions raised in their respective affidavits. 10. The Tamil Nadu District Municipalities Act, under Section 82, as it stood before the Tamil Nadu Amendment Act LXV of 1997, prescribed the method of assessment of annual value under sub-section 2. Section 82 reads as follows: “Section 82. Method of assessment of property: (1) Every building shall be assessed together with its site and other adjacent premises occupied as an appurtenance thereto unless the owner of the building is a different person from the owner of such site or premises. (2) The annual value of lands and buildings shall be deemed to be the gross annual rent at which they may https://hcservices.ecourts.gov.in/hcservices/ reasonably be expected to let from month to month or from year to year less a deduction in the case of buildings, of ten per cent, of that portion of such annual rent which is attributable to the buildings alone, apart from their sites and adjacent lands occupied as an appurtenance thereto; and the said deduction shall be in lieu of all allowance for repairs or on any other account whatever: Provided that-- (a) in the case of (i) any Government or railway building, or (ii)any building of a class not ordinarily let the gross annual rent of which cannot, in the opinion of the executive authority, be estimated; the annual value of the premises shall be deemed to be six per cent, of the total of the estimated value of the land and the estimated present cost of erecting the building after deducting for depreciation a reasonable amount which shall in no case be less than ten per centum of such cost; (aa) in the case of any building in industrial estate wherein essential amenities including water-supply, drainage and lighting are not provided by the municipality but provided by the Industrial Department of the State Government or by any other authority under the control of the State Government, the annual value of such building shall be deemed to be four per cent of its capital value; Provided that if any question arises whether for the purpose of this clause, essential amenities are provided by the Industrial Department or other authority, it shall be decided by such authority as may be prescribed. (b) machinery and furniture shall be excluded from valuations under this section. (3) The State Government shall have power to make rules regarding the manner in which, the person or persons by whom and the intervals at which, the value of the land, the present cost of erecting the building and the amount to be deducted for depreciation, shall be estimated or revised, in any case or class of cases to which clause (a) or clause (aa) of the proviso to sub-section (2) applies, and they may, by such rules, restrict or modify the application of the provisions contained in Schedule IV to such case or class of cases.” 11. In the present case, it is the property of the Government and therefore the first proviso to Section 82(2) is applicable, under which the annual value of the premises has to be deemed as six per cent of the total of the estimated value of the land and cost of construction less depreciation which shall not be less than 10% of the cost. Under Section 82(3), the Government has power to make rules and based on the powers conferred thereunder, the Taxation and Finance Rules have been formulated, as seen in the Schedule IV. Under https://hcservices.ecourts.gov.in/hcservices/ Rule 4 of the said Taxation Rules, the Executive Authority has to make amendment in the assessment books. If it is in the opinion of the authority, the property has been inadequately assessed or inadvertently or improperly omitted from the assessment books relating to any tax and in such event, the amendment can be effected and where it involves an increase in the assessment, the person concerned shall be afforded a reasonable opportunity to show cause to the executive authority. Rule 4 reads as follows: “ Rule 4. (1) If any time it appears to the executive authority that any person or property has been inadequately assessed or inadvertently or improperly omitted from the assessment books relating at any tax, or that there is any clerical or arithmetical error in the said books, the executive authority may amend the said book in such manner as it deems just or necessary. Provided that no such amendment in the said books shall be made where it involves an increase in the assessment, unless the person concerned shall have been afforded a reasonable opportunity to show cause to the executive authority why the assessment books should not be amended as proposed. (2) Such amendment shall be deemed to have taken effect on the earlier date, either in the current half-year or in the two half-years immediately preceding it, on which the circumstances justifying the amendment existed.” 12. After the above said amendment to the District Municipalities Act, Section 81 which empowers the levy of property tax makes it clear in sub-section 6 that in respect of such assessment, the Executive Authority or any Officer authorised by him, has to inspect, survey and measure the land after giving due notice to the owner or occupier before such inspection and the owner or occupier shall be bound to furnish necessary information required for such purpose. The said clause is as follows: “Section 81. Levy of Property tax:- (1) ..... (2) ..... (3) ..... (4) ..... (5) ..... (6) For the purpose of assessment of property tax for any building or land in the Municipality the executive authority or any officer authorised by him in this behalf may enter, inspect, survey and measure any building or land, after giving due notice to the owner or occupier before such inspection and the owner or occupier shall be bound to furnish necessary information required for this purpose.” https://hcservices.ecourts.gov.in/hcservices/ 13. Section 82 provides for minimum and maximum basic property tax, to be prescribed by the State Government, which is based on the value of building and land and use of building. The determination of basic property tax, additional basic property tax is enshrined under Section 83 of the Act, wherein, it enables the municipalities to classify the buildings into various zones apart from making classification based on use like residential, commercial, industrial, etc., In respect of location of the building, the said section provides for classification on the basis of (A) arterial roads, bus-route roads leading to arterial roads and main roads; (B) bus-route roads other than those specified in item (A); (C) roads and streets in primarily residential colonies. While explaining about the type of construction to be followed for the purpose of deciding the valuation, the said provision also classifies the types of construction as thatched and tiled roof, reinforced concrete cement roof, reinforced concrete cement roof with mosaic flooring etc., 14. Section 84 which is similar to the old Section 82 before amendment, contemplates the Executive Officer to issue property tax and also procedure to be followed in case of amendment regarding quantum of tax. The validity of the said method of valuation contemplated under Section 82 of the Act which is synonymous to the formula under Section 4 of the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 came to be decided by the Division Bench of this Court in Dindigul Anna District Tax Payers Sangam etc., Vs. Government of Tamil Nadu and another (1994 Writ L.R. 805). While upholding the validity of the provisions laid down under Section 82 of the Tamil Nadu District Municipalities Act, 1920 the Division Bench has also elaborately dealt with the manner for arriving at the annual value by relying upon the Judgment of the Hon'ble Supreme Court in Guntur Municipal Council Vs. Rate-Payers' Association (A.I.R. 1971 S.C. 353). The Division Bench has however held that as per Rule 9 of the Taxation Rules, before making amendment the particulars must be given to the resident, occupier as well as the owner and in that case, since such opportunity was not given before passing such orders, the Division Bench has directed the municipalities to follow Rule 9 and pass fresh orders by giving particulars to the occupiers. The operative portion of the said Judgment is as follows: “23. Accordingly we direct the executive authorities of Municipalities in question to issue fresh special notices under Rule 9 to the assesses giving reasons for the enhancement of the property tax, for the year commencing from 1.10.1993. On receipt of such notices, it is open to the members of the petitioners Sangams to file their objections or apply for revision of the proposed enhancement. As and when revisions are filed by the owners https://hcservices.ecourts.gov.in/hcservices/ or occupiers of properties within the prescribed time, the Municipal Authorities shall consider the same and pass appropriate orders on merits. With the above directions, these Writ Petitions are allowed. However, there will be no order as to costs.” 15. While deciding about the period of limitation for the purpose of recovery of revised tax as per the Madurai City Municipal Corporation Act, 1919, Mr.Justice P.Sathasivam, as he then was, in K.R.Santharam Vs. The Commissioner, Madurai City Municipal Corporation (2000 (1) CTC 518) by referring to the Madurai City Municipal Corporation Act, 1919 which has prescribed limitation period as six years for assessment of tax has quashed the impugned order therein for assessment beyond the period contemplated under the provisions as stated above. In the present case, it is not in dispute that as per Section 345 of the Tamil Nadu District Municipalities Act, 1920 no distraint proceedings can be instituted and no suit can be instituted and no prosecution in respect of any tax after expiration of a period of three years from the date on which distraint might first have been made. Section 345 reads as follows: “Section 345. Limitation for recovery of dues:- No distraint shall be made, no suit shall be instituted and no prosecution shall be commenced in respect of any sum due to the municipal council under this Act after the expiration of a period of three years from the date on which distraint might first have been made, a suit might first have been instituted, or prosecution might first have been commenced, as the case may be, in respect of such sum.” 16. Therefore as per the provisions of the Tamil Nadu District Municipalities Act, the period of limitation is prescribed which is certainly applicable to the respondents. On the basis of the above said legal issue involved in this case, while referring to the impugned notice issued by the respondents, it is clear that there was no particular given as to how the enhancement was arrived at, there is nothing to show that opportunity was provided to the petitioner before enhancing the amount of tax or for making re-assessment. It is also seen that the enhancement is claimed retrospectively from 1987-88 and 1993-94. 17. Under such circumstances, I am of the considered view that by applying the provisions of the Tamil Nadu District Municipalities Act along with various Judgments declaring the legal position, the impugned notices issued by the respondent Municipalities are not sustainable and they are liable to be set aside and accordingly set aside. In view of the same, the writ petitions stands allowed with a direction to the respondent Municipalities to make assessment based on the provisions of the Tamil Nadu District Municipalities Act, 1920 by giving necessary opportunity to the parties concerned and in https://hcservices.ecourts.gov.in/hcservices/ accordance with the method prescribed under the Act subject to the period of limitation as prescribed by the said Act. The learned counsel appearing for the respondents would submit that by applying Section 345 of the Act, the municipalities are entitled to recover the amount for three years from the date of demand i.e. 1993- 94. It is true that as per the said provisions of the Act, the municipality is entitled to recover the amount from the said year and not before. No costs. Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar. kk To 1. The Commissioner, Panruti Municipality, Villupuram District. 2. The Commissioner, Cuddalore Municipality, Cuddalore – 607 001. + 2 CCs to Mr.A.J.Abdul Razak, Advocate SR Nos.13365, 13364 + 1 CC To Mr.N.Subbarayalu, Advocate SR NO.13597 W.P.Nos.6823 & 3036 of 1999 mrd[c]o] gp/24.3. https://hcservices.ecourts.gov.in/hcservices/