1 HIGH COURT OF MADHYA PRADESH, BENCH AT INDORE SINGLE BENCH: JUSTICE J.K. MAHESHWARI WRIT PETITION NO.2293 OF 2001 Bhagwandas Vs Indore Municipal Corporation & another PRESENT: For petitioner : Shri V.K. Jain, Advocate and Shri Sumit Mittal, Advocate For respondents :Shri Shekhar Bhargava, Senior Advocate assisted by Shri Romesh Dave, Advocate O R D E R (16/08/2011) Invoking the jurisdiction under Article 226 of the Constitution and challenging the resolution (Annexure P/1) the bill of recovery (Annexure P/ 2) issued by the Municipal Corporation, Indore, the petitioner has filed this petition. 2. It is said that petitioner is the tenant of Shop No.8, Purana M.T.H. Compound, Indore on a monthly rent of Rs.125/-. The respondent No.1- Corporation is the owner thereof. However the petitioner is having a lease hold right in the said property. As per Section 132 of the M.P. Municipal Corporation Act, 1956 (hereinafter referred to as 'the Act'), the respondent No.1 is entitled to impose and recover the tax only against the owner of the property and no tax can be imposed on a person having a lease hold right and to recover it. It is further said that in exercise of the power under Section 433 read with Section 138 of the Act, the Rules were framed which were known as Madhya Pradesh Nagar Palika (Bhawno/ Bhumiyo Ke Varshik Bhada Mulya Ka Avdharan) Niyam, 1997 (in short 'the Rules '). As per the said rules, the Corporation is bound to divide the municipal area in zones and by passing a resolution the rate to determine the annual letting value of the properties may be fixed. As per the Rules, the respondent-corporation passed resolution No.338 dated 11.12.1997, determining the property tax and also resolved for imposition of service tax. It is urged that the imposition of the tax by the said resolution and to make demand is not in conformity to the 2 provisions of the Act and the Rules made thereunder, therefore such resolution may be set aside and the demand as made may also be quashed. 3. The respondent-Corporation by filing their return stated that the petition as filed by the petitioner is entirely on wrong and incorrect basis, treating service tax/fee as a property tax. It is said that the property tax on a property owned by Corporation is not leviable, however as per Section 132 (1) (c) (d) and (e) of the Act, the taxes for the services rendered in general may be leviable. If the Corporation by the said resolution fix the tax considering the notification issued by the State Government in the Gazette of State of M.P. dated 9th May, 1997 (Annexure R/2) and the letter issued (Annexure R/3) and directed such recovery, it cannot be said to be illegal. In fact, it is within the competence of the Corporation to impose such taxes and in view of the language of clause (10) of the lease deed (Annexure R/4), the petitioner is bound to pay such an amount without raising any objection on the said issue. In view of the foregoing, it is urged that the resolution (Annexure P/1) and the demand (Annexure P/2) has rightly been made by the respondent-Corporation. 4. By filing the rejoinder, it is said that the documents filed after filing of the return cannot be taken on record and to take coercive measure in furtherance to the resolution (Annexure P/1) is not in conformity to law and the action of the respondent-Corporation is illegal and arbitrary. 5. Shri V.K.Jain, learned counsel appearing on behalf of the petitioner contends that the resolution (Annexure P/1) was passed in view of the amendment made under Section 138 of the Act for determination of the annual letting value of land or building by self-assessment after framing the Rules of 1997. Bare reading of the resolution, it is apparent that it is in furtherance to the rules for imposition of the property tax. In the said resolution the Corporation is not required to resolve for the imposition and recovery of service tax. It is contended that the service tax imposed under Section 132 of the Act may not be recoverable from the tenant. It is also contended that as per clause (4) (Sa) (3) of the resolution, a fixed rate for recovery of the service tax has been specified irrespective to the area and location of the leased shop, however fixing such a flat rate is unreasonable 3 and not rational, therefore the recovery thereto cannot be made by issuing the bill (Annexure P/2). Lastly it is contended that the notification as issued by the State Government does not prescribe the maximum rate of tax for sanitation, lighting and fire taxes, however ignoring the minimum amount, recovery of service tax by the the Corporation @ Rs.500/- is unreasonable. Therefore the resolution as passed is in violation of Section 132(5) (a) of the Act. In support of his contention, reliance has been placed on the Judgment of the Apex Court in the case of Ahmedabad Urban Development Authority Vs. Sharadkumar Jayantikumar Pasawalla and others, AIR 1992 SC 2038 and Hansraj & Sons Vs. State of Jammu & Kashmir and others , (2002) 6 SCC 227 and contended that the taxing statute should be construed strictly and unless and until the delegated authority having the express power to that effect which are necessary, it cannot be implemented. Placing further reliance on the judgment of the Apex Court in the case of B.C. Banerjee Vs. State of M.P. , AIR 1971 SC 517 it is urged that unless and until the rule or regulation specifies the imposition of the tax, it cannot be imposed by the Corporation. In that view of the matter, it is submitted that by passing joint resolution for imposition and recovery of property tax and the general sanitation, fire and lighting taxes is not in coformity to the principle of law laid down in the aforesaid cases. 6. Per contra Shri Shekhar Bhargava, learned senior counsel contends that Section 132 of the Act empowers the Corporation to impose the property tax as well as other taxes subject to general or special order which the State Government may make in this behalf. Clause (a) of sub-section (1) of Section 132 specifies the imposition of the tax upon the building or land owner and payable by the owner subject to provisions of Section 135, 136 and 138. While the taxes as specified under clause (c) (d) and (e) of sub- section (1) of Section 132 are related to the sanitary cess, for the construction and maintenance of public latrines and for removal and disposal of refuse and general cleanliness of the city, general lighting tax, where the lighting of public streets and places is undertaken by the corporation and general fire tax for the conduct and management of the fire service and for the protection of the life and property in the case of fire. The legislation while specifying the 4 imposition of the said taxes not specified that such recovery may be made only against owner, however such imposition and recovery may be made against the users. It is also contended as per clause (a) of sub-section (5) of Section 132, it is apparent that the taxes under clause (c) (d) and (e) of sub- section (1) of Section 132 shall be levied at a consolidate rate on buildings and lands which are exempted from the property tax at a rate determined by the corporation subject to a minimum and maximum rate as may be prescribed by the State Government. Having competence of the aforesaid powers and subject to the rate as prescribed by the State Government by issuing a notification (Annexure R/2), the consolidated amount has been fixed by the said resolution imposing the tax and directed for recovery, however the said resolution cannot be said to be illegal as the Corporation is having competence to impose such taxes. 7. In reply to the argument of passing a joint resolution (Annexure P/1), it is contended that the Municipal Corporation is well within the competence under Section 133 of the Act to pass a consolidated resolution for imposition of the tax and fees as specified under the Act, however if a consolidated resolution of property tax and other taxes has been passed, it cannot be said to be in excess to the jurisdiction or illegal. In alternative it is submitted by him that in any case if this Court comes to the conclusion that if the resolution (Annexure R/1) ought to be passed for a specific purpose and the Corporation is having the competence to impose the tax then it may amounting to irregularity and may be crept out by passing a separate resolution but it cannot be termed as illegal to make the action of the Corporation as without jurisdiction or void ab initio. On the point of not fixing the maximum rate by the State Government by the notification (Annexure R/2), placing reliance on a Division Bench decision of this Court in the case of M.T. Cloth Market Marchants Asso. Vs. Municipal Corporation, Indore, 1982 JLJ 409, it is contended that once the Corporation is having power to impose such tax, and the limit has not been specified it would not oust the power of the Corporation to impose the tax; in view of the foregoing it is urged that the resolution (Annexure P/1) has rightly been passed imposing the service tax by fixed rate and the notice of 5 demand (Annexure P/2) has rightly been issued. 8. After having heard learned counsel appearing on behalf of the parties, to appreciate the rival contentions, the basic relevant provisions of Section 132 and 133 are required to be reproduced hereunder :- “132. Taxes to be imposed under this Act.- (1) For the purpose of this Act, the Corporation shall, subject to any general or special order which the State Government may make in this behalf, impose in the whole or in any part of the Municipal Area, the following taxes, namely:- (a) a tax payable by the owners or building or lands situated within the city with reference to the gross annual letting value of the buildings or lands, called the property tax, subject to the provisions of Section 135, 136 and 138. (b) a water tax, in respect of lands and buildings to which a water supply is furnished from or which are connected by means of pipe with municipal water works. (c) a general sanitary cess, for the construction and maintenance of public latrines and for removal and disposal of refuse and general cleanliness of the city. (d) a general lighting tax, where the lighting of public streets and places is undertaken by the corporation. (e) a general fire tax, for the conduct and management of the fire service and for the protection of life and property in the case of fire. (f) a local body tax on the entry of such goods as may be declared by the State Government by notification in the Official Gazette into the municipal area for consumption, use or sale therein at a rate not exceeding four percent of the value of goods: Provided that no local body tax shall be levied on the goods:- (i) xxx xxx xxxx (ii) xxx xxx xxx-- (a) xxx xxx xxx 6 (b) xxx xxx xxx (c) xxx xxx xxx (iii) xxx xxx xxx (2) Notwithstanding anything contained in clause (f) of sub-section (1) if in the opinion of the State Government it is expedient to do so, it may delegate the power to the Corporation to declare the goods on which local body tax shall be levied and the rates thereof. (3) The mode of assessment and collection of the local body tax shall be such as may be prescribed. (4) The water tax under clause (b) of sub-section (1) shall be charged -- (a) on buildings and lands which are exempted from property tax, at a rate as shall be determined by the Corporation, subject to a minimum rate as may be prescribed by the State Government. (b) on buildings and lands which are not exempted from property tax, at a minimum rate as determined in clause (a) plus such percentage of the property tax, as shall be determined by the Corporation: [Provided that the water tax under clause (b) of sub-section (1), shall not be levied on building and land owned by freedom fighters during their life time, if they are exempted from Income Tax and the water connection is for domestic purpose and which does not exceed half inch connection.] (5) The taxes under clauses (c), (d) and (e) of sub- section (1) shall be levied at a consolidated rate as under:- (a) on buildings and lands which are exempted from property tax at a rate as determined by the corporation subject to a minimum and maximum rate as may be prescribed by the State Government. (b) on buildings and lands which are not exempted from property tax at a minimum rate prescribed under clause (a) plus such percentage of the property tax as may be determined by the Corporation.” “[133. Imposition of Taxes and Fees.- (1) The Corporation may, by a resolution, at the time of final 7 adoption of the budget estimates for the next financial year, subject to the provisions of this Act and subject to such limitations and conditions, as may be prescribed by the State Government in this behalf -- (a) impose any of the taxes or fees specified in this Act; or (b) increase the rates of taxes or fees already imposed. (2) The resolution as referred to in sub-section (1) shall contain (a) in case of imposition of any tax or fees, the provisions under which such tax or fee is being imposed, class of persons or description of property to be taxed, the amount or rate of tax or fee being imposed, system of assessment and collection to be adopted and the date from which imposition of such tax or fee shall take effect; (b) in case of increase of rate of any tax or fee, te prevailing rate of such tax or fee, the proposed increased rate of such tax or fee and the date from which increase of rate of such tax or fee shall take effect. (3) The resolution, as passed, shall be conclusive evidence of the imposition of a new tax or fee, or increase of rate of any tax or fee, as the case may be: Provided that if the Corporation decides to have supplementary taxation during the financial year, it may do so from such date as the Corporation may resolve, subject to the provisions of this Act and subject to such limitation and conditions, as may be prescribed by the State Government in this behalf. (4) Nothing contained in this Section shall apply to tax mentioned in clause (a) of sub-section (1) of Section 132, which shall be charged and levied in accordance with Section 135]. 9. On reading of the aforesaid, it is apparent that under the Act, the Corporation is empowered to impose various taxes subject to general or special order of the State Government. Clause (a) of sub-section (1) of Section 132 specifies that the owner is liable to pay a tax on a building or land situated within the city with reference to gross annual letting value and it shall be called as a property tax subject to provisions of Section 135, 136 8 and 138 of the Act. Section 135 of the Act specifies the rate of property tax which may be in between six percent to ten percent of the annual letting value as determined by the Corporation for each financial year. Section 136 relates to exemptions of the property tax leviable under Section 135 of the Act, whereby the buildings and lands owned by or vested in the Union Government, the State Government and the Corporation are exempted from payment of property tax. Section 138 relates to annual letting value of land of building. 10. As per Section 133 of the Act, it is apparent that the Corporation by a resolution at the time of final adoption of the budget estimates for the next financial year, subject to the provisions of the Act and subject to such limitations and conditions, as may be prescribed by the Government may impose any tax or fee specified and increase the rate of tax or fee already imposed. Sub-section (2) of Section 133 of the Act makes it clear that when the resolution is passed then the way of assessment, collection and the date from which the imposition is required to be specified and in case of increase the rate of tax or fee from the prevalent rate and from which date the increased rate shall be given effect to is also specified. It has further been made clear in sub-section (4) that this Section shall not apply to the taxes as specified under clause (a) of sub-section (1) of Section 132 of the Act as it be charged and levied in accordance with Section 135. Section 138 of the Act specifies the annual letting value of land of building. Section 138 has been replaced by the Act 18 of 1997, thereafter by Act 29 in the year 2003, clause (a) of sub-section (1) of Section 132 has been replaced. In the year 1997, the rules have been framed which are known as the Rules of 1997. As per the said rules, the Corporation is bound to divide the area of the city within various zones for the purposes of determination of the letting value of the land of property situated. Thereafter, by passing a resolution the Corporation may fix the rate thereof for the purposes of self-assessment. Accordingly, as per Section 138, the self-assessment form is required to be submitted by the owner. The imposition of the said tax and recovery thereof is as per clause (a) of sub-section (1) of Section 132 of the Act. Clause (b), (c), (d), (e) and (f) of sub-section (1) of Section 132 of the Act empowers the Corporation for 9 imposition of water tax, general sanitary cess, general lighting tax, general fire tax and the local body tax on the entry of goods. Bare reading of the language of the aforesaid provisions, the legislative intent is clear whereby the imposition and recovery of such taxes is not akin to the provisions of clause (a) of sub-section (1) of Section 132 of the Act, taxes payable by the owners of building or lands. 11. In context of the aforesaid legal position, in the facts of the present case, it is to be determined that the imposition of the service tax by passing the resolution (Annexure P/1) and demand made vide Annexure P/2 is illegal or not. Bare reading of the resolution (Annexure P/1), reveals that the Standing Committee passed the resolution No.865 with respect to self- assessment of the property tax which was taken into consideration. Referring the Gazette of the State Government of Madhya Pradesh dated 21st April, 1997 making an amendment in the provisions of the Act for the year 1997 and 1998, the tax over the properties were determined in clause 4(aa) (ba). In clause 4 (sa) it is referred that with respect to the properties owned and vested in Central Government, State Government and the Corporation, the service tax may be leviable. While dealing the issue of imposition of service tax with respect to the properties of the Corporation, it is said that in the main market area if a shop is situated the service tax at the rate of Rs.500/- per annum and to the shop situated in other areas, it shall be Rs.250/- per annum while for Ghumtis the service tax of Rs.100/- annum shall be payable. 12. As per Section 132 of the Act, various taxes can be imposed by the Corporation out of which property tax is payable by the owners or building or lands as specified under clause (a) of sub-section (1) of Section 132 of the Act. While giving power for imposition and recovery of other taxes like water tax, general sanitary cess, general lighting tax, general fire tax as specified under clause (b), (c) (d) and (e) of sub-section (1) of Section 132 of the Act, it has not been specified that it be payable by whom or recoverable from the owners of building or lands. The general sanitary cess, general lighting tax, general fire tax are the taxes for the services rendered by the Corporation in general to the users or by citizens and not to the owners of 10 building or lands. The general sanitary cess is for the construction and maintenance of public latrines and for removal and disposal of refuse and general cleanliness of the city and the general lighting tax is where lighting of public streets and places is undertaken by the Corporation. The fire tax is for the conduct and management of fire service and for the protection of life and property in case of fire. Thus it is apparent that the aforesaid taxes may be imposed for the services rendered by the Corporation. Sub-section (4) of Section 132 makes it clear that the water tax may be imposed on buildings and lands even which are exempted from property tax, but it is not relevant in the facts of the present case. But, the intention of legislation for imposition of the similar tax like sanitary cess, general lighting tax and fire tax may be gathered in such cases. Sub-section (5) further makes it clear that the taxes under clause (c) (d) and (e) of sub-section (1) of Section 132 shall be levied at the consolidated rate as determined by the Corporation subject to minimum and maximum rate as may be prescribed by the State Government. Thus, it is clear that the imposition of these three taxes is well within the competence of the Corporation and may be imposed for the general services provided by the Corporation to the users and citizens as determined subject to minimum and maximum rate as prescribed by the State Government. In the present case, it is not in dispute that the petitioner is a lessee of the Corporation of a shop No.8, Purana M.T.H. Compound, Indore owned by the Corporation, however the said property is exempted from payment of the property tax which may be levied as per clause (a) sub- section (1) of Section 132 of the Act. 13. In the present case, the State Government by issuing a notification Annexure R/2 on 9th May, 1997 specified the minimum rate of general sanitation tax, general lighting tax and general fire tax @ Rs.180/- per annum but the maximum has not been specified thereunder. Thus by reading sub-section (5) of Section 132, it is clear that the determination of taxes as specified under clause (c) (d) and (e) of sub-section (1) of Section 132 shall be made by the Corporation but if the minimum and maximum rate is prescribed by the State Government, it shall be in accordance with the same. In the present case, the State Government while issuing the notification 11 (Annexure R/2) has not prescribed any maximum limit but the minimum is prescribed, however determination, if any, made by the Corporation fixing the service tax @ Rs.500/- per annum, cannot be said to be illegal as the Corporation is competent to determine it. If the maximum has not been prescribed in the notification, it would not oust the power of the Corporation to fix the limit more than the minimum as prescribed by the State Government. The said view fortifies from the view taken by the Division Bench judgment of this Court in the case of M.T. Cloth Market Marchants Asso. (supra). It is clear that the service tax may be imposed on the building and the land which are exempted from payment of the property tax as per Section 136