CWP No.6651 of 2007 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No.6651 of 2007 (O&M) Date of decision: 24.09.2010 St. Xavier's Sr. Sec. School, Sector 44, Chandigarh, and others ....Petitioners Versus Municipal Corporation through its Commissioner, Sector-17, Chandigarh and another ....Respondents CORAM: HON'BLE MR. JUSTICE VINOD K. SHARMA Present: - Mr. I William Gosain, Advocate, for the petitioners in CWP No.6651 of 2007. Mr. Puneet Jindal, Advocate, for the petitioners in CWP Nos.9018 of 2007 & 9519 of 2008. Mr. R.S. Ahluwalia, Advocate, for the petitioners in CWP Nos.13910, 16070, 13969 & 16025 of 2007. Mr. M.L. Sarin, Sr. Advocate, with Ms. Alka Sarin, Advocate, for the petitioners in CWP No.6038 of 2009. Mr. Inderjit Kaushal, Advocate, for the petitioner in CWP No.6502 of 2009. Mr. R.S. Cheema, Advocate, for the petitioners in CWP Nos.304, 306, 3223 & 390 of 2009 and 6822 of 2010. Mr. Rajdeep Singh Cheema, Advocate, for Mr. Hardeep Singh Dhindsa, Advocate, for the petitioners in CWP Nos.9875 & 10295 of 2009. Mr. B.S. Guliani, Advocate, for the petitioners in CWP Nos.9753, 9754 & 9952 of 2008. Mr. Sandeep Kotla, Advocate, for the petitioners in CWP No.938 of 2010. None for the petitioner(s) in CWP Nos.8246 of 2007 and 16699 of 2008. Mr. Sanjay Kaushal, Sr. Standing Counsel, with Mr. Sanjiv Ghai, Advocate, for UT, Chandigarh. Mr. Rajiv Sharma, Sr. Central Govt. Counsel, for Union of India. Ms. Lisa Gill, Advocate, for the Municipal Corporation, Chandigarh. ***** CWP No.6651 of 2007 -2- VINOD K. SHARMA, J. This judgment shall dispose of (1) CWP No.6651 of 2007 titled St. Xavier's Sr. Sec. School, Sector 44, Chandigarh, and others Vs. Municipal Corporation and another, (2) CWP No.6038 of 2009 St. John's High School, Sector 26, Chandigarh Vs. Union of India and others, (3) CWP No.6822 of 2010 titled DAV College Trust and Management Society, Chitra Gupta Road, New Delhi and another Vs. Municipal Corporation Chandigarh and others, (4) CWP No.10295 of 2008 titled Dev Samaj College for Women, Sector 45-B, Chandigarh Vs. Municipal Corporation and another (5) CWP No.9952 of 2008 titled S.D. High School, Sector 24-C, Chandigarh Vs. Municipal Corporation and others, (6) CWP No.304 of 2009 titled DAV College Trust and Management Society, Chitra Gupta Road, New Delhi and another Vs. Municipal Corporation Chandigarh and others, (7) CWP No.16698 of 2008 titled Divya Educational Society and others Vs. Union of India and others, (8) CWP No.323 of 2009 titled DAV College Trust and Management Society, Chitra Gupta Road, New Delhi and another Vs. Municipal Corporation Chandigarh and others, (9) CWP No.306 of 2009 titled DAV College Trust and Management Society, Chitra Gupta Road, New Delhi and another Vs. Municipal Corporation Chandigarh and others, (10) CWP No.390 of 2009 titled DAV College Trust and Management Society, Chitra Gupta Road, New Delhi and another Vs. Municipal Corporation Chandigarh and others, (11) CWP No.6502 of 2009 titled Vivek High School Vs. Municipal Corporation and another, (12) CWP No.10142 of 2007 titled Vishesh Educational Society (Regd.) Vs. Municipal Corporation, Chandigarh and others (13) CWP No.938 CWP No.6651 of 2007 -3- of 2010 titled Gyandeep Public School, Sector 20, Chandigarh Vs. Union of India and others, (14) CWP No.9753 of 2008 titled Shri Guru Gobind Singh Senior Secondary School, Sector 35-B, Chandigarh and another Vs. Municipal Corporation and others, (15) CWP No.9754 of 2008 titled Gurdwara Ashthapan Committee (Regd.) Sector 22, Chandigarh and others Vs. Municipal Corporation and others, (16) CWP No.16070 of 2007 titled Sri Guru Gobind Singh college of Pharmacy, Sector 26, Chandigarh Vs. Municipal Corporation and another, (17) CWP No.13969 of 2007 titled Guru Gobind Singh College for women, Sector 26, Chandigarh Vs. Municipal Corporation and another, (18) CWP No.8246 of 2007 titled Dayanand Anglo Vedic (DAV) College Trust and Management Society and others Vs. Municipal Corporation and others, (19) CWP No.9018 of 2007 titled St. Joseph Educational and Charitable Trust and others Vs. Union of India and others, (20) CWP No.16025 of 2007 titled Sri Guru Gobind Singh Collegiate Public School, Sector 26, Chandigarh Vs. Municipal Corporation and another, (21) CWP No.13910 of 2007 titled Sri Guru Gobind Singh College, Sector 26, Chandigarh Vs. Municipal Corporation and another (22) CWP No.9519 of 2008 titled Kids 'R' Kids International Educational & Social Welfare Trust, Sector 42, Chandigarh and others Vs. Union of India and others and (23) CWP No.9875 of 2008 titled I.S. Dev Samaj Public School, Sector 21-C, Chandigarh Vs. Municipal Corporation and another, as common questions of law and facts are involved. For the sake of brevity, facts are being taken from CWP No.6651 of 2007. The brief facts pleaded in the writ petition are, that the CWP No.6651 of 2007 -4- petitioner schools are managed by the societies registered under the Societies Registration Act, 1860. The schools are within the jurisdiction of the city of Chandigarh. The petitioner schools have challenged the illegal imposition of Municipal (Land and Building) Tax (Commercial Property Tax) only on private schools, which will result in financial burden on thousands of students studying in all the private unaided schools. The case of the petitioners was, that land of the petitioner schools was owned by the Central Government and allotted on lease to the unaided schools as per Chandigarh Lease Hold of Sites and Buildings Rules, 1973. The Central Government, therefore, is the owner of the land, whereas the petitioners were lessees/tenants. The petitioner- schools are recognised by the Chandigarh Administration and affiliated with either the Council for Indian School Certificate Examination (ICSE), New Delhi, or Central Board of Secondary Education (CBSE), New Delhi. The case of the petitioners is, that the petitioner-schools survive financially on the fee collected from the students, and have no other source of income, as they are neither funded nor aided by the State Government in any way. The case of the petitioners is also, that State of Punjab had granted complete exemption to all the schools from payment of municipal tax, which was imposed under the Punjab Municipal Act, 1911. Copy of the notification is placed on record as Annexure P-16. This fact is not relevant, as the action taken by the Municipal Corporation of Chandigarh is not under the Punjab Municipal Act, 1911, nor was Punjab Municipal Act, 1911 even applied to UT Chandigarh. The petitioners claim that under Section 3 of the Punjab CWP No.6651 of 2007 -5- Municipal Corporation Law (Extension to Chandigarh) Act, 1994 deals with the savings of certain Sections of the Punjab Municipal Act, 1911 and the rights that accrued from exemption granted were protected under the new Act. This again is of no consequence, as prior to imposition of tax, neither any tax was imposed nor the Punjab Municipal Act 1991 was applicable to UT Chandigarh. The petitioners cannot claim any right, privilege or obligation in pursuance of the notification issued by the State of Punjab/under Punjab Municipal Act, 1911. The averment of the petitioners, that in view of Section 428(a) of the Punjab Municipal Corporation Act, 1976, adopted by the respondents, respondents adopted all notifications issued under the Punjab Municipal Act, 1911 would continue to be in force, is again of no help for the reasons stated above. The petitioner also claim that the Government of Haryana has exempted all educational or charitable institutions from the application of taxes pertaining to Haryana Municipal Act, 1973. This again is not relevant to the issue raised in the present petition. These facts are noticed, because it has been so averred in the writ petition, and contentions raised by the learned counsel in support thereof. The case of the petitioners, which is relevant for consideration by this Court in this writ petition, as pleaded, is that the Administrator, UT Chandigarh violated Section 90(3), and issued impugned notification dated 7.5.2003, specifying tax on commercial, industrial and CWP No.6651 of 2007 -6- institutional lands and buildings in Chandigarh. The relevant extract of the notification dated 7.5.2003 reads as under: - “.....The Administrator Union Territory Chandigarh is pleased to specify that the Tax on Commercial Industrial and Institutional Land and Buildings in Chandigarh to be levied........And collected at the rate of 5% of the rateable value....” The case pleaded was, that the Administrator, UT Chandigarh, violated Section 399 of the Punjab Municipal Corporation Act 1976, without any authority of law, in issuing the second notification dated 3.6.2003 thereby framing bye-laws for imposition of tax. The extract of the notification dated 3.6.2003 reads as under: - “......and in exercise of the powers conferred by Sub Section (1) of Section 399 of the Punjab Municipal Corporation Act 1976, as extended to the Union Territory Chandigarh by the Punjab Municipal Corporation Law (Extension to Chandigarh) Act 1994 (Act No.45 of 1994), the Administrator Union Territory, Chandigarh, hereby makes the following Bye Laws, namely......” The case of the petitioners is, that the Administrator, UT Chandigarh, therefore violated Section 90(3) of the Punjab Municipal Corporation Act, as adopted by the UT Chandigarh, in reducing the rate of municipal tax to 2.25% without having jurisdiction to do so. The petitioners also challenged the notification dated 22.11.2004 specifying tax on commercial, industrial and institutional lands and buildings in Chandigarh being violative of Section 90(3). The extract of the notification dated 22.11.2004 reads as under: - “In supersession of the Chandigarh CWP No.6651 of 2007 -7- Administration, Local Government Department's Notification bearing No.774 – FII(8) – 2003/2779, dated 7 May 2003, and in exercise of the powers conferred by Sub Section (3) of Section 90 of the Punjab Municipal Corporation Act 1976, as extended to The Union Territory Chandigarh by the Punjab Municipal Corporation Law (Extension to Chandigarh) Act 1994 the Administrator, Union Territory, Chandigarh is pleased to specify that Tax on Commercial, Industrial and Institutional Lands and Buildings in Chandigarh is to be levied by the Municipal Corporation, Chandigarh, under Clause (a) of Sub Section (1) of Section 90 of the Act, shall be assessed and collected at rate of 3% of the Rateable Value of such lands and buildings within the limits of the Municipal Corporation of Chandigarh.” The challenge is also to the service tax on Government buildings in UT Chandigarh by way of notification dated 22.11.2004, which is attached as Annexure P-13 to the writ petition. The extract of notification with regard to specified service charges reads as under: - “The Administrator Union Territory, Chandigarh is further pleased to specify that Service Charges at the Rate of 2.25% of the Tax calculated on the building as per the rate of Zone “C” of the respective group in which building is situated as per Annexure I of the Self Assessment Scheme shall be levied in respect of Government Buildings of the Union Government Chandigarh Administration and State Governments, not being used for commercial purpose.” The case set up by the petitioners is, that the Hon'ble Supreme Court in TMA Pai Foundation Vs. State of Karnatka, 2002 SCC 481 has laid down, that educational institution is not a business but is recognized head of charity. The case of the petitioners is, that the respondents by illegally inserting word “institution” by way of advertisements in newspapers, CWP No.6651 of 2007 -8- have imposed the Municipal (Land Building) Tax on the petitioner- schools since 2004. The copy of the advertisement issued in the newspaper is attached as Annexure P-12 to the writ petition. The case of the petitioners also is, that the word “institution” has not been defined in the Municipal Corporation Act or in the impugned notifications imposing municipal tax. Section 2 dealing with the definitions in bye laws 2003 also does not define the word “institution”. The case of the petitioners is, that the examples of institutions given in the self-assessment scheme attached to bye laws, could not be a legal base, to impose municipal tax on private schools. The institutional buildings as defined in the self-assessment scheme read as under: - “Institutional Buildings: Commercial and Institutional Buildings, which are other than SCOs, SCFs, or Booths but have been constructed on the site earmarked for a specific purpose e.g. Cinema House, Pvt. Schools/Colleges, Theaters, or any other type of building which is being used for any type of Commercial/Institutional activities.” Petitioner No.1 paid the tax amounting to `3,91,121/- (Rupees three lac ninety one thousand one hundred and twenty one only) on 31.3.2006 for the assessment year 2004-05 and 2005-06 under protest. Petitioners No.1 and 4 also paid property tax for the year 2006-07 and 2007-08 also under protest, vide receipts attached with the writ petition. The pleaded case of the petitioners, however, is that the petitioner-schools, who are the members of the Independent Schools Association, Chandigarh (Regd.), protested and opposed the illegal CWP No.6651 of 2007 -9- imposition of municipal property tax by asserting that the petitioners being educational institutions, are not commercial bodies, therefore, the tax could not be imposed on them. The petitioners have also challenged the bills, subsequently sent calling upon the petitioners to pay the house tax, in pursuance of the notifications and bye laws read with the self- assessment scheme. The case of the petitioners further is, that the respondents in the advertisements have specified that the tax imposed is a commercial tax for commercial activities. But in the advertisement Annexure P-12, it has been stated that “pay property tax” and also that “all owners/occupiers of commercial, industrial and institutional properties and residential properties, from where commercial activities, are being undertaken are liable to pay property tax”. The case of the petitioners is, that in view of the admission by the respondents, that tax imposed was commercial tax it could not be applied to the private unaided schools, as the schools are not commercial but charitable, as held by the Hon'ble Supreme Court in TMA Pai Foundation Vs. State of Karnatka (supra). It was on 31.10.2006 that a resolution was passed in the elected House of the Municipal Corporation, Chandigarh, which exempted all the Government and Government aided schools from the payment of municipal tax. The petitioners claim that in pursuance of an application moved under RTI Act, a copy of the MC House resolution dated 31.10.2006 was supplied, wherein all the Government and Government aided schools, were exempted from payment of municipal tax. CWP No.6651 of 2007 -10- The resolution passed by the House of the Municipal Corporation, Chandigarh, reads as under: - “....After detail discussions the House passed the following Resolution. Considered and resolved by the Majority to commend to the Chandigarh Administration that Government Aided Pvt. Schools, Colleges, and Punjab University excluding Professional Colleges be exempted from the imposition of the Property Tax and is hereby approved.” The case of the petitioners further is, that as the petitioners are also performing the same function, therefore, this exemption should be equally applied to the petitioner-schools, on the basis of equality, as they form the same class. The petitioners also invoked the principle of promissory estoppel to challenge the imposition of tax. The petitioners also relied on the 74th Constitutional Amendment 1992, to plead, that the Municipal Corporation has an obligation and responsibility towards furtherance of education as an instrument of Local Self-Government. The petitioners referred to Section 44(u) of the Municipal Corporation Act, 1976, which makes it obligatory for the Municipal Corporation to fulfil its responsibility being Local Government/part of the Government, under the Constitution of India. Again under Section 45 of the Municipal Corporation Act, 1976, the Municipal Corporation has been made responsible towards education. The petitioners also claim that in view of the provisions of Article 243-W (12th Schedule) of the Constitution of India, the Municipal Corporation is under obligation to spend its funds on schools and education. CWP No.6651 of 2007 -11- It is also pleaded by the petitioners, that it could not be denied that private unaided educational institutions/schools are greatly shouldering the fundamental responsibility of the State, and that the Act of the respondents in imposing tax was likely to make the education more expensive. The result of the notifications is, that the education is being taxed, which is not permissible. It is further pleaded by the petitioners, that religious institutions have been exempted from payment of the tax under the self- assessment scheme, which provide that the religious institutions are exempted, except the one under commercial activity. The petitioners also pleaded that in the report of Central Advisory Board of Education (CABE) Committee in June, 2005 to the Ministry of Human Resources, it was stated that one of the principles that guided the Committee, is that: - “5(ii) Right to Education also employs that it is State's obligation to remove whatever obstacles, Social, Economic, Academic, Linguistic, Cultural, Physical etc. that prevent children from effectively participating and completing elementary education of satisfactory quality. 5(iii). Right to education must be seen not merely as a right for its own or the individual child's sake but also as an instrument of promoting other constitutional objectives e.g. equality, justice, democracy, secularism, social cohesion etc.” The petitioners also claimed, that the petitioner-schools have been granted exemption from payment of income tax by the Income Tax Authority, being educational institutions. The petitioners also placed reliance on the judgment of this Court in CWP No.19714 of 2006, titled The Sukhjit Starch & Chemicals Ltd., Sukhjit Road, Phagwara Vs. State of Punjab & others CWP No.6651 of 2007 -12- decided on 3.9.2008, whereby this Court had quashed the notification imposing tax for want of imposition of tax as per the provisions of the statute. On the facts pleaded above, the petitioners challenged the imposition of tax, and the notices issued for recovery, on the following grounds: - 1. That the land of the petitioner-schools being owned by the Central Government it is not open to the Corporation to tax the Government land. 2. That the respondents illegally implied and applied the term “institution”only to private schools to impose tax, though the term “institution” has not been defined in the Act or the bye laws framed under the Act, the term “institution” cannot be read to mean only private schools. 3. That Section 3(1)(B) of the Punjab Municipal Act, 1994 (as adopted by the UT Chandigarh) saves the obligations/rights under the 1911 Act. 4. That the imposition of tax is in violation of principles of natural justice, as it was illogical to impose tax on private unaided schools while exempting the Government schools when specific Section of the Municipal Act, stipulates that the municipality should spend its municipal funds on furtherance of education. 5. That the tax cannot be imposed as it would be in violation of doctrine of promissory estoppel. 6. That the imposition of service tax is without jurisdiction, as there is no provision or section in the Municipal Act to impose service charges. 7. That the Administrator, UT Chandigarh, has no authority to specify the impugned taxes or make the impugned bye laws 2003, as it is only the Government which could issue a notification qua the rate of tax. The Government qua UT Chandigarh, is the Central Government and not the Administrator. 8. That Section 399 of the Municipal Act, CWP No.6651 of 2007 -13- 1976 only empowers the Corporation to make bye laws and not the Administrator, therefore, the bye laws by the Administrator are illegal and void. 9. That the notifications imposing tax are in violation of provisions of Section 90(3) of the Municipal Act, 1976, which only authorises the Central Government to issue such notification. 10. That the imposition of tax is violative of Constitutional provisions, specially Article 14 of the Constitution of India. 11. That the Municipal Corporation, Chandigarh, has abdicated and violated its mandatory obligation of funding the educational schools by taxing private schools in violation of 74th Constitutional Amendment. Before noticing the reply filed by the respondents, it would be pertinent to hold, that the plea of the petitioners, that no tax could be imposed on the petitioners, as the land was owned by the Central Government, which is the owner of the land whereas the petitioners are only lessees/tenants, deserves to be rejected. As Section 97(2) of the Punjab Municipal Corporation Act, 1976 (as extended to the Union Territory, Chandigarh), provides that if any land is let for a term exceeding one year, to a tenant and such tenant has built upon the land, the taxes on lands and buildings assessed in respect of that land, and the building erected thereon shall be primarily leviable on the said tenant, whether the lands and building are in the occupation of such tenant or a sub-tenant of such tenant. Similarly, the plea of the petitioners that the tax could not be imposed on the principle of promissory estoppel, is also misconceived, as in order to attract the principle of promissory estoppel, it is for the person to plead and prove, that in pursuance of the promise made he CWP No.6651 of 2007 -14- acted to his detriment. In absence of the promise and action taken by the person acting on the promise to his detriment, the principle of promissory estoppel has no application. It is not the case of the petitioners that any such promise was made by the Municipal Corporation, Chandigarh, not to impose tax on the private schools, which prompted the societies to run the schools. The plea of promissory estoppel is thus rejected. The third plea of the petitioners, that the exemptions granted under the Punjab Municipal Corporation Act, 1911, were protected under the Municipal Corporation Act, 1976, again is misconceived, as the Punjab Municipal Corporation Act, 1911 was never applied to the UT Chandigarh, nor any notification was issued exempting the private schools from payment of tax. This contention of the petitioners again being misconceived, is rejected. The other contention of the petitioners, that there is a Constitutional bar, that the educational institutions cannot be taxed, is also misconceived, as power under Section 90 of the Municipal Act to impose tax is not restricted by any provisions of the Constitution to hold that the Municipal Corporation does not have the jurisdiction, to impose tax, merely because the petitioner-schools were running without the aid of the Government. The next contention of the learned counsel for the petitioners, that the imposition of tax is violative of Article 14 of the Constitution of India, being arbitrary and discriminatory, is also not correct, as the aided CWP No.6651 of 2007 -15- educational institutions, Government institutions and private aided institutions, form distinct classes and principle of equality cannot be applied to unequals. The contention of the learned counsel for the petitioners, that it was only the Central Government, and not the Administrator, which could impose the tax, also deserves to be rejected, as according to the Schedule of the Act as extended to UT Chandigarh the Government, has to be read as an Administrator, and not Central Government. The only question for consideration in the writ is as to whether the tax has been rightly imposed by following the procedure laid down under the Act, and whether the bye laws could be the basis to impose tax, on the petitioner-institutions. In the reply filed to the writ petition the stand taken is, that the tax has been imposed by following the procedure laid down under Section 90 of the Punjab Municipal Corporation Law (Extension to Chandigarh) Act, 1994, (hereinafter referred to as 'the Act'). Sections 90, 91 and 97 of the Act read as under: - “90. (1) The Corporation shall, for the purposes of the Act, levy the following taxes: - (a) taxes on lands and buildings; (b) & (c) – Omitted. (d) a tax on advertisements other than advertisements published in newspapers; (e) a tax on buildings payable along with the application for sanction of the building plan; and (f) a development tax on the increase in urban land values caused by the execution of any development or improvement work. (2) Subject to the prior approval of the Government the Corporation may, for the purposes of this Act, in addition to the taxes specified in sub-section (1), levy,-- (a) a