Case: MUNICIPAL CORPN.OF GREATER MUMBAI Vs. HARISH LAMBA OF BOMBAY, INDIAN INHABITANT

2. The appellant is a corporate body constituted under the provisions of the Mumbai Municipal Corporation Act, 1888 (for short, 1888 Act or the Act) and respondent No.1 is a sole proprietor in the business, which was carried on by him in the name and style of Volga Frozen Foods and Ice Cream Company, hereinafter referred to as the said firm. The stated business was located at Volga House, 1¬C, K.K. Marg, Mahalaxmi, Bombay-400034, hereinafter referred to as the said premises. The respondent No.2 is the landlord of respondent No.1 in respect of the said premises. The respondent No.3 is the tenant of respondent No.2 in respect of the remainder area of the said building other than the area in possession of respondent No.1. The respondent No.1s firm required 10 lakh gallons of water for its frozen food and ice cream business, which was being supplied by the appellant (under the fixed quota of 10 lakh gallons of water) till October, 1983. On 29 th October, 1983, an illegal strike call was given by the workmen in the factory of respondent No.1, due to which the production work in the factory was suspended by the management. Therefore, the respondent No.1 wrote to the appellant on 2 nd February, 1987 and 15 th October, 1987, requesting to discontinue the water quota allotted and then charge them on actual consumption basis, as they did not require the large quantity of water any more due to shut down of the production. Besides, a new water meter came to be installed on 15 th October, 1987. Later on, the appellant informed respondent No.1 vide letter dated 27 th January, 1992, that his water connection will be cut off as requested by the company. That was finally done on 25 th October, 1993. Since then, respondent No.1 is dependent on water supply by private water tankers3. Accordingly, respondent No.1 wrote to the appellant vide letter dated 10 th December, 1993 that since the water connection to the premises has been disrupted/cut off by the Water Department and he having paid all the dues until then amounting to Rs.46,794/- (Rupees Forty Six Thousand Seven Hundred Ninety Four Only), the appellant ought to install a new water meter. Upon receipt of this communication, the appellant demanded a deposit of Rs.72,000/¬ (Rupees Seventy Two Thousand Only) for processing the request for a new water meter. However, respondent No.1 did not pay the said amount on the ground of financial crisis because of closure of the factory. The respondent No.1 in turn requested the appellant to accept the deposit amount in installments of Rs.5,000/- (Rupees Five Thousand Only), which request was declined by the appellant. Therefore, there was no water connection/meter in the premises of respondent No.1 since 25 th October, 19934. The appellant thereafter in 1997 started raising bills for the period from 1 st October, 1993 including towards water benefit tax in respect of the subject premises. In January, 1997, seven bills of water tax and water benefit tax were raised in respect of the said building (for the period from 1 st October, 1993 to 30 th September, 1998) aggregating to Rs.10,60,312/¬ (Rupees Ten Lakh Sixty Thousand Three Hundred Twelve Only). The respondent No.3 paid his share of the bill in protest but respondent No.1, on advice, refused to pay his prorata share of the bill5. Resultantly, on 5 th August, 1998, the appellant issued Warrant of Attachment and levied an attachment upon the said premises and building for the arrears of stated tax being property tax amounting to Rs.9,11,708/¬ (Rupees Nine Lakh Eleven Thousand Seven Hundred Eight Only) and further penalty of Rs.1,48,503/- (Rupees One Lakh Forty Eight Thousand Five Hundred Three Only). Thus, the aggregate demand was for Rs.10,60,312/¬(Rupees Ten Lakh Sixty Thousand Three Hundred Twelve Only), against respondent No.1. Further, vide letter dated 18 th November, 1999, issued by the Legal Department of the appellant, respondents were informed that if the arrears of taxes were not paid, the appellant would proceed to advertise the public auction relating to premises occupied by respondent No.16. Being aggrieved, respondent No.1 filed Writ Petition No.1206 of 1999 before the High Court of Judicature at Bombay to quash/set aside the bills and demand raised by the appellant and the Warrant of Attachment dated 5 th August, 1998 for recovery of the amount. The High Court was pleased to quash and set aside the bills/demands along with the Warrant of Attachment dated 5 th August, 1998, vide impugned order dated 21 st November, 2006. For that, the High Court relied upon the judgment of this Court in Municipal Corporation of Greater Bombay Vs. M/s. Nagpal Printing Mills and Another(1988) 2 SCC 466 . The High Court held that the corporation can levy charge only in respect of water supplied to and consumed by the consumer and to be levied on the basis of measurement or estimated measurement. It concluded that as, admittedly, supply of water to the premises was stopped from 25 th October, 1993, there was no consumption by the respondents and hence they were not liable for any water charge or tax, as the case may be.

Reasoning: 22. Reverting to the view taken by the High Court, we agree with the appellant that the High Court has palpably misapplied the decision in Nagpal Printing Mills (supra) by erroneously assuming that the present case was also a case of levy of water charges referable to Section 169 of the Act. The High Court completely glossed over the distinction between the concept of property tax in the form of water benefit tax on the one hand; and water charges in respect of the quantity of water actually consumed on the other hand. In the former case, being a property tax, it is a compulsory imposition and liability to pay the same accrues irrespective of the quantity of water supplied and consumed in the premises concerned. That liability flows from Sections 139 read with 140 and 141 of the Act. The quantum of tax payable is specified by the standing committee from time to time on the basis of per centum of rateable value of premises or its capital value. The impugned demand notices, ex facie, are ascribable to Section 141 of the Act. The same in no manner can be construed as having been issued under Section 169 of the Act23. Had it been a case of demand under Section 169 of the Act, the principle stated in Nagpal Printing Mills (supra) would have come into play. We agree with the appellant that the decision in Nagpal Printing Mills (supra) is in reference to interpretation of Rule (3) (d) (1) of Water Charges Rules framed under Section 169 of the Act. The principle stated in that decision, therefore, can have no application to a demand notice(s) towards property tax in the form of water tax or water benefit tax, payable in respect of the premises by virtue of Section 139 read with Sections 140 and 141 of the Act24. Having said this, we must conclude that the High Court misread the impugned demand notices as being under Section 169 of the Act, when in fact the same were for recovery of property tax in the form of water benefit tax under Section 139 read with Sections 140 and 141 of the Act. The liability to pay such tax arises irrespective of disconnection of water supply/water meter including due to non¬payment of taxes, being a compulsory imposition. However, if the owner/occupant of the premises were to utilise the water supply facility made available to the premises through connection by means of communication pipes or municipal water works, as the case may be, the liability would be to pay only water charges on the basis of the quantity of water actually consumed, in lieu of property tax in the form of water tax or water benefit tax by virtue of Section 169 of the Act and in particular sub¬section (2) thereof25. That takes us to the next plea of the respondents about the demand for the period preceding 10 th January, 1994, i.e. 1 st October, 1993 to 9 th January, 1994, being barred by limitation. It is also urged that the impugned demand notices entail in levy of taxes retrospectively. This argument has been justly rejected by the High Court by relying on the dictum of the same High Court in State Bank of India Vs. Brihanmumbai Municipal Corporation of Greater Bombay and. In similar situation, the Court had observed thus:7. Insofar as the first contention is concerned, there is really no merit in the contention. The respondents have not imposed any tax with retrospective effect. All that the respondents have done is issuance of bills for the period previous to the date of the bills. In other words the bills are issued for the period for which they are payable by sending a bill after that period. There isno provision either under the Act or rules by which claim for sewerage charges/sewerage tax can be anticipated or made in advance. That can only be done subsequent to the charge/taxes becoming due and payable. Retrospectivity in levying tax would mean that a law has been enacted with retrospective effect. That is not the case over here. All that the respondents have done is to merely make demands for charges which had become due prior to issuance of the bills. That cannot be said to be levying of tax with retrospective effect. The first contention must therefore, be rejected26. Indisputably, the challenge on the ground of limitation is limited to period prior to 10 th January, 1994, i.e., between 1 st October, 1993 to 9 th January, 1994. This period falls within the official year 1993¬94 (from 1 st April, 1993 to 31 st March, 1994). In that sense, the amount towards property tax had become due and payable upon completion of official year 1993¬94 i.e., 31 st March, 1994. Three years limitation period, therefore, would have expired on 30 th March, 1997. However, the impugned demand notice(s) have been issued on 10 th January, 1997. Thus, the challenge to the impugned demand notice(s) being barred by limitation, as asseverated in ground (d) of the memo of writ petition filed by the respondents, is devoid of merits. No other averment is found in the writ petition filed before the High Court to reinforce the plea under consideration. In our opinion, therefore, the decisions of this Court in Kalyan Municipal Council (supra) and Municipal Corporation of City of Hubli (supra) will have no bearing on the matter under consideration. Resultantly, the challenge to the impugned demand notice(s) being barred by limitation or having the effect of retrospective tax demand, is rejectedWe find merits in the submission of the respondents that they be relieved from the liability to pay statutory interest for the period spent by them in pursuing the proceedings in good faith before the High Court and thereafter before this Court. Inasmuch as, time so spent is not attributable to the inaction or neglect of respondents in making payment; moreso because of the interim orders operating in favour of the respondents during the pendency of writ petition before the High Court and also because the impugned demand notices were set aside by the High Court. As the said notices will be revived in terms of this order, therefore, the respondents are entitled to an equitable arrangement to meet the ends of justice. Somewhat similar situation has been dealt with in State of Rajasthan and Another Vs. J.K. Synthetics Limited and Another (2011) 12 SCC 518 ( paragraph nos.12, 23, 41 & 42)and Kanoria Chemicals and Industries Ltd. and Others Vs. U.P. State Electricity Board and Others(1997) 5 SCC 772 . Applying the principle underlying these decisions, we deem it appropriate to quantify the interest component at the rate of 18% per annum on the outstanding principal tax amount or the statutory interest as may have been prescribed under the extant Regulations, whichever is less, for the period during the pendency of writ petition and the present appeal, as the case may be. For rest of the default period, from the date of demand notices until payment of the outstanding amount mentioned therein, the respondents shall be liable to pay interest at the rate as prescribed in the extant Regulations applicable in that regard. This would meet the ends of justice28. It is seen from the records that impugned demand notice(s) were issued on 10 th January, 1997, when the principal tax amount had become due and payable forthwith. The interest at the statutory rate, therefore, would commence from that date. However, for the period from the date of filing of the writ petition on 21 st April, 1999 till the judgment of the High Court dated 21 st November, 2006, the interest be reckoned as aforestated. Similarly, for the period during pendency of special leave petition in this Court from 27 th August, 2007 till the pronouncement of this judgment. Except these two periods, the rate of interest payable by the respondents for the delayed payment would be as prescribed in the governing Regulations. The respondents shall pay the outstanding amounts including interest within three months from today, failing which it will be open to the appellant¬ corporation to proceed against the respondents in accordance with law.