Case: Morarjee Gokuldas Spinning &amp; Weaving Company Limited &amp; Another Vs. State of Maharashtra &amp; Another

The petitioner No.1 is a Company incorporated under the Indian Companies Act. The 2nd petitioner is a citizen of India and a shareholder of the 1st petitioner2nd respondent is the planning authority created under the provisions of the Bombay Municipal Corporation Act, 1888. The 2nd respondent in exercise of its powers under the B.M.C. Act has framed Rules and Regulations including Water Charges Rules which have been revised from time to time. Section 140 of the Mumbai Municipal Corporation Act, 1888 which hereinafter shall be referred to as the Act confers a power on the Corporation to charge various taxes for property taxes which includes water tax and additional water charges, sewerage tax and additional sewerage tax and other taxes and cesses as mentioned in the Section. Section 169 of the Act falls under the heading Special Provisions Concerning the Water and Sewerage Taxes and Charges. Section 169 confers power on the Standing Committee to make Rules for the supply of water and for charging for the supply of water and for any fittings, fixtures of services rendered by the Corporation under Chapter X and by such Rules determine the charges for the supply of water by a water tax and a water benefit tax levied under Section 140 of a percentage of the rateable value of any property provided with a supply of water, or a water charge in lieu of a water tax, based on a measurement or estimated measurement of the quantity of water supplied or combined charges under clauses (i) and (ii) or a compounded charge in respect of what is set out above.3. The petitioner No.1 was established sometime in 1870 A.D. Since the year 1870 the company was engaged inter alia in Spinning and Waving process of textiles. The 2nd Respondent, which hereinafter shall be referred to as the B.M.C., has granted licences under Section 398, 479 of the B.M.C. Act to the company to carry on its business at its work. Under the provisions of the Bombay Town Planning Act, 1954 draft Development Control Rules had been framed and the Development Plan (DP) had been published. The Maharashtra Regional Town Planning Act, 1966 hereinafter referred to MRTP Act was enacted repealing the provisions of the Town Planning Act, 1954. The Development Plan of 1967 along with D.C. Rules of the same year were notified in the year 1967. Under these Rules there existed only two Industrial Zones viz. Zone(light industrial zone) and Zone(special or heavy industrial zone). The petitioners works were situated in ZoneAnother Unit fell in ZoneThe D.C. Rules of 1967 for the first time included the concept of retention activity, of permittingng industries to remain even in residential/commercial zone which existed on or before 1958.4. On 25th March, 1991 the D.C. Regulations of 1967 were replaced by the Development Control Regulations, 1991 hereinafter referred to as the DCR of 1991. In terms of the plan and the Regulations, the lands were zoned for various purposes which includes Residential Zone, Service Industries ZoneGeneral Industries Zoneand Special Industries ZoneUnder the new D.P., Unit No.2 belonging to the petitioners is located in Zonewhereas the works are listed under ZoneThe DCR of 1967 and DCR of 1991 both permitted retention activity, which would mean that even inzone the petitioners units are lawful and the land/building/premises, now existing prior to 1967 could be used for the same purpose. The D.C. Regulations of 1991 however, has gone a step further and permitted the same to be extended or enlarged. It is pointed out that the demarcation of the different zones by the B.M.C., on the new D.P. is not contiguous. They are different and scattered. Different plots are shown in the same Zone. This has led to a discrepancy in the zoning of the companys works and its other unit in different zones.5. The Standing Committee of B.M.C., vide Resolution dated 27th May, 1994 brought into force the Water Charges Rules, which hereinafter shall be called as WCR 1994. Rule 1.5 prescribed the rate of Rs.12/per 1000 litres for the companys works which fall partly in the Residential Zone and partly in theGeneral Industries ZoneThe Company has been paying to the B.M.C., the water charges in accordance with Water Charges Rules 1994 The Company is neither assessed nor does it pay any water tax in respect of the meter connection. On 22nd February, 1996 by Resolution No.1653 the Committee revised the rates at which water charges shall be levied under the WCR, 1994. Consequent to that resolution under Rule 1.5(iii) which prescribed the rate, the companys units which was charged at Rs.12/per 1000 litres would stand deleted and the works would fall under the category under Rule 1.6(xxiii) chargeable at Rs.22/per 1000 litres. The Resolution further provided that the industries under Water Charges Rule Nos.1.4, 1.5 and 1.6, located inzone will be charged at twice the rates applicable to industries in the conforming zone. The Companys works, therefore, were obliged to pay Rs.44/per 1000 litres. The petitioners were not intimated of this Resolution until the letter dated 31st October, 1998.6. By the letter of 31st October, 1998 the B.M.C., informed the Company that the Competent Authority had accorded sanction to charge its works at twice the rate applicable to the industries in the conforming zone as the said works were located inzone. The Company was, therefore, informed that the water connection will be charged at the rate of Rs.44/per 1000 litres with effect from 1st April, 1996 onwards and supplementary bills were being issued. The Company then was in correspondence with thepointing out that it was paying Rs.22/for water charges and Rs.11/for sewerage charges. On 27th January, 1999 the Company received water charges bill for the period from 1st October, 1998 to 31st December 1998 for an amount of Rs.61,42,686/at the rate of Rs.66/per 1000 litres which was inclusive of Rs.44/water charges and Rs.22/for sewerage charges.7. By communication of 4th February, 1999 the Company addressed a letter to the B.M.C., reiterating its objections to the higher rate and forwarded a cheque towards the water charges for the month of December, 1998. On 22nd February, 1999 the B.M.C., issued demand notice. Thereafter a final notice was received on the same day by the company. The Company thereafter once again wrote to the B.M.C., on 11th March, 1999 objecting to the levy and stated the reasons why the same was not payable. Averments have been made of the discussion held between the various branches of the Government. On 17th March, 1999 the Company received notice in respect of water charge towards it works and further notice on 22nd March, 1999.8. On 23rd March, 1999 as the demand was not withdrawn the petitioner filed the present petition on 24th March, 1999. On 1st August, 1999 the matter came up for admission whereby Rule was issued and interim relief was granted in terms of prayer clause (d) which was to prevent the B.M.C., from acting pursuant or in furtherance of its demand or implementing the order dated 31st October, 1998 and various other consequential orders.

Court's reasoning:
The learned Bench of this Court on that basis was pleased to reject the contention and upheld the decision of the Corporation to levy water charges based on measurement. In our opinion this judgment is of no assistance in applying that dicta to the facts of the present case and the issue which ariseschallenge again was to levy of tax at a different rate on a class of consumers. The Corporation sought to justify the same based on paying capacity. In other words charging more to a particular class more affluent than the others. The Court found that such a classification would not be violative of Article 14 of the Constitution. The Court observed that it was open to the Standing Committee to prescribe the particular rate for different industries separately. In our opinion, therefore, this judgment is also clearly distinguishable.20. If we now examine the reasons which have been placed by the Respondent No.2 and which we have set out earlier in justifying levying of higher water charges to industry inzone, in our opinion the reasons given are arbitrary and/or unreasonable and/or totally extraneous. Firstly merely because an industry is located in a conforming zone and another industry in aarea would be irrelevant as the consumption of water and the purpose for which it was consumed would be the same namely industrial use. The Second contention that the petitioners which are textile industries are large concerns and the tax and charges imposed upon them are transferred by them to consumers and that the Industries have a capacity to pay water charges than the other categories using the water, in our opinion is also unsustainable. Passing on the burden as cost of production which includes the inputs and taxes which it cannot pass on is true of every industry. Therefore, on this basis there can be no valid classification. Capacity to pay would depend on the profits made by the industry and not the size. At any rate the water charges are not based on the percentage of profits or gross revenue, if there could be valid reasons in the instantthe first instance industries whether in conforming zone orzone are not domestic users. The differentiation is not between those who consume less quantity of water and those who consume more water and/or those who have lesser capacity to pay or those who are more affluent. This reason is also irrelevant to constitute reasonable classification. The other reason that water consumed can be charged at higher rate ind luxurious useis not germane. All industries whether in conforming zone orzone use water as an input for production. In our opinion the reasons given being not reasonable the classification must be held to be not reasonable. Apart from that the purported classification even if it is reasonable, has no nexus with the object and consequently the Resolution and the consequent demands must be quashed and set aside.21. We may also mention that for the period previous to 31st March, 1996 all industries were being charged at the same rate. Similarly for the period after 1st April, 2000 all industries were being charged at the same rate. It is only between 1st April, 1996 to 31st March, 2000 that they were sought to be charged at different rates and which is the subject matter of the present petition. The Respondent No.2 has given no explanation for treating the industries alike for water charges previous to 1st March, 1996 and after 1st April, 2000. The reason is apparent, that the Respondent No.2 itself find the classification was unreasonable.