ANANT MILLS CO. LTD. v.

STATE OF GUJARAT & ORS.

January 21, 1975

[A. N. RAY, C.J., P. JAGANMOHAN REDDY, H. R. KHANNA AND

P. K. GOSWAMI, .TJ.)

Constitution of India, 1950, Art. 14-Treating pending coses as a class .differem from decided cases, if a permissible classi[ic111iv11.

Constitution of India, 1950, Art. 14-Duty of !he person challenging a provision of the Act as discrimi11atory-Constitutio11al validity, if cauld be 'decided on the basis of supposed existence of certain facts by raising a presumption.

Bombay Provincial Municipal Corporations Act (Bombay Act 59 of 1949) as amended by Gujarat Acts No. 8 of 1968 a11d No. 5 of 19i0, S,•ctions 129 a11d 137-Conservancy tax for different categories of prop.mies-Tax, if should

be related only to the expense for conserrancy service for I/wt paniwlar .category.

Bombay Prori11cia/ Municipal Corporations Act (Bombay Act 59 of 1949) as amended by Gujarat Act Nos. 8 of 1968 and No. 5 of 1970, proviso to s; ectiot1 129(b)-Corporation to determine dif/er1!nt rates for different classes of properties-Prol'iso, if suffers from the vidie of excessii'e delegation of legisl111ive power.

Bombay Provi11cial M1111icipal Corporations Act (Bom{HI)' Act 59 of 1949) as amended by Gujarat Acts No. 8 of 1968 a11d No, 5 of 1970, Section 406(2)(e) rule 42 of Taxation Rules-Appeal against a tax or mteable value-Deposit of

amount claimed condition precedent to e11tertaining appeal-Appellate j11dge empowered to remol'e u11due hardship ro appe//a11t-Requireme!lt of deposit, if

11ul/ifies right of appea/-Prorfsion if makes imidio11s disti11ctio11.

Constitution of India, 1950, Entry 49, List If, Schedule V/l-"Land", if E includes 1111dergro1111d strata.

The assessment of properties to property tax in Ahmedabad was made under the Bombay Provincial Municipal Corporations Act by making: entries in the assessment books in accordan:e with the procedure prescribed in the Taxation Rules set out in Chapter VIII of Schedule A of :lhe Corporations Act, A st!parate section of the assessment book was prepared by the Commissioner of the Corporation for each official year in respect of the assessment of property tax F on certain kinds of properties like textile mills, factories and bl!.ildings of University. These properties were classified as special properties. There was some increase in the rateable value fixed by the Commi>sioner for the year 1964-65 and 1965-66. The Commissioner also made initial entries in a; sessment book in respect of those properties for the year 1966-67. A numbr of writ petitions under Art. 32 of the Constitution were filed in this Court .:halJ.w(!ing

the validity of th(' assessments for the yea:rs !964-65 and 1965-66 as \\'ell as initial entries for the yca, r 1966-67. The Supreme Coun in the judgment N"w fo.:fanek Spinnfni; & Wea1•i11p, Mills Co, Ltd. & Ors. v. /lfo//iciral CorporatiO!.' of G Ci1y of Al1111,-.J,1bud & Ors. [1967] 2 S.C.R. 69, allowed th~ writ petitions and hdd the relevant entries in the assssment hooks to be invalid. Rules 7(2) and ( 3) were also held to be invalid on account of excssive delegation of powers hv the iegislature.

The 'taxation on the basis of floor area as adopted by the Corporation was held to violah~ Art. 14 of the Constitufon.

When the Corporation initiated steps to make fresh assessment for the years 1964-65, 1965-66 and 1966-67. it was unable to do so in view of the decision of the High Court in the case of A !tmedabad Mu11icipa/ity v. K eslwrlal 6 G.I..R.

H 2'.!8 wherein it wa-i held that the Corporation had no power to asess and levy property tax for uny otncial year after that year had ended. In order to get over this difficulty. the legislature enacted Gujarat Act 8 of 1968. New Sec. 1::2A

ANANT MILLS v. GUJARAT (Khanna, J.) 221


The Court also struck down sub-section (3) of >. 152-A which gave power to •he Corporation to refuse to refund the amount illegally collected despite the order of the Court. ·

For the offici&l year 1967-68 the Corporation determined the rate of conservancy tax to be 3 per cent and a special rate of 9 per cent for the large premises like textile mills and factories.

The petitioners preferred appeals against the order of the Deputy Commissioner determining the amount of property tax to the Chief Judge of the Court of Small Causes. Ahmedabad ..

The Chief Judge W3's, however, pre:luded from hearing those appeals since the amount of tax was not deposited by the petitioners as required bys. 406 (2)(e) of the Corporations Act. The petitioners thereafter filed petitions in the High Court challenging the validity of the assessments made by the Depu, ty Municipal Commissioner for the official years 1966-67, 1%7-68 and 1968-69. Those writ petitions were allowed by the Gujarat High Court as per judgment dated October 27, 1969.

The ordin&nce dated December 23, 1969, was replaced by Gujarat Act No. 5 of 1970 which came into effect from March 31. 1970. This Act brought about material changes in the Corporations Act. .

The High Court held (i) Section 2\IA) Clause (i) is valid so far as it is applicable to the official year 1969·70 but it is null and void in so far as it applies to the official years from the commencement of the Corporations Act upto and including the official year 1968-69, on account of infraction or Art. 14;

(ii) Se:tion 406(2)(~) ands. 41l(bb) are null und void as being in contravention of Art. 14; Rule 42 of the Taxation Ru,1es is also ultra vircs and void in so far as it' provides that if an appeal is preferred or entertained against the tax, wa:rrant shall not issue for the recovery of the amount of tax; and

(iii) Th~ Resolutions passed by the CorporJtion for the official year 1967-68, 1968-69, 1969-70 and 1970-7! to the extent to which they fix the rate of conservancy tax at 9 per cent inter alia in respect of textile mills and factories belonging to the petitioners are ultra vires the proviso to s. 129(b) and the

rate of conservancy tax applicable in respect of these textile mills and factories must. therefore, be taken to be the general rate of 3 per .:ent. The High Court upheld the constitutional validity of provi"o (e) to s. 2(IA) clause (ii) and sections 49, 129(b), 406(2)(e) and 411 (bb) of the Act ands. 13(1) and 13 t ~) of the Act 5 of 1970.

Ci1il Appeals Nos. 489 to 513 and 752 to 755 of 1973 have been filed in thi' CouJt by the petitioners before the High Cl"urt against the Judgment of that Court in so far a:s the Court had upheld the wm::tl.!.tional validity of the impugned provisions. Civil Appeals Nos. 643 to 684 of 1973 have be.en filec by the Municipal Corporation of the City of Ahmedabad and oher.; against the abovz judgment in so far as the High Court has struck down the impugned provisions and the Resoiutions.

Civil. Appeals No. 389 to 430 of 1974 have been filed by the State of Gujarat against the judgment in so far as the High Court has struck down the impugned provi, ions.

Writ Petitions Nos. 51, 60 to 73, 87 to 91. 197. 492 to 503, 533, 534 and 583 of 1972 as also writ petitions Nos. 1866 to 1877 and 2046 of 1973 which have been filed by the Aryodaya Spg, & Wvg. Mills Co. Ltd. and other parties involve substantially the same question which arises in appeals, thou.gh some of these writ petitions relate to the subseql\ent period of 1971-72. Writ Petition No. 74 of 1972 filed by the Ahmedabad Electricity Co. Ltd. involves an additional point regarding its liability to pay property tax which has been levied on the ground that it o:cupies land below the surface for underground cables.

/ \

222 SliPREME COURT REPORTS .l.1975] 3 s.c.R.

Reversing the decision of the High Court,

HELD : ( i) As the affidavit filed on behalf of the re; pondents disclo; s that the factual position as it existed refore th,: promu gation of Ordinance 6 of 1969 was that the provisions of the Bombay Rwt Ac~ were not tai(on into account in determining the rateable value, there would b0 no escape frcm 1he conclusion that no differential treatment has been meted out to pending cases in clause (i) of s. 20A). Ti)ere is a presumption of rhe constitutional validity

-0f a statutory provision. In case any party assails the validity of any provision B on the ground that it is violative of Art. 14 of the Contitution. it is for that party to make the ne::essary averments and adduce material to show discrimina- 1ion violative of Art. 14. No a1-erments were made in the petitions before the High Court by the petitioners that the assessmnts before the coming into force of Ordinance 6 of 1969 had been made by taking into account the rent restriction provisions of the Bombay Rent Act. It is extremely hazardoui to decide the question of constitutional validity of a provi; ion on the basis of the supposed existence of certain facts by rnistng a presumption. lt is very clear .that the Hi&h Court has acted on an incorrect u.mtmption. [236G-23'.'El C

Assessment Committee of the Metropolitan Borough of Poplar v. Roberts [1922] 2 A.C. 93, Gu/am Ahmed Rooo v. Bombay Municipality A.Ul. 19Sl Bom. 320 and The Corporation of Cairn/la v. Sm. Padma Devi and Ors. [1962] .3 S.C.R. 49, referred to

(ii) Classification by treating decided cases as belonging to one caitcgory and pending ca>es as belonging to another category is reasonable and not per se offensivi: to Art 14 of the Constitution.

[238H-239A] D


(iii) The scheme of the Corporation Act appears to be that in the case of premises used solely for public purposes and not intended to be med for purpo!!CS of profit or in the case of premises intended to be used for residential or charitable or religious pu.rposes in respect of which conservancy tax is payable by the Government, the rat: of conservancy tax should be lower \compared to the

rate of general conservancy tax'. What is required by s. 129 is that before determining the rates of cod'servMicy tax for different categories of propertie~ the Corporatio11 should find out the total expense it would have to incur for the various purposes mentioned in clause (b) of that section.

After having ascertained the total expccse it would be permi11Sible to the Corporatton to fix different rates of conecrvaccy tax for v1ulo11s categories of properties. It b not essential except !n cues me11tloned in sub.sections (2) and (3) of s. 137 that the rate of conservancy tax for a particular category of properties should 'be such as wouad be Nlated only to the expense for conrvancy mvii:<! for

that particular category of properties. Clause lb) oi s, 129 al•so takes into .account the expecse required for efficiently maintaining and repairing the municipal drains and for finding out the total expenditure for .conserva11cy Service.

The High Court. was, therefore, in error in striking down the resolution passed by the Corporation. [242E-F; 244F-H; 245B-C] .

(iv) The "opinian of Corporation" mentioned in clause (b) of section 129 'is formed after budget estimates are prepared in accordance with Ss.

!~S. 96 and 100 of the Corporations Act. The entire procedure provides built-insafeguards and lays down adequate guidelines in the matter of taxation. lt cannot, therefore, be said that the legislature has not prescribed any guiding principle for the Corporation for determining the rates of conservancy tax. f245FG. H-246Al

(v) The bar created by s. 406(2)(c) to the entertainment of the appeal by a person who has not deposited the amount of tax due from him and whe> i~ not

ANANT MILLS v. GUJARAT (Khanna, J.) 223

able to show to the appellate judge tha:'. the deposit of the amount would cause him undue hardship arises out of his own omission and default. A disability or disadvantage arising out of a party's own default or omission cannot be taken to be tantamount to the creation of two classes offensive lo Art. 14 of the Constitution, especially when that disabiliiy or disall'lantage operates upon all persons who make the default or omission. Section 406 (2) ( e) i> constitutionally valid and, in as much as <he validity of s. 411 (bb) and r. 42 binges on the

validity of sec. 406(2)(e) all the three provisions are constitutionally valid. f247D-248C. F-Gl

Hannah Cohen, Ex. of Sol, Cohen, De.cnisc•,1', and Da1•id E. Cohen, bitc1Te11er, l'elitimr, n & .. for., v. Beneficial Loan Corpo.a1io11 & Ors. 337 U.S. 539, referred lo.

(vi) There can be no doubt that land in entry 49 of List JI would include underground 5trala . The word "land" has also been defined in clause (30) of s. 2 of the Corporations Act to include land which fa being built upon or is built upon or covered with water, benefits to a:rise out of land, things attached to the earth or permanently fastened to anything attached to the earth or permanently fastened t.o anything attachedto the earth and rights created by legislative cllllctmcnt over any street. This definition is of inclusive 11<1ture and does not exclude from its ambi't the underground strata of the land. The petitioner-company is in oo:upation of the land whetein underground supply line i~ laid. f249E-F: 250D-El

E/ectJ'ic Telegraph Co. v. Salford O"e:secrs, [1855] 11 Ex. 181, 186, Mysore A/denritn and Council/or3 of .the City of Westminster Ors. v.

The Sout/iem Railway Company, Tiu Railw.ay Assessment Authority and W. IJ. Smii/1 & Son, Limited &: Ors, 1936 A.C. 511, The Assessment Committe of Holywel/ Union & Anr. v. Ha/kyn District Mines Drainage Col, [1895] A.C. 117 Rex. v. Chelsea Waterworks Company, 5 B. & Ad. 156 and Reg v. foJiest Middlesex Waterworks, 1 E. & E. at p. 720, referred lo.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 752 to 755, 489 to 513, 643 to 684 of 1973 & 389 to 430 of 1974.

From the Judgmei,1t and order dated the 4th December, 1972 of the Gujarat High Court in Sp!. Civil Appeals. Nos. 233, 239-241, 339, 488, 1634, 1635 and 1636 of 1971, and

Writ Petitions Nos. 51, 60 to 74, 87 to 91, 157, 492 to 503, 533- 534 and 583 of 1972 and 1866 to 1877 &: 2040 of 1973.

Y. M. Tarkundt (In C. ~. Nos. 752, 489, 643, 389 and W.P.

Nos. 51 and 74/72), C. T. Daru and Ravinder Narain, P. C. Bhartari, K. M. DeUli and K. J. John, for the petitioners, (In all the W.Ps.) and Appellants (fa C.As. Nos. 489-513, ,752-755 /73) and respondent No. 1 (C.As. Nos. 643-47, 650-654, 658-664, 667-671, 674, 678, 679 Wld 681-684/73).

F. S. Nariman, Additional Solicitor General of India, S. B. Vakil and /. N. Shroff, for appellants (In C.As. Nos. 643-684/73) and for respondent No. 3 (In all the W.Ps.) for respondents Nos. 2-4 (In C.As.

Nos. 489-497) respondent Nos. F4 (In C.As. Nos. 498-511) respondent Nos. 2-5 (In C.As. Nos. 512-513) respondent No. 2-4 (In C.A.

No. 752) respondent Nos: 1-4 (In C.A. Nos. 753-754) respondent Nos. 2-5 (In C.A. No. 755) and for respondent Nos. 1-3 (In C.As.

Nos. 389-430/74).

SUPREME COURT REPORTS [1975] 3 s.c.R.

M. C. Bhandare and M. N. Shroff, for the appellants (In C.As.

Nos. 389-430) respondent No. 7. (In C.A. No. 389-497, 512-513) respondent No. 5 (In C.As. Nos. 498-510) respondent No. 2. (In C.A. Nos. 643-678, 681-684) respondent No. 3 (In C.As. Nos. 679-

680) respondent No. l (In C.As. Nos. 752-755) respondent No. 5 (In C.As. Nos. 753) respondent No. 6 (In C.A. No. 754) and respondent No. 4 (In all the W.Ps.)

C. S.S. Rao, for respondent No. 5 (In C.A. No. 752/73).

R. H. Dhebar and B. V. Desai, for respondent No. 4. (ln C.As.

Nos. 417-418174) and In C.As. No. 656-657 of 1973).

The Judgment of the Court was delivered by

KHANNA, J .-Questions relating to the constitutional validity of the different provisions of the Bombay Provincial Municipal Corporations Act (Bombay Act 59 of 1949) (hereinafter referred to as the Corporations Act) as amended by Gujarat Acts No. 8 of 1968 and No. 5 of

1970 arise for determination in these appeals and the connected writ petitions. The Corporations Act was enacted by the Bombay legislature in December 1949 for the establishment of mU'ilicipal corporations in the cities of Ahmedabad and Poona. It was applied to Ahmiedabad on July 1, 1950.

The assessment of properties to property tax in Ahmedabad was made under the Corporations Act by making entries in the assessment books in accordance with the procedure prescribed in the Taxation Rules set out h1 Chapter VIII of Schedule A of the Corporations Act. 'A separate section of the assessment book was prepared by the Commissioner of the Corporation for each official year in respect of the assessment of property tax on certain kinds of properties like textile mills, factcries and buildings of university.

These properties were classified as special properties.

The rateable value of properties included in the Special Property Section was previously determined on a float rate for every 100 sq. ft. of the floor area. In arriviug at the figure of the rateable value, the plants and machinery situate upon lands and buildings were also taken into account as provided in clauses (2) and ( 3) of rule 7 of the Taxation Rules. There was some increase in the rateable value fixed by the Commissioner for the years 1964-65 nd

1965-66.

The CommissiO'aer also made initial entries in assessment boo.k in respect of those properties f0r the year 1966-67. A number of writ petitions under article 32 of the Constitution were filed in this Court challenging the validity of the assessments for the years 1964-65 and 1965-66 as well as the initial entries for the year 1966-67. Those writ petitions were disposed of by this C0urt by a judgment delivered on February 21, 1967 and reporterl as New Manek Chok Spinning & Weaving Mills Co. Ltd. & Ors. v. Municipal Corporation of the Cit)• of A111nedabad & Ors.( 1) This Court allowed the writ petitions and held the relevant entries in the assessment books to be invalid. It was held in that case that the State Legislature had no competence under entry 49 of the State List i'.1 the Seventh Schedule to the Constitution to make a law for taxing: plant and machinery. Rule 7(2) was held to be beyond the legislative competence of the State. Rules 7(2) and

(!) [1967) 2 S.C.R. 679.

T!ll!IZ''''lnl!'! .. Pf

1:1

ANANT MILLS v. GUJARAT (l(lwnnti, J.) 225

( 3) were also held to t:>e invalid on account of excessive delegation of powers. by the legislature.

Under those rules the specification of the classes of machinery for the purpose of taxation was to be made by the Commissioner with the approval of the Corporation irrespective of

the questioa as to where they were to be found.

ThiS Court found that it depended upon the arbitrary will of the Commissioner as to what machinery he would specify and what he would not <and that he. was the only person who could examine this question as there was no right of appeal. Dealing with the method of levy of tal( on the basisof floor area, this Court observed that it was against the provisiorui of the Act •and the rules made thereunder altld that it had not been shown that conditions prerequiite for determination of the annual value on that basis had existed at the relevant time. The above method of taxation on the basis of floor area, it was held, was violative of 'llrticle 1-4 of the Constitution as it would in tho absence of cllSliification ol f&ctories on any rational basis give rise to inequalities.

Although the Supreme Court directed the Corporation to prepare fresh <assessment lists relating to properties in the Special Property Section for the official years 1964-65, 1965-66 and 1966-67, the Coe poration was unable to do so in view of the decision of the High Court in the case of Ahdabad Municipality v. Keshavlal( 1) wherein it WM held that the Corporation had no power to assess and levy property tu for any official year after that year had anded. The legislature in order to get over this difficulty enacted Gujarat Act 8 of 1968 and by this amefading Act inserted inter alia new section 152A in the C0rpora tions Act.

The new section conferred power on the Corporation. to assess or re-assess property taxes if the original assessment was affected by a decree or order of a court da either of the grounds on which the Supreme Court !:rad set aside the es8essment for the official years 1964- 65, 1965-66 and 1966-67 in New Manek Chowk Mills case (supra).

The amending Act also substituted new rule 7 for the old rule which contained the offending clauses (2) and (3). Rule 21B was also inserted by the amending Act and the said rule permitted the Municipal .

Commissioner to make fresh valuatie!.1 of properties <after the expiry of

tho official year if preparation or completion of the assessment beloce the expiry of the official year were or would be affected on account of any order of a court. After the amending Act had come into force. the Corporation initiated proceedings for re-assessment of lands and buildings of the petitioners to property tax for the official years 1964- 65, 1965-66 alnd 1966-67. When notices were served on the petitioners to furnish return of the particulars, the petitioners filed petitions in the High Court challenging the validity of those notices. Those petitions were allowed by the High Court as per judgment dated July 3, 1969 on the ground that the demand for certain particulars contJained in the •,10tices was beyond the scope of rule 8 ( 1) . The contentioo of the petitioners in those petitions that no assessment could be_rn, ade after tho expiry of the official year was reoelled and it was held that the Corooration had the nower under section 152A to rassess lands and buildings of the petitioners to property tax for the official years

19~65. 1965-66 and 1966-67 notwithstanding the expiration of those

(.t) 6 G.LR. 228. 16-U79Su!)CI/75

' 2zs Sl:JPll!EM! C6UltT REPORTS: U975] 3 s.c.ll.

yeim. The High Court also held that the new section .did not stand in

the way of the petitioners getting refund of the property tu already paid. Appeal was filed in this Court against the above judgment by the Corporation. .

The Ahmedabad Corporation, it may be stated, used to pass :i resolution u'ilder section 99 of the Corporations Act determining the rate at whi:ch property tax would be levied for the particular official year. So far as conservancy tax was concerned, the rate determined by the Corporation was 3 per cent. A special rate of conservancy tax of 7t per c:ent was,, however, fixed by the Corporation for tht: official year up to 1966-67 for hotels, clubs, stable8'\ theatres or cinemas or other large premises including mills and factories registered under the Fiactories Act and where fifty or more workmeii1 were employed in manufacture for all the shifts. For the official year 1967-68 the Corporation determined the rate of conservancy tax to be 3 per cent and a special rate of 9 per cent for the large premises mentioned above. The rate of general tax for ordin•ary property was fixed on a graduated scale but 011 properties used by textile mills the rate was uniform at 30 per cent. The powers of the Commissioner under the Taxation Rules were entrusted to the Deputy Municipal Commissioner by virtue of an office order issued under section 49(1). The Deputy Commissioner thereafter determined the rateable value of the lands and buildings of the petitioners. The petitioners preferred appeals against the order of the Deputy Commissioner determining the amount of property tax to the Chief Judge of the Court of Small Causes Ahmedabadl. The Chief Judge was, however, precluded from hearing those appeals since the amount of tax was not deposited by the petitioners. as required by section 406 ( 2) ( e) of the Corporation Act. The petitioners the:reafter filed petitions in the High Court challenging the '"'1Hdity of the asses

ments made by the Deputy Municipal Commissioner for the official years 1966-67, 1967-68 and 1968-69. Those writ petitions were allowed by the Gujarat High Court as per judgment dated Octot1er 27,

1969. It was held that section 49 of the Corporation Act did ncit con template delegation of judicial or quasi-judicioal powers by the Muni cipal Commisioner under taxation rule 18 and that disposal of complaints by the Deputy Commissioner was not permi.ssible. The High Court also declared section 406(2) (c) violative of article 14. Part of rule 42 which related to distress or >attachment for default in payment of tax was also struck down on the ground that it could not stand independently of section 406(2)(e). The fixation of special ratf: of 9 per cent for conservancy tax in respect of large premises including mills aad factories was also held to be illegal and void.

The officral year 1969-70 having in the meantime commenced, the Municipal Commissioner adopted under taxation rule 21 the entries of the official year 1968-69 as the entries for the official year 1969-70.

Complaints were then filed by the petitioners against the amount of rateab1e value entered in the ssment books. During the pendency of those complaints, the. Governor of Gurarat promulgated Ordinance No. 6 of 1969 on ~:ember 23, 1969. The ordinance was rertaced by Gujarat Act No. 5 of 1970 which came into force with effect from March 31, 1970. The ordinance amel\ded the definition of ratble ·

ANANT MILLS v. GUJARAT (Khanna, J.) 227

value as well as section 49 with retrospective effect. It also contained certain valid'itins provisions. Gujarat Act 5 of 1970 was on the line • of Ordinance No. 6 of 1969, except in the ID!ltter of definition of rateable value. A number of petitions in the meantime were filed to challenge the validity of •the provisions of Ordinance No. 6 of 1969 and those of Act 5 of 1970.

For the official year ln0-71, the valuation was made in accordance with Gujarat Act 5 of 1970. A number of writ pe'itions were filed before the Gujarat High Court challenging the provisions . of Gujarat Act 5 of 1970 as well as the valuation for the year 1970-71.

In the meantime, on April 17, 1970 appeal filed by the Corporation against judgment .dated July 3, 1969 of Gujarat High Court was dismissed by this Court: The decision of this Court was given in Municipal Corporation of the City of Ahmedabad, etc. v. New Shorock Spg. & Wvg. Co. Ltd. etc.( 1). It was held by this Court that under section 152A before the Corporation can retain an amount collected as property tax, there must be assessment according to law. As the impugned assessments were not in accordance with law, the Corporation was not entitled to retain that amount. This Court also struck down sub section (3) of section 152A which had been added by Ordinance 6 of 1969 and which gave power to the Corporation to refuse to refund the amount illegally collected despite the ordi; ir of the

court

It may be stated that the dispute with which we are concerned in the present appeals and writ petitions relates to assessment to property tax of large premises like textile mills, and factories. One writ petition relates to an electricity company,

Before setting out the findings of the High Court and dealing with the questions which arise for determination in the appeals and writ petitions before us, we consider it appropriate to refer to some of the relevant provisions. Section 127(1) of the Corporations Act requires the Corporation to impose inter lia property taxes1 "Property taxes", according to section 129, shall comprise (a) water tax, (b) conservancy tax, and (c) a general tax. Clause (b) and the relevant part of clause ( c) of that section read as under :

"For the purpose of sub-sectipn (1) of Section 127 pro perty taxes shall comprise the following taxes which shall, subject to the exceptions, limitations and conditions hereinafter provided, be levied on buildings and lands in the City :-

(a) ............... .

(b) a conservancy tax at such percentage of their rateable value as will in the opinion of the Corporation suffice to provide for the collection, removal and disposal by municipal agency, of all excrementitious and pol~ luted matter from privies, urinals and cess-pools and for effiiently maintaining and repairing the munici- --. pal drams constructed or used for the receipition or

(I) (1971] I S.C.R. 288.

SUPREME COURT REPORTS [1975] 3 s.c.R.

conveyance of such matter, subject however to the provisos that the minimum amount of sue~ tax to be levied in respect of any one separate holdmg of land or of any one building or of any one portion of a building which is let as a separate holding shall be eight annas pr mensem and that th<! amount of such tax to be levied in respect of any hotel, club or other large pwmises may be specially fixed under section 137; ( c) a general tax of not less than twelve per cent. of their

rateable value, which may be levied, if the Corpora" tion so determines, on a graduated scale

Provided . . . . . . . . . . . .

Accordng to section 99 the Corporation shall, on or bef01:c the twentieth day of February, after considering the Standing Committee's pr°" posals in this behal( determine inter alia subject. to Iimi~ions and conditions prescribed in Chapter XI, the rates at which municipal taxes referred to in sub sec; tion (1 ) of section 12 7 shall be levied in the next ensuing official year. "Official year" has been defined in section 2( 44) D to mean the~ year commencing on the first day of April. Section 137 reads as under :

"(l) The Commissioner may, whenever he thinks fit, fix the conservancy tax to be paid in respect of any hotel, club, stable or other large premises at such special rate as shall be generally approved by the Standing Committee in this behalf, whether the service in respect of which such tax is levi-

II: able be performed by human labour or by substituted means or appliances.

(2) In the case cf premises used solely for public purposes and not used or intended to be used for purposes of profit or for residential or charitable or religious purposes in respect of which the conservancy tax is pavable by the Gov- F ernment the Commission:er shall fix the said tax at a special rate approved 21s aforesaid.

(3) In any such case tbe amount of the conservancy tax shall be fixed with reference to the cost or probable cost of

te collection, removal and disposal, by the agency of municipal conservancy staff, of excrementitious and polluted matter from the premises." G .section 150 relates to suppl 1ementary taxa'ion.

Clause (l) of sect10n 49 enables a Deputy Municipal Commissioner, subject to the orders of the Commissioner, to exercise such of the powers and oerform such of the duties of the Commissioner as the Commissioner shall fr?m time to time depute to him. Section 406 deals wi'h appeals. !"-ccordmg to. clause (1) of section 406. subiect to the provisions heremafter contained, appeais against any rateable value or tax fi.xed or H charged under the Act shall be heard and determined bv the Judge "Judge" has been defined in clause (29) (as amended by Act g of

\ c

ANANT MILLS v. GUJARAT (Khanna, J.) 22 9

1968) of section 2 to mean in the city of Ahmedabad the Chief Judge of the Court of Small Causes. Clause (e) of sub section (2) of section 406 states that no appeal shall be heard against a tax, or in the case of an appeal made against a rateable value after a bill ior any property tax assessed upon such value has been presented to the appellant, unless the amount claimed from rhe appllant has been d~-· posited by him with the Commissioner. Section 411 (as amended by Act 8 of 1968) makes provision for appeal to the 'High Court from a decision of the Judge in an appeal in certain contingencies.

Clause.

(54) of section 2 defines "rateable value" to mean the value of any building or land fixed in accordance with the provisions of the Act and the rules for th1: purpose of assessment to property taxes. According to section 453, the rules in the schedule as amended from time to time shall be deemed to be part of the Act.

Chapter VIII of the schedule contains the Taxation Rules. According to clause ( 1) of rule 7, in order to fix the rateable value of any building or land assessable to a property-tax there shall be deducted from the amount of the annual rent for which such land or building might reasonably be expeted to let from year to year a sum equal to ten per ce.nt of . the said annual rent, and the said deduction shall be in lieu of all allowance for repairs or on any other account whatever. Clauses (2) and ( 3) of that rule need not be set out as they were struck down by this Court in the case of New Manak Chowk Mills (supra). Rule 9 relates to the keeping of an assessment book in which shall be entered inter aliai every year the rateable value of buiklings and lands in the city of Ahmedabad determined in accordance with the provi!.ions of the Act and the rules as also the names of persons primarily liable for the payment of property taxes, if any, leviable on each such building or land. Clause ( 1) of rule 42 reads as under :

" ( 1 ) If the person on whom a notice of demand has been served under rule 41 does not within fifteen days from such service pay the sum demanded or shows sufficient cause for non-payment of the same to the satisfaction of the (', ommiss!oner and if. no appeal is preferred against the said tax, as heremafter provided, such sum, with all costs of the recovery, may be levied under a warrant in Form H or to the like effect, to be issued by the Commissioner, by distress and sale of the moveable property of the defaulter or the attachment and sale of the immovable property of the defaulter or, if the defaulter be the occupier of an.y premises in respect of which a property-tax is due, by distress and sale of any moveable property found on the said premises or. if the tax be due in respect of ny vehicle, boat or animal by distress and sale of such vehicle, boat or animal in whomsoever's ownership, possession or control, the same may be."

W, e may now set .out the material chan.ees brou.itht out in tho Cor- . porat10ns Act by Gu.iarat Act No. 5 of 1970. Seetions 2, 4, 6. 7,

10, 11, 12 and 13 of (2) of the amending Act read as under:

"2. In the ombay Provincial Municioal Corporations

Act~ 1949 (he rem after referred to as 'the principal Act') in section 2,- '

230 SUPREME COURl' REPORTS [19751 3 s.c.R.

(1) before clause (1) the following clause shall be, and shall be deemed always to ha.ve been, inserted, namely :-

, ( 1 A) 'annual letting value' means,-

(i) in relation to any period prior to 1st April, 1~70, the annual rent for which any building or lnd or pres1:s, exclusive of furniture or machin1ry cona1ned0 or situate therein or thereon, might, if the Bombay Rents, Hotel and

Lodging House Rates Control Act, 1974 were not .in forc:e, reasonably be fxpected to let from year to year wtth reforence to its use :

(ii) in relal!ion to any other period, the annual rent for which any building or land or premises, exclusive of furrriture or machim:ry contained or situate there in or thereon, might reasonably be expected to let from year to year with referenc:e to its use;

and shall include all payments made or agreed to be made to the owner by a person (other than the owner) occupying the building or land or premises on account of occupation, taxes, insurance or other charges incidental thereto

Provided that, fur the purpose of sub clause (ii),-

(a) i.n respei:t of any building or land or premises the standard rent of which has been fixed under section

11 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, the annual rent thereof shall not exceed the annual amount of the standard rent so fixed;

( b) in the case of any land of a class not ordinarily le:t,

the annual rent of which cannot in the opinion of the Commissoner be easily estimated, the annual rent shall be deemed to be six per cent of the estimate:d market value of the land at the time of assessment;

( c) in the case .gf any building of a class not ordinarHy let, or in the case of any industrial or other premisc:s of a class not ordinarily let. or in the case of a class

of . such pr7mies the building or buildings in which are not ordmar1ly let, if the annual rent thereof cannot in the opinion of the Commissioner be easily estimated, the annual rent shall be deemed to be six Jl(:r c.ent of the total of the estimated market value, at the time of the assessment, of the land on which such building or bu!ldigs sta~ or,. as the case may be:. of the land which 1s comprised m such premises, and the stimated os.t. at the time of the assessment, of

~:reeling th.e ?uildmg, or as the case may be, the buildmg or bu1ldmgs comprised in such premises;'.

c.:

ANANT MILLS v. GUJAM.T (Kha1111a, J.) 2 31

(2) for clause ( 54), the following shall be, and shall be deemed alW!lYS to have been, substituted, namely :.-

' ( 54) 'rateable value' means the value of any building or land fixed, whether with reference to any given premises or otherwise, in accordance with the provisions of this Act and the rules for the purpose cf assessment to property taxes;'

4. In section 49 of the principal Act, in sub-section (1),- ( 1) for the words 'such of the duties of the Cqmmissillncr' the words 'such of the duties of the Commissioner, including powers and duties of a judicial or quasi-judicial nature,' shall be, and shall be deemed always to have been,

substituted; .

(2) after the first proviso, the following further proviso shall be, ind shall be deemed always to have been, adde<; l, namely :-

. 'Provided further that nothing in this sub-section shall be deemed to empower the Commissioner to issue any order regulating the exercise of powers or performance of duties of a judicial or quasi-judicial nature deputed by him.'

6. In section 129 of the principal Act, to clause (b). the following proviso shall be, and shall be deemed always to have been, added, namely:-

'Provided that when determining under section 99 or_ section 150 the rate at which conservancy tax shall be levied for any official year or part of an official year, the Corporation may determine different rates for different classes of prd

perties.'

7. In section 137 of the principal Act, to sub-section (1) the fol.lowing proviso shall be added, namely :-

'Provided that if the Corporation shall have determined for any official year any different rate of conservancy tax for any class of properties to which any of the properties referred to in this sub-section belongs, the Commissioner shall not, without the previous approval of the Corporation, fix, for such official year or part thereof, the conservancy tax to be paid in respect of any property beloging to such class for which such different rate may have been determined by the Corporation, at any other different rate U'lder this subsection.'

10. In section 406 of the principal Act, in sub-section (2) ,- ( 1 ) for the words 'shall be heard' the words 'shalt be entertained' shall be substituted; and

(2) the following proviso 'wll be added after clause (e), namely :-

'Provided that where in any particular case the. Judge is of opinion that the deposit of tho amount by the appellant

232 SUPP.IME COURl' REPORTS [l 97 ~) 3 SoC, R.,

will causci undue hardship to him, the Judge may in his dis cretion dispense with such deposit or part thereof, either unconditionally or subject to such conditions as he may deem. .

fit.' '

11. ln s~; tion 411 oi the principal Act, after clause (a), tho following clause shall be inserted, namely :-

"(bb) from any order of the Judge under the proviso to sub-se:ction (2) of section 406; and;"

12. In Schedule A to the principal Act, in Chapter Vlll,-

(i) in sub-rule (3) of rule 7, for the words annual rent

for which such building, land or premi&es might Isonably c be expected to let from year to year a sum equal to ten pe1 cent of the said annual rent' the words 'annual letting valllAI

of such building, land or premises a sum equal to ten pol' cent of such annual letting value' shall be, and shall be deemed alway11 to hav1e been substituted; and ·

(ii) in sub rule (1) of rule 42, for the. words is preferred' D the words 'is prderred or entertained' shall be substituted.

13. Notwithstanding anything contained in any judgment, deoreo or order of any court or tribunal or any other authority,-

(1) .............. ..

( 2) no determination of any special or different rate of conservancy tax by a Municipal Corporation constituted by or under the principal Act in respect of any hotel, club, stable, industrial premises or other large premises in exerciso or purported exercise of its powers under any of the provi~ sions of the principal Act, at any time before the commenc&-

ment of . the said Ordinance, shall be deemed to have been invalidly made by reason of the Corporation having no power to determine such rate at the time. when such determination was made; and any such determination shall be deem ed to be valid and shall be deemed always to have been validly made under the provisions of the principal Act as amended by thfa Act as if this Act had br..en in force at the timo when such determination was made; and no such determination of different or special rate of conservancy tax, or any entry of tax made in any assessment book pursuant thereto; or any levy of such tax or bill or notice of demand or distresii

or attachment issued or execu'ed for collection of such tax, shall be clled in question in any court or before any tribunal or authonty mrely on the ground that the Corporation had no power or authori•y to determine such different or special :ate of. conserv.ancy tax in respect of any hotel, club, stable, industrial o/em1ses or other large premises or on any ground consequential thereto." ·

ANA?iT MILLS V,1 GUJARAT (Khanna, J.) 233

The High Court after protracd hearing . which wo aro given to understand lasted for 21 days besides 4 days for judgment whilo partly allowing the petitions filed before it under article 226 of tho Cons9nt !ion made the followng declaration :

"(i) Sectfon 2( lA) clause (i) is valid so far as it is applicable to the officii:I year 1969-70 but it is null and . void in so far as it applies to the official years from !he commencement of the Corporations Act upto and including tht official year 1968-69, on account of infraction of artide 14.

(ii) Proviso (c) to section 2(1A) clause (ii) is not violative of article 14 and is constitutionally valid.

(iii) Section 49 does not suffer from the vice of unreasonableness and is constitutionally valid and so also is section 13 ( 1) of Gujarat Act 5 of 1970.

(iv) The proviso to section 129(b) is not violative. of article 14 nor does it sufl'er from the vice of excessive delegation of legislative power.

(v) Section 13(2) of Gujarat Act 5 of 1970 i~ not violative of article 14 or article 19(1)(f) and cannot bo challenged as constitutionally invalid.

(vi) Section . 406 ( 2 )( e) and section 411 ( bb) ure null and void as beinp; in contravention of article 14: Rule 42 of the Taxation Rules is also ultra vire$ and void in so far llfl it provides that if an appeal is preferred or entertained against the tax, warrant shall not issue for the recovery of the amount of tax.

(viii) The Re., olutions passed by the Corporation for the official years 1967-68, 1968-69, 1969-70 and 1970-71 to the extent to which they fix the rate of conservancy tax at 9 per cent inter alia in respect of textile mills and factories belonging to the petitioners are ultra vires the· proviso to section 129(b) and the rate of conse1'\lancy tax applicable in respect of these textile mills and factories must, therefore be taken to be the general rate of 3 per cent."

Civil appeals Nos. 489 to 513 and 752 to 755 of 1973 have been filed in this Court by the _petitioners before the High Court against the judgment of that court in so far as the court has upheld the constitutional validity of the impugned provisions. Civil appeals Nos. 643 to 684 of 1973 have been filed by the Municipal Corporation of tllie

City of Ahmedabad and,. others against the above judgment in so tar as the High Court has struck down the impugned provisions and the Resolutions. Civil appeals No. 389 to 430 of 1974 have been filed

by the State of Gujarat ainst the judgment in so far as the High Court has struck down the impugned provisions. Writ petitions Noe.

51, 60 to 73, 87 to 91, 157, 492 to 503, 533, 534 and 583 of 1972 as also writ petitions Nos. 1866 to 1877 and 2046 of 1973 which have been filed by the Aryodaya Spg. & Wvg. Mills Co. Ltd. m.d other parties involve substantially the same question which arises in

234 !jUPRliMI\ COlJ!tT IU!!IORTS (197SJ 3 s.c.1t

uppeals, though some <>f these writ petitions relate to the subseqnent period of 1971-72. Writ petition No. 74 of 1972 filed by the Ahn11da bad FJertricit:y Co, Ltd. involves an addition11l point regarding; its liability ttl pay property tax which has been levied on the ground that it occupies lan.d below the surface for underground cables.

This i udgmet would disposr.~ of all the appeals and writ petitions.

Thi: first important. question which arises for de.termination is whether clause (i) of section 2(1A) is violative of article 14. Acol)t'ding to this clause, "annual letting value" means in relation to any period prior to 1st April, 1970 the annual rent for which any buildil18 or land or premises, exclusive' of forniture or machinery 1ontained c:ir aituate therein or th1reon, might, if th1~ Bombay Rents, Hotel and

Lodging Hou.e Ra~ Co11trol Al:t, 194 7 wer, e not in force, eanon nbly oo xpe1t1:d to lei: from year to year with reference to its use.

Accordir1g to the petitioners, the operation of this clause 11ft'.e1:tcd only the aa~.:ssment proceedings pending on Decembe1 23, 1.969 when Ordin1mci: 6 of 1969 (which wa.s subsequently replaced by Act 5 of 19 '/O) came into force and did not affect the assessments which were fu1al and complct1d before that date. The said provision was thWl aaid to create rm arbitrary and i1Tatloni!l classification which had no reasonable< ncm1 with the object of levying the tax. As age.inst

the aoove, the folhlwing fou1 contention~ wre advanced on hehn!f of the Corporatiott : ( l) There is no discrin1ination in the matter of comp

letc<l a&scss:ments and pending assessment because the prior h1.w did not require valuation to be restric!- ted to standard rent.

The impugned provision is merely declaratory of previow1 Rtate of law.

(2) There is 110 discrimination in the matter of comp

!eted asesRments and pending assessments because

as a matter of fact valuation assessment.'! finalised before Deo; mber 23, 1972 w1ire in disregard of the provi&io1111 of the Rent Act. ( 3) Pending cMes constitute a c; lass by themselveg and

any law which makes a distinction between decided cas1:s and pending cases is not violative of article

14 of the Constitution as the above dlstlnctio11 i~

baed upon rational classification. ( 4) In any cuse so far as the year 1969-70 is concerne<l,

there is no discrimination or violation of article 14.

The High Court :ejected the first three contentions urged on behalf of the C<1rpora!ton but accepted the fourt contention. Accordi11f6y, it held that clause (i) of section 2(1A) was valid in so far as it was applicable to the official year 1969-70 but was null and void i11 '° far as it arplied to the previous years on account of the infraction of article l. 4.

Regarding. clause ( c) of the proviso to aub-clause ( 2) of clause (1 A) of llCCtiOn 2 of the Act, the High Court held th!lt it is only if

ANAN'r MILLS v. GUJARAT (Khanna, J,)

Lhc annual l'cnt having regard to the P.rovisions of the Bombay Rent Act cnntlot be easily estimated that t.te Commissioner can adopt the basis of the valuation set out in proviso to cla11s1: (c). Mr. Tnrkundc \r.R.rncd counsel for the petitioners has not pressed the attack on the t:f•11s•itutional validity of clause (c) becauc, according to him, it is a:'t known as to which property would be covered by that clauses a8 construed by the High Court.

Likewise, so far as the constitutional validity of section 49 of thl) Act is concerned, the attack has not been pressed on behalf of the petitioner-appellants. Mr. Tarkunde has also pointed out that despite the decision of this Court in Man.ek Chowk Spg, & Wvg. Mills case

(supra) in making assessments attempts are being made by the Cor poration to inc, lude some structures which constitute plant Emd machinery as part of building. The learned counsel, however. con cedes tliat this would be question of fact depending upon eacl1 case.

He accordingly states that his clients would l.i necessary agitate the matter in appeal.

It hns been argued befoxo us by the Additional Solicitor Gcnernl, Mr. Vakil and Mr. Bhandafe on behalf of the Corporation i.s well as the State Government that the High Court was m error in holding thrlt clause ( i) of section 2 (1A) was violative of article 14 in respect of the, sears prior to the official year 1969-70, As 11gai115t that, Mr. Tarkunde on behalf or the petitioners (the word "p ... dtil)ncrs" would cover not only the petitioners in this Court but also Lhosc who were the petitioners in the High Court) has supported the finding of the High Court in this re.spect. Mr. Tarkunde in his own turn has

a.qsailed the finding of the High Court in so far as it has held that" clause (j) of section 2(1A) is not. violative 0£ article 14 in r\'-spect of the.year 1969-70. After hearing the learned counsel for Lhe parties

we find considerable force in the submission made on behalf of the Corporation and the State Government.

The first question which 'llries for consideration i11 th~ abO\',! Cl)ll" text is whether there ig any discrimination in relation to the ttsses~·

ments for th~ period prior to April 1, 1970 between pending . Cl\RC~ 1md the crue~ m which n:; sessment had already been eomplcfctL

S1) f(1r as this usr>ect i~ conc11med, we find that in the cnse of Assr:wsnumt Committee of the Metropolitan Borough of Poplar v. 1Joben1 (!) the

House of L<lrds held by majority that in arriving at the valuotion for the purposes of the Valuation (Metropolis) Act, 1969, of a heredi.ta

ment to which the Increase of Rent and Mortgage interest. (Res'tric tio.1) Act 1920 applies. the maximum gross value to be assig11cd to that hercditament is not limited to the standard rent of the heredit'a ment together with the additions thereto permitted by the latter Act.

It was further held that the above mentioned Act of 1920 is not to be taken into account in determining the valuation for rating purpose> of the hereditaments to which it applies.

Followi11g the above decision of the House of Lords a Division Bench of the Bombay High Couri. held in the case of Gulom Ahmed Rogay v. Bombay Mli, nicipallty( 1\

.. ·-·---·-··-·---·-··----.. ··-·-·-·~-·

(I) [1922] 2. A.C. 93.

SUPREME COURT REPORTS [1975) 3 i~.C.R.

that ill univi.ug at the rutca0lc va; uc ior purposes of , ection 1:54(1) -0f the City of Bombay Municipal Act, 1888 of property to which the

Bombay Rents, Hotel & Lodging House Rates Control Act, 1947 applies the maximum value to be assigned to the property. is 'JlOt to be limited to the maximum standard rent of the property together with additions thereto permitted by the latter Act. Sinular question thereafter arose i',1 the cas1~ of The Corporation of Caiuma v. Sm. Padma

Debi & Ors(2). This Court in that case was concern<:d with the provisions of section 127 (a) of the Calcutta Municipal Act, according

to which the annual rental value of land and the annual value of any building erected for Jetting purposes or ordim.ll'ily ict, ilatl be dc:emed

to be tbe gros.5 annual rent at which the .land or building might at the tjme of assessment reasonably be expected to let from year to year, less, in the. case of a building, an allowance of ten per (; Cflt for the co.; t of repairs and for all other expenses necessary to maintaiu the

building in a state to command such gross rent.

It was held by this Court that on a fair reading of the above provision the rental value cannot be fixed higher than the standard rent under the. Rent Control Act. It w<1s further held that the words "gross annual rent at which the land or building might at the time of assessment reasonably be expected to Jct from year to year" imply that the rent which the •, mdlord might realise if the house was let is the basis for fixrng the annual value of the building. The criterion is the rent realiable by the landlord and not the value of the holding in the na:ids of the t~:nent.

The value of the property to the owner is the standard in makin11 the

assessment.

The Corporation, it was accordingly concluded, had no power to fix the annual value of the premises higher than the stan- dard rent.

It was argued o•.i behalf of the Corporation before the High Court tlYat no avermcnt had been made by the petitioners in the petitiom" that the assessments which had been completed before the coming into force of Ordinance 6 of 1969 were made h•aving regard to the provisions of the Bombay Rent Act and that in the absence of such averments o case of discrimination could be said to have been made by the petitioners. The High Court rejected this contention because iin its opinion it would be reasonable to presume that the assessments were made keeping in view the fent restrictim provisions of the Bombay Rent Act.

We are unable to agree with the above approach of. the High Court.

There is a presumption of the constituti<Y.1al validity of a statutory provision.

In case any party assails the validity .of any provision on the ground that it is violative of article 14 of the Constitution, it i:s for that party to make the necessary averments and adduce material to :'how discrimination violative of article 14. No averments were made in the petitions before the High Court bv the petitioners that the assessments before the coming into force of Ordinance 6 of 1969 had

been made by taking into account the rent restriction provisions of the Bombay Rent Act. Paragraph 2B and some other paragraphs of peti-

( 1) ATR 1951 Bombay 320.

'(2) [1962) 3 SCR 49.

ANANT MILLS v. GUJARAT (Khanna, /.) 237

tion No. 233 of 1970 before the High Court, to which our attention. was invited l:ly Mr. Tarkunde, also do not contain that averme1.1t. No material on this factual aspect was in the circumstances produced. either on behalf of the petitioners or the Corporation. The High Court, as already observed, decided the matter merely on the basis of a presumption.

It is, in our opinion, extremely hazardous to deci<le the question of the constitutional validity of •a provision on the basis of the supposed exisknce of certain facts by raisi•ag a presumption.

The facts about the supposed existence of which presumption was raised by the High Court were of such a nature that a definite avrmcnt could have been made in respect of them and concrete materioal could have been produced in support of their existence or non-existence.

Presumptions are r.esorted to whe.1 the matter does not admit of direct proof or when there is some practical difficulty to produce evidence to prove a particular fact. When. however, the fact to be established is of such a nature that direct evidence •about its existence or nonexistence would be availab1e, the proper course is to have the direct evidence rather than to decide the matter by resort to presumption. A pronouncement about the constitutional validity of a statutory provision affects not only the parties before the Court, but all other parties who may be affected by the impugned provision. There would, there-. fore, be inherent risk in striking down an impugned provision without having the complete factual data and full material before the court.

It was therefore, in our opinio11, essential for the High Court to ascertain and fa1d out the correct factual position before recording a finding that the impugned provision is violative of •article 14. The fact that the High Court acted on an incorrect assumption is also borne out by the material which has been adduced before us in the writ petitions filed under article 32 of the Constitution.

In the affidavit of Jayantilal Maineklal Shah, Assessor •and Collector of the Corporation, filed on behalf of the respondents in these petitions. the factual position has been brought out at length. According to the affidavit, after . the Corporation had been constituted with effect from July 1, 1950 the Commissioner kept for every offici•al year an assessment book as contemplated by rule 9 of the Taxation Rules .. The rateable value of lands and buildings in Special Property Section were first determined by the municipal valueis on Contractor's Theory in accordance. with the methods prevailing under the English law of rating. The owners of lands •a•ad buildings which were valued on Contractor's Theory filed appeals.

During the pendency of the appeals, the authorities concerned agreed to refer the question of determination ol' the rateable values to the arbitration of the arbitrators, oae appointed by the Corporation and the other appointed by the taxpayers. On disagreement between the two arbitrators the matter was referred in 1953 to Shri H. V. Divetia. a former Judge of the High Court of Judicature at Bombay as umpire. Shri Divetia held that .!fat rate floor area method which was being adopted by the Municipal Corooration of the city of Bombay in similar cases. was the proper method. The municipal authorities consequently adopted that method. The award of Shri Divetia was effective only till the official year 1954-55, but its application was extended by agreement betwee1,1 the Jl'<lrlies up to the year 1958-59. The municipal authorities continued to value the lands

SUPRBMI! COURT REPORTS [l 97S] 3 s.c,!l.

and buildings aforesaid on the fiat rate floor area method for the year 1959-60 and and onwards to prevent any dispute being raised. The affidavit further shows that notwithsttmding the decision in Pcidma Debi's case (supra) the Corporation continued as before to valui;: the properties included in the Sp'ecial Property Section on the flat rate lloor area method. Both the valuers •as well as the persons liabl.e to pay property taxes were not conscious of any impact of rent restrktion for the purposes of property taxes. The Collector has denied that in dctcrmini1.1g the rateable value the Municipal Commissioner had been taking into account th1~ standard rent of the building or !•and or was following the principle that the rent restricted by Jaw was the mee1sure of the true rent of the building.

There is no material before us to show that the factual pm:ition is in nny wuy different frcirn that brnught out in the uffiduvit of the Asses

~01 untl Collector of the Corporution. Mr. Tarkunde hns rl!ferrcd to three orders dated March 22, l 969 of the Deputy Municipal Commi~·

ioncr whereby the mtiablc vnluc as initially fixed was reduced on complaint filed by the ratcpnycr. It would 11ppcar frorn the orders thut in reducing the ratc:nble value the Deputy Municip"ll Commissioner wok into account the rental vnluc. 'The above three orders, 1,1 our nph1ion, can hardly be of nny help to the petitioners because there is

nothing to how thut the Deputy Municipal Commissioner while 111ak ing those orders took into account the standard rent end the restrictions ph1ccd on the increne i:n rent by the Bombny Rent Act.

Mr. Tnrkunde then urge~ that the material which has been placed before this Court regarding the factual position was not before thE: High Court and as such this Court should not disturb the finding of tho High Court on the constitutional validity of clause (i) of cction 2(1A). We are unabl'~ to accede to this submission. The validity of the abow clause has also been assailed in the writ petitions flied before

11s nnd in decklin$ thoe writ petitions, wr. cannot refuse to take into uccotmt tho mntcr1al which has been placed before us. As that mate

rin1 dicloscs thnt the f!lctunl pc, isition ns it exiRtcd before tho prornnl gntion of Ordinnuce 6 t1f 1969 WM that the pnwiions of the Bomboay Rent Act wcrn not tnken into nccount ln determining the ratenblc value, there would bc no ccupc from the conclusion that no dlfl'crei.i

tinl treatment hus been nlt'tcd, out to pending cam in clnuse (i). l't Is plnin that the impugned provision cannot be held to be violutive l)f nrticle J 4 in the appctals filed against the judgment of the High Court a.id comtitutionally valid in the writ petitionR. As the High Court decided the matter without having the full and complete data beforn it and as such data is avallable to us, the co>,1tention that we should not take that data into account, in our opinion, is wholly untenable. We would, therefore., l1old that there is no material on record as might justify the infere,1cc that 1 differential hostile treatment has been meted out in pending cases.

T11e very boasis of striking down the impugned provisions on the ground of being violative of article 14 wquld thus disappear.

Apart from the abov1~. we are of the l'>pinion that classification hy treating decide<.! cases as belongi.ng to orie category and pending Calles

ANANT MILLS \I, OUJARAT (Klla1111a, /.) 239

as belonging to another category is reasonable and not per se ot!ensivc to Article 14.

lt is well-established that article 14 forbids class legislation but does not forbid classification. Permissible classification must be found cd on an i'.1telligible dift'erentia which distinguishes persons or things that are grouped together from others left out of the group, and the differentia must have •a rational relation to the object sought to be achieved by the statute in question.

In permissible classification mathematical nicety and perfect equality are not required. Similarity, not identity of treatment, is c<,1ough. If there is equality and uniformity within each group, the law will not be condem,1ed as discriminative, though due to some fortuitous circumstances arising out of a peculiar situation some included in a class get an advantage over others, so long ns they are 1;1ot singled out for special treatment. Taxiation law is 11ot 1m exception to this doctrine. But, in the application of the prlnclple.t1,

the comts, In view of the inherent complexity of fiscnl adjustment of diverse elements, permit a l•arger discret1on to the legislature in the matter of classification, so long ns it ndheres to the. fundamental princi pies underlying the said doctrine. The power of the legislature to classify is of wide range nnd flexJbility so that it can ndjust its system of taxation in all proper and rensoniable wnys (see Ram Krishna Dalmla v, Shri Justice S. R. Tendolkar( 1) and Klumdine Sht1h Bhat v.

Agrlculutral Income-tax Officer, Kasllragod( 2). Keeping the above principles in view, we find no violation ohrticle 14 in treating pendin!1, cases as a class different from decided cases. It cannot be disputed that so far as the pending cases covered by clame ( i) are concerned. they have been nll treated nlike. In the case of Rao Shiv Bahadur Singh v. State of Vindh.va Pradesli(B) this Court obsetved :

"But there is no reason why pe.nding proceedings cannol be treated by the lcgilature a~ a class by themclves h•.wing regard to the exiµcncies of the situation which ; uch pendcncy itself calls for. There can arise no question ns to such a

aving proviAion i1Mringing article 14 so lon~ as no scope is. left for onv further dic:riminnl ion int1'I' .r irn bctwen pernons affected by such pending mnwm."

Tn Hash/sin.I? Manufact11rln, q Co. Ltd. v. Un/011 ()f l11dhi(') the consti .. tulitinal validity of cction 2SFFF of the Jndutrial Diputes Act, 1947 WM nssailed. Thnt ectio'n nw1dc a diMinction between ~'rnployers who had closed their undertakings on or before Novt-mbl'r 28, 1956 and those who closed their undertaking~ after that date. It wns urged that the above provision was violative. of article 14 of the Ccnstirntinn. The nbove contention was rejected •and it was observed :

"When Parliament enacts a law imposin~ a liability as flowing from certain transactions prospectively, it evidently makes a distinction between those transactions which

8TC covered by the Act and those which •are not covered by the Act, because they were completed before the date on which . -·---------

(1) [19591 S.C.R. 279.

(2) rJ9631 3 S.C.R. 809.

(3) [1953] S.C.R. 1188. 1197. ( 4 l (1960] 3 S.C.R. 528.

SUPRBMI! COURT REPORTS

[1975] 3 6.C.R.

the Act was enacted. This differentiation, however, does not . amount to discrimination which is liable to be struck dow:n under article 14. The power of the legislature to impose civil liability in respect of transactions completed even before the date on which the Act is enacted does not appear to be restricted. If, as is conceded-iand in our judgment rightly -by a statute imposing civil liability in respect of postcnactment transactions, "lo discrimination is practised, by a statute which imposes liability in respect of transcti9ns which have taken place after a doate fixed by the statute, but before its enactment, it cannot be said that discrimination is practised."

ln the case of Jain Bros. & Ors. v. The Union of lndia &: Ora.(') it

was urged on behalf of the appellants that dause (g) of section 297(2) of the Income-tax Act, 1961 was violative of article 14 inasmuch. as in the matter of imposition of penalty, it discriminated between lwo seti of assessees with reforence to a particular date, namely, those whoe assessment had been completed before 1st day of April, t 962 >and others whose assessment was completed on or after that date. While upholding the validity of the above provision, this Court observc:d :

"Now the Act of 1961 came into force on first April

1962. It repeakd the prior Act of 1922. Whenever a prior enactment is repealed and new provisions are C'11acted th1~ legislature invariaply Jays down under which enactment pend .. ing proceedings shall bC continued and concluded. Section 6 of the General Clauses Act 1897 deal:o with the effect of repeal of an enactmelilt and its provisions apply unless a different intention appears i<n the statute. It is for the legislatut1~

to decide from which date a particular law should come int!l operation. It is not disputed that no reason has been suggested why pending proceedings cannot be treated by the

legislatwe us a class for the purpose of Art. 14. The date first April 1962 which has been selected by the legislature for tho purpose of els. (f) and (g) of s. 297 (2) cannot b<~ character:ised as arbitrary or fanciful."

We would, theri:forc, hold that clause (i) of section 2( I A) is co11stitutionally valid and not violative of article 14 in respect of nil the years .to which it has been made applic~.ble.

Learned Additional Solicitor-General and Mr. V•ak:il on behalf of the Corporation have assailed the finding of the High Court i.1 so far G as it has held the resolutions passed by the Corporation for the: four years from 1967-68 to 1970-71 fixing the rate of conservancy tair 11t 9 i:er coot in r1!spect 01' textile mills, factories and other large pre:mise•

instead. of the: general rate of 3 per cent to be ultra vires the proviso to secti?n 129(b). lie. may in this ccMtcxt set out the material part of tho impugned resolution for the assessment year 1971-72 taking it H to be tl specimen for the four years in question : -- ·-··· --··· ·~-- ···- --,.. ..


ANANT MILLS v, GUJARAT (Kha1111a, J,) 24 l

"(c) Conservancy tax at 3'.lv of the rateable value of th.;: premises liable to tax under provisions of section 131 of the Act, subject, however, to the proviso that the minimum amount t? such tax to be levied ra respect of any one separate holdmg of land or of any one portion of a building which is let as a seP'arate holding shall be eight annas per month, and that the amount of such tax to be levied in respect of any hotel, club, stable or other large premises may be specially fixed under sectio,1 13 7,

(d) As per the provisions of section 137, hotel, club, stables, theatres or cinemas or other large premises including mills and factories registered under the Factories Act, and where 50 or more workmen •are employed in manufacture in all the shifts, shall be subject to a conservancy tax at 9% of the rateable value."

The High Court in striki 111g down the four resolutions in so far as the mte of conservancy tax in respect of the large premises had been fixed at 9 per cent instead of 3 per cent, observed that the power to fix different rates of conservancy tax for different classes of properties is limited by the actual cost element and the differential rate of conservancy tax fixed for a particular class of properties must be related to the actual cost involved in supplying conservancy service to that class. The High Court agreed that 1'arge premises could be treated as a class and given differential treatment in the matter of fixation of conservancy tax.

On the question, however, a1> to what rate of conservancy tax should be fixed for large premises, the High Court observed that there was nothing in the affidavits filed on behalf of the Corporation which might show that the Corporation was guided by the actual cost of conservancy service supplied to each class.

We may at this stage advert to the scheme of the Corporation Act in the matter of levy of conservancy tax.

Clause (b) of section 129 states that the rate of conservancy tax shall be such percentage of rateable value as will ra the opinion of the Corporation suffice to provide the collection, removal and disposal, by municipal agency, of all excrementitious and polluted matter from privies, urinals and cess-pools and for efficiently maintaining and repairing the municip•al drai11s constructed or used for the receiption or conveyance of such matter. 1t is further provided that the minimum amount of such tax to be levied in respect of any one separate holding of la111d or of any one building or of any one portion of a building which is Jet as a sepamte holding shall be eight annas per mensem and that the amount of such tax to be

levied in respect of any hotel, club or other large premises may be specially fixed under section 137. Sub-section (1) of section 137 provides that the Commissioner may, whenever he thinks fit, fix the conservancy tax to be P'aid in respect of any hotel, club, stable or other large premises at such special rate as shall be generally approved by the Standing Committee in this behalf, whether the service in respect of which such tax is leviable be performed by human labour or by substituted means or appliances Sub-section (2) of section 137 directs the Commissioner to fix a special rate of conservancy tax in the case 17-L379Sup Cl/75 . -

SUPREME COURT REPORTS [ l975J 3 s.c.R.

of premises used solely for pL1blic purposes and not used or intended to be used for purposes of profit or for residential or charitable or religious purposes in respect of which the conservancy tax is payable by the Government. According to sub-section (3) of section 137, in any such case the conservancy tax shall be fixed with reference to the cost or probable cost of the collection, removal and disposal, by the agency of municipal consen•ancy staff, of cxcrementitious and polluted :matter from the premises.

One of the questions which has been agitated before us is as to whether sub-sect1cl'tl. (3) of section 137 deals only with case:s mentioned in sub-section (2) or whether it applies to cases coven:d both by sub-section (1) as well as sub-section (2) of section 137. Put ditkrently, the question is as to what is the significance of the opening woios "In any such case" in sub-section (3).

After giving the matter our consideratiaa, we are of the view that sub-section (3) deals only with cases mentioned in sub-secti<M (2) of section 13 7 and is not attracted in cases mentioned in sub-section ( 1).

Sub-section ( 3) provides for •a concessional rate of conservancy tax because the amount of such conservancy tax has to be fixtxi with reference to the cost or probable cost of the collection, removal and dis. posal, by the agency of municipal conse:rvancy staff, of excrementitious and polluted matter from the premises. The rate of conservancy tax covered by section 13 7 ( 3) would be lower compared to the general rate of caaservancy tax under clause (b) of section 129 which would be fixed after taking into account not only the cost or probabfo cost referred to in section 137 (3) but also the expenses for efficiently maintaining and repairing the municipal drains constructed or used for the receiption or conveyance of excrementitious and polluted matter. The scheme of the Corporations Act appears to be that in the case of premises used solely for public purposes and not intended to be used for purposes of profit or in the case of premises intended to be used for residential or charitable or religious purposes in respect of which conservancy toax is payable by the Governmei,1t, the rate of conservancy tax should be lower compared to the rate of general conservancy tax. Sub-section ( 1) deals with large premises like hotels, clubs and stables which in the very nature of things require greater c:onservancy service, and it hardly stands to reason that the Legislature would contemplate the fixing of lower concessional rate of conservant:y tax i.1 the case of such premises. The opening words of sub-section (3) of section 137, viz. "In any such case" make it clear that its concessional provisions apply only to the immediately preceding clause, namely, section 13 7 ( 2) .

Act 5 of 1970 added a proviso to clause (b) of section 129. According to that proviso, when determining under section 99 or section

150 the rate at which conservancy tax shall be levied for a'ay official year or part of an official year, the Corporation may determine different rates for different classes of propeties. A proviso was also added to section 13 7 (1) by the said Act that if the Corporation shall have determined for any official year any different rate of conservancy tax for any class of properties to which "<my of the properties referred to in

ANANT MJLJ.S V. GU.JARA'!' (K/ii1111111, J.)

this subsection belongs, the Commissioner shall not, without the previous e.:iproval of the Corporation, fix, for such official year or part thereof, the comervancy tax to be paid in respect of any property belonging to such cl'ass for which such <lilkrcnt rate may have been det<>r mined by the Corporation.

Perusal of the different provisions shows that the rate of conservancy tax can be fixed under the following three provisions :

( 1) A rate of conservancy tax (which for the sake of co11vcnicncc may be described as general rate of conscrva'Jcy tax) to be fixed by the Corporation under clause (b) of section 129. This is, how.over, subject to the proviso that it would be open to the Corporation to determine different rates for different classes of properties.

(2) A special rate of conservancy tax to be fixed by the Commissioner in respect of certain large premises under sub-section ( J) of section 137. Such rate shall not without the previous approval of the . Corporation be different from the rate of conservancy tax for that class of properties in case the Corporation has determined the rate of conservancy tax for that class.

(3) A special rate of conservancy tax i'.1 respect of premises mentioned in section 137(2) to be fixed by the Commissioner.

The following affidavit was filed on bchnlf of the Corporation in justification of the higher rate of conservancy tax of 9 per cent for lnrgc premises mentioned in the resolution :

"I submit that the properties in respect of which the Cor- E poration has determined the rate of conservancy tax at 9 per cent are properties belm1ging to a class the cost of providing conservancy services to which is proportionately higher than corresponding cost in respect of other properties. . ...

I state that it is not necessary for the purpose of determini11g such higher rate that the Corporation or the Commissioner should separately work out the expenditure involved in deal- F ing with these properties. I deny that there is no valid justification for providing a higher rate of conservancy tax in respect of such properties. I submit that it is competent to the Corporation to take notice of the higher cost of eonservancy services required to be incurred in respect of these propertic> and to form an opinion on general facts-that the cost of prn

viding conscrva.icy services to these properties would be higher and to what extent. I submit thoat matters of this type do not demand an arithmetical accuracy and broad compliance in matters of this type is sufficient for eomplfance with law. I submit that according to the estimate of the' Municipal Corporation, to meet the total expenditure of conservancy services, if 'a unit rate of conservancy tax was to be provided . .it was necessary to determine the rate of conser- H vancy tax at 4t per cent of the rateable value .. The corporation has, however. sought to distribute the incidence of conservancy tx equitably among all the lands and buildings. determine the general rate o1 conservancy tax at 3 per cent 18-L379SupCI/75 .

SUPREME COURT REPORTS [1975] 3 s.c.R.

and determine a higher rate of conserva•acy tax at 9 pct' cent

i~ resp.ect of inustrial pr.emises and other properties as pro·

v1dcd m the said resolut10n.

I submit that the use of the premises has a material relation to the cost of providing c011 .. scrvancy services and to the maintwance and repairs thereof I submit that the hotels, clubs, industrial premises and other large premises n:ferred to in section 129 (b) •as well as in section 137 arc premises which need relatively larger conser·

vancy services."

The question1 with which we are concerned in the present cases is whether it is sufficient, as has been argued on behalf of the Corporation, to find out the total expense to be incurred for conservancy ser-

\'ii:~ and thereafter to fix different rates for different categories of properties so th•at the tax raised is sufficient to meet the total expern.e, or whether, as has been held by the High Court, the different ratie of conserwacy tax fixed for a particular class of property under the pro

viso to clause (b) of section 129 must be related to the actual cost in\'Olvcd in supplying conservancy service to that class. In other words the question is whether the Corporation in determining the rates of consen"ancy tax has to find out the total expense it would have to incur for the various purposes mentioned in section J 29 (b) in connection with the conservancy service and thereafter to raise that amount by fixi1ag different rates of conservancy tax for various cate gories of properties or whether the Corporation would have to find out separately the expense required in respect of conservancy service for rnch category of property and thereafter to fix such rate of coaservancy tax for a category of property as would be sufficient to meet the expense on the conservancy service for that particular category. To put it differently is the rate of conservancy i•ax for a class of property to be determined by taking into account the total expense which the Corporation has to meet for conservancy service in aia official year or is it to be determined by taking into account the expense which the Corporation has to meet for conservancy service for that particular class of property ?

After giving the matter our consideration, we are of the view that what is required by section 129 is that before determining the raks of comervancy tax for different categories of properties the Corporntion should find out the total expense it would have to incur for the various purposes mentioned in clause (b) of that section. After having ascertained the total expense: it would be permissible to the Corporation to fix different rates of conservancy tax for various categories of properties. It is not essential, except in cases mentioiaed in sub-sections (2) and (3) of sectio1a 137 that the rate of conservancy tax for a particular category of properties should be such as would be related only to the expense for conservancy service for that particular category of properties. According to the proviso which has been added to clause (b) of section 129 of the Corporations Act by Act 5 of 1970, when detennini.1g under section 99 or section 150 the rate at which conservancy tax shall be levied for any official year or part of an official year, the Corporation may determine: different rates for different classes of properties. There is nothing in the above proviso which makes it obligatory

N'<ANT MILLS v, GUJARAT (Khanna, J.) 245 -

for the Cdrporation to take into account scp•arately the cost of conservancy service for. each class of property for which conservancy tax is fixed. Apart from the fact that there is no statutory obligation for the Corporatia,1 to have separate estimates of the costs of conservancy service for various classes of properties referred .to in the above proviso with a view to allocate the cost amongst different classes of properties,

it would not even be feasible. to do so for there would not be separate municipal drains for different classes of properties. As already mentioned clause (b), of section 129 alSo takes into account the exnense required for efficiently maintaini•ag and repairing the municipal drains for findi11g out the total expenditure for conservancy service. The High Court, in our opinion, was in error in striking down the resolutions passed by the Corporation fcir the official years 1967-68, 1968-69.

I 969-70 and l 970-71 to the cxteo,1t to which they fixed the rate of conservancy tax at 9 per cent in respect of textile mills and factories because of the absence of sufficient data to show as to what would he the cost of conservancy service for that P'articular category of proper ties. The affidavit filed on behalf of the Corporation, extract from which has been reproduced above, shows that the rates of conservancy tax for the different category of properties have been fixed after mking

into account the total expense for the conservancy service. It is not possible to insist upon arithmetical accuracy in such matters. A broad and general estimate of the cost of conservancy service and the tax receipts after taking into account the relevant factors would satisfy the requirement of law.

We are unable to accede to the submission of Mr. Tarkunde that in view of the construction which we are placing upon the proviso to section 129(b), the proviso would be violative of article 14 of the Constitution on account of excessive delegation of_ legislative power. As already mentioned, the Corporation tnust keep in view the total expense it would have to i1acur for the conservancy service before fixing the various rates of co•,1servancy tax. The different rates of conservancy tax have thus to be related to the total cost of conservancy service to be borne by the Corporation. The "opinion of the Corporation" mentioned in clause ·b) of section 129 is formed after budget estimates arc prepared in a;:cordance with sections 95, 96 and 100 of the Corporations Act /\.:cording to the above provisions the Commissioner is to make a stat. ·· tent of proposals as to the taxation which would in his opinion be nw-ssary or expedient to impose under the provisions of the Act in the Annual Budget estimate of the next official year. The Standi•ag Committee then considers the estimates and proposals of the Commissioner, and after having ob!'ained from the Commlssiouer. further details and information as they think fit, the Committee frames the budget estimates. The budget estiffi'ates contaioa proposals of rates and extents of municipal taxes. The budget estimates are then printed and the printed copies are sent to each munic:pal councillor. The budget estimates are thereafter laid before the Corporation which then considers the same. In considering the budget estimates the Corporation is entitled to refer them back to the Standing Committee for further consideration or to adopt them as they stand or subject to alterations.

The entire procedure provides built-in safeguards and lays down adequate guidelioaes in the matter of taxation. It therefore cannot be said

SUPREME COURT REPORTS [1975] 3 s.c.R.

that the legislature has not prescribed any guiding principle fc; ir the Corporation for determining the rates of conserv>ancy ta~. We agree with the High Court that the proviso to claue (b) of ecton 129 does not suffer from the vice of excessive delegat10n of legislative power.

Mr. Bhandare on behalf of the State of Gujarat has assailed the finding of the High Court that section 406(2) (~) and secti.oi,1 411 (bb) are violative of •article 14 and that rule 42 of the Taxation Rules is void in so far as it has provided that if an appeal is preferred or entertained against the tax, warrant shall not be issued for !he recovery of the amount of tax. The High Court in striking down section 406(2)-

(e) a•ad section 411(bb) relied upon its earlier judgment dated October 27, 1969 which had been given before the addition of the proviso to section 406(2) (e) of by Act 5 of 1970. According fo the arlier jucigment, clause (e) of sub-section (2) of section 406 classified the appellant filin, g appeals against tax and rateable value into two clauses : ( 1) those who deposited the amount of tax assessed by the Commissioner; and (2 l those who did not.

It was held that the above classification had no rational nexus with the object of the provision for appeal and that there was no reasonable justification for giving a right of appeal to one class and denying it to the other. After referring to the observations in the earlier judgment, the High Court expressed the opinion in the judgment under appeal that the addition of the proviso to section 406 ( 2) ( e) by Act 5 of 1970 did not make any material difference as far as the constitutional validity of the above provision was concerned.

According to the High Court, the proviso merely carves out an exception from the main provision in sec- 1ion 406 (2) (e) and limits the applicability of the main provi~· sion to appellants who can deposit the amount of tax without undue hartlship. The result. in the opinion of the: High Court, was that the discrimination between the appellants who deposited the amount of tax and the appellant who did not, which is the necessary consequence of the condition requiring deposit of the amount of tax, still persits, though it is now limited to the c:lass of appellants who can deposit the amount of tax without undue hardship.

After hearing the learned counsel for the parties, we are unable to subscribe to the view taken bv the High Court. Section 406(2)(e) as amended states that no appeal against a rateable value or tax fixed or charged under the Act shall be entertained by the Judge in the case of an appeal a1(ainst a tax or in the case of an appeal made against a rateable , value after a bill for any property tax assessed upon suc.h value has been presented to the appellant unless the amount

cl~1rr_ied from the appellant has been deposited by him with the Comm1ss10ner.

Accordmg to. the proviso to the above clause. where in anv particular case the Judge is of opinion that the deposit of the amou?t b~ th~ appllant .will cause un(!ue hardship to him; the Judge Yl?ay m his ~1cret10n dispense with such deposit or part thereof, either uncond1t10nally or subject to such conditjons as he may deem fit.

The object of the above provision apparently is to ensure the

i\NANf MILLS v. GUJARAT (Khwuw, J.) ~47

deposit of the amount claimed from an appeliant in case he seeks to

lilc. an appeal agamst a tax or agamst a rateable value atter a bill for

any propeny tax assessed upon sgch value has been presented to him. .Power at the same time is given to the appellate JUdgc to n:- l1eve the appeJ!ant from the ngour ot the above provmon in case the juoge is or the opmion tnat It would cause unoue haroship to . the appdlant.

The requirement about the µepos1t of th.C amount claimed as a condition precedent to the entertamment of an appeal which seeKs w cnaHenge tne 1mpos1tion or the quantum of that tax, in our opmion, has not the effect of nullirying the right of appeal, especially \Vhen we keep in view the fact that discretion is vested tn the appellate judge to dispense with the compliance of the above requirement.

All that the statutory provision seeks to do is to reilllate the exercise - of the rignt ot 'appeal. The object of the above provision is to keep in balance the right of appeal, _!Vhich is conferred upon a pern who is aggrieved with the demand of tax made from hlll11 and the right of the Corporation to spcdy recovery of the tax.

The impugn~ provision accordmgly conters a right of appeal and at the .same time prevents the delay in the payment of the tax.

We find ourselves unable to accede to the ari;:ument that the impugned provision bas the effect of creating a discrimination as .is offensive to the principle of equahty enshrined in article 14 of the Constitution. It is signifi- . cant that the right of appeal is confeffed upon all persons who are

aggrieved against the d.etermination of tax or rateable value.

The bar created by section 406(2) (e) to the entertairllllent of the appeal by a person who has not deposited the amount of tax .due from him and who is not able to show to the appellate judge that the deposit of the amount would cause him undue hardship arises out of bis own omission and default.

T.he above provision, in our opinion, has not the effect of making invidious distinction or creating two classes with the object of meting out differential treatment to them; it only spells out the consequences flowing from the omissio~ and defauit of a person who despite the fact that the deposit of the amount found due from him would cause him no hardship, declines of his own volition to deposit that amount. The right of appeal is the creature of a statute. Without a statutory provision creating such a right the person

aggrieve!d is not entitled to file an appeal.

We fail to understand as to why the legislature while granting the _right of appeal cannot i111posc conditions for the exercise of such right ln the absence of any special reasons there appears to be no legal or constitutional impediment to the imposition of such conditions.

It is permissible, for example. to prescribe a condition in criminal cases that unless a convicted person is released on bail. he must surrende.r to custody before his appeal against the sentence of imprisonment would be

cntertined .. Likewise, it is pemissible to enact a law lhat no appeal ,.hall lie agamst an order relatmg to an assessment of tax unless the

tux had been paid.

Such .a provision was on the statute book in section 30 of the lpdian Income-tax Act, 1922. The proviso to that section provided that ". . . . . no appeal shall lie against an order under sub-section (1) of section 416 unless the tax had been paid".

Such conditions merely regulate the exercise of the right of appeal so that

248 SUPRt!MB COURT REPORTS [1975) 3 s.c.IL

the same is not abused by a recalcitrant party and tl1ere is no difficlllty in the enforcement of the oroer appeal:d against in case the ll1ppeal

is ultunately dismissed. It is open to the Jcgislamr~ to mp()~1;: an accompanying liab11ity upon a party upon whom a legal nght 1s conferred or to presCflb(: conditions for the exercise of the nght.

Any requirement for the discharge of that liability or lhe uihlment ?t that eondition in casl: the party concerned seeks to avail ot th1~ said right is a valid piece of legislat1on, and we can disc:ern no contravention of articll~ 14 in it. A disability or disadvantage arising out of a party's own default or omission c:; inot be taken to be tantamount to the creation of two classes offensive to article 14 of the Constitution, especially when that disability or disadvantage operates upon all persons who make the default or omission.

Abservaticins in the case of Hannach Cohen, Exrx. of Sol Cohen, Deceased. and David E. Cohen, Intervener, Petitioners & Anr. vs.

Beneficial industrial Loan Corporation & Ors. ( 1) lend some sup-

Port to the view we have taken. Headnote 10 which is based upon the observations in the body of the judgment reads as under :·--

" 10. A Stall: statute which requires that in a stockhokler's derivative action a plamt1H wno owns less tnan 5 per cent ot the defendant cor_porations outstanding shares, or

shares having marked value not 1:xceeding $ :>0,000, give security for the reasonable expenses, including counsel fees, incurred by the corporation and by other parties d1:- fendant, and which makes the plaintiff liable for such expenses if he .docs not make good his claims, and subjects the amount of security to increase if the progress of the litigation reveals that it is inadequate or to decrease if it is proved to be excessive, does not violate the contract clause, or the due process cl(l.use, or the equal protection clause of the Federal Constitution."

So far as the constitutional validity of section 411 (bb) anct''l:U!e 42 is concerned, iUs the common case of the parties that it hinges upon the validity o[ section 406(2) (e) and that in case we uphold the validity of the last mentioned provision, the validity of the other two provisions would have to be upheld. We accordingly uphold the constitutional validity of all the three provisions.

The Ahmedabad Electricity Co. Ltd. petitioner in writ ]petition No. 74 of 1972 is a licensee under the Indian Electricity Act,. 1910.

It has laid undergrcmnd supply lins undr most of the roads anii public streets in th(: city of Ahmedabad. The Corporation has in that connection assessed property tax and made the petitioner-company liable to pay that tax on the ground that the underground suppl.y lines occupv soac:e below the surface and that the said space constitutes land. Section 12 of the Indian Electricity Act confers a right upon a licensee to open and break up the soil and pavement of any street, railway or tramway for laying down. and placing electric supplly lines

( 1 l 337 U.S. 53~.

ANANl' MILLS \I, OlJJARAl (Klta11na, /.) 24!;

and other works.

Although the roads and public streets under which the petitioner-company has laid down underground supply lines vest

it~ t~~ Corporation under sec!ion 202 of the Corporation Act, the

!!ability to pay property tax m respect of the space in which supply lines are laid is sou, ght to be fastened upon the petitioner-company iu view of the provisions of section 139(1) of the CorporatioM Act.

According to section 139( 1), subject to the provisions of sub-section

(2), with which we are not concerned, property taxes assessed upon any premises shall be primarily leviable if the premises are held imme dintely from the Government or from the Corporation, ftom the actual occu"lier thereof.

The word "premises" as defined in section 2( 46) includes land. The case of the Corooratlon as set out in the affidavit

of Shri Narendrn R. nes:ii, Town Development Officer of the Corporation is that only such urea of the land as is occupied by the underground supply lines that is valuekl. for the purposes of assessing propertv taxes. It. is stated that for the puroose of laying supply lines. the petitioner di~ trenches and lavs down bricks to serve as bedding for the supply lines, The petitioner-company, it is ur11ed1 occuoies bv means of the surply lines that area'of land which is occupied by the hedding prepared for laying down the supply lines.

Mr. Tarkunde on behalf of the petitioner-company has urge(! that under entrv 49 of the State List in the Seventh Schedule to the Constitution, th'e State Legislature is empowered to enact a law relating to taxes on lands and buildings. It is submitted that the State Legislature has no competence under the above entry to enact a law for levy· ing tax in resoect of the area occupied by the undereround supply lines. The word "land", according to the learnttl counsel, denotes the surface of the land and not the undernround strata. We are unable to accede to the above submission. Entry 49 of List II contemolat"~ a levv of tx on 1arids and buildine:s or bo'h as units. Such tax 'is directly imnosed on lands and builtline:s and bears a definite re1ation to it.

Section 129 makes provision for the levy of property tax on buiWne:s and lands. Secthn 139 merely specifies the persons who wnnM h~ "rhnqrilv resoonsibfo for the oavrrient of that tax. The word "lnd" indudPs n"t onlv th" face of the earth. but everything under nr over it. and has in its lee:al simific:itiot\ an indefinite extent upward and downward, i; vin" ri~~ to th~ maxim, Cuius eat solum ejus est uso11e ad coelum rue p, 263 72 Corpus Juris Secondum). According to Bro0ms Leg~) Maxims. 10th ed., p. 259, not only has land in its legal sie:nifir'ation at\ ind0 finite extent uowards, but in law it extends also downwards. so th'lt whatevrr is in a clirect line between the surface and the centre of the earth bv the common law belongs to the owner of the surface (not merelv the surface, but all the land do'Wn to the centre of the earth and uo to the heavens) and hence the word "land" wliinli i~ nnmP., ·"'"'"rt1liooin?Um. inclu'les. not only the face of the earth, but everything under it or over it.

In Rade on Rating, 11th ed., it is stated on page 14 :

"Bv far the largest number of persons rated are as 'occupiers of land or houses'. The word. 'land' as used in the

~50 SlJPRE\11' COURT REPORrS [!975] 3 s.c.R.

statute, must be understood in the widest possible sense : it includes not onlv the surface of the earth, but everything under it, or over it. fo Electric Telegraph Co. v. Salford Overseers( 1). Pollock,_ C. B. said :

'There is no distinction between the occupying land, by passing through a fixed point of space in the air to another fixed point, cir by passing in the same manner through land or water.

Land extends upwards as well as downward. " .....

In the cas~' of Mayor, Aldennen and Councillors of the City of Westminster & Ots. v. The Souther.n Railway Company, the Railway Assessment Authority and W. H. Smith & Son, Limited & Ors.e) c Lord Russel of K.illowen observed : .

"Subject to special enactments, people are rated as occupiers of land, land being understood as including not only the surface of the earth but all strata above or below."

There can, th1:refore, be no doubt that land in entry 49, of List H would include the underground strata.

It mav be stated that the word "land" has also been defined in clause f30) of section 2 of the Corporations Act to include land which is being built upon or is built upon or covered with water. benefits to ar:se out of land. things attached to the ea1ih or oermanentlv fastened to anvthing attached to the earth and rights created by legislative enactment over the street.

The definition is of inclusive nature and E does not exclude from its ambit the underground strata of the land.

It has been argued by Mr. Tarkunde that the right to !av down supply lines under section 12 of the Indiai,1 Electricity Act is in the nature of a statutory licence and is not •a right in land. Hence the right does not constitute land within entry 49 and is not taxable by the State legislature.

This submissiO'a is wholly misconceived because what is taxed under the Corporation Act is land. Section 139, as already mentioned earlier, merely fastens the liability and states that the person primari~ liable to pay that tax would be the actual occupier.

It is not the case of the Corporation that the right of the netitionercompany. of laying and placing electric supply lines constitutes land and •as such the petitioner-company is liable to pay property tax.

On the contrary, the liability is sou1?ht to be fastened on the petitionercompany because of the company being in occupatida of the land

whrcin electric supply Jines have been laid and placed. Section 52 of the Indian Easement Act, 1882, to which reference has been made on behalf of the petitioner-company, merely defines "Iicc; ase'" and has no bearing on the: question with which we are concerned.

It cannot, in our opinion, be doubted that the petitioner-company H is 2.i:_?~uptid~-:~-e land wherein underground supply line is laid.

!I) (]85~) 11 Ex. 181. a1 p. 186 (21 fl93ul A.C'. Sil.

ANANT JVULLS v. GUJARAT (Kha1111a, /.) 251

In England aUio a similar view was taken.

We may refer in this context to the case of The Assessment Committee of the Holywell Union & Anr. v. The Halky11 DWrict Mines Drainage Co.( 1). The Hea<lnote of this ca.c which was decided by the House of Lords. reads as under :

'Land may be ocr; upied for the purpose of and in connection with the enjoyment of an easement in such a manner as to make the person so 01.:cupying rateable to the relief of the poor .. Such a person may be rateable, though his occupation is exclusive only for certain purposes, and though the ow.ier of the soil has reserved to himself rights of possession subordinate to the paramourit right granted to the other.

The test of rateability is not whether the rights granted are corporeal or incorporeal, but whether there is an occupation-which is a question of fact.

Where in pursuance of a statute the owner of land granted to a drainage company the exclusive right of drainage through a tunnel and water-course in his land, with the right of placing works in the tunnel •and water-course, and of making other tunnels in connection therewith, reserving to himself mineral and other rights :-

Held, reversiiJg the decision of the Court of Appeal, that the statute and grant gave the company not merely an casement but possession of the tunnels and water-course, that the right reserved to the owner were subordinate to the rights granted to the comp•any, and that the company wefo de facto in occupation of the tui, mels and water-course and rateable to the poor in respect thereof."

Lord Herschell LC. in that case observed :

"Along the tunnel for a considerable distance the company have placed iron tubbing; in parts they have placed brick arches; it seems to me that in these parts they occupy land precisely in the same sense as a water company does by its pipes or a tramway compa'.1y by its rails, or a telephone company by the supports for its wires."

\ It was further observed :

"The question whether a person is an occupier or not within the rating law is •a question of fact, and docs not depend upon legal title. The person legally possessed may not occupy.

On the other hand, a person may be occupier either with or without the consent of the owner."

Lord Herschell also relied upon the case of Rex v. Chelsea Waterworks Comoany (2 ) wherein a water c-0mpany to whom the Crown granted the right .to lay down its pipes was held hy the Court of King's ·----------. (l} [1895] A.C. 117.

(~) 5 Tl. & Ad. 156.

SUPREME. COURT REPORTS [1975] 3 s.c.R.

Bench to be occupier of land nnd liable to be rated, Lord Macnaghteo in thi: above cas1~ observed :

"Now, putting aside for a moment the reservations coll tained in the d(:ed of grant, can there be any doubt as to the position of the company for rating purposes as regoards thdr

authorized works 'l The numerous cases relating to gas companies, water companies, and tramways, place the matter beyond questic1n.'' / Lord Davey observed ia the above case :

"My Lords, I agree with the learned judges in the Court of Appeal that the drainage company are not owners of the soil of the tumt.els of watecourse. But that does not seim

to me conclusive on the question of their rateabi!ity in r1s pect of their oc:cupation. The right of the company may be \lJ1 easement or incorporeal right; but the easeme1.1t may be

of such a c.haraeter as requires the occupation of land for its exercise. and confers upon the company a right to occupy land during its continuance. According to a long course of authority. the occupation of land u,1dcr such circumstances is sufficient for rating purposes, though unaccompanied by ownership of 1any portion of the soil.

The law was thus stated by Wightman J. in Reg. v. West Middlesex Waterworks(1) : In this case', says the learned Judge, 'the first question is whether the comp•any are rateable for their mains, which are laid under the surface of the highway. without my freehold or lea >chold interest in the soil thereof being vested in the company.

We think they are.

These mains are fixed capital vested in land. The company is in possession, of the mains burred in the soil. and so is de facto in possessitja of that space in the soil which the mains fill. for a our pose beneficial to itself.

The decisions are uniform in holding gas companies to be rateable in respect of their mains,

although the occupation of such mains may be de facto merely, and without any legal or eouitable estate in the land where the mains lie, by force of some statute.'•

Nothing CMcnt has been ar.gucd before us as may jl, idnce us to take a view rliffercnt from that we have arrived at and which i~ also in accord with tliC view of the House of Lords. We would, therefore. hold that the oetitioner-cornoanv is in occunation of the underground strata of the land through which 1heir electric supply lines had been laid. .

Ii has been argued bv Mr. Tarkunde that even if the petiti0',1er electricity company mav be held to be actual occnoier of the under ground space on whirh its suonlv line has been laid the petitioner company does not holrl the said soace from the Comoration. It i~ unred that the petitioner-comoany is in occuoation of that space under

a tat11tf' ::ind not from th~ Coroorqti•)n. T n orrler tn hrild that soace from the Corporation, it was essential, according to the learned 1ounsel,

r i i 1 r & E. M p. no,

ANAN'f MILLS v. GUJARAT (Khanna, /.) 253

A that there should have been some agreement between the petitionercompaay and the Corporation or that the CorpQration should have given it.~ consent for that purpose. We are unable to accede to the above submission. Clause (a) of section 139(1) of the Corporations Act fastens the liability for payment of property tax on the actual occupier of :h~ premises held immediately from the Government or from the Corporation. In order tu attract tht: liability under the <above B clause, it i:~ J"r()t :ssential that thcJ'e should have been an agreement between the actual o•; cupicr and the Government or the Corporatioh for the holding of the premises or that the holding must be with the consent of the Government or the Corporation.

The liability would accrue even if the premises vesting in the Govemment or the Corporation are occupied in pursuance of a statutory provision. The words "held immediately from the Government or from the Corporation C signify only the party in whom the premises vest which are held by the actual occupier thereof.

Contention has also been advanced by Mr. Tarkunde regarding the quantum of tax levied on aoo the extent of the land alleged to have been occupied . by the petitioner-company for the underground supply lines. This is essenti'ally a question of fact and would have to be D agitated before the authorities concerned, including the appellate authority. .

As a result of the above, we di8miss writ petitions Nos, 51, 60 to 74, 87 to 91 157, 492 to '503, 533, 534 and 583 of 1972 as also writ petitions Nos. 1866 to 1877 and 2046 of 1973 with costs. One hearing fee. We also dismiss civil appeals Nos. 489 to 513 and 752 to 755 of 1973. We accept civil a.ppeals Nos. 643 to 684 of 1973 E and civil appeals Nos. 389 to 430 of 1974 and set aside the judgment of the High Court in so far as it: has struck down section 2(1A) (i), section 406 (2) ( e), section 411 (hb) and rule 42 of the Taxatfon Rules in Schedule A to the Corporations Act. We also set aside the judgment of the High Court to the extemt it has struck-down resolutions passed by the Corporation for offici•; il years 1967-68, l 968-69, 1969- 70 and 1970-71 tlxing the rate of conservancy tax at 9 per cent in F respect of textile mills and factories. 'The writ petitions which were filed in the High Court by the respondents concerned are dismissed.

The appellants shall be entitled to their costs in these two sets of appeals.

One. hearing fee.

V.M.K.

2-423SupCl/75