caselaws

Supreme Court of India
Municipal Corpn.Of Greater … vs Harish Lamba Of Bombay, Indian … on 22 October, 2019Author: A.M. Khanwilkar

Bench: A.M. Khanwilkar, Hon’Ble Ms. Banerjee, Dinesh Maheshwari

1

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.142 OF 2009

Municipal Corpn. of Greater Mumbai ..…Appellant(s)

Versus

Harish Lamba of Bombay,
Indian Inhabitant & Ors. ….Respondent(s)

JUDGMENT

A.M. Khanwilkar, J.

1. This appeal takes exception to the judgment and order

dated 21st November, 2006 of the High Court of Judicature at

Bombay in Writ Petition No.1206 of 1999, whereby the

bills/demand raised by appellant including towards water

benefit tax and the Warrant of Attachment in respect of the
Signature Not Verified

Digitally signed by

stated premises belonging to the respondents came to be
DEEPAK SINGH
Date: 2019.10.22
18:20:52 IST
Reason:

quashed and set aside being illegal.
2

2. The appellant is a corporate body constituted under the

provisions of the Mumbai Municipal Corporation Act, 1888 (for

short, “1888 Act” or “the Act”) and respondent No.1 is a sole

proprietor in the business, which was carried on by him in the

name and style of Volga Frozen Foods and Ice Cream

Company, hereinafter referred to as the “said firm”. The stated

business was located at Volga House, 1­C, K.K. Marg,

Mahalaxmi, Bombay­400034, hereinafter referred to as the

“said premises”. The respondent No.2 is the landlord of

respondent No.1 in respect of the said premises. The

respondent No.3 is the tenant of respondent No.2 in respect of

the remainder area of the said building other than the area in

possession of respondent No.1. The respondent No.1’s firm

required 10 lakh gallons of water for its frozen food and ice

cream business, which was being supplied by the appellant

(under the fixed quota of 10 lakh gallons of water) till October,

1983. On 29th October, 1983, an illegal strike call was given by

the workmen in the factory of respondent No.1, due to which

the production work in the factory was suspended by the
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management. Therefore, the respondent No.1 wrote to the

appellant on 2nd February, 1987 and 15th October, 1987,

requesting to discontinue the water quota allotted and then

charge them on actual consumption basis, as they did not

require the large quantity of water any more due to shut down

of the production. Besides, a new water meter came to be

installed on 15th October, 1987. Later on, the appellant

informed respondent No.1 vide letter dated 27 th January,

1992, that his water connection will be cut off as requested by

the company. That was finally done on 25 th October, 1993.

Since then, respondent No.1 is dependent on water supply by

private water tankers.

3. Accordingly, respondent No.1 wrote to the appellant vide

letter dated 10th December, 1993 that since the water

connection to the premises has been disrupted/cut off by the

Water Department and he having paid all the dues until then

amounting to Rs.46,794/­ (Rupees Forty Six Thousand Seven

Hundred Ninety Four Only), the appellant ought to install a

new water meter. Upon receipt of this communication, the

appellant demanded a deposit of Rs.72,000/­ (Rupees Seventy
4

Two Thousand Only) for processing the request for a new

water meter. However, respondent No.1 did not pay the said

amount on the ground of financial crisis because of closure of

the factory. The respondent No.1 in turn requested the

appellant to accept the deposit amount in installments of

Rs.5,000/­ (Rupees Five Thousand Only), which request was

declined by the appellant. Therefore, there was no water

connection/meter in the premises of respondent No.1 since

25th October, 1993.

4. The appellant thereafter in 1997 started raising bills for

the period from 1st October, 1993 including towards water

benefit tax in respect of the subject premises. In January,

1997, seven bills of water tax and water benefit tax were raised

in respect of the said building (for the period from 1 st October,

1993 to 30th September, 1998) aggregating to Rs.10,60,312/­

(Rupees Ten Lakh Sixty Thousand Three Hundred Twelve

Only). The respondent No.3 paid his share of the bill in protest

but respondent No.1, on advice, refused to pay his prorata

share of the bill.
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5. Resultantly, on 5th August, 1998, the appellant issued

Warrant of Attachment and levied an attachment upon the

said premises and building for the arrears of stated tax being

property tax amounting to Rs.9,11,708/­ (Rupees Nine Lakh

Eleven Thousand Seven Hundred Eight Only) and further

penalty of Rs.1,48,503/­ (Rupees One Lakh Forty Eight

Thousand Five Hundred Three Only). Thus, the aggregate

demand was for Rs.10,60,312/­(Rupees Ten Lakh Sixty

Thousand Three Hundred Twelve Only), against respondent

No.1. Further, vide letter dated 18 th November, 1999, issued

by the Legal Department of the appellant, respondents were

informed that if the arrears of taxes were not paid, the

appellant would proceed to advertise the public auction

relating to premises occupied by respondent No.1.

6. Being aggrieved, respondent No.1 filed Writ Petition

No.1206 of 1999 before the High Court of Judicature at

Bombay to quash/set aside the bills and demand raised by the

appellant and the Warrant of Attachment dated 5 th August,

1998 for recovery of the amount. The High Court was pleased

to quash and set aside the bills/demands along with the
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Warrant of Attachment dated 5th August, 1998, vide impugned

order dated 21st November, 2006. For that, the High Court

relied upon the judgment of this Court in Municipal

Corporation of Greater Bombay Vs. M/s. Nagpal Printing

Mills and Another1. The High Court held that the corporation

can levy charge only in respect of water supplied to and

consumed by the consumer and to be levied on the basis of

measurement or estimated measurement. It concluded that

as, admittedly, supply of water to the premises was stopped

from 25th October, 1993, there was no consumption by the

respondents and hence they were not liable for any water

charge or tax, as the case may be.

7. The appellant has assailed the view so taken by the High

Court on the ground that the demand in question was towards

property tax in the form of water benefit tax and not referable

to demand under Section 169 of the Act, as such. In case of a

tax, which is ascribable to Sections 139 and 140 of the Act, it

is in the nature of a compulsory imposition or levy to be used

for general public good. Had it been a demand for charges

1 (1988) 2 SCC 466
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towards water actually consumed, it would come within the

sweep of Section 169 of the Act. In that case alone it need to

be commensurate with the quantity of water actually

consumed. If the consumer avails the water supply facility

extended by the corporation, the liability would be towards

charges in lieu of water tax, as predicated in Section 169 of

the Act and the Rules framed thereunder namely, Water

Charges Rules in force at the relevant time. In the present

case, the dispute relates to the bills raised by the appellant

towards property tax in the form of water benefit tax in respect

of the premises of respondent No.2 (Owner) and of which

respondent No.1 is the tenant.

8. It is submitted that water tax or water benefit tax is a

property tax and is determinable as a percentage of rateable

value of the land or building as prescribed in Section 154 of

the Act. Section 141 of the Act postulates that such tax shall

be levied in respect of premises (i) to which a private water

supply is furnished from OR (ii) which are connected by means

of communication pipes with any municipal water works. In

the present case, even though the water connection was
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disconnected on 25th October, 1993, the premises in question

were still connected by means of communication pipes with

the municipal water works. The term “communication pipes” is

defined in Section 260A (a) of the Act to mean a pipe extending

from a municipal water main up to and including municipal

stop­cock. Hence, the demand raised by the appellant against

the respondents towards water benefit tax under Section 141

of the Act was just and proper. It was not a recovery of charges

under Section 169 of the Act as such, which could be limited

to the quantity of consumed water. If the respondents had

continued to consume the water supplied by the appellant

through communication pipes connecting the premises in

question, they would have become liable only to pay water

charges under Section 169 of the Act, commensurate with the

quantity of water consumed in lieu of water tax or water

benefit tax. Having stopped consuming water and by the act of

cutting off the water connection on 25 th October, 1993, whilst

continuing the communication pipes connected to the

premises, the respondents became liable to pay property tax in

the form of water benefit tax under Section 141 of the Act.
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9. It is contended that the scheme of the provisions in

question and the interplay of Sections 140, 141, and 142 of

the Act on the one hand and Sections 160 and 169 on the

other hand, the Bombay High Court in its recent decision in

Sumer Builders Vs. Municipal Corporation of Greater

Mumbai2 opined that water charges recovered under Section

169 of the Act are not synonymous to the demand towards

property tax in the form of water tax or water benefit tax under

Section 141 of the Act. The appellant would adopt the

exposition in the said decision to buttress the ground urged

before this Court. It is then contended that the High Court

erroneously placed reliance upon Nagpal Printing Mills

(supra) although it was a case dealing with interpretation of

Rule III (d) (i) of the Water Charges Rules which provided for

deemed charges where a quota of water had been fixed. It is

urged that the said case was a case of water charges levied

under Section 169 (1) (ii), which has no application to the facts

of the present case.

2 2012 (114) BOM. L.R. 3400
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10. The appellant has also countered the argument

canvassed by respondent No.1 in particular to the effect that

the demand raised by the appellant was invalid being

retrospective in nature. According to the appellant, the

decision in Kalyan Municipal Council and others Vs. Usha

Paper Products (P) Ltd. and another3 as well as Municipal

Corporation of City of Hubli Vs. Subha Rao

Hanumatharao Prayag and Others4 dealt with question of

levy of property tax after alteration in the assessment list and

about the power to levy tax after authentication of the

assessment list. These decisions, according to the appellant,

have no bearing on the present case. For, the same is founded

on the singular plea taken in ground (d) of the writ petition

that the demand towards water benefit tax is for period prior

to 10th January, 1994 and is barred by limitation. However, no

material fact has been pleaded in the writ petition filed by the

respondents before the High Court so as to demonstrate that

the demand raised by the appellant was after expiry of

limitation period, consequent to alteration in the assessment
3 (1988) 3 SCC 306
4 (1976) 4 SCC 830
11

list or authentication of the assessment list, as the case may

be. No factual foundation was laid before the High Court that

the authentication of the assessment list had occurred 3

(three) years preceding the issuance of the impugned demand

notices in January 1997. Admittedly, the demand of property

tax in the form of water benefit tax dues issued in January

1997 was for official year 1993­94 (1st April, 1993 to 31st

March, 1994). For that reason, the demand raised in January,

1997 going back only upto 1st October, 1993 cannot be

considered as being barred by limitation. The appellant would,

therefore, urge that the impugned judgment be set aside and

the appellant be permitted to proceed with the enforcement of

the impugned demand notices and the Warrant of Attachment.

11. Per contra, the respondents would contend that the

demand was nothing but water charges recoverable under

Section 169 of the Act. It ought to have been commensurate to

the quantity of water supplied and consumed by the

respondents. Admittedly, after disconnection of water supply

on 25th October, 1993, no water supply was continued to the

premises. For that very reason, it was not open for the
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corporation to levy any charges, be it in the name of water tax

or water charge. It is urged that the demand is nothing but

water charges for supply of water to the premises and not in

the nature of tax. Even in case of a tax, the corporation cannot

recover the same in absence of supply of water to the

premises, which in the present case, admittedly, was

disconnected w.e.f. 25th October, 1993. It is urged that the

principle underlying the dictum in Nagpal Printing Mills

(supra) would squarely apply, as is applicable to Section 169

of the Act towards water tax.

12. It is then urged that in any case, the impugned demand

notice was barred by limitation and had the inevitable effect of

levy of property tax with retrospective effect qua the premises

in question. The respondents would invite our attention to the

term ‘official year’ defined in the Act and the interplay of

Sections 156, 160, 163, 165, 166, 168 and 169, to contend

that the Commissioner is required to prepare assessment book

for every official year and on authentication of assessment

book under Section 166 of the Act, the assessee can be made

liable to pay the property tax for such official year. Reliance is
13

placed on the decision of this Court in Municipal

Corporation of City of Hubli (supra) and Kalyan Municipal

Council (supra) to buttress this contention. It is then urged

that it must be presumed that for the official year 1993­94,

the assessment book was finalised and authenticated in due

course of official business, within prescribed time. However,

no demand followed despite finalisation of assessment book

for the concerned years in particular official year 1993­94. If

the appellant had issued demand notices for the concerned

year towards property tax in due course, the respondents

would have paid the same subject to just exceptions. In other

words, the impugned demand notices issued in January, 1997

for the period commencing from 1st October, 1993, being after

expiry of three years, are barred by limitation. The appellant

cannot be allowed to raise any demand which is inherently

barred by limitation. Resultantly, the appellant cannot be

permitted to pursue the impugned demand notices. Taking

any other view would legitimize retrospective levy, that cannot

be countenanced. As a matter of fact, it must be presumed

that the water taxes were never shown in the assessment book
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for the official year 1993­94 until January, 1997. Keeping in

view the exposition in the relied upon decisions of this Court,

the High Court order quashing the impugned demand notices

be upheld on this count alone.

13. Lastly, it is contended that even if, the respondents fail to

persuade this Court to uphold the decision of the High Court,

the Court may grant reasonable time to the respondents to

pay the dues in suitable installments. Further, the Court may

extricate the respondents from their liability to pay interest on

the outstanding dues. This is so because the respondents had

filed the writ petition before the High Court in April, 1998

immediately after receiving the impugned demand notices and

have also succeeded before the High Court. Due to reasons

beyond their control the matter had remained pending in this

Court, which delay is not attributable to the respondents. It is

urged that had the High Court rejected their writ petition, they

would have had no option but to pay the outstanding dues

long back. Taking into account these facts and circumstances,

it is urged that the respondents be absolved from the liability

of interest on the principal amount. The other respondents
15

have adopted the argument pursued on behalf of respondent

No.1.

14. We have heard Mr. Atul Y. Chitale, Senior Advocate for

the appellant and Mr. Anirudh Joshi, Advocate for the

contesting respondent (respondent No.1), Mr. Praveen Kumar

Rai, Advocate for the respondent No.2 and Mr. Ashish Wad for

the respondent No.3.

15. The main issue is whether: the impugned notices can be

styled as demand towards water charges or stricto sensu

demand towards property tax in the form of water benefit tax.

That can be answered by adverting to the impugned demand

notices (Annexure R­5 collectively). It may be apposite to

reproduce one such notice pertaining to official year 1993­94.

The same reads thus:
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16. The impugned demand notices for subsequent official

years are more or less similar except variation in the figures,

as applicable for the concerned official year.

17. On a bare perusal of these demand notices, it is amply

clear that the demand is towards property tax in the form of

water benefit tax and sewerage benefit tax. It is not a notice for

payment of water charges ascribable to Section 169 of the Act

as such.
17

18. The concept of water tax and water benefit tax and that

of water charges is qualitatively distinct. By its very nature,

the former has been made part of the property tax in terms of

Section 140 of the Act, in sub­section 1(a) (i) & (ii) thereof.

Section 140 reads thus:

“140. Property taxes leviable on rateable value, or
on capital value, as the case may be, and at what
rate.

(1) The following property taxes shall be leviable on
buildings and lands in Brihan Mumbai, namely:­

(a) (i) the water tax of so many per centum of their
rateable value, or their capital value, as the case
may be, as the Standing Committee may consider
necessary for providing water supply;

(ii) an additional water tax which shall be called
‘the water benefit tax’ of so many per centum
of their rateable value, or their capital value, as
the case may be, as the Standing Committee may
consider necessary for meeting the whole or part
of the expenditure incurred or to be incurred on
capital works for making and improving the
facilities of water supply and for maintaining and
operating such works;

Provided that all or any of the property taxes may be
imposed on a graduated scale.

(b) (i) the sewerage tax of so many per centum of their
rateable value, or their capital value, as the case may
be, as the Standing Committee may consider
necessary for collection, removal and disposal of
human waste and other wastes;

(ii) an additional sewerage tax which shall be called
the “sewerage benefit tax” of so many per centum of
18

their rateable value, or their capital value, as the case
may be, as the Standing Committee may
consider necessary for meeting the whole or a part of
the expenditure incurred or to be incurred on capital
works for making and improving facilities for the
collection, removal and disposal of human waste and
other wastes and for maintaining and operating such
works;

General tax
(c) a general tax of not less than eight and not more
than fifty per centum of their rateable value, or of not
less than 0.1 and not more than 1 per centum of their
capital value, as the case may be, together with not
less than one­eighth and not more than five per
centum of their rateable value or not less than 0.01
and not more than 0.2 per centum of their capital
value, as the case may be, added thereto in order to
provide for the expense necessary for fulfilling the
duties of the corporation arising under clause (k) of
section 61 and Chapter XIV;

“Provided that, the Corporation shall not levy property
tax leviable under this clause, on residential buildings
or residential tenements, having carpet area of 46.45
sq. meter (500 sq. feet) or less.

Explanation. – For the purposes of the above proviso,
the term “residential buildings or residential
tenements, having carpet area of 46.45 sq. meter (500
sq. feet) or less” means the residential buildings or
residential tenements, existing on the date of coming
into force of the Mumbai Municipal Corporation
(Amendment) Act, 2019, having carpet area of 46.45
sq. meter (500 sq. feet) or less and recorded with such
area in the Municipal records on the 1st January 2019
or in respect of which the permission to occupy has
been granted by the Corporation permitting such area
to be occupied after such date of coming into force of
the said Act.”.

Education cess
(ca) the education cess leviable under section 195E;
(cb) the street tax leviable under section 195G.
(d) betterment charges leviable under Chapter XII­A.
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(2) Any reference in this Act or in any instrument to a
water tax or a halalkhor tax shall after the
commencement of the Bombay Municipal Corporation
(Amendment) Ordinance, 1973, be construed as a
reference to the water tax or the water benefit tax or
both, or the sewerage tax or the sewerage benefit tax,
or both as the context may require.”

(emphasis supplied)

It may be useful to advert to Section 141, which permits levy

of water tax and water benefit tax concerning prescribed

premises. The same reads thus:

“141. Water taxes on what premises to be levied.

(1) Subject to the provisions of section 169, the water
tax shall be levied only in respect of premises–

(a) to which a private water supply is furnished
from or which are connected by means of
communication pipes with, any municipal water
works; or

(b) which are situated in a portion of Brihan
Mumbai in which the Commissioner has given public
notice that sufficient water is available from the
municipal water works for furnishing a reasonable
supply to all the premises in the said portion.

(2) Subject to the provisions of section 169, the
water benefit tax shall be levied in respect of all
premises situated in Brihan Mumbai, except the
buildings and lands or parts thereof vesting in, or
in the occupation of, any consul de carriers,
whether called as a consul general, consul, vice­
consul, consular agent, pro­consul or by any other
name of a foreign State recognised as such by the
Government of India, or of any members (not being
citizens of India) of staff of such officials, and such
buildings and lands or parts thereof which are used
20

or intended to be used for any purpose other than
for the purpose of profit.”
(emphasis supplied)

The water benefit tax is thus determined on prescribed per

centum of rateable value of specified premises or its capital

value, as the case may be. The levy of water benefit tax being a

property tax, however, has been made subject to Section 169

of the Act. Section 169 of the Act reads thus:

“169. Rules for water taxes and charges.

(1) Notwithstanding anything contained in section
128, the Standing Committee shall, from time to time,
make such rules as shall be necessary for supply of
water and for charging for the supply of water and for
any fittings, fixtures or services rendered by the
Corporation under Chapter X and shall by such rules
determine ­

(i) the charges for the supply of water by a water
tax and a water benefit tax levied under section
140 of a percentage of the rateable value or the
capital value, as the case may be, of any property
provided with a supply of water; or
(ii) a water charge in lieu of a water tax, based on a
measurement or estimated measurement of the
quantity of water supplied; or
(iii) combined charges under clauses (i) and (ii); or
(iv) a compounded charge in lieu of charges under
clauses (i) and (ii).

(2) A person who is charged for supply of water
under clause (ii) or (iv) of sub­section (1) shall not be
liable for payment of the water tax, but any sum
payable by him and not paid when it becomes due
21

shall be recoverable by the Commissioner as if it were
an arrear of property tax due.

(3) Notwithstanding anything contained in section
146, the water taxes and charges shall be primarily
recoverable from person or persons actually occupying
the premises.”
(emphasis supplied)

19. Section 169 is an enabling provision which empowers the

standing committee to make rules for supply of water and for

charging for the supply of water and for any fittings, fixtures

or services rendered by the corporation. The extent to which

such charges can be levied has been delineated in Section 169

of the Act. This provision envisages levy of charges for the

supply of water and further that if such supply materialises,

water charges be levied in lieu of a tax (water tax/water benefit

tax) prescribed under Section 140 of the Act. Concededly, the

primary liability to pay property tax in the form of water

benefit tax is co­extensive with meeting the whole or part of

the expenditure incurred or to be incurred on capital works for

making and improving the facilities of water supply and for

maintaining and operating such works, as the case may be in

terms of Sections 140 and 141 of the Act. The levy towards

property tax fructifies on fulfilment of conditions stipulated
22

therefor in Section 139 read with Sections 140 and 141 of the

Act. The extent of such levy is also predicated in Sections 140

and 141 of the Act. It is a compulsory imposition.

20. If it is a compulsory imposition, the fact that the water is

de facto utilised by the occupants or the owners of the

building becomes insignificant. It is not a tax on income where

the levy is linked to income. We are concerned with property

tax, which becomes payable in respect of specified property.

Water Tax or Water Benefit Tax, in law, is a property tax and

described by the legislature as being one of the component of

property tax. That becomes payable as soon as the

owner/occupant of the premises is in a position to avail of

water connection to his premises in the prescribed manner.

That liability is inevitable in terms of Section 141 of the Act,

even if the water supply/water meter is later on disconnected.

21. Indeed, in case of disconnection of water supply/water

meter the corporation cannot recover water charges under

Section 169 of the Act. For, the water charges can be

recovered commensurate to the quantity of water actually

supplied and consumed from the connection of
23

communication pipes or municipal water works to the

premises concerned.

22. Reverting to the view taken by the High Court, we agree

with the appellant that the High Court has palpably

misapplied the decision in Nagpal Printing Mills (supra) by

erroneously assuming that the present case was also a case of

levy of ‘water charges’ referable to Section 169 of the Act. The

High Court completely glossed over the distinction between the

concept of property tax in the form of water benefit tax on the

one hand; and water charges in respect of the quantity of

water actually consumed on the other hand. In the former

case, being a property tax, it is a compulsory imposition and

liability to pay the same accrues irrespective of the quantity of

water supplied and consumed in the premises concerned. That

liability flows from Sections 139 read with 140 and 141 of the

Act. The quantum of tax payable is specified by the standing

committee from time to time on the basis of per centum of

rateable value of premises or its capital value. The impugned

demand notices, ex facie, are ascribable to Section 141 of the
24

Act. The same in no manner can be construed as having been

issued under Section 169 of the Act.

23. Had it been a case of demand under Section 169 of the

Act, the principle stated in Nagpal Printing Mills (supra)

would have come into play. We agree with the appellant that

the decision in Nagpal Printing Mills (supra) is in reference

to interpretation of Rule (3) (d) (1) of Water Charges Rules

framed under Section 169 of the Act. The principle stated in

that decision, therefore, can have no application to a demand

notice(s) towards property tax in the form of water tax or water

benefit tax, payable in respect of the premises by virtue of

Section 139 read with Sections 140 and 141 of the Act. The

appellant has justly relied on the exposition of the High Court

of Bombay in Sumer Builders (supra), wherein the Court after

considering the interplay between the relevant provisions of

the Act, observed as follows:

“7. Conjoint reading of the above provisions and
Sections 142 and 170 is required, to understand levy
of the two taxes and charges by respondent No. 1.
Section 140 of the M.M.C. Act states different
components of the property taxes. They are, water tax,
water benefit tax, sewerage tax, sewerage benefit tax,
general tax, education cess, street tax and betterment
25

charges. The water tax/ sewerage tax and water
benefit/sewerage benefit tax are quantified by certain
per centum of the rateable value of the property on
which the property taxes are to be levied. The rateable
value of any property is to be determined under
Section 154 of the M.M.C. Act. As stated in that
provision, the factors relevant for determination of the
rateable value are (i) nature and type of land and
structure of the building, (ii) area of the land or carpet
area of the building, (iii) the different categories of use
of the property, (iv) the age of the building and (v) such
other factors as may be specified by the rules made for
the purpose. It is obvious from Section 140 that
water tax or sewerage tax payable under it, has no
connection whatsoever with the actual supply of
the services therefor. Another aspect that becomes
clear from the provision is that the
water/sewerage taxes run along with the property,
whether constructed upon or not, also whether put
to actual use or not. Even an open piece of land is
subject to property tax, the components of which
include water/sewerage tax, water
benefit/sewerage benefit tax. Sections 141 and
142, though refer to only water/sewerage taxes, as
such, make it clear that the same are subject to
the provisions of Section 169 and 170
respectively. Therefore, Sections 169 and 170, the
controlling sections would be the most relevant
provisions. They provide for rules for water/sewerage
taxes and water/sewerage charges and to determine
the charges. They empower the Standing Committee of
the Municipality to make such rules as may be
necessary for, supply and for charging for the supply
of water etc., and for supply of service of removing
human wastes, polluted matters, effluents etc.
Sections 169 and 170 provide for four modes of
payment of the charges. The first mode is by
payment of water/sewerage tax and
water/sewerage benefit tax under Section 140 by
way of a percentage of a rateable value. The second
mode is payment of water/sewerage charge in lieu
of water/sewerage tax based on measurement or
estimated measurement of the quantity of the
water supplied or of the quantity of water
26

discharged from the premises. The third mode is of
combined charges under the first two modes i.e.
partly by way of taxes and partly by way of
charges. The fourth mode is a compounded charge
in lieu of the first two modes i.e. a fixed sum to be
paid in lieu of the taxes and charges. These modes,
in particular the first and the second mode, make
it very clear that water/sewerage charges are not
synonymous with water/sewerage taxes and there
is no scope for confusing one for the other.
Therefore, I find substance in the submission of Mr.
Pakale that even if there is no water supply given to
the property for which no charges can be recovered by
the Municipality, there is no escape from payment of
water taxes/ sewerage taxes by a property owner,
which is solely dependent upon the rateable value of
the property fixed.”

(emphasis supplied)

24. Having said this, we must conclude that the High Court

misread the impugned demand notices as being under Section

169 of the Act, when in fact the same were for recovery of

property tax in the form of water benefit tax under Section 139

read with Sections 140 and 141 of the Act. The liability to pay

such tax arises irrespective of disconnection of water

supply/water meter including due to non­payment of taxes,

being a compulsory imposition. However, if the

owner/occupant of the premises were to utilise the water

supply facility made available to the premises through

connection by means of communication pipes or municipal
27

water works, as the case may be, the liability would be to pay

only water charges on the basis of the quantity of water

actually consumed, in lieu of property tax in the form of water

tax or water benefit tax by virtue of Section 169 of the Act and

in particular sub­section (2) thereof.

25. That takes us to the next plea of the respondents about

the demand for the period preceding 10th January, 1994, i.e.

1st October, 1993 to 9th January, 1994, being barred by

limitation. It is also urged that the impugned demand notices

entail in levy of taxes retrospectively. This argument has been

justly rejected by the High Court by relying on the dictum of

the same High Court in State Bank of India Vs.

Brihanmumbai Municipal Corporation of Greater Bombay

and Others5. In similar situation, the Court had observed

thus:

“7. Insofar as the first contention is concerned, there
is really no merit in the contention. The respondents
have not imposed any tax with retrospective effect. All
that the respondents have done is issuance of bills for
the period previous to the date of the bills. In other
words the bills are issued for the period for which they
are payable by sending a bill after that period. There is

5 MANU/MH/0667/2004=2005 (1) Bom. C.R. 296, 2005 (107(1)) BOM.L.R.
271, 2004 (4) Mh.L.J. 773
28

no provision either under the Act or rules by which
claim for sewerage charges/sewerage tax can be
anticipated or made in advance. That can only be done
subsequent to the charge/taxes becoming due and
payable. Retrospectivity in levying tax would mean
that a law has been enacted with retrospective effect.
That is not the case over here. All that the
respondents have done is to merely make demands for
charges which had become due prior to issuance of
the bills. That cannot be said to be levying of tax with
retrospective effect. The first contention must
therefore, be rejected.”

26. Indisputably, the challenge on the ground of limitation is

limited to period prior to 10 th January, 1994, i.e., between 1 st

October, 1993 to 9th January, 1994. This period falls within

the official year 1993­94 (from 1 st April, 1993 to 31st March,

1994). In that sense, the amount towards property tax had

become due and payable upon completion of official year

1993­94 i.e., 31st March, 1994. Three years limitation period,

therefore, would have expired on 30 th March, 1997. However,

the impugned demand notice(s) have been issued on 10 th

January, 1997. Thus, the challenge to the impugned demand

notice(s) being barred by limitation, as asseverated in ground

(d) of the memo of writ petition filed by the respondents, is

devoid of merits. No other averment is found in the writ

petition filed before the High Court to reinforce the plea under
29

consideration. In our opinion, therefore, the decisions of this

Court in Kalyan Municipal Council (supra) and Municipal

Corporation of City of Hubli (supra) will have no bearing on

the matter under consideration. Resultantly, the challenge to

the impugned demand notice(s) being barred by limitation or

having the effect of retrospective tax demand, is rejected.

27. The next question is: whether the respondents should be

called upon to pay statutory interest on the delayed payment

of principal amount stated in the impugned demand notices.

We find merits in the submission of the respondents that they

be relieved from the liability to pay statutory interest for the

period spent by them in pursuing the proceedings in good

faith before the High Court and thereafter before this Court.

Inasmuch as, time so spent is not attributable to the inaction

or neglect of respondents in making payment; moreso because

of the interim orders operating in favour of the respondents

during the pendency of writ petition before the High Court and

also because the impugned demand notices were set aside by

the High Court. As the said notices will be revived in terms of

this order, therefore, the respondents are entitled to an
30

equitable arrangement to meet the ends of justice. Somewhat

similar situation has been dealt with in State of Rajasthan

and Another Vs. J.K. Synthetics Limited and Another6 and

Kanoria Chemicals and Industries Ltd. and Others Vs.

U.P. State Electricity Board and Others7. Applying the

principle underlying these decisions, we deem it appropriate to

quantify the interest component at the rate of 18% per annum

on the outstanding principal tax amount or the statutory

interest as may have been prescribed under the extant

Regulations, whichever is less, for the period during the

pendency of writ petition and the present appeal, as the case

may be. For rest of the default period, from the date of demand

notices until payment of the outstanding amount mentioned

therein, the respondents shall be liable to pay interest at the

rate as prescribed in the extant Regulations applicable in that

regard. This would meet the ends of justice.

28. It is seen from the records that impugned demand

notice(s) were issued on 10th January, 1997, when the

principal tax amount had become due and payable forthwith.
6 (2011) 12 SCC 518 (paragraph nos.12, 23, 41 & 42)
7 (1997) 5 SCC 772
31

The interest at the statutory rate, therefore, would commence

from that date. However, for the period from the date of filing

of the writ petition on 21st April, 1999 till the judgment of the

High Court dated 21st November, 2006, the interest be

reckoned as aforestated. Similarly, for the period during

pendency of special leave petition in this Court from 27 th

August, 2007 till the pronouncement of this judgment. Except

these two periods, the rate of interest payable by the

respondents for the delayed payment would be as prescribed

in the governing Regulations. The respondents shall pay the

outstanding amounts including interest within three months

from today, failing which it will be open to the appellant­

corporation to proceed against the respondents in accordance

with law.

29. For the view that we have taken, it is unnecessary to

dilate on the efficacy of the provisions contained in Water

Charges Rules as applicable at the relevant time framed under

Section 169 of the Act.
32

30. The appeal is allowed in the aforementioned terms.

Impugned judgment of the High Court is set aside. No order as

to costs.

31. All pending applications are also disposed of in the above

terms.

……………………………..
J
(A.M. Khanwilkar)

……………………………..
J
(Ajay Rastogi)
New Delhi;
October 22, 2019.

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