A AHMEDABAD MANUFACTURING & CALICO PRINTING v. STATE OF GUJARAT & Ors.

. Annual letting value for the purpose of s. 12 is determined upon· and .Pursuant tq the preparation of an assessment book reliit ing to the ·p,ropertY. section under the corporation Act. . Accord ing to the asse5sment book, the annual letting value for the pur pose of levying property tax on textile mills, factories,. buildings of universities, etc., is made on the basis of a fiat ~te of a montIµy rental of Rs. 6- lOas. for the processing portion and Rs. 5-4~. for the non-processing portion, per 100 sq. foot of the floor area ·Of sttch property situated in the urban. area. Education cess is calculated on the basis of the annual letting value determined in the assessment book by applying the percentage. The details of the working of the system are 'fully. described by our brother Mitter, in his judgment in Writ Petitions Nos. 133, 156-157, 159-171; 178" 206-209, 210 and 234of·1966 decided on Feb ruary 21, 1967, where ·these mills and factories have successfully challenged the assessment boOk. . By the decision of this. Court, the floor area method of determining the annual letting value of textile factories in Ahlil.edabad has been held to be bad, · be cause the contractor's basis which is usually applied in such, cal culations was not applied and the system actually adopted was likely to lead to discrimination. The inclusion of plant and machinery has also been held to be illegal as the power of the State Legislature to tax lands and buildings does not include a power to tax plant and machinery and the powers of the Corpora tion are co-terminus with those of the State Legislature by reason of s. 127 ( 4) of the Corporation Act. It will be noticed that education cess is of three separate kinds. It is (a) a surcharge on land revenue assessed on purely agricultural lands, or (b) a surcharge on non-agricultural assess ment in respect of lands used for non-agricultural purposes or ( c > a tax on lands and buildings which do not bear land revenue. The properties in Ahmedabad are in three zones which may be described as demarcated by three concentric circles. In the inner zone are situated properties which do not bear limd revenue and no surcharge ls therefore payable in respect of lands and build ings. Properties in this zone were exempted from the payment of land revenue under s. 128 of the Bombay Land Revenue Code in Ahmedabad in common with other towns and cities in which there had been formerly a city survey. m the middle zone are situated lands which though originally agricultural lands have been diverted to non-agricultural use and the lands and buildings tax and non-agricQltural assess- therefore bear both municipal A B c D E F G AHMEDABAD MFG. co. v. GUJARAT· (Hidayatullah, I.) 599 A ment. In the outer zone are lands which are purely agricultural and they bear land revenue but no other charge. The textile mills of the petitioners are situated in the middle zone within the municipal limits of Ahmedabad and the main complaint in these cases is that by reason of their situation, these mills have to pay both the surcharge as well as the tax whereas the owners of property in the other two zones bear either a sur charge on the land revenue or a tax on the annual letting value. It is also contended that the preparation of the assessment book having been struck down by this Court in the case cited earlier by us, the tax under s. 12 is no longer leviable and s. 12 having become inoperative, the Cess Act must fall as a whole. The Cess Act does not provide for the procedure to arrive at It takes the valuation from the valuation of urban properties. the assessment book. There is, therefore, no doubt annual Jetting value or rateable value is not presently available since the decision of this Court has struck down the assessment book itself. This is conceded on behalf of the State of Gujarat. Similarly the decision of this Court. that there is no power to include the value of plant and machinery in the rateable value is binding for purposes of the Cess Act. The question is, does this make s. 12 to fail also ? In our judgment it does not. Section 12 lays down that the tax on lands and buildings situated in urban areas shall be collected at the rate of 3 % of the annual letting value (now 4.5%) where a building or land is used for the purpose of trade, commerce, industry, profession or business. This rate is applicable to the annual letting value as determined If under the Bombay Provincial Municipal Corporations Act. as a result of. the decision of this Court the assessment book needs revision or the principles on which valuation must be based have to be laid down afresh by the Legislature, the provisions of s. 12 of the Cess Act do not fail automatically. They will fasten on the new valuation when made. This cannot affect the validity of the section in the meantime. The section remains on the sta tute book to be worked into such assessment book as may here after emerge. The argument that s. 12 has failed must be rejected. The second argument that there is discrimination between properties in the middle zone and the inner zone may now be considered. Chapter X of the Bombay Land Reventie Code lands within the sites of villages, towns and cities. deals with Under s. 126, the limits of sites of villages,· towns and cities are fixed. Under s. 127, the Bombay Rent-free Estates Act 1852, the Bombay Exemptions from Land Revenue (No 1) Adt 1863 and the Bombay Exemption from Land-revenue (No. 2°) Act, 1863 h~ve been made applicable to all lands, within the limits of the stte of any town or city, in which an inquiry into titles B c D E F G H 600 SUPREME COURT REPORTS [1961] 3 S.C.R. has been made under the provisions of Bombay Act IV of 1868 A (now repealed), whi.ch had been ordinarily used for agricultural purposes only, but not to other lands. Section 128 of the Code then provides : . "s. 128 : The existing exemption from payment of land revenue of lands other than lands which have hitherto been ordinarily used for purposes of agricul· ture only, situate within the sites of towns and cities in which an inquiry into titles has been made under the provisions of Bombay Act IV of 1868 shall be conti- nued .•.....• First-if such lands are situated in any town or city where there has been in former years a survey which the State Government recognise for the purpose of this section, and are shown in the maps or other records of such survey as being held wholly or partially exempt from the pay- ment of land revenue; , · B Jll. c " D The exemption granted by s. 128 saves lands in the inner rone from the application of land revenue and the middle :zone bears the non-agricultural assessment since it does not· fall within this to non-agricultural assessment by exemption. reason of the non-agricultural use to which it is put. The outer zone being outside the limits of village sites, town or city and composed of pure agricultural land is subject to land revenue only. It is subjected The three zones are the result of the operation of different laws in rural and urban areas. Lands subjected to . city survey and assessed to property-tax are saved from the imposition of land revenue to which all lands are· normally subject. This exemp tion is a hundred years old and is based on the fact that land in the heart of the city ceases to be agricultural. Similarly lands in the outer circle are free from municipal assessment because they are outside municipal limits and do not benejit from the municipal services. They are subject to land revenue only. The middle zone comes into being because the owners and holders of agricultural lands are not content to hold land for agriculture In course of time the limits of the but divert it to other uses. municipality have to be revised and these lands are taken within the municipality which means that they begin to share municipal services. They are, therefore, assessed to municipal taxes as a return for the services rendered. Now a cess is really a tax and it is generally imposed for It is providing money for oome stated administrative purpose. E F G H AHMEDABAD MFG. co. v. GUJARAT (Hidayatullah, J,) 60 I A B c D E F G H l\nd so it is usually collected as an addition to an existing tax. here. It is made as an addition to the tax already 1evied on lands and buildings. Since lands and buildings bear· different.~ of taxes in the different zones, an attempt has been made to adiust the rates· for the different zones presumably to make the levy, equitable, regard being had I? the s1tuation R!ld advanta~· '.to be derived from the expenditure on education. No Objection has been made in the case that the tax levied in any zone is not commensurate with the advantages whkh are likely to acc!lle or that the burden has been made unduly high in any particular zone. The only objections raised are three. The first and second are (a) that flat rate is applied in calculatin,g the annual Jetting value and (b) that plant and machinery are included and buildings. . This has been corrected by the decision of our brother Mitter. The third is that the middle zone bears both the surtJharge and the tax. A doul/le imposition by itself is not offensive to Art. 14 of the Constitution unless It can be shown that the double tax in one zone as compared with the single tax in the other zones falls more heavily than the single tax. This is not attempted to be established except on the ground of fiat rate abovementioned. Since that has been struck down already and .will presumably be replaced by some more accurate and equitable valuation, we do not see any reason to interfere. The decision of our brother Mitter will lead to a readjustment of the assessment book and then only the ground that the rate of cess in the middle zone exceeds the rate in the other two zones can be considered. As at present situated it is sufficient to say that there is no discrimination because the method of calculation of cess in the three zones is diflerent. Even if, in the middle zone, the surcharge and tax have to be paid, the rates, for aught we know, may be so adjusted that the cess falls equitably on all landholders regard being had to the advantages derived from the cess and the advantages derived from the situation of the lands. . . Fin~lly there is the argument that the Cess Act, in not pro v1dmg Its own procedure of assessment and in not giving the tax-payers an opportunity for putting forward their objections by way of representation, appeal or otherwise, before the tax is finally. fixed, offends the principles of natural justice. This argu ment .1s not correct. The cess is nothing more than an addition to existing taxes. As it is a percentage of another tax the deter mination of the cess is not by an independent ass~sment. It is an arithmetical calculation based on the result of assessment ~nder other A:t or Acts. Those Acts allow the raising of objec tions and provide for appeals. It is only the result of assessment after scrutiny, objection and appeals which forms the basis for the application of a percentage. There is no need for further scrutiny, objection or appeals. Nor is the Cess Act bad because In all cases it is not self-contained in the matter of assessment. 602 SUPREME COURT REPORTS (1967] 3 S.C.R. of imposition of cesses for special administrative purposes (such as health cess, road cess, education cess, etc.) followed. Being an addition to another tax the only method possible. The legislation op. the subject of the imposi tion, levy and collection of a cess is made complete by incorpora tion of and reference to another piece of legislation. This prac tice is neither ineffective nor unconstitutional and cannot be said to be bad. lnethod B In the result we decline to issue a writ in these petitions. They will be dismissed but the costs will be . borne as incurred. G.C. Petitions dismissed.