Tamilnadu Warehousing v. The Commissioner, Panruti Municipality, Villupuram District

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 11.03.2008C O R A MTHE HONOURABLE Mr.JUSTICE P.JYOTHIMANIW.P.Nos.6823 & 3036 of 1999Tamilnadu Warehousing,represented by itsChairman cum Managing Director,No.100, Anna Salai,Guindy, Chennai – 600 032.... Petitioner in both the WPs.-Vs-The Commissioner,Panruti Municipality,Villupuram District.... Respondent in W.P.No.6823/99The Commissioner,Cuddalore Municipality,Cuddalore – 607 001.... Respondent in W.P.No.3036/99Prayer in writ petition No.6823 of 1999: Writ Petition filed underArticle 226 of the Constitution of India for the issuance of a Writof Certiorari calling for the records relating to the demand noticeissued by the respondent enhancing the property tax from Rs.8,442/-per annum to Rs.1,31,532/- per annum from the 2nd half year of 1987-88to 1st half year of 1993-94 and subsequently enhancing the propertytax from Rs.1,31,532/- per annum to Rs.3,71,612/- per annum witheffect from 2nd half year of 1993-94 for the petitioner's warehousingbuilding situate at Kumbakonam road, Panruti, Villupuram District andquash the same. Prayer in writ petition No.3036 of 1999: Writ Petition filed underArticle 226 of the Constitution of India for the issuance of a Writof Certiorari calling for the records relating to the letter bearingNo.A.1.12209/86 dated 31.05.1994 on the file of the Commissioner,Cuddalore Municipality, Cuddalore-607 001 the respondent herein andquash the same. For Petitioner : Mr.A.J.Abdul Razak.For Respondents : Mr.N.Subbarayalu. https://hcservices.ecourts.gov.in/hcservices/ C O M M O N O R D E RThese writ petitions are filed by the same petitioner viz.,Tamilnadu Warehousing Corporation against Cuddalore Municipality andPanruti Municipality challenging the demand made by the saidMunicipalities in respect of property tax for the year 1987-88 to1993-94 and upto 1998-99 retrospectively. Since common grounds areraised in challenging the impugned order, both these writ petitionswere heard together.2. The impugned orders which are the final notices issued by therespective municipalities, in assessing property tax for the abovesaid period, by which, the amount of tax has been enhanced fromRs.8,442/- per annum to Rs.1,31,532/- per annum in respect of PanrutiMunicipality and the Cuddalore Municipality has enhanced the propertytax from Rs.16,109/- to Rs.1,07,982/- per half year.3. The challenge is on various grounds including that theprocedure contemplated under Section 82(1) and 82(2) of the TamilNadu District Municipalities Act, 1920 which stood before the TamilNadu Amendment Act LXV of 1997 were not followed. Under Section 82,which stood before the amendment, the annual value of lands andbuildings were deemed to be the gross annual rent at which the personis expected to let on from month to month or from year to year bydeducting 10% in case of buildings from that portion of the annualrent and separate procedure has been contemplated in respect ofGovernment or Railway buildings, wherein, the annual value of thepremises is deemed to be six per cent of the total of the estimatedvalue of the land and the estimated present cost of the buildingafter deducting for depreciation a reasonable amount which is notless then 10% of such cost. 4. It is the case of the petitioner that as per G.O.Ms.No.1755dated 31.08.1968, the Government has directed that in respect ofTamilnadu Warehousing Corporation, the property tax on an annualrental value has to be fixed as per Section 82 of the Tamil NaduDistrict Municipalities Act, 1920 and that was reiteratedsubsequently by another G.O.Ms.No.1334, dated 30.06.1972. Accordingto the petitioner, while the municipalities have enhanced theproperty tax, no basis has been stated for such enhancement and theenhancement is more than eight times, which is illegal. It is alsohis further case that such enhancement giving retrospective effectfrom 1987-88 is not allowed as per law. 5. It is the further case of the petitioner that under Rule 4 ofSchedule IV of the Tamil Nadu District Municipalities Act, whichrelate to Taxation Rules, the property assessment tax has to befurnished and as and when any amendment has to be made, the same can https://hcservices.ecourts.gov.in/hcservices/ only be done after reasonable opportunity is given to the personsconcerned and according to the petitioner while making suchenhancement no such opportunity has been given as per the Rules. Itis also the further case of the petitioner that as per Rule 9-A (1)(ii) of the Taxation Rules, in the case of buildings used for non-residential purposes, the enhancement of property tax shall notexceed three hundred per centum of the property tax payableimmediately before 1st October 1987.6. It is their further case that in respect of fixing of annualvalue, as laid down in (A.I.R. 1993 SC 1507) the procedurecontemplated under Section 4 of the Tamilnadu Buildings (Lease andRent Control) Act, 1960 has to be followed. 7. The further case of the petitioner is that under Section 345of the Tamil Nadu District Municipalities Act, the period oflimitation has been prescribed for recovery of dues makes it clearthat any distraint action can be taken only for claim in respect ofthree years before the action taken and in the present case therespondent municipalities is claiming enhancement from 1987-88.8. On the other hand, it is the case of the respondentmunicipalities that the revised assessment tax has been done on thebasis of fair rent fixed under the provisions of the Tamil NaduBuildings (Lease and Rent Control) Act, 1960. It is the further caseof the respondents that in fact the municipalities have issued noticedemanding property tax stating that distraint proceedings will beinitiated. It is the admitted case of the respondents that theenhancement tax has been given effect to from 1993-94 retrospectivelyand before that the property tax was fixed at lesser amount. It isadmitted case in both the petitions that while admitting the writpetitions, this Court has directed 50% of the amount to be depositedand in fact the same has been deposited.9. Heard Mr.A.J.Abdul Razak, learned counsel appearing for thepetitioner and Mr.N.Subbarayalu, learned counsel appearing for therespondents, who reiterated the contentions raised in theirrespective affidavits.10. The Tamil Nadu District Municipalities Act, under Section82, as it stood before the Tamil Nadu Amendment Act LXV of 1997,prescribed the method of assessment of annual value undersub-section 2. Section 82 reads as follows:“Section 82. Method of assessment of property:(1) Every building shall be assessed together with itssite and other adjacent premises occupied as an appurtenancethereto unless the owner of the building is a differentperson from the owner of such site or premises.(2) The annual value of lands and buildings shall bedeemed to be the gross annual rent at which they may https://hcservices.ecourts.gov.in/hcservices/ reasonably be expected to let from month to month or fromyear to year less a deduction in the case of buildings, often per cent, of that portion of such annual rent which isattributable to the buildings alone, apart from their sitesand adjacent lands occupied as an appurtenance thereto; andthe said deduction shall be in lieu of all allowance forrepairs or on any other account whatever:Provided that--(a) in the case of (i) any Government or railway building, or(ii)any building of a class not ordinarily let thegross annual rent of which cannot, in the opinion of theexecutive authority, be estimated;the annual value of the premises shall be deemed to besix per cent, of the total of the estimated value of theland and the estimated present cost of erecting the buildingafter deducting for depreciation a reasonable amount whichshall in no case be less than ten per centum of such cost;(aa) in the case of any building in industrial estatewherein essential amenities including water-supply, drainageand lighting are not provided by the municipality butprovided by the Industrial Department of the StateGovernment or by any other authority under the control ofthe State Government, the annual value of such buildingshall be deemed to be four per cent of its capital value;Provided that if any question arises whether for thepurpose of this clause, essential amenities are provided bythe Industrial Department or other authority, it shall bedecided by such authority as may be prescribed.(b) machinery and furniture shall be excluded fromvaluations under this section.(3) The State Government shall have power to make rulesregarding the manner in which, the person or persons by whomand the intervals at which, the value of the land, thepresent cost of erecting the building and the amount to bededucted for depreciation, shall be estimated or revised, inany case or class of cases to which clause (a) or clause(aa) of the proviso to sub-section (2) applies, andthey may, by such rules, restrict or modify the applicationof the provisions contained in Schedule IV to such case orclass of cases.” 11. In the present case, it is the property of the Government andtherefore the first proviso to Section 82(2) is applicable, underwhich the annual value of the premises has to be deemed as six percent of the total of the estimated value of the land and cost ofconstruction less depreciation which shall not be less than 10% ofthe cost. Under Section 82(3), the Government has power to makerules and based on the powers conferred thereunder, the Taxation andFinance Rules have been formulated, as seen in the Schedule IV. Under https://hcservices.ecourts.gov.in/hcservices/ Rule 4 of the said Taxation Rules, the Executive Authority has tomake amendment in the assessment books. If it is in the opinion ofthe authority, the property has been inadequately assessed orinadvertently or improperly omitted from the assessment booksrelating to any tax and in such event, the amendment can be effectedand where it involves an increase in the assessment, the personconcerned shall be afforded a reasonable opportunity to show causeto the executive authority. Rule 4 reads as follows:“ Rule 4. (1) If any time it appears to the executiveauthority that any person or property has been inadequatelyassessed or inadvertently or improperly omitted from theassessment books relating at any tax, or that there is anyclerical or arithmetical error in the said books, theexecutive authority may amend the said book in such manneras it deems just or necessary.Provided that no such amendment in the said books shallbe made where it involves an increase in the assessment,unless the person concerned shall have been afforded areasonable opportunity to show cause to the executiveauthority why the assessment books should not be amended asproposed.(2) Such amendment shall be deemed to have taken effecton the earlier date, either in the current half-year or inthe two half-years immediately preceding it, on which thecircumstances justifying the amendment existed.”12. After the above said amendment to the District MunicipalitiesAct, Section 81 which empowers the levy of property tax makes itclear in sub-section 6 that in respect of such assessment, theExecutive Authority or any Officer authorised by him, has to inspect,survey and measure the land after giving due notice to the owner oroccupier before such inspection and the owner or occupier shall bebound to furnish necessary information required for such purpose.The said clause is as follows:“Section 81. Levy of Property tax:-(1) .....(2) .....(3) .....(4) .....(5) .....(6) For the purpose of assessment of property tax forany building or land in the Municipality the executiveauthority or any officer authorised by him in this behalfmay enter, inspect, survey and measure any building orland, after giving due notice to the owner or occupierbefore such inspection and the owner or occupier shall bebound to furnish necessary information required for thispurpose.” https://hcservices.ecourts.gov.in/hcservices/

13. Section 82 provides for minimum and maximum basic propertytax, to be prescribed by the State Government, which is based on thevalue of building and land and use of building. The determination ofbasic property tax, additional basic property tax is enshrined underSection 83 of the Act, wherein, it enables the municipalities toclassify the buildings into various zones apart from makingclassification based on use like residential, commercial, industrial,etc., In respect of location of the building, the said sectionprovides for classification on the basis of (A) arterial roads, bus-route roads leading to arterial roads andmain roads;(B) bus-route roads other than those specified in item (A);(C) roads and streets in primarily residential colonies.While explaining about the type of construction to be followed forthe purpose of deciding the valuation, the said provision alsoclassifies the types of construction as thatched and tiled roof,reinforced concrete cement roof, reinforced concrete cement roof withmosaic flooring etc.,14. Section 84 which is similar to the old Section 82 beforeamendment, contemplates the Executive Officer to issue property taxand also procedure to be followed in case of amendment regardingquantum of tax. The validity of the said method of valuationcontemplated under Section 82 of the Act which is synonymous to theformula under Section 4 of the Tamil Nadu Buildings (Lease and RentControl) Act, 1960 came to be decided by the Division Bench of thisCourt in Dindigul Anna District Tax Payers Sangam etc., Vs.Government of Tamil Nadu and another (1994 Writ L.R. 805). Whileupholding the validity of the provisions laid down under Section 82of the Tamil Nadu District Municipalities Act, 1920 the DivisionBench has also elaborately dealt with the manner for arriving at theannual value by relying upon the Judgment of the Hon'ble SupremeCourt in Guntur Municipal Council Vs. Rate-Payers' Association(A.I.R. 1971 S.C. 353). The Division Bench has however held that asper Rule 9 of the Taxation Rules, before making amendment theparticulars must be given to the resident, occupier as well as theowner and in that case, since such opportunity was not given beforepassing such orders, the Division Bench has directed themunicipalities to follow Rule 9 and pass fresh orders by givingparticulars to the occupiers. The operative portion of the saidJudgment is as follows:“23. Accordingly we direct the executive authoritiesof Municipalities in question to issue fresh specialnotices under Rule 9 to the assesses giving reasons for theenhancement of the property tax, for the year commencingfrom 1.10.1993. On receipt of such notices, it is open tothe members of the petitioners Sangams to file theirobjections or apply for revision of the proposedenhancement. As and when revisions are filed by the owners https://hcservices.ecourts.gov.in/hcservices/ or occupiers of properties within the prescribed time, theMunicipal Authorities shall consider the same and passappropriate orders on merits. With the above directions,these Writ Petitions are allowed. However, there will beno order as to costs.”15. While deciding about the period of limitation for the purposeof recovery of revised tax as per the Madurai City MunicipalCorporation Act, 1919, Mr.Justice P.Sathasivam, as he then was, inK.R.Santharam Vs. The Commissioner, Madurai City MunicipalCorporation (2000 (1) CTC 518) by referring to the Madurai CityMunicipal Corporation Act, 1919 which has prescribed limitationperiod as six years for assessment of tax has quashed the impugnedorder therein for assessment beyond the period contemplated under theprovisions as stated above. In the present case, it is not indispute that as per Section 345 of the Tamil Nadu DistrictMunicipalities Act, 1920 no distraint proceedings can be institutedand no suit can be instituted and no prosecution in respect of anytax after expiration of a period of three years from the date onwhich distraint might first have been made. Section 345 reads asfollows:“Section 345. Limitation for recovery of dues:- Nodistraint shall be made, no suit shall be instituted and noprosecution shall be commenced in respect of any sum due tothe municipal council under this Act after the expiration ofa period of three years from the date on which distraintmight first have been made, a suit might first have beeninstituted, or prosecution might first have been commenced,as the case may be, in respect of such sum.” 16. Therefore as per the provisions of the Tamil Nadu DistrictMunicipalities Act, the period of limitation is prescribed which iscertainly applicable to the respondents. On the basis of the abovesaid legal issue involved in this case, while referring to theimpugned notice issued by the respondents, it is clear that there wasno particular given as to how the enhancement was arrived at, thereis nothing to show that opportunity was provided to the petitionerbefore enhancing the amount of tax or for making re-assessment. Itis also seen that the enhancement is claimed retrospectively from1987-88 and 1993-94. 17. Under such circumstances, I am of the considered view that byapplying the provisions of the Tamil Nadu District Municipalities Actalong with various Judgments declaring the legal position, theimpugned notices issued by the respondent Municipalities are notsustainable and they are liable to be set aside and accordingly setaside. In view of the same, the writ petitions stands allowed with adirection to the respondent Municipalities to make assessment basedon the provisions of the Tamil Nadu District Municipalities Act, 1920by giving necessary opportunity to the parties concerned and in https://hcservices.ecourts.gov.in/hcservices/ accordance with the method prescribed under the Act subject tothe period of limitation as prescribed by the said Act. Thelearned counsel appearing for the respondents would submit that byapplying Section 345 of the Act, the municipalities are entitled torecover the amount for three years from the date of demand i.e. 1993-94. It is true that as per the said provisions of the Act, themunicipality is entitled to recover the amount from the said year andnot before. No costs.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.kkTo1. The Commissioner, Panruti Municipality, Villupuram District.2. The Commissioner, Cuddalore Municipality, Cuddalore – 607 001.+ 2 CCs to Mr.A.J.Abdul Razak, Advocate SR Nos.13365, 13364+ 1 CC To Mr.N.Subbarayalu, Advocate SR NO.13597W.P.Nos.6823 & 3036 of 1999mrd[c]o]gp/24.3.