Whether a party can challenge Validity and legality of property tax before Magistrate?

IN THE HIGH COURT OF JUDICATURE AT BOMBAY (PANAJI BENCH)

R.K. BATTA AND S.S. NIJJAR, JJ.

Shri Ketan Ranjit Maaganlal,

Vs.

Panaji Municipal Council Ors.

Letters Patent Appeal No.2 of 1998

15th October, 1999

Citation: 2000(1) ALL MR 515

BATTA, J. :- These Appeals arise out of common Judgment of the learned Single Judge, which is the subject-matter of challenge in these Appeals.

2. The brief facts common in all appeals may be enumerated first:

After the construction of the building named “Ketan Apartments”, the Municipality had issued demand notices dated 15th September 1987 levying municipal house tax for the period January 1984 to March 1988. The Appellants, who are occupants of flats in the said building, being aggrieved by such demand, had filed an appeal before the Judicial Magistrate, First class, Panji. This appeal was allowed and the Respondent No. 1 Panji Municipal Council (hereinafter referred to as ‘the Respondent’) was directed to refund the amount recovered and to further re-assess the tax, after hearing the Appellants. Consequently, the Respondent issued notices levying municipal house tax dated 14th June 1989 to the Appellants informing that the assessment relating to imposition of tax had been finalised and the Appellants were invited to inspect the list and file objections. The Appellants filed objections dated 12th July 1989. The Respondent without giving opportunity of hearing, upheld the assessment and informed the Appellants of the same vide letter dated 8th August 1989. However, by letter dated 6th September 1989, the Appellants brought to the notice of the Respondent that the Appellants were not heard and thereupon, the Respondent fixed hearing on 3rd January 1990. After giving personal hearing to the Appellants, the Chief Officer of the Respondent rejected the objections vide Order dated 10th January 1990 and bills of tax dated 10th January 1990 were issued to the Appellants. In these bills, the demand for tax was made for the period January 1984 to March 1990. The Appellants preferred appeals as under Section 164 of the Goa, Daman and Div Municipalities Act, 1968 (hereinafter called as ‘the said Act’) before the Judicial Magistrate, First Class, against the said bills. The Magistrate vide Judgment dated 29th November 1990, allowed the appeals filed by the Appellants. The Respondent preferred revision before the Sessions Judge at Panji, who dismissed the same. This is how the Respondent approached the High Court by way of a writ petition.

3. Before the learned Single Judge, three issues were agitated, namely:

(1) Scope of the appeals under Section 164 read with Section 165 of the said Act and the question posed in this regard was whether the Court of the Magistrate, while hearing the appeals, could entertain and decide the question of validity and legality of the house tax itself, or whether the inquiry in the appeals is confined to the valuation and/or assessment in dispute:

(2) Whether the bills were void on account of non-compliance of procedure contained in Section 116 of the said Act; and

(3) Whether the demand notices could be issued for recovery of municipal house tax retrospectively.

The learned Single Judge examined the scheme of Chapters IX and X of the said Act, and after placing reliance on a judgment of the Division Bench of this court in Municipal Council Morshi v. Tulsiram (AIR 1978 Bom. 92), came to the conclusion that the very validity and legality of the house tax itself could not be challenged before the Judicial Magistrate and the inquiry before the Judicial Magistrate was restricted to the challenge to the valuation and /or assessment shown in entry in the assessment list and to the quantum of sum claimed in the bill and to no other matter. On the question of non-compliance of the procedure under Section 116 of the Act, it was held by the learned Single Judge that the Respondent had issued notices dated 14th June 1989 to the Appellants to inspect the list and file their objections to the assessment list and the Appellants had filed their objections on 12th July 1989, which were duly considered by the Respondent in consultation with the authorised Valuation Officer. Regarding the question of recovery of tax retrospectively, it was held, after placing reliance on the Judgments of the Apex Court, that the tax could not be recovered retrospectively and the tax which could be recovered would be in relation to the financial year during which the list is duly authenticated. Accordingly, the recovery notices prior to the financial year 1990-1991 were quashed. The Writ Petitions were disposed of in the aforesaid terms.

4. Though the learned Single Judge has referred to the various provisions contained in Chapter IX and X in greater detail in the impugned Judgment, yet it is necessary to refer to some of the relevant provisions. Section 101 of the Act provides for imposition of compulsory taxes, which interalia includes consolidated property tax on buildings based on their rateable value as determined in accordance with Section 110 of the said Act. Section 107 of the Act provides for local publication of bye-laws relating to taxes. Section 109 as it stood at the relevant time provided for appointment of authorised Valuation Officer. It provided that the Government may, by notification in the official Gazette, appoint such officers including those of Public Works Department of the Government to be authorised Valuation Officers for the purposes of the said Act. It further provided that till such time as an authorised Valuation Officer is appointed for any municipal area, the powers conferred and duties imposed by or under the said Act on such officer shall in that area be exercised and performed by the Standing Committee. Section 110 provides for determination of rateable value. Section 111 speaks of preparation of assessment list. Section113 provides for checking of assessment list by authorised Valuation Officer. Section 114 provides for publication of notice of assessment list. Section 115 provides for public notice of time fixed for lodging objections and reads as under:

” 115. PUBLIC NOTICE OF TIME FIXED FOR LODGING OBJECTIONS

(1) The Chief Officer shall, at the time of the publication of the assessment list under the last preceding section, give public notice of a date not less than thirty days, after such publication, before which objections to the valuation or assessment in such list shall be made; and in all cases in which any property is for the first time assessed or the assessment is increased, he shall also give notice thereof to the owner or occupier of the property if known, and if the owner occupier of the property is not known, he shall affix the notice in a conspicuous position on the property.

(2) Objections to the valuation and assessment on any property in such list shall, if the owner or occupier of such property desires to make an objection, be made by such owner or occupier or any agent of such owner or occupier to the Chief Officer before the time fixed in the aforesaid public notice, by application in witting, stating the grounds on which the valuation or assessment is disputed; all applications so made shall be registered in a book to be kept by the chief officer for the purpose.”

It provides interalia for assessment of property for the purpose of tax for the first time or when the assessment is increased. It contemplates notice to the owner or occupier of the property. Sub-section (2) of Section 115 provides for filing of objections to the valuation and assessment of any property in such list. Section 116 speaks of how the objections are to be dealt with. Section 117 provides for authentication of list of assessment and reads as under:

” 117. AUTHENTICATION OF LIST OF ASSESSMENT

(1) The list so finally made by the authorised Valuation Officer shall be authenticated by him under the seal of his office and his signature and he shall endorse a certificate thereon that no valid objection has been made to the valuation and assessment contained in the list, except in cases in which amendments have been made therein.

(2) The list so authenticated shall be deposited in the municipal office, and shall there be open for inspection during office hours to all owners and occupiers of property entered therein or to the agents of such persons, and a notice that it is so open shall be forthwith published.”

Section 118 provides for conclusiveness of the authentic list. Section 119 speaks of amendments of the assessment list and provides for contingencies where construction has been altered, additions to construction are made or re-construction has been completed after preparation of assessment list, or for inclusion of the newly constructed buildings after the preparation of the assessment list. Sub-section (2) of Section 119 provides for objections to be filed by interested persons in the manner provided under Section 115 and such objections shall be dealt with in all respects as if it were an application under the said Section. Section 164 provides for appeals to Magistrates against any claim for taxes or other dues included in a bill presented under Section 145 of the Act or any other provisions of the Act. Section 165 deals with procedure in the appeals. It provides;

“165. PROCEDURE IN APPEAL

No appeal under the last preceding section shall be entertained unless:

(a) the appeal is brought within fifteen days next after the presentation of the bill complained of; and

(b) an application in writing stating the grounds on which the claim of the Council is disputed, has been made to the Council in the case of a tax on buildings or lands or both within the time fixed in the notice given under section 115 or 119 of the assessment or alteration thereof, according to which the bill is prepared; and

(c) the amount claimed from the appellant has been deposited by him in the municipal office.”

A revision is provided under Section 166 against the decision of the Magistrate before the Court to which appeals against the orders of the Magistrates lie. Section 167 provides for bar of other proceedings and lays down that no objection shall be taken to any valuation assessment or levy nor shall the liability of any person to be assessed or taxed be questioned, in any other manner or by any other authority than is provided in the said Act.

5. The learned Advocate for the Appellants has substantially relied upon the Judgment of the learned Single Judge in Dagdabai Manakchand v. Municipal Council, Aurangabad (1982 Mah. L.J. 866) in support of his submission that the legality and validity of the assessment can be challenged before the Magistrate and the challenge cannot be restricted or confined to quantum of taxes alone. The learned Single Judge has, in the impugned Judgment, distinguished this authority and has come to the conclusion that it is not applicable to the facts and circumstances of the case. The learned Single Judge has also come to the conclusion that the judgment of the Apex Court in Bata Shoe Co. v. Jabalpur Municipality (AIR 1977 SC 955) was given in the context of the law and facts and circumstances of the matters under consideration. The learned Single Judge has, on the other hand, relied upon a Division Bench judgment of this Court in Municipal Council Morshi v. Tulsiram (supra), which in turn, relies upon an earlier Division Bench judgment in Municipality of Ankleshwar v. Chhotalal (1955) 57 Bom. L.R.547.

6. Section 115 of the said Act provides for the objections which can be filed by the party aggrieved in relation to the assessment list. Sub-section (2) of Section 115 restricts the objections which can be raised by the aggrieved party to the valuation and assessment. It does not provide that levy of tax, its validity or legality can be challenged thereunder. The aggrieved party is required to state the grounds on which the valuation or assessment is disputed. Section 119, which speaks of objections against amendment of assessment list, also provides that an objection made by any person thereunder shall be filed before the time fixed in the notice and in the manner provided by Section 115 and the same shall be dealt with in all respects as if it were an application under the said Section. Section 164 provides for appeals to Magistrates against any claim for taxes or other dues included in a bill presented to any person under Section 145 or any other provisions of the Act to be made to Judicial Magistrate. Section 165 provides that no appeal under Section 164 shall be entertained unless the appeal is brought within fifteen days next after the presentation of the bill complained of and an application in writing stating the grounds on which the claim of the Council is disputed, has been made to the Council in the case of tax on building or land, or both, within the time prescribed in the notice under Section 115 or 119 of the assessment or alteration thereof, according to which the bill is prepared, and that the amount claimed has been deposited by the appellant in the municipal office. The aforesaid provisions thus clearly restrict the scope of the appeal before the Judicial Magistrate and the scope of the appeal is restricted to valuation and assessment alone. The filing of written objections, which are restricted to the valuation and assessment under Section 115(2) is condition precedent for entertaining an appeal under Section 165 of the said Act. The learned Single Judge in Dagdabai Manakchand v. Municipal Council, Aurangabad (supra) has not considered the relevant corresponding provisions of the Maharashtra Municipalities Act, which are pari materia to the provision involved in these Appeals. The corresponding provisions under the Maharashtra Municipalities Act, 1965 are Sections 119, 123 and 170. The learned Single Judge in the case of Dagdabai Manakchand v. Municipal Council, Aurangabad (Supra) had taken into consideration only the provisions of Section 169 and 172 of the Maharashtra Municipalities Act while coming to the conclusion that the challenge before the Magistrate could extend to validity or legality of assessment. Reliance was placed by the learned Single Judge in the said case on a judgment of the Apex Court in Bata Shoe co. Ltd. v. Jabalpur Corporation (AIR 1977 SC 955). In the case before the Apex Court, the question which was directly and substantially in issue was whether the civil suit under Section 9 of Civil Procedure Code was barred in view of the provisions contained in Section 84 (3) of the C.P. Berar Municipalities Act, 1922. The question of the scope of appeal before the Magistrate was not directly in issue before the Apex Court. The Apex Court in the context and in view of Section 84(3) had come to the conclusion that common remedy of a suit stood necessarily excluded and the same could not be availed of by a person aggrieved by an order of assessment of octori duty. The reliance placed by the learned Single Judge in Dagadabai Manakchand v. Municipal Council, Aurangabad (supra)on the judgment of the Apex Court was totally misplaced and on that basis it was not possible to arrive at a conclusion that the scope of appeal before the Judicial Magistrate would include challenge as regards the validity or legality of the assessment. In this view of the matter, the learned Single Judge in Dagdabai Manakchand v. Municipal Council, Aurangabad (supra) was not right when he held that the law laid down by the Division Bench in Municipal Council Morshi v. Tulsiram (supra) was no longer good law. In our opinion, the matter in question before the learned Single Judge was squarely covered by the Division Bench judgment of this Court in Municipal Council Morshi V. Tulsiram (Supra), which in turn, had relied upon an earlier Division Bench judgment in Municipality of Ankaleshwar v. Chhotalal Ghelabhai Gandhi (Supra). The question which was referred to the Division Bench was as to the scope of appeal under Section 169 of the Maharashtra Municipalities Act as well as interpretation of Section 170 (b) and Section 172 of the Act. In the said judgment before the Division Bench, the question as to the scope of the appeal was dealt with reference to various provisions of the Maharashtra Municipalities Act, which provisions are parimateria with reference to the provision of the said Act involved in these Appeals. The Division Bench, after analysing the Provision and various relevant aspects, had come to the conclusion that in an appeal under Section 169 of the Maharashtra Municipalities Act, 1965 (which corresponds to Section 164 of the said Act), it is not open to an assessee to challenge the legality or validity of the tax itself. The position was further illustrated with reference to Section 170 and the argument that the provisions of Section 169 of the Maharashtra Municipalities Act should be construed in the light of the provisions of Section 172 of the Maharashtra Municipalities Act was rejected and it was held that it would not be proper course for construing the scope of appeal under Section 169 of the Maharashtra Municipalities Act as the purpose and scope of Section 172 of the Maharashtra Municipalities Act was entirely different and distinct. With reference to Section 170 of Maharashtra Municipalities Act, it was observed:

“This position becomes further clear from the provisions of S. 170 of the Act itself. Under S. 10 no appeal against any claim for taxes or other dues can be entertained by a Court unless the appeal is brought within 15 days next after the presentation of the bill complained of an application in writing stating the grounds on which the claim of the Council is disputed has been made to the Council in the case of a tax on buildings or lands or both within the time fixed in the notice given under S. 119 or S. 123 of the assessment or alteration thereof, according to which the bill is prepared. Section 119 of the Act does not deal with the imposition of the tax itself. The question of imposition of tax is dealt with by Ss. 105 and 108 of the Act. From the various provisions of the Act, including Ss. 105, 106, 108,109,119,145, 332 and 346 (1), it is quite obvious that the word “levy” is used by the Legislature as distinct from the imposition of the tax itself. Therefore, by giving an extended meaning to the said word, it is not possible for us to widen the scope of an appeal provided by S. 169 of the Act.”

7. The learned Judge in the impugned Judgment has, rightly relied upon the said judgment of the Division Bench. We are in respectful agreement with the views expressed by the Division Bench and hold that in an appeal under Section 164 of the said Act, it is not open to the assessees to challenge the legality or validity of the tax itself.

8. In fact, the learned Advocate for the Appellants had, at a later stage, during the course of arguments, stated that the Appellants do not challenge the validity and legality of tax qua the said Act, that the policy to levy taxes cannot be challenged; that right to tax is not disputed, but his contention is that the bill in question is illegal, since the mandatory provisions of Section 116 of the Act have not been complied with. Therefore, we shall now pass on to the submission of the learned Advocate for the Appellants in this behalf.

9. The Appellants had filed objections to the assessment list under Section 115 of the Act. These objections are required to be dealt with under Section 116 of the said Act, which reads as under:-

“116. OBJECTION HOW TO BE DEALT WITH.

After the period given in the public notice referred to in section 114 expires the Chief Officer shall forward to the authorised Valuation Officer for the municipal area, the assessment list along with objections received. The authorised Valuation Officer shall investigate and dispose of the objections after allowing the objector an opportunity of being heard in person or by agent and cause the result thereof to be noted in the book kept under the last preceding section and cause any amendment necessary in accordance with such result to be made in the assessment list:

Provided that before any such amendment is made, the reasons therefor shall be recorded in the book aforesaid.”

10. We have already pointed out that Section 109 contemplates appointment of authorised Valuation Officer and at the relevant time sub-section (3) of Section 109 provided that till such time as an authorised Valuation Officer is appointed for any municipal area, the powers conferred and duties imposed by or under the said Act on such officer shall in that area be exercised and performed by the Standing Committee. Admittedly, the objections filed by the Appellants under Section 115 were not dealt with by the authorised Valuation Officer in terms of Section 116. The objections were examined and overruled by the Chief Officer. There is a distinct purpose as to why the objections are required to be dealt with by authorised Valuation Officer who is qualified for the said purpose in assessment of valuation of the properties in respect of which assessment list is prepared. In section 116 of the Act, there is a mandate to the Chief Officer that he shall forward the assessment list along with objections received under Section 115 to the authorised Valuation Officer. On receipt of such papers, the authorised Valuation Officer is required to investigate and dispose of the objections after allowing the objector an opportunity of being heard in person or by agent and cause the result thereof to be noted in the book kept under the last preceding section and cause any amendment necessary in accordance with such result to be made in the assessment list. The proviso lays down that before any such amendment is made, the reasons therefor shall be recorded in the book aforesaid. This procedure has been given complete go-by by the Respondent and the objections of the Appellants were overruled by the Chief Officer himself, which is not permissible under the said Act. When there is a challenge to the procedure regarding levy of tax or assessment for purpose of property tax, it amounts to challenge to assessment itself falling within the scope and ambit of Section 115 of the said Act. Therefore, we are of the view that the matter in relation to the examination of objections raised by the Appellants shall have to be remanded back to the Respondent so that the procedure contained under Section 116 of the said Act is followed.

11. Insofar as the question of recovery of house tax retrospectively is concerned, it is now well settled law that the authentication must be made within the financial year and the recovery can be made only with reference to the financial year during which the authentication has been done. Nevertheless, in the case under consideration, the authentication of the list was done by the Respondent on 10th January 1990, which authentication was successfully challenged by the Appellants before the Magistrate. However, in view of the fact that the matter is being remanded for considering objections raised by the Appellants in accordance with law under Section 116 of the said Act, we are of the opinion that if any authentication is done in pursuance of this Order, this authentication shall be deemed to be authentication for the financial year 1989 – 1990 and once the said authentication is done, the attack on the ground of retrospectivity with reference to the Order passed afresh in accordance with directions in this Order, shall not be open for challenge thereafter.

12. In view of the above, the Order of the learned Single Judge that in an appeal under Section 164 the legality and validity of the tax cannot be challenged is upheld and the challenge in such appeal shall be restricted to the question of valuation and/or assessment alone. The order of the learned single Judge in respect of the retrospective realisation of the house tax would stand modified so that recovery for the years prior to 1989 -1990 on the basis of the assessment list shall not be legal. The matters as we have already stated, stand remanded to the Respondent to consider the objections filed by the appellants under Section 115 in accordance with Section 116 of the said Act in the light of the observation made in this Order. Accordingly, the letters Patent Appeals are disposed of in the aforesaid terms. In the facts and circumstances, there shall be no order as to costs.

Appeals disposed of accordingly.

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