MUNICIPAL CORPN. OF GREATER MUMBAIversusHARISH LAMBA OF BOMBAY, INDIAN INHABITANT & ORS.

1006                      [2019]REPORTS
                SUPREME COURT    13 S.C.R. 1006           [2019] 13 S.C.R.


 A              MUNICIPAL CORPN. OF GREATER MUMBAI
                                        v.
                        HARISH LAMBA OF BOMBAY,
                        INDIAN INHABITANT & ORS.
 B                        (Civil Appeal No.142 of 2009)
                              OCTOBER 22, 2019
             [A. M. KHANWILKAR AND AJAY RASTOGI, JJ.]
             Mumbai Municipal Corporation Act, 1888:
 C           ss. 139, 140, 141 and 169 – Water tax and water benefit tax
       – Demand of arrears – Non-payment on the ground that water
       supply was disconnected – Warrant of attachment – Writ petition –
       High Court set aside the demand holding that the tax can be levied
       only in respect of water supplied and consumed by the consumer –
       Appeal to Supreme Court – Held: Water Tax or Water Benefit Tax is
 D
       one of the components of Property Tax in terms of ss. 139, 140 and
       141 – Liability to pay such tax arises irrespective of disconnection
       of water supply/water meter, being a compulsory imposition – Such
       levy is distinct from Water Charges ascribable to s. 169 – The
       demand is also not barred by limitation – The respondent is liable
 E     to pay such tax.
             Allowing the appeal, the Court
             HELD: 1.1 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
 F     terms of Section 140 of the Mumbai Municipal Corporation Act,
       1888, in sub-section 1(a) (i) & (ii) thereof. Section 141 permits
       levy of water tax and water benefit tax concerning prescribed
       premises. The water benefit tax is determined on prescribed per
       centum of rateable value of specified premises or its capital value,
 G     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.
       [Para 18][1017-G; 1019-F; 1020-D]
             1.2 Section 169 is an enabling provision which empowers
       the standing committee to make rules for supply of water and for
 H
                                      1006
  MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OF                1007
               BOMBAY, INDIAN INHABITANT


charging for the supply of water and for any fittings, fixtures or     A
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
                                                                       B
under Section 140 of the Act. Concededly, the primary liability to
pay property tax in the form of water benefit tax is co-extensive
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          C
the Act. The levy towards property tax fructifies on fulfilment of
conditions stipulated 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.
[Para 19][1021-C-E]
                                                                       D
       1.3 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. 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        E
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. [Para
20][1021-F-H]
      1.4 However, in case of disconnection of water supply/water      F
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 communication pipes or
municipal water works to the premises concerned. [Para 21][1022-       G
A-B]
       1.5 On a bare perusal of the demand notices issued by the
appellant, 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        H
169 of the Act as such. [Para 17][1017-F]
1008            SUPREME COURT REPORTS                      [2019] 13 S.C.R.


 A            1.6 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
 B     of water supply/water meter including due to non-payment 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 water works, as the case may
       be, the liability would be to pay only water charges on the basis of
 C     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 sub-section (2) thereof. [Para 24][1024-
       D-F]
             Municipal Corporation of Greater Bombay v. M/s.
 D           Nagpal Printing Mills and Another (1988) 2 SCC 466 :
             [1988] 3 SCR 274 – distinguished.
               2. The challenge on the ground of limitation is limited to
       period prior to 10th January, 1994, i.e., between 1st October, 1993
       to 9th January, 1994. This period falls within the official year 1993-
 E     94 (from 1st April, 1993 to 31st March, 1994). In that sense, the
       amount towards property tax had become due and payable upon
       completion of official year 1993-94 i.e., 31st March, 1994. Three
       years limitation period, therefore, would have expired on 30th
       March, 1997. However, the impugned demand notice(s) have
 F     been issued on 10th January, 1997. Thus, the challenge to the
       impugned demand notice(s) being barred by limitation, is devoid
       of merits. No other averment is found in the writ petition filed
       before the High Court to reinforce the plea under consideration.
       Resultantly, the challenge to the impugned demand notice(s)
       being barred by limitation or having the effect of retrospective
 G
       tax demand, is rejected. [Para 26][1025-D-G]
             Kalyan Municipal Council and others v. Usha Paper
             Products (P) Ltd. and another (1988) 3 SCC 306 :
             [1988] 3 SCR 832; Municipal Corporation of City of
             Hubli v. Subha Rao Hanumatharao Prayag and Others
 H
  MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OF                 1009
               BOMBAY, INDIAN INHABITANT


      (1976) 4 SCC 830 : [1976] 3 SCR 883 – held                        A
      inapplicable.
      Sumer Builders v. Municipal Corporation of Greater
      Mumbai 2012 (114) BOM. L.R. 3400; State Bank of
      India v. Brihanmumbai Municipal Corporation of
      Greater Bombay and Others 2004 (4) Mh.L.J. 773 –                  B
      referred to.
       3.1 The respondents may 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       C
to the inaction or neglect of respondents in making payment;
more so 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. [Para 27][1025-H; 1026-A-B]                    D
      3.2 It would be 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         E
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.
[Para 27][1026-C-D]                                                     F

      State of Rajasthan and Another v. J.K. Synthetics Limited
      and Another (2011) 12 SCC 518 : [2011] 10 SCR 993;
      Kanoria Chemicals and Industries Ltd. and Others v.
      U.P. State Electricity Board and Others (1997) 5 SCC
      772 : [1997] 2 SCR 844 – relied on.                               G

     3.3 The impugned demand notice(s) were issued on 10th
January, 1997, when the principal tax amount had become due
and payable forthwith. The interest at the statutory rate, therefore,

                                                                        H
1010             SUPREME COURT REPORTS                      [2019] 13 S.C.R.


 A     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 21 st November, 2006, the
       interest be reckoned as aforestated. Similarly, for the period
       during pendency of special leave petition in this Court from 27 th
 B     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. [Para 28][1026-E-G]
                                Case Law Reference
 C     [1988] 3 SCR 274                distinguished           Para 6
       2012 (114) BOM. L.R. 3400 referred to                   Para 9
       [1988] 3 SCR 832                held inapplicable       Para 10
       [1976] 3 SCR 883                held inapplicable       Para 10
 D     2004 (4) Mh.L.J. 773            referred to             Para 25
       [2011] 10 SCR 993               relied on               Para 27
       [1997] 2 SCR 844                relied on               Para 27
               CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 142 of
 E     2009.
             From the Judgment and Order dated 21.11.2006 of the High Court
       of Judicature at Bombay in Writ Petition No. 1206 of 1999.
              Atul Y. Chitale, Sr. Adv., Ms. Tanvi Kakar, Mrs. Suchitra Atul
       Chitale, Advs. for the Appellant.
 F
              Anirudh Joshi, Ms. Vandana Sehgal, Hardeep Singh Anand,
       Praveen Kumar Rai, Hemal Kiritkumar Sheth (for M/S. J S Wad And
       Co.), Ashish Wad, Mrs. Jayashree Wad, Sidharth Mahajan, Ms. Sukriti
       Jaggi (for M/S. Lawyer S Knit & Co.), Advs. for the Respondents.

 G             The Judgment of the Court was delivered by
               A.M. KHANWILKAR, J.
              1. This appeal takes exception to the judgment and order dated
         st
       21 November, 2006 of the High Court of Judicature at Bombay in Writ
       Petition No.1206 of 1999, whereby the bills/demand raised by appellant
 H
  MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OF                         1011
     BOMBAY, INDIAN INHABITANT [A.M. KHANWILKAR, J.]


including towards water benefit tax and the Warrant of Attachment in            A
respect of the premises belonging to the respondents came to be
quashed and set aside being illegal.
       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,         B
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, 1-C, K.K. Marg,
Mahalaxmi, Bombay-400034, 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              C
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,   D
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 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          E
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 27th January, 1992, that his
water connection will be cut off as requested by the company. That was
finally done on 25th October, 1993. Since then, respondent No.1 is              F
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            G
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 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
                                                                                H
1012               SUPREME COURT REPORTS                        [2019] 13 S.C.R.


 A     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.
 B            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 1st October, 1993 to 30th September, 1998) aggregating
       to Rs.10,60,312/- (Rupees Ten Lakh Sixty Thousand Three Hundred
 C     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.
             5. Resultantly, on 5th August, 1998, the appellant issued Warrant
       of Attachment and levied an attachment upon the said premises and
 D     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
 E     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.

 F            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 5th August, 1998 for recovery of the amount. The
       High Court was pleased to quash and set aside the bills/demands along
       with the Warrant of Attachment dated 5th August, 1998, vide impugned
 G     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
       1
 H         (1988) 2 SCC 466
  MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OF                        1013
     BOMBAY, INDIAN INHABITANT [A.M. KHANWILKAR, J.]


measurement or estimated measurement. It concluded that as, admittedly,        A
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          B
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
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          C
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    D
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       E
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 disconnected on
25th October, 1993, the premises in question were still connected by           F
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 stop-cock. Hence, the demand raised by the appellant against
the respondents towards water benefit tax under Section 141 of the Act         G
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
                                                                               H
1014             SUPREME COURT REPORTS                       [2019] 13 S.C.R.


 A     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
       25th 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.
 B
             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
 C     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
 D     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.
 E            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
 F     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
 G     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
       2
         2012 (114) BOM. L.R. 3400
       3
         (1988) 3 SCC 306
       4
 H       (1976) 4 SCC 830
  MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OF                         1015
     BOMBAY, INDIAN INHABITANT [A.M. KHANWILKAR, J.]


Court so as to demonstrate that the demand raised by the appellant was          A
after expiry of limitation period, consequent to alteration in the assessment
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
                                                                                B
of property tax in the form of water benefit tax dues issued in January
1997 was for official year 1993-94 (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         C
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             D
water supply on 25th October, 1993, no water supply was continued to
the premises. For that very reason, it was not open for the 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            E
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        F
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         G
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 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
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1016             SUPREME COURT REPORTS                          [2019] 13 S.C.R.


 A     urged that it must be presumed that for the official year 1993-94, 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 1993-94. If the appellant had issued demand notices for the
 B     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
 C     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 for the official year
       1993-94 until January, 1997. Keeping in view the exposition in the relied
 D     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
 E     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
 F
       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 have adopted the argument
 G     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.
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  MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OF                       1017
     BOMBAY, INDIAN INHABITANT [A.M. KHANWILKAR, J.]


      15. The main issue is whether: the impugned notices can be styled       A
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 R-5 collectively).
It may be apposite to reproduce one such notice pertaining to official
year 1993-94. The same reads thus:
                                                                              B




                                                                              C




                                                                              D




                                                                              E


      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.
                                                                              F
       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.
      18. The concept of water tax and water benefit tax and that of          G
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
sub-section 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.
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1018      SUPREME COURT REPORTS                         [2019] 13 S.C.R.


 A     (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
 B     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
 C     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.
 D
       (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
 E
       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 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
 F     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
 G     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 one-eighth 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
 H     fulfilling the duties of the corporation arising under clause (k) of
       section 61 and Chapter XIV;
  MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OF                       1019
     BOMBAY, INDIAN INHABITANT [A.M. KHANWILKAR, J.]


      “Provided that, the Corporation shall not levy property tax leviable    A
      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        B
      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          C
      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
      (d) betterment charges leviable under Chapter XII-A.
      (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
                                                                              E
      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        F
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–                                     G

      (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
                                                                              H
      Commissioner has given public notice that sufficient water is
1020      SUPREME COURT REPORTS                         [2019] 13 S.C.R.


 A     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
 B     thereof vesting in, or in the occupation of, any consul de
       carriers, whether called as a consul general, consul, vice-
       consul, consular agent, pro-consul 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
 C     thereof which are used 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
 D     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.
 E     (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 -
 F     (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
 G     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).
 H
  MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OF                         1021
     BOMBAY, INDIAN INHABITANT [A.M. KHANWILKAR, J.]


      (2) A person who is charged for supply of water under clause (ii)         A
      or (iv) of sub-section (1) shall not be liable for payment of the
      water tax, but any sum payable by him and not paid when it
      becomes due 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          B
      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           C
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         D
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
co-extensive 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               E
towards property tax fructifies on fulfilment of conditions stipulated
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      F
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     G
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.
                                                                                H
1022             SUPREME COURT REPORTS                         [2019] 13 S.C.R.


 A           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 communication pipes or municipal water works to the premises
       concerned.
 B
               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
 C     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
 D     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 Act. The same in
       no manner can be construed as having been issued under Section 169 of
 E     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
 F     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
 G     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
 H           by respondent No. 1. Section 140 of the M.M.C. Act states
MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OF                     1023
   BOMBAY, INDIAN INHABITANT [A.M. KHANWILKAR, J.]


   different components of the property taxes. They are, water tax,       A
   water benefit tax, sewerage tax, sewerage benefit tax, general
   tax, education cess, street tax and betterment 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
                                                                          B
   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   C
   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
                                                                          D
   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             E
   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
                                                                          F
   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              G
   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 discharged from the premises. The
                                                                          H
1024             SUPREME COURT REPORTS                          [2019] 13 S.C.R.


 A           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
 B
             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
 C           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,
 D     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 non-payment of taxes,
       being a compulsory imposition. However, if the owner/occupant of the
 E     premises were to utilise the water supply facility made available to the
       premises through connection by means of communication pipes or
       municipal 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 sub-section
 F     (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
 G     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 Others 5. In similar
       situation, the Court had observed thus:
       5
        MANU/MH/0667/2004=2005 (1) Bom. C.R. 296, 2005 (107(1)) BOM.L.R.
 H     271, 2004 (4) Mh.L.J. 773
  MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OF                         1025
     BOMBAY, INDIAN INHABITANT [A.M. KHANWILKAR, J.]


      “7. Insofar as the first contention is concerned, there is really no      A
      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 no provision    B
      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        C
      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 10th January, 1994, i.e., between 1st October, 1993 to 9th   D
January, 1994. This period falls within the official year 1993-94 (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 1993-94 i.e., 31st March, 1994. Three years limitation period,
therefore, would have expired on 30th March, 1997. However, the                 E
impugned demand notice(s) have been issued on 10th 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
                                                                                F
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.                                                        G
        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
                                                                                H
1026                SUPREME COURT REPORTS                         [2019] 13 S.C.R.


 A     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
 B     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 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.
 C     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
 D     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.
 E            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. 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
 F
       reckoned as aforestated. Similarly, for the period during pendency of
       special leave petition in this Court from 27th 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
 G     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.

       6
           (2011) 12 SCC 518 (paragraph nos.12, 23, 41 & 42)
       7
 H         (1997) 5 SCC 772
   MUNICIPAL CORPN. OF GREATER MUMBAI v. HARISH LAMBA OF                        1027
      BOMBAY, INDIAN INHABITANT [A.M. KHANWILKAR, J.]


       29. For the view that we have taken, it is unnecessary to dilate on      A
the efficacy of the provisions contained in Water Charges Rules as
applicable at the relevant time framed under Section 169 of the Act.
     30. The appeal is allowed in the aforementioned terms. Impugned
judgment of the High Court is set aside. No order as to costs.
                                                                                B
       31. All pending applications are also disposed of in the above terms.


Kalpana K. Tripathy                                           Appeal allowed.


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                                                                                G




                                                                                H