Municipal Rate Payers Association Vs. State of Andhra Pradesh and ors. - Court Judgment

Motilal B. Naik, J

1. In allthese writ petitions the controversy involvedis about the assessment of property tax of the buildings located in the limits of different municipalities in the State of Andhra Pradesh.

2. Few petitioners have sought a mandamus declaring the rules framed under G.O. Ms. No. 438, dated 29-10-1990 and the notification dated 8-2-2002 and the final Notification No. 30/02 dated 1-3-2002 as illegal, arbitrary and ultra vires the provisions of the A.P. Municipalities Act and violate of the rights of the citizens guaranteed under Articles 14 and 300A of the Constitution of India.

3. Few of the petitioners have sought a direction by calling for the records relating to and in connection with G.O. Ms. No. 167, MA., dated 18-4-2002 issued by the Government of Andhra Pradesh and also sought to set aside the same as being violative of Part IX-A of the Constitution of India and Articles 14, 19, 300A of the Constitution of India and Chapter I of Part IV of the A.P. Municipalities Act.

4. In another set of writ petitions, a writ of mandamus is sought declaring the notification issued in Form-B whereunder enhanced property tax is sought to be collected with effect from 1-4-2002 as illegal, arbitrary and violative of Sections 81 and 87 of the A.P. Municipalities Act and the rules made thereunder and contrary to the resolutions passed by the Municipal Councils of respective municipalities.

5. As indicated by us, though the common relief relates to the assessment of property tax for the building located in the limits of different municipalities, few of the writ petitioners have chosen to challenge the rules made under G.O. Ms. No. 438, dated 29-10-1990 by the Municipal Administration, Urban Development Department, Government of Andhra Pradesh and few of them sought to challenge the Government Order putting a limit on theassessment of tax on the ground that it is violative of constitutional provisions under Part DC-A of the Constitution of India and other writ petitioners have sought to question the enhancement of property tax on the ground of unsustainability, they are disposed of by the following common order.

6. On behalf of the writ petitioners in all these writ petitions we have heard Sri C. Kodandaram, learned Counsel for the petitioner in WP No. 5307 of 2002 and few other writ petitions; Sri T. Jagadish, learned Counsel for the petitioners in WP Nos.12324 and 12279 of 2002, Sri K.V. Chalapathi Rao, learned Counsel for the petitioners in WP No. 21951 of 1997 and WP No. 5757 of 2002 and Sri K.N. Jwala learned Counsel for the petitioner in WP No. 14871 of 2002. We have also heard other learned Counsel appearing on behalf of other writ petitioners, who mainly supported the submissions made by Sri Kondandaram, Sri Jagadish, Sri Chalapathi Rao and Sri K.N. Jwala, learned Counsel.

7. The gist of the submissions made on behalf of the writ petitioners could be stated as under:

8. According to the learned Counsel, when a mode is provided for assessing the property tax and when it is not followed, it is either abusive of powers or ultra vires the powers. It is mainly contended that through 74th constitutional amendment, Parliament, laying emphasis of self-government, inserted Article 243-P to 243-ZG to the Constitution under Part IX-A, which will go a long way in making the local bodies independent. The learned Counsel stated that the action of the State Government issuing G.O. Ms. No. 154, dated 8-4-2002 and G.O. Ms. No. 167, dated 18-4-2002 is a fraud on the Constitution. It is also submitted that the powers to make rules by the State Government is traceableto Section 326 of the A.P. Municipalities Act (for brevity 'the Act'), but such powers may not fall within the ambit of Article 243-X of the Constitution of India and as such any order issued invoking power under Section 326 of the Act is ultra vires the provisions of Part IX-A of the Constitution of India. Apart from these submissions, all the learned Counsel tried to urge before this Court that determination of property tax wherever it is proposed under Section 81 of the Act, levy of tax shall be preceded by a resolution by the Municipal Council and without there being any resolution by the Municipal Council, the Commissioner could not have determined the property tax on irrational basis and pleaded that on this ground alone the property taxes determined by the respective Commissioners of Municipalities have to be set at naught.

9. In support of their contentions, the learned Counsel have drawn our attention to' the taxation provisions appearing in A.P. Municipalities Act from Sections 81 to 124 and the rules made thereunder and the A.P. Municipalities (Assessment of Taxes) Rules, 1990. It is submitted in one voice by all the learned Counsel that creating divisions of Municipalities into Zones for the purpose of assessment of tax is impermissible, inasmuch as, property tax is' to be determined against each property and as such individual assessment has to be made against each property and that determination of property tax on sample basis is impermissible. Lastly it is submitted by the learned Counsel that steep rise in the property tax in some cases is 300 to 400% and therefore, pleaded that such steep rise in the property tax is causing hardship to the individuals and therefore, petitioners seek appropriate direction as prayed for.

10. On behalf of the State Government, which is one of the respondentsin the writ petitions along with the concerned Commissioners of Municipalities, the learned Advocate-General elaborated the submissions meeting the objections raised on behalf of the writ petitioners. The learned Advocate-General submitted that in order to determine property tax the Municipal Authorities have to follow several methods as provided under the scheme of the Act provided under Sections 81 to 124 and the rules made thereunder. He further submitted that the Municipal Council is only entitled to fix the rate at which property tax is to be levied on the basis of the rateable value ascertained by the Commissioner, who is competent to do so. According to the learned Advocate- General, the issue raised in these writ petitions has already been settled by a Division Bench of this Court in WP No. 15002 and batch, dated 29-12-1994 in SBH Co-operative Bank Officers Welfare Association, Hyderabad and Ors. v. Government of Andhra Pradesh, represented by its Chief Secretary, General Administrative Department, Hyderabad and Ors., : 1997(2)ALT62 (DB), wherein the Division Bench held as under:

'1. The power for determination of the rateable value of the building and the property-tax belongs to the Commissioner, which cannot be fettered by rules framed under the Acts.

2. The Committee constituted by the Government has no role to play and the Commissioner is not bound by their recommendations.

3. The annual rental value to be fixed by the Commissioner in the Corporation areas shall be limited to the fair rent either determined or determinable under the A.P. Buildings (Lease, Rent and Eviction) Control Act.

4. Subject to the maximum as above the Commissioner may fix a lesser annual rental value keeping in consideration the factors as provided for in Section 212 of the Corporations Act.

5. The annual rental value in respect of all buildings in municipal areas, where rent has been determined under the rent control legislation, would be the gross annual rental on the basis of such rent determined unless there is any fraud or collusion and that in respect of other buildings in the municipality areas, the Commissioner has to determine the amount keeping in consideration the factors under Section 87(2).

6. In determining the annual rental value the Commissioner may resort to plinth area method so as to serve him as a basis and guide but it will be open to the assessees to contest the annual rental value, rateable value or property-tax determined in respect of their buildings and when objections are raised, the Commissioner has to decide those objectively without fettering his discretion because of the determination already made on the basis of the plinth area method.

7. Rules 3 to 7 of the Corporation and the Municipal Rules are to be read only as enabling provisions for the Commissioner to aid him in discharge of his functions under the Corporation or the Municipal Act to arrive at working figures for the purpose of determination but not as fettering his discretion in the matter as conferred upon him under the statutes.

8. The Form-A publications already made would be deemed to have been issued by the Commissioner only on such basis as is stated above and not in pursuance of recommendations of the Committee.

9. Before Form-B is issued in respect of the buildings and lands, the Commissioner shall afford opportunity to the assessees to object to the determinations made and shall decide the objections on considerations as directed above and provisions of Sections 214 to 225 of the Corporations Act shall be scrupulously followed subject to the provisions of appeal.

Some argument was purported to be advanced, regarding the proviso to Section 269(2) as regards levy of penalty for non-payment of property-tax levied. Since the question has not yet arisen, as no tax has been yet levied, the question is left open.'

11. The matter was then carried to the Hon'ble Supreme Court by one of the Commissioners of Municipalities in Civil Appeal No. 4052 of 1996 with Nos.4057-88 of 1996 in Commissioner v. Griha Yajamanula Samakhya and Ors., : [2001]3SCR392 , and the Hon'ble Supreme Court decided the issue on 2-5-2001 in the above appeals affirming the decision of the Division Bench of this Court (supra), however the findings of the Division Bench of this Court on points (3) and (5) were set aside.

12. Thus according to the learned Advocate-General, the controversy with regard to the powers of the Commissioner and the procedure to be followed for determination of property-tax both in the municipal areas and corporation areas has already been settled by the Hon'ble Supreme Court in decision (supra) and therefore, it is not open to the learned Counsel for the writ petitioners to re-agitate on the settled issues. It also submitted by the learned Advocate-General that the Government of Andhra Pradesh has now issued two G.Os viz., G.O. Ms. No. 154, dated 8-4-2002 and G.O. Ms. No. 167, dated 18-4-2002 wherethrough the Government of A.P. after considering the representations made by various Rate-Payers Associations throughout the State about the abnormal increase in the property taxes, directed all the Municipalities to restrict the increase in the quantum of tax to 75% of the existing tax as on 31-3-2002 in respect of Buildings used for residential purpose and further restricted increase in the quantum of tax to 100% and 150% on the existing tax as on 31-3-2002 in respect of Building used for non-residential purpose which are more than twenty five years old and less than twenty five years old respectively. According to the learned Advocate-General, these G.Os.are issued by the Government of Andhra Pradesh in exercise of powers conferred on it under Section 326 and Sub-section (2) of Section 87 of the A.P. Municipalities Act, 1965 with an intention to lessen the hardship faced by the owners of the properties. He further submitted that in view of the decision taken by the Government of Andhra Pradesh in the above two G.Os. the petitioners need not have any grievances at all and prayed this Court for dismissal of all the writ petitions. It is also submitted that the action of the State Government is consistent with the constitutional spirit and cannot be held to be ultra vires to the provisions of the Constitution.

13. Before we proceed to examine the submissions made on behalf of the writ petitioners in the light of the submissions made by the learned Advocate-General, we desire to address the issue raised by Sri T. Jagadish, learned Counsel for the petitioners in WP Nos. 12324 and 12279 of 2002, in the first instance. According to the learned Counsel, though power to make rules is traceable to Section 326 of the Act, in view of the 74th amendment, Part IX-A, was inserted to the Constitution of India and that the levy and collection of tax fall within the ambit of Article 243-X of the Constitution of India and no authority is vested in the Government to issue directions or frame rules invoking the rule making powers. In the light of these submissions, we shall now examine the provisions of Part IX-A of the Constitution of India and see whether the provisions of Section 326 of the A.P. Municipalities Act, 1965 are repugnant to the provisions under Article 243-P to 243-ZG.

14. Article 243-P deals with definitions. Article 243-Q deals with the constitution of Municipalities. Article 243R deals with composition of Municipalities. Article 243-S deals with constitution and composition ofWards Committees etc. Article 243-T deals with reservation of seats for several classes of citizens. Article 243-U deals with duration of Municipalities etc. Article 243-V deals with disqualifications for membership. Article 243-W deals with powers, authority and responsibility of Municipalities etc.

15. Here we are primarily concerned with Article 243-X, which deals with power to impose taxes by, and Funds of, the Municipalities. Article 243-X reads as under:

''Article 243-X : The Legislature of a State may, by law,--

(a) authorise a Municipality to levy, collect and appropriate such taxes, duties, tolls and fees in accordance with such procedure and subject to such limits;

(b) assigns to a Municipality such taxes, duties, tolls, and fees levied and collected by the State Government for such purposes and subject to such conditions and limits;

(c) provide for making such grants-in-aid to the Municipalities from the Consolidated Fund of the State; and

(d) provide for constitution of such funds for crediting all moneys received, respectively, by or on behalf of the Municipalities and also for the withdrawal of such moneys therefrom,

as may be specified in the law.'

16. Thus the provisions of Article 243-X empowers the Legislature of the State to make law authorizing the Municipalities to levy tax. The learned Counsel for the petitioners submitted that the 74th amendment brought to the Constitution of India envisaged the local bodies shall be self-governed and shall be entitled to raise funds for their self-governance by way of levying taxes etc. In other words according to the learned Counsel, the constitutional object is to give autonomous power to local bodies withoutthere being any interference by the State Authority.

17. The two G.Os viz., G.O. Ms. No. 154, dated 8-4-2002 and G.O. Ms. No. 164, dated 18-4-2002 are issued by the State Government invoking powers under Section 326(2) of the A.P. Municipalities Act, 1965, which according to the learned Counsel is contrary to the constitutional scheme and offends Article 243-X of the Constitution of India. Elaborating further on this aspect, the learned Counsel drew our attention to Sub-section (3) of Section 86 of the Act. Section 86 of the Act deals with levy of property tax on a direction by Government. Sub-section (3) of Section 86 further creates an obligation on the Council not to alter the rate at which the property tax or any class of such tax is levied in pursuance of an order under Sub-section (1) or abolish such tax except with the previous sanction of the Government. It is stated by the learned Counsel, this power under Section 86 is taken away by 74th amendment brought to the Constitution of India through Article 243-X and are redundant. The learned Counsel drew our attention to Section 81(2), which provides that any resolution of a Council abolishing an existing tax or reducing the rate at which tax is levied shall be immediately reported to the Government; and in Municipalities which have an outstanding loan either from the Government or from the public or from any banking, insurance or financial corporation or from any other local authority, such abolition or reducation shall not be carried into effect without the sanction of the Government, and submitted that as required under the said provision, in case of any reduction, the Council need not send a report to the Government and seek its permission in view of the provisions of Article 243-X of the Constitution of India, which empowers the Council to decide the matter, which is best suited for their respective Municipalities.

18. To meet this submission we may immediately refer to a provision brought under 74th amendment under Article 243-ZF, which reads as under:

'Article 243-ZF: Notwithstanding anything in this Part, any provision of any law relating to Municipalities in force in a State immediately before the commencement of the Constitution (Seventy Fourth Amendment) Act, 1992, which is inconsistent with the provisions of this Part, shall continue to be in force until amended or repealed by a competent Legislature or other competent authority or until the expiration of one year from such commencement, whichever is earlier.

Provided that all the Municipalities existing immediately before such commencement shall continue till the expiration of their duration, unless sooner dissolved by a resolution passed to that effect by the Legislative Assembly of that State or, in the case of a State having a Legislative Council, by each House of the Legislature of that State.'

19. A reading of this provision, which is effected by 74th amendment to the Constitution, it is clear, if there are any provisions of law relating to Municipalities, which are in force in a State before commencement of amended provisions and if they are inconsistent with the provisions, then only they will continue to be in force until they are amended or repealed by a competent Legislature. Article 243-X speaks about the power to impose taxes by, and Funds of the Municipalities, which reads thus:

'Legislature of a State may, by law-

(a) authorise a Municipality to levy, collect and appropriate such taxes, duties, tolls and fees in accordance with such procedure.'

It is to be stated, in the State of Andhra Pradesh, the Andhra Pradesh Municipalities Act, 1965 is in force, prior to 74thconstitutional amendment, which was taking care of the requirements of the Municipalities. Necessary provisions are made in the Act in Part-IV of Chapter-I from Sections 81 of 124 and the rules made thereunder for assessment of property tax. Rule 7 of A.P. Municipalities (Assessment of Tax) Rules, 1990 provides a mode for determination of tax liability. Rule 4 of the said Rules provide for division of the Municipalities into Zones for the purpose of assessment of tax. Rules 5 and 6 of the said Rules further clarify about the classification of Buildings and nature of use of the buildings etc., on which basis annual rental value has to be determined as provided under Rule 3 of the said Rules. As long as these provisions under Sections 81 of 124 of the Act and the Rules made thereunder are not inconsistent with the constitutional scheme brought under 74th amendment, we are of the view, the plea set forth by the learned Counsel that the Government has no role to play and the issuance of G.O. Ms. No. 154, dated 8-4-2002 and G.O. Ms. No. 167, dated 18-4-2002 ultra vires the powers of the Government in the light of the provisions of Article 243-X of the Constitution of India is unsustainable.

20. It is not stated before us as to how the action of the Government in issuing these two G.Os., restricting the increase in quantum of property tax to a certain limit, is inconsistent with the provisions of Article 243-X of the Constitution of India. Except repeating the submissions that these two G.Os. are not in tune with the provisions of Article 243-X of the Constitution of India, no submission worth consideration is made before us by the learned Counsel in support of his contentions. We may incidentally mention here that in the earlier round of litigation, the entire gamut of the contentions has been considered by a Division Bench of this Court in the decision (supra) and the Hon'ble Supreme Court of India in thedecision (supra) affirmed the findings given by this Court except points (3) and (5) with regard to the method and manner to be followed by the Commissioner in levying properly tax. In this view of the matter, we are of the view that there is no substance in the submissions made by Sri T. Jagadish, learned Counsel.

21. Coming to the submissions made by the other learned Counsel that levy of property tax or revision of property tax cannot be made by the Commissioner without there being any resolution by the Council, we do not think this submission is sustainable. The provisions under Section 81 of the Act read thus:

'Section 81. Levy of ordinary taxes and the control of Government in respect thereof:--

(1)(a) Every Council shall by resolution levy the following taxes namely:

(i) a property tax

(ii) ..................

(iii) a tax on carnages and carts; and

(iv) a tax on animals.

(b) The Council may, by resolution and with the previous sanction of the Government also levy a tax on advertisements.

(2) Any resolution of a Council determining to levy a tax shall specify the rate at which and the date from which any such tax shallbe levied.

Provided that, before passing a resolution imposing a tax for the first time or increasing the rate of an existing tax, the Council shall publish a notice in at least one newspaper published in the main language of the district having circulation in the Municipality, on the notice board of the Municipal Office and in such other places within the municipal limits as may be specified, by the Council and by beat of drum, of its intention, fix a reasonable period not being less than one month for submission of objections andconsider the objections if any, received within the period specified:

Provided further that any resolution abolishing an existing tax or reducing the rate at which a tax is levied shall be immediately reported to the Government; and in Municipalities which have an outstanding loan either from the Government or from the public or from any banking, insurance or financial corporation or from any other local authority, such abolition or reduction shall not be carried into effect without the sanction of the Government.'

The first proviso to Section 81 would make it clear that before passing a resolution imposing a tax for the first time or increasing the rate of existing tax, there shall be a resolution by the Council. Admittedly property tax is being levied and collected for all these buildings for several years. It is not the first time the Municipalities are levying and collecting property tax. The extent of power exercisable by the Council is only fixation of rate at which property tax has to be collected. Section 56 of the Act deals with the powers and functions of the Commissioner. Clause (d) of subsection (1) of Section 56 empowers the Commissioner to exercise all powers in relation to the collection of taxes and fees, the licences and the removal of encroachments. Section 95 of the Act further empowers the Commissioner to call for information from the owners or occupiers of the buildings for the purpose of assessment of property tax. Sections 56 and 95 amply demonstrates that the Commissioners of respective Municipalities are solely responsible for collection of taxes, fees etc. Nonetheless, the facets which are to be taken into consideration, for determination of property tax are envisaged under Sections 81, 85, 87 of the Act and also in Rules 3 to, 8 of the A.P. Municipalities (Assessment of Tax) Rules, 1990. The above sections and rules provide the procedure to be followed by theCommissioner before the assessment of the property tax. The Commissioner is bound to place all the material before the Council for the purpose of fixing the rate I at which property tax has to be collected, which would be only at the first instance and not thereafter. As contemplated under the scheme of the Act, revision of property, tax or assessment of property tax shall take place once in five years. The Legislature in its wisdom empowered the Commissioner, who has all men and material, to inspect the areas, collect information with regard to the plinth area and nature of buildings, and basing on such information determination of reteable value. The Council fixes the rate at which tax has to be levied and collected thereafter. If the parties are aggrieved, provisions of appeal or revision are contemplated under the scheme of the Act.

22. The Hon'ble Supreme Court in para 35 of the judgment (supra) held thus:

'From the statutory provisions noted above, it is clear that the Act provides that the tax shall be levied at such percentages of the rateable value as may be fixed by the Corporation. It further provides the method and manner of determination of the rateable value. The determination of the annual rental value which is the basis for calculation of the rateable value is also provided in the Act and the Rules. The Act mandates that the Commissioner shall determine the tax to be paid by the person concerned in the manner prescribed under the statute and Rules. It is our view that the Act and the Rules provide a complete code for assessment of the property tax to be levied for the buildings and lands within the Municipal Corporation.'

At para 37 the Hon'ble Supreme Court further observed thus:

'The intent and purpose of the exercise to determine the annual rental value is to avoid arbitrariness in the process of assessment of the tax and also to ensure that the landlord does not escape payment of amount due astax by taking recourse to fraudulent and manipulated underwriting of the rental value. For proper implementation of the provisions of the Municipal Act it is necessary that the power of assessment should be vested in an authority 'specified' in the statute. The importance of specifying the authority to assess property tax under the Municipal Act cannot be overemphasized. Keeping in view the incidence of the tax the persons who are to bear the burden of payment of the tax and the effect it will have on the funds of the Municipalities for the purpose of development of the area, the Legislature vested the power in the Commissioner of the Municipal Corporation to complete the exercise.'

Thus there is no ambiguity or inconsistency in the provisions of the A.P. Municipalities Act, 1965 and the Rules made thereunder, which could be held as inconsistent with the provisions under Part IX-A of the Constitution. When the State Legislature has already made provisions under A.P. Municipalities Act, 1965, if the Legislature, in its wisdom thinks, some more provisions or safeguards to be made for promoting the objectives of Part IX-A of the Constitution of India, it is for the Legislature to do so and not for this Court to suggest to act in a particular fashion, as long as the provisions or rules made are not inconsistent with the constitutional scheme.

23. During the course of hearing of these writ petitions, Sri Chalapathi Rao, learned Counsel for some of the writ petitioners, stated that in view of the two G.Os. viz., G.O. Ms. No. 154, dated 8-4-2002 and G.O. Ms. No. 167, dated 18-4-2002 reasonably restricting the increase in the property tax, the respondents could be directed to implement the. orders, we think no further enquiry need be made by this Court on the question of abnormal increase in the property tax. We do not think this Court can look into each and every assessment relating to property taxes of all the Municipalities and examine thecorrectness or otherwise. The respondents have stated in the counters that due procedure has been followed. However, for individual grievances, remedies are provided under the Act, which could be availed of in such cases. Further, in the counters filed by respondents, it has been categorically stated that the enhancement in the property tax would be restricted as per the two G.Os. viz., G.O. Ms. No. 154, dated 8-4-2002 and G.O. Ms. No. 167, dated 18-4-2002. In view of those two Government Orders, we think the petitioners need not agitate that the increase of property tax is abnormal.

24. For all the reasons, the writ petitions are dismissed. No costs.