Allowed

Kalyani Maternity v. Bmc,Bhubaneswar

Orissa HC22 Apr 2021WP(C)/6590/2012

Case brief

AI extract

What is this about?

This single Bench held that the Orissa Municipal Corporation Act does not authorize the levy of holding tax. Consequently, a demand notice for increased holding tax after the repeal of the Orissa Municipal Act was unsustainable in law. The petition was allowed.

What did the court decide?

Impugned demand notice for holding tax issued after commencement of OMC Act was quashed. Petitioner directed to pay tax only at the rate prevalent when OM Act was repealed for the period before OMC Ac

Kalyani Maternity Vs Bmc,Bhubaneswar — Civil Procedure and Limitation | Orissa HC (2021)

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IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No.6590 of 2012

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Kalyani Maternity Hospital Pvt. Ltd., …. Petitioner Bhubaneswar

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Mr. G.M. Rath, Advocate

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-versus-

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Bhubaneswar Municipal Corporation (BMC)

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…. Opposite Party

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Mrs. M. Padhi, Advocate

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CORAM: THE CHIEF JUSTICE JUSTICE B.P. ROUTRAY

Order No.

ORDER 22.04.2021

This matter is taken up by video conferencing mode.

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The present writ petition has been filed seeking to challenge the demand notice dated 9^th February, 2012 issued by the Bhubaneswar Municipal Corporation (BMC), whereby the Petitioner has been asked to pay the sum of Rs.4,49,440/- as “holding tax, latrine tax and lighting tax”.

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Earlier the Confederation of Citizens’ Association, Bhubaneswar had filed W.P.(C) No.11764 of 2011 challenging BMC's notification dated 15^th December, 2010 enhancing 'holding tax' on the basis of the erstwhile Orissa Municipal Act, 1950 (OM

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Act) with the aid of Sections 693 and 694 of the Orissa Municipal Corporation Act, 2003 (OMC Act).

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The grievance of the Petitioner in that case was that the Commissioner intended to impose a new rate at a much higher rate than the mandate under the OM Act as well as the OMC Act. Further it was contended that a notification had been issued without following procedure under Chapter-13 of the OMC Act or the pari materia provision in the OM Act. The said writ petition was disposed of on 12^th August, 2011 by this Court with the following order:

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“Learned Govt. Advocate is directed to take notice on behalf of Opposite Party No.1. An extra copy of the writ petitioner be served on him by tomorrow. Notice issued to opposite party no.2 by Registered post with A.D. requisites for which shall be filled by Tuesday (16.8.2011).

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Pending consideration of the misc. case, the revision of rent is stayed under the Old Act as per Annexure-2, but the holding tax must be paid as was being paid earlier. It is open for the municipal Corporation to revise the tax in accordance with the provisions of Sections 694(3) read with Sections 205, 208, 209 and 210 and other relevant provisions of Chapter-XIII.

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Urgent certified copy of this order be granted as per rule.”

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Based on the same notification dated 15^th December 2010, the impugned demand dated 9^th February, 2012 was raised on the Petitioner by BMC leading to the filing of the present petition in

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which the prayer is for a direction to issue to the BMC to receive the holding tax as earlier paid by the Petitioner.

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On 20^th April, 2015 while directing to issue notice to the Opposite Party, the following interim order was passed:

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“As an interim measure, we direct that the holding tax as was being paid earlier shall be paid but the revision thereof shall remain in abeyance until further orders.”

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Mr. G.M. Rath, learned counsel appearing for the Petitioner submits that neither Section 693 nor Section 694 of the OMC Act can be invoked to raise the rate of ‘holding tax’ that was leviable under the OM Act after its repeal. He points out that under the OMC Act the concept of ‘holding tax’ does not exist. Therefore, the demand is entirely without the authority of law. In support of this submission, he referred to the decision of the Constitution Bench of the Supreme Court in New Delhi Municipal Council v. State of Punjab and Others, (1997) 7 SCC 339.

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Mrs. Padhi, learned counsel appearing for the Opposite Party (BMC), first submitted that against the impugned demand notice, the Petitioner has an alternative remedy under the OMC Act and therefore, this Court should not interfere. Secondly, she submitted that the procedure envisaged under the OM Act for enhancing the rate of ‘holding tax’ has in fact been followed and therefore, in the light of the transitional provision contained in Section 694(3) of the OMC Act, the BMC was entitled to raise the ‘holding tax’ and recover it from the Petitioner. She referred to the affidavits filed by

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the BMC in the present case on 6^th August, 2019 and 5^th December, 2019.

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The above submission of learned counsel for the parties have been considered.

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The Court finds no merit in the preliminary submission of the BMC that the Petitioner has an alternative remedy against the demand notice. Here the very authority of the BMC to raise such a demand in terms of the OMC Act is being challenged. This has to be dealt with only by this Court and not a statutory authority which is tasked with enforcing the demand.

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On the central issue that arises for consideration, Mr. Rath has rightly contended that no tax can be levied and collected by BMC without the authority of law. In other words, without there being a law passed by the State legislature specifically authorizing the Municipal Corporation to levy and collect taxes, it cannot do so. This has been succinctly explained by the Constitution Bench of the Supreme Court in New Delhi Municipal Council (supra) thus:

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“97. …Article 265 of the Constitution emphatically mandates that "no tax shall be levied or collected except by authority of law". Under the framework of the Constitution there are two principal bodies which have been vested with plenary powers to make laws, these being the Union Legislature, which is described by Article 79 as "Parliament for the Union" and the State Legislatures, which are described by Article 168 in the singular as "Legislature of a State". While certain other bodies have been vested with

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legislative power, including the power of levying taxes, by the Constitution for specific purposes, as in the case of District Committees and Regional Councils constituted under the aegis of the Sixth Schedule to the Constitution, the plenary power to legislate, especially in matters relating to revenue, still vests with the Union and the State Legislatures. Even if the submission that Municipalities now possess, under Part IXA of the Constitution, a higher juridical status is correct, the extension of that logic to the proposition that they have plenary powers to levy taxes is not, as is clear from a perusal of the relevant part of Article 243X of the Constitution which reads as under:

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"243X. Power to impose taxes by, and Funds of, the Municipalities. - The Legislature of a State may, by law,-

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(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;

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(b) –(d)

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as may be specified in law."

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Article 243ZB provides that this provision will be applicable to Union Territories and the reference to the legislature of a State would apply, in relation to a Union Territory having a Legislative Assembly, to that Legislative Assembly.

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It is, therefore, clear that even under the new scheme, Municipalities do not have an independent power to levy taxes. Although they can now be granted more substantial powers than ever before, they continue to be dependent upon their parent Legislatures for the bestowal of such privileges. In

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the case of Municipalities within States, they have to be specifically delegated the power to tax by the concerned State Legislature. In Union Territories which do not have Legislative Assemblies of their own, such a power would have to be delegated by Parliament. Of the rest, those which have Legislative Assemblies of their own would have to specifically empower Municipalities within them with the power to levy taxes.”

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Conscious of the above limitation, BMC has sought to argue in the present case that it can raise the rate of holding tax with the aid of under Sections 693 and 694 of the OMC Act. Section 693(2) saves the previous operation of the OM Act in respect of any right, privilege and obligation or liability accrued or incurred thereunder or any penalty, forfeiture or punishment incurred or in respect of any offence or any investigation, legal proceeding or remedy in respect of such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy in respect thereof. This provision, therefore, does not specifically empower the BMC to levy or collect tax. Even Section 693 (2) of the OMC Act exclusively preserves all rules, bye-law, notifications, orders, directions and powers, made, issued or conferred under the OM Act and in force before the commencement of the OMC Act cannot be invoked to enhance the rate of holding tax. In fact under the OMC Act, there is no concept of ‘holding tax’ at all.

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13. Section 694 of the OMC Act which is a transitional provision against seeks to continue liability against the BMC prior to

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commencement of the OMC Act. Section 694 (2) and (3), which are relevant in the present context, read as under:

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“694. Transitional provisions. –

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(1) xx xx

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(2) All arrear of taxes or other payment by way of composition of a tax, or dues for expenses or compensation or otherwise and all sums of money otherwise due to the Municipal Corporations at the commencement of this Act may be recovered as if they had accrued to the respective Corporations under the provisions of this Act.

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(3) All taxes, fees and duties, which immediately before the commencement of this Act, were being imposed by the Municipal Corporations shall be deemed to have been imposed by the respective Corporations under the provisions of this act and shall continue to be in force accordingly until such taxes, fees and duties are revised, cancelled or superseded by anything done of any action, taken under this Act.”

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A careful perusal of the above provision reveals that the legislative intent, engrafted in the OMC Act, was only to preserve the right of BMC to collect tax which were leviable “immediately before commencement of the OMC Act” and which were being imposed. It by no means permits BMC to raise the rate of a tax that was leviable for a period prior to the coming into force of the BMC act. In other words, any fresh levy of tax after the enactment of the OMC Act had to be only under the substantive provisions of the BMC Act and not its transitional provisions.

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The very nature of a transitional provision is temporary. As explained by Francis Bennion in his classical treatise on Statutory Interpretation, Third Edition, (page 233-234):

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"transitional provisions in an Act or other instrument are provisions which spell out precisely when and how the operative parts of the instruments are to take effect. They serve a very useful purpose, since merely to say that an enactment comes into force on a specified date is often insufficient to produce a clear meaning. Lord Bridge said that the purpose of a transitional provision is 'to facilitate the change from one statutory regime to another', citing Thornton's statement that 'The function of a transitional provision is to make special provision for the application of legislation to the circumstances which exist at the time when that legislation comes into force'.

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He further explains that "one feature of a transitional provision is that 'its operation is expected to be temporary, in that it becomes spent when all the past circumstances with which it is designed to deal have been dealt with'.

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Thus the transitional provision viz., Section 694 (3) of the OMC Act cannot be invoked by BMC to justify either the raising of the rate of ‘holding tax’ or to continue to levy and collect it for a period subsequent to the repeal of the OM Act. The question of BMC resorting to the procedure under the Om Act, after its repreal, is to no avail since under the OMC Act, there is no concept of holding tax at all. So the question of legitimizing such demand by following the procedure under the Om Act, after its repeal by the OMC act, does not arise.

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Consequently, the Court finds merit in the contention of Mr. Rath, learned counsel for the Petitioner that the impugned demand notice in so far as the BMC seeks to collect the holding tax from the Petitioner for a period after the commencement of the OMC Act, and at a rate higher than that prevalent when the OM Act was in force, is unsustainable in law. The impugned demand notice to that extent is hereby quashed.

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Mrs. Padhi, learned counsel for the Opposite Party submits that although by the interim order dated 28^th April, 2015 the Petitioner was directed to continue to pay the holding tax prior as it was doing prior to the repeal of the OM Act, it in fact did not do so.

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It is directed that, if not already paid, the Petitioner shall pay for the period prior to commencement of the OMC Act, the holding tax at the same rate at which it was paying when the OM act was repealed, without fail within a period of four weeks from today.

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The writ petition is disposed of in the above terms.

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As the restrictions due to resurgence of COVID-19 situation are continuing, learned counsel for the parties may utilize a printout of the order available in the High Court’s website, at par with certified copy, subject to attestation by the concerned advocate, in the manner prescribed vide Court’s Notice No.4587,

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dated 25^th March, 2020 as modified by Court’s Notice No.4798, dated 15^th April, 2021.

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(Dr. S. Muralidhar) Chief Justice (B.P. Routray) Judge

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S.K. Jena/P.A.

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Kalyani Maternity v. Bmc,Bhubaneswar

Case brief

What is this about?

What did the court decide?

Kalyani Maternity v. Bmc,Bhubaneswar

Case brief

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