Summary
After a factory’s municipal water connection was disconnected, the Corporation demanded property tax including water benefit tax. The Court distinguished that compulsory property levy from charges for water actually supplied and restored the demands. It rejected the pleaded limitation and retrospectivity objections, while limiting interest for specified periods spent litigating in good faith.
Issues
- Whether disconnection of municipal water supply extinguished liability for water benefit tax.
- Whether the demands were time-barred or retrospective, and what interest was payable.
Provisions considered
- Sections 140 and 141, Mumbai Municipal Corporation Act, 1888Water benefit tax was a component of property tax, payable on the statutory conditions independently of actual consumption. (¶¶ 18, 19, 20, 22, 24)
- Section 169, Mumbai Municipal Corporation Act, 1888Water-supply charges based on quantity were distinguished from the property levy; the provision governed charges in lieu of the specified taxes when supply was availed. (¶¶ 18, 19, 21, 24)
Held
- The notices demanded property tax, including water and sewerage benefit taxes, rather than consumption-based water charges. Disconnection did not eliminate the compulsory water benefit tax liability. The decision concerning water charges in Nagpal Printing Mills was inapplicable. (¶¶ 15, 17, 18, 20, 21, 22, 23, 24)
- Demanding previously accrued taxes by later bills did not constitute retrospective imposition. On the pleaded case, tax for official year 1993–94 became due at that year’s completion, and the notices of 10 January 1997 were within three years. The limitation challenge failed. (¶¶ 25, 26)
- For the writ proceedings from 21 April 1999 to 21 November 2006 and Supreme Court proceedings from 27 August 2007 to this judgment, interest was capped at eighteen per cent per annum or the applicable statutory rate, whichever was lower. The governing regulatory rate applied for the remaining default periods from the demand notices until payment. (¶¶ 27, 28)
Result
The appeal was allowed and the High Court judgment set aside without costs. Outstanding amounts with interest calculated as directed were payable within three months; on default the Corporation could proceed according to law. Pending applications were disposed of.