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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.142 OF 2009

Municipal Corpn. of Greater Mumbai          ..…Appellant(s)  

Versus

Harish Lamba of Bombay,  Indian Inhabitant & Ors.  ….Respondent(s)

J U D G M E N T

A.M. Khanwilkar, J.

1. This appeal takes exception to the judgment and order

dated 21st November, 2006 of the High Court of Judicature at

Bombay in Writ Petition No.1206 of 1999, whereby the

bills/demand raised by appellant including towards water

benefit tax and the Warrant of Attachment in respect of the

stated premises belonging to the respondents came to be

quashed and set aside being illegal.  

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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, 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, 1­C, K.K. Marg,

Mahalaxmi, Bombay­400034, 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 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, 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

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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 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 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 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

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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 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.

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 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.

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5. Resultantly,  on  5th  August,  1998, the  appellant issued

Warrant  of  Attachment  and  levied  an attachment  upon  the

said premises and 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  Twelve  Only), against respondent

No.1. Further, vide letter dated 18th  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.

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

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Warrant of Attachment dated 5th August, 1998, vide impugned

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

measurement or estimated  measurement. It concluded that

as, admittedly, 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 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

1 (1988) 2 SCC 466

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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 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 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 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

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disconnected on 25th October, 1993, the premises in question

were still  connected by 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

stop­cock. Hence, the demand raised by the appellant against

the respondents towards water benefit tax under Section 141

of the Act 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 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.

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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 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 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.  

2 2012 (114) BOM. L.R. 3400

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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 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 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 Court so as to demonstrate that

the demand raised by the appellant was after expiry of

limitation period, consequent to alteration in the assessment

3 (1988) 3 SCC 306 4 (1976) 4 SCC 830

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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 of property

tax in the form of water benefit tax dues issued in January

1997  was for official year 1993­94 (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

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 water supply

on 25th October, 1993, no water supply was continued to the

premises. For that very reason, it was not open for the

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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 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 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 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

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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 urged

that it must be presumed that for the official year  1993­94,

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 1993­94. If

the appellant  had  issued demand notices  for the 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 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

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for the official year 1993­94 until January, 1997. Keeping in

view the exposition in the relied 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 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 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

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have adopted the argument 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.

15. The main issue is whether: the impugned notices can be

styled 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 R­5 collectively). It may be apposite to

reproduce one such notice pertaining to official year 1993­94.

The same reads thus:

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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.  

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.   

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18. 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 terms of

Section 140 of  the Act, in sub­section 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.   

(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 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 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.

(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 benefit tax" of so many per centum of

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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 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 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 one­eighth 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 fulfilling the duties of  the corporation arising under clause (k)  of section 61 and Chapter XIV;

“Provided that, the Corporation shall not levy property tax leviable 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  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 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) betterment charges leviable under Chapter XII­A.

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(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 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 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–

(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 Commissioner has given public notice that sufficient water is 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 thereof vesting in, or in the occupation of, any consul de carriers, whether  called as  a  consul  general,  consul,  vice­ consul, consular agent, pro­consul 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 thereof which are used

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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 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.  

(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 ­

(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 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).

(2)  A  person  who is charged for supply of  water under clause (ii) or (iv) of sub­section (1) shall not be liable for payment of the water tax,  but any sum payable  by him and not  paid when  it  becomes due

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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 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 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 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 co­extensive 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 towards

property tax fructifies  on  fulfilment  of conditions  stipulated

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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 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 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.   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

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communication pipes or municipal water works to the

premises concerned.  

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 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 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

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Act. The same in no manner can be construed as having been

issued under Section 169 of 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  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 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  by respondent  No.  1. Section 140 of the M.M.C. Act states different components of the property taxes. They are, water tax, water benefit tax, sewerage tax, sewerage benefit tax, general tax, education cess, street tax and betterment

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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 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 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 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 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 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 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

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discharged from the premises. The 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 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 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,  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 non­payment 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

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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 sub­section (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 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  Others5.  In similar situation, the  Court  had  observed

thus:  

“7. Insofar as the first contention is concerned, there is really no 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

5 MANU/MH/0667/2004=2005 (1) Bom. C.R. 296, 2005 (107(1)) BOM.L.R.   271, 2004 (4) Mh.L.J. 773

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no provision 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 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  January, 1994. This period falls within

the official year 1993­94 (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

1993­94 i.e., 31st March, 1994. Three years limitation period,

therefore, would have expired on 30th March, 1997. However,

the 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

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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.  

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 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 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

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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.  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

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.   

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.

6 (2011) 12 SCC 518 (paragraph nos.12, 23, 41 & 42)  7 (1997) 5 SCC 772

31

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

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 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.  

29. For  the  view  that  we have taken, it is  unnecessary  to

dilate on the efficacy of the provisions contained in  Water

Charges Rules as applicable at the relevant time framed under

Section 169 of the Act.

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30. The appeal is allowed in the aforementioned terms.

Impugned judgment of the High Court is set aside. No order as

to costs.  

31. All pending applications are also disposed of in the above

terms.

       …………………………….. J       (A.M. Khanwilkar)

       …………………………….. J       (Ajay Rastogi)

New Delhi; October 22, 2019.