REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS.4616-4617 OF 2009

VASANT CHEMICALS LIMITED                    ….Appellant

VERSUS

THE MANAGING DIRECTOR, HYDERABAD      METROPOLITIAN WATER SUPPLY AND SEWERAGE BOARD AND OTHERS       …Respondents

With

CIVIL APPEAL NOS.4618-4619 OF 2009

VASANT CHEMICALS LIMITED                     ….Appellant

VERSUS

M. D., HYDERABAD METRO W.S. &  S. BOARD & OTHERS                …Respondents

J U D G M E N T

R. BANUMATHI, J.

These appeals arise out of the judgment dated 29.10.2003

passed in the Writ Petition Nos.4917 and 5044 of 2000 and order

dated 29.12.2003 passed in review petition by the High Court of

Andhra Pradesh at Hyderabad dismissing the writ petitions as well

as  the  review petitions  holding that  the  levy of  sewerage cess

levied on the appellant by the respondent-Board is in accordance

with Section 55 of the Hyderabad Metropolitan Water Supply and

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Sewerage  Act,  1989  (HMWS&S  Act)  and  Clause  16  of  the

agreement entered into between the appellant and the Board.

2. The facts giving rise to these appeals are that the appellant-

M/s Vasant Chemicals Limited which is an amalgamation of three

companies  is  engaged  in  the  manufacture  and  export  of  dye

intermediates  and  other  organic  chemicals  in  their  units  at

Jeedimetla Industrial Estate, Ranga Reddy District, Hyderabad. The

effluents of the appellant industry and other industries were not of

acceptable standards to be let into the sewer line of the Board and

required treatment and therefore, the industrial units in Jeedimetla

Estate decided to establish the Common Effluent Treatment Plant

(CETP). Hence, under the joint efforts of all the chemical units and

other industries including the appellant, a company was formed

namely M/s Jeedimetla Effluents Treatment Limited (JETL) in the

year 1987 to get the effluents treated at their own cost to bring

the quality of the effluents to an acceptable level. The appellant

and the other industrial units made investment by way of shares in

the said company towards its capital.  According to the appellant,

it has invested to the extent of more than 29% of the shares in

JETL towards its equity.   

3. After treating the effluents to sewer standards as prescribed

under the Water (Prevention and Control  of  Pollution) Act,  1974

(Water  Act,  1974)  and  the  Environment  (Protection)  Act,  1986

(Environment  Act,  1986)  between  1988  and  1995,  JETL  was

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discharging  the  treated  waste  water/effluents  into  the  open

drains/nalas in Jeedimetla Area.   After discussion with Hyderabad

Metropolitan  Water  Supply  and  Sewerage  Board  (HMWS&SB-the

Board)  and  the  Government  of  Andhra  Pradesh  and  APPCB,  a

dedicated pipeline was laid from the premises of JETL to connect to

the sewerage system of HMWS&SB which is located at a distance

of about 10.38 kilometers at Balanagar at an estimated cost of

Rs.346 lakhs. For the said dedicated pipeline, JETL paid an amount

of Rs.75,00,000/- as its contribution and the balance amount was

contributed by the Board and the Government of Andhra Pradesh.

The  pipeline  became  operational  on  31.01.1998.   As  per  the

direction of APPCB, the industries in IDA Jeedimetla are discharging

their  industrial  effluents  to  JETL,  which  in  turn  partially  treat

effluents and let into the dedicated pipeline connecting JETL and

sewer  line  at  Board’s  sewer  at  Kukatpalli,  Balanagar  and  then

carried to Sewerage Treatment Plant (STP) at Amberpet.  

4. The  appellant  has  obtained  bulk  water  supply  connection

from  the  respondent-HMWS&S  Board  and  the  Board  accorded

sanction for supply of 36,200 gallons water per day @ Rs.12 per

kilo litre to the appellant-Industry. An agreement was entered into

by  the  appellant  with  the  respondent-Board  on  27.04.1995

stipulating the terms and conditions of supply of water and the

payments required to be made in terms thereto. The agreement

provides that HMWS&SB will supply water to the appellant industry

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and water charges will be levied for the supply of water as per the

agreement.   Clause 16 of the agreement  inter alia provided for

payment of sewerage cess and that the appellant is liable to pay a

sewerage cess in accordance with Section 55 of the HMWS&S Act.

Clause 17 of the agreement obligates the appellant to avail the

sewer facility provided by the HMWS&SB if  the premises of  the

appellant is located at a distance of less than thirty-five meters

from the sewer line of the HMWS&SB.   

5. The  appellant  made  representations  between  1998  and

February, 2000 stating that levy of sewerage cess was illegal and

contrary to the provisions of HMWS&S Act as the appellant is not

discharging its effluents into the sewerage system of the Board.

According to the appellant, the Board insisted upon payment of

the  arrears  and  sought  payment  of  the  sewerage  cess  for  the

period January, 1998 to March, 2000 and sought certain amount

towards water cess from 1st January, 1998 to February, 2000 vide

two notices dated 25.01.2000.  Aggrieved thereby, the appellant

filed  writ  petitions  in  WP(C)  No.4917/2000  and  WP(C)

No.5044/2000 challenging the notices levying of water cess and

sewerage cess respectively.  The writ petitions were dismissed by

the  High  Court  by  the  common  judgment  dated  29.10.2003

upholding the levy of sewerage cess by holding that such levy is in

terms of  Section  55 of  HMWS&S Act.  The  High Court  held that

though the appellant’s premises is not directly connected to the

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sewer line of the Board, the industrial effluents of the appellant are

being carried to JETL and after partial treatment at JETL, the same

is  let  into  the  sewerage  system  of  the  Board.  It  was  further

observed that as per Section 55 of the HMWS&S Act, the occupier

of the premises from where the sewerage or effluents are let into

the sewer facility provided by the Board by any means, has to pay

the sewerage cess irrespective of the fact that whether or not the

area is served by sewerage system of the Board.  The High Court

pointed out that this statutory liability is incorporated in Clause 16

of the agreement as per which the appellant has to pay sewerage

cess along with water cess @ 20% of the water charges. The High

Court  dismissed  the  writ  petitions  vide judgement  dated

29.10.2003 holding that the demand notices are not arbitrary and

that do not suffer from any legal infirmities.  

6. The  appellant  filed  review  petitions  being  Review  MP

No.33154/2003  in  WP(C)  No.4917/2000  and  Review  MP

No.33158/2003  in  WP(C)  No.5044/2000  before  the  High  Court

which came to be dismissed  vide order dated 29.12.2003 on the

ground that the judgment dated 29.10.2003 does not suffer from

any error apparent on the face of the record.

7. Mr. V. Giri, learned senior counsel for the appellant submitted

that since the premises of the appellant industry is situated in the

area not served by the sewage system of the Board and in terms of

proviso to Section 55 of  the HMWS&S Act,  no sewerage cess is

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leviable.   It  was  contended that  since  the  appellant  is  covered

under  proviso  to  Section  55  of  the  HMWS&S Act,  the  statutory

liability cannot be imposed on the appellant on the basis of Clause

16 of the agreement.  Without prejudice to the above contentions,

it was urged that under the agreement dated 31.08.2000 between

the JETL and the Board, various charges are levied on JETL which

are in effect sewerage cess and therefore, there cannot be double

levy  for  the  same  service/same  taxable  event  which  is

impermissible  under  the  law.  It  was  contended that  the various

documents produced and the contentions raised by the parties in

the review petitions were not considered by the High Court and the

High Court erred in dismissing the review petitions.

8. Reiterating  the  above  submissions,  on  behalf  of  JETL,  Mr.

Guru Krishna Kumar, learned senior counsel submitted that under

the agreement dated 31.08.2000, five different kinds of charges

are levied on JETL by the Board namely:-  (i)  capital  contribution

(clause  4);  (ii)  sewerage  connection  charges  (clause  4);  (iii)

charges  towards  maintenance  of  sewer  line  (clause  28);  (iv)

sewerage maintenance and sewerage treatment charges (clause

28); and (v) sewerage surcharge for effluents above a certain level

(clause 29) and those charges though not christened as sewerage

cess, they are in effect sewerage cess in terms of Section 55 of

HMWS&S Act.  It was further contended that various charges levied

on JETL by virtue of the agreement dated 31.08.2000 correspond to

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the sewerage cess under Section 55 of HMWS&S Act and levy of

sewerage cess on the appellant for the same act of discharging of

the same sewage, would therefore amount to a double levy on the

industrial units.

9. On behalf of  the respondent Board,  learned senior counsel

Mr. Gourab Banerji submitted that the appellant industry, obtaining

bulk water supply from the Board and discharging sewage into the

sewer  line  of  the  Board,  is  liable  to  pay  sewerage  cess  under

Section 55 of the HMWS&S Act.  It was submitted that since after

partial treatment at JETL, the effluents are let into the sewer line of

the  Board  through  which  the  effluents  are  carried  to  Sewerage

Treatment  Plant  (STP)  at  Amberpet  for  further  treatment,  the

appellant is connected to the sewerage system of the Board and is

liable to pay sewerage cess under Section 55 of the HMWS&S Act.

It was contended that Clause 16 of the agreement incorporates the

levy  under  Section  55  of  the  HMWS&S  Act  and  the  Rules  and

Regulations  thereunder and as  per  the terms of  the agreement

also, the appellants are liable to pay sewerage cess.  Insofar as the

plea of double taxation, it was submitted that the JETL was not a

party  to  the  writ  petitions  filed  by  the  appellant  and  the

subsequent writ petition in WP(C) No.17381/2004 filed by the JETL

inter  alia challenging  the  sewerage  surcharge  under  various

agreements was already dismissed for default by the High Court.

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10. We have carefully considered the submissions and perused

the  impugned judgment  and  materials  on  record.  The  following

points arise for determination in these appeals:-  

(i) Whether the appellant is right in contending that the  appellant  unit  is  not  connected  to  the sewerage system of the Board and so the levy of sewerage cess on the appellant under Section 55 of HMWS&S Act is not sustainable?  

(ii) Whether the appellant is right in contending that since  the  appellant’s  unit  is  not  served  by  a sewerage system of the Board, as per proviso to Section 55 of HMWS&S Act, no sewerage cess can be levied?  

(iii) Whether the charges collected from JETL under the agreement dated 31.08.2000 is in effect, sewerage cess  in  terms  of  Section  55  of  HMWS&S  Act, thereby  amounting  to  double  levy  of  sewerage cess/charge  for  the  same  service/same  taxable amount?

Appellant’s  statutory  liability  to  pay  sewerage  cess  and Re:  contention:   Appellant  is  covered  by  the  proviso  to Section 55 of the Act

11. Section  55  of  the  HMWS&S  Act  contemplates  levy  of

sewerage cess on the occupier of the premises from where the

sewage or industrial effluents, as the case may be, are let into the

sewer facility  provided by the Board by any means whatsoever

irrespective of fact whether or not the area is served by sewerage

system of the Board.  Section 55 of HMWS&S Act reads as under:-

“55. Charges towards the use of sewerage cess---  

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Every occupier  of  both domestic  and non-domestic premises shall pay to the Board at the rate not exceeding thirty  five  percent  of  the  bill  charging  for  the  water consumed or at such rate as may be prescribed by rules, to defray the capital cost of sewerage and sewage treatment works  undertaken  by  the  Board  and  the  operation  and maintenance of the sewerage system from time to time:  

Provided that no such charges shall be levied in any premises situated in the areas which are not served by the sewerage system of the Board.”

12. Admittedly, the appellant industry has obtained sanction for

bulk  water  supply  connection  from the  Board  for  the  supply  of

36,200 gallons of  water  per day @ Rs.12/-  per  kilo  litre  for  the

manufacture of dye and other chemicals.  In terms of the sanction

of water supply to the appellant, an agreement was entered into

with  the  respondent-Board  on  27.04.1995  stipulating  the

conditions and the payments required to be made in terms thereto.

The  agreement  provides  for  payment  of  sewerage  cess  in

accordance with Section 55 of the HMWS&S Act.  Clause 16 of the

agreement mandates the Board to collect sewerage cess from the

appellant-industry  in  terms  of  Section  55  of  the  HMWS&S  Act.

Clause 17 of the agreement makes it obligatory on the part of the

appellant to avail  the facility of the Board if  it  is  located within

thirty-five meters from the Board’s sewerage system.  Clauses 16

and 17 read as under:-

“Clause 16. In accordance with the provisions of Section 55  of  the  HMWSSA  Act,  1989,  the  consumer  shall  pay

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sewerage cess along with water charges at the rate of 20% of  the  water  charges  or  such  other  rates  as  may  be prescribed and determined by the Board from time to time. Clause  17. It  shall  be  obligatory  on  the  part  of  the consumer to avail the sewers facility provided by the Board if the premises of the consumers are located at a distance less than 35 metres away from the Board sewer line to any point of the boundary of the consumer premises.”

13. Appellant  industry and other  industrial  units  are producing

chemicals,  bulk  pharmaceuticals  and  dye  intermediates  causing

heavy pollution.  In order to comply with the provisions of Water

Act,  1974,  the  industrial  effluents  discharged  by  the  appellant

industry and others are to be treated otherwise the industrial units

will be violating various laws governing the treatment and disposal

of  sewage  including  protection  of  environment.  The  issue

pertaining to pollution, discharge of effluents in the State of Andhra

Pradesh  including  the  industrial  region  of  Jeedimetla  was  the

subject matter of a proceeding before this Hon’ble Court being Writ

Petition (C) No.1056 of 1990, in the matter of  Indian Council for

Enviro/legal  Action  and  Others.  In  the  said  proceedings,  a  joint

action plan was proposed by the CPCB, New Delhi and APPCB and a

common effluent treatment plant was ordered to be set up. As the

industries were sending their untreated effluents into the sewer,

directions were given that the A.P. Pollution Control Board would

not  accept  the  effluents  unless  these  conform to  the  standards

prescribed by the Board vide Indian Council for Enviro Legal

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Action and others v. Union of India and others, (1998) 9 SCC

580. Similar problem arose in the case of World Saviors v. Union

of India and others (1998) 9 SCC 247. In order to comply with

the provisions of the Water Act, 1974 and the Environment Act,

1986 and in order to carry the industrial  sewage to the Board’s

sewer trunk, a dedicated pipeline to the extent of 10.38 kilo meters

from JETL to Kukatpally and Sanathnagar Main Line was laid.  The

cost of laying the pipeline is stated to be Rs.346 lakhs out of which

contribution of the JETL was Rs.75 lakhs and the balance amount

was  contributed  by  the  Board  and  the  Government  of  Andhra

Pradesh.  This  dedicated  pipeline  became  operational  from

31.01.1998.  The pipeline from JETL to Balanagar is a dedicated

pipeline  used  exclusively  by  the  JETL.  As  per  the  agreement

entered into with the Board, the management of the JETL pays the

amount to the Board towards surcharge for discharging partially

treated  effluents  from  JETL  into  Board  sewer  and  also  for

maintenance of the sewerage system.  After the industrial effluents

are partly treated at JETL, the industrial effluents are let into the

dedicated pipeline belonging to the Board system at Balanagar and

from there, the sewage is let into 1000 mm diameter sewage trunk

main  belonging  to  the  Board  through  which  the  effluents  are

carried to Sewerage Treatment Plant (STP) at Amberpet.

14. “A ‘trunk sewer’ is one which bears the same relation to an

entire sewer system that the trunk of a tree bears to its branches,

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or  the  main  stream  of  a  river  bears  to  its  tributaries.  It  is

sometimes called a ‘trunk line sewer,’ an ‘intercepting sewer,’ or a

‘trunk  line  intercepting  sewer”.  “Ref:  Environmental  &  Pollution

laws in India by Justice T. S. Doabia (2  nd   Edition-2010) published by

LexisNexis  Butterworths  Wadhwa,  Volume  1  at  page  no.1054  .”

Graphic description of the sewerage connection is as under:-  

STP, Amberpet

          18.90 kms            

Hyderabad Metropolitan Water Supply &

Sewerage Board, Kukatpalli/Balanagar

     1.2 kms…. No pipeline

15. As per Section 55 of the HMWS&S Act, the following essential

ingredients are to be satisfied for levy of sewerage cess:-

1. There has to be an occupier domestic or non-domestic premise;

2. There  should  be  consumption  of  water  by  such occupier;

3. The rate to be charged would be up to 35% of bill for water consumed or at such rate as may be prescribed by rules; and

4. The amount collected is towards:- (a) defraying capital cost  of  sewerage  and  sewerage  treatment  works

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1000 mm  sewage Trunk Disposal of Treated Wastewater

Through Dedicated Pipeline/Pipeline laid by the Board part contribution by

JETL

Water Supply

10.38 kms

Jeedimetla Effluent Treatment Limited (JETL)

Vasant Chemicals Private Limited Industrial Wastewater & Domestic

Sewage taken by tankers for Treatment & Disposal

undertaken  by  the  Board;  and  (b)  for  operation  and maintenance of sewerage system from time to time.

16. The appellant being an occupier of a “non-domestic premise”

having  bulk  water  supply  connection  from  the  Board  and  “a

consumer of water” and eventually discharging sewage effluents

into  the  sewer  line  of  the  Board,  the  essential  ingredients  of

Section 55 are thus satisfied.   The levy of  sewage cess by the

respondent is a statutory levy which the appellant is liable to pay

under Section 55 of HMWS&S Act.  Clause 16 of the agreement

provides for payment of sewerage cess in terms of Section 55 of

the Act which inter alia stipulates that the appellant is required to

pay sewerage cess in accordance with Section 55 of the Act.  The

sewerage cess of 35% levied by the Board for carrying the sewage

of the acceptable quality through its transmission system is thus

both  statutory  and  in  terms  of  the  agreement  between  the

appellant and JETL.

17. Contention  of  the  appellant  is  that  it  is  not  liable  to  pay

sewerage cess to  the Board as it  is  not  letting out the sewage

effluents to the sewage system of the Board but is carrying the

effluents  in  the  tanker,  lorries  and  letting  it  out  in  the  effluent

treatment of JETL and thus is not connected with the sewage line

of the Board.  Mr. V. Giri, learned senior counsel for the appellant

contended  that  the  appellant  industry  is  not  connected  with

sewerage system of  the  Board  and therefore,  levy of  sewerage

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cess  under  Section  55  of  the  HMWS&S  Act  is  not  sustainable.

Drawing our attention to the finding of the High Court “that there

is  no  sewerage  line  of  HMWS&SB  connecting  the  appellant’s

premises to the sewerage system of HMWS&SB…..”, the learned

senior counsel for the appellant submitted that since there is no

sewer or drainage line connecting the appellant industry, proviso

to Section 55 of the HMWS&S Act applies and no sewerage cess is

leviable.   It  was further submitted that even assuming that the

dedicated pipeline from JETL for carrying its treated effluents to the

sewerage system of the Board at Balanagar is a “sewerage system

of  the  Board” which  is  more  than  two  kilo  meters  from  the

premises of the appellant industry, JETL is separately paying the

surcharge and the appellant is not connected with the sewerage

system and therefore, there cannot be levy of sewerage cess on

the appellant under Section 55 of the HMWS&S Act.  

18. As pointed out earlier, admittedly, the appellant has obtained

bulk water supply connection from the Board for supply of 36,200

gallons of water per day @ Rs.12/- per kilo litre.  It is also admitted

that  the  appellant  is  discharging its  industrial  effluents  into the

Board sewer line. The appellant being an occupier of the premises

who is consuming water and discharging sewage into the sewerage

system of the Board, in terms of Section 55 of the HMWS&S Act, is

liable  to  pay  sewerage  cess.  Though  the  pipeline  from JETL  to

Kukutpally/Balanagar  is  stated  to  be  the  dedicated  pipeline,  as

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pointed out earlier, this was laid at the cost of Rs.346 lakhs, out of

which, JETL has paid only Rs.75 lakhs.  The rest of the cost was

borne by the Board and the Government of Andhra Pradesh.  It is

pertinent to note that Clause 4 of the agreement dated 31.01.1998

between  JETL  and  the  Board  categorically  stipulates  that  the

dedicated pipeline from JETL to Kukutpally/Balanagar belongs to

the Board.

19. As  per  Section  54  of  the  Act,  sewage  which  is  likely  to

damage or interfere with the free maintenance of the sewerage

system of the Board cannot be passed into the Board sewer and

sewage treatment works.  In terms of Section 54 of HMWS&S Act,

Clause 19 is also incorporated in the agreement dated 27.04.1995

between the appellant industry and HMWS&SB.  As per Clause 19

of the agreement, no effluents shall be discharged into the Board’s

sewerage system unless such effluents are treated in accordance

with the provisions of the Water Act, 1974.  Clause 19 reads as

under:-

“19. No effluent shall  be discharged into the Board sewer unless  such  effluent  is  treated  in  accordance  with  the provisions of Water (Prevention and Control of Pollution) Act, 1974 relating to discharge and disposal of industrial effluents and  other  objectionable  effluents.   Further,  the  treatment shall also conform to the IS specification laid down from time to time for disposal of effluent into the domestic sewer of the Board.”

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Admittedly, JETL is neither a consumer of bulk water supply nor

generating  any  sewage/industrial  effluents  of  its  own.   The

effluents of the appellant industry are not of acceptable standards

for transmission system of the Board.  Before the effluents of the

appellant industry are to be let into the sewer line of the Board, the

appellant industry has to get the effluents treated at its own cost

to bring the quality of the effluents to an acceptable level.  After

getting partial treatment from JETL, the effluents are let into the

said  dedicated  pipeline  which  belongs  to  the  Board  at

Kukutpally/Balanagar and then they are let into 1000 mm diameter

sewage trunk belonging to the Board through which the effluents

are  carried  to  Sewerage  Treatment  Plant  (STP)  at  Amberpet

measuring  a  distance  of  18.90  kilo  meters.  The  length  of  the

pipeline from JETL to Amberpet is 29.28 kilo meters. Though the

appellant’s unit is not directly connected with the Board sewer line,

the industrial effluents of the appellant unit partially treated at JETL

are ultimately let into the Board sewer line which is finally carried

to STP at Amberpet. In the light of this admitted factual position,

the appellant is liable to pay sewerage cess under Section 55 of

the Act.  Proviso to Section 55 of  the Act contemplates that the

sewerage cess shall not be levied on the occupier of the premises

if such premises is stated to be in an area which is not served by

the sewerage system of the Board.  The proviso implies that the

occupier  of  such  premises  cannot  use  the  Board  sewer  by  any

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means whatsoever. Therefore, the contention of the appellant that

it  is  not  liable  to  pay  sewerage  cess  to  the  Board  as  it  is  not

directly letting out sewage effluents into the sewage line of the

Board and that it is carrying its effluents in the tanker, lorries and

letting out  in  the effluent  treatment  plant  of  JETL and thus not

connected with the sewage system of the Board, in our view, is

wholly untenable.    Since the sewage of the appellant is ultimately

let into the sewer line of the Board, the appellant cannot contend

that it  is not covered under Section 55 of the Act and that it is

covered under proviso to Section 55 of the Act.

20. Placing reliance upon Ultra Tech Cement Ltd. v. State of

Maharashtra and another, (2011) 13 SCC 497, learned senior

counsel for the appellant contended that when a particular cess is

leviable under an enactment and the said enactment exempts a

specific  class  of  persons  from  paying  the  said  cess,  the  State

Government cannot make the lessee liable to pay the said cess on

the ground that the agreement was entered into under a different

enactment. Placing reliance upon paras (12) and (20) of the said

judgment, it was contended that there is no sewer or drainage line

connecting  the  appellant’s  units  or  any  other  industry  in

Jeedimetla Effluent Treatment Limited to the sewerage system of

HMWS&SB and neither the appellant nor other industries discharge

their sewage into the sewer line of the Board and, therefore, the

appellant’s  unit  is  covered  under  proviso  to  Section  55  of  the

17

HMWS&S Act. The learned senior counsel further contended that

any  fiscal  extraction  is  required  to  be  constructed  strictly  in

accordance with the provisions of the charging section and even if

a clause for such payment is incorporated into the agreement as

the agreement is subject to the provision of the relevant charging

section.  

21. The above argument proceeds on the presumptive footing as

if the appellant’s unit is covered under proviso to Section 55 of the

HMWS&S Act. Proviso to Section 55 of HMWS&S Act states that no

charge  would  be  levied  in  any  premises  situated  outside  the

sewage system/not served by the sewerage system of the Board.

It has to be seen whether the appellant is right in contending that

the appellant industry is not connected with the sewerage line of

the  Board  and  that  no  sewage  of  the  appellant  is  let  into  the

sewerage  system  of  the  Board  and  therefore,  the  appellant  is

covered under proviso to Section 55 of HMWS&S Act.  

22. In the process of letting out effluents, two things are involved

namely – (i) the treatment of industrial effluents to bring down the

contents of the effluents to an agreed specification on one part;

and  (ii)  the  transmission  of  those  partially  treated  industrial

effluents through the sewerage system of the Board.  Parties have

entered  into  various  agreements  and  there  are  three  sets  of

agreements which are as under:-

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S. No. Parties Date of Agreement

1. M/s.  Vasant  Chemicals  Ltd.  and HMWS&S Board

27.04.1995

2. M/s.  Vasant  Chemicals  Ltd.  and Jeedimetla Effluent Treatment Ltd. (JETL)

22.01.1996

3. Jeedimetla Effluent Treatment Ltd. (JETL) and HMWS&S Board

31.01.1998 and

31.08.2000

23. Let us now consider the effect of the agreement between the

appellant and JETL on the statutory liability of the appellant under

Section 55 of the Act. The agreement between the appellant and

JETL for partial treatment of appellant’s industrial effluents is the

internal  contractual  agreement between JETL and the appellant.

The appellant unit is to treat and process the industrial effluents

and bring them down to permissible standard limits in accordance

with the provisions of Water Act, 1974 and Environment Act, 1986

relating to discharge and disposal of industrial effluents and other

objectionable  effluents  into  sewers  before  discharging  of  the

effluents into the Board sewer. The treated effluents should also

have to conform to the IS specification laid down from time to time

for disposal of effluent into the domestic sewer of the Board. To

discharge  their  contractual  obligation  in  bringing  the  industrial

effluents to permissible standard limits, the appellant unit entered

into an agreement dated 22.01.1996 with JETL engaging it to treat

its industrial effluents in accordance with the environmental laws

in  force.  The  appellant  instead  of  treating  the  effluents  at  its

19

premises at its own cost engaged JETL for treating its effluents.

Thus, for its convenience, the appellant unit has entered into an

agreement with JETL for treating its effluents and the charges paid

by them to JETL are towards the treatment of effluents and bring it

to permissible standards. Therefore, the function of JETL is that of

an  intermediary  with  whose  assistance,  the  appellant  is

discharging its statutory obligation.   

24. Admittedly, the appellant’s industrial effluents are carried to

JETL in closed tankers and after partial treatment at JETL, let into

the Board’s sewer line. Admittedly, the effluents of the appellant’s

unit are not of acceptable standards for transmission through the

sewer line of the Board and therefore, the appellant’s industry and

other industries have to get the effluents treated at their own cost

to  bring  the  quality  of  the  effluents  to  an  acceptable  level  by

treating  the  same to  some extent.  The  sewerage  cess  of  35%

levied by the Board is  for  carrying the sewerage of  acceptable

quality  through  its  sewer  line  and  further  treating  it  at  STP  at

Amberpet.  

25. The sewerage cess aims to recover the cost of treating the

effluents of strength stronger than domestic sewage and to make

the effluents of acceptable quality. In addition to partial treatment

at  JETL,  the  effluents  require  further  treatment  and  their

transmission to Sewer Treatment Plant (STP) at Amberpet situated

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at 18.90 kms from Bala Nagar which requires huge finance. The

maintenance  of  sewer  line  is  highly  essential  for  proper

transmission of the effluents from JETL to Board’s sewer system at

Amperpet where the Board brings down the industrial effluents to

the tolerance limits. It requires huge amount to maintain the STP

treatment of industrial effluents.  Further, it requires high demand

of  energy,  STP  personnel  to  operate  and  maintain  the  system,

skilled and unskilled workers for proper maintenance of the plant.

The respondent-Board unless it collects sewerage cess and other

charges cannot meet the heavy expenditure on the operation and

maintenance of sewerage system. The liability of the appellant to

pay sewerage cess to the Board arises from the Statute and also

by way of an agreement which was agreed upon by the appellant.

There is no merit in the contention of the appellant unit that its

liability has ended upon transferring the industrial effluents to the

respondent-JETL and that it is not connected to the Board’s sewer

line.  As  discussed  earlier,  the  partially  treated  effluents  of  the

appellant’s unit are ultimately let into the sewer line provided by

the  Board  which  is  being  carried  to  Amberpet  STP  for  further

treatment  and  discharge.  After  partial  treatment  at  JETL,  when

appellant’s effluents are let into the Board’s sewage system, the

appellant is not justified in contending that it is not connected to

the sewer line of the Board and hence, covered under the proviso

to Section 55 of the Act.  

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26. It is well-settled that the normal function of a proviso is to

except something out of  the enactment.   While considering the

interpretation  of  the  proviso,  in  Romesh  Kumar  Sharma  v.

Union of India and others, (2006) 6 SCC 510, this Court held as

under:-

“12.  “10.  The normal  function  of  a  proviso  is  to  except something out of  the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. As was stated in  Mullins v. Treasurer of Surrey (1880) 5 QBD 170 (referred to in Shah Bhojraj  Kuverji  Oil  Mills  and  Ginning  Factory v.  Subbash Chandra  Yograj  Sinha  AIR  1961  SC  1596 and  Calcutta Tramways Co. Ltd. v. Corpn. of Calcutta AIR 1965 SC 1728, when  one  finds  a  proviso  to  a  section  the  natural presumption is that, but for the proviso, the enacting part of the section would have included the subject-matter of the proviso. The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment and its effect is  confined  to  that  case.  It  is  a  qualification  of  the preceding  enactment  which  is  expressed  in  terms  too general to be quite accurate. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule. ‘If the language of the enacting part of the statute does not contain the provisions which  are  said  to  occur  in  it  you  cannot  derive  these provisions  by  implication  from  a  proviso.  …’  said  Lord Watson in West Derby Union v. Metropolitan Life Assurance Society  1897 AC 647. Normally, a proviso does not travel beyond the provision to which it is a proviso. It carves out

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an exception to the main provision to which it  has been enacted as a proviso and to no other……”

27. The sewerage cess levied under Section 55 of the HMWS&S

Act is a statutory levy on the appellant as it satisfies the essential

requirements  of  Section  55  of  the  Act.  The  agreement/contract

between  the  appellant’s  unit  and JETL  does  not  take  away the

appellant from the network of the Board’s sewer line and its “use

and  treatment  of  sewerage”  of  the  Board’s  sewerage  system.

Where the appellant’s effluents are being eventually sent to the

Board’s sewer, the contention of the appellant that its premises

are not served with a sewer line by the Board defies logic and runs

contrary to the object of the Act. The appellant, being an occupier

of non-domestic premises, is consuming the water provided by the

Board, generating the industrial  effluents and using the Board’s

sewer to release them after partial treatment. In such an admitted

position, the appellant cannot escape from the statutory levy by

taking  a  technical  approach  and  interpreting  the  proviso  as  a

general rule where it is merely a qualifying one. As the appellant

eventually lets out its effluents to the Board’s sewerage system,

the appellant is not right in contending that it  is covered under

proviso to        Section 55 of the Act.

28. Re:  Contention  –  Levy  of  double  taxation:- Learned

senior  counsel  for  the appellant  contended that  even assuming

that the dedicated pipeline of JETL which connects to the sewerage

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system of the Board at Balanagar is construed to be “Sewer”, any

levy of sewerage cess is applicable only to JETL and JETL under its

agreement  with  HMWS&SB,  is  paying surcharges  and sewerage

charges  to  HMWS&SB  by  collecting  the  said  amount  from  the

appellants and other industries for the said taxable event.  It was

submitted that under Section 55 of HMWS&S Act, the sewerage

cess is collected for the – (i) to defray capital cost of sewerage; (ii)

for sewage treatment works undertaken by the Board; and (iii) for

operation  and  maintenance  of  the  sewerage  system.   It  is

contended that under its  agreement dated 31.08.2000 with the

Board,  JETL  is  paying  various  charges  like  -  (i)  sewerage

connection  charges;  (ii)  charges  towards  maintenance of  sewer

line; (iii) sewerage maintenance and water treatment charges; and

(iv) sewerage surcharge for effluents above a certain level.   It was

contended that various charges paid by JETL to the Board is in

essence “sewerage cess”,  though it  is  collected under different

head “sewerage surcharge”.

29. Taking  us  through  Clause  4  of  the  agreement  with  Board

dated 31.08.2000, Mr. Guru Krishna Kumar, learned senior counsel

appearing  for  JETL  submitted  that  under  agreement  dated

31.08.2000,  various  charges  are  collected  and  it  additionally

provides  for  levy  of  surcharge  also.  It  is  contended  that  even

though these charges may not be christened as a sewerage cess,

they are in effect correspond to the essentials of “sewerage cess”

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in     Section 55 and a levy of cess from the appellant for the same

act of disposal of the sewage would therefore amount to a double

levy on the industrial units. The learned senior counsel submitted

that sewerage cess cannot be exacted from the appellant because

it is already been paid by JETL.  It was urged that various charges

levied on  JETL  are  excessive  arbitrary  apart  from the  fact  that

there is a double levy.  

30. As  rightly  contended  by  learned  senior  counsel  for  the

respondent-Board, the plea of double payment of sewerage cess

was never raised in the writ petition filed by the appellant; but it

was raised by way of oral submission before the High Court and

thereafter, by way of review petition. The plea of double levy was

rightly rejected by the High Court  inter  alia holding that  “even

assuming  for  a  moment  that  the  petitioner-company  is  paying

some amounts to the JETL,  it  cannot be said that it  is  towards

sewerage cess”.

31. As  pointed  out  by  the  learned  senior  counsel  for  the

respondent-Board, JETL never sought to implead itself as a party

respondent  in  the  writ  petition  filed  by  the  Board.   It  is  also

pertinent to point out that one Mr. G.K.B. Chowdary who was then

the Managing Director of the appellant-group of companies, was

also the Managing Director of JETL.  It passes one’s comprehension

as  to  why  JETL  whose  Managing  Director  is  the  same  as  the

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Managing Director of the appellant Group of Companies had not

taken any step to get themselves impleaded in the writ petition

before the High Court and raise the plea of double taxation.   

32. In the Supreme Court, notice was ordered on 07.07.2004 and

permitted the appellant  to implead JETL as party respondent.  It

was  thereafter,  JETL  filed  writ  petition  in  WP(C)  No.17381/2004

(24.09.2004)  inter  alia for  various  reliefs:-  (i)  That  clauses  28

and 29 of the agreement dated 10.06.2003 between the petitioner

company Jeedimetla Effluent Treatment Limited and HMWS&SB as

shylockin  and  unconscionable,  usurious,  exorbitant,

unconstitutional, ultra vires the powers of the HMWS&SB; and (ii)

That  the  action  of  the  HMWS&SB  in  collecting  various  charges

under Clause 4 of the agreement and other charges levied upon

JETL. The said writ petition that kept pending for many years came

to be dismissed by the High Court’s order dated 21.12.2015 for

non-prosecution.    JETL  has  also  filed  WP(C)  No.20117/2017

challenging the enhancement of sewerage surcharge and the said

writ petition is also said to have been dismissed on 25.06.2014.

33. Since,  elaborate  arguments  were  advanced  regarding

“excessive  and  arbitrary  levy  on  JETL”  as  well  as  the  plea  of

“double  levy  of  sewerage  cess”,  we  have  also  considered  the

matter on merits.  Based on three sets of agreements between the

parties, there are three kinds of payments as under:-

26

a) Payment of sewerage cess by the appellant to the Board in terms of Section 55 of the HMWS&S Act and Clause 16 of the agreement dated 27.04.1995;

b) Payment of treatment and processing service charges by the appellant unit to JETL as stipulated in Clause 19 of the agreement  between  the  appellant  and  JETL  dated 01.04.2000; and

c) Various charges paid by JETL to the Board pursuant to the agreement dated 31.08.2000 and the earlier agreements.

So far as the payment by the appellant unit to the Board, it is the

statutory  liability  of  payment  of  sewerage  cess  in  terms  of

Section 55 of HMWS&S Act and Clause 16 of the agreement which

obligates the appellant unit to pay the sewerage cess in terms of

Section 55 of the HMWS&S Act.  The appellant having bulk water

supply connection from the Board and being “consumer of water”

and discharging sewage/effluents into the sewer line of the Board,

the  payment  of  sewerage  cess  by  the  appellant  unit  is  the

statutory liability under Section 55 of the HMWS&S Act and Clause

16 of the agreement.

34. Insofar as the charges paid by the appellant to JETL for the

treatment and processing of its effluents, it is purely contractual

pursuant to the agreement entered into between the appellant unit

and  JETL  dated  01.04.2000  and  the  earlier  agreement  dated

22.01.1996.  As pointed out earlier, the appellant unit is obligated

to treat and process the industrial effluents and bring them down

to permissible standard limits in accordance with the provisions of

27

the Water Act, 1974 and Environment Act, 1986 before they are let

into the sewer line of the Board.  To discharge its statutory as well

as  contractual  obligation,  the  appellant  unit  has  entered  into

agreement  with  JETL  for  the  treatment  and  processing  of

appellant’s  effluents  before  being  let  into  Board’s  sewer  line.

Payment of charges by the appellant to JETL is purely contractual

between the parties and the same cannot be considered to be in

deference to the statutory cess/statutory charge which can only be

levied by the Board.   In  this  regard,  the High Court  has rightly

observed that assuming that the appellant is paying some amount

to JETL, the same cannot be termed as “sewerage cess”.

35. So  far  as  payment  of  charges  by  JETL  to  the  respondent

Board, the same is governed by the terms and conditions of the

agreement between JETL and the Board dated 31.08.2000.  JETL’s

contention  is  two  fold:  -  (i)  levy  of  various  charges  under  the

agreement  is  arbitrary  and  exorbitant;  and  (ii)  double  levy  of

sewerage cess. The gist of the terms and conditions of the contract

dated 31.08.2000 between JETL and the Board and various charges

levied are as under:-

1. Clause 4 specifically stipulated that JETL shall be charged towards overall proportionate sewerage maintenance and sewerage treatment charges being incurred by the Board from time to time on the overall sewerage system of the Board;

28

2. In  terms  of  Clause  4,  the  Board  has  levied  sewerage connection charges @ Rs.4/- per litre for the discharge into the Board sewer (6 equal  installments of  Rs.23.34 lakhs each by 10th of each month) – Total Rs.140.04 lakhs;

3. Clause  18  stipulates  that  no  treated  effluent  shall  be discharged  by  JETL  unless  the  same  is  treated  in accordance with the provisions of  the Water and the Air Acts and the various upper limits of the parameters of the treated industrial effluents shall be within the permissible standard limits prescribed; Further, Clauses 22 to 24 give the Board the right to reject effluents of JETL if they are not found to be consistent with the prescribed parameters;

4. In terms of Clause 28, an amount of rupees one lakh per month is to be paid by JETL towards maintenance of the sewer  line.   Additionally,  JETL  has  to  pay  sewerage maintenance and sewerage treatment charges @ Rs.6 per thousand litres of treated effluents;

5. Further, as per Clause 29, a surcharge was also levied on JETL  for  permitting  industrial  effluents  beyond the  limits prescribed  on  two  important  parameters  viz.  Chemical Oxygen Demand (COD) and Total  Dissolved Solids (TDS); Each  parameter/COD  and  TDS  will  be  considered independent for levy the surcharge.

36. In terms of Rule 4 of Sewerage Rules, the Board shall charge

on  the  applicants  seeking  to  discharge  the  trade  or  industrial

effluents etc.  Rule 4 reads as under:-

“Sewerage and Industrial Effluents-

4. The  Board  shall  charge  on  applicants  seeking  to discharge their trade or industrial effluents, sullage drain, sewer (other than storm sewer or combined sewer)  of  a private party, State Government, Central Government, or

29

local body or local authority,  into Board sewers,  towards the special treatment cost of such sewage and the charges shall be as fixed by the Board from time to time, depending upon  the  nature  of  such  sewage  and  cost  of  treatment involved  to  bring  the  same  within  tolerance  limits  of effluent standards etc.  The installation and maintenance of required meters for measuring the volume of effluents shall  be  insisted  at  the  cost  of  the  applicants,  by  the board.”

Subject to the provisions of Water Act, 1974 and Environment Act,

1986 and subject to the restrictions of Section 54 of HMWS&S Act

and in terms of Rule 4 and other terms and conditions, Board has

the right to permit the ‘applicants’ seeking to discharge their trade

or industrial effluents into the Board’s sewer system and Sewerage

Treatment Plant subject to the imposition of costs.  The treatment

for letting the trade or industrial effluents into the Board’s sewer

shall be subject to such terms and conditions and in such form of

agreement as may be prescribed in the regulations made by the

Board  in  accordance  with  these  rules.  Having  entered  into  the

agreement with the Board on 31.08.2000 and on prior dates, JETL

cannot  turn  around  and  challenge  the  terms  and  conditions

imposed upon it by virtue of the agreement.

37. So far as the various payments made by JETL to the Board,

levy is in terms of Rule 4 of the Sewerage Rules and as per the

contract  and  is  purely  contractual  between  JETL  and  the

respondent  Board  for  letting  partially  treated  the  industrial 30

effluents of the appellant and other units into the Board’s sewer.

Likewise, charges paid by JETL to the Board cannot be said to be in

lieu of the sewerage cess that the appellant unit is liable to pay

which  is  a  statutory  liability.   It  is  pertinent  to  note  that  many

industries about fifty units, apart from the appellant unit, discharge

their effluents to the CETP/JETL.  The agreement dated 31.08.2000

and the earlier agreements between JETL and the Board are purely

contractual consciously entered into between the parties.  

38. JETL lets partially treated effluents into the Board’s sewerage

system for  further  treatment.   As  discussed  earlier,  for  further

treatment of sewerage, the effluents are to be taken to Sewerage

Treatment  Plant  (STP)  at  Amberpet  which  is  situated  at  the

distance  of  08.30  kilometres  from Balanagar.   It  requires  huge

amount for transmission of the effluents to Board’s sewer system

at Amberpet where the Board brings down the industrial effluents

to  tolerance  limits.  As  pointed  out  earlier,  the  treatment  of

industrial effluents requires high demand of energy, personnel to

operate the system and skilled workers  for  maintenance of  the

plant.  Unless  the  Board  collects  sewerage  charge/sewerage

surcharge, the Board cannot meet the heavy expenditure on the

operation and maintenance of  sewerage system.   Various other

members  of  JETL  who  discharge  sewage  into  JETL  which  is

ultimately let into Board sewer line, may or may not be consumers

of water supply by the Board.  That apart, members of JETL may

31

have their own source of water supply or they may supplement the

supply of water from the Board through different sources either by

extraction of ground water or supply through tankers which cannot

be quantified by the Board.  In pursuance of the provisions of the

HMWS&S  Act  and  the  Sewerage  Rules  and  pursuant  to  the

agreement dated 31.08.2000, the charges are levied on JETL who

in turn collects the charges from its member industrial units who

discharge their effluents into JETL.  Therefore, the payments made

by JETL to the Board and the charges in turn collected by JETL from

the  appellant  and  other  member  units,  cannot  absolve  the

appellant unit from its statutory liability to pay the sewerage cess.

We find no merit  in the contention that there is  double levy of

sewerage cess.

39. Levy  of  sewerage cess being a  statutory  levy in  terms of

Section 55 of HMWS&S Act and Clause 16 of the agreement which

incorporates the statutory levy under Section 55 of HMWS&S Act,

the learned Single Judge and the Division Bench rightly recorded

concurrent  findings  upholding  the  levy.   Observing  that  the

appellant  being  occupier  of  the  premises,  though  not  directly

connected to the sewer line of the Board, is ultimately letting into

the sewerage system of the Board after partial treatment at JETL,

the High Court was right in holding that the levy of sewerage cess

is in accordance with Section 55 of HMWS&S Act. The payment of

sewerage surcharges and the other charges by JETL cannot take

32

away the statutory liability of sewerage cess levied on the occupier

of the premises who consumes water and lets out the sewage into

the Board sewer system. The payment of sewerage surcharge and

other charges by JETL to the respondent-Board will not amount to

double levy and the High Court rightly dismissed the writ petitions

and also the review petitions filed by the appellant.  The impugned

order does not suffer from any infirmity warranting interference.

40. In the result,  these appeals are dismissed.  The arrears of

sewerage cess, if any, to be paid by the appellant within a period

of eight weeks from today with 6% interest with effect from the

date cess fell due. If the arrears are not paid within the stipulated

period of eight weeks, it  shall  carry interest at the rate of 12%

thereafter.

..……………………….J.      [R. BANUMATHI]  

                            ...………………………..J.      [INDIRA BANERJEE]

New Delhi; February 13, 2019

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