Whether civil suit challenging the valuation, assessment or levy, or liability of any person to be assessed or taxed for property tax is maintainable?

  In Bata Shoe Company's case, the Supreme Court, which was dealing with Section 84(3) of C.P. and Berar Municipalities Act, which is in pari materia with the provisions of Section 172 of the Maharashtra Municipalities Act, held that Section 84(3) of C.P. and Berar Municipalities Act expressly prohibits challenge to a valuation, assessment or levy, "in any other manner than provided in the Act" and since the Act has devised its own special machinery for enquiry into and adjudicating upon such challenges, the common remedy of a suit stands necessarily excluded and cannot be availed of by a person aggrieved by order of assessment to octroi duty. It was observed by the Supreme Court in this case that since the special machinery was devised for enquiry and adjudicating upon the duty of the tax, the common remedy of suit stands necessarily excluded and cannot be availed by a person aggrieved by the order of assessment. The octroi collected by Municipal Committee of Jabalpur on the goods imported by Bata Shoe Company was subsequently sought to be revised. It was revised and was paid by Bata Shoe Company and further, having paid such revised octroi duty, a suit was filed questioning the legality of refund or opening of the octroi already paid. It was held that the Municipal Committee had jurisdiction to reopen the cases to collect the tax. {Para 6}

7. The Supreme Court interpreted Section 84(3) of the C.P. and Berar Municipalities Act and held that such challenge to the valuation, assessment or levy could not be raised by filing a suit. It was observed by the Supreme Court that the decision of the Municipal Committee could not be said to be without jurisdiction. The case in Bharat Kala Bhandar Vs. Municipal Committee, Dhamangaon, reported in (1965)3 SCR 499 was distinguished by the Supreme Court, in which it was held that the action on the part of the Municipal Committee was unconstitutional. In Bharat Kala Bhandar's case, a suit was filed for recovery of excess tax paid by the plaintiff under Section 66(1)(b) of the Central Provinces Municipal Tax Act, 1922 on the ground that after coming into force of Section 142-A of the Government of India Act, 1935, till January 25, 1950, a tax in excess of Rs.50/- p.a. could not be imposed by the Municipal Committee. It was held in that case that the Municipal Committee had acted unconstitutionally as it was not entitled and it had no jurisdiction to collect tax in excess of Rs.50/-, as laid down under the provisions of Section 142 of the Government of India Act.

8. Thus, in Bata Shoe Company's case, the Supreme Court held that Section 84(3) of C.P. and Berar Municipalities Act expressly prohibited a challenge to the valuation, assessment or levy in any other manner than provided in the Act and since C.P. and Berar Municipalities Act has devised its own special machinery for enquiring into and adjudicating upon such challenges, the common remedy of a suit stood necessarily excluded and could not be availed of by person aggrieved by order of assessment. It was further held that Section 84(3) excluded expressly the power of any other authority than is provided in this Act to entertain an objection to any valuation, assessment or levy of octroi/tax. The provisions of Section 84(3) of C.P. and Berar Municipalities Act, as stated earlier, is in pari materia with Section 172 of the Maharashtra Municipalities Act and, therefore, the suit challenging valuation, assessment or levy of tax cannot be filed. The remedy provided under Section 169 of the Act i.e. filing of appeal before Magistrate and revision against the order of Magistrate will have to be availed of.

9. While deciding the aforesaid Bata Shoe Company's case, the Supreme Court did not disapprove the principles laid down in Bharat Kala Bhandar's case, wherein it was held that the act of the authority was unconstitutional and without jurisdiction, separate suit lay against it. In the case in hand, it is not the case of the plaintiff that the act of Municipality in imposing the tax was unconstitutional or without jurisdiction. On the contrary, the case of the original plaintiff was that the imposition of tax was exorbitant, unreasonable and that the procedure laid down under the Act was not followed. By applying the ratio laid down in Bata Shoe Company's case, this Court has, thereafter, in number of cases, held that the challenge to the procedure relating to the levy of any tax and assessment of the property for the purpose of tax amounts to challenge the assessment itself. When the plaintiff challenges the assessment on the basis that the provisions of the Act had not been correctly appreciated or followed and the tax was levied on the property without any basis, it is nothing but challenging to the assessment itself. It has been held by this Court in the case of Chief Officer, Sangamner Municipal Council Vs. Narayandas Jagannath Karwa (supra) that in such cases the bar under Section 172 of the Act will operate in respect of challenge to assessment on the ground of non-compliance of the Rules or of denial of principles of natural justice and of malice. This has been the consistent view of this Court. This Court, in Gandhi Agencies, Barshi Vs. Municipal Council, Barshi (supra), held that the suit for injunction seeking to restrain the Municipal Council from recovering octroi so as to include amounts allowed as discount in the invoice could only be challenged by way of appeal and revision and that jurisdiction of civil court to try suit is barred. This Court, by another judgment in the case of Ulhasnagar Municipal Council Vs. Arjun Kungooram Balani (supra), held that challenge to demand of Municipal for recovery of taxes by civil suit claiming declaration and injunction was barred under Section 172 of the Maharashtra Municipalities Act and that civil court had no jurisdiction. It was further held that the remedy lies by way of appeal under Section 169 of the Act before the Judicial Magistrate.

10. There is no dispute that in that case the plaintiff, who owned houses within the area of Municipal Council, Aurangabad, was issued with the bills in respect of the house, claiming consolidated property tax and that the original plaintiff, respondent herein challenged this saying that the tax was exorbitant, unreasonable and that the procedure laid down in the Act was not followed. It was never the case and was not shown that the Maharashtra Municipality Act was unconstitutional or without jurisdiction. What was stated was the procedure elapses and that could not be challenged in view of the Supreme Court's ruling in many cases, some of which have been cited in the foregoing paragraphs.

11. The defendant, in its written statement, had taken a plea of bar of civil suit. Both the courts below have erroneously held that the suit was not barred under Section 172 of the Maharashtra Municipalities Act. This Court, after careful consideration of the cases cited by learned counsel for the appellant, and for the reasons recorded in the foregoing paragraphs, holds that the civil suit challenging the valuation, assessment or levy or liability of any person to be assessed or taxed, cannot be questioned by filing suit and that it can be challenged in the manner provided in the Act itself.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY(AURANGABAD BENCH)

A.S. BAGGA, J.

Municipal Corporation, Aurangabad Vs. Shaikh Mohammed S/O. Shaikh Yusufsaheb

Second Appeal No.195 of 1984

5th March, 2004

Citation: 2004(3) ALL MR 532

JUDGMENT :- This Second Appeal, filed by the Municipal Corporation, Aurangabad, is directed against the judgment and decree dated 17-12-1982, passed by learned Joint Civil Judge, Senior Division, Aurangabad in Regular Civil Suit No.919/1972, which is confirmed by learned Assistant Judge, Aurangabad by his judgment and order dated 10-7-1984, passed in Regular Civil Appeal No.156/1983.

2. The respondent owns Municipal houses No.2-13-5 and 2-13-6, situated at Kelibazar, Aurangabad. The appellant Municipal Council, Aurangabad issued bills Nos.88 and 89, dated 30-9-1972 in respect of these two houses, claiming consolidated property tax of Rs.441/- and 663.90 for the years 1970-71 and 1971-72. The respondent brought a suit stating that the imposition of tax was exorbitant, unreasonable and that the procedure laid down under the Maharashtra Municipalities Act, 1965 (hereinafter referred to as 'the Act' for short) was not followed; no assessment list was prepared and that there was no authentication of the list by authorised valuation officer; the procedure laid down under Sections 112 to 124 was not followed and, therefore, the bills of demand were not in conformity with Section 150 of the Act. The respondent/original plaintiff, therefore, filed the suit, seeking declaration and injunction against the present appellant/Municipal Council from collecting the tax on the basis of the said bills.

3. The suit was resisted by Municipal Council, present appellant. It was stated by Municipal Council that the rules were duly published under Section 112 of the Act; the list was duly published and the list was prepared under Section 124 of the Act, which was valid for four years. Fresh authentication under Sections 121 and 122, according to the original defendant/Municipal Council was not required for each year. In short, it was denied that the procedure for assessment of tax was not followed. Apart from this, the maintainability of the suit was questioned firstly on the ground that the notice, as required under Section 304 of the Act, was not served on the original defendant/Municipal Council and finally it was stated that Section 169 of the Act provides for appeal against the claim for taxes and bills presented to any person under Section 150 of the Act; the assessment of tax was done is good faith and, therefore, civil suit was not maintainable on account of specific bar provided under Section 172 of the Act.

4. Learned trial Judge, after framing necessary issues and recording the evidence, as was led by the parties, recorded a finding that the procedure was not followed and, therefore, the bills given to the plaintiff were void; that the original plaintiff was entitled to challenge the bills. Learned trial Judge, after recording these findings, proceeded to decree the suit of the original plaintiff and restrained the present appellant from collecting the tax under the bills. Aggrieved by the aforesaid judgment and decree, the present appellant preferred appeal before learned District Judge, Aurangabad. The contention of the appellant that the suit was barred in view of the provisions contained in Section 172 of the Act were not accepted. Learned first appellate Court also held that the bills issued to the original plaintiff were illegal and that they were not enforceable. Learned first appellate Court, rejecting the contention raised by the present appellant, dismissed the appeal. It is against the decree of the learned trial Judge, which is confirmed by the first appellate Court that the present Second Appeal has been filed.

5. I have heard Shri. M. N. Nawandar, learned counsel for the appellant and Shri. A. H. Kasliwal, learned counsel for the respondent. I have gone through the judgment of both the courts below. It has been pointed out by learned counsel for the appellant that the respondent in the suit has challenged the imposition and assessment of tax under the bills Nos.88 and 89, dated 30-9-1972. The challenge is raised on the ground that the procedure relating to levy of tax and assessment of the property for the purpose of tax and, therefore, ultimately the challenge is to the assessment itself. It is, therefore, argued by learned counsel for the appellant that Section 172 of the Act bars entertaining such suits. Suit for declaration that assessment is illegal and for consequential injunction not to enforce the assessment is not maintainable. Reliance in that regard is placed by learned counsel for the appellant on the observations made by the Supreme Court in Bata Shoe Company Limited Vs. Jabalpur Municipality, reported in AIR 1977 SC 955 and the cases decided by this Court subsequently, including the cases between Chief Officer, Sangamner Municipal Council Vs. Narayandas Jagannath Karwa and another, reported in 1989(I), Mh.L.J. 26; Ulhasnagar Municipal Council Vs. Arjun Kungooram Balani, reported in 1998 (II) Mh.L.J. 49 : [1999(1) ALL MR 99] and Gandhi Agencies, Barshi s. Municipal Council, Barshi and another, reported in 1995 (II) Mh.L.J. 76.

6. In Bata Shoe Company's case, the Supreme Court, which was dealing with Section 84(3) of C.P. and Berar Municipalities Act, which is in pari materia with the provisions of Section 172 of the Maharashtra Municipalities Act, held that Section 84(3) of C.P. and Berar Municipalities Act expressly prohibits challenge to a valuation, assessment or levy, "in any other manner than provided in the Act" and since the Act has devised its own special machinery for enquiry into and adjudicating upon such challenges, the common remedy of a suit stands necessarily excluded and cannot be availed of by a person aggrieved by order of assessment to octroi duty. It was observed by the Supreme Court in this case that since the special machinery was devised for enquiry and adjudicating upon the duty of the tax, the common remedy of suit stands necessarily excluded and cannot be availed by a person aggrieved by the order of assessment. The octroi collected by Municipal Committee of Jabalpur on the goods imported by Bata Shoe Company was subsequently sought to be revised. It was revised and was paid by Bata Shoe Company and further, having paid such revised octroi duty, a suit was filed questioning the legality of refund or opening of the octroi already paid. It was held that the Municipal Committee had jurisdiction to reopen the cases to collect the tax.

7. The Supreme Court interpreted Section 84(3) of the C.P. and Berar Municipalities Act and held that such challenge to the valuation, assessment or levy could not be raised by filing a suit. It was observed by the Supreme Court that the decision of the Municipal Committee could not be said to be without jurisdiction. The case in Bharat Kala Bhandar Vs. Municipal Committee, Dhamangaon, reported in (1965)3 SCR 499 was distinguished by the Supreme Court, in which it was held that the action on the part of the Municipal Committee was unconstitutional. In Bharat Kala Bhandar's case, a suit was filed for recovery of excess tax paid by the plaintiff under Section 66(1)(b) of the Central Provinces Municipal Tax Act, 1922 on the ground that after coming into force of Section 142-A of the Government of India Act, 1935, till January 25, 1950, a tax in excess of Rs.50/- p.a. could not be imposed by the Municipal Committee. It was held in that case that the Municipal Committee had acted unconstitutionally as it was not entitled and it had no jurisdiction to collect tax in excess of Rs.50/-, as laid down under the provisions of Section 142 of the Government of India Act.

8. Thus, in Bata Shoe Company's case, the Supreme Court held that Section 84(3) of C.P. and Berar Municipalities Act expressly prohibited a challenge to the valuation, assessment or levy in any other manner than provided in the Act and since C.P. and Berar Municipalities Act has devised its own special machinery for enquiring into and adjudicating upon such challenges, the common remedy of a suit stood necessarily excluded and could not be availed of by person aggrieved by order of assessment. It was further held that Section 84(3) excluded expressly the power of any other authority than is provided in this Act to entertain an objection to any valuation, assessment or levy of octroi/tax. The provisions of Section 84(3) of C.P. and Berar Municipalities Act, as stated earlier, is in pari materia with Section 172 of the Maharashtra Municipalities Act and, therefore, the suit challenging valuation, assessment or levy of tax cannot be filed. The remedy provided under Section 169 of the Act i.e. filing of appeal before Magistrate and revision against the order of Magistrate will have to be availed of.

9. While deciding the aforesaid Bata Shoe Company's case, the Supreme Court did not disapprove the principles laid down in Bharat Kala Bhandar's case, wherein it was held that the act of the authority was unconstitutional and without jurisdiction, separate suit lay against it. In the case in hand, it is not the case of the plaintiff that the act of Municipality in imposing the tax was unconstitutional or without jurisdiction. On the contrary, the case of the original plaintiff was that the imposition of tax was exorbitant, unreasonable and that the procedure laid down under the Act was not followed. By applying the ratio laid down in Bata Shoe Company's case, this Court has, thereafter, in number of cases, held that the challenge to the procedure relating to the levy of any tax and assessment of the property for the purpose of tax amounts to challenge the assessment itself. When the plaintiff challenges the assessment on the basis that the provisions of the Act had not been correctly appreciated or followed and the tax was levied on the property without any basis, it is nothing but challenging to the assessment itself. It has been held by this Court in the case of Chief Officer, Sangamner Municipal Council Vs. Narayandas Jagannath Karwa (supra) that in such cases the bar under Section 172 of the Act will operate in respect of challenge to assessment on the ground of non-compliance of the Rules or of denial of principles of natural justice and of malice. This has been the consistent view of this Court. This Court, in Gandhi Agencies, Barshi Vs. Municipal Council, Barshi (supra), held that the suit for injunction seeking to restrain the Municipal Council from recovering octroi so as to include amounts allowed as discount in the invoice could only be challenged by way of appeal and revision and that jurisdiction of civil court to try suit is barred. This Court, by another judgment in the case of Ulhasnagar Municipal Council Vs. Arjun Kungooram Balani (supra), held that challenge to demand of Municipal for recovery of taxes by civil suit claiming declaration and injunction was barred under Section 172 of the Maharashtra Municipalities Act and that civil court had no jurisdiction. It was further held that the remedy lies by way of appeal under Section 169 of the Act before the Judicial Magistrate.

10. There is no dispute that in that case the plaintiff, who owned houses within the area of Municipal Council, Aurangabad, was issued with the bills in respect of the house, claiming consolidated property tax and that the original plaintiff, respondent herein challenged this saying that the tax was exorbitant, unreasonable and that the procedure laid down in the Act was not followed. It was never the case and was not shown that the Maharashtra Municipality Act was unconstitutional or without jurisdiction. What was stated was the procedure elapses and that could not be challenged in view of the Supreme Court's ruling in many cases, some of which have been cited in the foregoing paragraphs.

11. The defendant, in its written statement, had taken a plea of bar of civil suit. Both the courts below have erroneously held that the suit was not barred under Section 172 of the Maharashtra Municipalities Act. This Court, after careful consideration of the cases cited by learned counsel for the appellant, and for the reasons recorded in the foregoing paragraphs, holds that the civil suit challenging the valuation, assessment or levy or liability of any person to be assessed or taxed, cannot be questioned by filing suit and that it can be challenged in the manner provided in the Act itself. The Second Appeal, therefore, succeeds. In the result, the Second Appeal is allowed. Judgment and decree passed by both the courts below is set aside. No order as to costs.

Second Appeal allowed.

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