2016 (7) TMI 1676 - HC - Indian Laws

Court upholds NMMC's authority to levy taxes within jurisdiction, dismisses petitions challenging cess demands.

M/s. Super Label Manufacturing Co. ; M/s. Crown Corrugators Pvt. Ltd. ; M/s. Shiv Shankar Textile Processors Pvt. Ltd. (Formerly known in the name and style of M/s. Oceana Textiles Mills P. Ltd.) ; M/s. Schlim Engineers; M/s. Swaraj Erectors Pvt. Ltd. ; M/s. Sachins Impex Versus The State of Maharashtra and Ors.

The court dismissed the petitions challenging the demands for cess, penalties, and interest under various rules and upheld the authority of the NMMC to ... Inclusion of MIDC's notified area, i.e., TTC-Thane-Belapur Industrial Area in Notification dated 17 December 1991, by which, NMMC came to be constituted - petitioners contend that the MIDC is the Special Planning Authority insofar as such notified area is concerned and therefore, it is only the MIDC, which is competent to levy any tax, cess or other charges upon the petitioner's industries/properties, which are located within such notified area. HELD THAT:- There is no merit in the contention of Mr. E.A. Sasi that the property taxes or cess levied by the NMMC had not been challenged in case of Small Scale Entrepreneurs Association [[2010 (7) TMI 957 - BOMBAY HIGH COURT]] and that the challenge was only restricted to the Notification dated 17 December 1991, to the extent, the notification, whilst constituting the NMMC had included within its jurisdictional area, the MIDC's notified area, wherein, the petitioners' properties/industries are located. Once, the challenge to such inclusion came to be negatived, as a corollary therefore, the NMMC was held entitled to levy property taxes and other taxes upon the petitioners' industries, though, such industries may be stated to be located within the MIDC's notified area. Insofar as the challenge to validity of Rule 41 as aforesaid is concerned, it must be noted that nothing prevented the Small Scale Entrepreneurs Association from raising such challenge in Writ Petition No. 2787 of 2001, which has since been disposed of on 8 July 2010. It is impermissible for parties to raise challenges in installments, when it is apparent that the entire purpose for institution of Writ Petition No. 2787 of 2001 was to question the levy of property taxes or other taxes by the NMMC, insofar as the petitioners' properties/industries, which are located within MIDC's notified area are concerned. The petitioners have not disclosed as to whether in pursuance of liberty granted by this Court in Writ Petition No. 2787 of 2001, the petitioner had instituted appeals under Section 406 of the MMC Act in order to question the levy of cess. Possibly, the petitioners have avoided taking such route because Section 406(8) of the MMC Act, inter alia provides no appeal under sub-section (6) shall be entertained unless the amount of disputed tax claimed from the appellant has been deposited by the appellant with the Commissioner. By adding some challenge to the vires of the provisions of the MMC Act or the rules made thereunder, so as to evade the requirement of pre-deposit, as mandated in Section 406(8) of the MMC Act. The extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India is not meant to by-pass the statutory remedies otherwise available under the MMC Act - Rule is discharged in Writ Petition No.8506 of 2016 and interim order is hereby vacated. Issues Involved:1. Demand for cess under Rule 35(1) of the Maharashtra Municipal Corporation (Cess on Entry of Goods) Rules 1996.2. Notification dated 17 December 1991 including 'notified areas' of MIDC's TTC-Thane Belapur Industrial Area within the limits of 'City' under Section 2(8) of the MMC Act.3. Constitutional validity of Rule 41 of the Taxation Rule appended to Schedule-D of the MMC Act imposing penalties.4. Constitutional validity of Rule 41 of the Maharashtra Municipal Corporation (Cess on Entry of Goods) Rules 1996 imposing penalties and interest on unpaid cess.5. Demands towards interest and penalty on unpaid or late-paid cess.Detailed Analysis:1. Demand for Cess under Rule 35(1):The petitioners challenged the demand for cess under Rule 35(1) based on the argument that the Notification dated 17 December 1991, which included the 'notified areas' of MIDC's TTC-Thane Belapur Industrial Area within the limits of 'City' under Section 2(8) of the MMC Act, was ultra vires and unconstitutional. They contended that the MIDC is the Special Planning Authority under Section 40(1A) of the MRTP Act and thus, the Navi Mumbai Municipal Corporation (NMMC) was incompetent to levy any cess. The court noted that similar contentions were raised and rejected in the case of Small Scale Entrepreneurs Association vs. State of Maharashtra, and therefore, the challenge to the inclusion of the notified area was already decided against the petitioners.2. Notification dated 17 December 1991:The petitioners argued that the MIDC area should not be included within the jurisdiction of the NMMC as per the Notification dated 17 December 1991. They claimed that the MIDC, being the Special Planning Authority, should be the only entity to levy taxes or cess. The court referred to the previous judgment in the Small Scale Entrepreneurs Association case, which had already addressed and rejected these arguments. The court emphasized that the NMMC was entitled to levy property taxes and other taxes within its jurisdiction, including the MIDC's notified area.3. Constitutional Validity of Rule 41 of the Taxation Rule:The petitioners questioned the constitutional validity of Rule 41 of the Taxation Rule appended to Schedule-D of the MMC Act, which imposed penalties for failure to pay cess within the stipulated period. They argued that the MMC Act did not contain any substantive provision for the imposition of penalties or interest on unpaid cess. The court found no merit in this challenge, stating that Section 453 of the MMC Act deemed the rules in Schedule-D to be part of the Act, thus validating the imposition of penalties and interest.4. Constitutional Validity of Rule 41 of the Maharashtra Municipal Corporation (Cess on Entry of Goods) Rules 1996:The petitioners also challenged the constitutional validity of Rule 41 of the Maharashtra Municipal Corporation (Cess on Entry of Goods) Rules 1996, which authorized the imposition of penalties and interest on unpaid cess. They argued that the parent Act did not provide for such penalties and interest, making the rule ultra vires. The court rejected this argument, citing Section 453 of the MMC Act, which made the rules part of the Act, and Section 456A, which granted the State Government special powers to make rules, including those for penalties and interest.5. Demands Towards Interest and Penalty:The petitioners contested the demands for interest and penalties on unpaid or late-paid cess. The court noted that the petitioners had been resisting payment of cess for several years and had not pursued statutory remedies available under the MMC Act, such as filing appeals under Section 406. The court emphasized that the extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India should not be used to bypass statutory remedies. The court found no merit in the challenges to the demands for interest and penalties.Conclusion:The court discharged the Rule in Writ Petition No. 8506 of 2016 and vacated the interim order. The remaining petitions were dismissed, and the court found no merit in the challenges raised by the petitioners. The court emphasized that the NMMC had the authority to levy taxes and cess within its jurisdiction, including the MIDC's notified area, and upheld the validity of the rules imposing penalties and interest on unpaid cess.