2025 (11) TMI 848 - HC - Indian Laws

Hostel premises held residential; commercial tariffs, demand notices quashed for lack of prior notice and natural justice violation; Section 100

Mrs. M. Divya, Easwaramoorthi, P. Jothimani, V Anitha, R. Anitha, D Dhanagopal, M. Divya, Subburayan Mens Pg Represented by its proprietor MN Subburayan, S/O. Nagaiah, V.P. Kumaravel Versus The Senior Revenue Officer, The Assistant Commissioner, Coimbatore., The Commissioner Coimbatore City Municipal Corporation, Special Tahsildar Chennai Metropolitan Water Supply And Sewerage Board, Tamilnadu, The Secretary to Government, Municipal Administration and water supply Department, The Chairman Chennai Metro water Supply and Sewerage Board, The Depot Manager Chennai Metro water Supply and Sewerage Board, The Assistant Engineer Chennai, The Commissioner Coimbatore City Municipal Corporation, Coimbatore, The Assistant Commissioner East Zone Coimbatore

HC held that petitioners' hostel premises are residential, not commercial, and commercial tariff cannot be applied for property tax, water tax, water ... Nature of Hostel Premises - Petitioners' property to be treated as commercial premises for the purpose of levying property tax, water tax, water charges and electricity charges by looking from the perspective of service provider or not - filing of present petitions on the aspect of violation of principles of natural justice, in spite of the alternate remedy available in terms of Section 100 of the 1998 Act - main contention of the petitioners was that the impugned demand notices were issued by the concerned respondents without any proper prior notice. Whether the petitioners' property be treated as commercial premises for the purpose of levying property tax, water tax, water charges and electricity charges by looking from the perspective of service provider? - HELD THAT:- If the petitioners' hostels were treated as commercial unit, it will be a clear discrimination against the poor. The Legislation was not intend to charge more for poor and keep the rich in comfortable position by levying tax at lower rate of tariff. Even for example, if commercial tariff is applied, a person residing in hostel has to pay double the amount towards property tax and water tax, whereas, the person, living in bungalow/apartment, who is able to spend higher amount towards rent, will be eligible for payment of property tax, water tax, water charges, etc., at concessional rate, which is applicable for residential unit. If the respondents' contentions are accepted, the poor and lower middle class people, who are living in hostel, will be deprived of the said concession, and this discrimination is not permissible under the Constitution of India. Thus, it is clear that activities carried on at the petitioners' hostels are only residential in nature and it is not commercial. Therefore, the issue is hereby answered by holding that the petitioners' property cannot be considered as commercial property and thus, the commercial tariff will not apply for the petitioners' properties. In spite of the alternate remedy available in terms of Section 100 of the 1998 Act, whether the petitioners can file the present petitions on the aspect of violation of principles of natural justice? - HELD THAT:- Though an alternate remedy is available for the petitioner in terms of Section 100 of 1998 Act, they can also agitate before this Court by way of filing writ petitions on the aspect of violation of principles of natural justice and there is no bar for the petitioners to approach this Court without filing statutory appeal, which will be filed only on the factual aspects and not on legal issues. When a legal issue raised, the same shall be entertained by this Court by invoking the powers available under Article 226 of the Constitution of India. When a similar issue arise in GST Matter, the same petitioners filed a batch of writ petition before this Court in W.P.No.28486 of 2023, etc. [2024 (3) TMI 1271 - MADRAS HIGH COURT]. In the said batch of writ petitions, this Court, vide order dated 22.03.2024, had arrived at a conclusion by holding that the nature of activities carried on by the petitioners therein for the purpose of levying GST has to be considered/looked into from the perspective of the usage of premises by the recipients of service and it is immaterial to consider the aspect as to how the petitioners, being the owners of the premises, are considering the receipt of rent from the tenant and treating the same in his books of account. Further, in that case, this Court had arrived at a categorical conclusion that the hostel rooms were used by the inmates only as a sleeping apartment and the same would fall under the category of residential premises - Even in the above case, this Court has already laid down the law that the hostel rooms, which were used by working men/women or student as sleeping apartment after their avocation, has to be considered as “residential unit” and the same yardstick will squarely apply in the present case also. The nature of activities carried on by the petitioner is only residential in nature and accordingly, the residential tariff will apply for the purpose of levying the property tax, water tax and water charges for the petitioners' properties - It is needless to state that if the property tax as well as the water tax are required to be collected in the residential tariff and ultimately, the electricity charges is also required to be collected only in the residential tariff - there is a clear violation of principles of natural justice. In these cases, no notice was issued to the petitioners prior to the conversion of petitioners' properties from residential tariff into commercial tariff. Therefore, on this aspect also, the impugned notices are liable to be quashed. All the impugned notices are liable to be quashed. Accordingly, the same are quashed. While quashing the demand notices, the respondents are directed to treat the petitioners' property as “residential unit” and levy the taxes, such as property tax, water tax and electricity charges, accordingly. Petition allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether hostel premises let out to working men/women and students are to be classified as commercial premises (subject to commercial tariff for property tax, water tax, water charges and electricity charges) when assessed from the perspective of the service-provider. 2. Whether writ petitions under Article 226 can be entertained on alleged violation of principles of natural justice in levy/conversion of tariff despite existence of statutory appeal under Section 100 of the Tamil Nadu Urban Local Bodies Act, 1998. ISSUE-WISE DETAILED ANALYSIS Issue 1: Classification of hostel premises as residential or commercial for levy of property tax, water tax, water charges and electricity charges Legal framework: Relevant statutory definitions of 'residence'/'reside' in the Coimbatore City Municipal Corporation Act, 1981; Chennai City Municipal Corporation Act, 1919; and Tamil Nadu Urban Local Bodies Act, 1998; Regulation 4(ii) and Regulation 7 of the Chennai Metropolitan Water Supply & Sewerage Board (CMWSSB) Service Charges (Levy and Collection) Regulations, 1998; and the definition of 'hostel' under the Tamil Nadu Hostels and Homes for Women and Children (Regulation) Act, 2014. Principle that tariff classification for taxation should reflect the nature of use of premises. Precedent treatment: The Court followed and applied earlier High Court decisions (including those treating hostels used as sleeping apartments by students/working persons as residential) and relied on reasoning in recent writ orders addressing GST treatment of hostels that held the end-use/resident perspective controls classification. The Court treated administrative rulings equating 'private hostels' to commercial premises as distinguishable where end-use is residential. Interpretation and reasoning: The statutory definitions uniformly deem a place to be a 'residence' if any portion is sometimes used as a sleeping apartment; absence or secondary dwelling does not defeat residence if liberty to return remains. The decisive criterion is the nature of activities of the recipient of services (the inmates) - sleeping, eating, washing, and using common kitchen/wash facilities - which constitute residential use. The Court rejected classification based solely on the service-provider's business model (renting/receiving rent) or on presence of trade/registration/licenses (e.g., shops and establishments or trade licence) as determinative for tariff classification. Regulation 4(ii) (listing 'private hostels' under commercial premises) operates only where hostels function as commercial accommodation and not where the premises are used by inmates as residential dwelling units; such hostels fall under Regulation 7's 'domestic residential premises.' Analogous GST jurisprudence and notifications were examined to show that exemption/neutral treatment for renting of residential dwelling depends on end-use as residence; the Court applied that interpretive approach to municipal tariff classification. Ratio vs. obiter: Ratio - The classification for municipal and related service tariffs must be determined by the nature of use by the recipient (resident/inmate) and not merely by the owner/provider's commercial status; hostel rooms used by inmates as sleeping apartments are residential units for tariff purposes. Obiter - Extended discussion comparing policy implications (discrimination against poor) and detailed treatment of GST exemption jurisprudence; supportive authorities discussed but the core holding is the resident-use yardstick. Conclusions: The Court held that where hostel rooms are used by inmates as residential sleeping apartments with typical residential facilities, such premises are to be treated as residential units for the purpose of property tax, water tax, water charges and electricity charges and cannot be summarily classified as commercial merely because they are let out or generate rental income. The Court directed respondents to apply residential tariff unless there is material showing use for commercial activities. Issue 2: Maintainability of writ petitions under Article 226 despite alternate statutory appeal and alleged violation of natural justice Legal framework: Article 226 powers to adjudicate legal questions and interpret statutory provisions; Section 100 of the Tamil Nadu Urban Local Bodies Act, 1998 providing statutory appeal to the Taxation Appeals Committee as an alternative remedy for taxation disputes. Precedent treatment: The Court relied on principle that where legal questions of statutory interpretation or violation of fundamental justice (natural justice) arise, writ jurisdiction is available notwithstanding an alternate statutory remedy; distinction between factual disputes appropriate for statutory appeal and legal/constitutional issues cognizable under Article 226 was applied. Interpretation and reasoning: The Court observed that core issues raised were legal (classification of residential vs commercial in light of statutory definitions) and therefore amenable to judicial determination under Article 226. On the natural justice point, respondents failed to produce documentary evidence of any prior notice or opportunity before converting tariff from residential to commercial; absence of such evidence indicated a breach of principles of natural justice. Given that conversion and levy implicate legal rights and constitutional protections (equal protection and freedom to carry on business insofar as discriminatory taxation was alleged), immediate judicial process was held appropriate. Ratio vs. obiter: Ratio - Writ petitions challenging classification as commercial and alleging violation of natural justice are maintainable under Article 226 even if a statutory appeal exists, where legal issues and absence of fair notice are involved. Obiter - Remarks on the limited scope of this order (applicability only to present cases and similarly constituted hostels subject to verification) and guidance that respondents must verify on record before applying this reasoning to other hostels. Conclusions: The Court allowed the writ petitions on natural justice and legal grounds, quashed the impugned demand notices, and directed respondents to assess and collect taxes at residential tariff for the petitioners' properties; the Court clarified that the decision applies to the present cases and similar hostels only after verification of residential use by the appropriate authority. Remedial and ancillary findings 1. Absence of documentary evidence of prior communication or opportunity to explain was a determinative factor in quashing the demand notices for violation of natural justice. 2. The Court emphasized assessment must be fact-specific: a blanket or blind application of this order to all hostels is impermissible; respondents must verify that inmates use rooms as residential dwellings before applying residential tariff. 3. Constitutional concerns (Articles 14 and 19(1)(g)/19(1)(g) analogues as argued) were noted in relation to discriminatory application of tariffs that would disproportionately burden economically weaker inmates; such policy considerations reinforced the interpretive approach favoring resident-use classification.