Koundinya Educational ... vs Velugunanda Gram Panchyat
2022 Latest Caselaw 8630 AP

                                         1


          HON'BLE SRI JUSTICE U.DURGA PRASAD RAO
                         AND
 HON'BLE SRI JUSTICE GANNAMANENI RAMAKRISHNA PRASAD

                          Appeal Suit No.1562 of 2018

JUDGMENT: (Per Hon'ble Sri Justice U. Durga Prasad Rao)

      This appeal is preferred by the defendant aggrieved by the judgment

dated 19.06.2018 in O.S.No.108/2012 passed by the learned Judge of the

Family Court-cum-IX Additional District & Sessions Court, East Godavari,

Rajamahendravaram decreeing the plaintiff‟s suit for Rs.71,23,450/- with costs

and interest @ 12% p.a. from the date of suit till the date of decree and

subsequent interest at 6% p.a. from the date of decree till the date of realization,

against the plaintiff‟s claim of Rs.87,56,508/-.


2.    The factual matrix of the case is thus:

      The plaintiff is the Velugubanda Grama Panchayat rep. by its Secretary,

whereas the defendant is the Koundinya Educational Society rep. by its

Secretary and Correspondent Sri Kalidindi Satyanarayanaraju. The plaintiff‟s

case is that the defendant is running Engineering College and other colleges in

its premises and the plaintiff proposed to assess the educational institutions of

the defendant to house tax for the first time for the years 2007-2008 to 2011-

2012 vide panchayat resolution dated 18.11.2011 and pursuant to thereof,

special notices dated 21.11.2011 were issued for recovery of arrears of house

tax for the years 2007-2008 to 2010-2011 under Ex.A1 and for the year 2011-12

under Ex.A2. The defendant neither challenged the said notices nor paid the

tax. Hence, a demand notice dated 24.12.2011 was issued under Ex.A3. The

defendant did not pay the amount. In the meanwhile, the Government and the

District Panchayat Officer issued Memos directing the plaintiff Gram Panchayat

to collect arrears of the taxes and hence, the Panchayat resolution dated

30.06.2012 was passed and thereafter suit was filed for recovery of house tax

from the defendant for a sum of Rs.87,56,508/- as follows:

                  Sl. No.      Period         Amount due
                                                (in Rs.)
                     1        2007-2008        15,84,526
                     2        2008-2009        16,63,753
                     3        2009-2010        17,46,940
                     4        2010-2011        18,34,287
                     5        2011-2012        19,26,002
                                Total          87,56,508

The defendant opposed the suit mainly on two grounds. Firstly that the special

notices issued under exhibits A1 & A2 were not served on the defendant and

even otherwise those special notices are not legally tenable because they do not

contain the particulars as to the capital value of the building of the defendant

and the method and manner in which the year tax was arrived at by the plaintiff.

Further, the plaintiff has not provided an opportunity to the defendant to

question the legality of the assessment by seeking revision. Further, the

plaintiff has not taken into consideration the proper value of the subject building

and its depreciation etc. Nextly, the claim of the plaintiff since exceeded the

period of three years same is barred by limitation.

(a) During trial, PWs 1 and 2 were examined and exhibits A1 to A9 were

marked on behalf of the plaintiff and on behalf of the defendant DW1 was

examined and exhibits B1 to B4 were marked.

(b) The trial Court considered the aforesaid two objections of the

defendant. So far as the challenge with regard to the validity of special notices

and non-furnishing of opportunity to question the correctness of the assessment

is concerned, the trial Court observed that Exs.A1 & A2-special notices and

Ex.A3-registered demand notice were served on the defendant, but he failed to

challenge the same before the concerned authority which can be seen from the

cross examination of DW1 and hence, he cannot now question the validity of

the notices. Accordingly, the trial Court turned down the contention of the

defendant that exhibits A1 to A3 were not valid notices. The trial Court also

turned down the contention of the defendant that his institution being an

educational institution, it is exempted from paying the taxes. The trial Court

observed that the exempted categories under Ex.A5 were different from the

educational institutions and hence, the defendant cannot seek exemption.

(c) Nextly, with regard to the contention of the defendant the tax claim

for five years i.e., from 2007-2008 to 2011-2012 is barred by limitation as the

claim exceeds three years is concerned, the trial Court observed that the tax was

assessed for every financial year ending with March and claim was made

accordingly as per the plaint averments and further the defendant is liable to pay

due tax to the Government and above all the defendant made a part payment of

Rs.16,33,058/- under self assessment and therefore, the plaintiff is entitled to

recover the balance of the suit amount and hence, the suit is well within time.

Hence, the appeal.

3. Heard arguments of learned counsel for the appellant Sri Challa Ajay

Kumar, and Sri I. Koti Reddy, Standing Counsel for the respondent.

4. Learned counsel for appellant / defendant Sri Challa Ajay Kumar firstly

argued that as per Rule 9(3) of G.O.Ms.No.30, Panchayatraj Rural Development

and Relief (PTS.III) dated 20.01.1995, when a property is assessed to the tax for

the first time in between the two general revisions, the executive authority shall

intimate the same by special notice to owner of the house giving an opportunity

to him to file a petition for revision of the assessment and the same shall be

considered if filed within the time stipulated in the said rule. Learned counsel

would emphasize that the rule mandates that an obligation is cast on the

executive authority of the Gram Panchayat to issue special notice and call for

the objections in the form of a Revision Petition by the owner or the occupier

against the proposed assessment and consider the same and pass a reasoned

order. However, the respondent / plaintiff though claimed to issue special

notices under Exs.A1 & A2, it did not give any opportunity to the appellant to

file the revision petition. Further, the special notices under Exs.A1 & A2 and

the demand notice under Ex.A3 were not at all served on the appellant.

Therefore, the entire suit claim which is based on Exs.A1 to A3 is vitiated by

law and the suit is liable to be dismissed in limine.

(a) Nextly, he argued that the suit claim covers the tax for five

Assessment Years i.e., 2007-2008 to 2011-2012. He would submit that the A.P.

Panchayatraj Act, 1994 has not specified any period for filing the suit. As such,

the limitation to file suit will be covered by the residuary Article 113 of the

Limitation Act, whereunder the limitation to file suit for recovery of tax would

be three years when the right to sue accrues. He would thus emphasize, the suit

claim for the Assessment Years 2007-2008 & 2008-2009 is barred by limitation

as the suit was filed in the year 2012 i.e., more than three years after the right

accrued to the plaintiff in respect of the tax covered by those two years. He

would argue that the payment of Rs.16,33,058/- made by the defendant under

protest will not save the limitation for plaintiff. Nor the Government Memos

and resolution of the Gram Panchayat to assess the appellant‟s property for the

first time in the year 2011 would save the limitation. In this regard, he relied

upon the decision in V.K.Roy v. Commissioner, Municipal Corporation of

Hyderabad1

(b) He would further submit that after filing of the suit, the District

Panchayat Officer (DPO) convened a meeting on 08.02.2013 and instructed all

the educational institutions to submit their self assessment in respect of their

premises and issued a Memo dated 21.02.2013 to Panchayat Secretaries of all

2002 (4) ALD 711 (DB)

the Gram Panchayats, in whose jurisdiction the educational institutions are

located and the Panchayat Secretaries in turn served notices to the educational

institutions including the appellant institution. In response to the said Memo

dated 21.02.2013 of the DPO, the appellant, without prejudice to his contentions

in the suit that he is not liable to pay property tax, made a self assessment for

the subject period and paid an amount of Rs.16,33,058/- as required by the

District Panchayat Officer. Learned counsel would submit that the aforesaid

payment made under protest by the appellant would neither validate Exs.A1 to

A3 notices to claim the suit amount by the respondent / plaintiff nor save the

limitation in respect of the partly time barred claim. He thus prayed to allow the

appeal.

5. Per contra, Sri I.Koti Reddy, learned Standing Counsel for the respondent

/ plaintiff would firstly argue that the contention of the appellant that the

authorities have not followed the Rules, particularly Rule No.9 issued under

G.O.Ms.No.30 is not correct. In expatiation, he would submit that following the

spirit of Rule 9(3), the respondent issued two special notices under Exs.A1 &

A2 to the appellant and when there was no response from him, finally issued

demand notice under Ex.A3. Learned counsel would submit that the defendant

having received all these notices kept silent as he neither challenged the special

notices by filing revision nor paid the amount. Before issuing special notices,

the subject property was got assessed through PW2 by the DPO and basing on

the capital value, the special notices were issued. Since there was no response

from the appellant, the respondent-Gram Panchayat was constrained to issue

demand notice under Ex.A3, to which also there was no response from the

appellant and hence, the respondent ultimately filed the suit for recovery of the

unpaid property tax for five years. He would submit that the appellant obtained

permission from the Gram Panchayat in the year 2004 and completed the

construction in the year 2006 and since the property was not assessed to tax till

2011, the respondent-Gram Panchayat passed a resolution and decided to collect

the arrears of the tax from 2007 onwards. Hence, the issuance of special notices

and demand notice and the claim of the Gram Panchayat were all in accordance

with the governing law and Rules and the appellant having not taken any

initiation to challenge the same at the right opportune time, now cannot criticize

that the notices were vitiated for violation of the Rules.

a) Nextly, on the aspect of limitation, learned counsel would submit that

since the assessment was made for the first time as per the resolution of the

Gram Panchayat in the year 2011, it was resolved to collect the arrears of the

tax for all the pending years. In that view, Exs.A1 & A2 special notices were

issued to the petitioner covering the period 2007-2008 to 2011-2012. The

demand is made for each individual year. When he failed to pay, the suit was

filed for recovery of the tax covering all those five years. He would further

submit that pending suit, the appellant made self assessment and paid

Rs.16,33,058/- towards part of the suit claim. Hence, the entire suit claim is

within the time. He prayed to dismiss the appeal.

6. The points for consideration in this appeal are:

(1) Whether the respondent / plaintiff failed to follow the due procedure in assessing the appellant / defendant‟s property to tax and thereby the suit is untenable?

(2) Whether the suit claim for the Assessment Years 2007-2008 & 2008-2009 is barred by limitation?

(3) To what relief?

7. Point No.1: The facts undisputed are that the appellant / defendant is an

educational institution within the jurisdiction of the respondent-Gram

Panchayat. In the year 2004-2005 the defendant obtained approval for building

plan and completed construction of its buildings in the year 2006. In the

succeeding years, the said property was not assessed to tax till the year 2011 as

the respondent-Gram Panchayat appears to be in dilemma as to whether

educational institution could be assessed to tax. However, since there was no

specific exemption in this regard and the Government issued Memos to collect

arrears of taxes, the respondent under Ex.A8 resolution decided to assess the

appellant‟s property to tax.

8. Be that it may, the law relating to the taxation of the properties within a

Gram Panchayat is covered by Sections 60 & 61 of the Andhra Pradesh

Panchayatraj Act, 1994 (for short, „the Act, 1994‟). Section 60 lays down that a

Gram Panchayat shall levy in the village different types of taxes, of which,

House Tax is one such taxes. Then, Section 61 deals exclusively with the

House Tax. It reads thus:

"61. House Tax:- (1) The House-tax referred to in clause (a) of sub- section (1) of section 60 shall, subject to such rules as may be prescribed, be levied on all houses in the village on any one of the following basis, namely:-

(a) annual rental value, or

(b) capital value, or

(c) such other basis as may be prescribed:

Provided that no house-tax shall be levied on poultry sheds and annexes thereto which are essential for running the poultry farms.

(2) The House-tax shall, subject to the prior payment of the land revenue, if any due to the Government in respect of the site of the house be a first charge upon the house and upon the movable property, if any, found within or upon the same and belonging to the person liable to pay such tax.

(3) The House-tax shall be levied every year and shall, save as otherwise expressly provided in the rules made under sub-section (1) be paid by the owner within thirty days of the commencement of the year. It shall be levied at such rates as may be fixed by the gram Panchayat, not being less than the minimum rates and not exceeding the maximum rates, prescribed in regard to the basis of levy adopted by the gram panchayat.

(4) The Government may make rules providing for-

(i) the exemption of special classes of houses from the tax;

(ii) the manner of ascertaining the annual or capital value of houses or the categories into which they fall for the purposes of taxation;

(iii) the person who shall be liable to pay the tax and the giving of notice of transfer of houses;

(iv) the grant of exemptions from the tax on the ground of poverty;

(v) the grant of vacancy and other remissions; and

(vi) the circumstances in which, and the conditions subject to which houses constructed, reconstructed or demolished, or situated in areas included in, or excluded from the village, during any year, shall be liable or cease to be liable to the whole or any portion of the tax.

(5) If the occupier of a house pays the House-tax on behalf of the owner thereof, such occupier shall be entitled to recover the same from the owner and may deduct the same from the rent then or thereafter due by him to the owner."

As can be seen, the above section lays down that subject to such rules as

may be prescribed, the levy of house taxes in the village shall be on the basis of

any one of the three modes. The section also says that the Government may

make rules for exemption of certain special classes of houses from the tax; the

manner of ascertaining the annual / capital value of houses or the categories into

which they fall; the persons who shall be liable to pay the tax; the grant of

exemptions from the tax on the ground of poverty; the grant of vacancy and

other remissions etc. Apart from the above, as per Section 62 of the Act, 1994,

the Government can prescribe the rates at which the house tax has to be

collected by the Gram Panchayat. This is precisely about the taxation on house

properties within the Gram Panchayat.

9. Be that it may, under Section 268 of the Act 1994, the Government is

empowered to make rules to carry out all or any of the purposes of the Act. One

of the subjects on which the Government can make rules is in respect of the

assessment and realization of taxes under this Act and the revision of and

appeals against the assessment. Drawing the powers therefrom, the Government

have issued G.O.Ms.No.30, Panchayatraj Rural Development and Relief

(PTS.III) dated 20.01.1995 prescribing rules relating to certain taxes and other

lodging of monies received by the Gram Panchayat and payment of money from

the Gram Panchayat fund. Rules 4 to 13 which deal with assessment of the

house tax are germane for our purpose. Since the assessment of the appellant‟s

buildings was made for the first time in the year 2011 between two general

revisions, Rule 9 will be pertinent for us. Rule 9 reads thus:

9. (1) The executive authority may amend the assessment books at any time between one general revision and another by inserting any house therein or removing any house therefrom or by altering the valuation or classification of any house, or the amount of tax payable in respect thereof or, subject to any other rules which the Government may make in this behalf, by substituting therein for the name of the owner of any house, the name of any other person who has succeeded by transfer or otherwise to the ownership of the house;

(2) Such amendment shall be deemed to have taken effect on the first day of the year in which it is made:

Provided that when the amendment is made in any year after the expiration of the date on which payment of the tax is due, it shall have effect only from the succeeding year, except where the amendment gives effect to the fixation of the fair rent under the law relating to the control of lease and rent of buildings for the time being in force:

Provided further that, where the amendment is rendered necessary by reason of the fixation of the fair rent of a house under the law aforesaid, the amendment shall have effect as from the date on which the fair rent was so fixed:

Provided also that the decision of the executive authority in any disputed case of transfer of ownership of a house shall not give the transferee a legal title to the house:

(3) In every case in which, between one general revision and another, the executive authority assesses any

house for the first time or increases the assessment on any house otherwise than in consequence of a general enhancement of the rate at which the house tax is leviable, the executive authority shall intimate by a special notice to the owner or occupier of such house that a petition for revising the assessment will be considered, if it reaches the Gram Panchayat office within sixty days from the date of service of such notice in the case of the State or Central Government or a company, and within thirty days from the date of service of such notice in other cases."

10. Thus, Rule 9(3) lays down that in between two general revisions, if the

executive authority assess any house for the first time, it shall intimate by a

special notice to the owner or occupier of such house that a petition to revise the

assessment will be considered if it is received by the Gram Panchayat within 30

days from the date of service of such notice in case of private parties and 60

days in case of the State or Central Government or a company. Then Rule 10

lays down that if any person moves the executive authority by revision petition

to reduce the tax for which he is liable to pay, the authorities have to consider

the same and as per Rule 11, after disposal of the revision petition, the executive

authority shall inform the petitioner to pay the amount fixed on revision within

15 days after the date of receipt of the intimation.

11. Now, the contention of the appellant is that the special notices issued

under Section 61 were not served on him and therefore, he was deprived of the

opportunity to submit his revision. On perusal of the record, we find this

argument as fallacious. As rightly observed by the trial Court, DW1 in his cross

examination has clearly admitted that after receipt of Exs.A1 to A3, the

defendant did not challenge the same before any authority. This admission

proves the falsity of the contention of the appellant and establishes that the

respondent-Gram Panchayat indeed followed due procedure and issued special

notices as contemplated in Rule 9(3) r/w Section 61. If the appellant /

defendant did not take steps to file revision before the concerned authority, he

has to blame himself. Since he has not responded to Exs.A1 & A2 - special

notices, it would appear, the respondent issued Ex.A3-demand notice and then

filed the suit. Thus, in the entire process we do not find any violation of the law

or rules at the instance of respondent/plaintiff. This point is thus answered in

favour of the respondent/plaintiff and against the appellant.

12. Point No.2: This point relates to the time within which the

respondent/plaintiff has to file suit for recovery of arrears of the tax. As can be

seen, Sections 60 to 62 of the Act, 1994 have not specified the mode of

realization of the tax and the time limit therefor. Hence, one has to look into the

Rules. Rules 25 to 36 deal with the subject "collection of different types of

taxes" and House tax is one of such taxes. Briefly stating, Rule 25 lays down

that when a house tax is due from any person, the executive authority of the

Gram Panchayat shall serve upon such person a bill for the sum due before

proceeding to enforce the provisions of Rule 26. Rule 25(4) says that nothing in

Rule 25 or Rule 26 shall preclude the Gram Panchayat from suing in a Nyaya

Panchayat or Civil Court for the tax due to it. It should be noted, Rule 26 deals

with the mode of realization of the tax if the assessee upon receiving the bill did

not pay the tax amount within 15 days. As per Rule 26, the executive authority

shall take steps for recovery of the tax by distraint under warrant and sale of the

movable property of the defaulter. Elaborate procedure is laid down in Rule 26

and subsequent rules. Thus, a close scrutiny of the above rules would indicate

that except mentioning that the executive authority can file a suit before a Civil

Court for recovery of the tax, no specific time has been prescribed in the

aforesaid Rules. In that view, as rightly argued by the learned counsel for the

appellant, we have to fall back on the residuary Article 113 of the Limitation

Act, which reads thus:

113. Any suit for which no period Three years When the right to sue accrues of limitation is provided elsewhere in this Schedule

(a) Thus, going by Article 113, the respondent / plaintiff has to file the

suit within three years from the time the right to sue accrues to it. In V.K.Roy‟s

case (1 supra), a Division Bench of the High Court of Andhra Pradesh was

dealing with the question whether the Municipal Corporation of Hyderabad was

entitled to recover arrears of property tax by way of distraint after expiry of

three years from the date when the tax becomes due. While it was the

contention of the writ petitioners therein that either for filing a suit or for taking

out distraint proceedings the time limit under Article 113 would be only three

years, the Government on the other hand argued that in view of the amended

Section 238 of the Hyderabad Municipal Corporation Act, the limitation period

of three years provided for recovery of property tax was done away and the

Corporation was entitled to initiate the proceedings under the Revenue

Recovery Act and in that regard, Article 112 would be applicable which

provides limitation of 30 years for the Corporation to recover the arrears of

property tax as if it were arrears of land revenue. Disagreeing with the

argument of the Government, the Division Bench has held thus:

17. Applying the above test, if we look at the provisions of the Hyderabad Municipal Corporation Act, the Corporation has to fall back on the procedure contemplated under Section 278 of the Act by filing a suit in a competent Court. When no time limit is prescribed by the Legislature for filing a suit, for recovery of amounts due which is a substantive remedy, Article 113 of the Limitation Act, 1963 governs the field providing three years limitation period for initiating proceedings to recover the amount due from the date when the right to sue accrues. If the contention of the Municipal Corporation, that by legal fiction, the Corporation, in the light of the amended provision to Section 238 is entitled to recover the property tax as arrears of land revenue under the Revenue Recovery Act, within 30 years in terms of Article 112 of the Limitation Act is accepted, it would be like placing the summary remedy on a higher pedestal than the substantive remedy, which is not the intention of the Legislature. Needless to mention, as held by a Division Bench of this Court in the decision cited (supra), taking recourse to distraint proceedings is only a summary remedy to recover the arrears of tax and it cannot take precedence over substantive remedy. As held by the Supreme Court in State of Kerala v. V.R.Kalliyanikutty [(1999) 3 SCC 657),

there is no enlargement of time for recovery of certain dues beyond the time stipulated under Article 113 of the Limitation Act, unless the Act expressly provide for enlargement of time to recover claims which are legally recoverable. Therefore, the theory of legal fiction propounded by the learned Additional Advocate General appearing on behalf of the respondents cannot be accepted. The decisions cited by the learned Additional Advocate General have no bearing on the facts of the case in the light of the decision of the Supreme Court cited (supra).

18. Having regard to our discussion in the foregoing paragraphs and in the light of the ratio laid down by the Supreme Court in the decision cited (supra), we hold that the respondents are not entitled to recover arrears of property tax by way of distraint after the expiry of three years from the date when the tax becomes due. If the respondents so choose to recover such tax, it is open to them to take recourse to the provisions contemplated under Section 278 of the Hyderabad Municipal Corporation Act."

Accordingly, the Division Bench set aside the demand notices to the extent they

exceeded the period of three years with an observation that if the respondents

choose to recover such tax beyond three years period, they can do so by taking

recourse to the provisions under Sections 278 of the Act, however, according to

law.

13. Needless to emphasize the above judgment applies with all its fours to the

case on hand. In this case, the suit claim is for five years, of which the claim for

the tax pertaining to 2007-2008 and 2008-2009 is barred by limitation in the

light of Article 113 of the Limitation Act. The Memos of the Government and

the resolution of the Gram Panchayat to assess the appellant‟s property for the

first time in the year 2011 will not, in our considered view, enhance the period

of limitation prescribed under the aforesaid Article. So also the amount paid by

the appellant on self assessment basis under protest, that too, after filing of the

suit, also will not enlarge the period of limitation. Thus, at the outset, the

petitioner is entitled to a sum of Rs.55,07,229/- (17,46,940 + 18,34,287 +

19,26,002) covering the tax period 2009-2010 to 2011-2012. After deducting

the amount of Rs.16,33,058/- paid by the appellant, the respondent/plaintiff will

be entitled to a net amount of Rs.38,74,171/- (55,07,229 - 16,33,058).

The point is answered accordingly.

14. Accordingly, this appeal is partly allowed and the judgment of trial Court

is modified to the effect that the defendant shall pay a sum of Rs.38,74,171/-

(Rupees thirty eight lacs seventy four thousand one hundred and seventy one

only) to the plaintiff with simple interest @ 12% p.a. from the date of suit till

the date of decree and with subsequent interest @ 6% p.a. from the date of

decree till the date of realization. The parties shall bear their costs in the appeal.

As a sequel, interlocutory applications pending, if any, shall stand closed.

__________________________ U. DURGA PRASAD RAO, J

_____________________________ G. RAMAKRISHNA PRASAD, J 10.11.2022 MVA