Indian Oil Corporation Ltd. vs The Cantonment Board, Delhi
2011 Latest Caselaw 5370 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 Date of Decision: 08.11.2011


%                        W.P.(C.) No. 7093/2000

       INDIAN OIL CORPORATION LTD.             ..... Petitioner
                       Through: Mr. R.P. Sharma & Ms. S. Dutta,
                                Advocates.

                         versus

       THE CANTONMENT BOARD, DELHI CA           ..... Respondent

Through: Mr. T.S. Chaudhary, Advocate for Mr. R. Nanawati, Advocate.

CORAM:

HON'BLE MR. JUSTICE VIPIN SANGHI

1.     Whether the Reporters of local papers may
       be allowed to see the judgment?                           :      No

2.     To be referred to the Reporters or not?                   :      Yes

3.     Whether the judgment should be reported
       in the Digest?                                            :      Yes


VIPIN SANGHI, J.(ORAL)

1. The petitioner-Indian Oil Corporation Ltd (IOCL) seeks the

quashing of notice dated 20.06.1996 issued under Section 68(1) of the

Cantonment Act, 1924, purporting to prepare the assessment list for

the years 1995-98. The petitioner also assails the letter dated

02.08.1996 issued by the respondent calling upon the respondent to

file further objections, if any. The petitioner also assails the

communication dated 16.09.1996 issued by the respondent disclosing

the basis for assessing the letting value of the property in question.

The property tax bill No. 9382 issued for the years 01.04.2000 to

31.03.2001, with arrears for the year 1999-2000, for Rs.25,13,846/-

has also been assailed by the petitioner. The petitioner seeks refund

of an amount of Rs.1,47,552/- paid by the petitioner to the respondent

towards property tax dues.

2. The case of the petitioner is that an agreement was entered into

between the petitioner and the President of India on 05.11.1962

whereunder the petitioner agreed to construct fuel depots for Indian

Air Force so as to provide storage and supply facility for aviation fuels.

It was agreed that land for the construction of the depots shall be

made available by the Government to the company on payment of

10% of the normal rates in force from time to time. According to the

petitioner, in terms of the said agreement, the petitioner was allotted

the site in question situated at Palam Air Force Station, Sadar Badar

Road, Delhi Cantt, Delhi. According to the petitioner, the petitioner

raised construction of the depot in the year 1962 itself. Subsequently,

in the year 1988, a further agreement was executed between the

parties on 13.12.1988. Clause 19 of this agreement provided that

sales tax, local levies, octroi etc. will be paid by the Government at the

rates applicable from time to time if so provided for in the appropriate

DGS&D rates contract or posted Airfield price. This agreement also

provided in Clause 29 that the initial period of the agreement shall be

20 years.

3. According to the petitioner, the respondent for the first time

sought information under Section 103 of the Cantonment Act, 1924

vide a notice dated 16.02.1994. Prior to this notice, the respondent

had not sought to tax the aforesaid facility of the petitioner. The

petitioner communicated to the respondent that the cost of

construction of the building at Palam Air Force Station was

Rs.169977.60/.

4. On 20.06.1996, the respondent issued the notice under Section

16(1) of the Cantonment Act, 1994 on the subject of assessment list

for the year 1995-98. The respondent proposed the annual

assessment of Palam Air Force Station, Sadar Bazar Road, Delhi Cantt,

Delhi at Rs.53,30,739/-. Objections were invited by the respondent to

the said proposal. The petitioner responded on 26.07.1996. It was,

inter alia, submitted that there was no perpetual lease and the period

of lease has not been specified. Consequently no tax is leviable on the

land provided by the Government. The petitioner also questioned the

principle on the basis of which the assessment had been proposed by

the respondent.

5. On 02.08.1996, the respondent responded to the petitioner's

objections. It was stated that the formula adopted for calculation of

price amendment is based on cost of land plus cost of construction

which had been furnished by the petitioner on 16.02.1994 &

28.10.1994. The area of the depot was computed as 1,81,800 square

feet = 16896 square metres. The cost of the land assumed by the

respondent was Rs.6,300/- per square metre, stated to be on the basis

of the notified circle rates. A perusal of the statement of cost of land

annexed to this letter would show that the land was treated as

Category-I and the cost of land of Rs.6,300/- per square metre was

valid for the period from 01.04.1992 to 31.03.1993. The petitioner on

29.08.1996 disputed the assessment of cost of land at Rs.8,87,04,000/-

by calling the same as arbitrary. It was argued that the ownership of

the land vested in the Union of India and not the petitioner. Various

other objections were raised by the petitioner. The respondent stuck to

its earlier communicated stand as contained in their communication

dated 02.08.1996 in their subsequent communication dated

16.09.1996. The petitioner was called upon to file further objections, if

any, which the petitioner did on 01.02.1997. The petitioner pointed

out in the said communication that the cost of land in the year 1962

was not more than Rs.171/- per square yard.

6. The respondent then raised a property tax bill No.9382 for

Rs.13,30,695/- on 10.05.2000 for the year 2000-01. The respondent

also excluded arrears to the tune of Rs. 11,83,147/- for the year 1999-

2000. The petitioner made a payment of Rs.1,47,552/- under protest

in response to the said bill. Thereafter, the petitioner has preferred the

present petition.

7. The first submission of Mr. Sharma, learned counsel for the

petitioner is that since the land in question belongs to the President of

India, and the same has been given to the petitioner on a lease, the

petitioner is not liable to pay any property tax. He relies upon clause

19 of the agreement dated 13.12.1988.

8. I do not find any merit in this submission of Mr. Sharma. Section

65 of the Cantonment Act, 1924 deals with the aspect of incidents of

taxation. Section 65(1) reads as follows:

"(1) Save as otherwise expressly provided in the notification imposing the tax, every tax [assessed] on the annual value of buildings or lands or of both shall be leviable primarily upon the actual occupier of the property upon which the said tax is assessed, if he is the owner of the buildings or

lands or holds them on a building or other lease [granted by or on behalf of the Government or] the [Board] or on a building lease from any person."

9. From a reading of section 65(1), it is clear that the property tax

is leviable on the occupier of the property upon which the tax is

assessed. The section makes it clear abundantly clear that the

occupier may be the owner of the building or the land, or may hold the

same on a building lease or other lease granted by or on behalf of the

government or the board, or on a building lease from any person. It

cannot be disputed that the petitioner is the occupier of the property in

question. The land has been taken on a building lease from the

President of India, i.e. the Govt. of India. Thereon the petitioner has

erected a building. Merely because the lease has not have been

executed in a particular form, it does not cease to be a lease as it is

covered by the provisions of the Government Grant Act and no

particular form for execution of a lease is required to be adopted to

create a government grant.

10. Reliance placed by Mr. Sharma on section 65(2), in my view, is

misplaced. Section 65(2) reads as follows:

"(2) In any other case, the tax shall be primarily leviable as follows, namely: -

(a) If the property is let, upon the lessor;

(b) If the property is sub-let, upon the superior lessor;

(c) If the property is unlet, upon the person in whom the right to let the same vests."

11. A perusal of the aforesaid clause would show that it opens with

the words "in any other case". Since the case of the petitioner is

squarely covered by section 65(1) of the Cantonment Act, 1924, there

is no reason to proceed to apply section 65(2) of the Act, which deals

with residuary cases.

12. Reliance placed on clause 19 of the agreement dated 13.12.1988

between the petitioner and the President of India is also misplaced.

The board is only seeking to enforce its rights under the Cantonment

Act, 1924. If the petitioner is so minded, it is open to the petitioner to

seek recovery of the property tax paid by the petitioner to the board

by resort to clause 19. However, the petitioner cannot dispute its

liability to pay the property tax. I may hasten to add that my aforesaid

observation may not be taken as an adjudication of the inter se rights

between the petitioner and the President of India/Union of India

emanating from the agreement dated 13.12.1988.

13. Mr. Sharma has next contended that the Delhi Rent Control Act,

by virtue of section 1(2) of the said Act extends to the areas included

within the limits of, inter alia, Delhi Cantonment Board. He submits

that the process of preparation of the assessment lists is contained in

section 66 to 72 of the Cantonment Act, 1924. He submits that the

annual value of buildings or land or both has to be assessed in the

same manner as is provided for in section 6(2)(b) of the Delhi Rent

Control Act, which provides the manner for fixation of standard rent

where the premises have been let out on or after 02.06.1944. Clause

(b) of section 6(2) provides that the rent is to be calculated on the

basis of 10% p.a. of the aggregate amount of the actual cost of

construction and the market price of the land comprised in the

premises on the date of the commencement of construction. He

submits that the respondent has not disputed the cost of construction

as conveyed by the petitioner. The real dispute is about the cost of

land assumed by the respondent. He submits that the respondent has

not even dealt with the petitioners submission while levying tax that

the cost of land in the year 1962 was approximately Rs.171/- per sy.

yd.

14. It is also contended by Mr. Sharma that the petitioner has not

even been provided with a hearing and the procedure prescribed in the

Cantonment Act, 1924 has not been followed. He submits that under

section 68 of the Cantonment Act, 1924, the Executive Officer is

obliged to give public notice of the date the board will proceed to

consider valuation and assessment entered in the assessment list, and

in all cases in which any property is for the first time assessed or the

assessment is increased, the Executive Officer is also obliged to give

written notice thereof to the owner and to any lessee or occupier of the

property. After the objections to the valuation or assessment has been

raised under section 68(3), the objections are required to be enquired

into and investigated and the persons making them are allowed an

opportunity of being heard either in person or by authorized agent by

an assessment committee appointed by the Board. Section 68(4)

provides that assessment committee shall consist of not less than

three persons.

15. Mr. Sharma submits that the petitioner was never granted any

hearing by any assessment committee appointed by the board. He,

therefore, complains of the breach of principles of natural justice and

denial of a statutory right of hearing by the respondent. Mr. Sharma

also submits that the exercise of preparation of assessment list is

annually undertaken as each year is a fresh assessment year. He

submits that the notice issued by the respondent pertained to three

assessment years, i.e. for the period 1995-1998. Mr. Sharma submits

that the procedure adopted by the respondent for preparation of a

single assessment list for three years is illegal. Mr. Sharma submits

that even though the same assessment list may be adopted for three

consecutive years, the respondent is obliged to follow the prescribed

procedure in section 66 onwards of the Cantonment Act, 1924 and to

provide an opportunity to the assessee to raise his objections each

year.

16. In support of his submission, Mr. Sharma has placed reliance

upon the following decisions:

i) Municipal Corporation, Indore v. Rai Bahardur Seth Hiralal & Ors., AIR 1968 SC 642, wherein the Supreme Court, in para 8, has observed:

"8. Ordinarily therefore the Municipal Corporation has to prepare a fresh assessment list every year. The legislature however has empowered by Section 79, as other State legislatures have similarly done in several Municipal Acts, to adopt the valuation and assessment contained in the assessment list prepared in an earlier year provided, however, that it prepares a fresh list once in every 4 years. But sub- section 2 of Section 79 provides expressly that when such a previous list is adopted for a particular official year it can be done subject to the provisions of Sections 75 and 76. In other words, an assessment list being for a particular official year even when an assessment list prepared in an earlier year is adopted it becomes the list for such subsequent year subject to the procedure laid down in Secs. 75 and

76. The list so adopted has therefore to be published, has to invite objections and has to be authenticated in the manner prescribed by Section 76(6) after disposing of the objections if any and it is then only

that it becomes conclusive evidence of the valuation and the tax assessed thereon for that particular official year. If it were otherwise, the annual letting value or the value estimated on a particular building or house would be static for 4 years during which the Corporation can go on adopting the assessment list prepared in an earlier year and the owner or the occupier of the building would be deprived of the right to object to the valuation or the annual letting value or the tax assessed thereon for at least 4 years even though the valuation or the annual letting value thereof may have decreased for one reason or the other. In order to prevent such a result the legislature has provided by sub-section 2 of Section 79 that where a municipality adopts a previously prepared list for any subsequent year the provisions of Sections 75 and 76 shall be applicable as if a new assessment list has been completed at the commencement of that particular official year. The word, "if" appearing in sub-section 2 of Section 79 is obviously a mistake and must be read as "as if" because the word "if" standing by itself makes no sense at all. Section 79 therefore has to be construed to mean that though a Municipality need not prepare a fresh assessment list every year and need prepare such list once in every 4 years and can adopt an earlier assessment list such an adopted list becomes the assessment list for that particular year as if it was a new list and to which Sections 75 and 76 apply."

ii) Municipal Corporation of City of Hubli v. Subha Rao Hanumantharao Prayag & Ors., AIR 1976 SC 1398, wherein the Supreme Court, in para 9, has observed:

"9. Then again considerable light on this question is thrown by the provision enacted in Section 82. It is a well settled rule of interpretation that the Court is entitled and indeed bound, when construing the terms of any provision found in a statute, to consider any other parts of the Act which throw light on the intention of the legislature, and which may serve to show that the particular provision ought and not to the construed as it would be alone and apart from the rest of the Act." The statute must be read as a whole and every provision in the statute must be construed with reference to the context and other clauses in the statute so as, as far as possible, to

make a consistent enactment of the whole statute. Obviously, therefore, Sections 78 to 81 must be so construed as to harmonise with Section 82. They must be read together so as to from part of a connected whole Section 82, Sub-section (1) provides for making of an amendment in the assessment list by insertion or alteration of an entry in certain events after hearing objections which may be made by any person interested in opposing the amendment. Sub- section (3) of Section 82 makes the amendment effective from "the earliest day in the current official year on which the circumstances justifying the entry or alteration existed". The expression 'current official Year' in the context in which it occurs in Section 82, Sub-section (3) clearly signifies the earliest day in the official year which is current when the amendment in the assessment list takes place and that expression refers only to the official year which is running at the time when the amendment is made by insertion or alteration of an entry under Sub- section (1) of Section 82. It would, therefore, see clear, on a com bind reading of Sub-sections (1) and (3) of Section 82, that an amendment, in order to be effective in levying tax for an official year, must be made during the currency of the official year. That is now well settled as a result of several decisions of the Bombay High Court culminating in the Full Bench decisions in Sholapur Municipal Corporation v. Ramchandra (supra) and we do not see any reason to take a different view. Now the scheme of Sections 78 to 81 is identical with that of Section 82 and in both cases what is contemplated first is a proposal to which objections are invited and after the objections are investigated and disposed of, the assessment list in the one case and the altered entry in the other are authenticated giving rise to liability in the rate payer. It must follow a fortiori that if an alteration in the assessment list, in order to fasten liability on the rate-payer, is required to be made during the currency of the official year, equally, on a parity of reasoning, the assessment list, in order to give rise to liability in the ratepayer, must also be authenticated before the expiry of the official year. Moreover, it is difficult to believe that the legislature did not intend that there should be any time limit in regard to the levy of tax for any-official year and that the tax should be legally leviable at any time after the close of the official year. There is, in our opinion, sufficient indication in the various provisions of the Act to show that the authentication of the assessment list, in order to be valid and effective,

must be made within the official year, though the tax so levied may be collected and recovered even after the expiry of the official year."

17. Mr. Sharma submits that under section 69, upon disposal of the

objections to the proposed assessment list, the assessment list is

required to be authenticated by the signatures of the members of the

assessment committee. The authenticated assessment list is required

to be deposited in the office of the Board. Under section 70, it is

provided that the entries made in the authenticated assessment list is

conclusive evidence for purposes of assessing any tax imposed under

the said Act of the annual value or other valuation of all buildings and

lands to which entries made in the assessment list respectively

referred is also accepted as conclusive evidence for the purposes of

assessing any tax imposed of the amount of each such tax leviable

thereon during the year to which the said list relates. Therefore, the

preparation of the authenticated assessment list annually is sine qua

non for levying tax annually. Mr. Sharma submits that since the

respondent have not prepared a separate list for each year, i.e. 1995-

96, 1996-97 and 1997-98, the assessment list prepared by the

respondent cannot become the basis for levying tax for three years.

18. It was put to the learned counsel for the respondent as to

whether or not, as a matter of fact, the petitioner was granted any

hearing, as is required under Section 68(3) of the Cantonments Act,

1924 by the Assessment Committee appointed by the Board.

19. Learned counsel for the respondent submits that two notices

were issued to the petitioner for grant of personal hearing. The first

notice was issued for a meeting of the Cantonment Board slated on

17.10.1997 at 1100 Hrs. The notice was issued on 01.10.1997. The

second notice was issued on 06.11.1997, since the petitioner failed to

appear in response to the first notice.

20. Learned counsel for the petitioner points out, and in my

view correctly so, that the said notices fixing dates for personal

hearing were of no avail as the respondent had already passed the

order of assessment on 16.09.1996 after giving the basis on which the

respondent had made the assessment. The categorical stand of the

respondent was that the proposed assessment to the tune of

Rs.44,43,698/- has been worked out correctly. The admitted position is

that there is no other assessment order passed by the respondent

which may have been communicated to the petitioner or which may be

existing on the respondent's file.

21. In view of the aforesaid position, it is clear that the

respondent has breached the requirement of Section 68(3) by failing to

provide the petitioner an opportunity of being heard either in person or

by authorized agent before the Assessment Committee appointed by

the Board. The respondent has also not dealt with the aforesaid

submissions of the petitioner which were taken by the petitioner in its

objections.

22. On this very short ground of breach of the statutory requirement

as well as principles of natural justice, the impugned demand

contained in Bill No. 9382 dated 10.05.2000 for Rs.25,13,846/- made

by the respondent cannot be sustained and is hereby quashed.

23. In the meantime, since the Cantonments Act, 2006 has been

enacted, the matter is remanded back to the Chief Executive Officer

who shall re-assess the petitioner's liability to pay the tax in

accordance with the law, after granting a personal hearing to the

petitioner's representative. He shall deal with all the objections raised

by the petitioner, except those which have been rejected by this Court

and pass a reasoned order. The petitioner may raise additional

grounds, only if those grounds could not have been raised earlier.

The petition stands disposed of in the aforesaid terms.

VIPIN SANGHI, J

NOVEMBER 08, 2011 sr/'BSR'