Excelsior English Medium Higher vs The Secretary
2021 Latest Caselaw 9209 Ker

W.P.(C) No. 2137/2011                     :1:

                            IN THE HIGH COURT OF KERALA AT ERNAKULAM
                                       PRESENT

                        THE HONOURABLE MR. JUSTICE SHAJI P.CHALY

            FRIDAY, THE 19TH DAY OF MARCH 2021 / 28TH PHALGUNA, 1942

                                WP(C).No.2137 OF 2011(N)


PETITIONER/S:

                 EXCELSIOR ENGLISH MEDIUM HIGHER
                 SECONDARY SCHOOL, ILLICKAL, KOTTAYAM,, MANAGED BY M/S
                 EXCELSIOR ESTATES (P) LTD., ILLICKAL, KOTTAYAM WEST P.O.-686 003
                 AND REPRESENTED HEREIN BY ITS DIRECTOR, SRI N.J.MATHEW.

                 BY ADVS.
                 SRI.N.N.SUGUNAPALAN (SR.)
                 SMT.NITA.N.S.
                 SRI.S.SUJIN

RESPONDENTS:

        1        THE SECRETARY, KOTTAYAM MUNICIPALITY
                 KOTTAYAM - 686 001.

        2        KOTTAYAM MUNICIPALITY
                 KOTTAYAM-REPRESENTED BY ITS SECRETARY - 686 001.

        3        STATE OF KERALA,
                 REPRESENTED BY CHIEF SECRETARY,, GOVERNMENT SECRETARIAT,
                 THIRUVANANTHAPURAM - 695 001.

                 R1 BY ADV. SRI.PHILIP J.VETTICKATTU
                 R1 BY ADV. SRI.SIBY MATHEW
                 R1-2 BY SRI.SIBY CHENAPPADY, SC, KOTTAYAM MUNICIPALITY




                 SRI.SURIN GEORGE IPE,SENIOR GOVERNMENT PLEADER

      THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 19.03.2021, THE
      COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
 W.P.(C) No. 2137/2011                  :2:

                                                             'CR'

                        Dated this the 19th day of March, 2021.

                                    JUDGMENT

This writ petition is filed by an English Medium CBSE School within the

limits of the Kottayam Municipality. The issues raised in the writ petition are

two fold. First aspect is, Ext. P1 demand notice issued by the Municipality

dated 19.05.2009 imposing service tax of Rs.2,36,406/- cannot be sustained

under law, since it is imposed from the financial year 2001-2002 onwards

and as per Section 539 of the Kerala Municipality Act, 1994 ('Act, 1994' for

short), any amount due to the Municipality can be recovered only if it is

within a period of three years. Therefore, according to the petitioner, through

a notice issued on 19.05.2009, the service tax sought to be realised from

the year 2001-2002 cannot be recovered. Which thus means, the recovery

exceeding a period of three years is prohibited under law and therefore,

interference is required, is the contention.

2. The second aspect is in respect of the property tax imposed as per

Ext.P5 order dated 16.11.2010 directing the petitioner to pay an amount of

Rs.33,740/- annually. According to the petitioner, as per Section 235 of the

Act, 1994, as it originally stood, there was exemption from the property tax

to all educational institutions. However, consequent to an amendment made

in the year 2009, the exemption in regard to the schools was limited to the

Government and the Government Aided Schools. But, the tax was imposed

without providing sufficient opportunity of hearing and participation to the

petitioner. Anyhow, to Ext. P5 notice, petitioner has submitted Ext. P6 reply,

however apprehending coercive action before any orders are passed finally

on the same, the petitioner has approached this Court by filing this writ

petition.

3. This writ petition was pending before this Court from the year 2011,

and the petitioner has secured an order of status quo from the date of

admission of the writ petition.

4. A detailed counter affidavit is filed by the Secretary and the

Municipality jointly refuting the allegations and the claims and demands

raised by the petitioner and also submitting that the entire action initiated by

the Municipality is in terms of the provisions of the Act, 1994 and therefore,

the petitioner has not made out any case for interference with the demands

raised, invoking the discretionary jurisdiction conferred on this Court under

Article 226 of the Constitution of India.

5. I have heard the learned Senior Counsel for the petitioner Sri. N. N.

Sugunapalan assisted by Sri. Navaneet Pai, Sri. Siby Chenappady appeared

for the Municipality, and Sri. Surin George Ipe, learned Senior Government

Pleader, and perused the pleadings and materials on record.

6. The discussion of facts made above would make it clear that the

subject issue in respect of the recovery of service tax is guided by Section

539 of the Act, 1994, which reads thus:

"539. Limitation for recovery of dues.-- (1) No distraint shall be made, no suit shall be instituted and no prosecution shall be commenced in respect of any sum due to a Municipality under this Act after the expiration of a period of three years from the date on which distraint might first have been made, suit might first have been instituted, or prosecution might first have been commenced, as the case may be, in respect of such sum:

Provided that in the case of assessments made under section 282 the said period of three years shall be computed from the date on which distraint might have been made, suit instituted, or prosecution commenced, after the assessment under the said section shall have been made.

(2) Where any amount due to the Municipality has been barred by limitation under sub-section (1) due to the default of not taking steps at the appropriate time, and it is found in a lawful enquiry that it

was lost due to the default of any officer or officers, the amount so lost to the Municipality shall be realised with twelve per cent interest thereon from such officer or officers."

7. Therefore, on a reading of Section 539, it is categoric and clear that

the recovery initiated by the respondent Municipality against the petitioner

exceeding a period of three years cannot be sustained under law. In fact, the

petitioner has challenged the recovery action only based on Section 539

dealing with 'limitation for recovery of dues'. It is not disputed that the

petitioner is liable to pay service tax. However, as pointed out above, the

dispute was confined only to the question of limitation of recovery by virtue

of Section 539 of Act, 1994.

8. Therefore, I am of the considered opinion that so far as the

contention raised by the petitioner in the writ petition with regard to the

recovery of service tax is concerned, it is guided by a clear provision under

Section 539, consequent to which the Municipality/Secretary is not entitled

to proceed against the petitioner for a period exceeding 3 years in

contemplation of the said provision of law. So far as the second aspect is

concerned, the property tax is guided by Section 230 of the Act, 1994, which

reads thus:

"230. Enumeration of taxes and duties.-- (1) Every Municipality may levy

a) a property tax;

(b) a profession tax;

(c) a tax on animals and vessels;

(d) a show tax;

(e) a tax on advertisements;

(f) a tax on timber brought into the municipal area;

(g) a duty on certain transfers of immovable property in the shape of an additional stamp duty subject to the rules framed by Government.

(2) The Municipality may, for the purpose of providing any specific civic service or amenity levy a surcharge on any tax other than profession tax levied by the Municipality:

Provided that no surcharge shall be levied if a tax or cess is already being

levied for the same purpose:

Provided further that such surcharge shall, in no case, exceed [fifty per cent], of the amount of the tax.

(3) The Municipality may in the manner prescribed levy a land conversion cess not exceeding rupees seventy five per are from the landholder in respect of a paddy field, marshy land, pond or watershed held by him which is converted into garden land or building site.

4. Municipality may levy service cess on sanitation, water supply, street light and drainage in all places for providing such new services at the rate fixed by the Council of the Municipality subject to the minimum rate prescribed for such services."

9. It is an admitted fact that by a statutory legal fiction, the property

tax payable by the educational institution and other such institutions as is

provided under Section 235 were exempted from the payment of property

tax till it was amended on and with effect from 07.10.2009, by which the

exemption was confined to the Government and Government Aided

institutions, in so far as the educational institutions are concerned.

Therefore, it is an admitted fact that pursuant to the amendment, the

petitioner is liable to pay property tax. However, the case projected by the

petitioner is that tax was imposed without taking into account the provisions

of Section 231 of Act, 1994, which reads thus:

"231. Resolution of Council deciding to levy tax.-- (1) Any resolution of a

Council determining to levy a tax shall specify the rate at which and the date from which any such tax shall be levied.

Provided that in the case of property tax, the rates and the date from which they shall come into force shall be fixed as per Section 233 and the rules made thereunder.

(2) Before passing a resolution imposing a tax for the first time or increasing the rate of an existing tax, a notice showing the intention of the resolution shall be published in the Gazette and at least in one newspaper published in the language of the locality having wide circulation in the Municipality, on the notice board of the office of the Municipality and in such other places within the municipal area as may be specified by the Council and in any other manner as it may determine, of its intention of the resolution, fix a reasonable period not being less than one month for submission of objections, and consider the objection if any, received within the period specified.

(3) Any resolution abolishing an existing tax or reducing the rate at which a tax is levied shall immediately be reported to the Government and it shall not be implemented without the sanction of the Government:

Provided that in the case of a Municipality which has an outstanding loan from the Government or from the Public or from any financial institution or from any other local body, the Government shall not accord sanction for such abolition or reduction.

(4) Where any resolution under this section has taken effect for a particular year, no proposal to alter the rate or date fixed in such resolution so far as that year is concerned shall be taken into consideration by the Council."

10. After appreciating the contentions put forth by the learned Senior

counsel for the petitioner relying upon Section 231 of Act 1994, I am of the

considered opinion that the petitioner is not entitled to get any benefit of

Section 231, since the property tax is already conceptualised under Section

230 of Act 1994, and what is contemplated in Section 231 is only a new tax,

which is not conceivable as per the provisions of the Act, 1994. Therefore, I

do not find much force in the said contention. However, I find force in the

contention with respect to the action initiated by the Secretary of the

Municipality imposing property tax without issuing an appropriate demand

and consequential order. This I say because from Ext. P5 order itself, it is

clear that the discussion made therein is in respect of service tax. However,

ultimately it is stated that the petitioner is liable to pay the property tax

amounting to Rs.33,740/-. In that view of the matter and since the

petitioner has already filed an objection/reply to Ext. P5, it is only

appropriate that the writ petition is disposed of with suitable directions:

11. Accordingly, this writ petition is disposed of directing the Secretary

of the Municipality to provide an opportunity of hearing to the petitioner in

regard to Ext. P5 notice of demand in respect of property tax at the earliest

and at any rate, within two months from the date of receipt of a copy of this

judgment.

12. However, I make it clear that, though the petitioner has submitted

Ext. P6 reply, due to the elapse of time, petitioner is at liberty to file any

further objection or produce any documents so as to justify the stand

adopted by the petitioner in Ext. P5 action of the Secretary of the

Municipality. I further make it clear that the recovery, so far as the service

tax is concerned, shall be limited to the statutory period of limitation

prescribed under Section 539 of the Act, 1994 and in terms of the findings

rendered above, and accordingly petitioner is directed to pay the admitted

amount of service tax within a month from today, failing which the

respondents shall be at liberty to take recovery action in accordance with

law.

sd/-

SHAJI P. CHALY, JUDGE.

Rv

APPENDIX

PETITIONER'S EXHIBITS:

EXT.P1: TRUE PHOTOCOPY OF DEMAND NOTICE DATED 19.05.2009 ISSUED BY THE 1ST RESPONDENT MUNICIPALITY TO THE PETITIONER'S SCHOOL.

EXT.P2: TRUE PHOTOCOPY OF THE REPRESENTATION DATED 03.06.2009 GIVEN BY THE PETITIONER BEFORE THE FIRST RESPONDENT.

EXT.P3: TRUE COPY OF THE INFORMATION OBTAINED BY THE PETITIONER UNDER THE RIGHT TO INFORMATION ACT.

EXT.P4: TRUE PHOTOCOPY OF THE REPRESENTATION SUBMITTED BY THE PETITIONER ON 24.09.2009 BEFORE THE FIRST RESPONDENT.

EXT.P5: TRUE COPY OF NOTICE DATED 16.11.2010 RECEIVED FROM THE RESPONDENT MUNICIPALITY.

EXT.P6: TRUE COPY OF THE REPRESENTATION SUBMITTED BY THE PETITIONER BEFORE THE RESPONDENT MUNICIPALITY.

RESPONDENTS' EXHIBITS: NIL

/True Copy/

PS To Judge.

rv