Madras High Court
Ssm College Of Engineering vs The Government Of Tamil Nadu on 18 August, 2021
W.P. No. 25014 of 2016
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 18.08.2021
CORAM
THE HONOURABLE MR.JUSTICE S.M.SUBRAMANIAM
W.P. No. 25014 of 2016
and
W.M.P. Nos. 21436 and 21437 of 2016
SSM College of Engineering,
Represented by its Administrative Officer,
NH-47, Salem Main Road,
Valayakaranoor,
Komarapalayam,
Namakkal District - 638 183. ... Petitioner
-vs-
1. The Government of Tamil Nadu,
Represented by its Secretary,
Rural Development and Panchayat Raj Department,
Fort St.George, Chennai - 600 009.
2. Thattankutti Village Panchayat,
Represented by its President,
Thattankuttai Village,
Kumarapalayam Taluk,
Namakkal District - 638 183. ... Respondents
1/22
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W.P. No. 25014 of 2016
Prayer : Writ Petition filed under Article 226 of the Constitution of
India, praying for issuance of Writ of Certiorarified Mandamus calling
for the records of the respondents relating to the Demand raised by the
second respondent vide order dated 26.03.2015 and quash the same in so
far as it relates to collection of surcharge and forbearing the respondents
from levying surcharge as contemplated in Explanation-II under
Schedule-I to Tamil Nadu Panchayats Act, 1994 for the buildings of the
petitioner Educational Institution.
For Petitioner : Mr.Kandhan Doraisami
For Respondents : Mr.V.Nanmaran
Government Advocate for R1&R3
Mrs.A.Sri Jayanthi for R2
ORDER
The writ on hand is instituted to quash the demand of property tax
raised by the second respondent in order dated 26.03.2015 as far as it
relates to collection of surcharge and to forbear the respondents from
levying surcharge as contemplated in Explanation-II under Schedule-I of
the Tamil Nadu Panchayats Act, 1994 for the buildings of the petitioner
Educational Institution.
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W.P. No. 25014 of 2016
2. The petitioner is SSM Engineering College and one of the
premier Educational Institutions in the locality for its academic
excellence. The petitioner Institution has been approved by the All India
Council for Technical Education and affiliated to Anna University.
3. The learned counsel for the petitioner with reference to the relief
sought for in the present Writ Petition contended that the petitioner is
challenging the demand of surcharge alone and they have not remitted
the property tax in view of the pendency of the Writ Petition and now
they are ready and willing to pay the property tax as demanded except the
surcharge. In view of the said submission, the issues raised in this Writ
Petition are narrowed down as to whether the petitioner Institution is
liable to pay surcharge as demanded by the respondents under the
provisions of the Tamil Nadu Panchayats Act or not.
4. The learned counsel for the petitioner mainly contended that the
issue relating to the surcharge has already been decided by this Court in
W.P. Nos. 8160 of 2016 etc., on 20.06.2016 wherein, this Court made an
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W.P. No. 25014 of 2016
observation that the respondents are not justified in demanding surcharge
on flat rate of 60%. However, this issue was left open to be decided later
on. Relying on the findings in the said Judgment, the learned counsel for
the petitioner reiterated that the Court decided the issue regarding the
payment of surcharge and therefore, the petitioner need not pay the
surcharge as demanded by the respondents. Thus, the Writ Petition is to
be allowed.
5. It is contended that the issue relating to property tax including
surcharge is pending before the Hon'ble Supreme Court of India and the
hearing is expedited. Therefore, till the disposal of the appeal by the
Hon'ble Supreme Court of India, the respondents are to be restrained
from demanding surcharge from the petitioner Institution.
6. The learned counsel for the petitioner with reference to the
provisions of the Tamil Nadu Panchayats Act contended that except
Section 168, which contemplates Local Cess Surcharge, there is no
provisions under the Act for demanding surcharge on the property tax.
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W.P. No. 25014 of 2016
There is no nexus between Sections 172 and 173 to the Explanation-II
schedule-I and therefore, the respondents by relying on schedule-I
Explanation-II cannot impose surcharge on the property tax. Thus, the
very provisions relied on i.e., Schedule-I Explanation-II for imposing
surcharge is irrelevant and untenable. It is contended that there is no
other provision under the Act to impose surcharge on Educational
Institutions and therefore the very demand is to be set aside as the
petitioner is willing to pay the property tax and library cess as demanded
in the impugned demand notice.
7. The learned counsel for the second respondent / Village
Panchayat objected the contentions raised on behalf of the petitioner in
entirety by stating that the Panchayat is empowered to claim surcharge
under the provisions of the Act.
8. The very arguments advanced in this regard is directly in
contravention to the provisions of the Act and further to the Judgment
relied on by the petitioner. The issue in entirety was not adjudicated and
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W.P. No. 25014 of 2016
the Court itself formed an opinion that the issue was left open for further
adjudication. Therefore, the surcharge issue has not been decided with
reference to the provisions of the Act in the said Judgment dated
20.06.2016 and even the relief granted in the said Writ Petition would
reveal that the surcharge demand was not quashed. Contrarily, direction
was issued to the respondents to issue a revised demand giving breakup
details. The observations relied on by the petitioner cannot be a ground
for setting aside the surcharge already demanded by the respondents in
the present case. The surcharge is demanded under the provisions of the
Act and therefore, the Writ Petition is devoid of merits.
9. To substantiate the said contention, the learned counsel for the
second respondent relied on Section 172 of the Tamil Nadu Panchayats
Act and the Schedule-I Explanation-II. As per the Explanation-II,
surcharge rate contemplated is to be levied and accordingly for pure
residential no surcharge and for simple commercial like petty shops 20%
surcharge and largely commercial establishments 60% surcharge has to
be levied. This being the rate of surcharge contemplated under
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W.P. No. 25014 of 2016
Explanation-II(ii) Schedule-I, the respondents are right in demanding
surcharge on the property tax and the imposition of surcharge is in
consonance with the provisions of the Act and therefore, there is no
infirmity as such.
10. The learned counsel for the second respondent further
reiterated by stating that the petitioner Institution is a Private Institution
most specifically they are offering Self Finance Unaided Courses and the
surcharge is issued taking into consideration all these factual aspects.
Therefore, there is no irregularity as such.
11. Considering the arguments as advanced by the respective
learned counsel for the petitioner and the learned counsel for the second
respondent, the issue to be considered in this Writ Petition is,
Whether the Village Panchayats under the provisions
of the Tamil Nadu Panchayats Act, 1994 is empowered to
demand and collect surcharge on the property tax or not?
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W.P. No. 25014 of 2016
12. The learned counsel for the petitioner raised a ground that the
surcharge is not traceable under the provisions of the Act and further not
relatable to Section 172 of the Act and therefore, demand of surcharge is
beyond the scope of the powers conferred on the Village Panchayat to
collect more specifically under Section 172 of the Act. Contrarily, the
learned counsel for the second respondent reiterated by stating that the
provisions are unambiguous and Section 172 r/w Explanation-II(ii)
Schedule-I makes it clear that the Village Panchayat is empowerd to
collect surcharge on the property tax.
13. With this background, let us consider the provisions of the Act
regarding the property tax to be levied. Section 172 (1) of the Tamil
Nadu Panchayat Act enumerates House Tax as under:
"172. House-tax: (1) The house-tax shall be levied on all
houses in every Panchayat Village on the basis on which
such tax was levied in the local area concerned
immediately before the commencement of this Act or on
the basis of classified plinth area at the rates specified in
Schedule I, as the Village Panchayat may adopt subject
to the provisions of sub-section (3)."
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W.P. No. 25014 of 2016
14. Close reading of Section 172 sub-section (1) would reveal that
the house tax shall be levied on the basis of classified plinth area at the
rates specified in Schedule-I, as the Village Panchayat may adopt subject
to the provisions of sub-section (3).
15. Sub-section (3) of Section 172 reads us under:
"(3) The Government shall, by notification,
determine in regard to any Panchayat Village or
any class of Panchayat Villages whether the house-
tax shall be levied every half-year or year and in so
doing have regard to the following matters,
namely:-
(a) the classification of the local areas under
Section 4;
(b) the annual receipts of the Village Panchayat;
(c) the population of the Panchayat Village and the
predominant occupation of such population; and
(d) such other matters as may be prescribed."
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W.P. No. 25014 of 2016
16. Sub-section (3) enumerates the classification of the local areas,
the annual receipts of the Village Panchayat, the population of the
Panchayat Village and such other matters as may be prescribed. Thus, the
manner in which the property tax is to be assessed or enumerated is given
under sub-sections (3) and (4) of Section 172 of the Tamil Nadu
Panchayats Act.
17. Relevantly, sub-section (1) to Section 172 unambiguously
stipulates that the house tax shall be levied on all houses in every
Panchayat Village on the basis of classified plinth area at the rates
specified in Schedule-I.
18. Thus, Schedule-I is to be taken into consideration for the
purpose of specification of rate. Schedule-I to the Act refers Section 172
sub-section (1) of the Tamil Nadu Panchayats Act. Thus, Schedule-I is
relatable to Section 172 sub-section (1) of the Act. Section 172 as stated
above contemplates that tax shall be levied on the basis of the rates
specified in Schedule-I and Schedule-I provides classification as well as
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W.P. No. 25014 of 2016
the minimum rate per half year and maximum rate per half year,
minimum rate per year and maximum rate per year. The classification
contemplates concrete houses, Madras terraced houses, storeyard houses,
tiled houses, thatched houses 20 sq.mts and above, thatched houses
below 20 sq.mts. The rates are also prescribed for both half year
minimum and half year maximum and also for one year.
19. Explanation-I stipulates that "in respect of buildings which are
partly concrete, terraced, tiled or thatched, the rates applicable to the
respective categories as above shall be applicable for the portions
covered by each kind: provided that in respect of buildings, the plinth
area of which does not exceed 18.58 square metres and which are fully
concrete, terraced or tiled, or partly concrete, terraced or tiled, house-tax
shall be levied at a flat rate of rupees twenty per half year."
20. Explanation-II reads as under:-
"Explanation-II: The use of the building may be classified
and surcharge shall be levied on the levy of house-tax at
the rates specified below:-
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W.P. No. 25014 of 2016
Sl.No Class of Usage Rate of
Surcharge
(i)_ Purely residential Village Panchayats Nil
(ii) Simple commercial Village Panchayats
like petty shops and
other small
commercial
establishments 0.20
(iii) Largely Village Panchayats
Commercial,
industrial and
business
establishments,
Cinema theaters,
Hostels, Lodges,
etc., 0.60
Provided that in respect of buildings used partly as
residential and partly as commercial, industrial, etc.,
purposes, the rate of surcharge applicable to the
respective categories as above shall be applicable for the
portions covered by each class of usage:
Provided further that Educational Institutions (not
commercial in nature) exempted from levy of house-tax
immediately before the commencement of this Act, shall
continue to be exempted under this Act."
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W.P. No. 25014 of 2016
21. Reading of Explanation-II would reveal that “the use of the
building may be classified and surcharge shall be levied on the levy of
house tax at the rates specified. The language employed in
Explanation-II (ii) is surcharge shall be levied” and therefore, the
Explanation-II (ii) confers power on the authority competent to demand
surcharge. When Schedule-I provides classification of the property and
Explanation-II stipulates the use of building may be classified under
Explanation-II and surcharge shall be levied on the levy of house tax,
there is no ambiguity in respect of the provisions as contemplated under
the Tamil Nadu Panchayats Act, 1994.
22. Regarding the unreasonableness in demanding surcharge as
raised by the petitioner, this Court is of the considered opinion that,
Explanation-II(i) Schedule-I provides complete exemption to purely
residential buildings. Purely residential buildings are not liable to pay
surcharge at all. For simple commercial like petty shops and other small
commercial establishments, 20% of surcharge is specified. Only for large
commercial, industrial and business establishments, 60% of surcharge is
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W.P. No. 25014 of 2016
contemplated. Therefore, the Act has granted exemption for payment of
surcharge to pure residential buildings and prescribed 20% for simple
commercial buildings and 60% for large commercial and industrial and
business establishments. Thus, the classification made undoubtedly is
reasonable and there is no illegality or otherwise in respect of such
contemplation.
23. As far as the orders relied on by the petitioner dated
20.06.2016 in W.P. Nos. 8160 of 2016 etc., is concerned, the Court itself
made an observation that the respondent Panchayat would be entitled to
demand surcharge. Section 172 of the Act deals with the levy of house
tax and procedure for levying house tax. Sections 168 and 172 of the Act
have been mentioned. However, the issue has not been elaborately
adjudicated and no findings are given in respect of the provisions of the
Act. The Court itself made an observation in Paragraph No.5 that the
issue is left open to be decided later on. Now that the Educational
Institutions are held as liable to pay property tax, unless they are falling
within the exemption clause as contemplated under Rule 15 of the Rules.
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W.P. No. 25014 of 2016
Thus, all Educational Institutions are not exempted under Rule 15 of the
Rules and liable to pay property tax. The property tax as contemplated
under Section 172 of the Tamil Nadu Panchayats Act is to be read along
with Schedule-I Explanation-II to the Act, as Section 172 itself
unambiguously stipulates that the house tax shall be levied on all houses
in every Panchayat Village on the basis of classified plinth area at the
rates specified in Schedule-I.
24. The learned counsel for the second respondent brought to the
notice of this Court that large number of educational institutions across
the State of Tamil Nadu are evading payment of property tax, which
causes great concern to the Revenue of many Village Panchayats. The
Village Panchayats are bound to provide infrastructure facilities and
basic amenities to the people residing in the Village. However, the non-
payment of property tax throughout the State became a serious issue and
made a submission that the reputed institutions are also not inclined to
pay the property tax, though they are enjoying the amenities and
infrastructures provided by the respective Village Panchayats including
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W.P. No. 25014 of 2016
roads, water, street lights etc.,
25. High Court is not expected to close its eyes as large scale non-
collection of property tax across the State is the crisis. High Court being
the custodian of the Constitution of India, is obligated to initiate
appropriate action to ensure that the Constitutional principles and
mandates are being followed by the executives and all concerned
scrupulously.
26. “Judgment in rem” is imminent in extraordinary circumstances,
where it is brought to the notice of the High Court that large scale tax
evasions are traced, affecting the Revenue, resulting denial of
developmental activities for the citizen as enunciated under the
Constitution of India. Tax and its collection are backbone of the
development of our great Nation.
27. Private educational institutions are collecting exorbitant
amount of fees, charges, etc., in various forms and making huge profits.
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W.P. No. 25014 of 2016
These private institutions are mostly functioning as commercial
institutions. However, they are reluctant in paying the property tax to the
Village Panchayats, wherein, there is no other sources of income.
28. Power to impose taxes by the Village Panchayats are
constitutionally recognized. Under Article 243-H of the Indian
Constitution, imposition of tax, regulation of funds are contemplated.
Thus, it is an important factor for the Panchayats to improve the
infrastructure and basic amenities in Village Panchayats on par with the
urban areas.
29. Unfortunately, people residing in Villages are not enjoying the
facilities, infrastructures and the difference between urban and village
areas in the matter of amenities and infrastructures are not comparable at
all. Equality clause enunciated under the Constitution mandates that the
facilities provided in urban areas are to be extended to the Village
Panchayats. But, sadly even after a lapse of 75 years of independence of
our great Nation, many Villages are lacking such basic amenities and
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W.P. No. 25014 of 2016
infrastructures.
30. Prompt and punctual collection of property tax is certainly
possible only if administrative skill exists. Due to large scale corrupt
activities in Village Panchayats and in Revenue Department, there is a
laxity in the matter of collection of property taxes. Even in assessing the
property tax, there are large scale corruptions. Officials of the Revenue
Department and Village Panchayats are being bribed for assessment of
the property tax in a lower rate and so also, there are lapses in the matter
of collection of property tax by such Bill Collectors and other employees.
In this regard, stringent and drastic actions are certainly warranted. There
cannot be any leniency in the matter of collection of taxes as from and
out of the said Revenue, the Constitutional goals are to be achieved.
Indian democracy can flourish only if we thrive hard to achieve the
equality in all respects including economic status. Unless we minimize
the inequalities, it may not be possible to reach the Constitutional goals
and its visions.
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W.P. No. 25014 of 2016
31. In view of the facts and circumstances, this Court is inclined to
pass the following orders:
(i) The relief as such sought for in the writ petition stands rejected.
(ii) The first respondent / Secretary to Government, Rural
Development and Panchayat Raj Department, is directed to constitute
Taxation Committee in each District under the leadership of the
respective District Collectors.
(iii) The first respondent is directed to instruct the District
Collectors to review the property tax assessments already made to verify
the correctness or otherwise of the assessments made by the subordinate
authorities.
(iv) The first respondent is directed to publish the list of property
tax defaulters in the Collectorate and the details of the defaulters and the
amount of arrears to be collected, must also be published in the official
website of the Department.
(v) The first respondent is directed to instruct all the District
Collectors to conduct monthly review meetings and insist to show
progress in the matter of verifying the property tax assessment and its
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W.P. No. 25014 of 2016
collection in the manner provided under the Statute and Rules.
(vi) The first respondent is directed to instruct all the District
Collectors to ensure that lapses, dereliction of duty, negligence, corrupt
activities etc., if any noticed in the matter of assessment of property tax
or its collection, initiate appropriate action against all such officials and
other persons both under the Service Rules and under the criminal law in
force.
32. With the above directions, the Writ Petition stands disposed of.
However, there shall be no order as to costs. Consequently, connected
Miscellaneous Petitions are closed.
18.08.2021
Index: Yes/No
Speaking Order: Yes/No
vji
Note: The Registry is directed to communicate this order to the
Secretary to Government, The Government of Tamil Nadu, Rural
Development and Panchayat Raj Department.
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W.P. No. 25014 of 2016
To
1. The Secretary,
The Government of Tamil Nadu,
Rural Development and Panchayat Raj Department,
Fort St.George, Chennai - 600 009.
2. The President,
Thattankutti Village Panchayat,
Thattankuttai Village,
Kumarapalayam Taluk,
Namakkal District - 638 183.
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W.P. No. 25014 of 2016
S.M.SUBRAMANIAM, J.
vji
W.P. No. 25014 of 2016
and
W.M.P. Nos. 21436 and 21437 of 2016
19.08.2021
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