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Nagpur Hotel Owner's Association Vs. City of Nagpur Corporation (01.09.1982 - BOMHC) - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai High Court
Decided On
Case NumberSpl. C.A. No. 1331 of 1977 (Nagpur Bench)
Judge
Reported in(1982)84BOMLR600
AppellantNagpur Hotel Owner's Association
RespondentCity of Nagpur Corporation
DispositionPetition dismissed
Excerpt:
.....broadly classified as non-domestic consumers have been charged at higher rate for consumption of water supplied by meter.;it is an accepted principle that not merely the nomenclature but the character and nature of levy which is determining factor in deciding whether a particular charge is a tax or fee. many times the word 'taxation' is used loosely in the sense of imposition which appears to be a case under section 114(1)(d) of the city of nagpur corporation act, 1948. in sub-section (1) of section 114 itself, there is reference to rate as well, as cess. despite the use of word 'tax', in sub-section (2) of section 11k all items thereunder are not taxes. some are tolls, fees, cess etc. whereas tax is imposed to meet general expenses of the state and has no relation whatsoever with a..........- were made by the corporation for the city of nagpur for charging different rates for water supplied by meter. legality of this is questioned in this petition by a registered society of hotel owners and a proprietor of a lodge in the city.2. in exercise of the powers conferred by sub-section (1) of section 418 of the city of nagpur corporation act, ws ('the act' for short), the state government confirmed the city of nagpur corporation assessment and collection of water rates bye-laws, 1966, made by the administrator. bye-law no. 6(a) provides for charging according to the quantity of water consumed and registered by meter. sub clause (b) provides for charging on the basis of annual value of the building or land till meter is not fixed and till such time as may be granted by.....
Judgment:

Mohta, J.

1. Two broad classifications of consumers - domestic and non-domestic - were made by the Corporation for the City of Nagpur for charging different rates for water supplied by meter. Legality of this is questioned in this petition by a registered society of hotel owners and a proprietor of a lodge in the city.

2. In exercise of the powers conferred by Sub-section (1) of Section 418 of the City of Nagpur Corporation Act, WS ('The Act' for short), the State Government confirmed the City of Nagpur Corporation Assessment and Collection of Water Rates Bye-laws, 1966, made by the Administrator. Bye-law No. 6(a) provides for charging according to the quantity of water consumed and registered by meter. Sub Clause (b) provides for charging on the basis of annual value of the building or land till meter is not fixed and till such time as may be granted by the Commissioner to fix the same. Sub-clause (c) refers to the general water rate imposed on those buildings or lands which do not receive water supplied from the Corporation Water Works on the basis of their annual value. Clause (9) refers various charges for 'water supplied and sold by meters' by the Corporation. Certain slabwise rates are fixed under this bye-law without making any differentiation either based on the nature of the consumption or the category of consumer. Bye-law No. 9 reads as under:

9. Water supplied and sold by meters shall he charged per month at the rate of Re. 1/- for first 8000 liters and then at 25 paise for every 1000 liters or a part thereof upto next 40000 liters and then 30 paise for every 1000 litres or a part thereof during the month provided further that the minimum monthly charge shall be Re. 1/-. The total monthly charge under the bill will be in addition to the meter rent agreed to be paid by the consumers.

3. These Bye-laws were amended by the City of Nagpur Corporation Assessment and Collection of Water Rates (Second Amendment) Bye-laws, 1976, and brought in force from October 5, 1976. To Bye-law No. 9 the following paragraphs were added:

Water supplied for Industries, Constructions, Shops, Gardens, Cold Storages, Swimming Pools, Factories and all other Commercial Establishments shall be charged as under:Per month - 1st 5,000 Liters - Rs. 4.00, Next 30,000 Liters - Re. 1/- per 1000 Liters, And 30,001 Liters and above - Rs 1.50 per 1000 liters. Minimum charges per month Rs. 10.00. Total monthly charges under the bill, will be in addition to the meter rent agreed to be paid by the Consumers.

4. Thus, the net result, is that from that date certain categories of consumers which can be broadly classified as non-domestic consumers have been charged at higher rate for consumption of water supplied by meter.

5. The petitioner's contention is that this charge is in the nature of 'fees'. Fees have to be uniform and as this amendment to Bye-law No. 9 differentiates between different types of consumers, it has to be struck down as discriminatory. The contention of the Corporation as well as the State is that firstly the charge is in the nature of 'tax'. Alternatively, it is contended that it is a matter of contract - pure and simple and therefore, writ does not lie. According to them, even assuming the charge to be 'fees' there is nothing wrong in making these classifications as 'domestic-consumer' and 'non-domestic consumer' have always been considered to be different classes in the consumption of water.

6. First question which needs determination is whether the charge is .a 'tax'. Now, Chapter XI of the Act deals with taxation. It begins with section 114. It permits Corporation to impose various levies. Sub-section (iXd) permits imposition of 'a water rate where water is supplied by the Corporation'. It is accepted principle that not merely the nomenclature but the character and nature of levy which is the determining factor. Many times word 'taxation is used loosely in the sense of imposition. That appears to be a case here. In Sub-section (1) itself, there is reference to rate as well as cess. Despite the use of word 'tax' in Sub-section (2) all items thereunder are not taxes. Some are tolls, fees, cess, etc. Distinction between 'tax' and 'fees' is well recognized. Various facts are crystallized by judicial pronouncement made from, time to time and are too well known to be elaborately stated. Whereas tax is imposed to meet general expenses of the State and has no relation whatsoever with a particular benefit to be conferred on the person charged, 'fee' has a close relation with the particular services rendered. Consequently, element of quid pro quo which is so integral part of 'fees' is totally absent from tax. By the very mode of measure of water rate in respect of water supplied by meter it is clear that it is anything but a tax. Indeed the opening words of bye-law No. 9 reading as 'water supplied and sold by meter' are significant. In this particular matter we are not concerned with bye-law No. 6(c) and hence it is unnecessary to go into the question whether that general water rate 'based on annual value of building or land which receives no water supply will be taxed or No. There are our reasons for not dealing with the various points urged and authorities cited on., the question whether under any of the entries in . 2nd list of the Seventh Schedule of the Constitution it is either permissible for the State to levy this imposition as a tax or to delegate such authority to the Corporation. From the return filed on behalf of the Corporation it does appear that as per instructions of the State Government separate budget for Water Works Department is provided for. Indeed, increase in rates is attempted to be justified on the basis of that mini budget showing the Water Works Department in loss. At this stage, Chapter V of the Act dealing with 'obligatory and discretionary duties of the Corporation may be noticed. Section 57(1)(k) reads as under:

57(1) The Corporation shall make adequate provision, by any means or measures which it may lawfully use or take, for each of the following matters, namely:

(k) The management and maintenance of all municipal water works and the construction and maintenance of new works and means for providing a sufficient supply of suitable water for public and private purposes.

This makes it clear that it is mandatory duty of the Corporation to provide for water for public and so also private purposes. Thus, the supply of water is the service rendered to the consumer. All these aspects leave no manner of doubt that all ingredients of 'fees' are present in the charge.

7. It does not appear to us as correct the stand taken by the respondents that the question of mere contractual obligations arises in the present matter. Shri. Shelat, the learned Counsel for the Corporation, invited our attention to various provisions of the Act dealing with formalities to be observed for obtaining water connection in the house, the rights of the Corporation to refuse to supply and/or to disconnect the supply in certain contingencies. Chapter XVI deals with 'Water-supply'. Section 200 of the Act provides for 'General powers for supplying the City with water'. It authorises the Commissioner to enter into an agreement with any person for this purpose. Section 201 provides for making a written application specifying the purpose for which the water is needed and for prescribing terms and conditions as to payment, quantity and period of such supply. Section 220 deals with power of the Commissioner to fix scale of charges for establishing communications from and connections with mains or service cables or for installing wires and pipes for the supply of electricity or 'water or for the use of meters etc. Bye-law No. 10 refers to the Form of agreement which is prescribed as per Appendix 'B' to be signed before getting supply of water of smeter. Bye-law No. 19 refers to the power of the Commissioner for entering into agreement with any consumer using bulk supply of water for a special rate. It is true that a consumer has to apply for the supply and also to sign an agreement before actually receiving the supply of water. It is also apparent that the -supply can be regulated and the quantity desired may not be supplied depending upon many situations and the said supply is not only in terms of the statute but also in terms of the agreement which reserves the right to regulate and disconnect the supply in given situations. But, we fail to appreciate as to how despite these necessary regulatory measures, the supply of water becomes purely contractual affair. Certain regulatory powers are necessary and they are reserved in the Commissioner under the Act and bye-laws even de hors the contract. These powers are extremely necessary even for properly, justly and effectively performing the statutory obligation. The statute does step in the whole transaction. In this connection, our attention was invited to the following passage in A.R. Sethumandhavan v. Visakhapatnam Municipality : AIR1964AP280 (at p. 284 para 21):

Having regard unto the fact that the charges for water supply ate not taxes and scrutinising the provisions aforequoted dealing with the matter in issue, we see that water is supplied on an application by the owners and occupiers of buildings in accordance with the bye-laws, that in some cases the owners also contribute towards the capital cost of pipe, that they bear also the cost of works for taking such water, that in certain cases water is supplied to persons outside the limits of the municipality and non payment of charges due for supply of water entails the penalty of cutting off the water supply which would be restored only on payment of the expenses involved. These incidents reflect only contractual obligations, the persons receiving supply having applied for and agreed to receive supply agreeing to pay the charges therefor and paying them. These are essentially the terms of an agreement to pay for water taken at agreed rates. We do not therefore think that the petitioners could complain of an infringement of their rights under the Constitution.

with great respect to the learned Judges of the Andhra Pradesh High Court, it is not possible for us to endorse the aforesaid line of reasoning. In the first place, it seems to us that the attention of the learned Judges was not drawn to the mandatory duty of the Municipality to supply water. Maybe that the provisions in the Madras District Municipalities Act which were interpreted by the said Court are somewhat different. Secondly, much water had flown under the bridges since 1964 in the matter of concept of contract entered into by the State in respect of matters where statute steps in. We also fail to appreciate as to how the question of legality of a bye-law can be refused to be entertained on the ground of contractual obligations.

8. This takes us to the last and by far the most important questions:

(1) Whether as a rule 'fees' must be uniform?

(2) If no, is this classification reasonable having nexus with the object of the Act?

9. As rightly argued by Shri. Manohar, the learned Counsel for the petitioners, ordinarily fees should be uniform and should take no notice either of the financial capacity or of the category of the recipients of service. But, this concept does admit of certain exceptions. In the case of The Commissioner, Hindu Religious Endowments, Madras v. Sri. Lakshmindra Thirtha Swamiar : [1954]1SCR1005 , it is said (at p. 295) para. 44:

Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay, vide Lutz on 'Public Finance' P. 215. These are undoubtedly some of the general characteristics, but as there may be various kinds of fees, it is not possible to formulate a definition' that would be applicable to all cases.

The following passage from page 83 from 1952 Edition of the First Principles of Public Finance by Antonio De Viti De Marco, (translated from the Italian by Edith Pavlo Marget) dealing with the theory of fee, is to the point:

(a) The fee must be equal, in the aggregate, to the cost of production of the service. That is, the aggregate amount of the fees which the State collects from individual consumers must equal the aggregate expenses of production.

(b) But in the distribution of the aggregate cost among the various categories of consumers, the public price may become a monopoly price. In fact, for the same unit of service the State, as a monopolist, may demand different prices from the various categories of consumers, or it may demand the same price for units that have different costs.

Thus, it is clear that, in a given set of circumstances there can be different rates of fees for different type of consumers that 'domestic consumers' and 'non-domestic consumers' essentially belong to different classes cannot be reasonably disputed. Our attention has been invited to bye-laws framed under and various provisions of various Municipal Acts, in this State as well as outside. We find that these two classes have always been universally accepted as distinct for the supply of water and even for charging different rates. In this connection, the provisions of the Maharashtra Water Supply and Sewerage Board Act, 1976 in particular and Sections 40 and 41 in general may also be noticed. After all, in the matter of classifications large powers have to be conceded in favour of the State as it is in a better position to know the reasons behind making classifications considering the purpose for which they are made. More important question is, has the classification any nexus with the object of the Act. We see no difficulty in accepting the contention of the respondents in the return that water is a scarce commodity. Indeed, this statement is not questioned before us. We have already referred to the duties cast on the Corporation to regulate proper supply of water to the citizens. That supply of water for domestic use is more important admits of no debate. It is contended that consumer-wise classification has no nexus with meeting the scarcity of water, for in a given case a small hotel owner may consume less than a big domestic consumer. This is of course possible. But reasonableness of classifications has to be judged on the basis of generalities and not on exceptions. By and large consumption of water by non-domestic user is more though the use is less important. Nexus is thus obvious. We may in this connection notice that in A.R. Sethumadhavan's case (supra) such type of classification for charging different rates has been held valid. We also agree with the conclusion of the Andhra Pradesh High Court in this connection.

10. In the ultimate analysis, we see no merit in this petition which is dismissed and the rule is discharged. No order as to costs under the circumstances.


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