College case Full order of 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-

 

 

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.

 

  1. Thattankutti Village Panchayat, Represented by its President, Thattankuttai Village, Kumarapalayam Taluk,

Namakkal District – 638 183…………. Respondents

 

 

 

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

 

 

O R D E R

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.

 

 

 

  1. The petitioner is SSM Engineering College and one of the premier Educational Institutions in the locality for its academic The petitioner Institution has been approved by the All India Council for Technical Education and affiliated to Anna University.

 

 

  1. 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 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.

 

 

  1. 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

 

 

 

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.

 

 

  1. 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

 

 

  1. 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

 

 

 

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.

 

 

  1. 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

 

 

  1. 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 The issue in entirety was not adjudicated and

 

 

 

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.

 

 

  1. 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 This being the rate of surcharge contemplated under

 

 

 

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.

 

 

  1. 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

 

 

  1. 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?

 

 

 

  1. 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.

 

 

  1. With this background, let us consider the provisions of the Act regarding the property tax to be 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).”

 

 

 

 

 

 

 

 

  1. 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).

 

 

  1. 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:-

  • the classification of the local areas under Section 4;
  • the annual receipts of the Village Panchayat;
  • the population of the Panchayat Village and the predominant occupation of such population; and
  • such other matters as may be “

 

 

 

  1. 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.

 

 

  1. 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.

 

 

  1. 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

 

 

 

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.

 

 

  1. 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 “

 

 

  1. 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:-

 

 

 

 

 

 

Sl.No Class of Usage Rate                of Surcharge
(i)_ Purely residential Village Panchayats Nil
(ii) Simple commercial like petty shops and other                       small commercial establishments Village Panchayats  

 

 

 

0.20

(iii) Largely Commercial, industrial                      and business establishments, Cinema                  theaters, Hostels,                                    Lodges, etc., Village Panchayats  

 

 

 

 

 

 

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.”

 

 

 

  1. 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 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.

 

 

  1. 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

 

 

 

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.

 

 

  1. As far as the orders relied on by the petitioner dated 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.

 

 

 

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.

 

 

  1. 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

 

 

 

roads, water, street lights etc.,

 

 

 

  1. 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

 

 

  1. “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 Tax and its collection are backbone of the development of our great Nation.

 

 

  1. Private educational institutions are collecting exorbitant amount of fees, charges, , in various forms and making huge profits.

 

 

 

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.

 

 

  1. Power to impose taxes by the Village Panchayats are constitutionally 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.

 

 

  1. 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 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

 

 

 

infrastructures.

 

 

 

  1. 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

 

 

 

  1. In view of the facts and circumstances, this Court is inclined to pass the following orders:
  • The relief as such sought for in the writ petition stands

 

  • 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
  • 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
  • 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
  • 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

 

 

 

collection in the manner provided under the Statute and Rules.

 

  • The first respondent is directed to instruct all the District Collectors to ensure that lapses, dereliction of duty, negligence, corrupt activities , 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.

 

 

  1. With the above directions, the Writ Petition stands disposed

 

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.

 

 

 

To

 

  1. The Secretary,

The Government of Tamil Nadu,

Rural Development and Panchayat Raj Department, Fort St.George, Chennai – 600 009.

 

  1. The President,

Thattankutti Village Panchayat, Thattankuttai Village, Kumarapalayam Taluk, Namakkal District – 638 183.

 

 

 

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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