Owner/Occupier Of Property Will Have To Pay Water Tax, Water Benefit Tax Even If They Do Not Consume Water From BMC: Bombay High Court

In a significant ruling, the Bombay High Court last week held that an owner of a property will have to pay the water tax and the water benefit tax irrespective of whether the owner or occupier of the property uses the water facility or not.

A full bench of Justices Atul Chandurkar, Manish Pitale and Sandeep Marne was dealing with a reference made by a single judge, way back in 2007 framing three questions : 

(i) Whether the Corporation has the power to levy tax under Section 140(a)(i) of the said Act on the actual supply of water?

(ii) Whether the water benefit tax, as envisaged under Section 140(a)(ii) of the said Act, could be levied irrespective of the actual consumption of water since it pertains to maintenance of the system?

(iii) Whether the Corporation is entitled to levy fixed tax apart from the water charge which is levied for the actual consumption of water?

The judges noted that sections 140 and 141 of the Mumbai Municipal Corporation Act, 1888 empower the civic body to levy a 'water tax' for making available the facility of water supply in the area and a 'water benefit tax' for defraying the expenses incurred for providing and improving the infrastructure needed for such water supply and also for its maintenance and operation, respectively. 

"Since property taxes are compulsory imposition and the liability to pay water tax and water benefit tax accrues irrespective of consumption or otherwise of water in the premises. In our view, the Municipal Corporation can levy 'water tax' under Section 140(1)(a)(i) of the MMC Act once the facility of water supply is made available to the owner/occupier of a property and whether he actually consumes water or not becomes immaterial. Similarly mere difference in the purpose behind levy of 'water benefit tax' which is to meet the expenditure on laying, operation and maintenance of pipelines, would make no difference as 'water benefit tax' is also a component of property tax and would accordingly be leviable on same pedestal as that of 'water tax'," the judges said in the August 23 order.

For the third question referred to by the single-judge on whether water tax and water benefit tax can be levied in addition to the payment of 'water charges', the full bench noted that Section 169 of the MMC Act, which provides for levying water charges in lieu of water tax.

"Thus, from provisions of Section 169(1) (ii) of the MMC Act, it is clear that the levy of water charges is in lieu of water tax. Though clause (ii) of subsection (1) of Section 168 uses only the word 'water tax', the Apex Court has held that the levy of water charges would be in lieu of both water tax as well as water benefit tax. Therefore, once owner/occupier avails water supply facility and becomes liable to pay water charges under the provisions of Section 169(1)(ii) of the Act, payment of such water charges would be in lieu of water tax and water benefit tax. In short, it is not necessary for such owner/occupier to pay both water charges for actual consumption of water as well as water tax/water benefit tax," the judges held.

The issue arose from two petitions one filed by MARS Enterprises, which redeveloped a property in South Mumbai while the other filed by Oil and Natural Gas Corporation (ONGC) pertaining to its building in Bandra - both challenging the notices of the BMC seeking demanding water tax and water benefit tax. The petitioners argued that they did not consume the water supplied by the BMC and in fact, MARS had also applied for disconnection of the supply and after the same was disconnected, it relied on water tankers.

However, the BMC contended that irrespective of whether there is a consumption of water facilities or not, it can still levy water tax and water benefit tax as the same are meant for providing water supply and maintaining the services etc.

The full bench thus upheld the arguments of the BMC.

Appearance:

Advocates Arup Dasgupta, Sonam Ghiya, Drshika Hemnani instructed by Jhangiani Narula & Associates appeared for MARS Enterprise.

Advocates SA Bhalwal, Kundanlal Patil instructed by Vyas & Bhalwal appeared for ONGC.

Senior Advocate Anil Sakhare along with Advocates Rohan Mirpurey and Sunil Sonawane represented the MCGM.

Case Title: MARS Enterprise vs Municipal Corporation of Greater Mumbai (WP/455/2005)

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