In a significant judgment delivered on August 23, 2024, a Full Bench of the Bombay High Court, comprising Justice A.S. Chandurkar, Justice Manish Pitale, and Justice Sandeep V. Marne, ruled that property owners and occupiers in Mumbai are liable to pay water tax and water benefit tax irrespective of whether they actually consume water. The ruling was in response to a long-standing legal conflict regarding the interpretation of taxation provisions under the Mumbai Municipal Corporation Act, 1888 (MMC Act).
Background of the Case:
The case in question was brought before the court through two writ petitions. The first, Writ Petition No. 455 of 2005, was filed by MARS Enterprises, a company managing a property at 5 Battery Street, Gordon House, Mumbai. The second, Writ Petition No. 589 of 2001, was filed by Oil and Natural Gas Corporation Ltd. (ONGC), concerning a property in Bandra Kurla Complex. Both petitioners challenged the levy of water tax and sewerage tax by the Mumbai Municipal Corporation (MCGM) despite not consuming water on their respective properties.
MARS Enterprises had requested the disconnection of water supply during the redevelopment of its building, yet received a bill in 2004 that included significant charges for water tax and water benefit tax. ONGC, similarly, was charged for water and sewerage taxes without having procured a water connection for its land.
Legal Issues:
The legal questions referred to the Full Bench were pivotal to the interpretation of the MMC Act. The issues included:
1. The authority of MCGM to levy water tax under Section 140(1)(a)(i) of the MMC Act even when no water is consumed.
2. Whether the water benefit tax under Section 140(1)(a)(ii) could be imposed regardless of actual water consumption, given its purpose of maintaining the water supply infrastructure.
3. The relationship between water tax, water benefit tax, and water charges, and whether these could be charged simultaneously.
Court’s Decision:
The Full Bench, referencing the Supreme Court’s ruling in Municipal Corporation of Greater Mumbai vs. Harish Lamba, concluded that water tax and water benefit tax are forms of property tax and are, therefore, obligatory regardless of water consumption. The court stated, “The levy of water tax and water benefit tax becomes payable as soon as the owner/occupant of the premises is in a position to avail water connection… even if the water supply is disconnected.”
The court elaborated that water charges, which are based on actual consumption, are distinct from the compulsory property taxes of water tax and water benefit tax. Thus, even if water is not consumed, the obligation to pay these taxes remains.
Key Observations:
The bench made several important observations:
– On the nature of the tax: The court emphasized, “Water Tax or Water Benefit Tax, in law, is a property tax… payable as soon as the owner/occupant of the premises is in a position to avail of water connection… irrespective of the quantity of water supplied and consumed.”
– On the distinction between taxes and charges: It was noted that while water charges under Section 169 of the MMC Act are contingent on actual water consumption, water tax and water benefit tax are imposed based on the availability of the water supply infrastructure, not its use.
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The petitions have now been remanded to the Division Bench for further orders, following the resolution of these critical legal questions.
