1. Challenge to water and sewerage tax levy under the UP Water Supply and Sewerage Act — dispute over legislative competence and nature of levy as tax or fee. (Para 1 , 2 )
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2021 Supreme(SC) 633
SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, VIKRAM NATH, B.V. NAGARATHNA, JJ.
JALKAL VIBHAG NAGAR NIGAM & ORS. – APPELLANTS
VERSUS
PRADESHIYA INDUSTRIAL AND INVESTMENT CORPORATION & ANR. – RESPONDENTS
CIVIL APPEAL NO 6107 OF 2021 (ARISING FROM SLP (C) NO 22574 OF 2015)
CIVIL APPEAL NO 6108 OF 2021 (ARISING FROM SLP(C) NO 22577 OF 2015)
DECIDED ON : 22-10-2021
Advocates Appeared:
For the Petitioner(s):Pradeep Kant, Divyanshu Sahay, Shradha Narayan, Nishant Sharma, Rakesh K. Sharma, Advocates
For the Respondent(s):Rupesh Kumar, Neelam Sharma, Pankhuri Shrivastava, Alekshendra Sharma, Advocates
For the Petitioner(s):Pradeep Kant, Divyanshu Sahay, Shradha Narayan, Nishant Sharma, Rakesh K. Sharma, Advocates
For the Respondent(s):Rupesh Kumar, Neelam Sharma, Pankhuri Shrivastava, Alekshendra Sharma, Advocates
The Court held that water and sewerage taxes under Section 52 of the UP Water Supply and Sewerage Act are taxes on lands and buildings under Entry 49, List II, not fees, as they are compulsory exactions based on premises' location and value, irrespective of actual water consumption.
Headnote:
Constitution of India,1950 – Articles 285 , 246 , 266 and 265 - UP Water Supply and Sewerage Act - Sections 52, 55(b)(i) , 52(1);, 56(b) , 55(d)(a) , 56 , 25(2)(vi) , 44 , 101(2) - Factories Act, 1948 - Uttar Pradesh Dookan Aur Vanijya Adhisthan Adhiniyam, 1956 - Jal Sansthan (Radius regarding Levy of Water Tax) Rules 1993 - Section 55(b)(i), - Demand of water tax for amount - Queries and reiterated its demand - Levy of water tax and sewerage tax on premise - Respondent commenced construction of a building under auspices Construction of building was completed in possession was handed over - Building was known PICUP demand was raised by appellants by Bill No. towards water tax for the period By its letter - First respondent sought a clarification on location of sewer and water standpost and other water pipelines distance from PICUP and a copy of relevant notification or order prescribing ‘radius’ under Section 55(b)(i) of UP Water Supply and Sewerage Act – Held, There is an evident error observations - Section 52 is contained in Chapter VI which is titled “taxes, fees and charges that title of Chapter VI was conflated with nature of provision which is contained in Section 52. Section 52 provides for levy of taxes and not for fees or charges for which there are distinct provisions in Chapter observations of Court that though the charges are loosely termed as tax, it is in substance a fee, is per incuriam and in any event not reflective of a correct reading of provisions of statute – Court have indicated Section D.1, statute contains distinct provisions for levy of taxes and for the imposition of charges and the recovery of fees – Court’s view that there is no merit raised in the writ proceedings before the High Court of Judicature – Court reject constitutional challenge to validity of Sections 52 (1)(a), Section 55(b)(1) and Section 56 of UP Water Supply and Sewerage Act - Appeals allowed.
Legal Category Hierarchy
- constitutional law
- administrative law
Table of Contents
2. Whether the levy under Section 52(1)(a) is a tax on lands and buildings under Entry 49 List II or a fee under Entry 17 List II. (Para 8 )
3. The levy is a compulsory exaction on premises where the measure of tax — annual value — does not determine the essential character of the tax. (Para 17 , 24 , 25 , 26 , 47 )
4. A levy on premises defined as land or buildings is a tax on lands and buildings under Entry 49 List II, irrespective of its nomenclature or purpose. (Para 24 , 36 )
5. Appeals allowed — High Court judgment set aside — writ petition dismissed — recovery of dues with interest granted. (Para 49 )
6. Does the use of annual value as a measure change the nature of a tax on lands and buildings?
No. The measure employed for assessing a tax must not be confused with the nature of the tax. A tax on land may be based on annual value and still remain a tax on land under Entry 49 List II. (Para 23 , 29 , 31 )
7. What is the legal distinction between a tax and a fee regarding compulsory exactions?
The traditional distinction based on quid pro quo has blurred. Both can be compulsory. A tax is a compulsory exaction for public purposes, whereas a fee is typically for a specific service rendered or privilege granted. (Para 42 , 44 , 45 , 46 )
8. Can a tax on water supply be levied under Entry 17 of List II?
No. Entry 17 is a non-taxing entry dealing with the subject matter of water supplies. Taxation is treated as a distinct matter and must be supported by a taxing entry, such as Entry 49 for lands and buildings. (Para 37 , 38 , 39 , 40 )
9. Does the requirement that premises be within a certain radius of waterworks make a water tax a fee?
No. Such restrictions do not alter the fundamental nature of the levy. Since the tax is imposed on premises regardless of actual water consumption, it remains a tax on lands and buildings. (Para 25 , 26 , 47 )
JUDGMENT :
Dhananjaya Y. Chandrachud, J.
This judgment has been divided into the following sections to facilitate analysis:
| A. Factual Background ........................................................................................3 B. Issues ................................................................................................................5 C. Rival Submissions...........................................................................................6 D. Analysis...........................................................................................................11 | |
| D.1 Statutory Provisions ..............................................................................11 D.2 Nature of levy under Section 52 of the UP Water Supply and Sewerage Act..........................................................................................20 D.3 Entry 49 List II: Taxes on Lands and Buildings .................................28 D.4 Tax and fee ..............................................................................................38 D.5 The ‘Railways’ judgment .......................................................................44 | |
| E. Conclusion......................................................................................................47 | |
A. Factual Background
1. By its judgment dated 7 March 2014, a Division Bench at the Lucknow Bench of the High Court of Judicature at Allahabad allowed a petition under Article 226 of the Constitution of India instituted by the first respondent and directed the appellants to refund water and sewerage taxes levied and collected under the provisions of the Uttar Pradesh Water Supply and Sewerage Act 19751[“UP Water Supply and Sewerage Act”]. In coming to the conclusion that the levy was contrary to law, the High Court relied upon a decision of this Court in Union of India v. State of U.P. and others , (2007) 11 SCC 324.
2. The first respondent commenced construction of a building at Vibhuti Khand, Gomti Nagar, Lucknow in 1986 under the auspices of the U.P. Rajkiya Nirman Nigam Limited. Construction of the building was completed in 1991 and its possession was handed over on 31 May 1991. The building was thereafter known as ‘PICUP Bhawan’. On 5 January 1995 a demand was raised by the appellants by Bill No. 12/26 for an amount of Rs. 46,63,312.50/- towards water tax for the period from October 1986 to March 1995. By its letter dated 25 January 1995, the first respondent sought a clarification on the location of the sewer and water standpost and other water pipelines; distance from PICUP Bhawan and a copy of the relevant notification or order prescribing the ‘radius’ under Section 55(b)(i) of the UP Water Supply and Sewerage Act.
3 The bill was rectified on 28 January 1995 by which a demand of water tax for the amount of Rs.16,45,875.00/- was raised in terms of the provisions of Section 52(1). The respondent by its communication of 31 January 1995, once again, sought certain clarifications. The appellant clarified the queries and reiterated its demand. The first respondent deposited an amount of Rs. 3,46,500.00/- under protest on 15 March 1995, and a further sum of Rs. 9,41,942.77/- on 29 April 1995. On 7 September 1995 a writ petition was instituted by the first respondent under Article 226 of the Constitution of India for challenging the levy of water tax and sewerage tax on the premise that the first respondent had, during the construction of the building, not obtained any water from the pipeline laid down by the appellants within the area nor had it made a request for a fresh water connection. A challenge was raised to the validity of Sections 52(a), 55(b)(i) and 56(b) of the UP Water Supply and Sewerage Act on the ground that they are ultra vires the provisions of Article 265 of the Constitution. The petition was contested by the appellants, who filed a counter affidavit. By its judgment dated 7 March 201
