The impugned provisions of the Maharashtra Act No. III of 1966 are discriminatory and violative of Article 14 of the Constitution and are invalid and inoperative.

Headnote:
Maharashtra Act No. III of 1966 entitled "The Borough Municipalities (Validation of certain Taxes on Buildings and Lands) Act, 1965" is challenged on the ground that it is unconstitutional, invalid and inoperative. The Act was enacted to validate the levy and collection of taxes by the Borough Municipalities in the State and to provide for recovery of such taxes and for purposes connected with the matters aforesaid. The Act amends the Bombay Municipal Boroughs Act of 1925 by inserting a clause which lays down that "rate on buildings or lands includes any tax imposed on buildings or lands." It also substitutes the Explanation to section 75 of the Act to provide that for the purposes of a rate on buildings or lands, the basis of valuation may be - (i) the annual letting value; (ii) the annual value; (iii) the floor area, in the case of Mills, Factories and buildings and lands connected therewith; (iv) the capital value, in the case of vacant lands. Sections 4 and 5 of the impugned Act are designed to validate the levy and collection of the taxes despite the decisions of the Supreme Court. The impugned provisions are challenged on the ground that they contravene the petitioners fundamental right under Article 19 (l)(f) of the Constitution, that they are discriminatory and violate Article 14 of the Constitution, that the impugned Act was beyond the competence of the Legislature, and that it was a colourable piece of legislation. The Court held that the impugned provisions are discriminatory and violative of Article 14 of the Constitution on both the grounds urged by the petitioners. The Court also held that the impugned provisions are severable from the rest of the impugned Act and the invalidity of these provisions does not affect the validity of the remaining Act.
Fact of the Case:

The Lokmanya Mills of Barsi filed a writ petition against the Barsi Municipality and the State of Maharashtra for an appropriate writ or order under Article 226 of the Constitution declaring the impugned Act unconstitutional, invalid and inoperative and requiring the Barsi Municipality not to take any steps in pursuance of the impugned Act. The Rajen (Textile) Mills Private Limited filed a writ petition against the Barsi Borough Municipality and the State of Maharashtra. The Jalgaon Municipality filed three appeals from the decrees passed by the trial Court in suits filed by the owners of dal Mill and oil mills against the Jalgaon Municipality for the refund of amounts which they had paid by way of taxes assessed at the flat rate provided in rule 4.
Finding of the Court:

The Court held that the impugned provisions are discriminatory and violative of Article 14 of the Constitution on both the grounds urged by the petitioners. The Court also held that the impugned provisions are severable from the rest of the impugned Act and the invalidity of these provisions does not affect the validity of the remaining Act.
Issues: 1. Whether the impugned provisions of the Maharashtra Act No. III of 1966 are unconstitutional, invalid and inoperative? 2. Whether the impugned provisions contravene the petitioners fundamental right under Article 19 (l)(f) of the Constitution? 3. Whether the impugned provisions are discriminatory and violate Article 14 of the Constitution? 4. Whether the impugned Act was beyond the competence of the Legislature? 5. Whether the impugned Act was a colourable piece of legislation?
Ratio Decidendi: 1. The impugned provisions are discriminatory and violative of Article 14 of the Constitution on both the grounds urged by the petitioners. 2. The impugned provisions are severable from the rest of the impugned Act and the invalidity of these provisions does not affect the validity of the remaining Act.
Final Decision: Petitions allowed.

JUDGMENT

TARKUNDE J.--These two writ petitions and three first appeals were argued together as they involved a common question relating to the validity of Maharashtra Act No. III of 1966 entitled "The Borough Municipalities (Validation of certain Taxes on Buildings and Lands) Act, 1965.

2. In order to appreciate the contentions of the parties it would be useful

to, start with the facts leading to Special Civil Application No. 1476 of 1966.

That petition has been filed by the Lokmanya Mills of Barsi against the Barsi Municipality and the State of Maharashtra for an appropriate writ or order under Article 226 of the Constitution declaring the said Maharashtra Act No. III of 1966 (hereinafter referred to as the impugned Act) unconstitutional, invalid and inoperative and requiring the Barsi Municipality not to take any steps in pursuance of the impugned Act. The petitioner, the Lokmanya Mills, has its spinning millions Barsl" and the premises of the mill consist of a factory building, offices, bungalows, warehouses, out houses, etc. Till 1947 the Barsi Municipality used to levy and recover a house tax on the buildings of the petitioner which was assessed on the basis of their annual letting value. Till that year the annual letting value of the petitioners buildings was ascertained in the normal way, i.e. by ascertaining the amount at which the buildings might reasonably be expected to let from year to year, In 1947 the Municipality made fresh rules regarding the levy of house tax and rule 2 (0) of the new rules ran as follows:

"2. (c) In the case of Mills and factories and buildings connected; therewith, house to: on buildings shall be levied at the usual rate on the Annual Rental Value fixed at Rs. 4.0 for every 100 square feet or portions thereof for each story, floor or cellar.

The expression Building connected therewith means and includes warehouses, go downs, mill shops, etc which are within the compound of Mill premises but does not include residential buildings, such as bungalows, out houses.

Notes-Buildings which are not, taxed under rule 2 (0) shall be taxed under the ordinary Rules."

It will be noticed that under this rule the annual rental value of all the buildings of mills and factories other than residential buildings was fixed at a uniform rate of Rs. 40 for every 100 square feet of floor area irrespective of the actual rental value of the premises. The petitioner protested against this method of taxation on the ground that it was arbitrary and capricious but particular protested the taxes levied upon its buildings. Then in the years 1948 and to the petitioner filed five suits to recover from the Municipality the excess amount which had been paid by the petitioner under the new rules over and above the amount which used to be paid hi accordance with the assessment made under the old rules. The petitioner claimed refund of the excess amount in these suits on the ground that rule 2 (0) was invalid. The suits had a other chequered history, but they were eventually decreed by the Supreme Court. The Supreme Court held that rule 2 (c) was ultra vire8the powers of the Municipality Under the relevant provisions of the Bombay Municipal Boroughs Act of 1925 by which the Municipality was governed (vide Lokmanya Mills v. Barsi Brought Municipality Municipality (1)]. After referring to section 78 and the Explanation to section 75 of this Act (here in after referred to as the Boroughs Act), the Supreme Court pointed out that the Municipality should levy a rate on lands and buildings assessed on valuation based on capital or the annual letting value, and that in framing rule 2 (0) the Municipality had ignored both the methods of valuation and had adopted a method not sanctioned by the Act. The Supreme Court observed (p. 1360):

" By prescribing valuation computed on the area of the factory b1,1ilding, the Municipality not only fixed arbitrarily the annual letting value which bore no re

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