IMPORTANT POINT
The court established that 'disputed tax' does not encompass interest and penalty, which must be treated as separate entities under the Maharashtra Municipal Corporation Act.

JUDGMENT :

K.R. Shriram, J.

1. Mr. Shinde for respondent sought time saying that only yesterday he was given the brief. Mr. Sridharan states that petition was served way back in March 2024 and undertakes to file affidavit of service. In view thereof and since the issue involved was narrow, i.e., interpretation of provisions of the Maharashtra Municipal Corporation Act, 1949 (the Act) and the Maharashtra Municipal Corporation (Local Body Tax) Rules (the Rules) the court felt the matter can be disposed without giving any further time to, respondent to file reply.

2. Petitioner is impugning an order dated 22nd February 2024 to the extent where it says under Section 406 (6) (i) (ii) of the Act no appeal shall be entertained unless the amount of the disputed tax claimed plus interest and penalty has been deposited by appellant with the Commissioner. Admittedly, disputed tax is not defined under the Act.

3. The short issue which arises for our consideration is the interpretation of the phrase “disputed tax” as appearing in Section 406(8) of the Act. Sub-Section (8) of Section 406 of the Act reads as under:-

“(8) No appeal under sub-section (6) shall be entertained by the Deputy Commissioner or, as the case may be, the Commissioner unless the amount of the disputed tax claimed from the appellant has been deposited by the appellant with the Commissioner.”

4. In the instant case, the issue involved in the assessment order was whether Petitioner is liable to pay Local Body Tax (LBT). Respondents have passed an order levying LBT of Rs.28,861,674/-, interest of Rs.28,861,674/- for the period June 2015 to June 2017 and penalty of Rs.15,000/-. Petitioners have deposited the LBT but have not deposited the interest and penalty amount while filing the appeal. It is the contention of Petitioner that on a true and proper construction of Section 406(8) of the Act, for entertaining an appeal it is only the amount of “disputed tax” claimed from Petitioner which has to be deposited, whereas it is the contention of Respondents that for entertaining the appeal under the said section, Petitioner is required to deposit not only the disputed tax but also the interest and penalty. Therefore, the issue that arises for our consideration is :

(i) Whether on true and proper construction Section 406(8) of the Maharashtra Municipal Corporations Act, the phrase “disputed tax” used in the said section would include interest and penalty also?

5. To answer this question, it is relevant to analyse the scheme of levy of LBT. Section 127 of the Act deals with taxes to be imposed and Section 127(2)(aaa) provides for levy of LBT on the entry of the goods into the limits of the city for consumption, use or sale therein, in lieu of octroi or cess, if so directed by the State Government by notification in the official gazette. Sub-section (3) provides that the tax shall be levied in accordance with the provisions of the Act and the Rules. Pursuant to the said provision, the levy of LBT is regulated by Rules.

6. The scheme of levy of LBT makes a distinction between levy of tax and interest and penalty. Rule 5 of the said rules provides for liability to pay LBT in certain cases and various sub-rules therein prescribes liability to pay LBT including any interest and penalty. Rule 27 of the said Rules provides for lump sum payment of LBT in case of registered dealer having small turnover and the LBT based on the turnover ranges from Rs.2,000/- to Rs.5,000/-.

7. We also note that Rule 33 of the Maharashtra Municipal Corporation (Local Body Tax) Rules distinguishes between the local body tax and interest and penalty. Sub Rule (1) of Rule 33 of the said Rules provides that the amount of local body tax due from a registered dealer liable to pay shall be assessed separately for each period. Sub Rule (9) of Rule 33 provides the order of assessment shall be in Form I. Sub Rule (10) of Rule 33 says an order imposing a penalty or interest under Rule 48 or an order of forfeiture with or without