Bhadreswar Municipality vs Samnagar Jute Factory Co., Ltd.

P.B. Chakravartti, C.J.—This and three other appeals were heard together, as they involve a common point of law, arising out of precisely similar facts. The point was argued before us by reference to Appeal No. 25 of 1953, but we are taking Appeal No. 23 for the purposes of our main judgment, because the learned trial Judge gave his judgment in the proceeding which has given rise to that appeal. There is one special fact in two of the other appeals, but as no point was sought to be made out of it, I shall merely mention it in the orders I shall pass in those appeals.

The Appellant in each of the appeals is a Municipality. The question involved is the validity or otherwise of an alteration of the assessment of certain holdings, made by the Municipality in purported exercise of its power u/s 138(1)(c) of the Bengal Municipal Act by way of giving effect to a statutory change of the rate. In two of the cases, the alteration was made by the Municipal Commissioners themselves. In the other two, it was made by the Special Officer who was administering the affairs of the Municipality during a period of its super session.

In order to indicate the nature of the dispute between the parties and the question arising out of it for decision, it is not necessary to state many facts. Indeed, it can be indicated with sufficient fullness by reference only to certain sections of the main Act and one section of an amending Act.

The Bengal Municipal Act contemplates certain levies which are set out in Section 123(1). Four of them are called rates and they are to be levied "on the annual value of holdings". It is clear that in order that these rates may be imposed, the annual value of the holdings must first be determined and the percentages of the annual value at which the rates will be levied must also be fixed. The rates concerned are a rate on holdings, a water rate, a lighting rate and a conservancy rate. With respect to each of them, the Act lays down a maximum percentage which is to be found among the provisions contained in Sections 124 to 126 and which must not be exceeded, but subject to that limitation, a Municipality may fix any percentage that it may consider necessary and proper. The method of determining the annual value is laid down in Section 128, while Section 135 authorises and in fact requires the Commissioners to determine the percentage at which any rate, to be assessed on the annual value of the holdings, should be levied. The broad position, therefore, is that the four rates are to be levied on the annual value of the holdings, determined in accordance with Section 128, at the respective percentages determined u/s 135, subject to the maxima, as laid down in Sections 124 to 126.

A more detailed reference to Sections 128 and 135 and some other connected sections is now necessary. Section 128 which is concerned with the quantum of the annual value says in Sub-section (1) that such value shall be deemed to be the gross rental at which the holding may reasonably be expected to be let. It proceeds to say in Sub-section (2) that if the gross rental cannot be easily ascertained, the annual value of a holding shall be deemed to be an amount "which may be equal to, but may not exceed" seven-and-half per centum of the value of the building or buildings or the holding, together with a reasonable ground rent for the land. Those are all substantive provisions contained in the Act regarding the annual value of holdings. The direction to determine the annual value of all holdings within the municipality is contained in Section 133 which further provides that such value, when determined, shall be entered in a valuation list. u/s 137(1), a new valuation list is to be prepared once in every five years.

As to the percentage at which the rates are to be assessed, Section 135 provides that the Commissioners "shall determine the percentage... at which any rate on the annual value of holdings shall be levied" and do so "at a meeting held before the close of the year next preceding the year to which the rate will apply". The exercise of this power is "subject to the provisions of this Act" and therefore subject to the upper limits of the rates laid down in Sections 124 to 126. u/s 136, after the percentage at which a rate or the rates shall be levied for the next year has been determined u/s 135, the Commissioners must cause to be prepared an assessment list, containing inter alia, the following particulars, viz., (d) the annual value of the holding, (f) the amount of rate payable for the year (each rate to be shown separately) and (g) the amount of the quarterly instrument.

There are thus two lists, a valuation list and an assessment list. The general provision regarding the duration of these lists is contained in Section 137(2) which says that subject to any alteration or amendment made u/s 138 or upon an application u/s 148,

Every valuation and assessment entered in a valuation or assessment list shall be valid from the date on which the list takes effect in the Municipality and until the first day of April next following the preparation of a new list.

The question of amendments and alterations may be left out for the moment. Apart from them, the position is that a valuation or an assessment list, once prepared, remains valid till a new list replaces it, taking effect from the first day of the month of April next following its preparation. The duration of a list, therefore, depends on the preparation of a new list. As regards the valuation list, it has been seen that a new list is to be prepared once in every five years unless the State Government otherwise directs and therefore the resultant position is that, normally and apart from any alteration or amendment, the annual value of a holding, once determined, remains in force for five years for the purposes of the assessment of rates. As regards the assessment list, the position is a little obscure. Section 135, after providing that the Commissioners shall determine the percentage "before the close of year next preceding the year to which the rate will apply", proceeds to say that

The percentage so fixed shall remain in force until the Commissioners at a meeting shall determine some other percentage on the valuation of the holdings at which the rate will be levied from the beginning of the next year.

Whether the sections, taken as a whole, means that the Commissioners must, before the expiry of each year, determine the percentages for next year, even if the determination be only to maintain the current percentages or whether it means that they need make a fresh determination only when they desire to alter some or all of the percentages for the next year, is not very clear. The language of Section 136 might suggest that the former was the true meaning of the section, because it says that an assessment list shall be prepared after the percentage at which the rate or rates "shall be levied for the next year" has been determined u/s 135, indicating thereby that the list is for one year only. But the section also admits of the meaning that as assessment list shall be prepared only when new percentages have been determined for the next year but till such fresh determination is made, the old percentages shall continue to remain in force by virtue of the closing words of the first paragraph of Section 135 and no new assessment list is required to be prepared. In any event, there can be no question that when a new valuation list is prepared, there must necessarily be a new assessment list and when an assessment list has been prepared, the amount of rate payable and the amount of quarterly instalments, as entered in it, must remain valid for at least the next year, apart from alterations and amendments, if any.

Coming to alterations and amendments, those made on an application u/s 148 are made upon a review at the instance of the tax-payer and are not pertinent to the question to be decided in this appeal u/s 138(1) the Commissioners may alter or amend an assessment list in various forms and on various grounds, one of which is set out under Clause (c) of the section. That clause provides that an alteration or amendment can be made.

By altering the valuation of or assessment on any holding which in their opinion has been incorrectly valued or assessed.

It is somewhat curious that whereas Section 137(2) seems clearly to contemplate alteration or amendment of both the valuation list and the assessment list, Section 138(1) speaks of alteration or amendment of only the latter. The omission is not of much practical importance, because the annual value of the holding is one of the particulars required to be included in the assessment list, so that a correction of the valuation may be made in that list as well.

One other provision of the Act has next to be referred to. It has been seen that one of the particulars which an assessment list must include is "the amount of the rate payable for the year "(each rate to be shown separately)". The general provision as to the percentages of the rates is contained in Section 135, which requires the Commissioners to determine the percentage on the annual valuation of holding at which any rate, assessable on the annual value, shall be levied. That provision contemplates one uniform percentage for each of the rates, applicable to all holdings. It does not contemplate that the Commissioners may fix one percentage for one holding and another percentage for another, according to value or any other standard of differentiation, nor that they can fix a percentage on a graduated scale. But a differentiation is introduced by the proviso to Sub-section (2) of Section 128 which, as it stood before a recent amendment, read as follows:

Provided that, where the value of the building or buildings on the holding exceeds one lakh of rupees, the percentage on the annual value to be levied in respect of so much of the value as is in excess of one lakh of rupees, shall not exceed one-fourth of the percentages determined u/s 135.

The location chosen for this proviso is clearly inappropriate. It has no concern with the determination of the annual value which is the subject-matter of Section 128, but is concerned with the percentage on the annual value, that is to say, the percentages of the rates, the determination of which is the subject-matter of Section 135. It should, therefore, have been made the first proviso to that section. Be that as it may. the proviso lays down that where there are buildings on a holding and their value exceeds one lakh of rupees, the percentage to be charged on that part of the value which is in excess of Rs. 1 lakh shall not be the percentage determined u/s 135 but may only be a percentage up to and not exceeding one-fourth of that percentage. Obviously, the rule is to apply to the percentages for all the four rates. When an assessment list is prepared u/s 136, the special rule of computation or rather the provision for lower rates in respect of the slab above Rs. 1 lakh in the value of buildings has to be borne in mind and the figure arrived at on such basis, once it is entered in the assessment list, is to hold good for at least one year, apart, however, from alterations or amendments u/s 138.

Having set out the relevant provisions of the main statute, I may now proceed to refer to the short facts of the case. It appears that a revaluation of the holdings situates within the limits of the Appellant Municipality was made early in 1951 and it was to take effect from the first quarter of the year 1951-52. The Respondent company owns a holding within the Municipality on which there are buildings valued at more than Rs. 3 lakhs. The holding, conservancy and lighting rates, chargeable on the holding, were computed in accordance with the percentages determined u/s 135, and in accordance with the proviso to Section 128(2), the lower rate of one-fourth of those percentages was applied to the value of the buildings, in so far as it was in excess of Rs. 1 lakh. For the first three quarters of the year 1951-52, tax was demanded in accordance with such assessment and duly paid.

On October 27, 1951, an Act, called the Bengal Municipal (West Bengal Amendment) Act, came into force. By Section 12 it amended Section 126 of the main Act which deals with the conservancy rate and one of the amendments it made was to the following effect:

(a) in Clause (c) of Sub-section (1) for the words "seven per centum", the words "ten per centum" shall be substituted.

By Section 13, the amending Act amended the proviso to Sub-section (2) of Section 128 and the amendment was as follows:

(a) for the words "one lakh" in the two places where they occur, the words "three lakhs", and

(b) for the words "one-fourth" the word "one-half" shall be substituted.

The effect of the amendment of Section 126 was that the ceiling of the conservancy rate was raised. The effect of the amendment of the proviso to Section 128(2) was that instead of the amount above Rs. 1 lakh in the value of buildings, the lower rate was made applicable only to the amount above Rs. 3 lakhs and the lower rate was itself increased from one-fourth of the percentage fixed u/s 135 to one-half of that percentage. Up to Rs. 3 lakhs, the full percentage was not to be applicable.

After the amending Act had come into force, the Municipality informed the Respondent company by a notice u/s 138(2) of the main Act that it proposed to alter the assessment from Rs. 5,639-15 as. to Rs. 11,171-3 as. per quarter, with effect from the fourth quarter of the year 1951-52, as it was of opinion that by reason of Section 13 of the amending Act, the assessment had become incorrect and that the alteration would be made on a certain date. On receipt of that notice, the company applied for an adjournment in order that its lawyers might have some time to consider that legal position, but adjournment was refused and the alteration was made on the notified date. Thereafter, the company was informed of the new assessment by a notice u/s 147(2) of the main Act and that notice was followed by a demand notice u/s 155(2) in respect of the fourth quarter of 1951-52, with the bill enclosed. An application for a review of the assessment was rejected. The details of the new assessment incorporated in the notice u/s 138(2) show that there was a clear arithmetical mistake as regards the conservancy rate which, according to the figures given in the notice itself, should have been Rs. 1,225-6 as. and not Rs. 1,325-6 as.

The company did not pay the amount demanded. Instead, it moved this Court under Article 226 of the Constitution and obtained a Rule, which was eventually made absolute. Bose, J., who heard and decided the matter held that the alteration of the assessment on the strength of Section 13 of the amending Act was ultra vires section 138(1)(c) of the main Act under which the Municipality had purported to make it, because the section applied only to cases where the assessment was incorrect when it was made. The learned Judge held further that Section 13 of the amending Act was not intended to apply to past assessments and that to apply it retrospectively would be to affect the tax-payer''s position under the proviso to Section 128(2) before its amendment, which would be contrary to Section 8(c) of the Bengal General Clauses Act, whether the proviso conferred a right or only a privilege. In accordance with those findings, the learned Judge issued a direction to the Municipality to forbear from giving effect to the order by which the new assessment had been made and the order rejecting the application for a review as also to the notices under Sections 147(2) and 155(2) of the Act.

It is against the above order that the Municipality has preferred the present appeal.

I might point out here that under the new assessment, the holding, conservancy and lighting rates were all increased, as would appear from the notices and the bill. But no increase of the conservancy rate appears to have been made in pursuance of the amendment of Section 126(1)(c) by Section 12 of the amending Act. The only section of the amending Act to which reference was made in the notice u/s 138(2) was Section 13. The alterations were, therefore, consequential to the application of the amendment of only the proviso to Section 128(2) by which the limit up to which the ordinary percentages would apply was raised and the quantum of the lower rate applicable to the balance of the value of buildings was increased. Even so, why the water rate was not increased, is not clear.

In support of the appeal it was contended by Mr. Gupta that the construction of Section 138(1)(c) adopted by the learned trial Judge would have the effect of postponing the operation of the amending Act by five years, which could not have been the intention of the Legislature. According to Mr. Gupta, the amendment of Section 128 by Section 13 of the amending Act was intended to have immediate operation. If on the one hand, its operation was not intended to be retrospective, neither was it, on the other hand, intended to be delayed. If the amendment applied from its date, the provision contained in Section 138(1)(c) gave the Municipality a right to alter the assessment in accordance with the proviso to Section 128(2), as amended, because by the test of the amended section, the assessment had undoubtedly become incorrect. The language of Section 138(1)(c), viz., "which has been incorrectly assessed", could not, Mr. Gupta contended, be rightly read as confined to cases where there had been an incorrect assessment at the time it had been made, but it was wide enough to cover a case where the assessment had become incorrect at the time of the alteration, "which has been incorrectly assessed", meant also "the assessment of which has become incorrect". The result of the old assessment as distinguished from the process of making it was, Mr. Gupta further contended, an existing fact and if, factually, that assessment had become incorrect by reason of the amendment of the charging section coming into force on and from October 27, 1951, it could well be said thereafter that the holding had been incorrectly assessed and consequently the assessment could be corrected u/s 138(1)(c).

In spite of the subtlety and attractiveness of this argument, I do not find myself able to accept it as correct. We are not concerned with the valuation of the holding which has not been changed and need only consider the case of assessment. As a matter of language, the expression "which has been incorrectly "assessed" can, in my view, only mean "which was incorrectly "assessed at the time the assessment was made" or "which when "it was assessed, was assessed incorrectly". In support of his contention that the expression may also mean the assessment of which has "become incorrect", Mr. Gupta referred to Kinning''s case (1847) 10 Q.B. 730 : (1847) 116 F.R. 277, 283, where the expression "hath been resident", occurring in a warrant of commitment, was construed by two of the four learned Judges. I am unable to see that the case cited lends any assistance to Mr. Gupta, There, the Court had to consider the validity of a warrant of commitment to jail, issued against a debtor u/s 1 of 8 and 9 Vic, c. 127. That section said in the first place that a summons might be obtained against a debtor from any Court, within the jurisdiction of which he "shall reside or be" and then it said that the debtor might be committed to the gaol of the city, borough or place in which he "shall be resident". The warrant said that the debtor had been resident in the city of London, when summoned and that he was to be conveyed to the Debtor''s Prison in London where he "hath been resident". There was a difference of opinion among the Judges as to whether the Act intended the commitment to be to the gaol of the district where the debtor resided at the time when he was summoned or whether it would have to be to the gaol of the place where he was residing at the time of the commitment. If the latter was the true construction of the Act, there was a further question to be considered as to whether the warrant was in order, because the expression "hath been resident", it was contended, indicated cessation of residence. Coleridge and Erle, JJ., who favoured the former construction, held that even on the latter construction the warrant could not be said to be bad, because the words "hath "been resident" imported a continuous residence up to the time of the commitment. Coleridge, J., added that the expression "hath been" was not exclusive of the present time, but he also said that he did not propose to base his decision on the textual construction of the warrant. I cannot see how, because the expression "hath been resident" implies a continuous residence up to the present time, it can be said that the expression "has "been incorrectly assessed" may be taken to mean and include "the assessment of which has become incorrect". The intransitive verb "to be" used in the perfect tense along with the adjectival expression generally connotes a continuous state, but the same cannot be said of a transitive verb. I may also point out that even if full effect be given to the analogy of the expression relied on by Mr. Gupta, it will not help his argument because the utmost he can get from the analogy is the meaning that the incorrectness of the assessment has been a continuous fact from the beginning, which would obviously not be correct. What Mr. Gupta''s client requires is not the meaning that the assessment has always been incorrect, but the meaning that it has become incorrect. Of that meaning, the expression "has been incorrectly "assessed" does not, in my view, admit. The incorrectness contemplated by the expression is an incorrectness attaching to the act of assessment or the assessment as it was at the time of its making and, therefore, it refers back to the time when the assessment was made.

But even if we fake the expression as meaning "the assessment "of which has become incorrect", I do not see that it takes Mr. Gupta''s client any further. Section 138(1)(c) authorises the Commissioners to alter or amend the assessment list By altering... the assessment on any holding which in their opinion has been incorrectly... assessed.

Even assuming that the last words of the clause cover an assessment which has become incorrect since it was made, it is clear from the language of the clause that before the Commissioners can interfere with an assessment, it must already have become incorrect. It is only an existing incorrectness, arisen independently of their doing anything, which gives the Commissioners jurisdiction to alter an assessment. That condition precedent must be fulfilled before jurisdiction to interfere with an assessment can arise. Mr. Gupta disclaimed any intention to contend that the clause had left the incorrectness to the opinion of the Commissioners and, therefore, it was not material to enquire whether there was any incorrectness in fact prior to the alteration of the assessment. He also conceded that Section 13 of the amending Act did not by itself and of its own force effect any part assessment and that in order that it might affect an assessment, it had to be applied by the Commissioners. If so, it is impossible to see how before the Commissioners proceeded to alter the assessment, they could find that it had become incorrect and how unless they could so find, they could have any jurisdiction to alter the assessment u/s 138(1)(c). The meaning "has become "incorrect" does not, therefore, improve the position of the Municipality or confer on it wider powers. If the amending Act does not apply to a part assessment of its own force so as to make it incorrect, such an assessment could be found by the Commissioners to be incorrect before they proceeded to act u/s 138(1)(c) and apply the amended law only if it was incorrect under the previous law. Till then, no other law applied to it and under no other law could it have become incorrect. It would thus appear that whether the words of Section 138(1)(c) be taken as limited to assessments which were incorrect when they were made or as also including assessments which had since become incorrect, the incorrectness must be an incorrectness under the previous law in either case and, therefore, the position in both cases is exactly the same. No one contends that the assessment in the present case was incorrect even under the previous law and so it follows that the Commissioners had no jurisdiction to act u/s 138(1)(c) even on the interpretation of the clause suggested by Mr. Gupta.

When Mr. Gupta said that the assessment contemplated by Section 138(1)(c) was not the act or process of making assessment, but the result and that such result as an existing fact had become incorrect by reason of the amendment of Section 128, he was but advancing the same argument in another form and the argument is answered by the reasons I have already given. The only effect of Section 13 of the amending Act is that it lays down two new percentages for the percentages previously applicable to the amount between Rs. 1 lakh and 3 lakhs and the amount in excess of the latter sum in the value of buildings. When a statutory provision merely prescribes a rate of tax, it does not operate on any assessment unless it is made applicable to it by some other provision or some other words in the same provision. There is nothing in Section 13 or any other section of the amending Act which makes it applicable to completed and current assessments. Although the amendments made by the section came into force on October 27, 1951, and the main Act began to speak from that date as if the amendments were incorporated in it, they could not appply to past assessments unless retrospective operation was given to them by express words or necessary intendment. The immediate operation for which Mr. Gupta contended would attach the new percentages to assessments made on or after October 27, 1951, by reason of the other words in Section 128, but it could not make them applicable to existing assessments in the absence of a further provision making them so applicable. It is therefore, not correct to say that even completed assessment, existing as facts, became incorrect by reason of the amendments coming immediately into force. If Section 13 had said that the words substituted by it should be deemed to have always been in the Act or at least in the Act since January 1, 1951, there would be a case of the holding having been incorrectly assessed, although the assessment was quite correct at the time it was made. Or, if the section had said that the amendments would apply to existing assessments as well, then too there would be a case of the assessment being or becoming incorrect. In either case, it would have been lawful for the Commissioners to proceed u/s 138(1)(c). But since Section 13 does nothing more than prescribing two new percentages, the amendments made by it are not attracted to completed assessments and consequently such assessments cannot be said to have become incorrect.

On a reference to the various clauses of Section 138(1), it will be clear that except in the case of clerical or arithmetical errors which may be left out of account, the grounds on which it has authorised alteration or amendment of the assessment list are all grounds arising under the existing law and except in the case of Clause (e), grounds caused by a change in the facts. Clause (e) is a little puzzling. It deals with the case where the percentage or a rate has been altered u/s 135, but Section 136 seems to require that as soon as the percentage for a rate or the rates has been determined u/s 135, an assessment list should be prepared. If a fresh assessment list is to be prepared, it is a little difficult to see how there can be an occasion to amend the old list u/s 138(1)(e). Section 135 does not authorise the alteration of a percentage in the middle of the year. Perhaps the case which the Legislature had in mind is the case where the Commissioners first determine the percentages for the next year and an assessment list is prepared, but before the expiry of the previous year, the Commissioners change their mind with respect to one of the rates and alter its percentage. This explanation is not wholly satisfactory, but in any event Clause (e) also contemplates a change of circumstances within the limits of the existing law. Alteration of the assessment list on account of an alteration in the Act itself (sic).

Mr. Gupta contended strongly that the Legislature could not have enacted the amendments and at the same time intended to keep them in abeyance for five years. But if the Legislature intended immediate application even to assessments already completed, it is strange that it should not have made a direct or any provision in that behalf, but left the application to completed assessments to be achieved by action of the Commissioners u/s 138(1) and should have done so without making the amendments applicable to such assessments by the use of apt words. If the Legislature at all intended the amendments to be applied to completed assessments by action u/s 138(1)(c), it imposes on the Commissioners an impossible task, because it omitted to make any provision, express or implied, by the force of which the amendments could be applied to such amendments. In the absence of such provision, it was not legally possible for the Commissioners to apply the amendments to assessments already completed and the proper inference is that the Legislature did not intend the Commissioners to do as by means of taking action u/s 138(1)(c). Looking at the matter from a slightly different point of view, if the amendments did not apply to completed assessments by the force of some specific provision in that behalf, the Commissioners could not apply them to such assessments and then find a mistake. A mistake would arise only after the application of the amendments and not before and if there was no authority in the Act for applying the amendments to completed assessments, there would be no mistake to furnish a basis for action u/s 138(1)(c). It does not appear that the result must necessarily be to postpone the operation of the amendments for five years. Although the normal life of a valuation list is that period, a fresh assessment list can be prepared earlier and even every year. As soon as a fresh assessment list is prepared, the amendments can be applied.

There appears to have been some discussion before the learned trial Judge about the retrospective operation of the amendments and their effect on vested rights under such operation. The discussion was not repeated before us. In my opinion, no enquiry as to whether any vested right would be affected by the amendments operating retrospectively is called for in the present case. The question of the affection of vested rights properly arises only when the intention of the Legislature is not clear. Because there is a well-established principle that the Legislature does not affect vested rights except by express words or necessary intendment. Courts, when they find that the intention of the Legislature is not explicit, try to ascertain if any vested rights would be affected by a restrospective operation of the enactment in order to decide whether such operation was intended. In the present case, the amending Act furnishes no ground for thinking that it may have been intended to operate retrospectively. But I am prepared to hold that if the amendments are applied to completed assessments, vested rights would be affected and, therefore, they cannot be held to be applicable to such assessments in the absence of any express or implied provision in that behalf. The right affected would be the right under the old law to be assessed at no more than one-fourth of the percentage determined u/s 135 in respect of the amount between Rs. 1 lakh and 3 lakhs in the value of buildings. Under the amended law, the amount is chargeable with the full percentage.

For the reasons given above, I am of opinion that the Commissioners had no authority in law to alter the assessment u/s 138(1)(c), either on the basis that the holding had originally been incorrectly assessed or on the basis that the assessment had since become incorrect. Indeed, so for as the second amendment made by Section 13 of the amending Act is concerned, there could not be an incorrectness in any event. The amendment does not say that the amount in excess of Rs. 3 lakhs shall be chargeable to one-half of the percentage fixed u/s 135, but only that the percentage to be levied shall not exceed one-half. The old assessment at one-fourth of the percentage does not exceed one-half and accordingly it remains correct.

In my view, the conclusion arrived at by the learned trial Judge was correct. The appeal is accordingly dismissed with costs, to Respondent No. 1.

The hearing-fee is assessed at three gold mohurs.

Lahiri, J.

I agree.