R.K. Agnihotri vs Municipal Corporation and Another

Rajendra Menon, J.—As common questions of law and fact are involved in both these petitions and as relief claimed are identical in nature, both these petitions are being disposed of by this common order. For the sake of convenience, documents and pleadings available in the record of Writ Petition No. 386/2001 is being referred to.

Challenging the communication made to the Petitioner in Writ Petition No. 386/2001 vide Annexures P/6 and P/7 and questioning the tenability of the order-dated 1.1.2001 passed by Respondent No. 2, asking the Petitioner to deposit a sum of Rs. 3,21,777/-and Rs. 2,86,215/-in respect of constructions made in Plot Nos. 9 and 10 @ Rs. 500/-per square feet, Petitioner has filed the said writ petition.

Similarly, questioning the tenability of the order-dated 1.1.2001 asking the Petitioner to deposit a sum of Rs. 2,85,086/-with regard to construction made in the building, Writ Petition No. 396/2001 is filed by the Petitioner.

Both these Petitioners have made certain constructions. The constructions have been made in Zone 1, MP Nagar, Bhopal, after due approval and permission and the facts in this regard are admitted. However, it is the common case in both the writ petitions that the constructions made by both the Petitioners were found to be in violation to the building permission granted and the master plan applicable to the city of Bhopal. It was found that the Petitioners in both the cases have got the entire mezzanine floor constructed against the permissible limit of 1/3rd of the floor area. It is the case of the Municipal Corporation that as the construction of the mezzanine floor was beyond the permissible area, the construction is illegal and, therefore, action was proposed to be taken against both the Petitioners in the matter of the said illegal construction.

When notices were issued in this regard both the Petitioners submitted to the same and prayed for compounding of the matter by virtue of Section 308A of the M.P. Municipal Corporation Act. Sometime in the month of February 2000, the matter was taken up by the Municipal Corporation and after charging the requisite compounding fee, offence with regard to the excess construction made was compounded. In the case of Petitioner, in Writ Petition No. 386/2001, the excess construction made beyond the permissible mezzanine floor area was compounded after depositing a compounding fee of Rs. 77,500/- and Rs. 1 Lac; and, similarly in Writ Petition No. 396/2001 the compounding was permitted after depositing a compounding fee of Rs. 55,000/-. The compounding fee was deposited in February 2000, receipts were issued and after the compounding accepted by the Municipal Corporation, the entire illegal construction was regularized.

Grievance of the Petitioners now are that after the compounding was ordered and after the matter was settled and the illegal construction regularized by virtue of the compounding ordered u/s 308-A, the proposed recovery now made is impermissible. It is the case of the Petitioners that once the matter was compounded u/s 308-A and the requisite compounding fee as prescribed therein was deposited, no further power is vested with the Municipal Corporation to recover any further compounding fee or charges, tax etc in this regard. Accordingly, it is stated that the demand note for payment of compounding fee is now impermissible. It is further stated that if the Respondents are deducting any further charge by virtue of any decision taken subsequently, as is stated by the Respondents by placing reliance on Annexure R/1, Standing Order No. 22/2000 dated 23.12.2000, it is the case of the Petitioners that no recovery from them in pursuance to this Standing Order can be made as the said decision will have prospective effect on or after 23.12.2000 and will not have retrospective effect. Accordingly, Shri Avinash Zargar, learned Counsel for the Petitioner, taking me through the documents and material available on record and the provisions of Section 308-A argued that once the illegal constructions made by the Petitioners were regularized and the compounding granted, then in excess of the compounding fee already collected and paid by the Petitioners in accordance to the requirement of Section 308-A, no further compounding fee can be charged. It was further submitted by him that the proposed recovery by virtue of the powers vested under Standing Order No. 22, which came into force with effect from 23.12.2000, will have only prospective effect and not retrospective effect and as the cases of the Petitioners were already regularized much before 23.12.2000 i.e...in February 2000, no recovery can be affected now from the Petitioners. Accordingly, Shri Zargar submits that the action of the Respondents is illegal.

Shri Ajay Mishra, learned Senior Advocate for the Respondent Municipal Corporation, refuted the aforesaid and pointed out that Petitioners are mis-construing the demand note. It is submitted by learned Senior Advocate that compounding of an offence u/s 308-A and recovery of compounding fee has got nothing to do with the proposed recovery being made as per Standing Order No. 22 dated 23.12.2000 - Annexure R/1. It is submitted by him that compounding fee charged from the Petitioners was the fee prescribed u/s 308-A and now the proposed recovery is nothing but a surcharge/fee/tax, which is imposed by the Municipal Corporation by virtue of the powers vested in it u/s 132 read with Section 133 of the Municipal Corporation Act. It is pointed out by learned Senior Advocate that the Municipal Corporation, Bhopal found that in most of the commercial buildings in Bhopal mezzanine floor area is being constructed as an independent floor in violation of the Rules and Regulation and for restraining such an illegal activity the Municipal Corporation had two options: either to demolish the illegal construction; or, to regularize the same by compounding and by charging necessary fee. It is his contention that the Mayor-in-council passed a resolution in its meeting held on 7.11.2000 to impose a surcharge @ 500/-per square foot for every extra construction made in the mezzanine floor beyond the FRA permitted. Accordingly, it is his case that the amount being now recovered from the Petitioner is a surcharge for the construction made in the mezzanine floor in accordance to Standing Order No. 22, it is in the form of a tax and, therefore, the same is permissible. According to learned Senior Advocate it is neither a fine nor a compounding fee for the offence committed by the Petitioners, but it is in the nature of a tax/surcharge for the construction made quantified on the basis of the excess area of construction. Accordingly, it is argued by him that in imposing the aforesaid surcharge the Municipal Corporation has not committed any error warranting interference in these proceedings.

I have heard learned Counsel for the parties and perused the records.

From the records it is clear that after the illegal construction was detected, the matter was taken up and a compromise arrived at between the parties and accordingly the offence of illegal construction was compounded by virtue of the powers available u/s 308-A of the Act. Shri Avinash Zargar had submitted that once the offence was compounded and the compounding fee was paid by the Petitioners, the Respondents have no power to recover any further compounding fee or charge contrary to the mandate of Section 308-A. To that effect Shri Zargar is correct. Respondents can only charge compounding fee on the basis of the stipulations contained in Section 308-A and not beyond that. However, the question is as to whether the impugned recovery now made from the Petitioners is with regard to compounding fee or otherwise?

From the statements made by the Respondents and on a perusal of Annexure R/1, it is clear that what is being charged from the Petitioners is not the compounding fee for compounding the offence u/s 308-A. It is a surcharge on the additional construction made beyond the permissible limit and the same is being done by virtue of the resolution passed by the Municipal Corporation and it is permissible in the light of the powers conferred on the Municipal Corporation and to that extent the contention of Shri Zargar cannot be accepted. ''Surcharge'' is an ''over charge'' and in the context of taxation, this expression means an additional imposition resulting in enhancement of tax and is in the nature of additional imposition in the same as if a tax is imposed. In this regard the principle laid down in the case of Sarojini Tea Co. (P.) Ltd. Vs. Collector of Dibrugarh, Assam and another, may be taken note of. In the case of Bisra Stone Lime Co. Ltd. and Another Vs. Orissa State Electricity Board and Another, surcharge'' is termed to be an additional or extra charge or payment over and above the usual current dues. That being so, the ''surcharge'' now collected from the Petitioners by the impugned action is nothing but a charge in addition in the form of a tax payable for making the additional construction beyond the permissible limit and, therefore, it cannot be said that it is the compounding fee, which is being charged over and above the one contemplated u/s 308-A. The recovery now made from the Petitioners is in the form of a tax collector for the construction made beyond the permissible limit. That being so, the contention of Shri Zargar to the effect that the recovery of the compounding fee cannot be accepted.

However, even if the ''surcharge'' is in the form of a tax collected by the Municipal Corporation and if the Municipal Corporation is found entitled to impose such a tax, the question is whether the same can be given retrospective effect. To that affect contention advanced by Shri Zargar has much force. When a tax is imposed or a liability is cast for the first time, it only has prospective affect and cannot be given retrospective affect until and unless the taxing provision so provided for. If the Standing Order No. 22 - Annexure R/1 is perused, it would be seen that it has been enforced prospectively with effect from the date of its issuance i.e. 23.12.2000, and it has not been given any retrospective affect. The resolution clearly stipulates that the ''surcharge'' indicated in the order is to be enforced with immediate affect meaning thereby that it has only prospective affect from the date of its issuance and not prior to that. In that view of the matter, the second contention of Shri Zargar to the effect that the levy of ''surcharge'' cannot be made retrospectively is correct and has to be accepted.

In the present case, the alleged constructions were made and the entire construction was regularized when the same was permitted to be compounded in February 2000 and after the compounding fees were deposited by the Petitioners in February 2000, the entire construction was regularized. That being so, the dispute between the parties with regard to the construction in question stood settled after compounding of the offence and payment of the compounding fee in February 2000, on this date nothing further was payable as per the existing provisions, ''surcharge'' on such construction was brought into force vide Resolution of the Mayor-in-council on 17.11.2000 and enforced with effect from 23.12.2000 and, therefore, it cannot be given retrospective effect.

In this regard, it may be taken note of that every provision, statutory or otherwise, effecting the rights and liabilities are prima facie prospective unless by implication or by express provision it is given retrospective operation. When this general law is applied to statute and provisions governing fiscal matters, the normal presumption is liabilities to be imposed are prospective and not retrospective. Reference may be made in this regard to the judgment in the case of D.G. Gose and Co. (Agents) Pvt. Ltd. Vs. State of Kerala and Another, . Normally a statutory provision imposing financial liability with regard to taxation etc applies for the assessment year in progress until and unless by express provision it is given retrospective affect. Same is the rule which is made applicable to ''charging'' sections and provisions imposing penalty. Reference in this regard may be made to the judgment of the Supreme Court, in the case of Collector of Central Excise, Aurangabad v. Motor Industries Company Limited and Anr. AIR 2004 SC 953. The impugned action of the Respondents imposes liability, by imposing a ''surcharge'' into an action which was already settled by compounding the offence u/s 308-A of the M.P. Municipal Corporation Act, and when the compounding took place the provision for imposition of such a ''surcharge'' was not applicable and in the resolution imposing this ''surcharge'' i.e.... Annexure R/1, there is nothing to indicate that it is given retrospective affect. That being so once the matter was settled, by giving retrospective affect to Annexure R/1 the ''surcharge'' could not be recovered from the Petitioners, as the parties had already compounded the illegality, if any, in accordance to law.

That being so, recovery of the amount from the Petitioners with regard to their construction which was made much before coming into force of the Standing Order is unsustainable and on that count the recovery proposed is illegal.

Accordingly, these petitions are allowed. The impugned recoveries are quashed. Respondents are directed to refund to the Petitioners the amount, if any, recovery in pursuance to the impugned action. Petition stands allowed and disposed of.