Kandivali Cooperative Industrial Estate Vs Municipal Corporation of Greater Mumbai and others (Supreme Court of India)
The case study examines the Trade Refuse Charges (TRC) collected by the Brihanmumbai Municipal Corporation (BMC) in Mumbai, India. The BMC charges and collects TRC from businesses within its municipal area based on a circular. However, several trade associations and business units have challenged the validity of this practice, leading to legal proceedings in the Supreme Court and Bombay High Court. The Supreme Court has expressed concerns over the arbitrary 10% annual increase in TRC without considering the nature of the business or providing a reasonable opportunity for a hearing. The Bombay High Court has indicated that if it is determined that the TRC is not payable, it should be refunded by the BMC. The key question revolves around whether the BMC’s collection of TRC solely based on a circular is justifiable.
BMC, vide its circular number CHE/17785/SWM dated 14.01.2008 has been charging and collecting Trade Refuse Charges (TRC) from those who are carrying out business in whatever manner. To simply put, TRC means and includes garbage (refuse) generated in a business unit located within the BMC municipal area. Basic principle behind this is, since the garbage is generated by a business unit, this becomes a form of revenue for BMC. TRC is charged and collected by BMC every year when a business unit renews its Health license or any other license. BMC increases TRC by 10% every year while there is no such increase for renewing Health license or any other license of a business unit.
BMC has a long list (128) of various types businesses being carried out in its municipal limits and may have added few more in recent years.
Since BMC has been charging TRC just on the basis of its circular referred above (and amendments made thereto) few trade associations/business units have moved Supreme Court and/or The Bombay High Court seeking justice.
Re. Civil Appeal No. 1431 (of 2015) Civil Appeal No. 1433 (of 2015) and Civil Appeal No. 1436 (of 2015) The Supreme Court has in its judgment says:
“As regard clause (6) of the circular, prima facie we are of the definite opinion, increasing trade refuse charge by 10% every year from 2009 is highly arbitrary and without any guidelines. In our considered opinion, the automatic increase of trade refuse charges by 10% every year irrespective of the nature of business carried on by the Licensee, violates principles of natural justice. We therefore hold that the respondent shall not recover any increased trade refuse charges with effect from 2009 without giving reasonable opportunity of hearing to the licensee or persons liable to pay such increased charges.
…. However, we modify the impugned order (of the High Court)by holding that the clause (6) of the Circular increasing trade refuse charge by 10 per cent every year from 2009 is highly arbitrary and without any guideline. We therefore hold that the increase of trade refuse charge by 10 per cent every year irrespective of the actual escalation or reduction in costs involved or nature of business carried on by the Licensee, etc. violates principles of reasonableness as well as natural justice. Accordingly we direct that the respondent-authority shall not recover increased trade refuse charge at the rate of 10 per cent with effect from 2009..”
Re: In Writ Petition 549 (of 2009) which is in the final hearing stage, the Hon’ble Bombay High Court, in its very first hearing has said “In other wards, if it is ultimately found that the amount is not payable towards trade refusal charges, the same shall be refunded by the Respondents”. Read Order Here – Bombay Commodity Exchange Ltd. Vs Commissioner (Bombay High Court) Writ Petition 549 (of 2009)
The crux of the matter is whether BMC levying and collecting TRC just on the basis of its circular is justifiable.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
These appeals are directed against the common judgment and order dated 30.7.2013 passed by the High Court of Bombay in the writ petitions preferred by the appellants.
3. By the impugned judgment and order, the High Court dismissed the writ petitions preferred by the appellants challenging the Circular dated 12th December, 2011 and the respective entries made in the schedule appended thereto issued by the Respondent-Municipal Corporation of Grater Mumbai as also the respective entries in the schedule appended thereto, thereby questioning the levy of ‘trade refuse charges’ and the rates thereof.
4. The appellants are traders, carrying on activities of warehouse keepers, godown keepers, bank mukadam, carriers of stores, material and goods required to be stored and kept safe from insects, ants, rodents, moisture, rain, heat, fire etc. For this purpose, the appellants from time to time have been obtaining trade licences issued under Section 394 of the Mumbai Municipal Corporation Act, 1888 (in short, ‘MMC Act’). According to the appellants, the respondents recover ‘trade refuse charges’ (hereinafter referred to as ‘TRC’), by making the payment thereof a condition for renewing the trade licences under the MMC Act on a yearly basis.
5. Respondent Corporation, vide circular dated 5.6.1999 fixed the pattern of Trade Refuse Charges (TRC) to be collected from the owners/occupiers of trade premises. On receiving various representations from the traders, Municipal Commissioner took the decision of modifying the earlier charges levied on the trade refuse. Therefore, the TRC were revised by the Respondent Commissioner vide a circular dated 14.1.2008 w.e.f.1.1.2008 by almost 300% of the trade licence fees. It was further stated that the same was required to be collected once in a year along with the Licence fees at the time of renewal of licences issued under section 394 of the Mumbai Municipal Corporation Act, 1888. The appellants and several other parties made representations and preferred writ petitions urging reconsideration of the rates, which were disposed of by the Bombay High Court by an order dated 12.4.2010 upon the statement being made on behalf of the respondents that they would reconsider the rates of TRC.
6. Respondent Corporation gave a hearing to the representations and instructed the department concerned to submit the detailed report. A Core Committee was constituted which submitted its report in 2010. On consideration of Core Committee report, TRC were modified by the impugned Circular dated 12.12.2011. The circular stipulated that the TRC would be collected with retrospective effect from 1.1.2008 onwards.
7. Although there was very significant reduction in rates of trade refuse charges to be collected, the appellants, being dissatisfied, again moved the Bombay High Court by way of writ petitions, contending that they merely receive goods from the customers for purposes of safe custody and upon receipt of the prescribed charges, return such goods to the customers in the same conditions. For this purpose, they provide adequate space, security and safeguards against fire, rain, water, etc. In the process, neither any solid waste, nor any trade refuse is generated. In the circumstances, it is their case that levy of TRC upon them and that too with retrospective effect i.e. from 2008 is illegal, arbitrary and unconstitutional.
The appellants further contended that they do not generate any trade refuse and, therefore, question of payment of TRC does not arise.
8. The High Court by the impugned common order dismissed the writ petitions of the appellants holding that there is nothing illegal, arbitrary, unreasonable of unconstitutional in the levy of TRC by the respondents. It was observed that the question as to whether the appellants generate ‘trade refuse’ or not is a disputed question of fact, which cannot be adjudicated in proceedings under Article 226 of the Constitution of India. The High Court did not find any merit in the contention that the levy of TRC is invalid, because according to the Appellants there is no element of ‘quid pro quo’. The Appellants are certainly benefited, in as much as they have been called upon to pay TRC at reduced rates with effect from the year 2008. No retrospectivity is involved in the implementation of the Circular dated 12th December, 2011. If the contention is upheld, it is the appellants who would suffer a higher TRC. The High Court has further held that provisions of Sections 368(5) and 394(5) read with Section 479 of the MMC Act entitle the respondents to impose restrictions and conditions at the time of grant of licence. The same principle will be applicable even at the stage of renewal of licences. At this juncture, we consider it appropriate to reproduce the reasoning of the High Court in this regard:
“The linkage which is challenged by the appellants in the present petition is more concerned with the manner of recovery of TRC and not competence of the respondents to recover TRC. In deciding the manner, we are once again of the opinion that this is a policy matter and sufficient free hand is required to be conceded to the respondents in formulation of such policy. The respondents are right in submitting that it is not possible to monitor each and every establishment for purposes of determining the precise quantity and quality of ‘trade refuse’ generated. So also the respondents are right in contending that there is nothing illegal, arbitrary or unconstitutional in respondents recovering TRC at the stage of renewal of licences. From the averments made by the appellants themselves, it appears that this has always been the manner in which the respondents have been collecting TRC. In matters of policy, merely because some other system of collection may be better, is no ground to exercise power of judicial review. As long as it is not demonstrated that the manner of collection is ex-facie, absurd, unreasonable or disproportionately oppressive, we are unable to uphold the seventh challenge as to the linking. We find nothing absurd, unreasonable or disproportionately oppressive in the policy adopted by the respondents or the manner of collection of TRC.”
9. Being aggrieved, the appellants call in question the correctness of the common judgment and order passed by the High Court in a batch of Writ Petitions dated 30.7.2013.
10. Mr. Shyam Divan, learned senior counsel appearing for the appellant in SLP No.30485 of 2013, assailed the impugned Circular dated 11.10.2011 as being illegal, ultra vires and unconstitutional. Learned counsel submits that the respondents cannot demand, levy or recover any tax, cess or compulsory exaction without authority of law as mandate under Section 265 of the Constitution. According to the learned counsel, Section 368(5) empowers the Commissioner to fix the charges only when the owner or occupier of trade premises seeks permission to deposit trade refuse temporarily upon any place appointed by the Commissioner in this behalf and upon such permission granted by the Commissioner. It was urged that none of the members of appellant had ever sought such permission from the Commissioner and, therefore, the question of levy of trade refuse charges under Section 368(5) of the Act does not arise. According to the learned counsel any compulsory exaction whether it be a fee or tax or any other levy must be backed by law. The Circular dated 12.12.2011 imposing trade refuse charges is irrational and arbitrary.
11. Mr. Divan, learned senior counsel, submitted that the levy of TRC is contrary to the judgment of Bombay High Court in Doran Bomanji Ghadiali vs. Jamshed Kanga and others, AIR 1992 Bombay page 13 whereby the High Court has held that the only charge that can be levied on traders is to the limited extent provided under Section 368(5) of the Act. The Court further held that the fee imposable by Section 479 of the said Act must relate to licence or written permission for any purpose required under the Act and, therefore, the charge could only be for permission to deposit the trade refuse temporarily at a particular place and would not apply to traders not seeking such permission to dump their refuse at any place. Learned counsel drew our attention to various sections of the Act and submitted that the manner in which the imposition or levy of charges contemplated under Section 368(5) of the Act, is ultra vires. Learned counsel relied upon the decision in the case of Ahmedabad Urban Development Authority vs. Sharadkumar Jayantikumar Pasawalla, (1992) 3 SCC 285, which was subsequently followed in the case of Gupta Modern Breweries vs. State of J& K, (2007) 6 SCC 317 and Leelabai Gajanan Pansare vs. Oriental Insurance Co. Ltd., (2008) 9 SCC 720.
12. Mr. Chander Uday Singh, learned senior counsel, appearing on behalf of appellants in SLP (C) Nos. 35558, 35589 and 35593 of 2013, after referring relevant provisions of Municipal Corporation Act, made the following submissions:-
(i). The appellants are engaged in the warehousing business and they do not generate any trade refuse, thus entitling the Respondents to levy the TRC. Neither they are conducting any manufacturing activity due to which solid waste can be generated and, hence, the term TRC has been misinterpreted and equated to garbage. It was asserted that the Appellants merely receive goods from the customers for the purpose of safe custody and upon receipt of the prescribed charges, return such goods to the customers in the same condition. Therefore, the Respondents are wrong in treating every kind of refuse as ‘trade refuse’ and on the said incorrect premise imposing TRC upon the appellants. ‘Trade refuse’ should mean and imply some solid waste generated by an industry involved in manufacturing process and in this regard reliance is placed upon sub-clauses (a) and (b) of Section 367 and sub-sections (1) and (5) of Section 368 of the MMC Act and as the terms “refuse” and “trade refuse” have been dealt with separately this is indicative that every kind of refuse cannot be qualified as “trade refuse”.
(ii). It was pointed out that Respondents’ own inspection reports of warehouses show that those warehousers only generated dust, tree leaves, etc. and in a quantity of only one and a half to two baskets. This cannot, by any stretch of imagination, be treated as trade refuse since the dust and tree leaves are blown into the warehouses by the wind and not on account of any activity being carried out by the warehousers/appellants. Further, under Section 370 of the MMC Act it will be incumbent on the occupier of any premises situate in any portion of the city for which the Commissioner has not given a public notice under Section 142 (a) and in which there is no water closet or privy connected to municipal drains, to cause all excrementitious and polluted to be collected and to be conveyed to the nearest receptacle /depot provided for this purpose under Section 367 (b) and not (a). Pertinently, 367 (a) deals with dust, ashes, refuse and rubbish and 367 (b) deals with trade refuse. Thus “trade refuse” is obnoxious refuse and cannot and ought not be equated with refuse generated in any trade /business establishment. It is submitted that this vital difference has been ignored and TRC is being unlawfully sought to be levied upon the appellants who generate no “trade refuse at all”.
(iii) It was the contention of the learned counsel that the appellants, who are engaged in the warehousing business, do not generate any trade refuse and in the event TRC constitutes a ‘tax’ there is no taxable event for imposition of tax in the form of TRC. Alternatively, if TRC is to be regarded a ‘fee’, then, on account of the circumstance that the appellants generate no trade refuse at all, there is no element of ‘quid pro quo’ and hence levy of fee in the form of TRC is illegal and invalid.
(iv) It was submitted that the linking of payment of TRC with renewal of trade licences under section 394 of the MMC Act, is illegal, invalid and, therefore, renewal of trade licences under section 394 of the MMC Act ought to be granted, irrespective of whether the appellants pay TRC or not. The TRC being levied in addition to the normal licence fees for issue of trade licences under Section 394 of the MMC Act, there is double charging, which is wholly arbitrary and unreasonable and without authority of law, particularly, qua the Appellants, who do not generate any ‘trade refuse’. It was, therefore sought to be submitted, that the levy and collection of TRC cannot be linked to the renewal of an annual trade licence granted to the Appellants for conducting warehousing activity when there is no statutory provision enabling such linkage; and in the facts and circumstances and absence of any specific authority to levy a retrospective charge or fee, Respondent No.1 could not levy TRC with effect from 1.1.2008 when a solemn assurance was made by Respondent No.1 to the Bombay High Court that there would be no linkage between TRC and licence fees collected at the stage of renewal. Under Section 471 of the MMC Act, Respondent No.1 is entitled to impose penalty for contravention of Section 368 (1) to (4) and under Section 472 of the Act, the Respondent No.1 is entitled to impose penalty for continuing offence in contravention of any provision of Section 368 (1) to (5). When penalty provisions are provided under the Act, payment of TRC has been without any basis or justification whatsoever sought to be linked with renewal of the Trade Licence, which is impermissible and bad in law. Furthermore, only valid trade licence holders are being charged TRC. It becomes pertinent to note that after 1976, Respondent No.1 has stopped issuing warehousing licences in the Greater Mumbai Area. Therefore, the burden on TRC is only being applied to valid licence holders and not to others who are carrying on the trade without any licence.
(v). It was again pointed out that the Respondents have completely ignored their own Circular No. ChE/280/SWM dated 06.04.2010 which categorically states that for the year 2010, TRC will be levied on the basis of licence fees of the licence issued by the Shops & Establishment Department of the MMC and that the Respondents will delink TRC from licence fees in future and new TRC levy pattern will be introduced. The TRC is now wrongfully charged on the basis of sq. mtr. footage of area of premises and is in fact more than the licence fees which is wholly illogical, irrational, arbitrary and without any authority of law. The policy adopted by the Respondents and the manner of collection of TRC (whether charged based on number of employees or square meter area) is absurd, unreasonable and disproportionately oppressive, without Application of mind and incompetent and without the authority of law.
(vi). Lastly, it was contended that any compulsory execration of money by the Government for a tax or a cess has to be strictly in accordance with law and there should be a specific provision for the same and there is no room for intendment and nothing is to be read or nothing is to be implied and one should look fairly to the language used. Our attention was drawn to the decision of this Court in Consumer Online Foundation vs. Union of India (2011) 5 SCC 360. In this behalf it was sought to be pointed out, that Imposition of levy/charges by Respondent No.1 is in the nature of a tax and not a fee and hence such imposition without backing of statutes is unreasonable and unfair. Learned counsel also drew our attention to the decisions of this Court in the cases of Gupta Modern Breweries vs. State of J&K & Ors. – (2007) 6 SCC 317 and B.C. Banerjee & Ors. vs. State of M.P. & Ors. (1970) 2 SCC 467.
13. Mr. L. Nageswar Rao, learned Additional Solicitor General appearing for the respondents, firstly contended that the constitutional validity of Section 368(5) of the Act was never challenged by any of the appellants as being ultra vires to the Constitution. The appellants have only prayed in the writ petitions for issuance of appropriate writ directing the respondents to cancel and/or withdraw the Circulars dated 14.1.2008 and 11.10.2011 and also to withdraw the notice dated 9th June, 2014. Learned counsel submitted that the appellants challenged the circular by arguing that the manner of collection of trade refuse charges was contrary to law. The competence of the authority to demand and levy TRC has not been challenged at any point of time. Distinguishing the imposition of fee/TRC and tax, learned counsel put heavy reliance on the ratio decided by this Court in the case of The Commissioner, Hindu Religious Endowment, Madras vs. Sri Lakshmindra Tirtha Swamiar of Shirur Mutt, (1954) 1 SCR 1005. Mr. Rao referred to the Core Committee Report and submitted that the validity of guidelines provided therein cannot be tested on any ground. Learned counsel put reliance on a decision in the case of Corporation of Calcutta & Anr. vs. Liberty Cinema, Assam, (1965) 2 SCR 477. Learned counsel also made submission on the object and purpose of collection and submitted that absolute equality is impossible for the purpose of levy of fee or charges. Learned counsel referred the decision of this Court in the case of Gulabchand Bapalal Modi vs. Municipal Corpn. of Ahmedabad City, (1971) 1 SCC 82, Union of India vs. Nitdip Textile Processors (P) Ltd., (2012) 1 SCC 226.
14. Before appreciating the rival contentions made by the parties, we would like to refer the relevant provisions of Bombay Municipal Corporation Act, 1988. Section 3 (yy) defines the word ‘trade refuse’ as under:-
“3(yy) “Trade refuse” means and includes the refuse of any trade, manufacture or business.”
15. Section 367 empowers the Commissioner to make provision for providing receptacles, depots and places for temporary deposit or final disposal of waste articles including trade refuse. Section 367 is quoted hereinbelow:-
“367. Provision and appointment of receptacles, depots and places for refuse, etc.,
The Commissioner shall provide or appoint in proper and convenien situations public receptacles, depots and places for the temporary deposit or disposal of—
