S. Thiruvenkadam Vs Commissioner of Municipal Administration (Madras High Court)
Summary: The Madras High Court dismissed the writ petition filed by S.Thiruvenkadam seeking quashing of the proceedings dated 30.03.2024 issued by Kannivadi Town Panchayat and refund of Rs.17,06,990 towards waiver of lease amount and refund of security deposit.
The petitioner’s father had participated in the public auction conducted by the Kannivadi Town Panchayat for the right to collect market fees in its weekly market for the lease period from 01.04.2018 to 31.03.2021. He was declared the successful bidder and paid a security deposit of Rs.3,00,000. The lease amount for 2018-2019 was Rs.30,44,444 and was increased by 5% for each subsequent year.
The petitioner contended that collection of market fees was exempt from GST pursuant to the Circular dated 23.05.2012 issued by the Commissioner of Municipal Administration. Reliance was also placed on the constitutional functions entrusted to municipalities under Article 243W and on an advance ruling concerning exemption of market fees collected by local bodies.
During the COVID-19 pandemic, the markets remained closed for a considerable period. The Government subsequently issued G.O.(D) No.298 dated 02.09.2020 and G.O.(D) No.337 dated 16.06.2023 granting waiver of lease/rental amounts for specified periods. The petitioner claimed proportionate waiver of the lease amount of Rs.14,06,990 and refund of the Rs.3,00,000 security deposit.
The Town Panchayat rejected the request on the ground that GST and Income Tax dues payable by the lessee had not been remitted. The respondents relied upon the tender conditions, particularly Clause 20, under which the Town Panchayat could impose penalty and recover losses and adjust amounts payable to the licensee, and Clause 29, which required the contractor to pay all taxes imposed by the Central and State Governments.
The High Court noted that the petitioner’s father was the successful bidder for the right to collect weekly market fees and that the lease amount was fixed at Rs.30,44,444 for the first year and thereafter enhanced by 5%. The Court considered the petitioner’s principal contention that collection of market fees was exempt from GST and therefore payment of GST and Income Tax dues could not be insisted upon as a condition for considering waiver.
However, the Court distinguished the petitioner’s commercial activity from the municipal function performed by a local authority. It observed that the circular dated 23.05.2012 granted exemption in respect of certain activities undertaken by local authorities in discharge of municipal functions, including market fee. In the present case, the petitioner was not the local authority performing the municipal function. His father had acquired the leasehold right through public auction to commercially exploit the right to collect market fees. The Court therefore held that the activity undertaken by the successful bidder pursuant to the auction was essentially a commercial activity governed by the tender conditions.
The Court further noted that the tender conditions specifically required the contractor to pay all taxes levied by the Central and State Governments and that the respondents had placed materials indicating GST and Income Tax dues payable by the petitioner. According to the Court, the benefit contemplated under G.O.(D) Nos.298 and 337 could not be claimed as a matter of right by a person having outstanding statutory liabilities. The respondents had stated that upon payment of GST and Income Tax dues, the request could be considered in accordance with law.
Consequently, the Court found no ground to interfere with the impugned proceedings dated 30.03.2024. The claim for refund of the lease amount and security deposit was not granted. The writ petition was dismissed without costs and the connected miscellaneous petition was closed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This writ petition has been filed seeking issuance of a Writ of Certiorarified Mandamus calling for the records relating to the proceedings of the 3rd respondent in Na.Ka.No.38/2024 dated 30.03.2024, quash the same and consequently direct the respondents to refund a sum of Rs.17,06,990/- towards waiver of lease amount and refund of security deposit in terms of G.O.(D) No.298 dated 02.09.2020 and G.O.(D) No.337 dated 16.06.2023.
2. It is stated that the petitioner’s father participated in the public auction conducted by the 3rd respondent-Kannivadi Town Panchayat for the right to collect market fees in the weekly market belonging to the Town Panchayat. The lease period was from 01.04.2018 to 31.03.2021. He was declared as the successful bidder and paid the security deposit of Rs.3,00,000/-. The lease amount for the year 2018-2019 was fixed at Rs.30,44,444/-. For the subsequent years, namely 2019-2020 and 2020-2021, the lease amount was increased by 5% every year. According to the petitioner, the right to collect market fees is exempted from payment of GST by virtue of Circular No.18088/2012/D3 dated 23.05.2012 issued by the Commissioner of Municipal Administration.
3. It is further averred that during the COVID-19 pandemic, the markets remained closed for a considerable period. Subsequently, the Government issued G.O.(D) No.298 dated 02.09.2020 and G.O.(D) No.337 dated 16.06.2023 granting waiver of lease/rental amounts for certain periods during the pandemic. Thereafter, he submitted a representation seeking refund of the proportionate lease amount and return of the security deposit. The 3rd respondent, by proceedings dated 30.03.2024, rejected the request on the ground that GST and Income Tax dues payable by the lessee had not been remitted. Challenging the same, the present writ petition has been filed.
4. Learned counsel for the petitioner submitted that the activity of collection of market fees falls within the functions entrusted to municipalities under Article 243W of the Constitution and therefore the activity is exempted from GST. Reliance was placed on the Circular dated 23.05.2012 as well as the advance ruling relating to exemption of market fees collected by local bodies. He further submitted that in view of G.O.(D) Nos.298 and 337, the petitioner is entitled to waiver of lease amount for the COVID period and consequently refund of a sum of Rs.14,06,990/- together with the security deposit of Rs.3,00,000/-.
5. Per contra, the learned Government Counsel appearing for the respondents submitted that the petitioner is a defaulter in payment of GST and Income Tax dues. Reiterating the counter affidavit, more particularly, para Nos.6 to 11, he submitted that the tender conditions further authorize the Town Panchayat to adjust the amounts payable to the contractor towards outstanding dues.
6. Learned Government Counsel also invited the attention of this Court to Clause 20 of the General Conditions contained in the tender notification dated 08.02.2018 issued in Na.Ka.No.30/2018, which stipulates that if the contractor violates any of the conditions of the licence, the Executive Officer is empowered to impose penalty and recover the losses sustained by the Town Panchayat. The Town Panchayat is also entitled to adjust any loss or expenditure from the amounts payable to the licensee.
7. Further, relying upon Clause 29 of the tender conditions, he submitted that the contractor is liable to pay all taxes imposed by the Central and State Governments. Therefore, the petitioner cannot seek refund or waiver without first discharging the statutory liabilities. On the aforesaid score, it is contended that unless the statutory dues are cleared, the petitioner cannot seek the benefit of waiver or refund. Accordingly, he prayed for dismissal of this writ petition.
8. Heard the learned counsel appearing on either side and perused the materials available on record.
9. Admittedly, the petitioner’s father was the successful bidder in respect of the right to collect fees from the weekly market belonging to the 3rd respondent for the period from 01.04.2018 to 31.03.2021. It is also not in dispute that the lease amount was fixed at Rs.30,44,444/- for the first year and thereafter enhanced by 5% for the subsequent years.
10. The principal claim of the petitioner is that the activity of collecting market fees is exempt from GST and therefore the respondents cannot insist upon payment of GST and Income Tax dues as a condition for considering the request for waiver.
11. The Circular dated 23.05.2012 relied upon by the petitioner grants exemption in respect of certain activities undertaken by local authorities in discharge of municipal functions. The exemption contemplated therein relates to services rendered by local authorities in relation to functions entrusted to municipalities under Article 243W of the Constitution, such as bus stand fees, slaughter house fees, stand tax, market fee and pay and use toilet facilities.
12. In the present case, the petitioner is not the local authority performing a municipal function. The petitioner’s father had obtained the leasehold right through a public auction to commercially exploit the right to collect market fees. The activity undertaken by the successful bidder pursuant to the auction is essentially a commercial activity governed by the tender conditions.
13. Further, the tender conditions specifically provide that the contractor shall pay all taxes levied by the Central and State Governments. The respondents have also placed materials indicating the GST and Income Tax dues payable by the petitioner. The impugned order proceeds on the ground that the statutory dues have not been discharged.
14. The benefit contemplated under G.O.(D) Nos.298 and 337 cannot be claimed as a matter of right by a person who has outstanding statutory liabilities. The respondents have specifically stated that upon payment of GST and Income Tax dues, the request can be considered in accordance with law.
15. This Court is therefore of the view that the petitioner has not made out any ground to interfere with the impugned proceedings dated 30.03.2024. The claim for refund of lease amount and security deposit cannot be granted in the facts and circumstances of the case and thus the same stands negativated.
16. In view of the aforesaid observations, the writ petition stands dismissed. No costs. Consequently, connected miscellaneous petition is closed.
