CORPORATION OF TRIVANDRUM v. BHASKARAN NAIR — 1984 DIGILAW 340 (KER)

Judgment :- 1. The Corporation of Trivandrum and its Commissioner, defendants 1 and 2 are the appellants. The suit was filed for a declaration that a revised assessment of property by the Corporation in respect of a building owned by the plaintiff was illegal and for consequential injunction for collecting the tax. The suit has been decreed and hence this appeal. 2. The facts necessary are not in dispute. Building, "Bhaskara Bhavan Tourist Paradise" within the Trivandrum Corporation limits belongs to the plaintiff. It was assessed to property tax on an annual rental value of Rs.10,800/- upto 1971-72. In 1972, quinquennial revision was taken up. The annual rental value was proposed to be fixed at Rs. 49,536/-. The plaintiff submitted his objections. There was a hearing. The Commissioner in the meanwhile visited the property and ascertained that the lodgers paid much higher rent and the rental value shown was extremely low and the building was inadequately assessed. He noticed that even the proposed annual rental value of Rs. 49,536/- was itself low. But without issuing any further notice, he assessed the annual rental value at Rs. 83,120/- and on that basis property tax was fixed at Rs. 13,469.76 from 1972-73 onwards. The plaintiff who pleaded for reduction of the rental value was loaded with greater burden, more than the initial proposal. Ext. A4 is this memo. Attachment notices followed for recovery of tax on this basis for the period 1972-73 to 1976-77. The plaintiff therefore tiled the suit for a declaration that the assessment was illegal, beyond the provisions of the Kerala Municipal Corporations Act and for an injunction restraining the defendants from taking any steps for collecting the same. 3. The court below found that the suit was maintainable, the assessment was not in accordance with S.102 of the Kerala Municipal Corporations Act,30/61 as there was a patent error in the fixation of the annual rental value of the building. He, therefore, granted the declaration and injunction as prayed for but observed that the defendant-Corporation was free to make a re-assessment as per the provisions of the Act. 4. In this appeal, the learned counsel for the appellant submits that the civil court had no jurisdiction to entertain the suit and that in any case the decision of the lower court that there was a violation of S.102 of the Act is wrong. 5. 4. In this appeal, the learned counsel for the appellant submits that the civil court had no jurisdiction to entertain the suit and that in any case the decision of the lower court that there was a violation of S.102 of the Act is wrong. 5. Tax on property is imposed under S.101 of the Act. The procedure for assessment is contained in the IInd Schedule to the Act and R.7, 8 and 9 prescribe the method for effecting quinquennial revision. R.22. 23 and 24 provide the remedy available to the aggrieved assessee. R.23 says that the objector, dissatisfied with the order passed by the Commissioner can appeal to the Standing Committee and then there is a further appeal to the District Court against the decision of the standing committee also. 6. Very often civil court's jurisdiction is invoked to challenge a tax liability to claim protection against steps for recovery of the tax assessed. It is, therefore, necessary to outline the limits of the civil court's jurisdiction in those cases. Fortunately, this does not pose any problem, for it is practically settled by a catena of decisions, including the decisions of the Supreme Court and this Court. 7. In Firm Radha Kishan v Ludhiana Municipality (AIR 1963 SC. 1547), quoting from the observation of Willes. J. in Wolverhamston New Waterworks Co. v. Hawkesford (1859-6 CB (NS) 336) Supreme Court observed thus: "One is, where there was a liability existing at common law, and that liability is affirmed by a statute which gives a special and peculiar form of remedy different from the remedy which existed at common law; there unless the statute contains words which expressly or by necessary implication exclude the common law remedy the party suing has his election to pursue either that or the statutory remedy. The second class of case is where the statute gives the right to sue merely, but provides, no particular form of remedy; there, the party can only proceed by action at common law. But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it. The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. The remedy provided by the statute must be followed, and it is not competent to the party to pursue the course applicable to cases of the second class. It is clear from the said passage that in a case where the liability is created by a statute, a party aggrieved must pursue the special remedy provided by it and he cannot pursue his remedy in a Civil Court. This principle was approved by the Judicial Committee in Secretary of State v. Mask and Co. 67 Ind. App. 222: (AIR. 1940 PC. 105)" 8. Proceeding further, with special reference to S.9 of the Civil Procedure Code, the Supreme Court stated thus: "Under S.9 of the Code of Civil Procedure the Court shall have jurisdiction to try all suits of civil nature excepting suits of which cognizance is either expressly or impliedly barred. A statute, therefore, expressly or by necessary implication, can bar the jurisdiction of civil Courts in respect of a particular matter. The mere conferment of special jurisdiction on a tribunal in respect of the said matter does not in itself exclude the jurisdiction of civil Courts. The statute may specifically provide for ousting the jurisdiction of civil Courts: even if there was no such specific exclusion, if it creates a liability not existing before and gives a special and particular remedy for the aggrieved party, the remedy provided by it must be followed. The same principle would apply if the statute had provided for the particular forum in which the remedy could be had. Even in such cases, the Civil Court's jurisdiction is not completely ousted: A suit in a civil Court will always lie to question the order of a tribunal created by a statute, even if its order is, expressly or by necessary implication, made final, if the said tribunal abuses its power or does not act under the Act but in violation of its provisions. Let us now apply the said principles to the facts of the present case. The liability to pay terminal tax is created by the Act and a remedy is given to a party aggrieved in the enforcement of that liability. As has been already indicated, against the order of the municipal committee levying terminal tax an appeal lies to the Deputy Commissioner and a reference to the High Court. The liability to pay terminal tax is created by the Act and a remedy is given to a party aggrieved in the enforcement of that liability. As has been already indicated, against the order of the municipal committee levying terminal tax an appeal lies to the Deputy Commissioner and a reference to the High Court. Applying one of the principles stated supra, the party aggrieved can only pursue the remedy provided by the Act and he cannot file a suit in a civil Court in that regard. Provisions of S.84 and 86 of the Act exclude the jurisdiction of the civil Court in respect of the tax levied or the assessment made under the Act." 9. Having held that the Court has jurisdiction when the statutory tribunal abuses its power or does not act under the Act, but in violation of its rules, the Supreme Court again indicated the limits of interference by the Civil Court in tax matters and proceeded to bold thus: "The Committee has, therefore, ample power under the Act and the Notification issued by the State Government to impose the said tax. The only dispute was as regards the rate of tax payable in respect of the salt brought by the appellant into the limits of the Municipal Committee. The rate depended upon the character of the salt. The ascertainment of the said fact is necessary step for fixing the rate and it is not possible to say that in ascertaining the said fact the authorities concerned travelled outside the provisions of the Act. The learned counsel contends that if a municipal committee levies terminal tax on an article not liable to tax under the Act, a suit would lie and, therefore, the same legal position should apply even to a case where the municipal committee levies the tax in respect of an article under an entry not applicable to it. We do not see any analogy between these two illustrations, in the former, the municipal committee does not act under the Act, but in the latter it only commits a mistake or an error in fixing the rate of tax payable in respect of a particular commodity; one is outside the Act and the other is under the Act; one raises the question of jurisdiction and the other raises an objection to a matter of detail. We, therefore, hold that in the present case the mistake, if any, committed in imposing the terminal tax can only be corrected in the manner prescribed by the Act. The appellants have misconceived their remedy in filing the suit in the civil Court." 10. In an earlier decision of this Court in State of Kerala v. Gopalakrishna Pillai (1961 KLJ. 338), this Court held that civil courts have jurisdiction to entertain such suits "when the provisions of the Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure." 11. It has to be stressed that the assessing authority does not act mechanically, arbitrarily or capriciously; but functions as a responsible quasi-judicial authority, within the framework of the statute safeguarding the interest of the revenue without sacrificing the principles of fair play and justice. In fact, one of us (P. C. Balakrishna Menon, J.) in a recent decision of this Court in Kunju v. Executive Officer (1984 KLT. 466) observed thus and also extracting some of the most relevant decisions of the Supreme Court: "Even in the absence of a revision by the assessee, the assessment should be reasonable and objective based on relevant materials, and should not be arbitrary or capricious. In Siemens Engg. & Mfg. Co. v. Union of India reported in AIR. 1976 SC. page 1785 it is stated at page 1789: "It is now settled law that where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons. That has been laid down by along line of decisions of this Court ending with N. M. Desai v. Testeels Ltd., C. A. No. 245 of 1970 decided on 17-12-1975 (SC)". It is further stated in the same page: "If courts of law are to be replaced by administrative authorities and tribunals, as indeed, in some kinds of cases, with the proliferation of Administrative law, they may have to be so replaced, it is essential that administrative authorities and tribunals should accord fair and proper hearing to the persons sought to be affected by their orders and give sufficiently clear and explicit reasons in support of the orders made by them. Then alone administrative authorities and tribunals exercising quasi-judicial function will be able to justify their existence and carry credibility with the people by inspiring confidence in the adjudicatory process. The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem, a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law". 12. These observations, briefly and effectively summarise the responsibilities and duties of the assessing authorities in imposing the tax. 13. The imposition of tax on property is sanctioned by the Kerala Municipal Corporations Act, 1961. The procedure to assess the tax is also prescribed. The remedy available to the party is again provided by the Act. The aggrieved party has a right to move the District Court also under certain circumstances. With these elaborate statutory machinery available, the party can only pursue the remedy provided by the Act and cannot file a suit in the trial court in this regard. The assessment made by the authority is under the Act in respect of an article liable to tax under the Act. A mistake committed in fixing the rate of tax is only an error in respect of "a matter of detail", and cannot be characterised as a violation of the provisions of the Act to give jurisdiction to a civil court to sit in judgment over the assessment proceedings. These errors in the fixation or calculation of the rate of tax can thus only be rectified in the modes available under the statute, not by recourse to a court of law. However, where there is a clear and plain violation of the principles of natural justice, the assessing authority does not act in conformity with the fundamental principles of judicial procedure the Court's jurisdiction can be invoked in those cases to challenge the assessment. Even then, not a vague allegation, but a precise and accurate statement as to how and in what circumstances there has been a violation of the principles of natural justice is insisted before the Court can entertain suits of this nature. Even then, not a vague allegation, but a precise and accurate statement as to how and in what circumstances there has been a violation of the principles of natural justice is insisted before the Court can entertain suits of this nature. It is only after the court is satisfied, at least prima facie, that there has been a violation of this fundamental judicial procedure, that the authority can be injuncted from collecting the tax during the pendency of the suit. 14. One of the cardinal principles of natural justice is that a best judgment assessment has to be preceded by a pre-assessment notice. A pre-assessment notice is not an empty formality. It furnishes the particulars and materials available with the authority to the assessee and gives the assessee an opportunity to explain his stand with reference to those materials. 15. In the present case, the proposal was to fix the annual rental value at Rs. 49,530/-. This itself was objected to by the plaintiff. But eventually the rental value was fixed at Rs. 83,125/-. It is admitted before us that no notice was issued proposing to fix the rental value at Rs. 83,125/-. It is also clear that the particulars on the basis of which this figure was arrived at were also not communicated to the plaintiff. The facts gathered by the commissioner after his inspection of the lodge were not communicated to the plaintiff. In the circumstances we have no hesitation to hold that the assessments made against the plaintiff challenged in this suit were in gross violation of the principles of natural justice, that the lower court had therefore jurisdiction to entertain the suit, and was right in granting the declaration and injunction. The lower court was, however, wrong in its decision and conclusion regarding the applicability of S.102 of the Act, for, that was outside the province of the court in this suit. We also make it clear that the judgment in this appeal does not preclude the authorities from making a fresh assessment for the relevant period according to law. In the result, the appeal has only to be dismissed; but in the circumstances of the case, the parties will bear their own costs.