2010 (7) TMI 1080 - HC - Income Tax

Cash credit - Competence of NMMC to levy and collect cess and property taxes - prohibitory order - HELD THAT - In the present case, undisputedly, the NMMC has attached the cash credit account which in other words is a overdraft facility. The un-utilised overdraft account does not render the banker the debtor in any sense and the banker is, therefore, not a person from whom money is due to the customer. Nor is the banker in such case, a person from whom money may become due. Where the banker lends money on an overdraft and the customer is always in debit there is no stage at which the banker is debtor to the customer, nor at any point of time at which he holds any money of the customer or the later's account. We respectfully agree with the view expressed by the learned Single Judge of Madras High Court in Adam's case 1957 (10) TMI 32 - MADRAS HIGH COURT followed by the learned Single Judge of Karnataka High Court in Karnataka Bank's case 1998 (9) TMI 613 - KARNATAKA HIGH COURT . We have therefore no authority but to set aside the order dated November 29, 2007 passed by the 3rd Respondent under Rule 35 of the Rules. We however make it clear that this will not prevent the NMMC from proceeding to recover the amount of cess liability in any other manner authorised by law. In our opinion, the petitioners have equally efficacious alternate remedy by filing the appeal u/s.406 of the BMPC Act. It would be open to the petitioners to raise all the contentions before the learned Judge in the appeal u/s.406 of the BPMC Act. We do not express any opinion on these contentions. The order dated November 29, 2007 passed by the Cess Officer of the NMMC is quashed and set aside with liberty to the NMMC to recover the cess liability in any other manner authorised by law. Rule is made partly absolute in the aforesaid terms, with no order as to costs.

Summary

Issues Involved:
1. Competence of NMMC to levy and collect cess and property taxes.
2. Legitimacy of the order attaching the cash credit account.
3. Authority to issue the prohibitory order attaching goods.

Summary:

1. Competence of NMMC to levy and collect cess and property taxes:
The petitioners, a company engaged in manufacturing compounded asafoetida, challenged the competence of the Navi Mumbai Municipal Corporation (NMMC) to levy and collect cess from industries in the Maharashtra Industrial Development Corporation (MIDC) area. The court held that the MIDC area is within the municipal limits of NMMC, and thus, NMMC has the power and competence to levy and recover taxes, including cess.

2. Legitimacy of the order attaching the cash credit account:
The petitioners contested the order dated 29th November 2007, passed by the 3rd Respondent, attaching their cash credit account. The court referred to the judgments of the Madras High Court and Karnataka High Court, which held that an un-utilized overdraft account does not render the banker a debtor to the customer. Consequently, the court set aside the order under Rule 35 of the Bombay Provincial Municipal Corporation (Cess on entry of goods) Rules 1996, stating that the NMMC cannot attach an overdraft facility. However, the court allowed NMMC to recover the cess liability through other lawful means.

3. Authority to issue the prohibitory order attaching goods:
The petitioners argued that the prohibitory order dated 5th November 2007, attaching their goods, was without jurisdiction as only the Commissioner of NMMC could pass such an order. The court noted that the petitioners have an equally efficacious alternate remedy by filing an appeal u/s.406 of the Bombay Provincial Municipal Corporations Act, 1949. The court did not express any opinion on the jurisdictional contention and directed that if the petitioners file an appeal within eight weeks, it should be decided in accordance with the law.

Conclusion:
The court quashed the order dated 29th November 2007, attaching the cash credit account, but allowed NMMC to recover the cess liability through other legal means. The court also directed the petitioners to pursue their remedy by filing an appeal regarding the prohibitory order attaching their goods. Rule was made partly absolute with no order as to costs.