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TMI Blog1972 (12) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... the other group consisting petitions relating to the official year 1970-71. The petitions in each group follow the same pattern both as to facts and also as to law and, therefore, instead of dealing with each petition separately, we propose to take up Special Civil Application No. 233 of 1970 as representative of the first group and Special Civil Application No. 300 of 1971 as representative of the second group. Both these petitions were argued as main petitions and it was agreed between the parties that the affidavits in these two petitions may be treated as affidavits in all the other petitions. Even so far as these two petitions are concerned, there is hardly any difference in the material facts save for the official year and we would, therefore, be content to state the facts only in regard to Special Civil Application No. 233 of 1970. 3. The first petitioner in Special Civil Application No. 233 of 1970 is a limited Company deemed to be registered under the Companies Act, 1956 and owns a textile mill situate within the limits of the Corporation. The textile mill consists of land, buildings, plant and machinery. The land admeasured about 1,36,138 square meters and has been ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Rule 7 Clauses (2) and (3) of Taxation Rules. There was no complaint against this method of assessment except that in the application of this method there were certain grievances which were sought to be remedied by filing appeals to the Chief Judge, Small Causes Court, Ahmedabad. But when the assessments came to be made for the official years 1964-65 and 1965-66, there was some increase in the rateable values fixed by the Commissioner which was not approved by the owners of some mills and factories. Therefore, being aggrieved by the assessments made upon them, they preferred writ petitions in the Supreme Court under Article 32 of the Constitution challenging the validity of the Assessment Books relating to Special Property Section by which the Corporation sought to levy property tax on them for the official years 1964-65 and 1965-66. So far as the official year 1966-67 is concerned, the Commissioner made initial entries in the Assessment Book relating to Special Property Section under Rule 9 Clauses (a), (b), (c) and (d) on the same basis on which the assessments for the previous two official years were made, but before the Commissioner could proceed to complete the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Property Section as invalid and cancelled and to prepare fresh assessment lists for those official years relating to textile mills and other properties dealt with in the Special Property Section. 5. Though the Supreme Court directed the Corporation to prepare fresh assessment lists relating to properties included in the Special Property Section for the official years 1964-65, 1965-66 and 1966-67, the Corporation was unable to do so, as it was felt, in view of a decision of a Division Bench of this Court in Ahmedabad Municipality v. Keshavlal 6 G.L.R. 228 where similar though not identical provisions of the Bombay Municipal Boroughs Act, 1925 came up for consideration, that the Corporation had no power to assess and levy property tax for any official year after the official year had ended : all steps in the process of assessment and levy starting from the making of initial entries under Clause (a) of Rule 9 and ending with authentication of the Assessment Book under Rule 19 Clause (i), as it then stood, were required to be completed before the close of the official year.' The Legislature, therefore, in order to get over this difficulty, enacted Gujarat Act VIII of 1968 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to reassess property tax on the lands and buildings of the petitioners. The petitioners thereupon preferred Special Civil Application No. 670 of 1968 and other allied petitions challenging the competence of the Corporation to initiate proceedings for reassessment of the lands and buildings of the petitioners as also the validity of the requisitions issued by the Assessor and Collector of the Corporation. The main contention of the petitioners was that assessment of property tax for any particular official year could not be made after the expiry of the official year except in cases falling within Rule 21-B and since the cases of the petitioners were not covered by Rule 21-B, the Corporation had no power under Section 152-A to re-assess property tax on lands and buildings of the petitioners for the official years 1964-65, 1965-66 and 1966-67. There was also a subsidiary contention put forward on behalf of the petitioners, namely, that some of the particulars demanded in the impugned requisitions were beyond the scope of Rule 8(1). The subsidiary contention found favour with the Court but the main contention was negatived and this Court by a judgment dated 3rd July 1969 struck do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined the rateable value of the lands and buildings of the petitioners and in conformity with his decision, amended the initial entries in regard to rateable value in the Assessment Book. The rateable value was determined by the Deputy Municipal Commissioner on the basis of what he conceived to be the Contractors Test Method. This method, according to the petitioners, was wholly inappropriate and irrelevant for determining the rateable value of the lands and buildings of the petitioners and, in any event, in the application of this method, the Deputy Municipal Commissioner committed various lapses and errors. The result was that the rateable value of the lands and buildings of the petitioners shot up to a very high figure, more than hundred per cent higher than what it was for the earlier official year 1966-67 which itself was very much on the high side. The Deputy Municipal Commissioner calculated the amount of conservancy tax at the special rate of nine per cent and the amount- of general tax at the rate of thirty per cent of the net rateable value and made the necessary entries in the Assessment Book showing the amount of the property taxes leviable on the premises of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chief Judge of the Court of Small Causes to dismiss the appeal if the deposit was not made, was violative of Article 14 of the Constitution and was accordingly ultra vires and void. (3) Rule 42 of the Taxation Rules was ultra vires and void as it was inseparably connected with Section 406 Sub-section (2) Clause (e) and could not stand independently of that clause. (4) The Corporation had no power to fix different rates of conservancy tax for different classes of premises and the fixation of a special rate of nine per cent for conservancy tax in respect of large premises including mills and factories was, therefore, illegal and void, and on this view quashed and set aside the orders made by the Deputy Municipal Commissioner determining the rateable value of the lands and buildings of the petitioners as also the Municipal Bills, Notices Demand and Distress Warrant Cards issued by the Municipal authorities and also issued a writ declaring Section 406 Sub-section (2) Clause (e) and Rule 42 of the Taxation Rules to be ultra vires and void and the special rate of nine per cent for conservancy tax in respect of hotels, clubs, stables, theatres and cinemas or other large premises inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se writ petitions along with the validity of the earlier Resolutions passed by the Corporation for the previous official years. 11. Whilst these writ petitions were pending, Gujarat Act 5 of 1970 was enacted by the Legislature and it came into force on 31st March 1970. It repealed Ordinance 6 of 1969 after reenacting ipsisima verbs the material provisions of that Ordinance. Obviously this necessitated amendment of the writ petitions and the petitioners, therefore, with leave of the Court, amended the Writ petitions and directed the challenge against the constitutional validity of the provisions of Gujarat Act 5 of 1970. The petitioners also challenged by way of amendment the determination of rateable value made by the Deputy Municipal Commissioner, since, in the meantime, on the strength of the amendment made by Gujarat Act 5 of 1970, the Deputy Municipal Commissioner had proceeded to dispose of the complaints before him and to determine the rateable value of the lands and buildings of the petitioners and the amount of property tax leviable on the premises of the petitioners on the basis of such rateable value by calculating conservancy tax at the special rate of nine per cent a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, final and closed before that date. It thus makes a classification between property owners whose assessments are final and closed before 3rd December 1969 and property owners whose assessments are pending on that date and this classification is arbitrary and irrational and has no reasonable nexus with the object of levying the tax. Clause (i) of Section 2(1 A) is, therefore, discriminatory in its operation and effect and is void as offending Article 14 of the Constitution. (iii) Clause (i) of Section 2(1A) directs the Commissioner to ignore the provisions of the Rent Act in determining the annual letting value and this has the effect of making the tax unreasonable and excessive, particularly in case of old properties where the free market rent would be very much higher than the standard rent permissible under the Rent Act. The impugned clause, therefore, imposes unreasonable restrictions on the right of the petitioners to hold property and is consequently bad as being violative of Article 19(1)(f). of the Constitution. (B) (i) The definition of 'annual letting value' in Clause (ii) of Section 2(1A) embodies the classical concept of 'annual letting value' whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner for any past official year, even though such challenge may be based on any ground other than lack of jurisdiction in the Deputy Municipal Commissioner. The effect, of Section 13(1) of Gujarat Act 5 of 1970 is to cure any invalidity which may be there in an assessment made by the Deputy Municipal Commissioner for any past official year and thus takes away the right of the property owner to challenge the validity of the assessment on any ground whatsoever. This is clearly violative of the fundamental right guaranteed under Article 19(1)(f). of the Constitution and Section 13(1) of Gujarat Act 5 of 1970 is,, therefore, bad on that ground. (D) (i) The proviso to Section 129(b) introduced with retrospective effect by Gujarat Act 5 of 1970 confers naked and arbitrary power on the Corporation to select and classify properties in such manner as it likes and having made classification of properties at its sweet will, to fix such rate of tax for different classes of properties as it chooses and there is no guiding policy or principle laid down by the Legislature to control and regulate the exercise of this power by the Corporation. It is, therefore, constitution ally invalid on two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orations Act deals with the subject of municipal taxation. Section 127 which is the first section in this Chapter, enumerates the taxes to be imposed under the Corporation Act. Sub-section (1) of that section lays down obligatory taxes which must be imposed by the Corporation and Sub-section (2) refers to other taxes which may be imposed at the option of the Corporation. The property taxes constitute an item of obligatory taxes which, says Section 127, Sub-section (1), shall be imposed by the Corporation. Section 129 lays down that for the purposes of Sub-section (1) of Section 127 property taxes shall comprise water tax, conservancy tax and general tax which shall, subject to the exceptions, limitations and conditions there provided, be levied on buildings and lands in the City at such percentage of their rateable value as may be determined by the Corporation and so far as general tax is concerned, it may be levied, if the Corporation so determines, on a graduated scale. Section 99 confers power on the Corporation to determine, subject to the limitations and conditions prescribed in Chapter XI, the rates at which municipal taxes shall be levied in the next ensuing official year. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , exclusive of furniture or machinery contained or situate therein or thereon, might, if the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 were not in force, reasonably be expected to let from year to year with reference to its use, and shall include all payments made or agreed to be made to the owner by a person (other than the owner) occupying the building or land or premises on account of occupation, taxes, insurance or other charges incidental thereto; Rule 7(3) was also amended with retrospective effect to make it correspond with the new definition of rateable value in Section 2(54). Ordinance No. 6 of 1969 was then replaced by Gujarat Act 5 of 1970 which came into force on 31st March 1970. This Act made a radical departure in the definitions of annual letting value and rateable value and Section 7 of the Act introduced the following definitions with retrospective effect by adding Section 2(A) and substituting Section 2(54): (1A) 'annual letting value' means, - (i) in relation to any period prior to 1st April, 1970, the annual rent for which any building of land or premises, exclusive of furniture or machinery contained or situate therein or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In order to fix the rateable value of any building or land or premises assessable to a property tax there shall be deducted from the amount of the annual letting value of such building, land or premises a sum equal to ten per cent of such annual value and the said deduction shall be in lieu of all allowances for repairs or on any other account whatever. Having set out the various changes through which the definitions of 'rateable value' and 'annual letting value' passed, we may now proceed to examine the validity of these grounds of challenge in seriatim. 15. Re : Ground (A)(i) :- It is clear from the above resume of the relevant provisions of the Corporations Act and the Taxation Rules that the assessment of property tax depends on 'rateable value' and by reason of Section 2(54) read with Rule 7(3), 'rateable value' in its turn depends on what is the 'annual letting value' of the property. The 'annual letting value' is thus the pivot on which rests the entire superstructure of property taxes. Section 2(1 A) introduced in the Corporations Act with retrospective effect by Gujarat Act 5 of 1970 gives two definitions of 'annual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date. The State is undoubtedly prohibited from denying to any person equality before the law or the equal protection of the laws, but by enacting a law which applies generally to all persons who come within its ambit as from the date on which it becomes operative, no discrimination is practised. When Parliament enacts a law imposing a liability as flowing from certain transactions prospectively, it evidently makes a distinction between those transactions which are covered by the Act and those which are not covered by the Act, because they were completed before the date on which the Act was enacted. This differentiation, however, does not amount to discrimination which is liable to be struck down under Article 14. The power of the Legislature to impose civil liability in respect of transactions completed even before the date on which the Act is enacted does not appear to be restricted. If, as is conceded-and in our judgment rightly-by a statute imposing civil liability in respect of post enactment transactions, no discrimination is practised, by a statute which imposes liability in respect of transaction which have taken place after a date fixed by the statute, but before its enact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;. The annual letting value is thus the annual rent which a hypothetical tenant would pay for a hypothetical tenancy of the building or land. It does not matter whether the building or land is actually let or not. If it is let, the annual rent may afford some evidence of the hypothetical rent but it is the hypothetical rent which is the measure of the annual letting value and not the actual rent. Now obviously in determining the hypothetical rent which a landlord can reasonably expect from a hypothetical tenant, any legislation which restricts or controls rent must be taken into account, because no landlord can reasonably expect his tenant to pay rent in excess of that permitted by law. The concept of what can be lawfully recovered as rent must necessarily enter as a component in the determination of the question of reasonableness. The landlord cannot reasonably expect to receive rent which is unlawful or prohibited by rent restriction legislation. The rule of reason requires everyone to observe the mandate of law and that which would be contrary to such mandate would be clearly unreasonable. Here the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, (hereinafter refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This view was based on the majority judgment of the House of Lords in Poplar Assessment Committee v. Roberts (1922) 2 A.C. 93. But in Corporation of Calcutta v. Sm. Padma Debi (supra), the Supreme Court expressed its disapproval of the view taken by the majority Law Lords in Poplar Assessment Committee v. Roberts. The Supreme Court quoted with approval the following observations of Atkin L. J., If no higher rent than the standard rent and statutory increases is enforceable, as a matter of common sense that seems to be the limit of the rent a tenant can be reasonably expected to give.... How then is the annual rent to be ascertained ? It is obvious that the definition presupposes that the premises are deemed to be vacant and are deemed to be capable of being let, and after pointing out that these observations were accepted by Lord Carson in his dissenting judgment in Poplar Assessment Committee's case, referred to the following passage from the dissenting judgment: I cannot persuade myself that it is possible to ask the assessment authority to enter into such super speculative and hypothetical regions, and I am of opinion that the only rent we have to consider is a rent de j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of rating. 18. The respondents however, made a valiant attempt to distinguish the decision of the Supreme Court in Sm. Padma Debt's case by contending that decision was based on the peculiar provisions of the Calcutta Rent Control Act which made it penal for a landlord to receive rent in excess of the standard rent and it could have no application to a case like the present where the rent control legislation did not impose any penal sanction against receipt of rent in excess of standard rent. This contention is, for reasons which we have already indicated, without substance In the first place it is not correct to say that the decision of the Supreme Court proceeded on the ground that the receipt of a higher rent than the standard rent was penal under the Calcutta Rent Control Act. The main ground on which the decision of the Supreme Court rested was that the minority view of Lord Carson was correct and the majority view was wrong and a landlord could not reasonably expect to get higher rent than the standard rent, if it was not de jure recoverable or enforceable by reason of the Rent Control legislation. It was only in the alternative that the Supreme Court proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to 3rd December 1969. 19. Now this would undoubtedly be true if the standard rent were fixed by the Court under the Rent Act. But what would be the position if the standard rent is not fixed ? The answer is provided by the decision of the Supreme Court in The Guntur Municipal Council v. The G.T.R.P. Association . That was a case in which assessments to property tax made by the Guntur Municipality were challenged on the ground that the rental values of lands and buildings were fixed by the Guntur Municipality Without regard to the provisions for determination of fair or standard rent contained in the Rent Control Act. The challenge was clearly supported by the decision of the Supreme Court in Sm. Padma Debt's case but this decision was sought to be distinguished on the ground that Section 7 of the Rent Control Act made it clear that it is only after fixation of the fair rent of a building that the landlord is debarred from claiming or receiving payment of any amount in excess of such fair rent and therefore, so long as the fair rent of a building is not fixed, the assessment or valuation by the Municipality need not be limited or governed by the measure provided by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of unearned increment in the value of his property. Section 5 Sub-section (10) of the Rent Act which gives the definition of standard rent pegs down the standard rent to a particular fixed date, namely, 1st September 1940. Clause (b)(i) of that sub-section provides that the standard rent shall be the rent at which the premises were let on 1st September 1940 and where the premises were not let on the first day of September 1940, Clause (b)(ii) says that the rent at which they were last let before that date shall be the standard rent. The case where the premises are first let after 1st September 1940 is dealt with in Clause (b)(iii) and that clause provides that in such a case the standard rent shall be the rent at which the premises were first let, but if the rent at which the premises were so let is in the opinion of the Court excessive, the Court is given power under Section 11 to fix the standard rent. Section 11 also sets out other contingencies in which the Court has power to fix the standard rent. But in all these cases when the Court sets under Section 11, the Court is required to fix the standard rent at such an amount as, having regard to the provision's of the Rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letting value, according to the definition which operated upto 3rd December 1969, was limited by the measure of standard rent provided under the Rent Act. But Section 2(54) as substituted by Gujarat Ordinance 6 of 1969 on 3rd December 1969 with retrospective effect and when Gujarat Ordinance 6 of 1969 was replaced by Gujarat Act 5 of 1970, the identical provision reenacted in Section 2(1 A) Clause (i) with retrospective effect, made a radical departure from this classical concept of annual letting value. The new definition introduced an additional hypothesis in the concept of annual letting value by providing that the rent which a landlord can reasonably expect to get from a hypothetical tenant shall be determined on the basis that the Rent Act is not in force. The result is that under the new definition the land or building is to be valued not at the rent which a tenant would pay having regard to the provisions of the Rent Act but at the rent which a landlord would get in the free market if the Rent Act were not in force. The new definition thus ignores the hard realities of the situation and for the purpose of rating, empowers the Commissioner to value the land or building at an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention was that whatever be the position in regard to the earlier official years, there was no discrimination so far at least as the official year 1969-70 was concerned. Even if any assessment for the official year 1969-70 was finally completed before 3rd December 1969, the Commissioner could always reopen the assessment under Clause (d) of Rule 20(1) of the Taxation Rules for the purpose of giving effect to the new definition and thus all assessments for the official year 1969-70, whether finally completed before 3rd December 1969 or not, would be on the basis of the new definition. This answer made on behalf of the respondents is fully justified and must be sustained. Rule 20(1) Clause (d) provides that subject to the requirement of giving special notice, the Commissioner may upon the representation of any person concerned or upon any other information at any time during, the official year to which the Assessment Book relates, amend the same by altering the assessment of any land or building or premises which has been erroneously valued or assessed through fraud, accident or mistake. Now if any assessment for the official year 1969-70 has been finally completed before 3rd Decembe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. The respondents submitted that there was no factualment made in any of the petitions that the assessments which were finally completed before 3rd December 1969 were made having regard to the rent restriction provisions of the Bombay Rent Act and in the absence of such averment, no case of discrimination could be said to have been made out by the petitioners and the challenge to the constitutionality of the definition must fail in limine. This submission is, in our opinion wholly without substance. It is clear from what we have stated above that assessments which were finally completed before 3rd December 1969 made on the basis of the old definition and, therefore unless it is shown to the contrary by the respondents, it would be reasonable to presume that the assessments were made keeping in view the rent restriction provisions of the Bombay Rent Act as required by the old definition. It would be unnecessary for the petitioners to aver that the assessments were made having regard to the rent restriction provisions of the Bombay Rent Act because it would be a normal presumption to make that the Commissioner must have acted in accordance with the requirements of the statute If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore 3rd December 1969 were made keeping in view the restriction of standard rent under the Bombay Rent Act, at any rate after the decision of the Supreme Court in Padma Debt's case. 25. Now the new definition of 'annual letting value' in Section 2(1A) Clause (i) on its face applies equally to all assessments of lands and buildings for the period prior to 1st April 1970, but, in its operation and effect, it is confined only to those assessments which are not completed on or before 3rd December 1969. If any assessment has been finally completed before 3rd December 1969, it would obviously be on the basis of the old definition because at that time the new definition had not come into force with retrospective effect and the new definition would have no impact on such assessments though made retrospective in so many terms. The reason is that, as pointed out by this Court in its decision dated 27th October 1969, on a proper construction of the relevant provisions of the Corporations Act and the Taxation Rules, the procedure for assessment of property tax for any particular official year must be completed before the expiry of that official year, except in cases falling with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld fall within the latter class but that is a matter of detail which may not be set out in the petitions. It would be sufficient to state what is the classification made by the new definition and how it is arbitrary and irrational. Which kinds of cases fall within one class or another need not be elaborated in the petitions: that would be a matter for argument. Moreover, in the present case, it was well-known to the respondents that proceedings for assessment of lands and buildings of textile mills and factories for the official years 1964-65, 1965-66 and 1966-67 were pending under Section 152A and these assessments were not finally completed before 3rd December 1969. The respondents could have, therefore, dealt with these cases on a factual basis, if they wanted to do so. But possibly they had nothing to say beyond what they actually did in the affidavit-in-reply. The respondents could have even filed a supplemental affidavit-in-reply if they had something to add, but they deliberately and advisedly did not do so. As a matter of fact assessments for the official years 1964-65, 1965-66 and 1966-67 pending under Section 152A stand on the same footing as assessments for the other off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to recognise them and enact different statutory provisions for different classes of lands and buildings. There are two tests which have been evolved by judicial decisions and both must be satisfied in order that a classification made by a statutory provision may be sustained as valid. The first test is that the classification must be based on an intelligible differentia which distinguishes persons or things grouped together from others left out of the group and the second test is, that the differentia in question must have a reasonable relation to the object sought to be achieved by the statutory provision, or, in other words, there must be some rational nexus between the basis of the classification and the object intended to be achieved by the statute. The question is, whether these two tests are satisfied in the present case. Now, here the applicability of the more onerous provision contained in the new definition is made dependent on the fortuitous circumstance that the assessment has not been finally completed and is pending on 3rd December 1969. The new definition metes out differential treatment in respect of pending assessments by applying a different measure of annual let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was negatived by the Supreme Court and the constitutional validity of Section 297(2)(g) was upheld. The Supreme Court while repelling the challenge made the following observation which was strongly relied upon on behalf of the respondents: It is not disputed and no reason has been suggested why pending proceedings cannot be treated by the Legislature as a class for the purpose of Article 14. This observation read divorced from its context might seem to suggest that, whatever be the nature of the proceeding, pending proceedings can always be treated by the Legislature as a class and differential treatment given to them would not invite the inhibition of Article 14. But that is not correct. The observation made by the Supreme Court must be read in the context in which it is made. It is clear from paragraphs 10 and 12 of the judgment that when the Supreme Court made the above observation, the Supreme Court did not intend to lay down any absolute proposition that pending proceedings can always be treated as a class for the purpose of Article 14, regardless of the nature of the proceedings. The Supreme Court, after making the above observation, proceeded to add in paragraph, 10 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings are for assessment and levy of tax and tax is levied with reference to each official year. The application of a different law to pending proceedings cannot, therefore, be justified on the strength of this decision. On the contrary, this decision, if properly applied, would problem to indicate that pending proceedings for assessment and levy of tax should be governed by the same law by which assessments already completed were determined. The law applicable during the relevant official year should govern both assessments. This decision of the Supreme Court, therefore, far from helping the respondents, actually goes against their contention. 28. But even if we read this decision of the Supreme Court as laying down that pending proceedings may be governed by the law in force at the date of completion of the assessment, the respondents must yet fail. The definition in Section 2(1 A) Clause (i) which is applied to pending proceedings lays down what shall be the annual letting value in relation to the period prior to 1st April 1970. The definition of annual letting value in relation to the period subsequent to 1st April 1970 is to be found in Section 2(1A) Clause (ii) and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the annual rental value on the basis of applicability of the Supreme Court decision in Padma Debt's case and, therefore, the Legislature was justified in treating such properties as a separate class and enacting a special definition in Section 2(1A) Clause (i) for assessment of annual rental value of such properties. But this argument is equally futile. In the first place, there is no averment in the affidavit-in-reply filed on behalf of the respondents-at any rate none could be pointed out to us on behalf of the respondents-that the only assessments which were pending on 3rd December 1969 were those of textile mills and factories included in the Special Property Section. It is no doubt true that the assessments which were pending under Section 152A were those of textile mills and factories included in the Special Property Section but the same could not be said of the assessments pending in appeal under Section 406. There is nothing to show, and it is also not probable, that appeals pending under Section 406 related only to assessments of textile mills and factories included in the Special Property Section. It is difficult to believe that, if not for other official years, at l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 1969 were those of textile mills and factories, we should have expected a positive statement to that effect in an otherwise lengthy affidavit-in-reply. The respondents cannot rely on a stray statement made in one of the petitions in a wholly different context for the purpose of founding an argument, 30. But even if it be assumed that the only assessments pending on 3rd December 1969 were those of textile mills and factories and the definition in Section 2(1A) Clause (i) applied only to those assessments, the argument of the respondents must yet fail. It is not possible to say that textile mills and factories formed a distinct class to which the definition in Section 2(1 A) Clause (i) could be legitimately applied without violating the equality clause of the Constitution. The only ground on which the respondents sought to justify differential treatment to textile mills and factories was that if the old definition of annual letting value were to be applied, they would totally escape liability to tax and hence it was necessary to provide a different measure of annual letting value for them by enacting Section 2(1A) Clause (i). We do not think this ground can be sustained: it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional justification for making this differentiation. We do not agree that if the rental value were to be determined on the basis of the rent restriction provisions of the Bombay Rent Act, the textile mills and factories would totally escape liability to tax. Even if date of actual or comparable rent are not available because the properties are of a class which are never or seldom let, that would not present any difficulty in ascertaining the rental value keeping in view the restriction of standard rent prescribed under the Bombay Rent Act. We have already discussed and pointed out the principles laid down by judicial decisions for determining standard rent of premises under the Bombay Rent Act and we need not repeat what we have said earlier in this connection. It is sufficient to state that it is possible in accordance with these principles to determine the standard rent of the properties of the textile mills and factories. It is neither an impossible nor a difficult exercise. The principles are well-settled and all that has to be done is to apply them to the given facts. It is, therefore, not possible to accept the thesis of the respondents that if the rental value were to be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty tax resulting from the retrospective operation: of the new definition in Section 2(1A) Clause (i) and placed them on par with property owners whose assessments were finally completed before 3rd December 1969 and thus saved the new definition in Section 2(1A) Clause (i) from the vice of discrimination. But this argument, plausible though it may seem, is not well-founded. There are no less than three answers to it. In the first place, the vice of discrimination lies in providing two different measures of annual letting value so far as imposition of tax is concerned and this discrimination in imposition of tax is not obliterated by the provision that the property owner who is subjected to the higher burden of tax may recover the amount of difference in tax from someone else. That does not remove the inequality in the burden of tax, because so far as the Corporation is concerned, the liability is that of the property owner and qua the Corporation, one property owner is liable to pay tax on a more onerous basis than the other. The fact that the property owner may be entitled to recover the difference in the amount of the tax from the tenant may to some extent relieve the hardship, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably.... The Supreme Court has been practical and has permitted a very wide latitude in classification for taxation. This principle was approved by the Supreme Court in East India Tobacco Co. v. State of Andhra Pradesh and in F.F.R. Varma v. Union of India where Shah J., speaking on behalf, of the [Supreme Court elaborated the principle in these words: Equal protection clause of the Constitution does not enjoin equal protection of the laws as abstract propositions. Laws being the expression of legislative will intended to solve specific problems or to achieve definite objectives by specific remedies, absolute equality or uniformity of treatment is impossible of achievement. Again tax laws are aimed at dealing with complex problems of infinite variety necessitating adjustment of several disparate elements. The Courts accordingly admit, subject to adherence to the fundamental principles of the doctrine of equality, a larger play to legislative discretion in the matter of classification. The power to classify may be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing value'. There is also a clause at the end which includes in 'annual letting value' other payments made or agreed to be made to the owner by a person occupying the building or land or premises on account of occupation, taxes, insurance or other charges incidental thereto. Now when we compare Clause (ii) of Section 2(1 A) with Clause (i), an important difference immediately becomes noticeable. Whereas Clause (i) of Section 2(1A) requires the assessing authority to determine the hypothetical rent as if the Bombay Rent Act were not in force, Clause (ii) of Section 2(1A) does not enjoin the assessing authority to ignore the Bombay Rent Act. It omits the words if the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, were not in force which occur in Clause (i) of Section 2(1A). The result is that, as laid down in the decision of the Supreme Court in Padma Debt's case the assessing authority determining the hypothetical rent under Clause (ii) of Section 2(1A) is bound to take into account the restriction of standard rent prescribed under the Bombay Rent Act, the annual letting value under Clause (ii) Section 2(1A) cannot exceed the standard rent determina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings covered by Proviso (c), shall be deemed to be that determined according to the statutory formula and, therefore, it would seem that the statutory formula purports to prescribe a method for determining hypothetical rent for such buildings. There can be no doubt, conceded the petitioners, that, to meet a given situation, where recognised methods fail of application, the Legislature may devise a new method of determining hypothetical rent but such method must be logically relevant and capable of yielding hypothetical rent. Here, contended the petitioners, the method prescribed by the statutory formula is wholly irrelevant and cannot possibly give hypothetical rent in a market controlled by rent restriction legislation. The Legislature has, therefore, clearly provided a different basis of valuation for buildings covered by Proviso (c) and it is a more onerous basis. This differentiation, said the petitioners, is based only on the circumstance that it is not easy in the opinion of the Commissioner to estimate the hypothetical rent of the building. The basis of the differentiation is the ease or difficulty felt by the Commissioner in estimating the hypothetical rent. This basis is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide Sudhir Chandra v. Wealth Tax Officer : Assistant Commissioner, Madras v. Buckingham and Carnatic Co. Ltd. . That being so, it is for the Legislature to select which units of lands and/or buildings it would bring to tax. The Legislature may also select its measure of tax. The measure of tax is a product of two components, namely, basis of valuation and rate of tax. The Legislature has choice in regard to both components. The Legislature may fix such rate as it thinks fit provided, of course, tax does not become confiscatory or extortionate. The Legislature may also adopt as the basis of valuation, the annual rental value or the capital value or any other method of valuation which the Legislature may in its wisdom and ingenuity devise. These are matters for the Legislature to decide. Besides, the Legislature need not necessarily provide a uniform measure of tax for all units of lands and buildings it decides to tax. It can make a rational classification of units of lands and buildings and provide different measures of tax for different classes of units by prescribing different bases of valuation and/ or different rates of tax. So long as there is a rational basis for the classifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to whether the method of valuation set out in Proviso (c) is comparable to the Contractor's method. The Contractor's method consists of estimating the effective capital value of the premises and applying a rate per cent thereto in order to estimate the rental value. Ryde in the Eleventh Edition of his book on Rating at page 443 points out that in the modem practice of applying the Contractor's method, it is possible to discern five stages, though the fourth and fifth are not usually recognised as distinct and are often mixed up. He describes the five stages thus: The first stage is the estimation of the cost of construction of the building. There is a difference of view as to whether it is better to take the cost of replacing the actual building as it is, or the cost of a substitute building on the same plan as the actual building but otherwise in an up-to-date form. The second stage is to make deductions from the cost of construction to allow for age, obsolescence and any other factors necessary to arrive at the 'effective capital value'. The third stage is to estimate the cost of the land. The principle of rebus sic stantibus demands that the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the determination of the annual rental value. The petitioners urged that, in the circumstances, even if the method of valuation laid down in Proviso (c) were nothing else than the contractor's method, it would not give the annual rental value in case of textile mills and factories of the petitioners which admittedly consist of old buildings. This contention raises interesting questions of law but it is not necessary for the purpose of the present petitioners to examine it, since what we are concerned here is to determine, not the applicability of the contractor's method in determining annual hypothetical rent in a market controlled by rent control legislation, but the relevance of the statutory method of valuation provided in Proviso (c) in determining it. It is in our view immaterial to consider whether the method of valuation set out in Proviso (c) is the same as the contractor's method or it differs from the contractor's method in any material respects. The question for our consideration is a limited one, namely, whether the method of valuation prescribed in Proviso (c) is capable of yielding hypothetical rent in a market controlled by rent restriction legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is the correct meaning of this provision. When the law says that the market value of the land on which the building stands shall be taken as a component for arriving at the valuation of the building, what is meant is that the market value shall be taken with reference to the existing use of the land. The principle of rebus sic stantibus which demands that the land should be valued as if limited to its existing use is clearly incorporated in this provision. The method of valuation in Proviso (c) is, therefore, not very much different from the contractor's method except that the rate to be applied to the effective capital value which constitutes the fourth stage in the contractor's method is statutorily fixed at six per cent and the fifth stage which is an important stage in the contractor's method and which cures the contractor's method of its inadequacies, is absent. This discussion would show that the method of valuation prescribed in Proviso (c) is based on the market value of the land and building at the time of the assessment which would include the component of unearned increment in the value of the land and building and that cannot possibly yield the hypothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lass ordinarily let, the rent bearing capacity of the building could legitimately be taken to be a proper measure of its value to the owner, irrespective whether the building is actually let or is self-occupied. But where the building is of a class not ordinarily let, the rent bearing capacity would be irrelevant because the class to which it belongs is never or seldom let and the value of the building to the owner would not be reflected by its rent-fetching capacity. The Legislature could, therefore, legitimately draw a distinction between buildings of a class which are not ordinarily let and other buildings and while laying down annual rental value as the basis of valuation in case of the latter category of buildings, provide a different basis of valuation in case of the former. That would have been a legitimate classification permissible under the equality clause of the Constitution but the Legislature in enacting Proviso (c), did not make such classification: instead, it adopted a different basis of classification. Proviso (c) makes it clear that even in case of buildings of a class not ordinarily let, the annual rental must be taken as the basis of valuation and it is only if, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of the petitioners. It is no doubt true that the words used are in the opinion of the Commissioner but these words are used because the determination of the question whether the annual rent can or cannot be easily determined involves an inferential process and it is the Commissioner who has to make the determination in the first instance as the original assessing authority. The opinion as to the ease or difficulty in estimating the annual rent is to be arrived at first by the Commissioner as the original assessing authority and this power is to be reasonably and judicially exercised which excludes any subjective or arbitrary decision by the Commissioner : but the opinion so reached is not clothed with finality and it not excluded from review by the Chief Judge in an appeal preferred under Section 406. The opinion arrived at by the Commissioner as the original assessing authority is subject to challenge in the appeal preferred under Section 406 and the Chief Judge entertaining such appeal can decide whether the opinion formed by the Commissioner was right or wrong. It is, therefore, not possible to accept the contention of the petitioners that the opinion of the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timating the annual rent. This condition could not, therefore, form a valid basis of classification and it affected the classification with the vice of discrimination. The answer which the respondents sought to give to this contention was that, in the context of the legislative history of the provision, it was clear that when the Legislature used the expression the annual rent thereof cannot in the opinion of the Commissioner be easily estimated , the Legislature meant to refer to the difficulty of estimating annual rent in cases where no recognised methods are available for determining the annual rent. This expression, contended the respondents, must mean : If the annual rent cannot be easily estimated because there are no recognised methods available for determining the annual rent in the case of the building . We do not think we can accept this contention of the respondents. The construction suggested on behalf of the respondents requires us to add the words by any recognised methods which are not there in the provision. It would be contrary to every recognised cannon of construction to add words in a statutory provision when there is nothing in the context which compels us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riate method. This is clearly a valid basis of classification, because it is apparent that if there is no appropriate method by which the annual rent of the building-and when we speak here of the annual rent, we mean annual rent contemplated by Sub-clause (ii), that is, hypothetical rent in a market controlled by rent restriction legislation-can be properly estimated, the Legislature would certainly be justified in prescribing a different method of valuation. Proviso (c) which prescribes a statutory method of valuation in respect of buildings covered by it cannot, therefore, be said to be violative of Article 14 of the Constitution. 44. Re : Ground (B) (ii) :- There was a preliminary contention urged on behalf of the respondents against the maintainability of this ground of challenge. The preliminary contention was that the petitioners in all the petitions barring Special Civil Application No. 233 of 1970 being Limited Companies incorporated under the Company Law or Corporations incorporated under the relevant statutory enactments could not be regarded as citizens and hence it was not open to them to challenge the constitutional validity of Proviso (c) to Section 2(1A)(ii) on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following words: It is not possible to put the test of reasonableness into the strait-jacket of a narrow formula. The objects to be taxed, the quantum of tax to be levied, the condition subject to which it is levied and the social and economic policies which a tax is designed to subserve are all matters of political character and these matters have been entrusted to the Legislature and not to the Courts. In applying the test of reasonableness it is also essential to notice that the power of taxation is generally regarded as an essential attribute of sovereignty and constitutional provisions relating to the power of taxation are regarded not as grant of power but as limitation upon the power which would otherwise be practically without limit. It was observed by this Court in Rai Ramkrishna v. State of Bihar AIR 1968 SC 1667 at p. 1673: It is of course true that the power of taxing the people and their property is an essential attribute of the Government and Government may legitimately exercise the said power by reference to the objects to which it is applicable to the utmost extent to which Government thinks it expedient to do so. The objects to be taxed so long as they happen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e resultant tax would exhaust the bulk of the rental income from the property or take away an exceedingly high proportion of it. It is, therefore, not possible to accept the contention of the petitioners that the tax imposed in case of buildings covered by Proviso (c) is unreasonable and Proviso (c) is on that account violative of Article 19(1)(f). 46. The petitioners then urged, and that was the second ground of challenge, that the condition which attracts the applicability of Proviso (c), namely, that the annual rent of the building cannot in the opinion of the Commissioner be easily estimated confers unguided and unfettered power on the Commissioner to pick and choose, out of buildings described in the opening part of Proviso (c), any building he likes for imposition of higher burden of tax according to the statutory formula, since the selection is left wholly to his subjective opinion as regards the ease or difficulty in estimating the hypothetical rent. The conferment of such power on the Commissioner, the exercise of which depends on the formation of a subjective opinion as regards the case or difficulty experienced by the Commissioner in estimating the hypothetical rent, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Commissioner shall not be subject to any control by the Municipal Commissioner. This requirement is a necessary concomitant of the judicial or quasi-judicial nature of the power, duty or function deputed to the Deputy Municipal Commissioner, for it is elementary that there can be no interference or control by one officer in the exercise, performance or discharge of a judicial or quasi-judicial power, duty or function by another. Such interference or control except by way of appeal is inherently inconceivable in the field of judicial or quasi-judicial decision. It is in fact a contradiction or negation of judicial or quasi-judicial power, duty or function. Now, on the amended Section 49 Sub-section (1) read with the proviso, two subsidiary contentions were raised on behalf of the petitioners. One was that on a proper interpretation of the orders of deputation, there was no deputation by the Municipal Commissioner of his power to investigate and dispose of complaints under Rule 18 to the Deputy Municipal Commissioner. This contention is clearly unfounded because it is apparent on a plain reading of the orders of deputation dated 20th November 1964 and 21st April 1966, Exhibits F1 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o jurisdiction or authority to make the assessments. It does not remove every cause of invalidity. It does not exclude challenge on every ground. It cures only one infirmity and that is the infirmity arising from the circumstance that by reason of the power, duty or function of the Municipal Commissioner under Rule 18 being of a judicial or quasi-judicial nature, it could not be validly deputed or delegated under the unamended Section 49 Sub-section (1) and the Deputy Municipal Commissioner had, therefore, no jurisdiction, power or authority to investigate and dispose of any complaints. Section 13(1) has no wider ambit or reach and cannot be assailed on that ground. 49. These were, however, only subsidiary contentions. The main contention of the petitioners was directed against the constitutional validity of the retrospective amendment of Section 49 Sub-section (1) and the enactment of Section 13(1) by Gujarat Act 5 of 1970. These provisions were challenged as constitutionally invalid on the ground that they are violative of Article 19(1)(f). of the Constitution. The petitioners pointed out that according to the scheme of the Corporations Act and the Taxation Rules, the process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without affording him a real opportunity to contest it. Equally, a fresh due date for payment must be declared, because otherwise the tax-payer would be visited with consequences of default in respect of non-payment of an amount which he was not liable to pay at the material time and non-payment of which did not then constitute any default and that would entail great hardship to the tax payer. These two conditions are essential requisites for valid enactment of a fiscal legislation which seek to create retrospective liability for payment of tax. Here, by retrospective amendment of Section 49 Sub-section (1), the Deputy Municipal Commissioner is retrospectively invested with power to make assessment of tax, but there is no provision in the amending legislation providing any machinery for fresh assessment of tax by the Deputy Municipal Commissioner or conferring a fresh right to appeal against assessment made by the Deputy Municipal Commissioner or declaring a fresh due date for payment of tax assessed by the Deputy Municipal Commissioner. The effect, therefore, is as if the liability to pay tax is created without there being any assessment. The assessment purported to be made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 6 of 1969 would be void and even assessments made subsequent to 3rd December 1969 in respect of the official years 1969-70 and 1970-71 would be bad, because void entries in the Assessment Book for the official year 1968-69 were adopted by the Municipal Commissioner as the initial entries for the official years 1969-70 and 1970-71 under Rule 21. This was broadly the contention urged on behalf of the petitioners and there can be no doubt that, if it is well-founded, it would result in invalidation of all assessments made by the Deputy Municipal Commissioner for official years upto 1970-71. But, for reasons which we shall immediately proceed to state, we do not think there is any force in this contention and it must be rejected. 50. Before we proceed to deal with this contention on merits we may refer to a preliminary objection raised on behalf of the respondents. The respondents urged that the petitioners were not entitled to challenge the constitutional validity of the retrospective amendment of Section 49 Sub-section (1) and the enactment of Section 13(1) of Gujarat Act 5 of 1970 on ground of infraction of Article 19(1)(f) as they were non-citizens and their challenge was lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pal Commissioner under the belief-which was then well-founded-that the Deputy Municipal Commissioner had no jurisdiction or power to dispose of complaints and make assessment and the decision of the Deputy Municipal Commissioner was, therefore, null and void. It is difficult to believe that any tax-payer would take the risk of not contesting the proposed assessment by the Deputy Municipal Commissioner or refrain from preferring an appeal against the decision of the Deputy Municipal Commissioner on the chance that a Court of law might hold that the Deputy Municipal Commissioner had no jurisdiction or power to dispose of complaints and make assessment. It would be most fool-hardy for a taxpayer to do so and we can safely assume that there would be hardly any such tax-payer, unless of course the petitioners can point out such taxpayers which, as we have pointed out above, the petitioners have not done. But even if there be any such exceptional tax-payers who did not prosecute their complaint before the Deputy Municipal Commissioner or prefer an appeal against the decision of the Deputy Municipal Commissioner on the view that the Deputy Municipal Commissioner had no power or authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has arisen from the defect is seeking a windfall since, had the Legislature's or administrator's action had the effect it was intended to and could have had, no such right would have arisen. Thus, the interest in the retrospective curing of such a defect in the administration of government outweighs the individual's interest in benefiting from the defect.... The Court has been extremely reluctant to override the legislative judgment as to the necessity for retrospective taxation, not only because of the paramount governmental interest in obtaining adequate revenue, but also because taxes are not in the nature of a penalty or a contractual obligation but rather a means of apportioning the costs of government among those who benefit from it. Indeed, as early as 1935 one commentator observed that 'arbitrary retrospectivity' may continue...to rear its head in tax briefs, but for practical purposes, in this field, it is as dead as wager of law. We are, therefore, of the view that the retrospective amendment of Section 49 and Section 13(1) of Gujarat Act 5 of 1970 do not impose any unreasonable restriction and they cannot be hold to be violative of Article 19(1)(f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and choose any class of properties for differential treatment in the matter of fixation of rate of conservancy tax. Let us examine whether these grounds are well founded. 54. We will first examine the ground based on violation of the equal protection clause of the Constitution. It is now well-settled as a result of several decisions of the Supreme Court of which we may mention only two, namely, Ram Krishna Dalmia v. Justice Tendolkar and Jyoti Pershad v. Union of Territory of Delhi that where a statute does not itself make a classification of persons or things to which its provisions are intended to apply but leaves it to the discretion of a subordinate authority to select and classify persons or things for the application of its provisions, the statute must lay down a policy or principle to guide and control the exercise of discretion by the subordinate authority. If the statute leaves the entire matter of selection classification to the unrestrained will of the subordinate authority without laying down any policy or principle or disclosing any tangible or intangible purpose which would control and regulate the exercise of discretion of the subordinate authority, the statute w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) that conservancy tax is a tax of a special kind and differs from general tax in an important feature. General tax has no relation to any particular service supplied or expenditure incurred by the Corporation. It is an impost for augmenting the general revenues of the Corporation and, subject to the minimum and maximum prescribed by Section 129(b), it may be levied at any rate or rates which may be fixed having regard to the needs of the Corporation in implementing the purposes of the Corporations Act. But so far as conservancy tax is concerned, the power of the Corporation is not so wide. Though conservancy tax is a tax and has been rightly designated as a tax, it differs from general tax in this respect that its rate is co-related to the conservancy service supplied by the Corporation. Section 129(b) provides that conservancy tax shall be levied at such percentage of the rateable value as will in the opinion of the Corporation suffice to provide for the collection, removal and disposal, by municipal agency, of all extrementitious and polluted matter from the privies, urinals and cesspools and for efficiently maintaining and repairing the municipal drains constructed or used fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rate of conservancy tax and the conferment of the power could not be said to be violative of Article 14 of the Constitution. 57. But the question is, whether the power conferred on the Corporation by the proviso to Section 129(b) to fix different rates of conservancy tax for different classes of properties is discriminatory and violative of Article 14 of the Constitution. The argument of the petitioners was that the Legislature has, by enacting the proviso to Section 129(b), vested unfettered and uncontrolled power in the Corporation to select and classify properties in such manner as it likes and having made classification of properties at its own sweet will, to fix such rates of tax for different classes of properties as it chooses, without laying down any policy or principle or disclosing any tangible or intangible purpose which would guide and control the exercise of such power by the Corporation, so that it is open to the Corporation, in arbitrary exercise of such power, to pick and choose any class of properties for differential treatment in the matter of fixation of rates of conservancy tax. Now there can be no doubt, having regard to the principles which we have discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be taken into account by the Commissioner in fixing the special rate of conservancy tax for such premises. If that be so, can there be any doubt that the Legislature intended that in making classification of properties and fixing different rates of conservancy tax for different classes of properties, the Corporation should be guided by the same consideration, namely, the cost of conservancy service supplied in respect of each class of properties ? The same guidance which is given in respect of determination of total quantum of conservancy tax and in respect of determination of special rate of conservancy tax for any individual premises must also guide the Corporation in fixing different rates of conservancy tax for different classes of properties. The cost of conservancy service supplied by the Corporation must be the guiding principle for differentiating between different classes of properties and fixing different rates of conservancy tax for them. The Legislature has thus clearly laid down a standard or principle to guide and control the exercise of power by the Corporation. This standard or principle is fair and just, as it is calculated to bring about an equitable distributi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such class of properties, having regard to the cost of supplying conservancy service to that class. The proviso to Section 129(b) conferring this power on the Corporation cannot, therefore, be successfully challenged as violative of the equality clause of the Constitution. 58. The challenge to the constitutional validity of the proviso to Section 129(b) on the ground of excessive delegation of legislative power must also fail, since, as pointed out by the Supreme Court in Jyoti Pershad v. Union Territory of Delhi (supra), this challenge is really nothing but another form or rather another aspect of the objection based on grant of unguided and unfettered power to the Corporation to fix different rates of conservancy tax for different classes of properties. We have already dealt with this objection while examining the challenge based on infraction of Article 14. There we have pointed out that the power conferred in the Corporation by the proviso to Section 129(b) is not arbitrary or vagrant but it is controlled and regulated by a guiding principle or policy provided by the Legislature. The law is now well-settled that where a statute delegates to a subordinate authority the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile the rate of conservancy tax fixed for other properties was only 3 per cent. These resolutions were passed in exercise of power assumed by the Corporation to be vested in it but since such power was non-existent, they were null and void. The conferment of such power with retrospective effect by the introduction of the proviso in Section 129(b) cured the infirmity arising out of lack of power. But if there was any other infirmity in the exercise of the power, that was not cured by the retrospective addition of the proviso in Section 129(b). Section 13(2) of Gujarat Act 5 of 1970 also cured the invalidity of the resolutions only in as far as such invalidity arose out of lack of power. It did not cure the invalidity, if any, arising out of other causes. Every exercise of assumed power was not sought to be validated by it. If, therefore, the exercise of assumed power did not conform to the guiding principle above referred to, it would be invalid, because it would not be justifiable by reference to the power restrospectively conferred, such power being subject to the limitation of the guiding principle. Since the norm or standard laid down by the guiding principle is an objective on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvancy tax may be fixed for different classes of properties according to the cost of conservancy service supplied to each class. The power to fix different rates of conservancy tax for different classes of properties is limited by the actual cost element and the differential rate of conservancy tax fixed for a particular class of properties must be related to the actual cost involved in supplying conservancy service to that class. The Corporation cannot arbitrarily classify properties and fix different rates of conservancy tax for them as it likes. It must take into account and be guided by the actual cost of supplying conservancy service in relation to each class. Now here in the present case there is nothing to show that the Corporation acted in conformity with this guidance in fixing 9 per cent as the rate of conservancy tax in respect of large properties, when the rate of conservancy tax fixed in respect of these properties was only 3 per cent. The Corporation has not produced only material to show that differential rates of tax were fixed by the Corporation having regard to the cost of conservancy service supplied to each of these two classes. The only averment made on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively larger conservancy services. It will be seen from this passage that according to the Corporation-and the opinion of the Corporation on this point being reasonably held cannot be questioned-hotels, clubs, theatres or cinemas, industrial premises and other large premises need relatively larger conservancy service and the cost of providing conservancy service to them is proportionately higher than corresponding cost in respect of other properties . There can, therefore, be no doubt that these large properties could be treated as a class and given differential treatment in the matter of fixation of conservancy tax from other properties. But on the question as to what rates of conservancy tax should be fixed, we do not find anything in the affidavit-in-reply which would show that the Corporation was guided by the actual cost of conservancy service supplied to each class. The Corporation did not bother to find out even roughly, what would be the cost of supplying conservancy service to these large properties as compared to the cost in relation to the other properties. The Corporation, as a matter of fact, asserted that it was not necessary to work out such cost separately in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly contemplated that even in respect of an individual hotel, club, industrial premises or other large premises, the cost of supplying conservancy service can and must be calculated, if the Commissioner wants to fix special rate of conservancy tax for such premises. If the cost of supplying conservancy service to an individual hotel, club, stable, industrial premises or other large premises can be determined, a fortiori, there is no reason why it should not be possible to determine the cost of supplying conservancy service to a class of properties. That should in fact be a much easier task than that contemplated by the Legislature in Section 137. But that apart, no consideration of practical inconvenience can relieve the Corporation of the necessity of complying with the guiding principle laid down by the Legislature in exercise of the power conferred upon it. 61. The Corporation sought to repel this ground of challenge urged on behalf of the petitioners by putting forward a rather ingenious contention. The Corporation contended that the classification of properties was no doubt required to be made having regard to the volume of conservancy service supplied by the Corporation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operties is for the purpose of fixing differential rates of tax and the fixation of differential rates of tax must be justified having regard to the guiding principle. The differences in the rate of tax must, therefore, be broadly proportionate to the differences in the cost of conservancy service supplied to different classes. We must of course, make it clear that when we say this, we do not insist on mathematical precision. The law does not and cannot require that the rates of conservancy tax for different classes of properties should be fixed in such a manner that the conservancy tax collected in respect of each class of properties is precisely equal to the cost of supplying conservancy service to that class. The taxing authority must, by the very nature of the function it has to discharge, have some latitude in the matter of fixation of rates of conservancy tax. But it is necessary-and that is the requirement of the statute-that there must be broad correspondence between the rates of conservancy tax fixed for different classes of properties and the cost of conservancy service supplied to them. That alone would eliminate arbitrariness in the exercise of power. Since in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith by the Judge wholly or in part and unconditionally or subject to conditions, under the proviso, if the Judge is of opinion that the deposit would cause undue hardship to the appellant. The decision of the Judge in regard to dispensing with the requirement of deposit is made appealable to the High Court by Section 411 (bb). The question is, whether this provision enacted in Section 406(2)(e) read with Section 41 l(bb) can stand the scrutiny of Article 14 of the Constitution. 63. Prior to its amendment by Section 10 of Gujarat Act 5 of 1970, Section 406(2)(e) was without the proviso and it created a bar against hearing of the appeal and not against entertainment of the appeal. The constitutional validity of Section 406(2)(e) in its unamended form came up for consideration before this Court in Special Civil Application No. 662 of 1968 and other allied petitions and by its judgment dated 27th October 1969, this Court struck down that provision as violative of Article 14 of the Constitution. In view of this decision, the Learned Counsel for the petitioners at one stage contended that since Section 406(2)(e) as unamended was declared invalid by this Court, it was erased or obliter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... priety of which is impugned in the appeal. The question is whether this basis has any rational nexus with the object of the provision for appeal, or, in other words, from the point of view of the object of providing an appeal, is there any reasonable justification for making this distinction for giving the right of appeal to one class and denying it to the other ? We do not think so. The object of providing an appeal is to give a remedy to an assessee against illegal, improper or excessive exaction of tax so that he can get the legality, propriety or correctness of the tax tested in a judicial forum and only such tax as may be payable according to law may be levied upon him. It is difficult to see what nexus the deposit of the tax assessed has with this object. How does the deposit of the tax in any way bear upon this object either by way of furthering it or impeding it ? The deposit of the tax is a totally irrelevant consideration so far as the securing of this object is concerned. The legality or propriety of the tax which is to be tested in the appeal does not depend on the deposit of the tax nor does the deposit of the tax in any way facilitate the disposal of the appeal.... Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper or excessive exaction of tax so that he can get the legality, propriety or correctness of the tax tested in a judicial forum and only such tax as may be payable according to law may be levied upon him, there was no rational basis for making a distinction between appellants who make deposit of the amount of tax assessed and appellants who do not. The deposit of the [amount of tax assessed had no relevance whatsoever to the object intended to be secured by provision of an appeal and the classification made by the unamended Section 406(2)(e) was, therefore, arbitrary and irrational. This was the vice or infirmity from which Section 406(2)(e) as unamended suffered and the question is, whether the addition of the proviso has made any difference. Is the vice or infirmity cured by the addition of the proviso ? We think not. The proviso does not wholly obliterate the basis of classification found by this Court to be arbitrary and irrational. It does not say that deposit of the amount of tax assessed shall be immaterial. Section 406(2)(e) with the proviso still insists-and indeed the provision is made more rigorous by substitution of the word entertained for the word heard in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clog the right of appeal despite the addition of the proviso in Section 406(2)(e) and since, as held by this Court in its judgment dated 27th October 1969, this condition has no relevance to the object of providing an appeal, Section 406(2)(e) must, even after the addition of the proviso, be held to be discriminatory and violative of the equal protection clause of the Constitution. The proviso would have cured the invalidity of Section 406(2)(e), if Section 406(2)(e) had been declared to be unconstitutional on the ground that it discriminates between appellants who can deposit the amount of tax without undue hardship and appellants who cannot. It would have in that case obliterated the discrimination by making it possible for the latter class of appellants to exercise their right of appeal without being required to deposit the amount of tax. But that is not the discrimination struck down by this Court by its judgment dated 27th October 1969. The discrimination invalidated by this Court was between appellants who deposit the amount of tax and appellants who do not and this discrimination, as pointed out by us, is not wiped out by the proviso. The proviso does not have the effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these textile mills and factories must, therefore, be taken to be the general rate of 3 per cent. We also issue a writ of mandamus quashing and setting aside the Resolutions passed by the Corporation for the official years 1967-68, 1968-69, 1969-70 and 1970-71 to the extent to which they fix a special rate of conservancy tax at 9 per cent inter alia in respect of textile mills and factories belonging to the petitioners. We have been invited by the petitioners to quash the entries in the Assessment Books relating to the textile mills and factories belonging to the petitioners for the official years 1969-70 and 1970-71. There is no doubt that, on the view taken by us; these entries would be liable to be quashed, but we do not propose to do so in the exercise of our judicial discretion. The reason is that if we quash the entries made in the Assessment Books relating to the textile mills and factories of the petitioners on the grounds which have found favour with us, the tax for the official years 1969-70 and 1970-71 would be lost to the Corporation because no assessment can be made by the Commissioner after the expiry of the relevant official year, except in the limited class of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recover the amount of tax for the official year 1969-70 from the petitioners in those petitions. We do not see any reason why we should grant interim injunction to the petitioners restraining the Corporation from totally recovering the amount of tax from the petitioners. There can be no doubt that, whatever be the ultimate decision in regard to the various questions raised in these petitions, tax is payable by the petitioners to the Corporation and the only question is as to the quantum of the tax. 'We think it would be a fair order to make that the petitioners in these petitions should pay to the Corporation within three weeks from today the following amounts shown against their respective names towards part payment of the amount of tax which may ultimately be found due and payable by them to the Corporation. S. No. Name Amount 1 The Sarangpur Cotton Mfg. Co. Ltd. No. 2. 1,20,930-04 2 The Aryodaya Spg. Wvg. Mills Co. Ltd. 80,429-25 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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