The Bombay High Court has ruled that the ‘water tax’ and ‘water benefit tax’ can be levied by the municipal corporation even if the water is not consumed by the owner or the occupier. However, if they consume the water, they have to pay the water charges in lieu of tax.
The high court considered the two writ petitions together in one which was filed by the Mars Enterprises and the other was filed by the Oil & Natural Gas Corporation Ltd against Mumbai Municipal Corporation (MMC) of Greater Mumbai.
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The petition raised the following issues: (i) Whether the Corporation has the authority to levy tax under Section 140(a)(i) of the said Act on the actual supply of water? (ii) Whether the water benefit tax, as outlined in Section 140(a)(ii) of the Act, can be levied regardless of the actual consumption of water, given that it pertains to the maintenance of the water system? (iii) Whether the Corporation is entitled to levy a fixed tax in addition to the water charge, which is levied based on the actual consumption of water?
The bench noted the decision of the Supreme Court in the Harish Lamba case. The apex court distinguished the concepts of ‘water tax’ and ‘water benefit tax’ which form components of property taxes from that of ‘water charges’ which are to be paid on the basis of the quantum of water actually consumed.
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The High Court, concurring with the precedent, held that the Municipal Corporation can levy ‘water tax’ under Section 140(1)(a)(i) of the MMC Act once the water supply facility is made available, regardless of actual water consumption by the owner/occupier. Similarly, ‘water benefit tax,’ intended to cover pipeline maintenance costs, is also a component of property tax and can be levied similarly to ‘water tax.’
With regards to ‘water benefit tax’ as envisaged under Section 140(1)(a)(ii) of the MMC Act, the bench ruled that the tax is leviable for meeting of expenditure for providing, operating and maintaining the water supply facilities, the same can be levied irrespective of the fact whether there is actual consumption of water or not.
Further, the bench referred to Section 169 of the Act, which states that “water charges” based on the amount of water supplied can only be levied “in lieu” of water tax. The Supreme Court, in its judgment in Harish Lamba (in its para 21), clarified that water charges under Section 169 of the MMC Act are a substitute for water tax and water benefit tax. In para 26, the Court further stated that once an owner/occupant avails of the water supply, they are only liable to pay water charges based on actual consumption, replacing both water tax and water benefit tax.
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The bench, comprising Justice A.S. Chandurkar, Justice Manish Pitale, and Justice Sandeep V Marne, ruled on the issues raised in the petition. They clarified that the expression “for providing water supply” under Section 140(1)(a)(i) of the M.M.C. Act does not require actual water supply to the owner/occupant, and water tax can be levied regardless of whether water is consumed.
Likewise, the water benefit tax under Section 140(1)(a)(ii) can be levied irrespective of actual water consumption, as it is meant for the maintenance of water supply infrastructure. They further added that the water charges paid for actual water consumption replace the need to pay water tax or water benefit tax.
As the larger Bench has addressed the issues, the petitions will be sent to the Division Bench for appropriate orders.
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