Analysis of ASF Insignia SEZ Private Limited v. State of Haryana and others

• In The High Court Of Punjab And Haryana At Chandigarh
• Hon'ble Judges/Coram: Tejinder Singh Dhindsa and Deepak Manchanda, JJ.
   

Brief Facts of the Case:
ASF Insignia SEZ Pvt. Ltd. is a company incorporated under the Companies Act 1956. It was asserted that the said company of the petitioner was notified as an IT-ITES SEZ by the Ministry of Commerce and Industry, Department of Commerce, Government of India as well as by the Industries and Commerce Department, Government of Haryana. Pursuant to such approval, the petitioner's properties were leased out to various lessees for setting up of SEZ units.

In 2013, the Haryana government, urban local bodies department issued a notification in terms of Section 87(3) read with Section 149(1) of the Haryana Municipal Corporation Act 1994 imposing property tax on buildings and lands within the limits of the concerned municipal corporation. Subsequently, in 2014 the Haryana government brought out an amendment to the previous notification and inserted Para no. 2F (xiii) and which was in the following terms: - "(xiii) IT Park, Cyber City/Park 50 percent of commercial space rate for both A1 and A2 cities respectively".

The respondent in the said case: The municipal corporation of Haryana communicated to the petitioner to pay property tax from 2010-2011 to 2014- 2015 in terms of the 2013 notification and as amended in the year 2014. Petitioner Company responded by clarifying that in so far as their property was concerned only two buildings were operational and the residential buildings were still under construction. Petitioner also raised a plea before Municipal Corporation, Gurugram, to levy property tax on the petitioner's property by treating the same to fall under the "industrial category".

Further, in 2015 communication was made by the Municipal Corporation to the petitioner company that the said property was assessed under the head of "IT Park, Cyber City Park" which had been inserted in the notification dated 11.10.2013 by virtue of amendment made on 03.03.2014 and as such the property tax liable to be levied was 50 per cent of the rates applicable to commercial properties. Demand notices dated 11.09.2015 were as such issued by the Joint Commissioner, Municipal Corporation, Gurugram for recovery of property tax for the period 2010-11 to 2015-16.

At this stage, the petitioner company filed by an appeal titled as M/s. ASF Insignia SEZ Pvt. Ltd. vs. Municipal Corporation, Gurugram attacking the demand notices issued earlier which demanded property tax under the commercial category. In the meanwhile vide memo dated 30.12.2015 petitioner was informed that his property falls under mix use category as per Clause 2(G) of the notification dated 11.10.2013 and accordingly the liability of tax on such proprieties shall be as per areas under different usage. The appeal filed by the petitioner was withdrawn in 2015 with the liberty to file an appeal against the assessment of property tax.

Accordingly, the petitioner filed an appeal dated 21.05.2016 against the demand notices dated 11.09.2015 before the Divisional Commissioner under Section 138 of the 1994 Act. In 2018 the divisional commissioner allowed the appeal and the demand notices whereby property tax had been imposed at rates prescribed for "IT Park, Cyber City/Park" were quashed. Directions were issued to reassess the property at industrial rates in respect of IT/ITES and its allied infrastructure buildings in the SEZ.

However, the area under the SEZ where the petitioner is carrying out any "commercial activity" such as operating any "hotel" or "restaurant" which is not related to information technology would be taxed as per commercial rates, further, a view was taken that if the petitioner is carrying out any "residential activity" in the SEZ, rates applicable for SEZ would be levied and the factum of vacant/under-construction/basement for parking were to be duly considered while levying property tax.

In 2019, the respondent preferred a revision before the 1st respondent i.e. the Principal Secretary, Government of Haryana Urban Local Bodies Department. Such revision was allowed vide order dated 29.10.2021 setting aside the order passed by the divisional commissioner in 2018. Petitioner then filed CWP No. 22675 of 2021 assailing the order dated 29.10.2021 passed by the Divisional authority.

Vide order dated 09.11.2021 passed by High Court, CWP No. 22675-2021 was disposed of in terms of setting aside the order dated 29.10.2021 passed by the revisional authority, and the matter was remanded back for passing an order afresh. Upon remand, the matter was heard again and an order was passed which set aside the 2018 order, revision petition was allowed and direction was given that the IT space of IT SEZ be taxed as per para 2 Item F Clause (xiii) of the notification dated 03.03.2014 and the residential/commercial spaces under hotels/restaurant, etc. be taxed accordingly as per the decision of Divisional Commissioner dated 15.11.2018."

Against this factual matrix, the writ petition is filed before the Punjab and Haryana High Court assailing the order dated 30.11.2021 passed by respondent No. 1.

Arguments of the petitioners:

• Petitioners submitted that Respondent No.1 had erred in equating Cyber City Park/IT Park with IT/ITES Sector Specific SEZ for purposes of levy of property tax. It was contended that the 2014 notification would not apply to the petitioner's property because it was an IT/ITES SEZ rather than a Cyber City/IT Park.
   
• In support of such contention, the SEZ Act of 2005 was referred to, the preamble and Section 11 in particular. It was submitted that the preamble clearly states that SEZs are an industry and various incentives were examined under Chapter 5 Section 11 of the Haryana SEZ Act 2005. SEZ rules of 2006 were also referred to.
   
• Further, it was submitted that in an SEZ, there are restrictions on the purchase and sale of land but in Haryana, there is no bar on the same in Cyber City/Cyber/IT Park. The Industrial and Investment Policy 2011 of Haryana categorises six different types of IT/ITES sector-specific SEZs, all completely different from each other.
   
• Referring to the same policy, it was submitted that the EDC rates for the SEZs would be applied equally as for the industrial sector, contention rose that the intent of the certain policy was to treat SEZ as an industry. Consequently, it was argued that the petitioner's property which is IT/ITES and SEZ should be taxed under the category of "Industry" and cannot be treated as a subject matter of taxation under Para 2 F (xiii) of the notification dated 11.10.2013 by virtue of the amendment carried out vide notification dated 03.03.2014.
   
• It was submitted that there cannot be any taxation by implication and the charging section in a tax statute has to be construed strictly. Para 2 F (xiii) inserted in the notification dated 11.10.2013 by virtue of the amendment notification dated 03.03.2014 would not be applicable to IT/ITES Sector specific SEZ as the applicability of the same was restricted specifically to IT Park/Cyber City/Cyber Park.
   
• Unless and until by clear words a person/entity is brought within the ambit of the charging section, no entity can be taxed by mere implication. The petitioners also referred to a notification dated 14.03.2005 issued by the IT Department of the Chandigarh Administration exempting SEZ units within the SEZ as well as developers from payment of various taxes including property tax.
   
• Department of Industries and Commerce of Punjab also granted similar exemptions, state of UP has exempted SEZ units from payment of taxes levied by local bodies by treating SEZs to be "industrial township". Likewise, the State of MP is also stated to have exempted SEZ developers and units from taxes levied by local bodies. Such instances were cited to throw light on the fact that other states have exempted SEZ from payment of property taxes and a similar treatment should be meted out to the petitioner as well.
   
• One issue that was vehemently raised by the petitioners was the issue of delay by respondent no. 2 (Municipal Corporation Gurugram) in filing the revision petition against the order passed in 2018 by the Divisional Commissioner. According to S. 140 of the Haryana Municipal Corporation Act 1994 a 30 days limitation period for filing of a revision application against the order passed by the Divisional Commissioner under Section 138 has been provided whereas in the present case, the petition was filed with a delay of 53 days.
   
• The petitioners submitted that the 1994 Act does not contemplate the applicability of any provision of the Limitation Act 1963 so as to empower the Revisional Authority to condone any delay whatsoever in the filing of the revision application. The 1994 Act did not allow respondent no. 1 which was a statutory authority such delay.
   
• In support of this contention Ganeshan Vs. T.N. Hindu Religious & Charitable Endowments Board[1] was relied upon wherein the court held that the suits, appeals, and applications referred to in the Limitation Act 1963 are suits, appeals, and applications that are to be filed in a Court and not before any statutory authority. It is further held in the judgment that a special or local law could vide its statutory scheme provide for the applicability of any provision of the Limitation Act 1963 or exclude the applicability thereof.
   
• Subsequently, it was argued that the revisional authority could not have accepted the delay under any circumstances provided that the Municipal Corporation had not even filed an application seeking condonation of the 53 days delay in filing of the revision application.
   
• It was further submitted that the revisional authority's reliance on the judgment of the Supreme Court in Bhakra Beas Management Board (PW) Slapper Vs. Excise & Taxation Officer Sunder Nagar/Assessing Authority[2] to take a view that a judgment in CCE and Customs vs. Hongo India (Pvt.) Ltd.[3] stands distinguished and as such not applicable would not hold good because both the judgments dealt with the power of 'The High Court' under the H.P. VAT Act 2005 and Central Excise Act 1944 respectively and as such both these cases did not deal with the applicability of the Limitation Act 1963 to statutory authority. It was submitted that the revision application filed by the Municipal Corporation against the order passed by Divisional Commissioner should be rejected on the ground of delay.
   
• The petitioners also alleged a violation of principles of natural justice due to the fact that the demand notices dated 11.09.2015 were issued in violation of Section 87-B (2) of the 1994 Act, which requires that; "the authority shall serve notice on the person chargeable with property tax, which has not been paid by him to show cause why he should not pay the amount specified in the notice and the authority shall pass an appropriate order in this regard after giving an opportunity of hearing".
   
• It is contended that the demand notices were affixed on the petitioner's premises on 22.09.2015 even though during the same period of time correspondence was being exchanged between the parties in relation to the computation of the property tax. It is argued that the demand notices have been issued without any application of mind and there has been a flagrant breach of natural justice.

Arguments of the respondents:

• Respondents submitted that the impugned order passed was strictly in accordance with law and in terms of the notification dated 11.10.2013 and as amended vide notification dated 03.03.2014.
   
• It has been submitted that the rate of property tax is to be notified keeping in view various factors like the location of property/building, the purpose for which said property is being used, its capacity for profitable use, and other relevant factors. Even if the building is set up for a specific purpose but such building is being used for a different purpose, for example, if an industrial building is converted for use of IT-enabled services, the property tax would be levied on the basis for which it is being used actually.
   
• It was asserted that even if the building/premises is situated within the specific earmarked area like SEZ, the levying of the property tax on the building will be made on the basis of actual usage of such building within SEZ and the building/premises falling in SEZ/industrial township/residential township can be used for different purposes and different rates of property tax accordingly will be levied on each and every building on the basis of actual usage and no uniform rate of property tax can be levied upon the entire area/buildings falling in such SEZ/industrial township/residential township.
   
• It has been argued on behalf of the respondents that merely for the reason that there is no specific mention of the rate of property tax for SEZ in the notifications dated 11.10.2013 and 03.03.2014 cannot support the prayer raised on behalf of the petitioner for levy of property tax at "industrial rates".
   
• It is submitted that each and every activity cannot be specifically mentioned in the Government notifications for the levy of property tax. Accordingly, different activities may be clubbed into broad categories like residential, commercial, institutional, industrial, etc., and taxed accordingly.
   
• It is contended that the notification dated 11.10.2013 regarding property tax does not have IT park/Cyber Park/Cybercity/SEZs as any separate category and as such based upon actual usage of the building, property tax in terms of para 2 F (xiii) which had been inserted in the notification dated 11.10.2013 by amendment notification dated 03.03.2014 has been levied.
   
• Regarding the delay in filing of the revision, the respondents submitted that the provisions of the Limitation Act 1963 would be applicable for condonation of delay as there is no specific provision for non-applicability of the Limitation Act under the special act i.e., under the 1994 Act. It was contended that in the case of Government functionaries/ instrumentalities, some delay does occur in filing applications/revisions as various types of approvals are required by the government authorities to file the same.
   
• In the facts of the present case the revision had been filed after a delay of 53 days only and such a short period was attributable to administrative exigencies. The larger issue was about the rate at which property tax was to be levied and such an issue could not have been sacrificed on the alter of delay in itself. No prejudice as such is stated to have been caused to the petitioner in such regard as a due opportunity of hearing had been granted by the revisional authority prior to the passing of the impugned order.
   
• The respondents sought dismissal of the writ petition.

Findings of the court:

• It was construed that in the exercise of the powers conferred by Sub-Section 3 of Section 87 read with sub-section 1 of Section 149 of the 1994 Act, the Haryana Government, Urban Local Bodies Department issued notification dated 11.10.2013 imposing property tax on buildings and land within the limits of the concerned Municipal Corporation and subsequently the notification dated 03.03.2014 was issued carrying out an amendment in the previous notification dated 11.10.2013 and as per which in para 2, Item F sub-para (xiii) was inserted and to the following effect:- "(xiii) IT park, cyber city/park; 50% of commercial space rate for both A1 and A2 cities respectively."
   
• It was asserted by the court that the charging provision to levy tax is Section 87. It provides that the State Government shall notify the rate of property tax from time to time. The factors, that have been taken into consideration by the Government are (i) the area in which the building or land is situated (ii) its location; (iii) the purpose for which it is used; (iv) its capacity for profitable use; (v) quality of construction and (vi) other relevant factors.
   
• The notification dated 11.10.2013 prescribes different rates of tax for residential commercial shops, and commercial spaces i.e., shopping malls, multiplexes or commercial office space, etc. Industrial properties, institutional properties, commercial, non-commercial, educational institutions, special categories-private hospitals, etc. However, there is no classification on the basis of the nature of the construction raised or the location of the building within the area of the Municipal Corporation.
   
• Brij Mohan Gupta vs. State of Haryana and another[4] upheld the validity of Section 87(1)(a) of the 1994 Act and found out that there was no illegality when Section 87(1) (a) of the Act was incorporated empowering the State Government to notify the rates of property tax by taking into consideration the factors as mentioned therein.
   
• It was analysed that Clause 2(G) of the notification dated 11.10.2013 stipulates that in case of the mixed-use of premises in any property, the liability of tax shall be calculated as per area under different usage. In other words, if a single building is being used for different and mixed purposes, then the property tax will be levied taking into consideration the usage of the specific area of the building/premises under different heads.
   
• The petitioner cannot escape the rigors of imposition of property tax at "commercial rates" in respect of such a specific area which is being used for IT/ITES only on the basis that it falls under a separate distinct category of SEZ and as such ought to be levied property tax at industrial rates. It is not even the case projected in the pleadings that no area of the building/premises of the petitioner even though recognised as SEZ is not being used for IT/ITES purposes. Mere non-mention of IT in the SEZ category cannot be taken as a tenable ground for non-levy of property tax at commercial rates. There is no merit in the contention raised on behalf of the petitioner that it is a case of taxation by implication.
   
• Section 87 of the 1994 Act which is the charging section clearly envisages the levy of property tax and one of the vital factors enumerated therein is the purpose for which the area in question is being used. Sub Section G of Clause 2 of the notification dated 11.10.2013 clarifies that in case of mixed-use of premises in any property, the liability of tax would be as per area under different use.

By virtue of the amendment carried out vide notification dated 03.03.2014 for IT park, cyber city/park activities, the property tax leviable is 50% of the commercial space rate for A1 and A2 cities. In terms of the order dated 30.11.2021 passed by the Revisional Authority, a view has been taken that the IT space of the petitioner SEZ is taxed as per Para 2 item No. F Clause (xiii) of the notification dated 03.03.2014, whereas for the residential activity being carried out in the SEZs, the rate applicable for residential purposes are levied.

The court did not find any infirmity in the impugned order dated 30.11.2021 whereby property tax stands levied as per actual usage of the petitioner SEZ and which would strictly be in terms of the charging provision i.e. Section 87 of the 1994 Act as also the notifications dated 11.10.2013 and 03.03.2014 respectively.

• Reliance placed by the petitioners upon the Haryana Special Economic Zone Act 2005 as also the Haryana Industrial and Investment Policy 2011 for purposes of treating the petitioner SEZ under a distinct and separate category and to be levied property tax at industrial rates is wholly misplaced. Undoubtedly Section 11(1) of the 2005 Act envisages various benefits to a SEZ but the same is subject to any other law.
  
  Section 11(1) list out the exemptions granted to a SEZ but there is no mention of exemption of property tax to be levied by the concerned municipality.
  
  On the other hand, Section 19 of the 2005 Act, is couched in clear and unambiguous language regarding any liability, obligation, etc. of a SEZ as far as the implementation of any other law is concerned.
  
  It can thus be concluded that the provision of any other law including the Haryana Municipal Corporation Act 1994 would not stand excluded insofar as its applicability to buildings within SEZ including the aspect of imposition of property tax.
   
• The contention raised on behalf of the petitioner regarding the applicability of industrial property rates on IT/ITES buildings situated within SEZ on the plea that IT/ITES has been treated as an industry under the Haryana Industrial & Investment Policy 2011 is not well-founded.
   
• As the name of the policy would in itself suggest that it is an investment policy and the basic purpose is to provide incentives and priority to IT Sector in recognition of its potential towards employment, exports, wealth generation, and growth of the services sector. As per Clause 10.5 of the policy, SEZs are required to pay EDC rates as applicable to the industrial sector. The same can only be understood in the backdrop of equating certain service sectors like IT/ITES with industry for the limited purpose of granting certain incentives as are available to the industrial sector.
  
  By no stretch of the imagination can the Industrial and Investment Policy of 2011 be construed to mean that it would have primacy over the other acts/provisions of the State Government like the 1994 Act or notifications issued by the Urban Local Bodies Department on the subject of imposition of property tax.
  
  The court held that the Haryana Industrial and Investment Policy 2011 issued by the Industries & Commerce Department cannot override the State acts and rules made thereunder by the Urban Local Bodies Department.
   
• The court held that the notifications issued by the IT department of the Chandigarh administration, State of Punjab, Madhya Pradesh as well as the Gujarat SEZ Act of 2004 would have no bearing insofar as the present case is concerned due to the fact that in each of these notifications as also SEZ policies there was a categoric and specific exemption envisaged insofar as property tax is concerned apart from other exemptions.
   
• In the present case, the charging provision is under Section 87 of the 1994 Act which rather permits the levy of property tax based on various factors including actual usage of the premises.
  
  The levy of property tax has to be necessarily as per the charging provision contained under the 1994 Act as also the notifications issued therein. The petitioner as such cannot be permitted to gain any mileage from the notifications/SEZ policies that may have been issued in relation to other states across the country.
  
  The court was also of the view that the contention of the petitioners in relation to violation of principles of natural justice is unfounded due to the reason that both at the appellate and revisional stage the petitioner/authorized representative were granted effective opportunity of hearing.
  
  The contentions raised on behalf of the petitioner and who was arrayed as a respondent in the revision petition at the hands of Municipal Corporation, Gurugram, were specifically noticed as also dealt with.
  
  As has been noticed above, petitioner having contested the demand notices in terms of filing an appeal under Section 138 of the 1994 Act had succeeded at the appellate stage and merely for the reason that the revisional authority after granting due opportunity has taken a different view, would not tantamount to a situation which would permit the petitioner to allege violation of the principles of natural justice.
   
• As regards the aspect of delay it was observed that a special or local law vide statutory scheme can make applicable any provision of the Limitation Act or exclude applicability of any provision of the Limitation Act which can be decided only after looking into the scheme of the particular special or local law. Referring to Section 140 of the 1994 Act the court held that Section 140 of the afore-reproduced nowhere expressly excludes the applicability of the provisions of the Limitation Act.

The provisions of Section 5 of the Limitation Act would be applicable as they are not expressly excluded by the provisions of the 1994 Act and the provisions contained in Section 29(2) of the Limitation Act would be attracted as there is no express exclusion or by implication under the Scheme of the 1994 Act.

State of Haryana vs. Chandra Mani and others[5] was relied on by the court while dealing with the issue of delay and in particular at the hands of the State. After analysing the case the court observed that the State cannot be put on the same footing as an individual insofar as dealing with condonation of delay. The individual would always be quick in taking the decision whether he would pursue the remedy by way of an appeal or application since he is a person legally injured while State is an impersonal machinery working through its officers or servants.

Judgment Held:
The court was of the view that the impugned order dated 30.11.2021 passed by the first respondent is based on cogent and valid reasoning and in conformity with the relevant provisions of the 1994 Act as well as the notifications dated 11.10.2013 and 03.03.2014. We find no merit in the instant writ petition and the same is accordingly dismissed.

End-Notes:

1. MANU/SC/0654/2019: (2019) 7 SEC 108.
2. CIVIL APPEAL NOS. 8276-8277 OF 2019 (ARISING OUT OF S.L.P. (C) NOS.15280-15281 OF 2019)
3. MANU/SC/0471/2009
4. CWP No.17765 of 2015 (O&M)
5. MANU/SC/0426/1996

Award Winning Article Is Written By: Ms.Charvi Sahay

Authentication No: DE333833196937-4-1223