Case: FOOD CORPORATION OF INDIA Vs. BRIHANMUMBAI MAHANAGAR PALIKA & ORS


Decision reasoning: 1[ds]As noticed above, the land was acquired by the State of Bombay for the Central Government and it was the Central Government, which constructed the godowns thereon. The earlier Division Bench judgment of Bombay High Court dated 03.12.1992 in Civil Appeal No. 259 of 1989 has been referred to and relied by the appellant, by which judgment, the Division Bench has set aside the levy of non-agricultural assessments as imposed on the appellant. The Division Bench in the above judgment has also accepted the case of the appellant that legal ownership of the land and the structures vests with the Government27. The above Constitution Bench judgment of this Court clearly lays down that exemption from payment of taxes on the properties of Central Government as available under clause (1) of Article 285 can be denied only when the property in question was exigible to the Municipal Tax prior to the commencement of the Constitution or any Parliamentary law provides for properties to be exigible to pay tax to the Municipality31. From the above discussion we arrive at the conclusion that for the applicability of clause (2) of Article 285, the property on which tax is sought to be proposed ought to have been subject to property tax before the commencement of the Constitution. Since, object of the Article 285(2) of the Constitution was to continue the levy of the such tax which local authority was enjoying prior to the commencement of the Constitution so as to maintain the status quo regarding the financial resources of Municipal Corporation to avoid the complete exemption from property of Central Government as provided under Article 285(1). In the present case the constructions on which the property tax is sought to be imposed by Municipal Corporation came into existence only after 1964 and were not subject to property tax prior to the commencement of the Constitution, hence condition for applicability of Article 285(2) is not satisfied. Resultantly the Municipal Corporation is not competent to impose property tax denying the exemption under Article 285(1) of the Constitution.34. There cannot be any dispute to the proposition laid down by this Court in Food Corporation of India vs. Municipal Committee, Jalalabad (supra) and by the Constitution Bench in Electronics Corporation of India Ltd. (supra) Article 285 does not apply when the property that is to be taxed is not of the Union of India but a distinct and separate legal entity. Had the property in question which is sought to be taxed belonged to the Food Corporation of India, in the present case, the judgment of this Court in Municipal Committee, Jalalabad (supra) as well as Electronics Corporation of India Ltd. (supra) would have applied in full force, but in the present case the property being that of the Central Government, both the above judgments are not applicable36. The heading of Section 146 is Primary responsibility for property taxes from whom to rest. When there is a claim of exemption from payment of property tax with regard to property owned by the Government of India, the question of primary responsibility or secondary responsibility loses its importance. When payment of property tax is exempt under Article 285(1) to tax the occupier runs counter to the very claim of exemption as delineated by Article285. Section 146 of 1888 Act as it exists now has to be construed in a manner so as to give effect to the meaning and purpose of Constitutional protection granted under Article 285. The statutory provision, may it be Section 146 of 1888 Act, cannot be read in a manner so as to run contrary to a Constitutional provision37. In the event the claim of Municipality/Corporation to levy property tax is not covered by sub-clause (2) of Article 285, it cannot be allowed to take recourse to any statutory provision or device to make exemption under Article 285(1) nugatory. We are, thus, not persuaded to accept the submission of Shri Shishodia that since the appellant is occupier of premises owned by Union of India, is liable to pay property tax under Section 146(1) of 1888 Act. Both the premises and building therein are entitled for exemption from payment of property tax under Article 285(1). At this stage, it is required to be noted that the FCI is not in occupation of the godowns owned by the Government of India as a lessee. Nothing is on record and it is also not the case on behalf of the Corporation that any rent/lease amount is being recovered from the FCI. It appears that FCI is permitted to occupy and use the godowns owned by the Government of India for the purpose of storage of the goods which are required to be transported to the different Fair Price Shops under the public distribution system40. No exception can be taken to the above judgment of Gujarat High Court which has correctly relied on this Courts judgment in Food Corporation of India vs. Municipal Committee, Jalalabad (supra) and Electronics Corporation of India Ltd. (supra) when the property belonged to Corporation who has constructed the godowns, it was liable to pay municipal taxes and the Division Bench has rightly dismissed the appeal. The above judgment does not help the respondent, since, in the present case the construction was made by the Government of India and ownership of the Government of India of the premises including the construction in the present case has not been questioned42. The above judgment of the Gujarat High Court was on its own facts and was based on liability to pay municipal tax under Section 113(2) of the Gujarat Municipalities Act. In the above case there was no question pertaining to claim of any exemption from payment of tax from property of the Union. Thus, the above judgment in no manner helps the respondent in the present case43. The Division Bench of the High Court in the impugned judgment relying only on sub-section (1) of Section 146 held the appellant liable to pay property tax without giving any reason as to why the appellant is not entitled to exemption from payment of property tax under Article 285. The High Court has also not come to any conclusion that the Corporation is entitled to levy property tax on the strength of Article 285 clause (2). The judgment of the Division Bench, thus, cannot be sustained.45. From the above, it is clear that the appellant is not denying its liability to pay services charges and direction was sought to respondents to conduct an enquiry in accordance with the provisions of The Mumbai Municipal Corporation Act, 1888 and decide the ratable value of the properties on which taxes were to be paid46. At this stage, we may also notice the judgment of this Court in Union of India and others vs. State of Uttar Pradesh and others, (2007) 11 SCC 324  , wherein it is held that water charges and sewerage charges levied by the Jal Sansthan against the Railways for the services rendered by Sansthan were termed as taxes, charges were not taxes but fees for the services rendered by the Jal Sansthan which are not precluded by Article 285. This Court in paragraphs 11 and 23 laid down following:11. The distinction has to be kept in mind between a tax and a fee. Exemption under Article 285 is on the levy of any tax on the property of the Union by the State, and exemption is not for charges for the services rendered by the State or its instrumentality which in reality amounts to a fee. In this connection, a reference was made to the decision of this Court in Sea Customs Act (1878), S. 20(2), In re 3 . This was a case in which a reference was made by the President of India with regard to levy of customs and excise duties on the State under Article 289 of the Constitution of India wherein Sinha, C.J., Gajendragadkar, Wanchoo and Shah, JJ. answered the question at para 31 as follows: (AIR p. 1777)31. For the reasons given above, it must be held that the immunity granted to the States in respect of Union taxation does not extend to duties of customs including export duties or duties of excise. The answer to the three questions referred to us must, therefore, be in the negative23. In this case what is being charged is for service rendered by the Jal Sansthan i.e. an instrumentality of the State under the Act of 1975. Section 52 of the Act states that the Jal Sansthan can levy tax, fee and charge for water supply and for sewerage services rendered by it as water tax and sewerage tax at the rates mentioned therein. Though the charge was loosely termed as tax but as already mentioned before, nomenclature is not important. In substance what is being charged is fee for the supply of water as well as maintenance of the sewerage system. Therefore, in our opinion, such service charges are a fee and cannot be said to be hit by Article 285 of the Constitution. In this context it is to be made clear that what is exempted by Article 285 is a tax on the property of the Union of India but not a charge for services which are being rendered in the nature of water supply, for maintenance of sewerage system. Therefore, in our opinion, the view taken by the Division Bench of the Allahabad High Court is correct that the charge is a fee, being service charges for supply of water and maintenance of sewerage system, which cannot be said to be tax on the property of the Union. Hence it is not violative of the provisions of Article 285 of the Constitution.