Case: Jalkal Vibhag Nagar Nigam &amp; Ors Vs. Pradeshiya Industrial and Investment Corporation &amp; Anr

2. The first respondent commenced construction of a building at Vibhuti Khand, Gomti Nagar, Lucknow in 1986 under the auspices of the U.P. Rajkiya Nirman Nigam Limited. Construction of the building was completed in 1991 and its possession was handed over on 31 May 1991. The building was thereafter known as PICUP Bhawan. On 5 January 1995 a demand was raised by the appellants by Bill No. 12/26 for an amount of Rs. 46,63,312.50/- towards water tax for the period from October 1986 to March 1995. By its letter dated 25 January 1995, the first respondent sought a clarification on the location of the sewer and water standpost and other water pipelines; distance from PICUP Bhawan and a copy of the relevant notification or order prescribing the radius under Section 55(b)(i) of the UP Water Supply and Sewerage Act.3. The bill was rectified on 28 January 1995 by which a demand of water tax for the amount of Rs.16,45,875.00/- was raised in terms of the provisions of Section 52(1). The respondent by its communication of 31 January 1995, once again, sought certain clarifications. The appellant clarified the queries and reiterated its demand. The first respondent deposited an amount of Rs. 3,46,500.00/- under protest on 15 March 1995, and a further sum of Rs. 9,41,942.77/- on 29 April 1995. On 7 September 1995 a writ petition was instituted by the first respondent under Article 226 of the Constitution of India for challenging the levy of water tax and sewerage tax on the premise that the first respondent had, during the construction of the building, not obtained any water from the pipeline laid down by the appellants within the area nor had it made a request for a fresh water connection. A challenge was raised to the validity of Sections 52(a), 55(b)(i) and 56(b) of the UP Water Supply and Sewerage Act on the ground that they are ultra vires the provisions of Article 265 of the Constitution. The petition was contested by the appellants, who filed a counter affidavit. By its judgment dated 7 March 2014, the Division Bench of the High Court allowed the writ petition and directed the appellants to refund the water and sewerage taxes levied and collected. The review petition against this judgment was also dismissed by the High Court by order dated 9 August 2014. On 7 August 2015, while entertaining the special leave petition and issuing notice, this Court stayed the operation of the impugned judgments of the High Court.

Reasoning:
5. We must note at the outset that the High Court has allowed the prayer for refund purely on the basis of a judgment of a two-judge Bench of this Court in Union of India v. State of U.P. (supra). The judgment of the High Court has been drafted in a rather casual manner which is evident from the fact that:(i) While extracting from a portion of the judgment of this Court noted above, the High Court has neither referred to the citation nor the name of the case;(ii) After citing the extract from the judgment, the High Court recorded the submissions of the first respondent that the law laid down in the above case is also extended to the first respondent and then proceeded to allow the petition in the following terms:Accordingly, we dispose of the writ petition with a direction to the Jal Sansthan, Lucknow to refund the amount, which has been paid to the petitioner, if there is no legal impediment or any outstanding against the petitioner.Accordingly, writ petition is disposed of.6. There is absolutely no discussion on the merits. There is no discussion of the basis on which the High Court accepted the contention of the first respondent that the judgment of this Court noted earlier was applicable to the facts of the present case. The proceedings have been pending before this Court for well over six years and a remand to the High Court will only result in another round of proceedings and possibly further appeals. That apart, the decision in Union of India v. State of U.P. (supra) is of a two-judge Bench of this Court and we shall explain the judgment which contains observations that were per incuriam and in any event contrary to the statute.20. This characterization of the components of a tax has been described repeatedly in the decisions of this Court. The locus classicus on this point was a two judge Bench decision in Govind Saran Ganga Saran v. CST 1985 Supp SCC 205 . Justice RS Pathak (as the learned Chief Justice then was) held:6. The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity.22. In Federation of Hotel and Restaurant Association of India v. Union of India (1989) 3 SCC 634,  a challenge was raised to the constitutional validity of the Expenditure Tax Act 1987 which imposed an expenditure tax on persons incurring chargeable expenditure in a class of hotels. In that case, the petitioners argued that the Act in essence levied a tax on luxuries, which falls within Entry 62 of List II and lies outside the competence of Parliament. Rejecting this contention, the Constitution Bench, speaking through Justice MN Venkatachaliah (as the learned Chief Justice then was), observed:43. The subject of a tax is different from the measure of the levy. The measure of the tax is not determinative of its essential character or of the competence of the legislature. In Sainik Motors v. State of Rajasthan [AIR 1961 SC 1480  : (1962) 1 SCR 517 ] , the provisions of a State law levying a tax on passengers and goods under Entry 56 of List I were assailed on the ground that the State was, in the guise of taxing passengers and goods, in substance and reality taxing the income of the stage carriage operators or, at any rate, was taxing the fares and freights, both outside of its powers. It was pointed out that the operators were required to pay the tax calculated at a rate related to the value of the fare and freight. Repelling the contention, Hidayatullah, J., speaking for the court said : (SCR p. 525)We do not agree that the Act, in its pith and substance, lays the tax upon income and not upon passengers and goods. Section 3, in terms, speaks of the charge of the tax in respect of all passengers carried and goods transported by motor vehicles, and though the measure of the tax is furnished by the amount of fare and freight charged, it does not cease to be a tax on passengers and goods.Indeed, reference may be made to the following statement in Encyclopaedia Britannica (Vol. 14 p. 459) on Luxury Tax:A different approach to luxury taxation, much less frequently found, seeks to single out the luxury component of spending on a given object rather than taxing specified goods and services as luxuries. One example of this is the Massachusetts 5 per cent tax on restaurant meal of $. 1 or more.44. The submissions of the learned Attorney General that the tax is essentially a tax on expenditure and not on luxuries or sale of goods falling within the State power, must, in our opinion, be accepted. As contended by the learned Attorney General, the distinct aspect, namely, the expenditure aspect of the transaction falling with the Union power must be distinguished and the legislative competence to impose a tax thereon sustained. Contention (a) is, in our opinion, unsubstantial and, accordingly, fails.23. In State of West Bengal v. Kesoram Industries Ltd (2004) 10 SCC 201  a Constitution Bench of this Court held that the measure employed for assessing a tax must not be confused with the nature of the tax. In doing so, Justice RC Lahoti (as the learned Chief Justice then was), adverted to a line of decisions in Ralla Ram v. Province of East Punjab AIR 1949 FC 81 , Sainik Motors v. State of Rajasthan AIR 1961 SC 1480 , D.G Gose & Co. (Agents) P. Ltd. v. State of Kerala (1980) 2 SCC 410  and Hingir Rampur Coal Co. Ltd. v. State of Orissa AIR 1961 SC 459 , and observed33. […] It has been long recognised that the measure employed for assessing a tax must not be confused with the nature of the tax. A tax has two elements : first, the person, thing or activity on which the tax is imposed, and second, the amount of tax. The amount may be measured in many ways; but a distinction between the subject-matter of a tax and the standard by which the amount of tax is measured must not be lost sight of. These are described respectively as the subject of a tax and the measure of a tax. It is true that the standard adopted as a measure of the levy may be indicative of the nature of the tax, but it does not necessarily determine it. The nature of the mechanism by which the tax is to be assessed is not decisive of the essential characteristic of the particular tax charged, though it may throw light on the general character of the tax. (emphasis supplied)29. The ambit of the expression taxes on lands and buildings in Entry 49 of List II has come up for consideration before the Federal Court and this Court. In Ralla Ram (supra) the Federal Court interpreted Item 42 of List II (the Provincial Legislative List) under Section 100 of the Government of India Act 1935. Item 42 of List II dealt with taxes on lands and buildings, hearths and windows. In this case, a tax was imposed on the basis of annual value of buildings and lands by a Provincial legislature and the question before the Court was whether it was in substance, an income tax. The Federal Court emphasized that annual value is not necessarily actual income but only a standard by which income may be measured. The Court observed:Now once it is realised that the annual value is not necessarily actual income, but is only a standard by which income may be measured, much of the difficulty which appears on the surface is removed. In our opinion, the crucial question to be answered is whether merely because the Income-tax Act has adopted the annual value as the standard for determining the income, it must necessarily follow that, if the same standard is employed as a measure for any other tax, that tax becomes a tax on income? If the answer to this question is to be given in the affirmative, then certain taxes which cannot possibly be described as income-tax must be held to be so. A case in poi- n]t is to be found in In re a Reference under the Government of Ireland Act, 1920: In re s. 3 of the Finance Act (Northern Ireland), 1934 [[1986] A.C. 852.] .This case demolishes the broad contention that wherever the annual value is the basis of a tax, that tax becomes a tax on income. It shows that there are other factors to be taken into consideration and that it is the essential nature of the tax charged and not the nature of the machinery which is to be looked at.31. In Ajoy Kumar Mukherjee v. Local Board of Barpeta AIR 1965 SC 1561 , a Constitution Bench of this Court upheld the validity of an annual tax levied by local boards upon lands used for holding markets created under the Assam Local Self- Government Act 1953. Justice KN Wanchoo, speaking for the Constitution Bench, observed that:4. … It is well-settled that the entries in the three legislative lists have to be interpreted in their widest amplitude and therefore if a tax can reasonably be held to be a tax on land it will come within Entry 49. Further it is equally well-settled that tax on land may be based on the annual value of the land and would still be a tax on land and would not be beyond the competence of the State legislature on the ground that it is a tax on income: (see Ralla Ram v. Province of East Punjab [(1948) FCR 207] . It follows therefore that the use to which the land is put can be taken into account in imposing a tax on it within the meaning of Entry 49 of List II, for the annual value of land which can certainly be taken into account in imposing a tax for the purpose of this entry would necessarily depend upon the use to which the land is put. It is in the light of this settled proposition that we have to examine the scheme of Section 62 of the Act, which imposes the tax under challenge.6. […] This will again show that the tax provided by Section 52(2) is a tax for the use of the land and it is not a tax on the market as such, for the income from the market in the shape of tolls, rents and other dues is not liable to tax under Section 52 and is different from tax. The scheme of Section 62 therefore shows that whenever any land is used for the purpose of holding a market, the owner, occupier or farmer of that land has to pay a certain tax for its use as such. But there is no tax on any transaction that may take place within the market. Further the amount of tax depends upon the area of the land on which market is held and the importance of the market subject to a maximum fixed by the State Government. We have therefore no hesitation in coming to the conclusion on a consideration of the scheme of Section 52 of the Act that the tax provided therein is a tax on land, though its incidence depends upon the use of the land as a market. Further as we have already indicated Section 62(2) which uses the words impose an annual tax thereon clearly shows that the word thereon refers to any land for which a licence is issued for use as a market and not to the word market. Thus the tax in the present case being on land would clearly be within the competence of the State legislature. The contention of the appellant that the State legislature was not competent to impose this tax because there is no provision in List II of the Seventh Schedule for imposing a tax on markets as such must therefore fail.Thus, the Court reaffirmed the principle that the use to which the land has been put can be taken into account in imposing a tax which is within the meaning of Entry 49 of List II.33. Another case in which the interpretation of Entry 49 of List II came up for consideration before a Constitution Bench of this Court is Union of India v. HS Dhillon AIR 1972 SC 1061. In that case, the appeal arose from a judgment of the Punjab and Haryana High Court holding that Section 24 of the Finance Act 1969 insofar as it amended the relevant provisions of the Wealth Tax Act 1957 was beyond the legislative competence of Parliament. The High Court held that the Wealth Tax Act as amended was ultra vires the Constitution insofar as it included the capital value of agricultural land for the purposes of computing net wealth. The majority (4:1) of the High Court had also held that the law was not one with respect to Entry 49 of List II. Chief Justice SM Sikri in the course of the judgment of the Constitution Bench of this Court enunciated the essential elements of a tax under Entry 49 of List II by observing that74. The requisites of a tax under Entry 49, List II, may be summarised thus:(1) It must be a tax on units, that is lands and buildings separately as units.(2) The tax cannot be a tax on totality, i.e., it is not a composite tax on the value of all lands and buildings.(3) The tax is not concerned with the division of interest in the building or land. In other words, it is not concerned whether one person owns or occupies it or two or more persons own or occupy it.In other words, it was held that the tax under Entry 49 of List II is not a personal tax but a tax on property. Consequently, the wealth tax imposed under the Wealth Tax Act was held to be distinct from a tax under Entry 49 of List II.36. In view of the above decisions, there can be no manner of doubt that the levy which is imposed under Section 52 is a tax on lands and buildings situated within the area of the Jal Sansthan for the purpose of imposing the tax. The tax is imposed on premises which fall within the territorial area of the Jal Sansthan. The expression premises is defined to mean land and building. The tax is on lands and buildings. The nomenclature of the tax does not indicate its true character and substance. Nor does the fact that the law enables the Jal Sansthan to levy the tax render it a tax on water. The charging section indicates in unambiguous terms that it is a tax on lands and buildings. The legislature has introduced certain restrictions in Section 55 inter alia stipulating in clause (a) that for land which is exclusively used for agricultural purposes, the tax shall not be levied unless water is supplied by the Jal Sansthan for such purposes to the land and in clause (b) stipulating that(i) the premises should be situated within the prescribed radius from the nearest stand-post or other waterworks at which the water is made available to the public; and(ii) the annual value of which does not exceed Rs. 360 and to which no water has been supplied by the Jal Sansthan.These restrictions do not detract from the nature of the levy nor would the liability which is imposed on the owner and occupier be anything other than a tax on lands and building within the meaning of Entry 49 of List II. The water tax and sewerage tax are taxes levied in order to augment the finances of the Jal Sansthan for the purpose of meeting the cost of its operation, maintenance and services, so as to achieve an economic return on its fixed assets. The collection is ultimately for providing water supply and sewerage in the area of the Jal Sansthan, even if it may not be provided to the particular premises. The tax is imposed on an occupier or owner of the building or land falling within the area of the Jal Sansthan irrespective of whether a connection of water supply or sewerage has been obtained to the land or building. In another words, the basis for the levy of the taxes is on the location of premises within the area of the Jal Sansthan as notified by the State Government. Since the respondents premises are located within the area of the appellants authority, the respondent is liable to pay the water tax as well as the sewerage tax as the owner and occupier of the premises.38. We do not find any merit in this submission. Long years ago in 1958, this Court in M.P.V. Sundararamier & Co. v. State of AP 1958 SCR 1422  held that the Constitution makes a differentiation between the subject matter of the legislation, and the tax in relation to the said subject matter in the Union, State and Concurrent List in the Seventh Schedule. Justice TL Venkatarama Aiyar, speaking for the majority (4:1), observed that :51. In List I, Entries 1 to 81 mention the several matters over which Parliament has authority to legislate. Entries 82 to 92 enumerate the taxes which could be imposed by a law of Parliament. An examination of these two groups of Entries shows that while the main subject of legislation figures in the first group, a tax in relation thereto is separately mentioned in the second. Thus, Entry 22 in List I is Railways, and Entry 89 is Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freights. If Entry 22 is to be construed as involving taxes to be imposed, then Entry 89 would be superfluous. Entry 41 mentions Trade and commerce with foreign countries; import and export across customs frontiers. If these expressions are to be interpreted as including duties to be levied in respect of that trade and commerce, then Entry 83 which is Duties of customs including export duties would be wholly redundant. Entries 43 and 44 relate to incorporation, regulation and winding up of corporations. Entry 85 provides separately for corporation tax. Turning to List II, Entries 1 to 44 form one group mentioning the subjects on which the States could legislate. Entries 45 to 63 in that List form another group, and they deal with taxes. Entry 18, for example, is Land and Entry 45 is Land revenue. Entry 23 is Regulation of mines and Entry 50 is Taxes on mineral rights. The above analysis — and it is not exhaustive of the Entries in the Lists — leads to the inference that taxation is not intended to be comprised in the main subject in which it might on an extended construction be regarded as included, but is treated as a distinct matter for purposes of legislative competence. And this distinction is also manifest in the language of Article 248, clauses (1) and (2) and of Entry 97 in List I of the Constitution. Construing Entry 42 in the light of the above scheme, it is difficult to resist the conclusion that the power of Parliament to legislate on inter-State trade and commerce under Entry 42 does not include a power to impose a tax on sales in the course of such trade and commerce.55. To sum up: (1) Entry 54 is successor to Entry 48 in the Government of India Act, and it would be legitimate to construe it as including tax on inter State sales, unless there is anything repugnant to it in the Constitution, and there is none such. (2) Under the scheme of the entries in the Lists, taxation is regarded as a distinct matter and is separately set out. (3) Article 286(2) proceeds on the basis that it is the States that have the power to enact laws imposing tax on inter-State sales. It is a fair inference to draw from these considerations that under Entry 54 in List II the States are competent to enact laws imposing tax on inter-State sales.40. As explained above, the levy under Section 52 falls squarely under the ambit of Entry 49 of List II as it is in the nature of a tax and not a fee. Thus, the applicability of Entry 17, which is a non-taxing entry, does not arise in this case.44. In Southern Pharmaceuticals and Chemicals, Trichur v. State of Kerala (1981) 4 SCC 391  Justice AP Sen speaking for the Court held:24. The distinction between a tax and a fee is well settled. The question came up for consideration for the first time in this Court in the Commissioner, H.R.E., Madras v. Lakshmindra Thirtha Swamiar of Shirur Mutt [AIR 1954 SC 282  : 1954 SCR 1005  : 1954 SCJ 335 ].25. Fees are the amounts paid for a privilege, and are not an obligation, but the payment is voluntary. Fees are distinguished from taxes in that the chief purpose of a tax is to raise funds for the support of the Government or for a public purpose, while a fee may be charged for the privilege or benefit conferred, or service rendered or to meet the expenses connected therewith. Thus, fees are nothing but payment for some special privilege granted on service rendered. Taxes and taxation are, therefore, distinguishable from various other contributions, charges, or burdens paid or imposed for particular purposes and under particular powers or functions of the Government. It is now increasingly realised that merely because the collections for the services rendered or grant of a privilege or licence, are taken to the consolidated fund of the State and are not separately appropriated towards the expenditure for rendering the service is not by itself decisive. That is because the Constitution did not contemplate it to be an essential element of a fee that it should be credited to a separate fund and not to the consolidated fund. It is also increasingly realised that the element of quid pro quo stricto senso is not always a sine qua non of a fee. It is needless to stress that the element of quid pro quo is not necessarily absent in every tax. We may, in this connection, refer with profit to the observations of Seervai in his Constitutional Law, to the effect: [HM Seervai Constitutional Law of India, 2nd Edn, Vol. 2, p 1252, para 2239]It is submitted that as recognised by Mukherjea, J. himself, the fact that the collections are not merged in the consolidated fund, is not conclusive, though that fact may enable a court to say that very important feature of a fee was present. But the attention of the Supreme Court does not appear to have been called to Article 266 which requires that all revenues of the Union of India and the States must go into their respective consolidated funds and all other public moneys must go into the respective public accounts of the Union and the States. It is submitted that if the services rendered are not by a separate body like the Charity Commissioner, but by a government department, the character of the imposition would not change because under Article 266 the moneys collected for the services must be credited to the consolidated fund. It may be mentioned that the element of quid pro quo is not necessarily absent in every tax.Our attention has been drawn to the observations in Kewal Krishan Puri v. State of Punjab [(1980) 1 SCC 416, 425  : (1979) 3 SCR 1217 , 1230] : (SCC p. 425, para 8)The element of quid pro quo must be established between the payer of the fee and the authority charging it. It may not be the exact equivalent of the fee by a mathematical precision, yet, by and large, or predominantly, the authority collecting the fee must show that the service which they are rendering in lieu of fee is for some special benefit of the payer of the fee.To our mind, these observations are not intended and meant as laying down a rule of universal application. The Court was considering the rate of a market fee, and the question was whether there was any justification for the increase in rate from Rs 2 per every hundred rupees to Rs 3. There was no material placed to justify the increase in rate of the fee and, therefore, it partook the nature of a tax. It seems that the Court proceeded on the assumption that the element of quid pro quo must always be present in a fee. The traditional concept of quid pro quo is undergoing a transformation.45. In Municipal Corporation of Delhi v. Mohd. Yasin (1983) 3 SCC 229,  Justice O Chinnappa Reddy, while speaking for two judge Bench of this Court, referred to the decision in Southern Pharmaceuticals (supra) and observed:9. What do we learn from these precedents? We learn that there is no generic difference between a tax and a fee, though broadly a tax is a compulsory exaction as part of a common burden, without promise of any special advantages to classes of taxpayers whereas a fee is a payment for services rendered, benefit provided or privilege conferred. Compulsion is not the hallmark of the distinction between a tax and a fee. That the money collected does not go into a separate fund but goes into the consolidated fund does not also necessarily make a levy a tax. Though a fee must have relation to the services rendered, or the advantages conferred, such relation need not be direct, a mere causal relation may be enough. Further, neither the incidence of the fee nor the service rendered need be uniform. That others besides those paying the fees are also benefitted does not detract from the character of the fee. In fact the special benefit or advantage to the payers of the fees may even be secondary as compared with the primary motive of regulation in the public interest. Nor is the court to assume the role of a cost accountant. It is neither necessary nor expedient to weigh too meticulously the cost of the services rendered etc. against the amount of fees collected so as to evenly balance the two. A broad co- relationship is all that is necessary. Quid pro quo in the strict sense is not the one and only true index of a fee; nor is it necessarily absent in a tax.47. In view of this consistent line of authority, it emerges that the practical and even constitutional, distinction between a tax and fee has been weathered down. As in the case of a tax, a fee may also involve a compulsory exaction. A fee may involve an element of compulsion and its proceeds may form a part of the Consolidated Fund. Similarly, the element of a quid pro quo is not necessarily absent in the case of every tax. In the present case, the tax has been imposed by the legislature in Section 52 on premises situated within the area of the Jal Sansthan. The proceeds of the tax are intended to constitute revenue available to the Jal Sansthan to carry out its mandatory obligations and functions under the statute of making water and sewerage facilities available in the area under its jurisdiction. The levy is imposed by virtue of the presence of the premises within the area of the jurisdiction of the Jal Sansthan. The water tax is levied so long as the Jal Sansthan has provided a stand post or waterworks within a stipulated radius of the premises through which water has been made available to the public by the Jal Sansthan. The levy of the tax does not depend upon the actual consumption of water by the owner or occupier upon whom the tax is levied. Unlike the charge under Section 59 which is towards the cost of water to be supplied by the Jal Sansthan according to its volume or, in lieu thereof on a fixed sum, the tax under Section 52 is a compulsory exaction. Where the premises are connected with water supply, the tax is levied on the occupier of the premises. On the other hand, where the premises are not so connected, it is the owner of the premises who bears the tax. The levy under Section 52 (1) is hence a tax and not a fee. Moreover, for the reasons that we have indicated above, it is a tax on lands and buildings within the meaning of Entry 49 of List II.48. The High Court in the present case has relied on the decision of a two judge Bench of this Court in Union of India v. State of U.P. (supra) in support of its decision to order a refund of the taxes collected by the appellants. In that case, the writ petition which was filed by the Union of India before the High Court challenged certain orders for the recovery of service charges on railway properties issued by the Jal Sansthan, Allahabad. The Jal Sansthan had directed the recovery of a sum of money towards sewerage charges for 3125 seats from the Divisional Railway Manager of the Northern Railway at Allahabad. The levy was sought to be challenged on the ground that the Railways were holding the property of the Central Government for which service charges were not payable under Article 285 of the Constitution as such charges were in the nature of a tax. The bulk of the water was supplied by the Jal Sansthan for maintenance of the railway platforms as well as railway colonies. The Jal Sansthan was catering to the need of maintaining the sewerage system not only at the railway stations but in the adjoining areas as well as the residential quarters, offices, gardens, and sheds maintained by the Union of India through the railways. The Division Bench of the High Court dismissed the writ petition challenging the levy. It must be noted that it was contended by the Union of India that the levy of service charge was in the nature of a tax and hence fell within the ambit of Article 285 of the Constitution. On the other hand, the Jal Sansthan contended that the water and sewerage charges did not constitute a tax but were a fee for services rendered by the Jal Sansthan to which Article 285 had no application. In that context, Justice AK Mathur speaking for a two judge Bench of this Court observed:10. From a perusal of Article 285 it is clear that no property of the Union of India shall be subject to tax imposed by the State, save as Parliament may otherwise provide. The question is whether the charges for supply of water and maintenance of sewerage is in the nature of a tax or a fee for the services rendered by the Jal Sansthan. There is a distinction between a tax and a fee, and hence one has to see the nature of the levy whether it is in the nature of tax or whether it is in the nature of fee for the services rendered by any instrumentality of the State like the Jal Sansthan. There are no two opinions in the matter that so far as supply of water and maintenance of sewerage is concerned, the Jal Sansthan is to maintain it and it is they who bear all the expenses for the maintenance of sewerage and supply of water. It has to create its own funds and therefore, levy under the Act is a must. In order to supply water and maintain sewerage system, the Jal Sansthan has to incur the expenditure for the same. It is in fact a service which is being rendered by the Jal Sansthan to the Railways, and the Railways cannot take this service from the Jal Sansthan without paying the charges for the same. Though the expression tax has been used in the Act of 1975 but in fact it is in the nature of a fee for the services rendered by the Jal Sansthan. What is contemplated under Article 285 is taxation on the property of the Union. In our opinion the Jal Sansthan is not charging any tax on the property of the Union; what is being charged is a fee for services rendered to the Union through the Railways. Therefore, it is a plain and simple charge for service rendered by the Jal Sansthan for which the Jal Sansthan has to maintain staff for regular supply of water as well as for sewerage system of the effluent discharged by the railway over their platforms or from their staff quarters. It is in the nature of a fee for service rendered and not any tax on the property of the Railways.The above observations make it clear that what was being charged in that case were charges for the supply of water and maintenance of sewerage. This was held to be plain and simple a charge for service rendered by the Jal Sansthan. As a consequence, Article 285 of the Constitution had no application on the ground that what is prohibited by Article 285 is taxation on the property of the Union of India, but it does not prohibit a charge of a fee on account of a service rendered by local bodies or an instrumentality of the State, such as the supply of water or the maintenance of sewerage. This Court ruled that the charge would be in the nature of a fee and not a tax. Having drawn the above conclusion, the Court in the concluding paragraph of the decision adverted to Section 52 and held thus:23. 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.In the above extract, the two judge Bench held that Section 52 states that the Jal Sansthan can levy tax, fee and charge for water supply and for sewerage services and though the charge was termed as a tax, in substance it is a fee for the supply of water. There is an evident error in the above observations. Section 52 is contained in Chapter VI which is titled taxes, fees and charges. The observations in paragraph 23 quoted above indicate that the title of Chapter VI was conflated with the nature of the provision which is contained in Section 52. Section 52 provides for the levy of taxes and not for fees or charges for which there are distinct provisions in Chapter VI. The observations of the Court that though the charges are loosely termed as tax, it is in substance a fee, is per incuriam and in any event not reflective of a correct reading of the provisions of the statute. As we have indicated above in Section D.1, the statute contains distinct provisions for the levy of taxes and for the imposition of charges and the recovery of fees. The levy under Section 52 is a tax simplicitor and cannot be regarded either as a charge or a fee for a service rendered. To that extent, the observations in paragraph 23 of the decision in Union of India v. State of U.P. (supra) would have to be and are accordingly overruled.