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

2. The brief facts necessary to be noted for deciding this appeal are:2.1 The Government of Bombay acquired land at Village Poisar and at Village Magathane, Borivali for Government of India prior to the year 1964. Upon completion of the acquisition proceedings, the lands vested in the Government of India and the Government of India constructed the godowns and silos on the acquired land for storage of food grains2.2 FCI was set up under the Food Corporations Act, 1964 with the purpose of undertaking the purchase, storage, movement, transport, distribution and sale of food grains and other food stuff2.3 on 28.10.1988, a notice demanding non- agricultural tax was issued to the FCI and the FCI protested against the levy of non- agricultural tax and filed a writ petition, which was dismissed by learned Single Judge on 10.11.1988. A Letter Patent Appeal No.259 of 1989 was filed by the FCI, which was allowed by the Division Bench vide its judgment dated 03.12.1992 holding that land vested in Central Government on which godowns were constructed, hence, Central Government was not liable to pay taxes for non- agricultural use of land as per Article 285 of the Constitution of India2.4 The Government of India wrote a letter dated 17.02.1992 to FCI, New Delhi stating that the land for godowns was acquired by the erstwhile Government of Bombay for Government of India on which godowns were constructed by the Government of India and when the FCI came into being in 1965, these godowns alongwith other godowns of the Government were transferred to FCI during the period from 1966 to 1969. The Government of India, however, has not executed any conveyance deeds for these godowns with the FCI and legal ownership of these godowns still vests in the Government, the Status of FCI, therefore, is that of an occupier2.5 Letters and demands were issued by Municipal Corporation of Greater Bombay (hereinafter referred to as Corporation) demanding property tax in respect of property situate in Dattapada Road, Borivali owned by FCI. A demand notice dated 04.09.2001 was issued by the Corporation asking to make payment for the period from 01.03.1969 to 31.03.1997 and taxes from 01.04.1997 onwards. The FCI protested the demand claiming exemption from payment of property tax as per Article 285 of the Constitution of India, the property being owned by the Central Government. The plea of the appellant was not accepted and a further notice dated 24.09.2001 was issued asking for payment of property tax. The properties were also attached2.6 A Writ Petition No. 2672 of 2001 was filed by the FCI, in which FCI has prayed to declare the demand for payment of property tax as illegal. Prayer was also made to issue a writ of prohibition prohibiting the respondents, their servants and agents in pursuance of letter dated 04.09.2001 and 24.09.2001. The Corporation decided the claim of the FCI. A Division Bench of the Bombay High Court relying on the judgment of this Court in Food Corporation of India Vs. Municipal Committee, Jalalabad and Another, (1999) 6 SCC 74 dismissed the writ petition vide judgment dated 02.02.2002. A review petition was filed by FCI to review the judgment, which too was dismissed on 04.10.2002. The FCI filed a special leave petition against the judgment dated 02.02.2002 as well as against the order dated 04.10.2002 in review petition. It was contended before this Court that High Court erred in relying on the judgment of the Court in Food Corporation of India Vs. Municipal Committee, Jalalabad (supra) without referring to the earlier Division Bench judgment of Bombay High Court in Civil Appeal No. 259 of 1999 dated 03.10.1992 wherein the Division Bench had held that properties in dispute in the present case is owned by the Central Government and not by FCI. This Court after noticing the submissions of both the parties allowed the appeals, set aside the impugned judgment of the High Court observing that since the High Court has not gone into these questions, the matter is remitted back to the High Court for fresh decision in accordance with law. All the contentions were left open2.7 After the above judgment of this Court dated 26.07.2006, the Division Bench of the Bombay High Court by judgment dated 05.05.2016 again dismissed the Writ Petition No.2672 of 2001. Special Leave Petition No. 24251 of 2016 was filed questioning the judgment dated 05.05.2016. This Court noticed the submissions made by FCI and by order dated 26.08.2016 observed that it would be more appropriate for the petitioner (FCI) to approach the High Court by filing a review petition. After the judgment of this Court dated 26.08.2016, review petition was filed, which too was dismissed by non-speaking order dated 11.09.2018 by the Division Bench of the Bombay High Court2.8 These appeals have been filed against the Division Bench judgment dated 05.05.2016 dismissing the writ petition and order dated 11.09.2018 dismissing the review petition.

Court's reasoning:
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.