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CASE NO.:

Appeal (civil) 6532 of 2002

PETITIONER:

Municipal Corporation, Amritsar

RESPONDENT:

The Sr.Supdt. of Post Offices,Amritsar Div.& Anr.

DATE OF JUDGMENT: 21/01/2004

BENCH:

S.N. VARIAVA & H.K. SEMA

JUDGMENT:

J U D G M E N T

SEMA, J.

This appeal, preferred by the Municipal Corporation, Amritsar is

against the judgment of the High Court dated 17th July, 2001, allowing the

writ petition, filed by the respondents herein.

The appeal arises out of the following facts:

The Posts and Telegraphs Department has nine buildings within the

limits of Amritsar Municipal Corporation (hereinafter referred to as 'the

Corporation'). The appellant Corporation had issued notices to the

respondents for payment of service charges for providing various services

like water supply, street lighting, drainage and approach roads to the land

and buildings in the municipal area. However, the respondents did not make

any payment contending that the respondent-Department, being of Central

Government, the properties owned by them are exempt from all taxes.

Several demand notices, without any result, culminated in the notice dated

24.10.2000. Being aggrieved by the aforesaid notice, the respondents had

taken the matter before the High Court, which was allowed and the aforesaid

notice was set aside. The High Court, having noticed the earlier judgment of

the Division Bench dated 19th December, 2000, held inter-alia that the

demand of service charges made by the Municipal Corporation was violative

of Article 285 of the Constitution.

We have heard learned counsel for the parties.

The questions revolve around for determination in this appeal are:

(a) Whether the demand for service charges, so made by the

Corporation against the respondents is by way of `service charge'

or by way of 'tax'?

(b) If it is held that the demand so made was by way of `tax', whether

the same is violative of Article 285(1) of the Constitution of

India.

Before we advert further we may, at this stage, peruse the demand

notice dated 24.10.2000. It reads:

"The Joint Commissioner

Municipal Corporation,

AMRITSAR.

To

The Assistant Engineer,Civil

Postal Civil Sub Divisions,

Jalandhar City.

No. J.C/I.S./319 Dated 24.10.2000

Sub: Payment of Service Charges of the properties owned

By P & T Department, Amritsar.

\005\005..

Whereas a notice of demand in respect of service charges

in lieu of tax on land and Buildings with regards to the

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following properties owned by P & T Department Amritsar for

the period mentioned against each property, was served on the

Senior Superintendent of Post Offices Amritsar vide letter Nos.

PT/IS/307 dt. 19.7.95, EO/TS/252 dt. 23.5.97, EO/TS/1274 dt.

19.3.97, AC/TS/254 dt. 9.9.98 & No. AC/TS/627 dt. 6.1.99:

S.No. Name of Deptt. & Location Year Amount

1. General Post Office & Telegraph Office 1.4.67 2,33,296.65

& Quarters New/XIII, Amritsar to

31.3.2K

2. Post Office, Kt. Mohar Singh,Amritsar do 29,173.80

3. Post Office, KT Bhai Sant Singh, do 26,298.00

New/X, Amritsar

4. Post Office, Durgiana Mandi New/XVI, do 18,336.47

Amritsar

5. Post Office, Chhoharta, New XXII, do 17,036.42

Amritsar

6. Post Office,Hide Market New/XV, do 14,492,95

Amritsar

7. Post Office, KT. Sher Singh, New/XII, do 38,114.41

Amritsar

8. Post Office, Kairon Market New/1, do 39,011.36

Amritsar

9. Post Office, Chowk Phagwara do 34,845.50

4,51,105.56

Whereas Service Charges in respect of properties of

Central Government are payable by the respective Deptt. to the

Municipal Corporation of the rates varying from 33.1/25% to

75% as decided by the Government of India, Ministry of

Finance in its letter No. 14(1)P/52-I dated 10.5.54 and No.

4(7)P/65, dated 29.3.67 (copy enclosed). According to para

(ii)(c) of the letter dated 29.3.67, in respect of colonies where

all the services normally are provided by the Municipal

Corporation to the residents of other areas are being availed of,

Service charges will be paid at 25% of the property tax rate

realized from the private individuals. The next ratable

value/annual value for the purpose of these instructions shall be

9% of the capital value of the property concerned both in

respect of residential and non-residential properties.

Whereas the office of P&T Department has failed to

deposit the amount as specified in the notice of demand raised

vide letters mentioned above amounting to Rs. 4,51,105.56.

Now, I, Gurwaryam Singh, PCS, Joint Commissioner,

Municipal Corporation, Amritsar exercising the delegated

powers of Commissioner, Municipal Corporation, Amritsar

conferred on me vide office order No. C/242 dated 4.8.1999

direct that the Service Charges of the buildings owned by P&T

Department may be paid within 30 days failing which the

moveable property lying in the said properties would be

attached and retained to be sold in order to recover the arrears

of service charges by public auction.

Encl: As above Sd/-

(Gurwaryam Singh)

Joint Commissioner,

Municipal Corporation,Amritsar

Exercising the powers of Commissioner

Municipal Corporation, Amritsar."

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Article 285(1) provides that the property of the Union shall, save in so

far as Parliament may by law otherwise provide, be exempt from all taxes

imposed by a State or by any authority within a State.

As observed from the impugned notice, the whole basis of the demand

notice was in pursuance of the letters/circulars issued by Government of

India, Ministry of Finance being Nos. 14[1]-P/52/1 dated 10.5.54 and 14(7)-

P/65 dated 29.3.67. It is argued by Mr. Mahabir Singh, learned counsel that

the Corporation is justified and entitled for payment of service charges in

view of the circulars issued by the Government of India, as referred to

above. We are unable to countenance with this contention of the learned

counsel. The circulars, aforesaid, issued by the Union of India were

administrative in nature. It is now settled principle of law that

administrative circulars cannot override the constitutional provisions. The

Government of India circular, as referred to above, was issued by one

Deputy Secretary to the Government of India. By no stretch of imagination

such circulars, issued by the Deputy Secretary to the Government of India,

can be said to have any overriding effect over the mandate of Article 285(1)

of the Constitution. We are, therefore, of the view that the circulars so

issued, as noticed above, do not alter the position with regard to the bar

imposed by Article 285(1) of the Constitution. The interplay of the

constitutional and legal provisions being well cut and well defined requires

no marked elaboration to stress the point.

The question, whether the demand so made was by way of `service

charge' or `tax', need not detain us any longer. The demand so made was

with regard to the services rendered to the respondents' department, like

water supply, street lighting, drainage and approach roads to the land and

buildings. In the counter, the respondents averred that they are paying for

the services rendered by the appellant-Corporation by way of water &

sewerage charges and power charges separately. It is also categorically

averred that no other specific services are being provided to the respondents

for which the tax in the shape of service charges can be levied and realized

from the respondents. There is no provision in the Municipal Corporation

Act for levying service charges. The only provision is by way of tax.

Undisputedly, the appellant-Corporation is collecting the tax from general

public for water supply, street lighting and approach roads etc. Thus, the

"tax" was sought to be imposed in the garb of "service charges". The

interplay of the constitutional and legal provisions being well cut

and well defined, it was clearly not within the competence of

the Corporation to impose tax on the property of the Union of India, the

same being violative of Article 285(1) of the Constitution.

Furthermore, the issues raised herein are no more res-integra. This

Court, in (1992) 1 SCC 100 Union of India v. Purna Municipal

Corporation & Ors. considered an identical question and held that Section

135 of the Railways Act, being an Act of the Central Government and saved

by clause (1) of Article 285 of the Constitution, clause (2) of Article 285 was

not attracted, and the Municipal Corporation was restrained from demanding

tax by way of service charges from railways. This is what this Court has said

in para 5 of that judgment:

"The aforesaid provisions, existing as it is, in terms permits

taxation of railways by the local authority in the manner given

therein; the Central Government being the controlling and the

regulating authority permitting liability at a given point of time,

its extent and manner. The Indian Railways Act being a central

enactment has no role to play in sub-article (2) of Article 285,

for that is a sphere in which the State legislation operates. The

reasoning of the High Court to oust the applicability of Section

135 of the Indian Railways Act on the test of sub-article (2) of

Article 285 was totally misplaced, as also in not venturing to

create room for it in sub-article (1) of Article 285. The

interplay of the constitutional and legal provisions being well

cut and well defined requires no marked elaboration to stress

the point. Accordingly, we allow this appeal, set aside the

judgment and order of the High Court and issue the writ and

direction asked for in favour of the Union of India restraining

the respondent council from raising demands on the railway in

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regard to service charges."

The same view was reiterated in (1996) 7 SCC 542 Union of India

& Anr. v. Ranchi Municipal Corporation & Ors.

For the aforesaid reasons, the appeal is devoid of merits and it is

accordingly dismissed with no order as to costs.