TMI Blog2007 (11) TMI 701X X X X Extracts X X X X X X X X Extracts X X X X ..... Railway, Allahabad. It was alleged by the Jal Sansthan that the appellants were liable to pay the sewerage charges for 3125 seats at the rates notified under Allahabad Jal Sansthan Notification published in U.P. Gazette dated 19.11.1994. The plea of the appellants was that they were holding the property of the Central Government for which the service charges were not payable under Article 285 of the Constitution of India as such charges were in the nature of a tax. It was submitted that in view of the policy taken by the Ministry of Railways, Government of India such charges cannot be recovered as this was totally exempted but the respondent - Jal Sansthan did not heed to it and they moved the Tahasildar, Sadar, Allahabad for effecting recovery. Therefore, the appellants were constrained to file the present writ petition before the High Court of Allahabad. 3. The writ petition was contested by the respondents and they filed their reply and pointed out that in view of various circulars of the Ministry of Railways, the appellants have been paying the service charges to the Jal Sansthan and in that connection it was pointed out that other Central Government Offices situated in All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l on this aspect in absence of the material placed in support thereof and did not permit to raise this plea. 5. As against this, it was contended on behalf of the respondents that the writ petitioner- appellants herein were paying its predecessors the amount for water and sewerage charges and there was no reason why they should discontinue the payment for the same. However, it was contended by the appellants that merely because they were paying the charges that does not become law or a vested right accrued in favour of the respondents to continue with the charges. 6. It was contended by the Jal Sansthan that the so called water and sewer charges is not a tax and it is a fee for the services rendered by the Jal Sansthan. Hence the exemption granted to the property of the Union from the State taxation under Article 285 of the Constitution has no relevance to the present case as the property of the Union of India was not being subjected to any tax. It was only a fee which has been charged for the services rendered and this has been the practice which is prevalent since long as other departments of the Central Government have been paying the same. In this background, the Division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject 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 is no two opinion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Article, if the imposition is to raise revenue but not to regulate external trade. (2) The provisions of Article 289 of the Constitution of India preclude the Union from imposing, or authorizing the imposition of excise duties on the production or manufacture in India of the property of a State used for purposes other than those specified in Clause (2) of that Article. 13. Ayyangar,J. has also expressed a separate opinion concurring with the Chief Justice. This decision on reference of the President of India only dealt with the question of Article 289 of the Constitution and we are not concerned in the present case with the effect of Article 289 which is, so far as the present controversy is concerned, of no useful assistance. 14. Learned Counsel for the appellant has relied on the decision of this Court in Union of India v Purna Municipal Council (supra). In this case, the Railways challenged the notice of demand issued by Purna Municipal Council claiming ₹ 28,400/- by way of 'service charges' due for the period from 1954 to 1960. The Union of India made a reference to Article 285 of the Constitution of India read with Section 135 of the Indian Railway ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed and was dismissed by the High Court and the special leave was refused by this Court on the ground of gross delay. It was also observed at paragraph 5 as follows: It is now settled law that the summary dismissal does not constitute res judicata for deciding the controversy. Moreover, this being a recurring liability which is ultra vires the power, earlier summary dismissal of the case does not operate as a res judicata. 17. Therefore, from the perusal of these two decisions what emerges is that no property of the Union of India can be subjected to State taxation, but these decisions do not deal with a charge for services rendered by any State or an instrumentality of the State. In this connection, our attention was invited to a decision of this Court in New Delhi Municipal Council v. State of Punjab and Ors. AIR1997SC2847 . This was also a case where Articles 289, 246(4), 245(1) and 1(2), 3(b) and 285 came up for consideration. As per the majority it was held that levy of property tax on such lands / buildings which are not used or occupied for the purpose of any trade or business carried on by the State Government with profit motive was invalid and incompetent by vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant 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. 18. In this case, what is clear is that in fact the P T Department was paying for water supply and sewerage separately and it was over and above that some service charges were levied under the garb of service charges which was exempted by the Constitution. In the present case, what is being charged is in fact water supply and sewerage. Therefore, so far as this part is concerned, it is affirmed by this Court in the aforesaid decision. But what is not accepted was that over and above the charges for supply of water and sewerage and power charges, the Municipal Corporation was levying service charges which were not contemplated under the Municipal Corporation Act for levying such service charges. Therefore, indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of consideration and was adjusting the value of the materials in the final bills of the contractor. The question was whether there was immunity for the property of the Union from the State taxation under Article 285. Their Lordships held that from the case law it is clear that the Union is not exempted from the levy of indirect tax under Article 285. Their Lordships after examining the decision in re Sea Customs Act (1878) Section 20(2) (supra) in reference by a nine Judge Bench observed that Article 285 is a mandate and not indirect tax such as sales tax. Their Lordships concluded with reference to sales tax which reads as follows: We may in this connection contrast sales tax which is also imposed with reference to goods sold, where the taxable event is the act of sale. Therefore, though both excise duty and sales tax are levied with reference to goods, the two are very different imposts; in one case the imposition is on the act of manufacture or production while in the other it is on the fact of sale. In neither case therefore can it be said that the excise duty or sales tax is a tax directly on the goods for in that event they will really become the same tax. 22. The afo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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