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PETITIONER: UNION OF INDIA

       Vs.

RESPONDENT: PURNA MUNICIPAL COUNCIL AND ORS.

DATE OF JUDGMENT19/09/1991

BENCH: PUNCHHI, M.M. BENCH: PUNCHHI, M.M. RAMASWAMY, K.

CITATION:  1992 AIR 1597            1991 SCR  Supl. (1) 183  1992 SCC  (1) 100        JT 1991 (4)     3  1991 SCALE  (2)669

ACT:     Indian Railways Act, 1890--Section 135 read with Article 285  of the Constitution of India,  1950--Municipal  Council claiming tax by way of "Service charges" --Legality of.

HEADNOTE:     The  Union of India, the appellant, approached the  High Court  under  Article 226 of the  Constitution,  challenging notices of demand issued by the Municipal Council,  respond- ent  No.1, claiming tax to the tune of Rs. 28,400 by way  of ’Service  charges’  due for the period 1954 to  1960,  under Article 285 of the Constitution read with Section 135 of the Indian Railways Act, 1890.       The High Court dismissed the writ petition  negativing the  claim, against which, this appeal by special leave  was filed. Allowing the appeal, this Court,     HELD  1.  Section 135 of the Indian Railways  Act,  1890 gets saved under Article 285(1) of the Constitution  itself. The said Article provides that property of the Union  shall, save  in so far as Parliament may by law otherwise  provide, be  exempt  from all taxes imposed by the State  or  by  any authority within a State. [185 A-B]     2. Section 1315 of the Railways Act permits taxation  of Railways by the local authority in the manner given therein; the  Central Government being the controlling and the  regu- lating  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  legis- lation operates. [186 A-B]     3. The reasoning of the High Court to oust the  applica- bility 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 184 and  legal  provisions being well cut and well  defined  re- quired no marked elaboration to stress the point. [186 B-C]

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JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No.903 of 1978.     From  the  Judgment and Order dated 5/6-12-1977  of  the Bombay  High Court in Special Civil Application  No.1937  of 1971.     V.C.  Mahajan, B.K. Prasad, Smt. Sangeeta  Aggarwal  and C.V. Subba Rao (NP) for the Appellant. K.R. Chowdhary for the Respondent. The following Order of the Court was delivered     This  appeal  by special leave is directed  against  the judgment  and order of the Bombay High Court passed in  Spe- cial Civil Application No. 1937 of 1971 decided on  December 5, 1977.     The Union of India, the appellant herein, approached the High Court under Article 226 of the Constitution challenging notices  of demand issued by the Municipal  Council,  Purna, respondent  No.  1 herein, claiming tax to the tune  of  Rs. 28,400/- by way of "Service charges" due for the period 1954 to  1.960.  The claim of the Union of  India  primarily  was based  under Article 285 of the Constitution read with  Sec- tion  135 of the Indian Railways Act, 1890. The  High  Court interplaying  the two provisions negatived the claim of  the appellant by holding as follows:               "In  terms of Article 285(2) these  properties               will  continue  to  be liable  to  such  taxes               ’until  Parliament by law otherwise  provides.               Mr.  Govilkar has not drawn our  attention  to               any  specific law made by the Parliament  pro-               viding  otherwise.  He,  however,  relied   on               section  135 of the Indian Railways Act,  but,               as  indicated earlier, provisions  of  section               135 cannot have any overriding’ effect against               the  continuance of such laws when  authorised               by Article 285 (2) of the Constitution. It  is               not possible for us to hold that Railways  Act               is  an Act made by the Parliament  as  contem-               plated under sub-Article (2) of Article 285 of               the Constitution" The High Court further observed that:                        "As  Section 135 of the Railways  Act               is now substituted by the corresponding provi-               sions  of the above enactment, it is  unneces-               sary to consider the contention of Mr.  Govil-               kar as to effect of the absence of any Notifi-               cation. We have already indicated how  section               135  or the corresponding section of  the  new               enactment  can  have no overriding  effect  as               against the saving of laws contemplated  under               Article 285 (2) of the Constitution."               185     The view expressed by the High Court is obviously  erro- neous.  Section  135 of the Indian Railways Act,  1890  gets saved  under Article 285(1) of the Constitution itself.  The said Article provides that property of the Union shall, save in  so  far as Parliament may by law otherwise  provide,  be exempt from all taxes imposed by the State or by any author- ity within a State. Section 135 of the Railways Act provides as under:               "Taxation  of railways by local  authorities:-               Notwithstanding  anything to the  contrary  in               any  enactment, or in any agreement  or  award               based  on any enactment, the  following  rules               shall regulate the levy of taxes in respect of               railways from railways administrations in  aid

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             of the funds of local authorities, namely:.-               (1)  A  railway administration  shall  not  be               liable  to pay any tax in aid of the funds  of               any  local authority unless the (Central  Gov-               ernment) has, by notification in the  official               gazette,  declared the railway  administration               to be liable to pay the tax.               (2)  While  a  notification  of  the  (Central               Government), under clause (1) of this  Section               is in force, the railway administration  shall               be liable to pay to the local authority either               the  tax mentioned in the notification  or  in               lieu  thereof such sum, if any as  an  officer               appointed  in  this  behalf  by  the  (Central               Government  )  may having regard  to  all  the               circumstances  of the case, from time to  time               determine to be fair and reasonable.               (3) The (Central Government ) may at any  time               revoke or vary a notification under clause (1)               of this Section:               (4) Nothing in this Section is to be construed               as  debarring any railway administration  from               entering into contract with any local authori-               ty for the supply of water or light or for the               scavenging  of  railway premises  or  for  any               other service which the local authority may be               rendering or be prepared to render within  any               part of the local area under its control.               (5) ’Local Authority’ in this section means  a               local  authority  as defined  in  the  General               Clauses  Act, 1887 and includes any  authority               legally  entitled  to or  entrusted  with  the               control  or  management of any  fund  for  the               maintenance of watchmen or for conservancy  of               a river".               186     The  aforesaid  provision, 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 liabili- ty  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  direction  asked for in favour of the Union  of  India restraining  the respondent council from raising demands  on the  railway in regard to service charges. We make it  clear that  the  rights of the local authority  as  flowing  under Section 135 of the Indian Railways Act, 1890 stand preserved in  the  event  of the Central Government  moving  into  the matter,  if not already moved. In the circumstances  of  the case, however, there will be no order as to costs. V.P.R                                    Appeal allowed.                                 1 187

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