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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.