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City Municipal Council, Bellary Vs. Union of India Owning Southern Railway - Court Judgment

LegalCrystal Citation
SubjectMunicipal Tax;Limitation
CourtKarnataka High Court
Decided On
Case NumberOriginal Suit No. 1 of 1969
Judge
Reported inAIR1970Kant37; AIR1970Mys37; ILR1969KAR491; (1969)2MysLJ167
ActsLimitation Act, 1908 - Schedule - Article 120; Constitution of India - Articles 228, 277, 285 and 285(2); Madras District Municipalities Act, 1920 - Sections 81 and 81(1); Mysore City Municipalities Act, 1933 - Sections 64; Railways Act, 1890 - Sections 135; Railways (Local Authorities Taxation) Act, 1941 - Sections 3, 3(1) and 3(2); Mysore Municipalities Act, 1964; Code of Civil Procedure (CPC), 1908 - Sections 113; Madras Elementary Education Act, 1920 - Sections 34; Government of India Act - Sections 154
AppellantCity Municipal Council, Bellary
RespondentUnion of India Owning Southern Railway
Appellant AdvocateVenugopalacharya and ;A.V. Albal, Advs.
Respondent AdvocateK. Nanjundiah, Adv.
Excerpt:
- karnataka land reforms act, 1961.[k.a. no. 10/1962]. section 48a: [h.v.g. ramesh, j] grant of occupancy right - rejection of form no.7 finding of the land tribunal that the land is not a tenanted land petitioner cultivating the land originally as a tenant and thereafter by virtue of the registered sale deed as owner of the land - as on 1.3.1974 or immediately prior to it the land was a tenanted land, vested with the government held, even if the sale in favour of the petitioners husband is held to be invalid, originally it was tenanted land and the land was vested with the government. the land tribunal has to consider the application for grant of occupancy rights to the petitioner as he was holding the land as a tenant prior to and as on 1.3.1974. - 4. whether the failure to issue.....somnath iyer, j.1. in this suit, which has been withdrawn to this court under article 228 of the constitution, from the court of the civil judge, bellary, in which it was originally instituted, the plaintiff is the city municipal council of bellary, and the defendant is the union of india, owning the southern railway. the plaintiff, which will be referred to in the course of this judgment as the municipal council, asks for a declaration that it has the right to levy and collect the taxes enumerated in paragraph 5 of the plaint in respect of properties owned by the union of india and situate within the municipal limits of bellary. it also asks to make a decree against the union of india for a sum of rupees 38,988.2. it is undisputed that the union of india which owns the southern railway,.....
Judgment:

Somnath Iyer, J.

1. In this suit, which has been withdrawn to this Court under Article 228 of the Constitution, from the Court of the Civil Judge, Bellary, in which it was originally instituted, the plaintiff is the City Municipal Council of Bellary, and the defendant is the Union of India, owning the Southern Railway. The plaintiff, which will be referred to in the course of this judgment as the municipal council, asks for a declaration that it has the right to levy and collect the taxes enumerated in paragraph 5 of the plaint in respect of properties owned by the Union of India and situate within the municipal limits of Bellary. It also asks to make a decree against the Union of India for a sum of Rupees 38,988.

2. It is undisputed that the Union of India which owns the Southern Railway, is the owner of sixty-five buildings and twenty vacant lands which are situate within the municipal limits of the Bellary City Municipality. It is also not controverted that in respect of these eighty-five properties, the then Madras and Southern Mahratta Railway became liable to pay general property tax and water and drainage tax under a notification of November 26, 1941, promulgated by the Government of India under Section 3 (1) of the Railways (Local Authorities Taxation) Act, 1941 (Central Act XXV of 1941). In consequence, during some of the years prior to the commencement of the Constitution the Madras and Southern Mahratta Railway which owned those properties used to pay a sum of Rs. 4,792-13-0 as tax for the sixty-five buildings owned by it and a sum of Rs. 863-11-6 as tax payable in respect of the twenty vacant lands which it owned.

3. After the Madras and Southern Mahratta Railway ceased to be the owner of these properties, the Government of India which became its owners continued to pay the tax after it acquired such ownership and even after the commencement of the Constitution until April 1, 1956.

4. The Bellary City Municipal Council was functioning until October 24, 1955, under the provisions of the Madras District Municipalities Act (Madras Act V of 1920), when the district of Bellary became part of the former State of Mysore on October 1, 1953 under the provisions of the Andhra State Act, 1953 (Central Act XXX of 1953). The provisions of the Madras District Municipalities Act continued to operate in the district of Bellary under the provisions of Section 53 of the Andhra Act, and stood repealed only with effect from October 24, 1955, under the Mysore Laws Extension to Bellary and Amendment Act, 1955 (Mysore Act XIV of 1955), when the Mysore City Municipalities Act 1933 (Act VII of 1933) was extended to the district of Bellary.

5. So, on and from October 24, 1955, the relevant statute under which the municipal council was exercising its municipal administration was the Mysore City Municipalities Act, 1933.

6. In the course of this judgment, the Madras District Municipalities Act will be referred to as the 'Madras Act' and the Mysore City Municipalities Act, 1933, will be called the 'Mysore Act'.

7. We should observe here that the Mysore City Municipalities Act, 1933, is no longer in force in the State of Mysore since it was repealed with effect from April 1, 1965 by the Mysore Municipalities Act, 1964, (Mysore Act XXII of 1964). But with this repeal we are not concerned in this suit which relates to the period antecedent to the date of such repeal.

8. The case for the municipal council which is the plaintiff before us is that there was an unreasonable repudiation by the Union of India of the demand made by it for the payment of property tax in respect of the period commencing on April, 1, 1957 and ending with March 31, 1963. The tax so demanded comprised of the following items :

(a) tax on buildings and lands,

(b) water tax and

(c) education tax.

In respect of the years 1960-61, 1961-62 and 1962-63 the demand also includes the impost described as health cess.

9. The case for the Municipal Council as set out in the plaint was that the tax so demanded which the Union Government was liable to pay immediately before the commencement of the Constitution, and which continued to be levied in the new State of Mysore after its formation on November 1, 1956, continued to be exigible under the provisions of Article 285(2) of the Constitution.

10. Many contentions were raised on behalf of the Union of India in the written statement produced by them. The main ground on which there was a repudiation of the liability to pay the tax demanded was that the tax which was payable immediately before the commencement of the Constitution was not the tax demanded by the municipal council and so was not exigible. There was another contention that the demand also related to buildings which were constructed only after the commencement of the Constitution and that the tax demanded in respect of those buildings was not payable. But Mr. Nanjundiah appearing for the Union of India intimated us that the Union of India does not dispute that the suit claim relates only to buildings which were in existence before the commencement of the Constitution.

11. On the pleadings produced by the parties, the following issues were settled by the Civil Judge, Bellary :

1. Whether on merger of the City oE Bellary to Mysore State, right to levy tax on property of the Union Territory is barred under Article 285 of the Constitution of India?

2. Whether the enforcement of the Mysore City Municipalities Act, 1933 to Bellary had changed the incidence of property tax levied on the Union within the meaning of Article 285 clause (2) of the Constitution of India?

3. Whether the plaintiff is estopped from taxing railway properties at Bellary in view of the letter of the Mysore Government dated 29-1-1962 in L.T.H-53-CTX-59 to the Central Government?

4. Whether the failure to issue a fresh notification under Section 3 of the Local Authorities Act (Act 25 of 1941) puts an end to the plaintiff municipality's right to tax the properties of the Union of India?

5. Whether the right to tax property of the Indian Union consequent on the enforcement of the Mysore City Municipalities Act arises only on issuing of a notification under the Indian Railways Act under Section 135 and read with Section 3, Local Authorities Taxation Act, 1941?

6. Whether there is any change in the incidence, mode of assessment and levy of tax under the Mysore City Municipalities Act as contended in paragraph 13 of Written Statement of the defendant? If so, whether the plaintiff is entitled to levy tax on the property of the Indian Union?

7. Whether the suit is barred by limitation?

8. Whether this is a fit case to refer to the High Court under Section 113 of Civil P. C.?

9. Whether the defendant has not agreed to pay the education tax and whether the refusal of the plaintiff to receive the samo is proper?

10. What is the amount due and payable to the plaintiff by way of arrears of tax?

11. To what relief is the plaintiff entitled to?

12. What order?

12. It will be seen that quite a few issues among these which the Civil Judge framed overlap one another and they ara Issues 1, 2 and 6. Similarly Issues 1, 4 and 5. The eighth issue no longer survives since the suit is now before us under Article 228 of the Constitution.

13. It is not necessary to record any finding on Issues 3 and 9 since Mr. Nanjundiah did not press the defendant's case with reference to those two issues.

14. So, the three main questions on which we have to pronounce are :

(i) Whether on the extension of the provisions of the Mysore City Municipalities Act, 1933, to the district of Bellary, the liability of the Union of India to pay the taxes which were originally being paid in respect of the properties owned by the Union disappeared, and whether that liability would arise only on the issue of a fresh notification under Section 135 of the Indian Railways Act read with Section 3 of the Railways (Local Authorities Taxation) Act, 1941?

(ii) Whether the liability to pay the taxes which the Union of India had been previously paying was not preserved by Article 285(2) of the Constitution? and

(iii) Whether the suit is barred by limitation?

15. On the question of limitation, a feeble argument was presented by Mr. Nanjundiah on behalf of the Government of India and it is obvious that there is no substance in the plea relaling to it. It will be recalled that the period to which the claim relates commenced on April 1, 1957 and ended on March 31, 1963. The tax payable in respect of the earliest period commenced on April 1, 1957 which became payable only on April 1, 1958, and the demand for this payment was made by the municipal council through a bill presented under Section 95 of the Mysore City Municipalities Act on February 14, 1958, The suit was instituted on October 7, 1963, and it was not seriously disputed by Mr. Nanjimdiah that the suit was governed by the residuary Article 120 of the Indian Limitation Act, 1908, which prescribes a period of six years for the institution of a suit like the one before us. The right to enforce the claim in respect of the earliest period accrued only on April 1, 1958 and so, the suit brought on October 7. 1963, is well within time, and that is our rinding on the seventh issue.

16. We should mention here that Mr. Venugopalachari appearing on behalf of the Municipal Council and Mr. Nanjundiah appearing for the Union of India submitted to us that it was not necessary for the parties to produce any evidence in the suit since it presented only pure questions of law.

17. Mr. Nanjundiah made the further submission that the repudiation of the claim of the Municipal Council would be restricted only to the claim which related to the tax demanded in respect of the buildings and vacant lands owned by the Union. We were informed by Mr. Nanjundiah that the Union of India would not dispute its liability to pay water tax and education tax or its liability to pay health tax for the years 1960-61, 1961-62 and 1962-63.

18. So, the only question to be decided is whether Article 285 (2) of the Constitution maintains its liability to pay property tax on its buildings and lands.

19. It is common ground as we were informed during the course of the proceedings before us that the impost in the form of property tax on buildings and lands situate within the municipal limits of the Bellary Municipality, was made under the provisions of Section 81 of tbe Madras Act, and that, no new impost was as such made by the Municipal Council under Section 64 of the Mysore Act which in displacement of the Madras Act commenced to operate on October 24, 1955. It is thus undisputed that the tax on buildings and vacant lands which was imposed under Section 81 of the Madras Act is the tax which continues to be levied within the limits of the Municipal Council after the Mysore Act came into force.

20. But Mr. Nanjundiah on behalf of the Union of India contended that such continuance of old impost does not attract the application of Article 285(2) of the Constitution which reads :

'285 (1) The property of the Union shall, save in so far as Parlier-Exemption of merit may by law other-property of the wise provide, be exemptUnion from State from all taxes imposedtaxation. by a State or by any auauthority within a State. '

(2) Nothing in clause (1) shall, until Parliament by law otherwise provides, prevent any authority within a State from levy ing any tax on any property of the Union to which such property was immediately before the commencement of this Constitution liable or treated as liable, so long as that tax continues to he levied in that State.'

21. The stress of Mr. Naujundiah's argument was that although the Union did pay and continued to pay the tax imposed on lands and buildings during the period when the Madras Act was in force, that liability perished when the Mysore Act came into force, for the reason that the tax imposed under the Madras Act is not the tax which the Municipal Council now claims under the Mysore Act. It was also said that since the measure of the tax has also become altered by resort to the mode of quantification of the tax prescribed by the Mysore Act, the tax payable after such quantifica-. tion was a new tax distinct from the old lax payable under tbe Madras Act, and so, was not the old tax.

22. That was also the postulate on which was constructed the further argument that the Union of India could not be made liable to pay that new tax except under a new notification under Section 135 of the Indian Railways Act read with Section 3 of the Railways (Local Authorities' Taxation) Act, 1941.

23. Section 135 (1) of the Indian Railways Act as it read in the year 1946 when a notification was promulgated by the Government of India under Section 3 (1) of the Railways (Local Authorities' Taxation) Act, 1941 reads :

'135. 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 and from railway administrations in aid of the funds of local authorities, namely :

(i) A railway administration shall not beliable to pay any tax in aid of the fundsof any local authority unless the generalcontrolling authority has, by notification inthe Official Gazette, declared the railwayadministration to be liable to pay the tax. * * * * *

24. It is not controverted that there was a notification by the general controlling authority in the year 1946 which is reflected in a notification under Section 3 (1) of the Railways (Local Authorities' Taxation) Act, 1941, which was made on June 18, 1946 by the Government of India which reads :

'Notification'

In pursuance of Sub-Section (1) of Section 3 of the Railways (Local Authorities' Taxation) Act, 1941 (XXV of 1941) the Central Government is pleased to declare that the Administration or the Madras and Southern Maliratta Railway shall be liable to pay, in aid of the funds of the local authorities specified in column 1 of the schedule annexed hereto the taxes specified in column II thereof.

SCHEDULELocal authority TaxesI II*****4. Bellary General propertyMunicipality tax, and water anddrainage tax** ** Explanation : In this schedule,

(i) General property tax means so much of the property tax levied under clause (a) of sub-Section (1) of Section 81 of the Madras District Municipalities Act, 1920 (Madras Act V of 1920) as comprising a tax for general purposes;

(ii) Water and drainage tax means so much of the property tax as is levied in accordance with clause (b) of the said subsection; and

(iii) Education tax is the tax levied as a surcharge on property tax in accordance with Section 34 of the Madras Elementary Education Act, 1920 (Madras Act VIII of 1920).'

25. Under Section 3 (1) of the Railways (Local Authorities' Taxation) Act, 1941, under which the above notification was promulgated reads :

'3. Liability of railways to taxation by local authorities-

(1) In respect of property vested in the Central Government, being property of a railway, a railway administration shall be liable to pay any tax in aid of the funds of any local auauthority, if the Central Government, by notification in the official Gazette, declares it to be so liable. * * * * *

26. It was maintained that since the tax which by the notification under the above sub-Section made the Madras and Southern Mahratta Railway which was the predecessor in title of the Union Government liable to pay only the general property tax which was levied under the Madras Act, that liability disappeared when the Mysore Act repealed the Madias Act and commenced to operate in the district of Bellary on October 24, 1955. It was, according to the argument advanced by Mr. Nanjundiah by that process that the notification of the Central Government lapsed and for that reason that Article 285(2) can have no relevance.

27. Before proceeding to discuss this submission, we should mention that there was an admitted variation of the amount of the taxes payable by the Union of India with respect to the buildings and those payable in respect of the vacant lands when the Mysore Act came into force. This variation consisted of the diminution of the buildings tax and an enhancement of the tax on vacant lands. The tax payable in respect of the buildings became reduced to a sum of Rs. 4,326-80p. from Rs. 4,792-13-0 which was the tax payable under the repealed Act. Similarly, the old tax with respect to the vacant lands amounting to Rs. 863-11-6 became enhanced to Rupees 2,538-50 p.

28. But, it is undisputed that these variations were not attributable to the coming into being of any new impost under the repealing Act, but, because of the mode by which the quantification of the taxes payable under the repealed Act was made. So, the tax on buildings of which there was a quantification on the basis of a new formula prescribed by the repealing Act became smaller, and, the tax payable for the vacant lands which was determined by the application of the method prescribed by the repealing Act in displacement of the process prescribed by the repealed Act became higher.

29. But, what cannot be overlooked is that whatever was the mode by which there was a quantification of the tax payable by the Union of India, the tax of which there-was such quantification was. not a new tax which was not in existence when the Constitution commenced to operate but was the same old impost the attributes of which were not different from the attributes of the tax which the municipal council demanded. The tax continued to be property (ax which was imposed under the old Act and the demand related only to the property tax which had been so imposed.

30. Section 81 (1) of the Madras Act empowered the municipal council by resolution to levy a tax on buildings and lands. Similarly, Section 64 of the Mysore Act bestowed power on the municipal council to impose a tax in the form of a rate on buildings or lands or both situated within the municipality. Even if the municipal council had made a new impost under Section 64 of the Mysore Act in the form of a rate on buildings and lands, that impost would have had the same attributes, as the impost which had been made under the Madras Act under the 81st Section of that Act. But, what might have been the legal position with respect to Article 285(2) of the Constitution had a new impost been made in that way does not arise for consideration in this case for the reason that no such new impost was made by the municipal council of Bellary which preserved the old impost made under the Madras Act although the quantification of the tax imposed under its provisions was suitably altered so as to bring it into conformity with the formulas which the Mysore Act incorporated.

31. The question, therefore, is whether that alteration in the mode of quantification excludes the operation of Article 285(2) of the Constitution.

32. The provision which that clause incorporates is that subject to any law which Parliament may make, the liability of the Union to pay tax on its property which was immediately before the commencement of the Constitution liable or treated as liable to pay that tax, shall continue to be so liable so long as that tax continues to be levied in the State. This provision is an exception to that contained in clause (1) which says that the property of the Union shall stand exempted from payment of all taxes payable to a State or any authority within that State.

33. The three conditions which should exist before the Union property could be made to fall within the exception which clause (2) incorporates are, firstly, that there should be an impost by the State or by an authority within the State, secondly, that the Union property was liable to pay that tax immediately before the commencement of the Consitution and thirdly, that that tax continues to be levied in the State even after the commencement of the Constitution.

34. It was asserted on behalf of the Union that although it may be that the first two conditions exist, the third did not. This assertion was founded on the postulate to which we have already referred that the old tax which the Union of India was paying before the commencement of the Consitution and even thereafter, is not the tax now demanded, since, there was a reduction of the tax in respect of buildings and an enhancement of the tax in respect of lands after the extension of the provisions of the Mysore Act to the district of Bellary.

35. The acceptance of this postulate would involve the assumption that Article 285(2) when it speaks of the 'tax' for the payment of which there was a pre-constitutional liability on the part of the Union to pay, refers to the amount of the tax payable by it and not to its character. We do not think it right to place any such narrow construction on the provision of this clause.

36. We lean to the view that Article 285(2) of the Consitution does not speak of the amount of the tax but only speaks of its nature or character. What in effect it provides is that if a tax was exigible in respect of Union property during the period preceding the Constitution, such tax whatever may be its measure, continues to be payable so long as its levy continues in the State even after the commencement of the Constitution. That liability, in our opinion, is enforceable even if the measure of the tax gets altered by the adoption of a new method or mode for its computation or quantification.

37. So, if in respect of its properties the Union Government was liable to pay property tax before the commencement of the Constitution, that property tax so long as property tax is not abolished in the area in which the Union properties are situate, continues to be exigible even after the commencement of the Consitution even if its measure gets diminished or enhanced.

38. That that is the true interpretation to be placed upon Article 285(2) of the Consitution is clear from the enunciation made by Mukherjea, J., as he then was, in Governor-General of India in Council v. Corporation of Calcutta : AIR1948Cal116 . The question which arose in that case was whether a tax in respect of a property which was not in existence before the Government of India Act, 1935 was enacted, could be demanded under Section 154 of that Act, the provisions of which correspond to Article 285 of the Constitution. In the context of the enunciation made in that case that no such tax could be demanded, Mukherjea J., said this :

'So far as the Calcutta Municipal Act is concerned, the only two kinds of property that required consideration for the purposes of determining the scope of exemption under Section 154, Government of India Act, are land and building, for it is upon lands and buildings that consolidated rates are imposed by the Calcutta Municipal Act. We do not think however that the mode of assessment employed by the Calcutta Corporation is at all a relevant factor in determining the meaning of the word 'property' for purposes of Section 154, Government of India Act.

***** The liability for rates that exists in respect of a particular property prior to April 1937, and which is to continue according to the proviso, may certainly include any future variation resulting from alteration in the valuation of the property or the rale of assessment, but it does not include any future liability on account of any new property being added to it, no matter whether according to the method of assessment followed by the taxing authority the additional property could be separately taxed or not.' (pages 119 and 120).

39. Again, in Union of India v. Municipal Board Lucknow, : AIR1957All452 , a similar interpretation was placed on Article 285(2) of the Consitution and the enunciation made in that case reads :

'Moreover, it is the nature of the tax for which sanction has to be obtained. Any variation of the quantum of tax based on an increase in the value of the property 01 additions made to that property would also be covered by the proviso to Article 285 of the Constitution. This point also arose, it appears, in a Calcutta case in : AIR1948Cal116 , and it was observed by Mukherjea J., that the liability for rates that exists in respect of a particular property prior to April 1937, and which is to continue according to the proviso, may certainly include any future variation resulting from alteration in the valuation of the property or the rate of assessment....' (pages 454 and 455).

40. That being so, and, since the tax demanded by the Municipal Council was no other than the same tax which was imposed under the Madras Act, the mere fact that there was a diminution of the tax in respect of buildings and an enhancement of the tax in respect of lands by the adoption of a different method of computation which was prescribed by the relevant provisions of the Mysore Act did not absolve the Union Government from its liability to pay the tax under Article 285(2) of the Consitution since the postulate that such diminution or enhancement of the one tax or the other, introduced a new tax in the relevant area cannot be sound and is therefore unacceptable.

41. We do not think that Mr, Nanjundiah appearing on behalf of the Union Government can derive any support for his contention to -the contrary from the decisions upon which he relied, namely, Municipal Council Cuddapah v. M. and S. M. Rly. Co. Ltd., AIR 1929 Mad 746, South Indian Railway v. Panchayat Board Mauda-pam, AIR 1943 Mad 733, Kanpur Municipality v. Dominion of India, : AIR1954All56 and AmraoK Municipality v. Ramachan-dra, : [1964]53ITR444(SC) .

42. In AIR 1929 Mad 746, the contention of the Railway Administration that it was not liable to pay the tax imposed under the provisions of the Madras Act V of 1920 succeeded on the ground that the tax imposed under that Act was not the tax which had been imposed under the Madras District Municipalities Act 4 of 1884 the liability to pay to which had been declared by a notification under Section 135 of the Railways Act. The ratio of the decision was that the tax imposed was 'substantially different', but, whether the view taken in that case that the taxes imposed were substantially different in that way is supportable or not is not a matter into which we need make any investigation in this suit. But, it is clear that if the view had been taken in that case that they were not substantially different the contention raised on behalf of the Railway Administration would not have succeeded. It is this feature of that case which distinguishes it from the case before us.

43. The view taken in AIR 1943 Mad 733, rested wholly on the view taken in AIR 1929 Mad 746, which, as we have already explained, has no relevance to the case before us in which the impost made under the Madras Act is the very impost which the Union Government is called upon to pay.

44. The decision in : AIR1954All56 , can have no application to the present case since that case was one in which there was a decision by an arbitrator under Section 3 (2) of the Railways (Local Authorities' Taxation) Act and the elucidation made in that situation was that the local authority could not demand tax in excess of the amount determined by the arbitrator.

45. The decision in : [1964]53ITR444(SC) , was the foundation of the argument that the words 'so long as that tax continues to bo levied in that State' occurring in Article 285(2) of the Constitution, should be interpreted in the same way in which the words 'may continue to be levied' occurring in Article 277. The argument maintained was that since it was explained by the Supreme Court that no old tax may continue to be levied under Article 277. if the rate of the old tax is enhanced, an enhanced or reduced old tax ceases to be exigible even for purposes of Article 285(2).

46. But, it is clear that the expression 'may continue to be levied' occurring in Article 277 cannot receive the same meaning which the expression 'so long as that lax continues to be levied in that State' occurring in Article 285(2) should be given. Article 277 authorises the continuance ol the levy of an old tax which was lawfully imposed before the commencement of the Consitution by the Government of any State or a local or other authority or body even if under the Consitution that impost is an impost which could be made only by Parliament.

47. The terminal tax, the levy of which was called in question before the Supreme Court, was a tax concerning three new items which was not exigible in respect of those items before the commencement of the Consitution but was imposed after the Consitution came into force by the concerned municipal council in the State.

48. The argument advanced on behalf of the Council was that under Article 277 of the Constitution, it had the power to impose a terminal tax on new items so long as there was an impost in the form of a terminal tax on some item or the other, before the commencement of the Constitution. It was this contention which was repelled by the Supreme Court on the ground that for purposes of Article 277 of the Constitution, the impost which could continue to be levied even if the topic relating to the impost is in the Union list, is an old impost which after the commencement of the Consitution has not suffered any transformation or variation of any kind including its measure. The ratiocination which impelled that conclusion emphasised the importance of legislative competence concerning which the suit before us presents no controversy.

49. Moreover, between the collocation of the words in Article 277 and their arrangement in Article 285(2), there is no similarity, Article 277 which says that a tax lawfully levied before the Consitution 'may.....continue to be levied', continues an old impost with respect to which the Consitution transmits to Parliament Legislative competence, which, no longer resides in the legislative organ which created it. And so, the power to recover it is limited to its old magnitude which could after the Consitution be varied only by Parliament.

50. But the words 'so long as that tax continues to be levied' in Article 285(2) which only mean that there should have been no subsequent disappearance of the impost, do not introduce any such limitation. While the purpose of the relevant phrase in Article 277 is the authorisation of the recovery of the amount of the tax previously payable, the emphasis of the concluding words of Article 285(2) is on the exclusion of liability when there is a subsequent cessation or the impost, and, not on its measure, if it continues to maintain its character. The suggestion that we should understand the words occurring in the two articles in the same way is to mistake the purpose of the one for the intendment of the other.

51. The discussion made so far yields the result that the property tax which the Union of India was called upon by the Municipal Council to pay was the same old property tax which was imposed under the Madras Act. The attenuation of the measure of the tax in the one case and the increase in the case of the other are not factors which could change the attributes or the character of the tax. The tax demanded was the same old tax although its quantification which was made by a different process entitled the municipal council to make a higher demand in the case of lands.

52. That that is the true position is what negatives the contention that Article 285(2) is inapplicable and makes unavailable the argument that a new notification under Section 135 of the Railways Act or under Section 3 of the Railways (Local Authorities' Taxation) Act, 1941, was a condition precedent to the impugned demand.

53. Indeed, in the letter addressed by the Southern Railways Administration on January 30, 1957 to the Municipal Council, it did not dispute its liability to pay the tax imposed under the Madras Act, but only repudiated its liability to the extent of the enhancement which, as we have already stated, was made only in the case of taxes with respect to the vacant lands while on the contrary the tax with respect to the buildings had become smaller. There was also a contention raised in that letter that scavenger tax was not payable. But with that question, we are not concerned in this suit since we have been intimated by both sides that the Municipal Council has made no demand for the payment of scavenger tax. The genuineness of this letter was not disputed by Mr. Nanjundiah appearing on behalf of the Union Government although he explained to us that what was stated in that letter was attributable to a mistaken impression in them and of the General Manager of the Southern Railways Administration. But, as already explained by us, nothing turns upon the concession made by the General Manager since our decision in this suit depends upon the conclusion reached by us on the merits of the case and not upon the concession made by him.

54. So, our findings on issues 1, 2, 4, 5 and 6 are in favour of the plaintiff and against the defendant. Our finding on the first issue is that the liability of the Union of India under Article 285(2) of the Consitution did not perish when the District of Bellary became part of the old State of Mysore.

55. Our finding on the second issue is that the extension of the provisions of the Mysore City Municipalities Act, 1933, to the District of Bellary did not affect that liability created by Article 285(2) of the Constitution.

56. Our finding on the 4th and 5th issues is that the promulgation of a fresh notification under Section 3 of the Railways (Local Authorities' Taxation) Act, 1941, and Section 135 of the Indian Railways Act was not necessary to create a right in the plaintiff to demand the taxes which it called upon the Union of India to pay.

57. Our finding on the second issue is also our finding on the sixth issue.

58. In the result, we make a decree infavour of the plaintiff as prayed for in theplaint. By that decree, we make a declaration that the plaintiff has a right to levyand collect the taxes mentioned in paragraph5 of the plaint on the properties of thedefendant situate within the municipallimits as specified in Schedule A to theplaint, and we make a further decree againstthe defendant and in favour of the plaintiff for the payment of a sum of Rs. 38,988.The defendant shall also pay the plaintiffthe costs of this suit and future interest onthe amount for which we have made adecree in favour of the plaintiff at six percent per annum from the date of the institution of the suit till date of payment.

59. Suit decreed.


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