UNION OF INDIA v. CITY MUNICIPAL COUNCIL, BELLARY

The Civil Judge, Bellary had settled several issues for trial in suit and the first issue framed by him, in our opinion, had correctly highlighted the main dispute in this case. The said issue was in the following term; : - •·v,. hether on merger of the City of Bel!ary to Mys<ire State, nght to levy tax on properly of the Union Territory is barred under Article 285 o( th: Constitution of India ?" • In the High Court, however, it seems the main burden of tl1e argument advanced for the Union of India was that the tax which was levied before under the Madras Act of 1920 was not the tax, which was being claimed in the suit under the Mysore State Municipali ties Act, 1933 on the extension of the provisions of the said Act to Bellary Municipality on and from 24-10-1955. In furtner support of the said plea, a stand was also taken on behalf of the Union that the amount of tax had been varied under the Mysore Act. No argu ment seems to have been pointedly advanced in the High Court nor was its attention focussed on the question whether the Bellary Munici pality being a part of the Mysore State was entitled to continue claim a tax which it was levying while it was in the Madras State. The High Court repelled the contention ot the Union ot India as advanced belorc it, and in our opinion rightly, with reference to clause (2) of Article 285. But the real difficulty of the Municipal Council in seeking a support of its claim under the said constitutidnal provision became highliafited during the course of the argument of the appeal in this Court. Apart from the fact that this aspect of tl1e matter was covered by issue no. 1 as settled by the Bellary Court, the point was allowed to be canvassed and received our due consideration as being a pure and simple point Of law as to the interpretation of clause (2) A B c D E F G H • A B c D E F G H 578 SUPREME COURT REPORTS [1979] 1 S.C.R. of Article 285. Mr. K. S. Ramamurthi appearing for the Munici;:i~l Council, perhaps, being conscious of the fact that he will have consi derable difficulty in bringing the case of the Municipal Cow1cil under clause (2 i of Article 285 endeavoured to bring it under the main clause ( 1 ) by contending that the said clause was not a bar in the way of imposing and levying the tax in question because the previous law as enshrined ih the Central Act o( 1941 was saved under Article 372 of the Constitution. He urged this point in the forefront. We allow ed him to do so. In the alternative he endeavoured to bring his case even under clause (2) of Article 285. We shall presently show that neither of the two contentions of Mr. Ramamurthi is welJ..faunJed and fir to be accepted. Article 285 reads as follows : - "(l) The property of the Union shall, save in so far as Parliament may by Jaw otherwise provide, be exempt from all taxes imposed by a State or by any authority within a 5tate. (2j Nothing in clause ( l ,1 shall, until Parliament by law o1herwise provides, prevent any authority within a State from levying any tax on any property of the Union to which such property was inunecliately be'orc the commencement of this Constitution liable or treated as liable. w long as that tax contim, es to he levied in that State." The property of the Union is exempt from all taxes imposed by a State or by any authority within a State. But the Parliament may by law rrovidc otherwise and then any tax on the property of the Union can be imposed and k1ied in accordance with the said law. But then an e~.ception bas been car; ed out in clause (2). The excep tion is t•ot meant for levying any tax on such prdperty by any State; but it is merely for the benefit of any authority including authority like the Municipal Conncil in question. Clause (I) cannot prevent such authority from levying any tax on any property of Union if such property was exigible to such tax immediately before the commencement of the Coi1stitutio11. The local authority, however, can reap advantage of this exception only under two conditions namely (1) tha~ it is "that tax" which is being continued to be levied and no other; (2) that the local authority in 'that State" is claiming to con tinue the levy of the tax. Jn other words, the nature, type and the property <'n which the tax was being levied prior to the commence ment of the Constitution must be the same as also the local authority mnst be the local authority of the same State to which it belonged be fore he commencement of the Constitution. On fulfilment of these / • -.. UNION v. MUNICIPAL COUNCIL ( Untwalia, J.) 579 two condition~ it is authorised to levy the tax on the Union property under clause (2). As in the case of clause (1) it lies within the power of the Parliament to make a law withdrawing the exemption of the im position of the tax on the property of the Union, so in the case of clause (2) it is open to the Parliament to enact a law and finish right of tile local authority withm a State to claim any tax on any property of tbc Union, a right it derived under clause (2). That is to say, in both the cases the ultimate power lies with the Parliament. The argument of Mr. Ramamurthi with reference to Article 3 72 of the Constitution for taking cut the case of the respondent general bar of clause (1) of Article 285 can be briefly disposed of_ first. The Railways (Local Authorities Taxation) Act, 1941 conti nued in force as an existing law under Article 372. Clause ( 1) thereof provides : - " 372 (1) Notwithstanding the repeal by this Constitution of the enactments referred to in article 395 but subjects to the other provisions of this Constitution, all the law in force in the territory of India immediately before the commence ment of this Constitution shall continue in force therein until altered or repealed or amended by a competent Legislature or other competent authority." The Act of 1941 creating the liability of But. the continuance in force of such an existing law is "subject to In other words if the the other provislilns of this Constitution." said law contravenes or is repugnant to any other provision of the Constitution then it has to give way to such provision of the Consti tution and its continuance in force after the commencement of Constitution is affected to the extent it contravenes or is repugnant to the ~d provision. Railways to taxation by local authorities was passed by Central Legislature which was a Federal Legislature ot India. The present Central Legislature, namely, the Parliament has not enacted any law after coming into force of the Constituiton making any provi sion affecting the exemption of the property of the Union from all taxes impnscd by (I Sta~ or by any authority within a State The 1941 Act is repugnant to clause ( 1) of Article 285. It is neither a law made by Parliament nor a law made by the Central Lcgi~Iature In either view of the matter after the advent of the Constitution. it is not a law covered by the phrase "save in so far as Parliament may by law otherwise provide" occurring in clause (1) of Article 285. There is an additional reason for rejecting the argument of Mr. Rama If the contentio11 as made were to hold gol5d it murthi in this regard. A B c D E F G ... ... A B c D E F G 580 SUPREME COURT REPORTS [1979) 1 S.C.R. will make clause (2) of Article 285 almost nugatory. · We, therefore, hold that the property in question is exempt from all taxes claimed by the Bellary Municipal Council under clause ( 1) of Article 285 unless the claim can be supported and sustained within the four corners of clause (2). We respectfully agree with the High Court that some variation in the amounts of the tax as payable by the Railway in the pre-consti tution and post-consutution periods will not rob the tax of being the same tux within the meaning or the expression "'that tax" occurring In support of this view, reliance was in dause (2) of Article 285. rightly placed upon the decision of the Calcutta High Court in Governor General of India in Council v. Corporation of Calcutta(') and that of the Allahabad High Court in Unrm of India through General Mana ger E.l. Rly., v. Municipal Board, Lucknow( 2 ). The decision of this Court in The Town Municipal Committee, Amravati v. Ramchandra Vasudev Chimote and another(') was rightly distinguished. A ques tion for consideration before this Court was with reference to Article 277 of the Constitution. The Amravati Municipality claimed to im pose and levy new terminal taxes on silver jewellery, gold and gold jewellery and precidus stones which it was not levying in the constitution days. Article 277 is a saving provision empowering, besides others, any Municipality in a State to continue to levy the tax in the post-constitution era under certain circumstances until provision to the contrary was made by Parliament by law. It was held by this Court that Article 2 77 was not intended to confer an unlimited legisla tive power to impose. what in effect were new taxes though of the same type or nature as existed before the Constitution. In our op.;nion the High Court is also right in saying that the mere fact that the tax was being levied and claimed previously under the Madras Act of 1920 and now the claim is founded upon the Mysore Act of 1933 will not make it a tax different from "that tax" within the meaning of clause (2) of Article 285. As rightly pointed out by Mr. Ramamurthi taking aid from ~ecticn 55 of the Anclbra State Act, 1953 or even without it the reference to the Madras District Muni cipalities Act, 1920 in the explanation appended to the notification dated the 18th June, 1945 i~sued under sub-section (1) of Section 3 of the Central Act of 1941 can by a rule of construction be read as referring to th~ Mysore Act of 1933 in the changed circumstances of the case. B (I) A. I. R. 1948 Calcutta. 116 \2) (2) A. I. R. 1957 Allahabad, 452. (3) [1964) 6 S. C.R. 947=A. I. R. 1964 S.C. 1116. • UNION v. MUNICIPAL COUNCIL (Untwalia, J.) 581 It is neither necessary nor advisable for us to speculate But that is not all. The real difficulty in the way of the Municipal Council 1s presented by the ~xprcssion "that State" occurring at the end of clause (2) of Article 285. The plain and simple meaning which must be culled out frolil the said expression in the context of the other phraseology in clause (2) is that the local authority· claim protection under clause (2) it it is a local authority in the same State in which it was before the advent of the Constitution. There does not seem to be any ambiguity in this matter and there is, therefore, no escape from the position that the Bellary Municipal Council in the city of Hellary which was a local authority within the State of Madras cannot take the advantage of clause (2) as at the time when it was making the daim for realization of 1.he tax it was a part of the Mysore State. hazard a surmise to find out a reason for making this distinction bet- ween the right of a. local authority continuing to be a local authority in the s"m< State and being part of the different States in the pre Constitution and post-Constitution eras. As we have said above the ultimate authority lies with the Parliament either under clause ( 1) If it thinks that the distinction so made was without or clause (2). a difference it can by enacting a suitable law empower the Bellary Municipal Council to claim the municipal retrospectively or prospectively from the Railway concerned in respect of its property situated within tlie limits of the Municipal Council. The amount of tax which the Municipal Council was getting from the Railway in res pect of such property was quite considerable and was, perhaps, neces- sary for the funds of the Municipality. Such considerations are foreign and not germane for our purposes for deciding the constitu tional point at issue. We are regretfully constrained against the Municipal Council on a plain reading of the constitutional provision engra!ted in Article 285{2). We accordingly hold that the respondent's suit cannot be decreed against the appellant. to decide A B c D E F In the result the appeal succeeds and the judgment and decree of the High Court are set aside. . But in the special circumstances of the case we direct the parties to pay and bear their own costs through- ~ G N.V.K. Appeal allowed. ' .. •