Karnataka High Court
Secab Association vs The State Of Karnataka on 7 June, 2024
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NC: 2024:KHC-K:3733
WP No. 201155 of 2017
C/W WP No. 201156 of 2017
WP No. 201157 of 2017
WP No. 201158 of 2017
WP No. 201159 of 2017
WP No. 201160 of 2017
IN THE HIGH COURT OF KARNATAKA
KALABURAGI BENCH
DATED THIS THE 7TH DAY OF JUNE, 2024
BEFORE
THE HON'BLE MR. JUSTICE R.NATARAJ
WRIT PETITION NO.201155 OF 2017 (LB-TAX)
C/W
WRIT PETITION NO.201156 OF 2017 (LB-TAX),
WRIT PETITION NO.201157 OF 2017 (LB-TAX),
WRIT PETITION NO.201158 OF 2017 (LB-TAX),
WRIT PETITION NO.201159 OF 2017 (LB-TAX) AND
WRIT PETITION NO.201160 OF 2017 (LB-TAX)
IN W.P.No.201155 OF 2017:
Digitally BETWEEN:
signed by
RENUKA
SECAB ASSOCIATION,
Location:
High Court P.U. COLLEGE, S.R. COLONY-VIJAYPUR,
Of Karnataka REPRESENTED BY THE
SOCIO ECONOMIC AND CULTURAL ASSOCIATION
OF BIJAPUR, A REGD. SOCIETY, THROUGH ITS
GENERAL SECRETARY,
SHRI A. S. PATIL, AGE: 59 YEARS,
R/O C/O SECAB ASSOCIATION, NO.12, NAUBAG,
VIJAYPUR-586102.
...PETITIONER
(BY SRI AMEET KUMAR DESHPANDE, SR. COUNSEL FOR
SRI GANESH SUBHASHCHANDRA KALBURGI, ADVOCATE)
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C/W WP No. 201156 of 2017
WP No. 201157 of 2017
WP No. 201158 of 2017
WP No. 201159 of 2017
WP No. 201160 of 2017
AND:
1. THE STATE OF KARNATAKA,
REPRESENTED BY THE PRINCIPAL SECRETARY,
DEPARTMENT OF MUNICIPAL ADMINISTRATION AND
URBAN DEVELOPMENT, M. S. BUILDING,
BENGALURU-1.
2. THE CORPORATION OF CITY OF VIJAYPUR,
REPRESENTED BY ITS COMMISSIONER,
VIJAYPUR-586102.
...RESPONDENTS
(BY SRI MALHAR RAO, AAG AND
SRI VEERANAGOUDA MALIPATIL, HCGP FOR R1;
SRI AMRESH S. ROJA, ADVOCATE FOR R2)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA, PRAYING TO ISSUE AN
APPROPRIATE WRIT MORE SO IN THE NATURE OF CERTIORARI
AND DECLARE THAT RULE 7-A OF SCHEDULE III OF THE
KARNATAKA MUNICIPAL CORPORATIONS ACT, 1976 IS ULTRA-
VIRES THE CONSTITUTION OF INDIA, AND SUCH IS NULL AND
VOID, THE COPY OF EXTRACT IS FILED AT ANNEXURE-D. II)
QUASH THE DEMAND NOTICE DATED 20.02.2017 ISSUED BY
THE RESPONDENT NO.2 IN FILE NO.MNPV/KMV/W-
NO.7B/2016-17, WHICH IS AT ANNEXURE-A III) QUASH
COMMUNICATION DATED 23.02.2017 ISSUED BY THE
RESPONDENT NO.2 IN THE FILE NO.MNP/KMV/2016-17 WHICH
IS AT ANNEXURE-C.
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WP No. 201155 of 2017
C/W WP No. 201156 of 2017
WP No. 201157 of 2017
WP No. 201158 of 2017
WP No. 201159 of 2017
WP No. 201160 of 2017
IN W.P.NO.201156 OF 2017:
BETWEEN:
SECAB ASSOCIATION,
CHANDBIBI URDU GIRLS HIGH SCHOOL-VIJAYPUR,
REPRESENTED BY THE SOCIO ECONOMIC AND
CULTURAL ASSOCIATION OF BIJAPUR, A REGD
SOCIETY, THROUGH ITS GENERAL SECRETARY
SHRI A. S. PATIL, AGE: 59 YEARS,
R/O C/O SECAB ASSOCIATION,
NO.12, NAUBAG,
VIJAYPUR-586102.
...PETITIONER
(BY SRI AMEET KUMAR DESHPANDE, SR. COUNSEL FOR
SRI GANESH SUBHASHCHANDRA KALBURGI, ADVOCATE)
AND:
1. THE STATE OF KARNATAKA,
REPRESENTED BY THE PRINCIPAL SECRETARY,
DEPARTMENT OF MUNICIPAL ADMINISTRATION
AND URBAN DEVELOPMENT, M. S. BUILDING,
BENGALURU-1.
2. THE CORPORATION OF CITY OF VIJAYPUR,
REPRESENTED BY ITS COMMISSIONER,
VIJAYPUR-586101.
...RESPONDENTS
(BY SRI MALHAR RAO, AAG AND
SRI VEERANAGOUDA MALIPATIL, HCGP FOR R1;
SRI AMRESH S. ROJA, ADVOCATE FOR R2)
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WP No. 201155 of 2017
C/W WP No. 201156 of 2017
WP No. 201157 of 2017
WP No. 201158 of 2017
WP No. 201159 of 2017
WP No. 201160 of 2017
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA, PRAYING TO ISSUE AN
APPROPRIATE WRIT MORE SO IN THE NATURE OF CERTIORARI
AND DECLARE THAT RULE 7-A OF SCHEDULE III OF THE
KARNATAKA MUNICIPAL CORPORATIONS ACT, 1976 IS ULTRA-
VIRES THE CONSTITUTION OF INDIA AND SUCH, IS NULL AND
VOID, THE COPY OF EXTRACT IS AT ANNEXURE-D. II) QUASH
THE DEMAND NOTICE DATED 20.02.2017 ISSUED BY THE
RESPONDENT NO.2 IN FILE NO.MNPV/KMV/W-NO.8/2016-17,
WHICH IS AT ANNEXURE-A. III) QUASH COMMUNICATION
DATED 28.02.2017 ISSUED BY THE RESPONDENT NO.2 IN THE
FILE NO.MNP/KMV/2016-17 WHICH IS AT ANNEXURE-C.
IN W.P.NO.201157 OF 2017:
BETWEEN:
SECAB ASSOCIATION,
ENGLISH MEDIUM PRIMARY SCHOOL-VIJAYPUR,
REPRESENTED BY THE SOCIO ECONOMIC AND
CULTURAL ASSOCIATION OF BIJAPUR,
A REGD SOCIETY,
THROUGH ITS GENERAL SECRETARY
SHRI A.S.PATIL,
AGE: 59 YEARS, R/O C/O SECAB ASSOCIATION,
NO.12, NAUBAG, VIJAYPUR-586102.
...PETITIONER
(BY SRI AMEET KUMAR DESHPANDE, SR. COUNSEL FOR
SRI GANESH S. KALBURGI, ADVOCATE)
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WP No. 201157 of 2017
WP No. 201158 of 2017
WP No. 201159 of 2017
WP No. 201160 of 2017
AND:
1. THE STATE OF KARNATAKA,
REPRESENTED BY THE PRINCIPAL SECRETARY,
DEPARTMENT OF MUNICIPAL ADMINISTRATION
AND URBAN DEVELOPMENT, M.S.BUILDING,
BENGALURU-1.
2. THE CORPORATION OF CITY OF VIJAYPUR,
REPRESENTED BY ITS COMMISSIONER,
VIJAYPUR-586 102.
...RESPONDENTS
(BY SRI MALHAR RAO, AAG AND
SRI VEERANAGOUDA MALIPATIL, HCGP FOR R1;
SRI AMRESH S. ROJA, ADVOCATE FOR R2)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA, PRAYING TO ISSUE AN
APPROPRIATE WRIT MORE SO IN THE NATURE OF CERTIORARI
AND DECLARE THAT RULE 7-A OF SCHEDULE III OF THE
KARNATAKA MUNICIPAL CORPORATIONS ACT, 1976 IS ULTRA-
VIRES THE CONSTITUTION OF INDIA, AND SUCH, IS NULL AND
VOID, THE COPY OF THE EXTRACT IS AT ANNEXURE-D. II)
QUASH THE DEMAND NOTICE DATED 20.02.2017 ISSUED BY
THE RESPONDENT NO.2 IN FILE NO.MNPV/KMV/W-NO.8/2016-
17, WHICH IS AT ANNEXURE-A. III) QUASH COMMUNICATION
DATED 23/28.02.2017 ISSUED BY THE RESPONDENT NO.2 IN
THE FILE NO.MNP/KMV/2016-17 WHICH IS AT ANNEXURE-C.
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C/W WP No. 201156 of 2017
WP No. 201157 of 2017
WP No. 201158 of 2017
WP No. 201159 of 2017
WP No. 201160 of 2017
IN W.P.NO.201158 OF 2017:
BETWEEN:
SECAB ASSOCIATION
MODERN URDU PRIMARY SCHOOL, NAVBAG-
VIJAYPUR, REPRESENTED BY THE SOCIO ECONOMIC
AND CULTURAL ASSOCIATION OF BIJAPUR,
A REGD SOCIETY, THROUGH ITS GENERAL
SECRETARY, SHRI A.S.PATIL,
AGE: 59 YEARS, R/O C/O SECAB ASSOCIATION,
NO.12, NAUBAG, VIJAYPUR-586102.
...PETITIONER
(BY SRI AMEET KUMAR DESHPANDE, SR. COUNSEL FOR
SRI GANESH S. KALBURGI, ADVOCATE)
AND:
1. THE STATE OF KARNATAKA,
REPRESENTED BY THE PRINCIPAL SECRETARY,
DEPARTMENT OF MUNICIPAL ADMINISTRATION
AND URBAN DEVELOPMENT, M.S.BUILDING,
BENGALURU-1.
2. THE CORPORATION OF CITY OF VIJAYPUR,
REPRESENTED BY ITS COMMISSIONER,
VIJAYPUR-586101.
...RESPONDENTS
(BY SRI MALHAR RAO, AAG AND
SRI VEERANAGOUDA MALIPATIL, HCGP FOR R1;
SRI AMRESH S. ROJA, ADVOCATE FOR R2)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSITTUTION OF INDIA, PRAYING TO ISSUE AN
APPROPRIATE WRIT MORE SO IN THE NATURE OF CERTIORARI
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C/W WP No. 201156 of 2017
WP No. 201157 of 2017
WP No. 201158 of 2017
WP No. 201159 of 2017
WP No. 201160 of 2017
AND DECLARE THAT RULE 7-A OF SCHEDULE III OF THE
KARNATAKA MUNICIPAL CORPORATIONS ACT, 1976 IS ULTRA-
VIRES THE CONSTITUTION OF INDIA, AND SUCH, IS NULL AND
VOID, THE COPY OF THE EXTRACT IS AT ANNEXURE-D. II)
QUASH THE DEMAND NOTICE DATED 20.02.2017 ISSUED BY
THE RESPONDENT NO.2 IN FILE NO.MNPV/KMV/W-NO.8/2016-
17, WHICH IS AT ANNEXURE-A. III) QUASH COMMUNICATION
DATED 23/28.02.2017 ISSUED BY THE RESPONDENT NO.2 IN
THE FILE NO.MNP/KMV/2016-17 WHICH IS AT ANNEXURE-C.
IN W.P. NO.201159 OF 2017:
BETWEEN:
SECAB ASSOCIATION,
P.U. COLLEGE FOR BOYS-VIJAYPUR,
REPRESENTED BY THE SOCIO ECONOMIC AND
CULTURAL ASSOCIATION OF BIJAPUR
A REGD. SOCIETY, THROUGH ITS
GENERAL SECRETARY,
SHRI A.S.PATIL, AGE: 59 YEARS,
R/O C/O SECAB ASSOCIATION,
NO.12, NAUBAG, VIJAYPUR-586102.
...PETITIONER
(BY SRI AMEET KUMAR DESHPANDE, SR. COUNSEL FOR
SRI GANESH S. KALBURGI, ADVOCATE)
AND:
1. THE STATE OF KARNATAKA,
REPRESENTED BY THE PRINCIPAL SECRETARY,
DEPARTMENT OF MUNICIPAL ADMINISTRATION AND
URBAN DEVELOPMENT,
M.S.BUILDING, BENGALURU-1.
2. THE CORPORATION OF CITY OF VIJAYPUR,
REPRESENTED BY ITS COMMISSIONER,
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C/W WP No. 201156 of 2017
WP No. 201157 of 2017
WP No. 201158 of 2017
WP No. 201159 of 2017
WP No. 201160 of 2017
VIJAYPUR-585102.
...RESPONDENTS
(BY SRI MALHAR RAO, AAG
SRI VEERANAGOUDA MALIPATIL, HCGP FOR R1;
SRI AMRESH S. ROJA, ADVOCATE FOR R2)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSITTUTION OF INDIA, PRAYING TO ISSUE AN
APPROPRIATE WRIT MORE SO IN THE NATURE OF CERTIORARI
AND DECLARE THAT RULE 7-A OF SCHEDULE III OF THE
KARNATAKA MUNICIPAL CORPORATIONS ACT, 1976 IS ULTRA-
VIRES THE CONSTITUTION OF INDIA, AND SUCH, IS NULL AND
VOID, THE COPY OF THE EXTRACT IS AT ANNEXURE-D. II)
QUASH THE DEMAND NOTICE DATED 20.02.2017 ISSUED BY
THE RESPONDENT NO.2 IN FILE NO.MNPV/KMV/W-NO.8/2016-
17, WHICH IS AT ANNEXURE-A III) QUASH COMMUNICATION
DATED 23/28.02.2017 ISSUED BY THE RESPONDENT NO.2 IN
THE FILE NO.MNP/KMV/2016-17 WHICH IS AT ANNEXURE-C.
IN W.P.NO.201160 OF 2017:
BETWEEN:
SECAB ASSOCIATION
ENGINEERING COLLEGE-VIJAYPUR,
REPRESENTED BY THE SOCIO ECONOMIC AND
CULTURAL ASSOCIATION OF BIJAPUR
A REGD. SOCIETY,
THROUGH ITS GENERAL SECRETARY
SHRI A.S.PATIL, AGE: 59 YEARS,
R/O C/O SECAB ASSOCIATION,
NO.12, NAUBAG, VIJAYPUR-586102.
...PETITIONER
(BY SRI AMEET KUMAR DESHPANDE, SR. COUNSEL FOR
SRI GANESH S. KALBURGI, ADVOCATE)
AND:
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WP No. 201155 of 2017
C/W WP No. 201156 of 2017
WP No. 201157 of 2017
WP No. 201158 of 2017
WP No. 201159 of 2017
WP No. 201160 of 2017
1. THE STATE OF KARNATAKA,
REPRESENTED BY THE PRINCIPAL SECRETARY,
DEPARTMENT OF MUNICIPAL ADMINISTRATION
AND URBAN DEVELOPMENT, M.S.BUILDING,
BENGALURU-1.
2. THE CORPORATION OF CITY OF VIJAYPUR,
REPRESENTED BY ITS COMMISSIONER,
VIJAYPUR-586101.
...RESPONDENTS
(BY SRI MALHAR RAO, AAG
SRI VEERANAGOUDA MALIPATIL, HCGP FOR R1;
SRI AMRESH S. ROJA, ADVOCATE FOR R2)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA, PRAYING TO ISSUE AN
APPROPRIATE WRIT MORE SO IN THE NATURE OF CERTIORARI
AND DECLARE THAT RULE 7-A OF SCHEDULE III OF THE
KARNATAKA MUNICIPAL CORPORATIONS ACT, 1976 IS ULTRA-
VIRES THE CONSTITUTION OF INDIA, AND SUCH, IS NUL AND
VOID, THE COPY OF THE EXTRACT IS AT ANNEXURE-D. II)
QUASH THE DEMAND NOTICE DATED 20.02.2017 ISSUED BY
THE RESPONDENT NO.2 IN FILE NO.MNPV/KMV/W-
NO.7B/2016-17, WHICH IS AT ANNEXURE-A. III) QUASH
COMMUNICATION DATED 23.02.2017 ISSUED BY THE
RESPONDENT NO.2 IN THE FILE NO.MNP/KMV/2016-17 WHICH
IS AT ANNEXURE-C.
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WP No. 201157 of 2017
WP No. 201158 of 2017
WP No. 201159 of 2017
WP No. 201160 of 2017
THESE PETITIONS ARE COMING ON FOR PRELIMINARY
HEARING IN 'B' GROUP THIS DAY, THE COURT MADE THE
FOLLOWING:
ORDER
The petitioners in all these petitions are private educational institutions governed by a set of bye laws which are duly registered under the provisions of the Karnataka Societies Registration Act, 1960. The petitioners possessed properties lying within the limits of the Municipal Corporation and by virtue of Section 110 of the Karnataka Municipal Corporations Act, 1976 (henceforth referred to as 'Act of 1976') they were exempt from payment of property tax. The State Government, in exercise of its power under Section 110(2), amended Schedule III to the Act of 1976 and incorporated Entry 7- A, whereby it authorized the Municipal Corporation to collect service charges from properties that were exempt from payment of property tax. The Municipal Corporation based on the above, have addressed notices to the
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 petitioners to pay the service charges from the year 2004 and onwards. It is these notices that have been challenged in these petitions.
2. Learned Senior Counsel appearing for the petitioners contends that Schedule III to the Act of 1976, is relatable to Section 103 of the Act of 1976, which deals with taxes that could be imposed by the Corporation based on the general or special orders of the Government. He submits that there is no provision for collection of services tax under Section 103 of the Act of 1976. However, he contends that power, if any, to collect the service charges can be traced to Section 110(2) of the Act of 1976, which reads as follows:
"Notwithstanding the exemptions granted under this section it shall be open to the corporation to collect service charges for providing civic amenities and for general or special services rendered at such rates as may be prescribed."
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3. He contends that since the service charges are to be collected for providing civic amenities and for general or special services, there should be a quid pro quo and there cannot be a blanket order directing the petitioners to pay 25% of the property tax payable on the properties of the petitioner as service charges. He further contends that under Entry 7-A in Schedule III to the Act of 1976, the State Government has fixed 25% of the property tax as service charges though there is no intelligible differentia for fixing the rate of service charges at 25%. He further contends that the services provided to the petitioner is similar to the services provided to various other persons living within the municipal area and therefore, the petitioners cannot be singled out for payment of 25% of the property tax without specifying the nature of civic amenities or special or general services which is provided to the petitioners. He further submits that the impugned notices were issued in the year 2017
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 demanding tax from the period 2002-03 in 2016-17. He therefore contends that the Municipal Corporation is also bound by the law of limitation and hence, it cannot attempt to recover the service charges that were long due and barred by the law of limitation. He also contends that the Municipal Corporation was constituted in the year 2014 and therefore, it cannot demand service charges retrospectively from 2004, when it did not provide any civic amenity or general and special services. He further submits that the demand notice is issued without specifying the tax leviable on the property and the pro rata service charges payable by the petitioner. He therefore contends that the demand notices itself are defective and are liable to be set aside.
4. He further contends that Entry 7-A in Schedule III of the Act of 1976, exempts the payment of service charges in respect of places of public worship and therefore, the petitioners are discriminated inasmuch as,
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 the benefit is not extended to the petitioners who were exempt from payment of property tax under Section 110(2) of the Act of 1976. Therefore, he contends that the petitioners should also be extended the benefit which is extended to the properties of places of public worship.
5. Per contra, the learned counsel for the Municipal Corporation submitted that the service charges is not akin to a tax and Section 110(2) of the Act of 1976 specifically provides that the service charges could be levied and collected for providing civic amenities and for general or special services rendered at such rates as may be prescribed. He submits that the Municipal Corporation is endowed with myriad functions as set out under Section 58 of the Act of 1976 and also performs various other functions within the municipal area. He therefore, submits that in order to enable the Municipal Corporation to effectively provide the civic amenities and other general or special services, provision is made under Section 110(2) of
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 the Act of 1976 to collect the charges. He submits that Entry 7-A of the Act of 1976 in Schedule III was inserted prescribing the rate of service charges to be collected and the basis of such collection. He submits that though there is no reason for prescribing 25% of the property tax leviable, but contends that there is no other means to determine what should be the rate of service charges payable by the property owners having properties within the municipal area who are exempt from payment of property tax. Thus, he contends that the State Government is not deprived of the power to impose service charges and Entry 7-A of the Schedule-III is in furtherance of such power of State Government. He relied upon the judgment of the Apex Court in the case of Union of India and others Vs. State of Uttar Pradesh reported in (2007) 11 SCC 324, where the Apex Court was considering the distinction between a fee and tax. The Apex Court held as under:
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 "From a perusal of Article 285 it is clear that no property of the Union of India shall be subject 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 is in the nature
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 of a fee for the services rendered by the Jal Sansthan. What is contemplated under Article 285 is taxation on the property of the Union. In our opinion the Jal Sansthan is not charging any tax on the property of the Union; what is being charged is a fee for services rendered to the Union through the Railways. Therefore, it is a plain and simple charge for service rendered by the Jal Sansthan for which the Jal Sansthan has to maintain staff for regular supply of water as well as for sewerage system of the effluent discharge by the railway over their platform or from their staff quarters. It is in the nature of a fee for service rendered and not any tax on the property of the Railways.
11. The distinction has to be kept in mind between a tax and a fee. Exemption under Article 285 is on the levy of any tax on the property of the Union by the State, and exemption is not for charges for the services rendered by the State or its instrumentality which in reality amounts to a fee. In this connection, a reference was made to the decision of this Court in Sea Customs Act (1878), S.20(2) [ AIR 1963 SC 1760]. This was a case in which a reference was made by the
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 President of India with regard to levy of custom and excise duties on the State under Article 289 of the Constitution of India wherein Sinha, CJ, Gajendragadkar, Wanchoo and Shah,JJ answered the question at paragraph 31 as follows :
"(31). For the reasons given above, it must be held that the immunity granted to the States in respect of Union Taxation does not extend to duties of customs including export duties or duties of excise. The answer to the three questions referred to us must, therefore, be in the negative."
6. He therefore contends that the demand of service charges cannot be equated with the demand of property tax and therefore, the challenge to Entry 7-A in Schedule III of the Act of 1976 is without any basis and therefore, these petitions are liable to be dismissed.
7. I have considered the submissions made by the learned Senior counsel for the petitioner as well as the
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 learned counsel for the contesting respondent - Municipal Corporation.
8. In all these petitions, the challenge is to the constitutional validity of Entry No.7-A in Schedule III of the Act of 1976 by which, the service charges for providing civic amenities to properties exempt from payment of property tax was fixed at 25% of the property tax leviable on such lands and buildings.
9. A Municipal Corporation under the provisions of the Act of 1976, is entitled to impose tax as provided under Section 103 of Chapter X of the Act of 1976. Section 110 of the Act of 1976 allows exemption of certain categories of lands and buildings from the liability to pay property tax of which, the lands and buildings used for educational purposes by recognized educational institutions is one such entity. Section 110(2) of the Act of 1976 invests power in the Corporation to collect service charges for providing civic amenities and for general and
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 special services rendered at such rates as may be prescribed notwithstanding the exemption granted under Section 110(1) of the Act of 1976. The petitioners have not challenged the Section 110(2) of the Act of 1976 but have chosen to challenge the Entry relating to the rate of such service charges inserted in Schedule III by Entry 7-A. It is trite that the authority of a local body to impose and collect a fee or a charge is derived from a law made by the legislature of a State and it is trite that payment of service charges is neither a tax nor a fee but is in lieu of providing specific services or general services or civic amenities. A perusal of Section 58 of the Act of 1976 shows the kind of general services that a Corporation is bound to provide to the residents within its limits. In addition, there are several other functions, which are performed by the Corporation such as provision of water and evacuation of sewage, provision of drainage, public privies, maintenance and repair of streets, construction of subway bridges,
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 cleaning of streets and removal of rubbish and filth, forming new streets, removal of encroachment of public streets and properties of the Corporation, removal of dangerous structures, provision of public markets, slaughter houses, cart stands, removal of compost of animals and prevention and abatement of dangerous diseases, providing burial grounds and place for disposal of dead body and provision for crematoriums etc., These are all special services that are provided by the Corporation. In the case on hand, the petitioners are all educational institutions, who are completely exempt from payment of property tax. Nonetheless, the petitioners continued to avail these special services provided by the Corporation from time to time. The petitioners having accepted the exemption under Section 110(1) of the Act of 1976 have tacitly accepted their liability to pay service charges as provided under Section 110(2) of the Act of 1976. They therefore, are estopped from contending that the demand
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 of service charges is beyond the statute and/or that the Corporation has no power to impose and collect such a charge. They also cannot contend that the imposition and collection of service charges is akin to a tax or a fee. It is evident that provision of these civic amenities and special services mentioned above is itself is quid pro quo for the charges demanded by the Corporation. As a matter of fact, a Division Bench of Kerala High Court in the case of Food Corporation of India, Alleppey vs. Alleppey Municipality and others [AIR 1996 KER 241], was considering a case of collection of service charge on a property belonging to the Food Corporation of India. The Division Bench repulsed the contention of the petitioner therein that the property of the Food Corporation of India being a property of the Union of India is exempt from payment of tax under Article 285 of the Constitution of India. It held that even if provision is not made in the concerned Municipal Corporation Act for collecting the
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 service charges, in view of Section 70 of the Indian Contract Act, 1872, service charge is nothing but a charge for the services availed and therefore, held that even a property belonging to the Union of India is not exempt from payment of service charge.
10. In the Act of 1976, the Corporation is vested with the right to demand and collect service charges. Though it is contended by the learned Senior counsel for the petitioners that Entry No.7-A in Schedule III of the Act of 1976 is violative of provisions of the Constitution of India, the learned Senior counsel fairly conceded that unless the charging Section 110(2) of the Act of 1976 is challenged and whittled down, a mere prescription of the rate of service charges in Entry No.7-A of Schedule III cannot be challenged.
11. One of the contentions raised by the learned Senior counsel for the petitioners was that the demand notice is vague as there was no quantification as to what
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 was the property tax payable and hence, mere demand to pay 25% of the property tax, was unenforceable being vague.
12. The mechanism for determining the property tax is now incorporated in Sections 108 and 109 of the Act of 1976 and the rates at which the property tax are collectible, are enlisted in Form - A and therefore, it is for the petitioners to calculate the property tax payable and credit 25% of it into the account of the Corporation towards service charges demanded by the Corporation.
13. The other contention raised by the learned Senior counsel for the petitioner is that the Municipal Corporation in these cases was all formed in the year 2014, prior to which these areas were governed by a Municipality where provisions analogous to Section 110(2) of the Act of 1976 was not found in the Karnataka Municipalities Act, 1964 and therefore, the Municipal
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 Corporation in these cases is not entitled to collect service charges prior to the year 2014.
14. A perusal of Section 94(2) of the Karnataka Municipalities Act, 1964 does indicate that there was a provision analogous to Section 110(2) of the Act of 1976 providing for collection of service charges for providing civic amenities and for general and special services rendered at such rates as may be prescribed. However, Schedule - I, which related to Section 94 of the Karnataka Municipalities Act was omitted by Act No.28 of 2001 with effect from 19.11.2001. Therefore, there was no prescription of the rates at which the service charges were collectible during the existence of a Municipality. The Municipal Corporation in these cases was admittedly constituted in the year 2014 and hence, the petitioners were exempt from payment of service charges from the year 2001 till the year 2014. To this extent, the
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 contention of the learned Senior counsel deserves acceptance.
15. Consequently, though the demand notice issued by the Municipal Corporation cannot be assailed by the petitioners but yet the entitlement of the Municipal Corporation to demand and collect service charges prior to its constitution, is liable to be set at naught.
16. In that view of the matter, these petitions are allowed in part. The challenge to the power of the Municipal Corporation to demand and collect service charges at 25% of the property tax is rejected. The demand made by the Municipal Corporation against the petitioners to pay service charges shall be restricted from the year 2014 and onwards. The petitioners shall calculate the property tax payable on their respective properties from the year 2014 and credit 25% of it towards service charges payable to the Municipal Corporation after deducting the amount already deposited before this Court.
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NC: 2024:KHC-K:3733 WP No. 201155 of 2017 C/W WP No. 201156 of 2017 WP No. 201157 of 2017 WP No. 201158 of 2017 WP No. 201159 of 2017 WP No. 201160 of 2017 It is open for the Municipal Corporation to verify the correctness of such payment.
The Municipal Corporation in these cases is reserved liberty to make appropriate application before this Court within a period of three months from today to indicate the liability of the petitioners in each of these cases from the year 2014 and onwards and thereupon the amount in deposit shall be released appropriately.
Sd/-
JUDGE RSP/PMR CT:SI LIST NO.: 1 SL NO.: 30