Karnataka High Court
Secab Association vs The State Of Karnataka And Anr on 7 June, 2024
-1-
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)
-2-
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
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.
-3-
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 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)
-4-
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
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)
-5-
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
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.
-6-
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 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
-7-
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
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,
-8-
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
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:
-9-
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
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.
- 10 -
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
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
- 11 -
NC: 2024:KHC-K:3733
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."
- 12 -
NC: 2024:KHC-K:3733
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
- 13 -
NC: 2024:KHC-K:3733
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,
- 14 -
NC: 2024:KHC-K:3733
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
- 15 -
NC: 2024:KHC-K:3733
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:
- 16 -
NC: 2024:KHC-K:3733
"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
- 17 -
NC: 2024:KHC-K:3733
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
- 18 -
NC: 2024:KHC-K:3733
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
- 19 -
NC: 2024:KHC-K:3733
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
- 20 -
NC: 2024:KHC-K:3733
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,
- 21 -
NC: 2024:KHC-K:3733
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
- 22 -
NC: 2024:KHC-K:3733
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
- 23 -
NC: 2024:KHC-K:3733
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
- 24 -
NC: 2024:KHC-K:3733
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
- 25 -
NC: 2024:KHC-K:3733
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
- 26 -
NC: 2024:KHC-K:3733
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.
- 27 -
NC: 2024:KHC-K:3733
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
