Holding

Section 135 of the Indian Railways Act, 1890 is saved under Article 285(1) of the Constitution, permitting the Central Government to declare railway administrations liable to local taxes, and the High Court’s decision was erroneous.

Summary

The Union of India filed a writ petition under Article 226 challenging demand notices issued by the Purna Municipal Council for service charges of Rs.28,400 on railway property for the years 1954‑1960. The Union relied on Article 285 of the Constitution read with Section 135 of the Indian Railways Act, 1890, which permits the Central Government to declare a railway administration liable to pay local taxes by notification. The Bombay High Court dismissed the petition, holding that Section 135 could not override the saving clause of Article 285(2). On appeal, the Supreme Court held that Section 135 is saved under Article 285(1), allowing the Central Government to make the railway liable to tax, and that the High Court’s reasoning was erroneous. Consequently, the appeal was allowed, the High Court judgment set aside, and a writ was issued restraining the municipal council from demanding the service charges.

Issues considered

Whether Section 135 of the Indian Railways Act, 1890 is saved under Article 285(1) of the Constitution and can therefore permit taxation of railway property by a local authority.
Whether the High Court erred in holding that Section 135 cannot have overriding effect against the saving clause of Article 285(2).

Legislation cited

Constitution of Indias. 285(1), s. 285(2)
General Clauses Act, 1887
Indian Railways Act, 1890s. 135

Subjects

Union of Indiamunicipal taxservice chargesrailway propertyArticle 285Section 135taxationcentral government notificationconstitutional lawwrit petitionArticle 226

Judgment

uNION Of'. INDIA A·
v.
PURNA MUNICIPAL COUNCIL AND ORS.

SEPTEMBER 19, 1991

(MADAN MOHAN PUNCHHI° AND K. RAMASWAMY, JJ.] · .B

Indian Railways Act, 189()-Section 135 read .with ATticle 285 of the ,
. Constitution of India, 195~unicipal Council claiming tax by way of "Se,..
~---- vice chmgcs" -Leiality of. ·
The Unien ~f India: the appellant, approached the High Court under , C .
· Article 226.of the Constitution, challenging·notices of demand issued by
the Munidpal Council, respondent No.1, claiming tax to the tune of.
RS.28,400 by way of "Service c_barges" ·due for the period 1954 to 1960,
under Article 285 of the Constitution read with Section 135 of the Indian
·Railways Act, 1890. , · ·
D
The High Court dismissed the writ petition·. negativing the claim, .
"""\ · against which, thi~ appea_I by special leave was filed.

Allowing the appeal, this Court, .

HELD 1. Section 135 of ~he Indian Railways· Act, 1890 gets saved ·E
under Article 285~1) of the Constitution· itself. The said Article proVides
t"-"at property of the Union shall,. save in s~ far as· Parliament may by law
otherwise provide, be exempt from alttaxes impoSed by the State or by.any .
authorlty within a State. (185 A·B] ' . .
F
• 2. Section 13"5 of the Railways Act permits taxation of Railways by
, the 19C&I ·autllority in ~e manner gjven therein; the C~ntral Govemmen1
being the controlling and the regulating autbol,'ity per.milting liability at-a
.gjven po~nt of time, its extent and manner. 1'h:e Indian Railways Act being
a central.enactment has no role to play in sub-Article (2) of.Article 285, for ·
that is a sphere in Which th_e State legjslation opera~. [186 ~-BJ . G
3. The reasoning of the High Court to oust the appllcabUity of
~on iJS of the. Indian· Railnys Act on ihe test of sub-Article (2). of
Article 285 was totally misplaced, as also in not venturing to create room ·
for'. it in sub-Artide (1) of ~cle 285. The interplay of th~ constitutional
183 · · H
184 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A and legal provisions being well cut and well defined required no marked
elaboration to stress the point. [186 8-C] ')--
CIVIL APPELIATE JURISDICTION: Civil Appeal No.903of1978.

From the Judgment and Order dated 5/6-12-1977 of the Bombay
High Court in Special Civil Application No.1937 of 1971.
B V.C. Mahajan, B.K. Prasad, Smt. Sangeeta Aggarwal and C.V. Subba
Rao (NP) for the Appellant.
K.R. Chowdhary for the Respondent.
The following Order of the Court was delivered
C This appeal by special leave is directed against the judgment and
order of the Bombay High Court passed in Special Civil Application No.
1937 of 1971 decided on December 5, 1977.
The Union of India, the appellant herein, itpproached the High
Court under Article 226 of the Constitution challenging notices·of demand
issued by the Municipal Council, Puma, respondent No. 1 herein, claiming
D tax to the tune of Rs. 28,400/- by way of "Service charges" due for the
period 1954 to 1960. The claim of the Union of India primarily was based 'r-
under Article 285 of the Constitution read with Section 135 of the Indian
Railways Act, 1890. The High Court interplaying the two provisions nega-
tived the claim of the appellant by holding as follows: ·
"In terms of Article 285(2) these properties will continue to be
E liable to such taxes 'until Parliament by law ctherwise provides.
Mr. Govilkar has not drawn our attention to any specific law
made by the Parliament providing other.wise. He, however,
relied on section 135 of the Indian Railways Act, but, as indi-
cated earlier, provisions of section 135 cannot have any over-
riding· effect against the continuance of such laws when
F authorised by Article 285 (2) of the Constitution. It is not
possible for us to hold that Railways Act is an Act made by
the Parliament as contemplated under sub-Article (2) of Ar-
ticle 285 of the Constitution"
The High Court further observed that:
G "As. Section 135 · of the Railways Act is now substituted by the
corres1:xmding provisions of the above enactment, it is unneces-
sary to consider the contention of Mr. Govilkar as to effect of the
absence of any Notification. We have already indicated how sec-
tion 135 or the corresponding section of the new enactment can
have no overriding effect as against the . saving of laws con-
H templated under Article 285 (2) of the Constitution.''
U.0.1 v. PURNA MUNICIPAL COUNCIL 185

The view expressed by the High Court is obviously erroneous. Sec- A
~ tion 135 of the Indian Railways Act, 1890 gets saved under Article 285(1)
of the Constitution itself. The said Article provides that property of the
Union shall, save in so far as Parliament may by law otherwise provide, be
exempt from all taxes imposed by the State or by any authority within a
State. Section 135 of the Railways Act provides as Un.der:
B
"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 from railways
administrations in aid of the funds of local authorities, namely:-
C
(1) A railway administration shall not be liable to pay
any tax in aid of the funds of any local authority unless the
(Central Government) has, by notification in the official
gazette, declared the railway administration to be liable to pay
the tax.
D
(2) While a notification of the (Central Government),
under clause (1) of this Section is in force, the railway ad-
tninistration shall be liable to pay to the local authority either
the tax mentioned in the notification or in lieu thereof such
sum, if any as an officer appointed in this behalf by the
(Central Government ) may having regard to all the cir- E
cumstances of the case, from time to time determine to be fair
and reasonable.

(3) The (Central Government) may at any time revoke or vary
a notification under clause (1) of this Section:
F
(4) Nothing in this Section is to be construed as debarring any
railway administration from entering into contract with an-y
local authority for the supply of water or light or for the
scavenging of railway premises or for any other service which
the local authority may be rendering or be prepared to render
within any part of the local area under its control. G
(5) 'Local Authority' in this section means a local authority as
defined in the General Clauses. Act, 1887 and includes any
authority legally entitled to or entrusted with the control or
management of any fund for the maintenance of watchmen or
for conservancy of a river". H
186 SUPREME COURT REPORTS (1991) SUPP. 1 S. C. R.

A The aforesaid provision, existing as it is, in terms permits taxation of
Railways by the local authority in the manner given therein; the Central ".,.....-
Government being the controlling and the regulating authority pe~tting
liability at a given point of time, its extent and manner. The Indian Rail-
ways Act being a central enactment has no role to play in sub-Article (2) of
Article 285, for that is a sphere in which the State legislation operates. The
B reasoning of the High Court to oust the applicabjJity of Section 135 of the
Indian Railways Act on the test of sub-Article (2) of Article 285 was totally
misplaced, as also in not venturing to create room for it in sub-Article (1) -
of Article 285. The interplay of the constitutional and legal provisions ~-
being well cut and well defined requires no marked elaboration to stress ·
the point. Accordingly, we allow this appeal, set aside the judgment and
C order of the High Court and issue the writ direction asked for in favour of
the Union of India restraining t.he respondent council from raising
demands on the railway in regard to service charges. We make it clear that.
the ·rights of the local· authority as flowing under Section 135 of the Indian
Railways Act, 1890 stand preserved in the event of the Central Govern-
ment moving into the matter, if not already moved. In the circumstances of
D the case, however, there will be no order as to costs.
'r.
V:P.R Appeal allowed.