Summary
The Supreme Court held that Union-owned godowns occupied by FCI were exempt from municipal property tax under Article 285(1). The post-Constitution constructions did not satisfy Article 285(2)’s saving for existing taxation, and the occupier-liability provision could not defeat the constitutional immunity. FCI remained liable for actual services, with a Section 144 inquiry left open. The ruling distinguished property owned by FCI itself, which enjoys no such immunity.
Issues
- Whether the Union-owned premises occupied by FCI were exempt from property tax.
- Whether the pre-Constitution municipal enactment or occupier-liability provision overcame Article 285.
- Whether service charges and valuation proceedings remained permissible.
Provisions considered
- Article 285, Constitution of IndiaUnion ownership attracted exemption; the particular post-Constitution property did not meet the saving in clause (2). (¶¶ 11, 18, 27, 28, 30, 31, 34, 37)
- Section 146(1), Mumbai Municipal Corporation Act, 1888Primary occupier liability could not impose the exempt property tax contrary to constitutional protection. (¶¶ 9, 35, 36, 37)
- Section 144, Mumbai Municipal Corporation Act, 1888An inquiry to determine rateable value remained open alongside liability for services rendered. (¶¶ 9, 44, 45, 47)
Held
- The property, including the godowns constructed by the Government, remained Union-owned; that status was not disputed. Decisions denying immunity to FCI’s own property concerned a distinct legal entity and did not control these premises. (¶¶ 17, 18, 32, 33, 34, 38, 39, 40)
- Article 285(2) preserves qualifying existing taxation of the particular property, not a general power under a pre-Constitution enactment to tax later Union property. These constructions arose only after 1964 and had not been liable or treated as liable immediately before the Constitution; the saving therefore did not apply. (¶¶ 24, 25, 26, 27, 28, 30, 31)
- Section 146 must be read consistently with Article 285. Where the property tax itself is constitutionally exempt, assigning primary liability to an occupier cannot make the immunity ineffective. FCI here was permitted to use the godowns for public distribution storage, without any pleaded lease or rent arrangement. (¶¶ 35, 36, 37)
- Article 285 does not exclude charges genuinely levied for services such as water supply or sewerage. FCI accepted service-charge liability, and the municipal respondents could undertake the statutory valuation inquiry under Section 144. (¶¶ 44, 45, 46, 47)
Result
Appeals allowed; High Court judgments set aside and FCI held exempt from the disputed property tax. Liability for services preserved, with Section 144 valuation inquiry open. Parties to bear their own costs.