IMPORTANT POINT
Govt. circular cannot have an overriding effect on constitutional provisions.

JUDGMENT

Sema, J.-This appeal, preferred by the Municipal Corporation, Amritsar is against the judgment of the High Court dated 17th July, 2001, allowing the writ petition, filed by the respondents herein.

2. The appeal arises out of the following facts:

The Posts and Telegraphs Department has nine buildings within the limits of Amritsar Municipal Corporation (hereinafter referred to as the Corporation ). The appellant Corporation had issued notices to the respondents for payment of service charges for providing various services like water supply, street lighting, drainage and approach roads to the land and buildings in the municipal area. However, the respondents did not make any payment contending that the respondent-Department, being of Central Government, the properties owned by them are exempt from all taxes. Several demand notices, without any result, culminated in the notice dated 24.10.2000. Being aggrieved by the aforesaid notice, the respondents had taken the matter before the High Court, which was allowed and the aforesaid notice was set aside. The High Court, having noticed the earlier judgment of the Division Bench dated 19th December, 2000, held inter-alia that the demand of service charges made by the Municipal Corporation was violative of Article 285 of the Constitution.

We have heard learned counsel for the parties.

The questions revolve around for determination in this appeal are:

(a) Whether the demand for service charges, so made by the Corporation against the respondents is by way of service charge or by way of tax ?

(b) If it is held that the demand so made was by way of tax , whether the same is violative of Article 285(1) of the Constitution of India.

3. Before we advert further we may, at this stage, peruse the demand notice dated 24.10.2000. It reads:

"The Joint Commissioner

Municipal Corporation,

AMRITSAR.

To

The Assistant Engineer, Civil

Postal Civil Sub Divisions,

Jalandhar City.

No. J.C/I.S./319 Dated 24.10.2000

Sub : Payment of Service Charges of the properties owned By P & T Department, Amritsar.

............

Whereas a notice of demand in respect of service charges in lieu of tax on land and Buildings with regards to the following properties owned by P & T Department Amritsar for the period mentioned against each property, was served on the Senior Superintendent of Post Offices Amritsar vide letter Nos. PT/IS/307 dt. 19.7.95, EO/TS/252 dt. 23.5.97, EO/TS/1274 dt. 19.3.97, AC/TS/254 dt. 9.9.98 & No. AC/TS/627 dt. 6.1.99:

S.No. Name of Deptt. & Year Amount Location

1. General Post Office & Telegraph Office & Quarters New/XIII, Amritsar

2. Post Office, Kt. Mohar Singh, Amritsar

3. Post Office, KT Bhai Sant Singh, New/X, Amritsar

4. Post Office, Durgiana Mandi New/XVI, Amritsar

5. Post Office, Chhoharta, New/XXII, Amritsar

6. Post Office, Hide Market New/XV, Amritsar

7. Post Office, KT. Sher Singh, New/XII, Amritsar

8. Post Office, Kairon Market New/1, Amritsar

9. Post Office, Chowk Phagwara

Whereas Service Charges in respect of properties of Central Government are payable by the respective Deptt. to the Municipal Corporation of the rates varying from 33.1/25% to 75% as decided by the Government of India, Ministry of Finance in its letter No. 14(1)P/52-I dated 10.5.54 and No. 4(7)P/65, dated 29.3.67 (copy enclosed). According to para (ii) (c) of the letter dated 29.3.67, in respect of colonies where all the services normally are provided by the Municipal Corporation to the residents of other areas are being availed of, Service charges will be paid at 25% of the property tax rate realized from the private individuals. The next ratable value/annual value for the purpose of these instructions shall be 9% of the capital value of the property concerned both in respect of residential and non-residential properties.

Whereas the