Judgment

RAY, J. :- The only question which falls for determination in these two appeals by certificate is whether the respondent Municipality is entitled to levy and collect taxes on 32 blocks of buildings some constructed after 31 March, 1937 and some after 25 January 1950.

2. The buildings are situated within the municipal limits of the Sahibganj Municipality in the State of Bihar.

3. Pursuant to Section 135 of the Indian Railways Act, 1890 referred to as the 1890 Act, the Governor General in Council by a Railway Department, Railway Board notification No. 225 dated 24 August, 1911 declared that the administration of East India Railway shall be liable to pay in aid of the funds of the local authorities set out in the Schedule thereto annexed, the taxes specified in the second column thereof. In the Schedule the names of various local authorities are set out. Sahibganj is one such. In the second column the taxes are mentioned. In respect of Sahibganj Municipality the taxes specified are House rate and latrine fees.

4. In 1961 the Sahibganj Municipality revised the valuation of the buildings and premises with effect from 1 April, 1961. The 32 blocks of buildings forming subject matter of these two appeals were assessed with effect from the fourth quarter of 1965-66.

5. It is common ground that these 32 blocks of buildings and premises were constructed some after 31 March, 1937 and some after 25 January, 1950.

6. The appellant contended that these 32 blocks of buildings could not be made liable to pay the municipal tax by virtue of the provisions contained in Section 154 of the Government of India Act, 1935 and Article 285 of the Constitution.

7. Part III of the Government of India Act, 1935 referred to as the 1935 Act came into force on 1 April, 1937. Under Section 154 of the 1935 Act all property vested in His Majesty for purposes of the Federation shall, save in so far as any Federal law may otherwise provide, be exempt from all taxes imposed by, or by any authority within, a Province or Federal State. The proviso to Section 154 of the 1935 Act states that until any Federal law otherwise provides, any property so vested which was immediately before the commencement of Part III of the 1935 Act liable or treated as liable, to any such tax shall, so long as that tax continues, continue to be liable, or to be treated as liable thereto.

8. Article 285 of the Constitution also provides that the property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State. Clause (2) of Article 285 states that nothing in Clause (1) shall, until Parliament by law otherwise provides, prevent any authority within a State from levying any tax on any property of the Union to which such property was immediately before the commencement of this Constitution liable or as treated as liable, so long as that tax continues to be levied in that State.

9. The High Court held that the Railways (Local Authorities Taxation) Act, 1941 referred to as the 1941 Act was a federal law and Section 4 of the 1941 Act thereof rendered the buildings liable to taxation. The reasons given by the High Court were these. The notification issued by the Government in 1911 under the 1890 Act continued by virtue of the provisions contained in Section 4 of the 1941 Act. The 1911 notification was not in respect of any particular property. Therefore the railway properties whether in existence before 1 April 1937 or coming into existence after that date were liable to pay taxes.

10. Section 4 of the 1941 Act provided as follows : The Central Government may by notification revoke or vary any notification issued under clause (1) of Section 135 of the 1890 Act.Where a notification is so revoked any liability arising out of the notification to pay any tax to the local authority shall cease. Were a notification is so varied the liability arising out of the notification shall be varied accordingly.