Central Government Establishments are constitutionally protected from State Taxation under Article 285 of the Constitution, and local bodies cannot demand property tax from them.

Heard both sides.

2. The petitioner in both the Writ Petitions is the Principal Accountant General (Civil Audit), Tamil Nadu and Pondicherry. Their office is situated at No.361, Anna Salai, Chennai 18. The building is known as Lekha Pariksha Bhavan.

3. In both the Writ Petitions the challenge is to the demand notices dated 12. 2003 and 13. 20004 issued by the respondent City Municipal Corporation, Chennai, demanding property tax from the petitioner Establishment for the various half years set out therein. A consequential direction is also sought for directing the Corporation to refund a sum of Rs.41,61,550/-which has been illegally collected from the petitioner. The Writ Petitions were admitted on 29. 2005 and notice was ordered to the respondent. Pending the Writ Petitions, this Court granted an interim injunction on the same date. Despite notice on the Writ Petitions, the respondent Corporation had not filed any counter affidavit resisting the claim made by the petitioner.

4. Mr.T. Ravikumar, learned counsel for the petitioner stated that the petitioner is Central Government Establishment and it is constitutionally protected under Article 285 of the Constitution of India from any State Taxation. Article 285 of the Constitution reads as follows:

"285. Exemption of property of the Union from State taxation.__ (1) 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.

(2) 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 treated as liable, so long as that tax continues to be levied in that State."

5. The said provision came to be considered in relation to Local Bodies claiming taxes/service charges from such Central Government Establishments. The Supreme Court vide its Judgment in UNION OF INDIA AND ANOTHER Vs. RANCHI MUNICIPAL CORPORATION, RANCHI AND OTHERS reported in (1996) 7 SCC 542, after referring to its earlier Judgment in UNION OF INDIA v. PURNA MUNICIPAL COUNCIL reported in (1992) 1 SCC 100, has held as follows:

"4. The controversy is no longer res integra. This Court in Union of India v. Purna Municipal Council had held that Section 135 of the Railways Act is subject to the provisions of Article 285 of the Constitution. Therefore, the respondent Municipality was restrained from demanding any payment by way of service charges from the Railways. Shri M.P.Jha, learned counsel appearing for the Municipality, sought to rely on clause (4) of Section 135 of the Railways Act which contemplates a contract between the Central Government and the Municipality and payment thereof on the basis of the said contract. In this case, the contract now sought to be relied upon is only to relieve distress warrant pending disposal of the dispute in the High Court. Therefore, it cannot be construed that there is any contract between the Union of India and the Municipality. In view of the fact that the Municipality has no right to demand service charges from the Union of India, the demand made by the Municipality is clearly ultra vires its power. It is true that earlier W.P.No. 2844 of 1992 was filed and was dismissed by the High court and the special leave was refused by this Court on the ground of gross delay."

6. In the Judgment in UNION OF INDIA v. PURNA MUNICIPAL COUNCIL reported in (1992) 1 SCC 100, in paragraph No.5 it has been held as follows:

"5.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 permitting liability at a given point of time, its extent and manner. The Indian Railways Act being a central enactment has no role to play in sub-article (2