Judgement

CHANDRACHUD, J:- This is a tax dispute concerning the power of the second appellant, Kuthbullapur Gram Panchayat, to levy house-tax and Permission Fee on the respondent. The Hindustan Machine Tools Ltd., which is a Government of India Undertaking. The first appellant is the Government of Andhra Pradesh.

2. The Kuthbullapur Gram Panchayat was established in 1959. In 1964 the Andhra Pradesh State Legislature passed the Andhra Pradesh Gram Panchayats Act, 2 of 1964, which with the exception of Chapter VII of the Act, came into force on January 18, 1964. The Act applies to the Kuthbullapur Gram Panchayat within whose geographical limits the respondent has established a factory for the manufacture of special apparatus machines, presses etc. The construction of the factory began in 1964 and was completed in December 1965. The factory was constructed without the permission of the Gram Panchayat Considering the skeleton staff which mans the Panchayat and its skeleton activities, the respondent s plea that it did not obtain the Panchayat s permission because it was not aware of its existence is not implausible. But such awareness has no relevance on the respondent s liability to pay taxes and fees. In any event, on coming to know of the construction of the factory and the other buildings the Panchayat asked the respondent to obtain the requisite permission. The respondent asked for ex-post facto permission in January, 1967.

3. In its meeting of May 8, 1967 the Panchayat passed a resolution for collecting Permission Fee from the respondent at 1/2 percent on the capital value of the factory buildings and at 1 per cent on the capital value of other buildings. By a letter dated August 20, 1968 the Panchayat called upon the respondent to pay house-tax for the years 1966-67, 1967-68 and 1968-69 amounting to Rupees 1,83,750 at the rate of Rs. 61,250 per annum, on March 3, 1969 the Panchayat demanded from the respondent a sum of Rs. 1,65,000 by way of Permission Fee, Rs. 80,000 bring for factory buildings and Rs. 85,000 in respect of the other buildings.

4. On November 25, 1969 the respondent filed a writ petition in the High Court of. Andhra Pradesh challenging the levy of house-tax and the Permission Fee. By its judgment dated August 6, 1971 the High Court allowed the writ petition. It held that, the buildings constructed by the respondent did not fall within the definition of a house as contained in the Act and therefore no house-tax could be levied on the buildings. Regarding the Permission Fee the High Court repelled the appellant s contention that the fee was in the nature of tax and held that since no services were rendered by the Panchayat to the respondent the levy of Permission Fee was illegal. The High Court has granted to the appellants a Certificate of Fitness under Article 133 (1) (a) of the Constitution to appeal to this Court.

5. Section 69 (1) (a) of the Act provides that a Gram Panchayat shall levy in the village a house-tax. By Section 2 (15), as it stood when the High Court delivered its judgment, house meant a building or hut fit for human occupation, whether as a residence or otherwise, "having a separate principal entrance from the common way, "and included" any shop, workshop or warehouse or any building used for garaging or parking buses or as a bus-stand". The High court held that buildings other than factory premises were not a house within the meaning of the Act because their separate principal entrances were situated on the roads belonging to the respondent and not on the common way as required by Section 2 (15). As regards the factory buildings,the High Court held that the Legislature had included shops, workshops and warehouses but not factories within the definition of a house and therefore factory buildings were also not a house within the meaning of the Act. The demand of house-tax was accordingly held illegal.

6. By the Andhra Pradesh Gram Panchayats (Amendment) Act, 16 of 1974 the state Legislatu