Case Note & Summary
The Supreme Court allowed the appeals filed by the Food Corporation of India (FCI) against the judgment of the Bombay High Court dated 05.05.2016 and the order dismissing the review petition dated 11.09.2018. The dispute concerned the demand of property tax by the Municipal Corporation of Greater Mumbai (Corporation) in respect of godowns and silos situated at Dattapada Road, Borivali, Mumbai. The land was acquired by the Government of Bombay prior to 1964 for the Government of India, and godowns were constructed by the Central Government. FCI was set up under the Food Corporations Act, 1964, and the godowns were transferred to FCI between 1966 and 1969, but legal ownership remained with the Central Government. The Corporation issued demand notices for property tax for the period from 01.03.1969 to 31.03.1997 and onwards. FCI challenged the demands, claiming exemption under Article 285 of the Constitution of India, which exempts property of the Union from State taxes. The High Court dismissed the writ petition, relying on Section 146 of the Mumbai Municipal Corporation Act, 1888, which imposes liability on the occupier, and on the Supreme Court's decision in Food Corporation of India v. Municipal Committee, Jalalabad (1999) 6 SCC 74. FCI appealed to the Supreme Court, which remitted the matter back to the High Court for fresh consideration. On remand, the High Court again dismissed the writ petition. The Supreme Court held that the property in question is owned by the Central Government, and therefore, under Article 285(1), it is exempt from property tax imposed by the Corporation. The Court distinguished the Jalalabad case, noting that in that case FCI was the owner of the property, whereas here ownership vests in the Central Government. The Court also held that Section 146 of the MMC Act cannot override the constitutional exemption, and the occupier (FCI) cannot be held liable for tax on Union property. The Court further observed that the Corporation failed to establish that the tax was levied prior to the Constitution under Article 285(2). The arbitrator under Section 144(2) had no jurisdiction to decide ownership. The Court set aside the impugned judgment and order, and allowed the appeals, quashing the demand notices.
Headnote
A) Constitutional Law - Tax Exemption - Article 285(1) of the Constitution of India - Property of the Union - The court examined whether godowns owned by the Central Government but occupied by FCI are exempt from municipal property tax. Held that Article 285(1) exempts Union property from State taxes, and the occupier cannot be taxed if the owner is exempt, unless Parliament provides otherwise. The High Court's reliance on Section 146 of the MMC Act was misplaced as it cannot override constitutional immunity. (Paras 8-12) B) Municipal Law - Property Tax - Section 146 of the Mumbai Municipal Corporation Act, 1888 - Liability of Occupier - The court considered whether FCI as occupier is primarily liable for property tax. Held that Section 146 imposes liability on the occupier, but when the property is owned by the Central Government, the constitutional exemption under Article 285(1) prevails, and the occupier cannot be held liable for tax on Union property. (Paras 8-12) C) Constitutional Law - Article 285(2) - Saving of Pre-Constitution Taxes - The court analyzed whether the property tax was levied prior to the Constitution. Held that the burden is on the Corporation to show that the tax was levied before the Constitution and continuously collected; mere existence of a pre-Constitution law is insufficient. The Corporation failed to establish that property tax was actually levied on this property before 1950. (Paras 8-12) D) Municipal Law - Arbitrator's Jurisdiction - Section 144(2) of the Mumbai Municipal Corporation Act, 1888 - The court noted that the arbitrator appointed under Section 144(2) has limited jurisdiction to determine rateable value and cannot decide ownership or constitutional exemption. The arbitrator's finding that FCI owns the property was beyond his jurisdiction and erroneous. (Paras 8-12)
Issue of Consideration
Whether the property (godowns) occupied by the Food Corporation of India but owned by the Central Government is exempt from property tax under Article 285 of the Constitution of India, and whether the occupier (FCI) can be held liable under Section 146 of the Mumbai Municipal Corporation Act, 1888.
Final Decision
The Supreme Court allowed the appeals, set aside the judgment of the Bombay High Court dated 05.05.2016 and the order dated 11.09.2018 dismissing the review petition. The demand notices for property tax were quashed. The Court held that the property is owned by the Central Government and is exempt from property tax under Article 285(1) of the Constitution of India. The occupier (FCI) cannot be held liable for tax on Union property. The Corporation failed to establish that the tax was levied prior to the Constitution under Article 285(2).
Law Points
- Article 285(1) of the Constitution of India exempts property of the Union from all taxes imposed by a State or any authority within a State
- unless Parliament provides otherwise
- Section 146 of the Mumbai Municipal Corporation Act
- 1888 imposes liability on the occupier
- but cannot override constitutional exemption when the property is owned by the Central Government
- The burden to prove that the tax was levied prior to the Constitution under Article 285(2) lies on the taxing authority
- The arbitrator under Section 144(2) of the MMC Act has limited jurisdiction to determine rateable value and cannot decide ownership.
