2009 (11) TMI 946 - SC - Indian Laws

Summary

Issues involved: The issues in this case involve the payment of service charges by municipal corporations to properties owned by the Union of India and its departments for services like water supply, conservancy/sewerage disposal, and other indirect services.

Issue 1: Municipal corporations' actions and High Court's decision
The appellant municipal corporations raised bills for service charges, leading to attachment of Union of India's properties. The High Court held that the recovery of service charges in lieu of taxes was ultra vires the municipal corporations' powers as there was no law withdrawing the exemption from municipal taxes for properties of Union of India.

Issue 2: Interpretation of Article 285 of the Constitution
The appellant municipal corporations challenged the High Court's order, arguing that service charges were not included in the exemption from taxes under Article 285. They also contended that agreements with the Government of India exempted them from paying taxes, not service charges.

Issue 3: Precedent and distinction between fee and tax
Referring to a previous case, the Supreme Court upheld that charges for services like water supply are fees, not taxes. The Union of India was held liable to pay such charges, which were considered fees and not hit by Article 285.

Issue 4: Agreement between Union of India and municipal corporations
The Union of India agreed to pay service charges for various services provided by municipal corporations, excluding property tax. Rates were agreed upon based on the level of services utilized by the Union of India, with provisions for periodic reviews and dispute resolution mechanisms.

Issue 5: Resolution and agreement between parties
The parties reached a broad agreement where the Union of India would pay service charges, not property tax, at specified rates depending on the services utilized. A mediation committee was established for dispute resolution, and municipal corporations were prohibited from taking coercive steps for recovery.

Conclusion: The appeals were disposed of based on the agreement reached between the parties, outlining the payment of service charges by the Union of India to municipal corporations and establishing mechanisms for resolving disputes and ensuring fair payment for services rendered.