Water supply and sewerage charges treated as service fees, not Union property tax, and recoverable from Railways.

Charges levied for actual water supply and sewerage services by a statutory body were treated as a fee, not State taxation, even though the local law and demand notice used the word "tax". Because the levy reflected payment for services actually rendered to Railway properties, Article 285 did not bar recovery from Union property. The Court distinguished earlier authorities dealing with true taxation on Union property or charges that were only disguised taxes, and held that Article 289 and Section 184 of the Railways Act did not alter the position on these facts. The demand was therefore legally recoverable.

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Issues: Whether water supply and sewerage charges levied by the Jal Sansthan on Railway properties were a tax hit by Article 285 of the Constitution of India or a fee for services rendered.

Analysis: The statutory scheme under the U.P. Water Supply and Sewerage Act, 1975 enabled the Jal Sansthan to maintain water supply and sewerage infrastructure from its own funds and to recover charges for those services. The demand was not a levy on the property of the Union but a charge for the supply of water and maintenance of sewerage systems actually rendered to the Railways. Article 285 protects Union property from State taxation, but that protection does not extend to a charge which is in substance a fee. The use of the word "tax" in the enactment or demand did not alter the true nature of the levy. The earlier decisions relied upon by the appellants were distinguished as they dealt with taxation on Union property or with demands that were in substance tax dressed as service charges, whereas the present case involved genuine service charges. The Court also noted that Section 184 of the Railways Act, 1989 and Article 289 of the Constitution of India did not assist the appellants on the facts of this case.

Conclusion: The levy was held to be a fee for services rendered and not a tax on Union property, and therefore it was not barred by Article 285.

Final Conclusion: The demand for water supply and sewerage charges was upheld as legally recoverable from the Railways.

Ratio Decidendi: A charge imposed for actual water supply and sewerage services rendered by a statutory body is a fee and not State taxation merely because it is described as a tax in the local law or demand notice.

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