1978 (10) TMI 158 - HC - Indian Laws

State Can't Tax Port of Kandla Properties: Court Upholds Exemption Under Article 285, Dismisses State Appeals.

State of Gujarat and Ors Versus The Board of Trustees of Port of Kandla and Ors

The HC dismissed the appeals by the State of Gujarat and Gandhidham Municipality, upholding the writ of mandamus against the State Government, preventing ... - Issues Involved:1. Ownership and vesting of lands and buildings comprising the Port of Kandla.2. Nature of vesting under Section 29(1)(a) of the Major Port Trusts Act, 1963.3. State Government's entitlement to recover non-agricultural assessment from the Board.Issue-wise Detailed Analysis:1. Ownership and Vesting of Lands and Buildings Comprising the Port of Kandla:The court examined the historical background and constitutional provisions to determine the ownership of the lands and buildings comprising the Port of Kandla. Initially, the lands belonged to the Indian State of Kutch, which acceded to the Dominion of India in 1948. On the coming into force of the Constitution of India in 1950, Kutch became a Part 'C' State, and the properties vested in the Central Government. The lands and buildings comprising the Port of Kandla were declared a Major Port in 1955, and the properties vested in the Central Government for Union purposes. The court concluded that before the Major Port Trusts Act, 1963 came into force, the properties comprising the Port of Kandla belonged to the Central Government.2. Nature of Vesting Under Section 29(1)(a) of the Major Port Trusts Act, 1963:Section 29(1)(a) of the Major Port Trusts Act, 1963, states that all property, assets, and funds vested in the Central Government for the purposes of the port shall vest in the Board. The court analyzed the term 'vest' and concluded that it does not have a fixed connotation and must be interpreted in the context of the statute. The court held that the vesting in the Board is not absolute but limited to administration, control, and management. The Central Government did not divest itself of ownership of the properties, and the Board acts as an agent of the Central Government for the purposes of the Act.3. State Government's Entitlement to Recover Non-Agricultural Assessment from the Board:The State Government argued that since the ownership of the lands comprising the Port of Kandla vested in the Board under Section 29(1)(a) of the 1963 Act, it was entitled to recover non-agricultural assessment from the Board. However, the court held that since the vesting in the Board was limited to administration, control, and management, the ownership of the properties remained with the Central Government. Therefore, the lands and buildings within the administrative control of the Board were immune from State taxation under Article 285 of the Constitution, which exempts the property of the Union from all taxes imposed by a State. Consequently, the State Government was not entitled to recover non-agricultural assessment from the Board.Conclusion:The court dismissed the appeals filed by the State of Gujarat and the Gandhidham Municipality, upholding the writ of mandamus issued against the State Government and its officers, requiring them to desist from enforcing the impugned notice of demand for non-agricultural assessment. The court did not make any order as to costs. The judgment clarified that the properties comprising the Port of Kandla vested in the Central Government, and the Board of Trustees was vested with the administration, control, and management of the port without divesting the Central Government of ownership.