Justice Anand Byrareddy observed that the BBMP could not levy any service charge as the State bodies could not levy service taxes on central government bodies. The postal department had challenged the circular which demanded service tax from the Mahalakshmi Layout post office.
The BBMP had issued the circular after amending the Karnataka Municipal Corporation Act in 2005, allowing it to collect service charges for the facilities provided, such as water, sewage and road.
The postal department, which questioned the constitutional validity of the circular, cited Article 258 (1) of the Constitution of India, which denies power to the State government and its agencies to levy any kind of tax or charges on central government undertakings.
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