PETITIONER: FERTILIZER CORPORATION OF INDIALTD., GORAKHPUR Vs. RESPONDENT: NAGAR MAHAPALIKA. GORAKHPUR DATE OF JUDGMENT: 24/04/1996 BENCH: MANOHAR SUJATA V. (J) BENCH: MANOHAR SUJATA V. (J) PUNCHHI, M.M. CITATION: JT 1996 (4) 488 1996 SCALE (3)809 ACT: HEADNOTE: JUDGMENT:
J U D G M E N T
Mrs. Sujata V. Monohar. J.
Delay in filing supplementary affidavit is condoned .
The appellant, Fertilizer corporation of India carries
on the business of manufacturing fertilizers. It has a
factory situated at Gorakhpur. Prior to 1982, the area in
which the factory of the appellant is situated, was outside
the city limits of Gorakhpur. This area was governed by the
U.P. Town Areas Act, 1914 and it had a Notified Area
Committee constituted under this act to discharge the
functions specified under this Act The city of Gorakhpur.
prior to 16.11.1981, had a municipality constituted under
the U.P. municipalities Act, 1916. With effect from
16.11.1981, by reason of a notification issued under Section
3(1) of the U.P. Nagar Mahapalika Adhiniyam. 1959. the city
of Gorakhpur ceased to be governed by the U.P.
municipalities Act of 1916 and became a Nagar Mahapalika
governed by the Uttar Pradesh Nagar Mahapalika Adhiniyam,
1959.
Thereafter the area in which the appellant’s factory is
situated was brought within the limits of Gorakhpur city
with effect from 15th of June, 1982. by a notification
issued under Section 3(2) of the U.P. Nagar Mahapalika
Adhiniyam, 1959 (hereinafter referred to as the Adhiniyam of
1959). As a result. the area in which the factory of the
appellant is situated, which was previously under the
jurisdiction of the Notified Area Committee, came under the
jurisdiction of the Nagar Mahapalika of Gorakhpur city.
The dispute in these appeals relates to the levy and
recovery of octroi from the appellant for the period
7.4.1979 to 22.12.1982. A sum of Rs.2.19 lakhs was recovered
from the appellant by the Notified Area Committee by way of
octroi for the period 7.4.1979 to 14.6.1982, and an amount
of Ps.4.78 lakhs was recovered by the Nagar Mahapalika of
Gorakhpur city by way of octroi from 14.6.1982 to
22.12.1982. It is the contention of the appellant-
Corporation that it is not liable to pay octroi for the
period 7.4.1979 to 15.6.1982 or for any period thereafter.
The appellant made a representation to the Administrator of
the Mahapalika claiming refund of the octroi paid for the
said periods but the Administrator rejected the
representation. The appellant thereafter filed petitions in
the Court of Small Causes under Section 472 of the said
Adhiniyam of 1959. These petitions were allowed on
30.8.1982 and the appellant was granted refund of the octroi
paid as also a permanent injunction restraining the Nagar
Mahapalika from recovering octroi. The Nagar Mahapalika of
Gorakhpur preferred two appeals against these orders, The
District Judge, however, dismissed these appeals by his
order dated 4.10.1986. The order the District Judge was
challenged by the Nagar Mahapalika of Gorakhpur city by
filing two writ petitions before the Allahabad High Court
The High Court by its judgement and order dated 7.12.1987
allowed these writ petitions. Hence the present appeals have
been filed by the appellant before us.
We have to examine Whether octroi was validly collected
from the appellant for the aforesaid periods I. 7.4.1979 to
14.6.1982
Prior to 7.4.1979 the Notified Area Committee had the
power to levy octroi under the U.P. Town Areas Act, 1914.
On 7th of April, 79, the Uttar Pradesh Urban Local
Self-Government Laws (Amendment) Ordinance, 1979 was
promulgated which has been subsequently replaced by an Act.
This Ordinance 6 of 1979 made amendments to the U.P.
Municipalities Act, 1916, as also the U.P. Town Areas Act.
1914. By reason of Section 3 of the said Ordinance. the U.P.
Town Areas Act. 1914 was amended. As a result, the power of
a Notified Area Committee under the U.P. Town Areas Act,
1914, to levy. inter alia, octroi was taken away.
Prior to the said Ordinance. the Notified Town Area
Committee, under Section 14(1)(g) of the U.P. Town Areas
Act. 1914 had the power to impose any tax mentioned in
Section 128(1) of the U.P. Municipalities Act. 1916. This
included the power to levy octroi which was provided for
under Section 128(1)(viii) of the U.P. Municipalities Act.
1916. By reason of the amendment made by the said Ordinance,
the power to levy , a tax mentioned in Section 128(1)(viii)
of the U.P. Municipalities Act, 1916 was taken away from the
Notified Area Committees under the U.P. Town Areas Act,
1914.
Therefore, with effect from 7.4.1979 the Notified Area
Committee had no power to levy and collect octroi from the
appellant. this position continued upto 14.6.1982 when the
area which was under the jurisdiction of the Notified Area
Committee became a part of the Gorakhpur Nagar Mahapalika.
Clearly. therefore. the sum of Rs.2.19 lakhs which has been
collected by the Notified Area Committee from the appellant
for the period 7.4.1979 to 14.6.1982 is Without the
authority of law.
II. 15.61982 to 22.12.1982
From 15.6.1982, the area in which the factory of the
appellant is situated become a part of Gorakhpur Nagar
Mahapalika. It is the contention of the respondent that even
when Gorakhpur city had a municipality under the U.P.
Municipalities Act, 1916, octroi was being validly levied in
Gorakhpur city. After the Gorakhpur City Municipality
became Gorakhpur Nagar Mahapalika under the Adhiniyam of
1959. octroi was continued in the city of Gorakhpur.
Therefore, when the Nagar Mahapalika of Gorakhpur was
extended to the area in which the factory of the appellant
is situated, this area also became subject to octroi.
Therefore. the appellant is bound and liable to pay octroi
from 15.6.1982. This submission has been challenged by the
appellant.
Now, under sub-section (2) Section 3 of the Adhiniyam
of 1959 ( as it stood at the relevant time ), the State
Government may from time to time, after consultation with
the Mahapalika, by a notification in the official Gazette,
alter the limits specified for any city under sub-section
(1) so as to include or to exclude therefrom such area as
may be specified accordingly a notification was issued under
Section 3(2). As a result, as from 15th of June, 1982 the
Area in which the appellant’s factory is situated came to be
included in the limits of Gorakhpur city. Section 3(4) of
the said Adhiniyam of 1959 provides as follows :
“3(4); Where by reason of a
notification under sub-section (2),
any area is included in a city
declared under subsection (1), such
area shall thereby become subject
to all notifications, rules.
regulations, bye-laws. orders
directions issued or made under
this or any other enactment and in
force in the city at the time
immediately preceding the inclusion
of such area, and all taxes fess
and charges imposed under this Act,
shall be and continue to be levied
and collected in the aforesaid
area.”
Therefore. by reason of sub-section (4) of Section 3.
once the area in which the appellant’s factory is situated
is included in Gorakhpur city, all notifications. rules.
bye-laws etc. of Gorakhpur city in force. automatically
apply to the freshly included area; and all taxes. fees and
charges imposed under the Adhiniyam can be levied and
collected from the newly included area.
Section 3(4), however. was not in existence at the time
when the appellant’s factory area was included in Gorakhpur
city. Section 3(4) has been inserted in the said Adhiniyam
of 1959 by reason of the Uttar Pradesh Local Urban Self-
Government Laws (Amendment) Act, 1987, being U.P. Act 3 of
1987. Section 6 of the Amending Act which adds Section (4)
to the U.P. Adhiniyam of 1959 provides that section 3(4)
shall be and shall always be deemed to have been inserted in
the said Adhiniyam. therefore. Section 3(4) has been
inserted with retrospective effect and will apply to the
levy and collection of octroi in the newly included area
with effect from 15th of June. 1989. Section 18 of the said
Amending Act 3 of 1987 further provides as follows :
“18(l) Notwithstanding any
judgment, decree or order of any
court of other authority to the
contrary, any tax. fee or collected
levied. charged or collected or
purporting to have been levied,
charged or collected before the
commencement of the Uttar Pradesh
Urban Local Self-Government Laws
(Amendment) Act. 1987 and any
action taken or thing done before
such commencement in relation to
the assessment. reassessment, levy
or collection of such tax, fee or
charge under the provisions of the
principal Act referred to in
Chapter IV or Chapter V, as the
case may be, and the rules made
thereunder shall be deemed to be
valid and effective as if such
assessment, reassessment. levy of
collection or action or thing had
been made, taken or done under the
principal Act referred to in
Chapter IV or Chapter V as the case
may be, as amended by the Uttar
Pradesh Urban Local Self-Government
Laws (Amendment) Act, 1987 and the
rules and bye-laws made thereunder.
(2) for the removal of doubts, it
is hereby declared that nothing in
sub-section (1) shall be construed
as preventing any person –
(a) from the Questioning in
accordance with the provisions of
the principal Act referred to in
Chapter IV or Chapter V. as the
case may be as amended by the Uttar
Pradesh Urban Local Self-Government
Laws (Amendment) Act. 1987, any
assessment, re-assessment. levy or
collection of any tax fee or charge
referred to in sub-section (1): or
(b) from claiming refund of any
amount paid by him in excess of the
amount due from him by way of any
tax. fee or charge under the
principal Act referred to in
Chapter IV or Chapter V, as the
case may be as amended by the Uttar
Pradesh Urban Local Self-Government
Laws (Amendment) Act, 1987.
Therefore, any tax, fee or charge levied, charged or
collected before the Amending Act 3 of 1987 shall be deemed
to be as valid and effective as if such assessment. re-
assessment. levy or collection had been done under the said
Adhiniyam of 1959 as amended by the Amending Act 3 of 1987.
By reason of these retrospective amendments. it is not open
to the appellant to challenge the imposition of octroi in
the extended area of Gorakhpur city with effect from 15th of
June. 1982.
In the case of Hindustan Gum and Chemicals Ltd. v.
State of Haryana & Ors. (1985 (4) S.C.C 124. the factory
premises of the appellant were included within the municipal
limits of’ Bhiwani by a notification dated 10th of August,
1965. issued under Section 5(3) of the Punjab Municipal Act.
1911. Sub-section (4) of Section 5 was amended
retrospectively by the Punjab Municipal (Haryana Amendment
and Validation) Act, 1971, whereby the levy and collection
of octroi in the extended area were validated. In sub-
section (4). the expression “notification was
retrospectively added thereby including within its scope a
notification imposing octroi which would only automatically
apply with retrospective effect to the extended area. This
Court held that the reason of the retrospective amendment of
Section 5(4). imposition of octroi in the extended area was
valid from the date when the new area became included within
the municipal limits. The facts of the present case are very
similar to this case. Therefore, by reason of the Amending
and Validating Act 3 of 1987. the levy and collection of
octroi in the extended area of Gorakhpur city must be upheld
with effect from 15.6.1982.
In the case of Bhaskar Textile Mills Ltd v. Jharsuguda
Municipality & Ors (1984 (2) SCC 25, para 20), a similar
provision in Section 5 of the Orissa Municipal Act. 1950 was
considered by this Court. Section 5 which is worded in a
manner similar to Section 3(4) which is before us. inter
alia, provided that any bye-law immediately in force before
the inclusion of new area shall be deemed to apply to such
new area. The Court said that when the area of a
municipality is extended to cover a new area. the existing
municipal bye-laws automatically apply to the extended area
and no separate steps as prescribed under the Municipal Act
are necessary to be taken before applying such bye-laws to
the extended area. It was contended before this Court in the
above case that when the Municipal Act requires specific
step to the before bye- laws can be enacted and enforced in
the municipal area is extended to cover new areas. It was
contended that the bye-laws will not be enforceable in the
new area without such steps being taken. This argument was
negatived by this court in view of the provisions of Section
5 of the Orissa municipal Act of 1950. Following this
decision, the argument of the appellant that procedure under
Sections 199 to 219 of the adhiniyam of 1959 must be
following for imposing octroi in the extended area, must be
rejected.
The appellant next contended that even prior to
15.6.1982 octroi was not validly levied and collected in the
original Gorakhpur city. The appellant contended that
procedure under Section 199 to 219 of the said Adhiniyam of
1959 was at no time followed for the levy of octroi in the
original Gorakhpur city. Hence octroi could not be extended
to the newly included area of t he appellant’s factory after
15.6.1982. According to the respondent, however. even prior
to 16.4.1981. (when the Adhiniyam of 1959 became
applicable). under the U.P. Municipalities Act, 1916.
Section 128(1)(viii) authorized the municipality of
Gorakhpur to levy octroi. the municipality of Gorakhpur had
levied octroi . When the municipality of Gorakhpur city was
succeeded by the Mahapalika of Gorakhpur city under the said
Adhiniyam of 1959 with effect from 16.4.1981, the existing
octroi was continued. Section 577 of the said Adhiniyam of
1959. inter alia, provides that any tax, bye-laws,
regulation etc. imposed under the U.P. Municipalities Act,
1916, shall, in so far as it is not’ inconsistent with the
provisions of the Adhiniyam. continue in force until it is
superseded by any tax etc. imposed under the Adhiniyam of
1959. The respondent. therefore. rightly submits that it was
not required to follow the procedure under Sections 199 to
219 of the said Adhiniyam of 1959 as octroi was not levied
under the Adhiniyam of 1959. It was levied earlier and
continued under Section 577 when Gorakhpur city came under
the Adhiniyam of 1959. Octroi which was imposed under the
U.P. Municipalities Act. 1916 remained in force. This octroi
was, levied and collected from the extended area when the
extends area became a part of Gorakhpur city.
It was also contended by the appellant that by reason
of the Uttar Pradesh Urban Local Self- Government Laws
(Amendment) Ordinance. 1979 referred to earlier, the power
to levy octroi under the U.P. Municipalities Act, 1916 was
also taken away. just as it was taken away in the case of a
Notified Area Committee under the U.P. Town Areas Act. 1914.
This contention, however. has no merit. Section 2 of the
said Ordinance deals with amendment to the U.P.
Municipalities Act, 1916. lt substitutes tor clause (vii) of
sub-section (l) of Section 128, a new clause (vii) which is
set out there. This clause deals with imposition of a toll.
Clause (viii) of sub-section (1) of Section 128, which deals
with the imposition of octroi, is not in any manner affected
by the said ordinance of 1979.
The Ordinance, however, also amends Section 338 of the
U.P. Municipalities Act. 1916. It is this amendment which is
relied upon by the appellant. Section 338 of the U.P.
Municipalities Act, 1916 deals with the extension of
certain enactments to and imposition of taxes in and
constitution of committees for notified areas. It provides
that the State Government may by notification apply or adopt
to a notified area the Provisions of any section of this Act
or impose in the whole or a part of such notified area any
tax which might he imposed under the provisions of the U.P.
Municipalities Act, 1916 as if the notified area were a
municipality. To this the Ordinance has made an amendment by
carving out an exception. It has provided that the taxes
which can be so imposed on a notified area shall be taxes
other than those taxes referred to in clauses (vii) and
(viii) of sub-section (1) of Section 128. These two clauses
deal with toll and octroi. The amendment thus. takes away
the right to impose octroi in any notified area. Notified
area is described in Section 337 as an area other than a
municipality. town area or agricultural village which may be
so notified by the State Government by a notification as set
out therein. In such a notified area octroi cannot be
imposed under Section 338 as amended by the Ordinance.
Section 338 has no application to a municipality constituted
under the U.P. Municipalities Act, 1916. Such a municipality
has and continues to have the power to impose octroi under
Section 128(1)(viii) of the said Act. the contention.
therefore, that the Gorakhpur municipality prior to
16.4.1981 had no power to levy octroi must be rejected.
octroi was validly levied and imposed in Gorakhpur city
under the U.P. Municipalities Act, 1916 and it continued to
the validly levied when Gorakhpur city came to be governed
by the U.P. Adhiniyam of 1959. Hence octroi was leviable in
the extended area which became a part of Gorakhpur city With
effect from 15.6.1982.
To sum up. the Notified Area Committee had no power to
levy and collect octroi from the appellant from 7.4.1979 to
14.6.1982 by virtue of the said Ordinance 6 of 1979. But
with effect from 15.631982 the Gorakhpur Mahapalika has
validly levied octroi on the appellant.
The respondent has tried to justify the collection of
octroi by the Notifies Area Committee for the period
7.4.1979 to 14.6.1982 on basis of Section 18 of the Amending
Act 3 of 1987. The respondent contends that by reason of
Section 18 of the Amending Act of 1987 which has been set
out earlier any purported levy and collection of tax has
been validated. A perusal of Section 18. however. makes it
clear that what is validated is a purported levy and
collection of octroi under the provisions of the principal
Acts referred to in Chapters IV or V of the Amending Act 3
of 1987. These two chapters of the said U.P. Act 3 of 1987
deal with the said Adhiniyam of 1959 and the U.P.
Municipalities Act. 1916 respectively. Section 18.
therefore. will not validate a purported levy of octroi
under the U.P. Town Areas Act. 1914 levied by the Notified
Area Committee.
It is lastly, submitted by the appellant that it is by
virtue of the retrospective introduction of subsection (4)
of Section 3 in the said Adhiniyam of 1959 that the levy and
collection of octroi from 15.6.1982 is validated. This
retrospective imposition puts an unreasonable burden on the
appellant. The appellant has relied upon a decision of this
Court in J.K. Cotton Spinning and Weaving Mills Ltd. & Anr.
v. Union of India & Ors. [1988 (1) SCR 700 AT 713] where
this Court has said in Connection with the retrospective
levy of excise duty, that the period of limitation
prescribed under Section 11A of the Central Excises and Salt
Act. 1944 would apply even to the levy and collection
retrospectively of excise duty. The ratio of this judgment
cannot apply to the present case since we have not been
shown any provision similar to Section 11A in the said
Adhiniyam of 1959. What is more. in the present case. from
January 1983 to 7.12.1987, which is the date of the High
Court judgment. the collection of octroi by the respondent
was stayed by reason of court orders. Therefore, all that we
can observe is, that the respondent shall collect octroi for
any period subsequent to in accordance with the provisions
of law. But the respondent who is the successor of the
Notified Area Committee, is also liable to refund to the
appellant octroi collected for the period 7.4.1979 to
14.6.1982 Looking to the fact that the appellant has closed
its unit. it will be open to the respondent to adjust the
amount of octroi refundable to the appellant against the
liability of the appellant to pay octroi for a period
subsequent to 22.12.1982 the respondent is entitled, in
accordance with law. to collect such octroi for periods
subsequent to 22.12.1982.
The appeals are accordingly partly allowed. There will.
however. be no order as to costs.