PETITIONER:
THE MUNICIPALITY OF ANAND
Vs.
RESPONDENT:
STATE OF BOMBAY
DATE OF JUDGMENT:
21/12/1961
BENCH:
SARKAR, A.K.
BENCH:
SARKAR, A.K.
SINHA, BHUVNESHWAR P.(CJ)
GUPTA, K.C. DAS
AYYANGAR, N. RAJAGOPALA
MUDHOLKAR, J.R.
CITATION:
1962 AIR 988 1962 SCR Supl. (2) 355
CITATOR INFO :
R 1990 SC 548 (12)
ACT:
Octroi, Tax-Imposition by Municipality-order
by Government prohibiting imposition-Validity of-
Bombay District Municipal Act, 1901 (Bom, of
1901), s. 59-Constitution of India, Art. 14.
HEADNOTE:
After following the procedure prescribed by
the Bombay District Municipal Act, 1901, and after
obtaining the requisite sanction of the Government
the appellant imposed an octroi tax on milk
brought within its limits for consumption, use or
sale therein. Shortly afterwards the Government
passed an
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order directing that the octroi tax shall not be
leviable by the appellant. The appellant contented
that the Government had no power to control the
imposition of the tax once it had been properly
imposed.
^
Held, that the Government was competent under
s. 59 of the Act to pass the order. Section 59
provided that subject to any general or special
orders which the State Government may make, a
Municipality may "impose" the tax after following
the procedure laid down and after obtaining the
sanction of the Government. The word "impose" in
s. 59 meant the actual levy of the tax after
authority to levy it had been acquired by rules
duly made and sanctioned and this imposition was
subject to the general or special orders of the
Government. The general and special orders under
s. 59 could not be confined to orders under s. 73
which gave the Government power to suspend the tax
in certain cases.
Held, further, that the order of the
Government was not discriminatory. Subsequently
the Government had prohibited all municipalities
from levying octroi tax on milk. For the same
reason no question of mala fides could arise.
Per Ayyangar, J.-Imposition of tax was a
continuing power deriving vitality from the power
of the authority to impose it. The power of the
Government to issue special or general order under
s. 59 was therefore not exhausted after
"imposition" of the tax. There were provisions in
ss. 47, 73 and 74 for other contingencies but
except for the opening words of s. 59 there was no
provision to enable Government to intervene in
cases where the continued levy was against public
interest. The opening words of s. 59 clothed the
Government with power to direct a municipality to
desist from imposing a tax.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 211 of 1956.
Appeal from the judgment and order dated July
19, 1955, of the Bombay High Court in Special
Civil application No. 976 of 1955.
A. V. Viswanatha Sastri, S. N. Andley,
Rameshwar Nath and P. L. Vohra, for the appellant.
M. C. Setalvad, Attorney-General for India,
C. K. Daphtary, Solicitor-General of India and B.
Sen, for respondent No. 1.
Vithlbhai B. Patel and I. N. Shroff, for
respondent No. 2.
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1961, December 21. The Judgment of Sinha C.
J., Sarkar, Das Gupta and Mudholkar JJ., was
delivered by Sarkar J. Ayyangar J., delivered a
separate judgment.
SARKAR J.-The appellant is a City
Municipality within the meaning of the Bombay
District Municipal Act, 1901 and is governed by
that Act. It had by a resolution duly passed by
it, made a rule under s. 60 of the Act selecting
for the purpose of an octroi tax of -/4/- annas
per Bengali maund, milk brought within its octroi
limits for consumption, use or sale therein. On
November 29, 1954, the Government of Bombay had
given its sanction to the rule under s. 61 of the
Act. The appellant Municipality thereafter
published the rule and the sanction as required by
s. 62 of the Act and the tax was accordingly
imposed with effect from January 1, 1955. On April
4, 1955, the Government of Bombay passed an order
directing that the octroi tax shall not be
leviable by the appellant Municipality. This order
has given rise to the present proceedings.
The appellant Municipality filed a petition
in the High Court at Bombay under Art. 226 of the
Constitution challenging the validity of the
order. This petition was dismissed by the High
Court. The appellant Municipality has now come up
to this Court in appeal against the decision of
the High Court.
The questions that arise in this case will be
stated after a few of the sections of the Act have
been referred to. Chapter VII of the Act deals
with municipal taxation. We shall be concerned
principally with ss. 59, 60, 61 and 62 which are
all contained in this chapter and deal with
imposition of taxes by Municipalities. It will be
necessary also to consider s. 46.
Section 46 gives power to a Municipality to
make rules for various purposes as specified in
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the several clauses contained in it. Under cl. (i)
of this section a Municipality has power to make
rules for the purpose of “prescribing, subject to
the provisions of Chapter VII, the taxes to be
levied”. Section 59 is the section on which the
decision of this case will really turn and we,
therefore, think it right to set out that portion
of it which is relevant for our purpose.
S. 59. (1) Subject to any general or special
orders the State Government may make in
this behalf, any Municipality-
(a) after observing the preliminary
procedure required by section 60
and
(b) with the sanction of the State
Government in the case of City
Municipalities ……….. and
subject to such modifications or
conditions as under section 61 the
State Government……………. in
according such sanction, deems fit,
may impose, for the purposes of
this Act, any of the following
taxes, that is to say,
……………………………..
……….
(iv) an octroi on animals or goods, or
both, brought within the octroi
limits for consumption, use or sale
therein;
Section 60 lays down the procedure to be observed
by a Municipality preliminary to imposing a tax.
It requires that first a resolution shall be
passed at a meeting to the Municipality selecting
the tax and making rules for the proposes of cl.
(i) of s. 46 prescribing the tax. Thereafter the
resolution has to be published with a notice in a
specified form inviting the inhabitants of the
Municipal
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area to submit within a month their objections, if
any, to the tax. After the objections have come
in, they are to be considered by a committee of
the Municipality and unless on the report of the
committee the Municipality decides to abandon the
tax, it has to submit the objections with its
opinion thereon, any modifications it desires to
make and the rules prescribing the tax to the
State Government. Section 61 provides that on
receipt of the rules and the other things
mentioned in s. 60 from the Municipality, the
Government may refuse to sanction the rules, or
return them to the Municipality for further
consideration or sanctioned them with or without
modifications or subject to conditions prescribed.
Section 62 lays down that the rules as sanctioned
by the Government shall be published by the
Municipality and the tax shall, from the date
which shall be specified in the notice publishing
the rules, be imposed accordingly. It is not in
controversy that in the present case the procedure
prescribed in the sections mentioned above had
been complied with.
The Government’s contention is that the order
made by it was competent as it was order which was
authorised by s. 59, subject to which only a tax
could be imposed by a Municipality. The appellant
Municipality does not dispute that it can impose a
tax only under s. 59 but it contents that the
general or special orders mentioned in the section
subject to which it has the power to impose tax,
are orders which were in existence before the rule
prescribing the tax was framed and once a rule has
been framed by it and the Government has accorded
its sanction to that rule, the Government has no
power to control the imposition of tax under it by
any order made under s. 59. The question so raised
is one of the construction of s. 59. But for such
construction we have to refer also to the other
sections earlier mentioned.
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In our opinion, the Government’s contention
is well founded. The Municipality’s power to tax
arises only under s. 59. Under that section, it
has been given the power of impose a tax after
following the procedure prescribed but subject
always to the general or special orders of the
Government. The appellant Municipality can succeed
in this appeal only if the word “impose” in s. 59
means the acquisition of the power to tax by
following the procedure laid down in ss. 60 to 62.
Its appeal must otherwise fail. It seems to us
that the word “impose” in s. 59 has not the
meaning for which the appellant Municipality
contends.
It would have been noticed that under s. 59 a
Municipality may impose a tax only after it has
framed a rule under s. 60 prescribing the tax to
be levied and the Government has given its
sanction to that rule under s. 61. It is this
imposition which is made by s. 59 “subject to any
general or special orders which the State
Government may make in this behalf”. Therefore, it
is the imposition after the making of the rule
authorising the tax, that is subject to the
Government’s orders and not the making of the rule
itself which authorises the tax itself. It is
plain from s. 59 that the control over a
Municipality’s power to tax imposed by the
requirement of the Government’s sanction of the
rule prescribing the tax in contained in s. 61, is
not the same thing as the control contemplated by
the general or special orders mentioned in s. 59,
for both are mentioned in s. 59. If it were not
so, it would have been unnecessary to provide for
the general or special orders controlling the
imposition of the tax in s. 59. This is the first
reason why we think that the appellant
Municipality’s contention is untenable.
The imposition contemplated by s. 59 is
clearly not the passing of the resolutions under
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s. 60 selecting the tax and making the rule
prescribing the tax to be levied in terms of s.
46(i), for s. 59(1)(a) expressly makes the
imposition something happening after s. 60 has
been complied with. This seems to us to be another
reason for not accepting the appellant
Municipality’s contention.
The third reason is to be found in s. 62. As
we have earlier stated, it provides that the tax
shall be imposed from the date mentioned in the
notice publishing the sanctioned rule. The choice
of this date lies with the Municipality and not
with the Government. The power to levy the tax is
acquired by a Municipality when the rule
prescribing the tax made by it is sanctioned by
the Government. The Municipality at its own choice
thereafter fixes a date from which it will collect
the tax. Therefore, the word “impose” in s. 62
does not refer to the acquisition of power to levy
a tax by making the rule but to the actual levy of
the tax under the power so acquired. It is of some
significance to note that in s. 46(i) the words
used are “make……rules…. prescribing…..the
taxes to be levied”. What we wish to point out is
that in connection with the making of the rules
the Act uses the word “levied” in s. 46 (i) and in
connection with an actual impost, and word
“imposed” in s. 62. We, therefore, think that it
would be legitimate to construe the word “impose”
in s. 59 in the sense in which it has clearly been
used in a connected provision, that is, s. 62.
Hence, in our view, “impose” in s. 59 means the
actual levy of the tax after authority to levy it
has been acquired by rules duly made and
sanctioned, and it is such imposition that is made
subject to the general or special orders of the
Government. Therefore, the Government can at any
time by any such order prohibit the imposition of
the tax.
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Mr. Sastri for the appellant said that the
general or special orders in s. 59 refer to orders
that can be made under s. 73, but the present
order had admittedly not been made under that
section. Section 73 does not empower an order
prohibiting the imposition of a tax altogether as
the order in the present case does. It only gives
power to suspend the levy of the tax authorised
till the objections to the tax which the
Government required to be removed, had been
removed. Because s. 73 gives a power to suspend
the tax, it is, in our opinion, no argument that
the general or special orders in s. 59 must be
understood as confined to such orders. Section 73
cannot help in interpreting the words “general or
special orders” in s. 59.
A third objection to the validity of the
order was that it was discriminatory. It was said
that no other Municipality had been prohibited
from collecting a similar tax which it had power
under its rules to collect. Apart from the very
interesting question raised by the learned
Attorney General that the Municipality being a
local authority, was a state, and was not
therefore entitled to the benefit of Art. 14, as
to which we think it unnecessary to express any
opinion we are on the facts satisfied that there
is no discrimination. The Government has now, it
is not disputed, prohibited all Municipalities
from levying any octroi tax on milk. Furthermore,
it has not been shown to us that all
Municipalities stand on the same footing with
regard to milk.
The last objection was that the order had
been mala fide made. This grievance is completely
without foundation. The Government had earlier
requested the appellant Municipality to drop the
tax on the ground, among others, that milk was
really being purchased for the Government and that
the Government was not liable to be
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taxed by a Municipality. It may be that this
ground was not justified on the facts, but as to
this we do not come to any finding. It is clear to
us that even if this stand taken by the Government
was not tenable, that is no reason for thinking
that the order was made mala fide. It was said
that the Government had made this order to benefit
respondent No. 2, a co-operative union, dealing in
milk. This is a bare allegation and is not
supported by facts. In any event, since similar
orders have now been made in respect of all
Municipalities within the State, no question of
mala fide can possibly arise.
We think that the challenge to the order
dated April 4, 1955 is without any foundation. In
our view, the order was perfectly legitimate and
must be upheld.
We accordingly dismiss the appeal with costs.
AYYANGAR J.-I have had the advantage of
perusing the judgment just delivered and I agree
with order passed.
The relevant facts and the statutory
provisions which bear on the points arising in the
appeal have all been set out by Sarkar J. and do
not require to be repeated.
There is no dispute that the levy of the duty
by the municipality as and from January 1, 1955
was lawful because the requirements of ss. 59-62
were satisfied when the levy was made. No general
or special order of the State Government stood in
the way of the municipality making the particular
levy and the sanction of the State Government
under s. 59 (1) (b) had been accorded to it, and
the relevant rules had conformed to the procedural
and other requirements of these sections. The
power of the municipality in the matter of the
levy of the tax is, however, not absolute but it
made subject, apart from other provisions to which
I
375
shall advert, to such general and special orders
as the State Government might pass by virtue of
the opening words of s. 59 of the Act.
The argument strenuously pressed by Mr.
Visvanatha Sastri was this: The Government had no
doubt, a power to prescribe and control by general
or special orders the right of a municipality to
impose a tax. These general or special orders
would again, no doubt, be subject to modification
from time to time to suit the changing needs of
particular areas, or of particular interests which
would be affected by the tax-levy, but the
exercise of the power of modification or this
power too prescribe conditions and restrictions is
exhausted when a municipality does, by conforming
to the orders then in force, impose a levy which
has come into force under s. 62.
I am unable to agree with this construction
of the opening words of s. 59 (1). On its language
there is nothing to warrant the doctrine that it
gets exhausted by reason of a municipality
imposing a tax in conformity with an order as it
stood at a particular date. The limitation
suggested must therefore, be deduced as a
necessary implication either from the fasciculus
of sections ending with s. 62 leading to the
imposition of a levy, or from other provisions of
the Act.
The other provision of the Act to which
learned Counsel referred was s. 73 which reads:
“If it shall at any time appear to the
Provincial Government, on complaint made or
otherwise, that any tax, leviable by a
Municipality, is unfair in its incidence, or
that the levy thereof, or of any part
thereof, is obnoxious to the interest of the
general public, it may require the said
Municipality, within such period as it shall
fix in this behalf, to take measures for
removing any objection which appears to it to
exist to the said tax,
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and if, within the period so fixed, such
requirement shall not be carried into effect
to the satisfaction of the Provincial
Government, it may, by notification in the
official Gazette, suspend the levy of such
tax, or of such part thereof, until such time
as the objection there to shall be removed.
The Provincial Government may at any
time, by a like notification, rescind any
such suspension.”
It is obvious that this section is of limited
operation and confined to the subject it actually
deals with. It posts the continued exaction of the
impost, but points to the removal of anomalies and
hardships in the details of the levy or of its
administration. The existence of this provision
would manifestly not suffice to negative the right
of the Government to forbid the continued
imposition of the tax altogether-such as has been
done in the present case. Section 73 cannot
therefore be construed as negativing by
implication the right claimed by the state
Government under s. 59, for it refers to and
comprehends a totally different subject-matter.
Coming now to the construction of ss. 59-62
as themselves supporting theory of the exhaustion
of the power, the submission was this. “The
general or special orders” could only restrict the
power of a municipality “to impose a tax”. On the
scheme of provisions contained in ss. 59-62 a tax
was “imposed” only once, though when imposed and
in operation the levy and collection of such a tax
might be periodic and throughout the life of the
imposition. Hence there was no scope for the
exercise of the State Government to make “any
special order” in relation to a tax after it has
once been “imposed” because the power to prescribe
conditions or restrictions by general or special
order is with reference to the “imposition” of the
tax. I feel unable to accept this construction.
The whole foundation
377
of the argument is based on a denial of the
premise that a power to impose tax is a continuing
power. In my judgment the “imposition” of a tax is
a continuing power in the sense that so long as it
is in force, it points to the existence of and
derives vitality from the power of the authority
to impose it. When the municipality levies the tax
in the sense of quantifying it with reference to
an ascertained person and thereby creating a
statutory debt payable by the tax payer, it is in
reality exercising the power to “impose” the tax,
for it is the continued existence of the
imposition that furnishes the legal basis for the
levy when made. When the power to impose is
withdrawn the imposition falls to the ground. That
is the ratio of saving provisions which enable
taxes to be levied and collected not withstanding
the deprivation of the right to impose taxes for
the future. In this view it is clear that there is
no exhaustion of the State power under the opening
words of s. 59 (1).
In arriving at this construction I have also
taken into consideration the scheme of the Act and
the wide powers conferred on the State Government
in the matter of control and supervision over the
municipalities powers designed to ensure, that,
subject of course to express statutory provision,
municipal administration is coordinated to secure
the vital interest of the general public.
In this connection reference may be made to
s. 74 of the Act which reads:
“Whenever it appears to the Provincial
Government that the balance of the municipal
fund of any Municipality is insufficient for
meeting the expenditure incurred under
section 175 or for the performance of any
duties in respect of which they shall have
been declared under section 178 to have
committed default, the Provincial Government
may be notification require the Municipality
to impose
378
within the Municipal district, any such tax
specified in the notification as may be
imposed under section 59 if no such tax is at
the time imposed therein, or to enhance any
existing tax in such manner or to such extent
as the Provincial Government considers fit,
and the Municipality shall forthwith proceed
to impose or enhance in accordance with the
requisition such tax under the provisions of
this Chapter as if a resolution of the
Municipality had been passed for the purpose
under section 60:
Provided that:
(a) the Provincial Government shall
take into consideration any
objection which the Municipality or
any inhabitant of the Municipal
district may make against the
imposition or enhancement of such
tax,
(b) it shall not be lawful for the
Municipality to abandon or modify
or to abolish such tax when
imposed, and
(c) the Provision Government may at any
time cancel or modify any
requisition made by it under this
section, and the levy of tax or the
enhancement, except as to arrears
theretofore accrued due. shall
thereupon cease or be modified
accordingly.”
Government are thus empowered both to direct
the municipality to impose tax when Government
consider the same necessary in the interest of
municipal finance and administration as also to
direct the municipality to desist from continuing
the imposition when the necessity ceases. In cases
where a tax is imposed by the municipality by
virtue of the provisions in ss. 59-62, the
municipality
379
itself could revoke the tax if the rules so
provide, for s. 47 of the Act enacts:
(1) Subject to the requirements of
clause (a) of the proviso to section 46 every
Municipality may, except as otherwise
provided in clause (b) of the proviso to
section 74, at any time for any sufficient
reason, suspend, reduce or abolish any
existing tax by suspending, altering or
rescinding any rule describing such tax
under the provisions of clause (1) and of the
first clause of the proviso to section 46.
(2) The provisions of Chapter VII
relating to the imposition of taxes shall, so
far as may be, apply to the suspension,
reduction or abolition of any tax and to the
suspension, alteration or rescission of any
rule prescribing a tax.”
But for the opening words of s. 59(1) there is no
specific provision in the Act to enable Government
to intervene in cases where the continued levy of
a tax is contrary to public interest. I do not
consider that any such gap was intended and in my
judgement the opening words in s. 59(1) are both
apt and sufficient to clothe Government with power
to direct by ‘special order’ a municipality to
desist from ‘imposing’ a tax when satisfied that
public interest so requires.
The points raised regarding discrimination
and mala fides are without substance and for the
reasons stated by Sarkar J. I would reject them.
The appeal therefore fails and has to be
dismissed with costs. The Writ Petition which
raises the same points as the appeal will also
stand dismissed but without any order as to costs.
Appeal dismissed.
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