Full Judgment Text
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PETITIONER:
ATLAS CYCLE INDUSTRIES LTD.
Vs.
RESPONDENT:
STATE OF HARYANA & ANR.
DATE OF JUDGMENT11/08/1971
BENCH:
RAY, A.N.
BENCH:
RAY, A.N.
SIKRI, S.M. (CJ)
PALEKAR, D.G.
CITATION:
1972 AIR 121 1972 SCR (1) 127
1971 SCC (2) 564
CITATOR INFO :
E 1975 SC2172 (14)
R 1975 SC2193 (11)
R 1984 SC 583 (21)
O 1985 SC1683 (4,7)
ACT:
Punjab Municipality Act, 1911, s. 5(4), 62 (10)-Notification
imposing octroi if became automatically applicable to new
areas included in Municipality by virtue of s. 5(4)-
Notification, bye law difference between.
HEADNOTE:
Section 5 (4) of the Punjab Municipality Act, 1911 enacts:
"when any local area has been included in a municipality
under sub-section (3) of this section of this Act, and,
except as the State Government may otherwise by notification
direct all rules, bye-laws, orders, directions and powers
made, or conferred under this Act and in force throughout
the whole municipality at the time shall apply to such
area."
By a notification the industrial area within which the
appellants’ factory was situated was included within the
municipality of Sonepat. Thereafter, the respondent-
municipality purported to impose, levy and collect from the
appellant octroi. The appellant filed a writ petition in
the High Court for restraining the municipality from levying
and collecting the octroi. The municipality relied upon the
provisions contained in s. 5 (4) of the Act in support of
the contention that the notification dated 3rd November 1942
issued under s. 62 (10) of the Act notifying the imposition
of octroi within the octroi limits of the Sonepat municipal
limits became applicable to the areas included. The High
Court dismissed the petition. It came to the conclusion
that by reason of the provisions contained in s. 5 (4) of
the Act the taxes would "automatically become leviable" to
new areas included in the municipal limits. Allowing the
appeals,
HELD: The High Court was wrong in holding that the
municipality was competent to levy and collect octroi from
the appellants by reason of the provision contained in s. 5
(4) of the Act.
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(i) Section 5 (4) of the Act speaks of rules, bye-laws,
conducts, directions and powers and does not significantly,
mention notification. The Act speaks of notification
ceasing to apply to excluded areas, whereas, in the case of
inclusion of areas the Act significantly omits any notifi-
cation being applicable to such areas. The legislative
intent is, therefore, unambiguous that notifications would
not be applicable to an included area on the strength of s.
5 (4). And s. 62 (10) of the Act speaks of notification for
the imposition of taxes and such a notification is the
statutory basis of the imposition and levy of tax. [133 H]
(ii) The word ’notification’ is not synonymous with rules,
bye laws, orders, directions and powers. The power to issue
notifications orders, rules or bye-laws refers to different
and separate methods of expression of exercise of power
under the statute. Bye-laws are entirely
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different from notifications imposing tax and the bye-laws
fixing the ’limits and prescribing the routes by Which
articles which are subject to octroi may be imported
obviously cannot be equated with notification of imposition
of octroi. [134 C, G]
Bagalkot City Municipality v. Bagalkot Cement Co., [1963]
Supp. I S.C.R. 710, distinguished.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1927 and
2222 of 1970.
Appeals from the judgment and order dated May 18, 1970 of
the Punjab and Haryana High Court in Civil Writ Nos. 2014
and 2611 of 1967.
C.K, Daphtar and L N. Shroff, for the appellant (in C. A.
No. 1927 of 1970).
I. N. Shroff, for the appellant (in C.A. No. 2222 of 1970).
V. C. Mahajan, and R. AT. Sachthey, for the respondent
No. 1 (in both the appeals).
M. C.. Setalvad, N. S. Das Bahl, P. C. Bhartari, J. B.
Dadachanji and Ravinder Narain, for respondent No. 2 (in C.
A. No. 1927 of 1970).
P. C. Bhartari, J. B. Dadachanji and Ravinder Narain, for
respondent No. 2 (in C. A. No. 2222 of 1970).
The Judgment of the Court was delivered by
Ray, J. These two appeals are by certificate against the
common judgment dated 18 May, 1970 of the High Court of
Punjab and Haryana dismissing the applications of the
appellants for a writ of mandamus restraining the
Municipality of Sonepat from levying against and collecting
from the appellants any octroi in respect of raw materials,
components and parts imported by the appellants into the
factory of the appellants situated at Industrial Area,
Sonepat.
The factory of each of the appellants was situated at
Industrial Area, Sonepat. The appellants carry on business
of manufacturing bicycles and bicycle components and parts.
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On 30 September, 1966 a notification dated 15, September,
1966 was published in the Punjab Government Gazette to the
effect that under section 5(1) of the Punjab Municipal’ Act,
1911 (referred to for the sake of brevity as the Act) the
President of India was pleased to declare his intention of
including within the municipal limits of Sonepat in the
Rohtak District, the area specified in the Schedule to the
notification. The Schedule included the Industrial area of,
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Sonepat where the factory of the appellants was situated.
Under section 5(2) of the Act the inhabitants of the area
who objected to the proposed inclusion of the said area
could submit their objection in writing within six weeks- of
the date of publication of the notification. The
appellants. filed objections in writing.
On 1 November, 1966 after the bifurcation, of Punjab, the
State of Haryana came into existence. A notification dated
11 August, 1967 was published in the Haryana. Government
Gazette. The Gazette notification was to the effect that
the Governor of Haryana, was pleased to,, include within the
Municipality of Sonepat in the Rohtak District the areas
mentioned in the notification. The industrial area within
which the factory of the appellants was, situated was thus
included within the local limits of the Municipality of
Sonepat.
From 18 August, 1967 the respondent-Municipality, purported
to impose, levy and collect from the appellants, octroi in
respect of raw materials, components and parts imported by
the appellants into their factory for consumption or use in
the manufacture of bicycles and bicycle components.
The respondent-municipality relied an the provisions.
contained in section 5(4) of the Act in support of their
contention that imposition of octroi which was in force
within the municipality applied to the area included within
the limits of the municipality by the notifications, and,
therefore, the appellants were liable to payment of octroi.
The provisions of section 5(4) of the Act are as follows:-
"When any local area has been included in a
municipality under sub-section (3) of this
section of this Act, and, except as the State
Government may,
otherwise by notification direct all rules,
bye-laws, orders, directions and powers made,
or conferred under this Act and in force
throughout the whole municipality at the time,
shall apply to such area."
The respondent-municipality relied on the provisions
,contained in section 5(4) of the Act that all rules, bye-
laws, orders, directions and powers made, or conferred under
the Act and in force throughout the whole municipality would
apply to such an area, and, therefore, the notification No.
3798-C-42/60545 dated 3 November, 1942 issued under ,section
62(10) of the Act notifying the imposition of octroi within
the octroi limits of the Sonepat Municipality became
applicable to the area included.
The relevant provisions for imposition of tax are to be
found in sections 61 and 62 of the Act. Under section 61 of
the Act any municipal committee may impose tax of different
kinds enumerated there. The three broad heads of taxes
under section 61 of the Act are those provided in sections
61(1)(a),61(1)(b)to(f)inclusive and61(2). Tax mentioned in
section 61(1)(a) of the Act is on buildings and lands. Tax
mentioned in section’ 61 (1)(b) to (f) is tax on profession,
,calling, trade and of other forms which are not material
for the purpose of the present appeals. Under section 61(2)
of the Act the municipality may impose with the previous
sanction of the State Government any other tax which the
State Legislature has power to impose in the State under
the Constitution. The levy of octroi is under section
61(2) ,of the Act. Competency to impose octroi is because
of item 52 of the State List which reads "taxes on the entry
of goods within the local limits of the area for sale
therein." The power to levy octroi is indisputable and was
not ,challenged.
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The contention on behalf of the appellants Was that the
provisions contained in section 62 of the Act should have ’-
been followed. Section 62 consists of 12 sub-sections.
Broadly stated, under section 62 of the Act a Municipal
Committee passes a resolution proposing the imposition ,of
any tax under section 61. When such a resolution has been
passed the committee shall publish a notice defining the
class of persons or description of property proposed to be
taxed, the amount or rate of the tax to be imposed, and
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the system of assessment to be adopted. Any inhabitant,
objecting to the proposed tax may within thirty days from
the publication of the notice submit his objection in
writing., to the committee. If the committee decides to
amend its proposals it shall publish the amended proposal
along with, a notice indicating that they are in
modification of those previously published for objection.
Objections may-within, thirty days be received to the
amended proposal and the: committee shall then consider the
objections. Counsel on behalf of the appellants contended
that this procedure. for inviting objections should have
been followed.
In the case of tax falling under section 6 1 (1)(b) to (f)
of the Act the municipal committee after settlement of the
proposals shall direct that the tax be imposed and
forward,;, a copy of the order through the Deputy
Commissioner to,, the State Government. These orders will
be attracted by, the provisions of section 5(4) of the Act
to the included areas. But orders by themselves are not the
authority for imposition of tax.
In the case of tax falling under section 61(1)(b) to, (f) of
the Act the State Government one receipt of the order-shall
notify under section 62 (10) of the Act the imposition of
the tax in accordance with such order and shall in the
notification specify a date not less than; one month from
the date of the notification, on which the tax-shall come
into force. Therefore, in the absence of notification
falling within the ambit of section 5 (4), of the- Act the
municipality will not be competent to levy or collect tax.
In the case of a proposed tax. under section 61 (1) (a) of
the Act the municipality has, to submit proposals together
with the objection, if any,, made in connection., therewith
to the Deputy Commissioner. The Deputy,Commissioner after
considering the objections may either.refuse to sanction the
proposals or, return them to 1 the municipality for further
consideration or sanction them without modification or with
such. modification not involving an increase of the amount
to be imposed, as he deems. fit and then forward the same
to, the State Government. a copy of the proposals and his-
order. of, sanction..
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In the case of tax falling under section 61 (1) (a) of the
Act the State Government on receipt of the order of sanction
of the Deputy Commissioner shall notify the imposition of
the tax in accordance with such order and in the noti-
fication shall specify a date not less than one month from
the date of the notification, on which the tax shall come
into ,.force.
In the case of tax falling under section 61(2) of the Act
the municipality has to submit proposals together with
objections to the Deputy Commissioner. The Deputy
Commissioner shall submit the proposal and objections with
his recommendation to the State Government. The State
Government on receiving the proposals for taxation under
section 61(2) of the Act may sanction or refuse to sanction
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the same or return them to the committee for further
consideration.
In the case of tax falling under section 61(2) of the Act
when the State Government on receipt of the proposal,and
objections along with the recommendation of the Deputy
Commissioner sanctions the imposition of the tax the State
Government under section 62(10) of the Act shall notify the
imposition of the tax and shall in the notification specify
a date not less than one month from the ,date of the
notification, on which the tax shall come into force.
Inasmuch as the provisions of section 5(4) of the Act render
the order of the relevant authorities sanctioning proposal
of municipality for levy of octroi applicable to the
included area, there cannot be any question of following the
procedure for inviting objections to the proposed tax
contemplated in section 62. It may also be stated here that
a contention was advanced on behalf of the appellants that
the applicability of octroi to the, included area would
offend Article 14 of the Constitution by reason ,of denial
to the persons within the included area of right to object
to the tax. The provisions contained in section 5 of the
Act and, in particular, sub-section (2) thereof, confer on
inhabitants within the area proposed to be included the
right to object to the alteration proposed and submit
objections in writing. The inhabitants. would
133
thereby have the opportunity of objecting not only to the
inclusion of the area but also to the incidence of tax as a
result of the inclusion.
Section 62 of the Act consists of 12 sub-sections. These
sub-sections deal with three matters. The first five sub-
sections deal with the procedure for proposals of tax,
objections by inhabitants and final consideration of ob-
jections by the committee. These sub-sections form part of
a stage anterior to sanction by the relevant authorities of
proposals for tax.
Sub-section (6) to (9) of section 62 of the Act deal with
the order of sanction by the appropriate authorities of the
proposals for tax. These orders are not the provisions by
which tax is imposed. These orders are sanction for
imposition of tax. These orders are attracted by virtue of
the provisions contained in section 5(4) of the Act to the
included areas. But in the absence of notification by the
Government under section 62(10) of the Act there is no
imposition of tax.
Section 62 (10) of the Act indicates that there is
imposition of tax only when the State Government shall
notify the imposition of the tax and shall in the
notification specify a date on which the tax shall come into
force. In the absence of imposition of tax by a
notification under section 62 (10) of the Act the
municipality is not competent to impose, levy or collect
tax. Section 62(12) of the Act enacts that a notification
of the imposition of tax shall be conclusive evidence that
the tax has been imposed in accordance with the provisions
of the Act. It is the notification under the statute which
is conclusive evidence of the imposition of tax.
The controversy in the present appeals is solved by finding
out as to whether the notification dated 3 November, 1942
imposing octroi within the limits of the Sonepat
Municipality became applicable by reason of the provisions
contained in section 5(4) of the Act. It is noticeable at
the outset that section 5(4) of the Act speaks of rules,
bye-laws, orders, directions and powers and does not signi-
ficantly mention ’notifications’. It is apposite to
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consider
134
sections 6,7 and 8 of the Act which deal with the effect of
exclusion of local area from the municipality. In the case
of exclusion of an area from the Municipality it is provided
in section 8(1) (a) of the Act that "This Act and all noti-
fications, rules, bye-laws, orders, directions and powers
issued, made or conferred under the Act, shall cease to
apply thereto". When the Act provided for notifications
ceasing to apply in the case of exclusion of local areas,
and in the immediately preceding section 5 refrained from
using the word ’notifications’ becoming applicable in the
case of inclusion of areas the legislative intent is unam-
biguous and crystal clear that notifications could not
become applicable to an included area on the strength of
section 5(4) of the Act.
The word ’notification’ cannot be said to be synonymous with
rules, bye-laws, orders, directions and powers for two
reasons. First, the Act in the present case speaks of noti-
fications for imposition of tax and uses the word ’notifi-
cation’ separately from the other words "rules, bye-laws,
orders, directions and powers". In the case of exclusions
of areas, the Act speaks of notification ceasing to apply to
excluded areas whereas in the case of inclusion of areas the
Act significantly omits any notification being applicable to
such area. Secondly, the General Clauses Act in section 21
speaks of power to issue notifications, orders, rules or
bye-laws and it is, therefore, apparent that the power to
issue notifications, orders, rules or bye-laws refers to
different and separate methods of expression of exercise of
power under the statute. Section 62(10) of the Act speaks
of notification of the imposition of tax. Such a
notification is the statutory basis of imposition and levy
of tax.
Bye-laws are entirely different from notifications imposing
tax as will be manifest from section 188 of the Act. Under
that section the committee may by bye-laws as mentioned in
clause(g) thereof fix limits for the purpose of collecting
octroi where collection of octroi has been sanctioned and
may prescribe routes by which articles which are subject to
octroi may be imported into municipality. Bye-laws fixing
the limits and prescribing the routes by which articles
which are subject to octroi may be
135
imported obviously cannot be equated with notification of
imposition of octroi.
In the present appeals, the High Court came to the
conclusion that by reason of the provisions contained in
section 5(4) of the Act taxes would ’automatically become’
leviable’ to new areas added to the municipal limits. The
High Court fell into the error of holding that taxes became
automatically leviable in new areas. The High Court relied
on the decision of this Court in Bagalkot City’ Municipality
v. Bagalkot Cement Co. to support the conclusion of taxes
becoming automatically leviable in extended areas on the
ground that by reason of the provisions contained in section
5(4) of the Act the inhabitants of the, included area would
’suffer all the burdens that are inherent in their inclusion
within the municipal limits’. This conclusion of the High
Court is not supported either by the decision of this Court
or by the provisions of the statute. In the first place, a
taxing provision always receives a strict interpretation for
the obvious reason that there must be clear and express
language imposing a tax and the date from which such tax
shall come into effect. Notifications, under the Act are
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the only authority and mandate for imposition and charge
of tax. Notifications are not made applicable to included
areas under section 5(4) of the Act. There cannot be any
taxation by implication. Secondly, in the Bagalkot City
Municipality case’ there was no provision comparable to
section 5(4) of the Act and this Court did not decide that
taxes would become automatically leviable. On the contrary,
this Court in the Bagalkot City Municipality case’ in
interpreting the words ’Municipal district’ occurring in a
bye-law did not extend the meaning of ’municipal district,
to include areas which were subsequent to the making of the
bye-law added within the limits of the municipal district’
The reason given by this Court was that the expression
’municipal district’ in the bye-law referred to the
’municipal district’ as existing when the bye-law was
framed. The words ’municipal district’ in the bye-law were
not construed to relate to extended areas. In the Bagalkot
City Municipality case’ section 48 of the Municipal Act
provided that a bye-law could be made only with the sanction
of the Government. The further provisions
(1) [1963] Supp. 1 S.C.R. 710.
10-MI245SupCI/71
136
of section 48 in the Bagalkot CitY Municipality case’
required publication of a proposed bye-law for the
information of the persons likely to be affected thereby.
The lack of publication of the bye-law to the Bagalkot
Cement Company affected by the bye-law was held to be an
additional reason for refusing to extend the meaning of the
words ’municipal district’ to include extended areas. There
is no such aspect in the present appeals. The Bagalkot City
Municipality case’ is, therefore, of no aid in interpreting
section 5(4) of the Act in the manner the High Court did.
The High Court was wrong in holding that the municipality
was competent to levy and collect octroi from the appellants
by reason of the provisions contained in section 5(4) of the
Act. The judgment of the High Court is set aside. The
appeals are allowed. The applications of the appellants are
allowed and writs of mandamus will go to the respondent
municipality restraining the municipality from levying
against and collecting from the appellants any octroi in
respect of raw materials, components and parts imported by
the appellants into the factory of the appellants. Each
party will pay and bear their own costs. Liberty to mention
if the Respondent Municipality will fail to refund the
monies within a fortnight.
K.B.N. Appeals allowed.
137