Berar Swadeshi Vanaspathi and Others vs The Municipal Committee, Shfgaon

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Civil Appeal No. 234 of 1959

Decision Date: 28 March 1961

Coram: J.L. Kapur, S.K. Das

The case was styled as The Berar Swadeshi Vanaspathi and Others versus The Municipal Committee, Shfgaon, and was decided on 15 February 1957 by the Supreme Court of India. The opinion was written by Justice J. L. Kapur, who sat on a bench that also included Justices S. K. Das, Aiyyar, T. L. Venkatarama Das, S. K. Hidayatullah, M. Shah and J. C. The petitioners were identified as the Berar Swadeshi Vanaspathi and others, while the respondents were the Municipal Committee, Shfgaon and an additional respondent. The judgment was rendered on the same day as the date of the decision, 15 February 1957, and the bench was headed by Justice Kapur. The official citation of the decision is reported in 1962 AIR 420 and also appears in the Supreme Court Reports Supplement (1) 596, with further citations including RF 1965 SC 895 (paragraphs 12, 14, 23), RF 1966 SC 693 (paragraph 11) and RF 1970 SC 58 (paragraph 5). The statutory provision at issue was Section 67, sub-sections 6 and 8 of the Central Provinces and Berar Municipal Act, 1922 (C. P. & Berar 11 of 1922).

The headnote of the reported decision explains that the Municipal Committee had passed a resolution under Section 67(1) of the Central Provinces and Berar Municipal Act, 1922, with the purpose of imposing an octroi duty, and that this resolution was published in the State Gazette together with the assessment rules. The Gazette invited objections to the proposed tax, and only a single objection was filed within the prescribed time; that objection was subsequently rejected. After this, the Government gave its sanction to the imposition of the tax and to the draft rules by issuing two notifications. The appellants filed a petition challenging the legality of the tax on the ground that the notifications were beyond the authority of the Government, arguing that all procedural steps required for imposing the tax had not been completed. They further contended that the objections raised by the first respondent within the allowed time had not been considered on their merits but were dismissed merely because there was only one objector, and that such a dismissal violated an essential requirement for the validity of the tax under Section 67 of the Act.

The Court held that when a Government Notification clearly directs the imposition of an octroi tax, it falls within sub-section 7 of Section 67 of the Act. Once the notification is published in the Gazette, sub-section 8 of Section 67 becomes operative, and the issuance of the notification constitutes conclusive evidence that the tax has been imposed in accordance with the statutory provisions. Consequently, the Court concluded that the tax could not be successfully challenged on the basis that some procedural steps had allegedly been omitted.

The judgment was issued in Civil Appeal No. 234 of 1959, an appeal from the order dated 15 February 1957 of the Bombay High Court of Judicature at Nagpur in Special Civil Application No. 2-N of 1956. Counsel for the appellant No. 1 was identified as S. P. Varma, while counsel for respondent No. 1 comprised B. S. Shastri and Ganpat Rai, and counsel for respondent No. 2 were B. R. L. Iyengar and T. M. Sen. The appeal was heard on 28 March 1961, and the judgment of the Court was delivered by Justice Kapur, who noted that the present appeal arose on a certificate granted by the High Court of Bombay against the judgment and order of that Court passed in a petition under Article 226 of the Constitution concerning the legality of the notification imposing an octroi duty on certain goods.

In this matter the present appellants, who were ratepayers of the Municipal Committee of Shegaon (identified as respondent No 1), contested the legality of a notification that imposed an octroi duty on certain goods. The second respondent was the State of Bombay. The appellants were merchants who brought goods into the municipal limits as part of their trade. On 25 July 1954 the Municipal Committee adopted a resolution to levy an octroi duty in place of a terminal tax. This resolution was subsequently published in the State Gazette on 29 June 1956 together with the rules governing assessment. On 4 August 1956 the Committee invited objections to the proposed tax. The first appellant filed objections on that same day, while other objectors submitted theirs on 5 August and 6 August. At a special meeting of the Municipal Committee held on 16 August 1956 the objections of the other appellants were dismissed as untimely, and the objection of the first appellant was also rejected on the ground that he was the sole objector whose submission fell within the prescribed period. After this meeting the first appellant made representations to the Government, and a few days later the other objectors also lodged similar representations. Despite these representations the Government issued a notification sanctioning the imposition of the tax and the draft rules on 27 October 1956; the corresponding Gazette notifications appeared on two successive days, namely 30 October and 31 October 1956. The appellants then instituted a petition under Article 226 of the Constitution in the High Court of Bombay at Nagpur, challenging the legality of the tax. Their challenge was based on two principal grounds: first, that the notification was ultra vires because the Municipal Committee had failed to comply with the requirements of section 67 of the C. P. & Berar Municipalities Act, 1922 (the “Act”); and second, that the rate of tax imposed on certain articles exceeded the maximum permissible under the Act. The High Court rejected the first ground but accepted the second, granting relief accordingly. Appellants Nos 2 to 6 did not pursue prosecution of the appeal, and therefore the portion of the appeal relating to them was dismissed for non-prosecution. The remaining appellant, No 1, continued before this Court, again raising two arguments: that the necessary steps for imposing the octroi duty had not been completed, rendering section 67 non-compliant, and that, in fact, there was no valid notification imposing an octroi duty. To resolve these points the Court needed to examine the scheme of the Act, particularly Chapter IX, which governs the imposition, assessment, and collection of taxes. Section 66 enumerates the taxes that may be levied, while section 67 sets out the procedural requirements for imposing such taxes, the text of which follows.

In this case the Court examined the procedure prescribed in Section 67 of the Central Provinces and Berar Municipalities Act, 1922, which governs the imposition of any tax listed in Section 66. The section provides that a municipal committee may, at a special meeting, pass a resolution proposing the imposition of a tax. Once the resolution is passed, the committee must, in accordance with rules made under the Act, publish a notice that defines the class of persons or the description of property to be taxed, specifies the amount or rate of the tax, and sets out the system of assessment to be adopted. Any inhabitant of the municipality may, within thirty days of the notice’s publication, submit a written objection to the committee. The committee is required to consider the proposal together with any objections received at a special meeting, may modify the proposals so long as their substance is not altered, and must forward the proposals, all objections, its decisions and the reasons for those decisions to the Provincial Government. If the committee modifies the proposals in a way that affects their substance, it must republish them following the same procedure. The Provincial Government, upon receiving the proposals, may sanction them, refuse sanction, sanction them with modifications it deems fit, or return them to the committee for further consideration. Finally, if the proposals are sanctioned under the fifth subsection, the Provincial Government may, by notification, direct the imposition of the tax as sanctioned, specifying the date from which the tax shall take effect; the tax then comes into effect on that date, and the notification serves as conclusive evidence that the tax has been imposed in accordance with the Act. Appellant No. 1 challenged the validity of the tax imposition on two grounds: first, that the committee had not completed all steps required by Section 67 before the notification was issued; and second, that, in fact, no notification imposing the tax had been issued. The objection to the procedural validity was based on the claim that, although the appellant’s written objections were filed within the prescribed time, the committee had not considered them on their merits and had rejected them merely because there was only one objector, a step that the appellant alleged was essential for compliance with Section 67, rendering the imposition invalid. The High Court rejected this argument, relying on subsection (8) of Section 67, which states that the issuance of the notification imposing a tax constitutes conclusive evidence that the tax was imposed in accordance with the Act, even though the High Court acknowledged that the failure to consider the objections was a procedural error. The appellant argued further that no notification had actually been issued, so the conclusive-evidence provision could not apply. The Court found that this contention was not established, noting that two notifications had been issued by the State Government on 27 October 1956: one was published in the Gazette on 30 October 1956 and the second appeared the following day, thereby satisfying the statutory requirement that a notification be issued to give effect to the tax.

In this case the Court recorded that the first notification issued by the State Government carried the heading “No. 4963-5869-M-XIII” and stated that, in exercise of the powers conferred by sections 71, 76 and 85 of the Central Provinces and Berar Municipalities Act, 1922, the Government was pleased to sanction draft rules for assessment, collection and refund of the octroi tax within the limits of the Shegaon Municipality in Buldana District, and that those rules would become effective from the date of their publication in the Madhya Pradesh Gazette Extraordinary. The second notification, bearing the heading “No. 4962-5869-M-XIII”, declared that, in exercise of the powers conferred by sub-section (2) of section 67 of the same Act, the Government was pleased to confirm draft rules for the imposition of the octroi tax within the limits of the Shegaon Municipal Committee in Buldana District, under clause (c) of sub-section (1) of section 66, superseding the rules of terminal tax sanctioned by Notification No. 3716-B-VIII dated 15 February 1921, and that those rules would also take effect from the date of their publication in the Madhya Pradesh Gazette Extraordinary.

The Court observed that the first notification appeared to be issued under the authority of section 71, which deals with rules for assessment and prevention of tax evasion, section 76, which provides for the collection of taxes, and section 85, which concerns refunds. Consequently the first notification laid down the various rules and other matters necessary for the collection of taxes. By contrast, the second notification on its face was said to be issued under sub-section (2) of section 67, but the Court considered this to be a mistake and held that it should have been issued under sub-section (7) of section 67. The Court explained that the second notification confirmed the draft rules for imposing the octroi duty, which in context meant the imposition of the tax, because the very first rule of those draft rules stated that “Octroi shall ordinarily be levied on commodities included in the following classes and specified in the schedule hereto annexed and at the rates therein entered”. The notification then listed the various classes of articles and commodities subject to octroi, set out the exceptions and explanations, and attached schedules specifying the goods in each class and the rates at which octroi was chargeable. The Court concluded that this notification clearly directed the imposition of octroi, fell within sub-section (7) of section 67, and, having been published in the Gazette, constituted conclusive evidence that the tax had been imposed in accordance with the provisions of the Act. Accordingly the Court held that the appeal could not be maintained on the ground that procedural steps were lacking, dismissed the appeal with costs, and declared the appeal without force.