http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: MUNICIPAL BOARD OF ABU ROAD

       Vs.

RESPONDENT: JAISHIV & ORS. ETC.

DATE OF JUDGMENT27/10/1987

BENCH: MISRA RANGNATH BENCH: MISRA RANGNATH RANGNATHAN, S.

CITATION:  1988 AIR  388            1988 SCR  (1) 584  1987 SCC  Supl.  301     JT 1987 (4)   176  1987 SCALE  (2)832

ACT:      Rajasthan  Municipalities  Act.  1959-S.  l04  Levy  of octroi by  different  municipalities  within  the  State  on varying basis and at varying rates-Validity of.

HEADNOTE: %      By a  notification issued  in 1964  under s. l04 of the Rajasthan Municipalities  Act, 1959,  the  State  Government revised the  rate of octroi levied on cloth by the municipal board of  Abu Road  which was  challenged by a batch of writ petitions. A  Single Judge  of the  High Court held that the provisions of  s. l04(1)  of the  Act  were  valid  but  the notification in  respect of  the municipal board of Abu Road relating to  cloth was  bad.  During  the  pendency  of  the appeals before  the Division  Bench sub-s. (2) of s. l04 was added by  s. 12  of the Rajasthan Municipalities (Amendment) Act of  1978. The  Division Bench  overlooked this amendment and reiterated the reasons of the Single Judge and dismissed the appeals.  By another  notification issued  in 1976,  the State Government  revised the levy of octroi on all types of cloth in  respect of  Sujangarh Municipal  Board  which  was challenged by another batch of writ petitions relying on the decision in  the Abu  municipal board  cases; but the Single Judge, as  also a  different Division Bench which dealt with the matter  did not  entertain the  challenge in view of the amended provision  of s. l04 of the Act. These two groups of appeals  arose  from  the  two  batches  of  writ  petitions aforesaid.      Allowing the  appeals preferred  by the Municipal Board of Abu Road and dismissing the appeals relating to Sujangarh Municipality. ^      HELD: There  is no dispute as to exigibility of octroi. Every   municipality   under   s.   7   of   the   Rajasthan Municipalities  Act,   1959  is  a  body  corporate.  People residing within each municipal area can be classified as one group different  from residing  in  any  other  municipality since octroi is to be levied by the municipality as provided in s.  l04(1) subject  to the control regarding the rates of levy by  the State Government. The plea of discrimination on

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

the basis  of the  rates prevalent  in another  municipality cannot be  entertained. The  scheme in  s. 104 takes note of the position  that local  conditions and  needs  varied  and accord- 585 ingly both  in the  proviso to  sub-s. (1) as also in sub-s. (2) itself,  emphasis on  that feature  has been  put. It is thus open  to the  State Government  on the  basis of  local conditions  and   needs  to  prescribe  different  rates  in relation to  different municipalities in the matter of taxes to be levied, varying duty of octroi is, therefore, not open to challenge.  The Division  Bench while  dealing  with  the appeals of  Abu Road  municipality should have taken note of the amendment  of  sub-s.  (2)  with  retrospective  effect. [588B-E]      2. In  some municipalities  the levy is on the value of goods while  in others  it is  on the  basis of weight. Here again, the  State Government  seems to have applied its mind and has  authorised charge  of octroi on weight basis taking into consideration  the  special  circumstances.  In  bigger municipalities   where    there   are    wholesale   markets particularly of  cloth. a  reduced rate  of octroi  has been prescribed  to   encourage   larger   import.   In   smaller municipalities where  the import  is for  direct consumption the levy  is on ad valorem basis at a higher rate. The State Government seems  to have also taken into consideration that in smaller  municipalities there  is  not  much  demand  for costly and  fine cloth  which have  higher prices  while the position  is  otherwise  in  bigger  municipal  areas.  This appears to  be the  justification for  adopting  the  weight basis in  respect of  larger municipalities  and ad  valorem basis for  the smaller  municipalities. This  seems to  be a legitimate basis  and we do not think any valid objection is available against  this differential  treatment. Law is well settled that  if unequals  are treated unequally there is no discrimination and  Art.  14  of  the  Constitution  is  not available to be invoked. [588E-H]

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2255-56 of 1979.      From the  Judgment and  order dated  20.12.1978 of  the Rajasthan High  Court in  Special Appeal  Nos. 40  and 39 of 196.      V.M. Tarkunde, Tapas C. Ray, Chandmal Lodha, S.K. Jain, Dalveer Bhandari  and  Badridas  Sharma  for  the  appearing parties.      The Judgment of the Court was delivered by      RANGANATH MISRA, J. These are appeals by special leave. Two of them being Civil Appeals 2255 and 2256 of 1979 are by the Municipal Board of Abu Road. The rest of the appeals are by assessees  living within the municipal area of Sujangarh. The common ques- 586      tion involved  in these  appeals is  as to  whether the levy of octroi by different municipalities- within the State of Rajasthan on varying basis-some on weight of the material and others  on the  ad valorem basis of the price thereof at varying rates  is valid  in law.  l he  High  Court  decided against the Abu Road municipality while a different bench of that Court in the cases of Sujangarh municipality decided in its favour on the same question.      Entry 52  of List  II of Schedule VII read with Article

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

246(3) of  the Constitution authorises the State Legislature to raise  a tax  on the entry of goods into a local area for consumption, use  or sale. The Rajasthan Municipalities Act, 1959 (hereinafter  referred to  as the  Act) in  Chapter VII makes provisions  for imposition of taxes. Section 104 deals with  obligatory   taxes  while   section   105   authorises imposition of  other taxes.  As far as relevant, section 104 provides:-                "(1) Every Board shall levy, at such rate and           from such date as the State Government may in each           case  direct   by  notification  in  the  official           gazette and in such manner as is laid down in this           Act and  as may  be provided  in the rules made by           the State Government in this behalf, the following           taxes, namely-                (i) .............................                (ii) an  octroi on  goods and animals brought                within the  limits of  the  municipality  for                consumption, use or sale therein; and                (iii)............................                ....................................           (2) A  direction under sub-section (1) may provide           for the  levy  of  taxes  at  different  rates  in           different municipalities  having regard  to  their           varying local  conditions and  needs, and  on  the           same considerations  and by  a like direction, the           State Government may, from time to time                (i)  vary   uniformally  or   differently  in                relation  to  different  municipalities,  the                rates      of      taxes      levied,      or                (                (ii)................................ 587      Abu Road  municipality prior  to 1956 was a part of the State of Bombay and with effect from Ist November 1956, as a result of  the States  Reorganisation Act  of 1956, became a part of  the State  of Rajasthan.  While within the State of Bombay the  Abu Road municipality had prescribed octroi duty on cloth  at the  rate of  1.9 annas per cent ad valorem and the rate  continued till it was varied after promulgation of the Rajasthan  Municipalities Act  of  1959.  The  rates  in cities like  Jaipur were  on the  basis of  weight. Judicial notice can  be taken  of the  fact that  the areas which now constitute the  State of  Rajasthan prior to independence of India were  independent States  of different  dimensions and the local  conditions and  needs of  the  people  inhabiting those areas  considerably varied.  There were  13  different Acts then  in vogue governing the municipalities within that State. The  Rajasthan  Municipalities  Act  was,  therefore, introduced to  consolidate and  amend the  law  relating  to municipalities in  that State.  In February, 1962, the State Government by  notification dated 13th February, 1962 issued under section  104 of  the Act  fixed the  rate of octroi at 0.50 paise  in place  of 1.9  annas with  effect  from  15th February, 1962.  By notification  dated 10th of April, 1964, published in  the Gazette on 20th of August, 1964, the State Government in  exercise of  powers under  section 104 of the Act revised  the rates of octroi and so far as the municipal board of  Abu Road  was concerned,  Item 62  of the Schedule provided the  rate of  1 per  cent ad valorem on cloth. This led to  the challenge  before the  High  Court.  The  leamed Single Judge  who dealt  with the writ petitions relied upon the provisions  of section  104 of  the Act as it then stood and came  to hold  that the  provisions of section 104(1) of the Act  were valid  but the  notification in respect of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

municipal board  of Abu  Road relating  to  cloth  was  bad. During the pendency of the appeals before the Division Bench of the  High Court, sub-section (2) of section 104 was added by section  12 of  the Rajasthan  Municipalities (Amendment) Act of  1978. The  Division Bench  overlooked this amendment and reiterated  the reasons  of the learned Single Judge and dismissed the  appeals by  judgment dated  20th of December, 1978.      The state  Government authorised  levy of octroi on all types of  cloth at  the rate  of one  and a half per cent ad valorem  in   respect  of   Sujangarh  Municipal   Board  by notification dated  3rd January,1976. 34 writ petitions were filed before  the High  court   challenging the levy. It was contended   inter   alia   that   there   was   unreasonable discrimination between  the citizens  and traders  of  cloth within Sujangarh Municipal area on the one hand and those of Jodhpur, Jaipur  and other  named towns  on the other, as by authorising levy of octroi at different rates 588 and on different basis discrimination resulted. Reliance was placed on  the decision in the Abu Board municipal cases but the  Single  Judge  as  also  the  Division  Bench  did  not entertain  the   challenge  by   relying  upon  the  amended provision of  section 104 of the Act. That is how that group of appeals too has come before this Court by special leave.      There is  no dispute as to exigibility of octroi. Every municipality under the Act is a body corporate. Section 7 of the  Act  provides  for  it.  People  residing  within  each municipal area can be classified as one group different from those residing  in any other municipality since octroi is to be levied  by the municipality as provided in section 104(1) of the  Act subject  to the  control regarding  the rates of levy by  the State Government. The plea of discrimination on the basis  of the  rates prevalent  in another  municipality cannot be  entertained. The scheme in section 104 of the Act takes note  of the  position that local conditions and needs varied and  accordingly both in the proviso to sub-section ( I) as  also in  sub-section (2)  itself,  emphasis  on  that feature  has  been  put.  It  is  thus  open  to  the  State Government on  the basis  of local  conditions and  needs to prescribe  different   rates  in   relation   to   different municipalities in the matter of rates of taxes to be levied. Varying duty of octroi is, therefore, not open to challenge. The Division  Bench while  dealing with  the appeals  of Abu Road municipality should have taken note of the amendment of sub-section (2) with retrospective effect.      In some  of the municipalities the levy is on the value of the  goods while  in others  it is  on the  basis of  the weight. Here  again, the  State  Government  seems  to  have applied its  mind and  has authorised  charge of  octroi  on weight  basis   taking  into   consideration   the   special circumstances. In  bigger  municipalities  where  there  are wholesale markets  particularly of  cloth, a reduced rate of octroi has  been prescribed  to encourage  larger import. In smaller  municipalities  where  the  import  is  for  direct consumption the  levy is  on ad  valorem basis  at a  higher rate. The  State Government  seems to  have also  taken into consideration that  in smaller  municipalities there  is not much of demand for costly and fine clothes which have higher price while  the position  is otherwise  in bigger municipal areas. This appears to be the justification for adopting the weight basis  in respect  of larger  municipalities  and  ad valorem basis  for the  smaller municipalities.  This  again seems to be a legitimate basis and we do not think any valid objection is  available against this differential treatment.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

Law is  well settled  that if unequals are treated unequally there  is   no  discrimination   and  Article   14  of   the Constitution is not available to be invoked. 589      In view  of  what  we  have  said  above,  the  appeals preferred by  A Municipal  Board of  Abu Road  will have  to succeed. They  are allowed.  Other group of appeals relating to Sujangarh  Municipality have to be dismissed. Parties are directed to bear their own costs throughout.      Before we  part with the cases we would like to suggest that  in   the  backdrop  of  a  consolidating  and  uniform municipal legislation  now operating in the field, the State Government may  rationalise the  rate structure prevalent in different municipal areas so that assessment of octroi would be convenient,  a common  method would  be adopted  and  the challenge which  is raised now and again-though we have made it clear that it would be competent for the State Government to allow  varying rates  in different municipalities keeping the provisions  in section  l04 of  the Act  in view  may be avoided. H.L.C.                                     Appeals allowed. 590