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PETITIONER: MUNICIPAL COUNCIL, PUSAD

       Vs.

RESPONDENT: GOKALDAS DOSSA & CO. LTD.

DATE OF JUDGMENT13/11/1979

BENCH: SARKARIA, RANJIT SINGH BENCH: SARKARIA, RANJIT SINGH REDDY, O. CHINNAPPA (J)

CITATION:  1980 AIR  428            1980 SCR  (2)   7  1980 SCC  (1) 354

ACT:      Constitution of  India 1950, Article 276(2), Government of India  Act 1935,  S. 142A(2), Central Provinces and Berar Municipalities  Act  1922,  S.  66(1)(b)  &  Profession  Tax Limitation Act  1941, S  3 and  Item 4  of Schedule-Boja and Bale Tax-Tax by municipality on ginning and pressing cotton- Continuance  of   imposition  in  excess  of  constitutional limits-Validity of.

HEADNOTE:      Pusad was  part of District Akola, which was one of the four Hyderabad Assigned Districts, popularly known as Berar. These districts  not forming  a part  of British India, were administered by the Governor-General-in-Council, who enacted a law applicable in Berar, known as the Berar Municipal Law, 1886      On January  22,  1924  the  Governor-General-in-Council issued a notification the effect of which was that the Berar Municipal Law,  1886, was  repealed and  in  its  place  the Central  Provinces   Municipalities  Act,   1922  was   made applicable to  Berar. Further,  the taxes  imposed under the Berar Municipal  law were  deemed to have been imposed under the Central Provinces Municipalities Act, 1922.      On August  1, 1941,  the  C.P.  and  Berar  Legislature enacted the  C.P. and  Berar Act  as a  result of which, the words "and  Berar"  were  added  after  the  words  "Central Provinces" in  the  Central  Provinces  Municipalities  Act, 1922.      In the  meanwhile, the  Profession Tax  Limitation Act, 1941 was  enacted by   the Dominion Legislature in pursuance of the power given by the Government of India Act, 1935, and it came  into force on April 1, 1941. It provided that after its commencement,  the Municipalities  would not  impose  or levy taxes  which exceeded  Rs. 50/-  per annum. However, by section 3  read with  Item 4 of the Schedule to the Act, any tax levied  by a  Municipality in respect of any profession, trade, or calling imposed under section 66(1)(b) of the C.P. Municipalities Act,  1922 was  exempted from  the  aforesaid ceiling.      The appellant  Municipality which  was constituted as a Municipal   Committee    under   the    Central    Provinces Municipalities  Act   1922,  imposed  a  tax  under  section

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66(1)(b) read  with section  67, sub-sections 5 and 7 of the said Act  on ginning  and pressing  cotton by a notification dated January  9, 1932.  The tax  was known as Boja and Bale Tax. It  issued a demand notice and a bill in respect of the said tax  to the  respondent firm who was doing the business of ginning  and pressing  cotton within  the limits  of  the municipality. The  objections of  the respondent having been turned down,  they approached  the   High Court  in  a  Writ Petition for  a declaration  that  the  Boja  and  Bale  Tax imposed on  them was  ultra vires  and unconstitutional  and that the demand 8 notice be  quashed. The High Court allowed the writ petition and quashed the demand notice on the ground that the tax was in excess  of the ceiling limit of Rs. 250/- per annum fixed in Article 276 of the Constitution.      In the  appeal to this Court it was contended on behalf of the  appellant, relying  on the decision of this Court in Municipal Committee Akot v. Manilal Manekji Pvt. Ltd. & Anr. [1967] 2  SCR 100,  that the  Boja and  Bale Tax having been imposed under  the C.P.  Municipalities Act,  1922, in 1932, and there being no question of importing any deeming fiction the demand for the tax was valid.      Allowing the appeal, ^      HELD :  1. The  demand  notice  in  question  does  not contravene section  142A(2) of  the Government of India Act, 1935, and  Article 276(2)  of the Constitution and is valid. [15 A]      2. In Municipal Committee, Akot v. Manilal Manekji Pvt. Ltd. &  Anr. [1967]  2 S.C.R.  100, this Court held that the word ’imposed’  in Item  4 of the Schedule to the Profession Tax Limitation  Act, 1941, meant that the taxes which can be continued to  be levied  should have been imposed before the said Act came into force. [14 D]      3. If  the tax  in question  had in  fact been  imposed under   section    66(1)(b)   of   the   Central   Provinces Municipalities Act,  1922, before  the coming  into force of the 1941  Act, it  would fall within the exemption of item 4 read with  section 3  of the  Profession Tax Limitation Act, 1941 and  the continuance of such an imposition in excess of the constitutional  limit, will  be in  consonance with  the proviso to  section 142A(2)  of the Government of India Act, 1935, and also Article 276(2) of the Constitution. [14 E-F]      In the instant case, the tax was actually imposed under section 66(1)(b)  of the  C.P. Municipalities  Act, 1922, in 1932, when  this Act was applicable and in force in Berar by virtue of  the notification dated January 22, 1924 issued by the Governor-General-in-Council.  Even if section 3 and item 4 of  the 1941  Act  were  to  be  strictly  construed,  the impugned tax  will squarely  fall within  the ambit  of  the exemption enacted in the aforesaid item 4. [13 D]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeal No. 259 of 1970.      Appeal by  Special Leave  from the  Judgment and  Order dated 17-7-1968  of the  Bombay High Court (Nagpur Bench) in Special Civil Application No. 329/67.      M. N. Phadke and Naunit Lal for the Appellant.      A. G. Ratnaparkhi for Respondent No. 1      M. N. Shroff for Respondent No. 2.      S. B. Saharya and V. B. Saharya for the Intervener.

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9      The Judgment of the Court was delivered by      SARKARIA, J.  This appeal  by special leave is directed against a  judgment, dated July 17, 1968, of the Bombay High Court (Nagpur Bench). It arises out of these facts:      The appellant  herein,  Municipal  Council,  Pusad  was constituted as  a  Municipal  Committee  under  the  Central Provinces Municipalities Act 1922. Thereafter, on January 9, 1932  the   appellant  with   the  sanction   of  the  local government, imposed a tax known as Boja Tax & Bale Tax under section 66(1) (b) read with section 67, sub-sections (5) and (7) of  the C. P. Municipalities Act on ginning and pressing cotton. The rate fixed was Annas 2 for each Boja of 392 lbs. and Annas  4 for  each Bale of 392 lbs. The respondents M/s. Gokuldas Dossa & Co. Ltd. were doing the business of ginning and pressing  cotton  by  mechanical  processes  within  the limits  of  the  said  Municipality.  In  pursuance  of  the aforesaid Notification  of January 9, 1932 imposing the tax, the appellant  on November 22, 1966 issued demand notice and a bill  for Rs. 3,971.75 in respect of Boja and Bale Tax for the year  1965-66 requiring  the  respondents  to  pay  that amount of  tax. The respondents submitted objections to this Demand on  March 28,  1967. The  objections were rejected by the appellant on April 7, 1967.      Aggrieved, the  respondents filed  a writ  petition  on April 9,  1967 in  the High  Court under  Article 226 of the constitution seeking  a declaration that the Boja & Bale Tax imposed on  them was  ultra vires and unconstitutional. They prayed that  the Bale  and Demand  Notice be  quashed.  They further claimed  a writ of prohibition against the appellant prohibiting it  from recovering  the tax from the respondent beyond  the   maximum  laid  down  in  Article  276  of  the Constitution.      The High  Court by  its  order  dated  April  29,  1967 granted an  interim stay  of the  recovery of  the tax  from respondent no.  1. Thereafter, by its judgment under appeal, the High  Court allowed  the writ  petition and  quashed the Demand Notice  on the  ground that  the tax was in excess of the ceiling  limit of Rs. 250 per annum fixed in Article 276 of the Constitution.      The High  Court purporting  to follow, what it says, "a series of  decisions"  pronounced  by  that  Court  and  the Supreme Court,  has held  that the demand by way of Bale and Boja tax  in excess  of the limits prescribed in Article 276 of the  constitution is  illegal. It, therefore, quashed the demand notice  in question.  When the High Court spoke of "a series of  decisions" of the Supreme Court, it had, perhaps, in mind  two decisions  of this  Court, namely  :  Municipal Committee, Akot 2-868SCI/79 10 v. Manilal  Manekji  Pvt.  Ltd.  &  Anr.(1)  and  Ballabhdas Mathuradas  Lakhani   &   Ors.   v.   Municipal   Committee, Malkapur.(2)      Mr. M.  N. Phadke, appearing for the appellant, submits that on facts, the aforesaid two decisions of this Court are clearly distinguishable.  According to the counsel. properly read, these  decisions,  support  his  contention  that  the demand for  the Boja and Bale Tax of the appellant is valid. It is  pointed out  that the  tax with  which this Court was concerned in  Municipal Committee,  Akot’s case (ibid) was a tax levied  under the old Municipal Law, which was by virtue of the notification of January 27, 1924 deemed to be imposed under the  C. P.  Municipalities Act,  1922; that  it was on this ground  that this  Court strictly  construing Item 4 of the Schedule  to the  Professions Tax  Limitation Act, 1941,

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held that  only taxes imposed under the C. P. Municipalities Act, 1922 and not those which are deemed to be imposed under that Act by virtue of the deeming fiction, were saved by the proviso to  Article 142A(2)  of the Government of India Act, 1935, and  the corresponding  clause in  Article 276  of the Constitution. Stress  has been laid on the fact that, in the instant  case,   the  tax   was  imposed   under  the   C.P. Municipalities Act, 1922, in 1932, and there was no question of importing any deeming fiction.      As against  this,  Mr.  Ratnaparkhi  submits  that  the imposition in  question was  directly hit  by the  ratio  of Municipal Committee  Akot’s  case  (ibid).  Further,  it  is halfheartedly submitted, for the first time, that even under the old  law, the  Municipal Committee  could levy  a tax on professions to a maximum limit of Rs. 500 per annum, only.      Taking the last contention of Mr. Ratnaparkhi first, we find no  substance in the same. The C. P. Municipalities Act of 1922  does not  fix any  ceiling on the profession tax on professions that  may  be  imposed  by  a  Municipality.  We therefore, have no hesitation in rejecting this contention.      Before proceeding  further, it  is necessary to have an idea of  the various  provisions bearing  on  the  point  in issue.      Pusad was  a part  of District  Akola, which was one of the four  Hyderabad Assigned  Districts, popularly  known as Berar. Those  Districts were not a part of British India but were administered  by the  Governor-General-in-Council under the India  (Foreign Jurisdiction)  Order-in-Council of 1904. In exercise of those powers, the Governor-General-in-Council enacted a  law applicable in Berar, known as Berar Municipal Law, 1886, which enabled the Municipalities  functioning 11 in Berar  to impose professional taxes. On January 22, 1924, the Governor-General-in-Council issued a notification, which so far as material for our purpose, ran thus:           "No. 58-1.-In  exercise of the powers conferred by      the  Indian  (Foreign  Jurisdiction)  Order-in-Council,      1902 and  of all  other powers  enabling  him  in  that      behalf, the  Governor-General-in-Council is  pleased to      direct that  the following  further amendments shall be      made in  the First  Schedule to the Notification of the      Government of India in the Foreign Department No. 8510-      I.B., dated  the 3rd  November, 1913,  applying certain      enactments to Berar, namely:-           After Entry  No. 149, the following Entry shall be inserted namely:-           150. The  Central  Provinces  Municipalities  Act,      1922 (II of 1922) (1) in section 2:-           (a) for  sub-section (1)  the following  shall  be      substituted, namely:-           "(1) The  Berar Municipal  Law,  1886,  is  hereby      repealed."           (b) In  Sub-Section (2),  for the  word "Acts" the      word "Law" shall be substituted." The effect of this notification was that the Berar Municipal Law, 1886  was repealed and Central Provinces Municipalities Act, 1922  was made  applicable to  Berar; and  further, the taxes imposed  under the  Berar Municipal Law were deemed to have been  imposed or  assessed under  the Central Provinces Municipalities Act.      Thereafter on  January  9,  1932,  a  notification  was issued imposing  the Boja  and Bale Tax under section 66 (1) (b) of  the C.  P. Municipalities  Act. 1922.  The  impugned demand notice  was issued  by virtue  of this  notification. This tax came into force from the date of the publication of

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the notification in the Central Provinces.      Section 142A(2)  of the  Government of  India Act, 1935 provided as under:           "142A (2).-The  total amount payable in respect of      any  one   person  to   the  province  or  to  any  one      Municipality, district  board, local  board,  or  other      local authority  in the  Province by  way of  taxes  on      professions, trades,  callings  and  employments  shall      not, after the thirty-first day of March, 12      nineteen hundred  and thirty-nine,  exceed fifty rupees      per annum:           Provided that,  if in  the financial  year  ending      with that  date there  was in  force in the case of any      Province or any such municipality, board or authority a      tax on professions, trades, callings or employments the      rate, or  the maximum  rate, of  which  exceeded  fifty      rupees per annum, the preceding provisions of this sub-      section shall,  unless for  the time being provision on      the  contrary   is  made  by  a  law  of  the  Dominion      Legislature, have  effect in relation to that Province,      municipality,  board   or  authority   as  if  for  the      reference  to   fifty  rupees   per  annum   there  was      substituted a  reference to  that rate or maximum rate,      or such  lower rate,  if any (being a rate greater than      fifty rupees  per annum),  as may for the time being be      fixed by a law of the Dominion Legislature; and any law      of  the  Dominion  Legislature  made  for  any  of  the      purposes of this poviso may be made either generally or      in relation  to any specific Provinces, municipalities,      boards or authorities."      In pursuance  of the  powers given by the Government of India  Act,  1935,  the  Dominion  Legislature  enacted  the Profession Tax Limitation Act, 1941 which came into force on April 1, 1941. This Act provided that after the commencement of that  Act, the  Municipalities would  not impose  or levy taxes which exceeded Rs. 50/- per annum. However, by Section 3 of  this Act,  the taxes specified in the Schedule thereto were exempted  from this  ceiling. Item 4 of the Schedule is in these terms:           "The taxes  on person exercising any profession or      carrying on  any trade  or calling within the limits of      the Municipalities, imposed under clause (b) of Section      1 or Section 66 of the C.P. Municipalities Act, 1922."      On August  1, 1941,  the C.  P. and  Berar  Legislature enacted Act  15 of  1941 called  C. P.  and Berar  Act, as a result of  which, the words "and Berar" were added after the words "Central Provinces"  wherever occurring in the Central Provinces Municipalities Act, 1922.      A provision analogous to Section 142A (2) proviso is to be  found   in  the  proviso  to  Article  276  (2)  of  the Constitution, which reads as follows:           "Provided  that   if   in   the   financial   year      immediately  preceding   the   commencement   of   this      Constitution there  was in  force in  the case  of  any      State or any such municipality, board or 13      authority a  tax on  professions, trades,  callings  or      employments the  rate, or  the maximum  rate, of  which      exceeded two  hundred and  fifty rupees per annum, such      tax may  continue to  be levied  until provision to the      contrary is  made by  Parliament by law, and any law so      made by  Parliament  may  be  either  generally  or  in      relation to any specified States, municipalities boards      or authorities."

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    It will  be seen  from the  above conspectus,  that  in order to  qualify for  the exemption  under item  4  in  the Schedule to  the Profession  Tax Limitation  Act, 1941 (1941 Act, for  short) from the limitation imposed by Section 2 of that Act,  the tax  in question must have been imposed under clause (b)  of sub-Section  (1) of  Section 66  of the  C.P. Municipalities Act,  1922, before the 1941 Act passed by the Dominion Legislature by virtue of the power derived from the enabling proviso  to Section  142A (2)  of the Government of India Act,  1935, came  into force.  This condition has been satisfied by the impugned tax. This tax was actually imposed under section  66 (1)  (b) of the said Act of 1922, in 1932, when this Act was applicable and in force in Berar by virtue of the  notification dated  January 22,  1924 issued  by the Governor-General-in-Council. Thus,  even if  Section  3  and item 4  of the  1941 Act  were to be strictly construed, the impugned tax  will squarely  fall within  the ambit  of  the exemption enacted in the aforesaid item 4.      Now, let  us notice the Municipal Committee Akot’s case (ibid) which  was presumably  relied upon by the High Court. It will  be presently  seen that  this decision  if properly read does  not support  the decision  under appeal.  In that case, the  impugned tax  was not  actually  imposed  by  the Municipal Committee  after the coming into force of the 1941 Act, under  the C.P.  Municipalities Act  of 1922,  but  was imposed under  a notification  No. 98, dated March 14, 1899. The  contention   on  behalf  of  the  appellant,  Municipal Committee was  that since this notification of 1899 would be deemed to  be issued  under the  Central Provinces and Berar Municipalities Act, 1922 (which only changed the name of the C.P.  Municipalities  Act  of  1922),  it  would  be  a  tax ’imposed’ under  Section 66(1)(b) of the C.P. Municipalities Act of  1922, within  the contemplation  of item  4  of  the Schedule to the 1941 Act. Sikri, J., speaking for the Court, repelled this contention in these terms:           "In our opinion the High Court came to the correct      conclusion. First,  item No. 4 is an exemption from the      limitation imposed  by s.  2  of  the  Professions  Tax      Limitation Act, 14      1941, and  the exemption  must be  construed  strictly.      Secondly, the effect of s. 3 and item 4 of the Schedule      is to  continue the  leviability of  a tax  and, in our      opinion, this  item must  be construed  strictly like a      taxing statute.  If Mr. Gupta had been able to convince      us that the item would be otiose if this interpretation      is put,  there would be something to say in his favour.      But the item will not be otiose even if we do not treat      item 4  as a  case of misdescription but give the plain      meaning that  the Central Provinces Municipalities Act,      1922, means  the Central  Provinces Municipalities Act,      1922,  and   not  the   Central  Provinces   and  Berar      Municipalities Act,  1922. Various taxes must have been      imposed by  the Municipalities in the Central Provinces      by virtue  of notifications issued under s. 66(1)(b) of      the Central  Provinces Municipalities  Act,  1922,  and      they would  fall within  the ambit  of item  4..... The      word "imposed".....in  our view,  means that  the taxes      which can  continue  to  be  levied  should  have  been      imposed  in   the  past  before  the  Profession    Tax      Limitation Act,  1941, came  into  force.  This  is  in      consonance with  s. 142A(2)  of the Government of India      Act, 1935." The crucial  words are  those which  have  been  underlined. These words  clearly lay  down that  if the  tax in question

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had, in  fact, been  imposed under  Section 66(1)(b)  of the Central  Provinces  Municipalities  Act,  1922,  before  the coming into  force of the 1941 Act, it would fall within the exemption of  item 4  read with Section 3 of the Professions Tax Limitation  Act, 1941,  and the  continuance of  such an imposition in excess of the constitutional limit, will be in consonance with  the  proviso  to  Section  142A(2)  of  the Government of  India Act,  1935, and  also Article 276(2) of the Constitution.      Since in  the instant  case, the  tax in  question  was imposed under  Section 66(1)  (b) of the C.P. Municipalities Act, 1922,  in 1932,  long before  the 194]  Act  came  into force, and  no question of invoking any deeming, fiction was involved, the  ratio of  Municipal Committee Akot’s case, in fact, supports  the contention  of  the  appellant-Municipal Council,  and   highlights  the  error  in  the  High  Court decision.      It is  not necessary  to discuss  the case, Ballabhadas Mathuradas Lakhani  & Ors.  v. Municipal Committee, Malkapur (ibid), because  if simply  follows the  ratio of  Municipal Committee, Akot  v.  Manilal  Manekji  Pvt.  Ltd.  and  Anr. (ibid). 15      In view  of all  that has  been said  above, we  are of opinion  that   the  demand  notice  in  question  does  not contravene Section  142A(2) of  the Government of India Act, 1935, and  Article 276(2) of the Constitution, and is valid. Accordingly, we allow this appeal, set aside the judgment of the High Court and dismiss the writ petition of respondent 1 leaving the parties to bear their own costs. N.V.K                                        Appeal allowed. 16