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PETITIONER: MUNICIPAL COUNCIL, RAICHUR

       Vs.

RESPONDENT: AMAR CHAND PRASANNA ETC.

DATE OF JUDGMENT: 01/08/1967

BENCH: SHAH, J.C. BENCH: SHAH, J.C. SIKRI, S.M.

CITATION:  1968 AIR  255            1968 SCR  (1)  87

ACT: Mysore Municipalities Act, 1964, ss. 57, 80(5), 94, 95,  96, 97,  123(1),  824(4)  and  (5)--Resolution  levying   octroi whether can be adopted by confirmation of resolution  passed by  Standing Committee--Modification in  resolution  whether can  be adopted by circulation among members and  subsequent confirmation by general body--Modification in model bye-laws must  comply with s. 324(4) and (5)--Defect in some  of  the bye-laws   does   not  make  the  rest   of   the   bye-laws unenforceable.

HEADNOTE: On  June  11, 1965, the Standing Committee  of  the  Raichur Municipal Council resolved to levy octroi duty according  to Sch.  II under s. 94 of the Mysore Municipalities Act, 1964. It  was recited in the resolution that the  confirmation  of the general body be obtained.  The general body  unanimously approved  the  resolution  of the  Standing  Committee.   On October  27,  1965 the notification under s. 95 of  the  Act inviting  objections  from  the  public  was  published;  no objections were received.  On February 26, 1966 there was  a special  general body meeting and it was. resolved  to  levy octroi with effect from April 1, 1966.  This resolution  was however  amended by modification of its second paragraph  on March 25, 1966.  Approval to this modification was  obtained at first by circulation to the members on March 31, 1966 the minutes  of  the  meeting dated February 26,  1966  and  the adoption of the resolution modifying the second paragraph by circulation  on  March  25,  1966,  were  read,  heard   and confirmed unanimously.  As required by s. 123 of the Act the model  bye-laws  framed by Government were adopted  but  the table  of rates in model bye-law 16 relating to the levy  of storage  fee  and  charges on goods  placed  in  the  bonded warehouses  was,  left blank.  The rates were fixed  by  the Council  by its resolution of March 31, 1966.  On April  16, 1966  sanction of the Government under s. 96 of the  Act  to the  levy  of octroi and the adoption of model  by-laws  was given  and on May 3, 1966, the notification under s.  97  of the Act imposing octroi duty under Sch.  II and adopting the bye-laws was published.  The respondents who were dealers in cloth  in Raichur moved the High Court of Mysore under  Art. 226  of the Constitution.  The High Court held  that  though

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octroi  had  been properly levied its collection  wag  unau- thorised  owing  to defects in the  bye-laws  adopted.   The municipality  appealed.   The following questions  fell  for consideration: (i) whether the resolution levying the octroi and the subsequent modification of the said resolution  were procedurally  valid (ii) whether the fixation of  rates  for the  purpose  of  model bye-law 16  was  validly  made,  the procedure  in s. 324(4) and (5) not having  been  followed-, (iii) whether the bye-laws were unenforceable for the reason that  they did not fix the time for the purpose of  bye-laws 23,  27 and 28 and did not give a list of articles  for  the purpose of bye-laws 33 to 36. HELD:(i)  The  resolution  of  the  Standing  Committee selecting  octroi tax for imposition expressly  stated  that confirmation of the general body would be obtained, and such confirmation  was  actually obtained.  It could not  in  the circumstances be contended that 88 there was no valid resolution by the Municipal Council under S. 94 selecting octroi duty for imposition. [92F-H] The  resolution  modifying  the  original  resolution  dated February  26,  1966 was no doubt passed by  circulation  but later  the said circulation was "read, heard  and  confirmed unanimously"  by  the  general body.   Under  s.  80(5)  any irregularity  not  affecting the merit of the  case  can  be cured and s. 97(2) prohibits enquiry into the regularity  of the procedure by which a tax has been imposed after a notice under  s. 97 (1) is published.  No material had been  placed before the Court to show that in making the modification  s. 57 had not been complied with. [93A-D] Municipal, Board, Hapur v. Raghuvendra Kripal & Ors., [1966] 1 S.C.R. 950, relied on. (ii)If bye-laws in respect of the matters specified in  cl. (m) of S. 324(1)  are  made and submitted  for  sanction  or model  bye-laws framed by the Government for those  purposes are   adopted,  the  requirements  of  s.  123(1)  will   be satisfied, and if Government sanctions the resolution of the Municipal  Council imposing octroi duty under S.  97(1)  and the  notice is duly published. octroi duty may be  collected by the Municipal Council.  Defect in ’the bye-laws will  not affect the authority of the Municipal Council to collect the tax for the authority arises under s. 94(3) from Act and the Rules. [94C-D] The  Municipal  Council by fixing a tariff for  storage  fee under bye-law 16 modified the model bye-laws, and since  the modification was made without the Procedure prescribed in s. 324(4)  and (5) the said bye-law was invalid.  As  a  result the  Municipal Council was not entitled to levy  any  charge for  storage  under bye-law 16.  But the validity  of  other bye-laws was not thereby affected. [94H-95C] (iii)The time contemplated to be fixed for the purposes of  byelaws 23(e), 27 and 28 need not be fixed in  the  bye- laws.   If  time  is fixed by resolution  of  the  Municipal Council after the bye-laws are sanctioned, there would be no defect in the bye-laws. [95E-F] Bye-laws  33 to 36 depend for their operation upon the  list of  articles being effectively incorporated in  bye-law  32. Failure to incorporate the list of articles would result  in the  Municipal Council I being unable to enforce  compliance with  the requirement of taking out a licence.  The rest  of the by-laws did not threby become ineffective. [95G-H]

JUDGMENT:

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CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2382-  2384 of 1966. Appeals  from the judgment and orders dated October 6,  1966 of  the Mysore High Court in Writ Petitions Nos. 1056,  1607 and 1298 of 1966, S.   T.  Desai,  S.  C. Javali and  Vineet  Kumar,  for  the appellant (in all the appeals). M.   M. Ramamurthi and Shyamala Pappu, for respondent No.  1 (in all the appeals) and respondent No. 2 (in C. A. No. 2382 of 1966). 89 The Judgment of the Court was delivered by Shah, J.-On May 3, 1966 the Municipality of Raichur  imposed octroi  duty  on goods specified in Sch. 11 to  the  Mysore. Municipalities Act 22 of 1964, entering the municipal limits for  consumption,  use  or sale.  The  respondents  who  are traders  in cloth at Raichur moved the High Court of  Mysore by-petitions under Art. 226 of the Constitution  challenging the levy and collection of octroi duty on goods described in Sch.   II of the Act in pursuance of the notification  dated May 3, 1966.  The High Court of Mysore held that the tax was properly  imposed, but in their view collection of  the  tax was  not  authorised  by law.  The  High  Court  accordingly issued a writ of mandamus restraining the Municipal Council, Raichur from recovering the octroi duty levied in  pursuance of  the  notification  dated May  3,  1966.   The  Municipal Council,  Raichur,  has appealed to this Court  against  the orders passed by the High Court. The relevant provisions of the Mysore Municipalities Act  22 of  1964  and the Bye-Laws may be summaried.  By s.  94  the Municipal  Council is authorised, subject to the general  or special  orders of the Government, and after  observing  the preliminary  procedure prescribed by s. 95, to  levy,  among other taxes, octroi on goods specified in Sch.  II  entering the  municipal limits for consumption, use or sale  therein. By  sub-s.  (3)  of  S. 94 it is  provided  that  the  taxes specified  in  sub-s.  (1) shall  be  assessed,  levied  and collected  in accordance with the provisions of the Act  and the  rules made by the Government under s. 323.  Section  95 prescribes  the procedure preliminary to imposition of  tax. A  municipal council has by resolution passed at  a  general meeting  to select for the purpose one or more of the  taxes specified  in  s. 94 and in such resolution to  specify  the classes  of  persons  or of property or of  both  which  the municipal  council proposes to make liable and to  prescribe exemptions which it proposes to make, the amount or rate  at which  the  municipal council. proposes to assess  any  such class, and in the case; of octroi, the octroi stations.  The resolution must be published in the official Gazette and  in such  other manner as may be prescribed.  Any inhabitant  of the  municipality may within one month from the  publication of the notice submit his objection to the imposition of  the tax or to the amount or rate proposed, or to the classes  of persons or property to be made liable, or to any  exemptions proposed.    The   municipal   council   must   take    into consideration the objections and submit to the Government of the  State such objections with its opinion thereon and  any modifications proposed in accordance therewith together with a  copy  of  the notice.  A  resolution  sanctioned  by  the Government together with a notice reciting the sanction  and the  date  and number thereof may then be published  by  the ,municipal  council in the official Gazette, and the tax  as prescribed by the, resolution shall be imposed  accordingly. Sub-section (2) of               "The  publication  of  a  notice  under   this

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             section shall be conclusive evidence that  the               tax has been imposed in               90               accordance with the provisions of this Act and               the rules made thereunder". Section  123  provides  that every  municipal  council  when submitting  for  sanction a proposal for the  imposition  of octroi, shall submit therewith for sanction bye-laws for the purposes  of cl. (m) of sub-s. (1) of s. 324 or adopt  model bye-laws made for the said purposes.  Section 124 deals with "non-liability  for octroi and refund of octroi on goods  in transit".   Section 125 invests the municipal  council  with power  to exempt articles liable to octroi duty, and S.  126 relates  to  the  presentation  of  bills  for  octroi   and prescribes  penalties  for  evasion of  payment  of  octroi. Section  127  prescribes the penalty  for  selling  articles liable  to  octroi  without  a  licence,  or  for  being  in possession of any such article on which octroi has not  been paid.   Section 323 authorises the Government to make  rules for  carrying out all or any of the purposes of the Act  and to prescribe forms for any proceeding for which it considers that  a form shall be prescribed. Exercising  the  authority conferred  by s. 323 the Government of Mysore  published  on September 2, 1965, the Mysore Municipalities Taxation Rules, 1965.   Rules 25 to 32 deal with the collection  of  octroi. Rule  25 deals with the mode of collection; r. 26 with  pay- ment  of  octroi, r. 27 with assessment  and  collection  of octroi  at octroi station; and r. 28 with the  procedure  in case where octroi is leviable ad valorem.  Rule 3.1 requires the  municipal  council to maintain a list  of  traders  and public bodies allowed to have an account current, and r.  32 requires a trader or public body allowed, to have an account current  to present a declaration in Form VII.  Section  324 authorises  the municipal council to make, alter or  rescind bye-laws, subject to the provisions of the Act and the rules made  thereunder.   Clause (m) provides, insofar  as  it  is material:               "   providing for the exhibition of tables  of               octroi, requiring a licence to be obtained for               the  sale of any article liable to octroi  and               prescribing  the, conditions on or subject  to               which  such licence may be  granted,  refused,               suspended or withdrawn, regulating, subject to               any  general  or  special  orders  which   the               Government may make in this behalf, the system               under which refunds are to be made on  account               thereof when the goods on which the octroi has               been  paid, or article manufactured wholly  or               in  part from such goods, are  again  exported               and  the custody or storage of goods  declared               not  to be intended for use or consumption  or               for          sale          within          the               municipality;.................. Section  325(2)  provides that a municipal  council  may  by resolution adopt in respect of any matter the model bye-laws made by the Government under sub-s. (1) of s. 325 in respect ’of matters specified in S. 324.  Sub-section (3) of s.  325 provides:               "If a municipal council proposes to adopt  the               model  bye-laws  in  respect  of  any   matter               subject  to any modifications,  the  procedure               specified in sub-sections (4), (5) and (6)                                     91               of  section  324 shall be followed as  if  the               modifications  were  bye-laws proposed  to  be

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             made   by   the   municipal   council.     The               modifications  as approved by  the  Government               shall  be published in the  prescribed  manner               and  the model bye-laws shall subject to  such               modifications  come into force from such  date               as  may be specified by the municipal  council               and where no date is specified on the date  of               such publication". . Sub-sections (4) & (5) of s. 324 set out the procedure to be followed  by  the  municipal  council  in  the  making   and publication  of  bye-laws.  Sub-section (6)  authorises  the local  Government while approving the bye-laws to  make  any changes therein which appear to it-to be necessary. In the present case the Municipal Council adopted the  model bye-laws  framed  by the Government.  It  appears,  however, that the table of rates in model bye-law 16 relating to  the levy  of  storage  fee and charges on goods  placed  in  the bonded warehouses was left blank.  The Municipal Council has however  by  resolution  prescribed a,  table  of  rates  of storage  fee and charges in respect of different classes  of articles stored in the bonded warehouses. The respondents challenge in this Court the validity of  the imposition of octroi duty on two grounds: (i) that there was no valid resolution by the Municipal Council under s. 94  of the  Act selecting the octroi duty for imposition, and  (ii) that  the  model bye-laws having been altered  by  adding  a tariff  of  storage  fee in the  bonded  warehouses  without following  the procedure prescribed under s. 324(4)  &  (5), the model bye-laws could not be deemed to have been  validly adopted by the Municipal Council.  They also submit that the Municipal  Council has no authority to collect octroi  duty, and  support  the  judgment  of  the  High  Court,  on  that question. Before  considering the arguments advanced at the  Bar,  the steps  taken by the Municipal Council for imposing  the  tax and  for adoption of the model bye-laws may be  briefly  set out.  On June 11, 1965 the Standing Committee of the Raichur Municipal Council resolved to levy octroi duty according  to Sch. 11 under s. 94 of the Mysore Municipalities Act,’ 1964, at  the  maximum  rates at  the  octroi  barriers  specified therein.  It was recited in the resolution that confirmation of  the general body be obtained.  By resolution dated  June 28,  1965 the general body resolved unanimously  to  confirm the recommendations of the Standing Committee dated June 11, 1965.   On October 27, 1965 the notification under s. 95  of the  Act  by  the Municipality inviting  objections  to  the proposals to impose octroi tax was published.  No Objections were received from any resident of the Municipality  against the proposal to levy octroi.  On February 26, 1966 there was a special general body meeting of the, Municipal Council and it was resolved to levy 92 octroi  with effect from April 1, 1966.  The resolution  was in the following terms:               "After  due decision and consideration it  was               unanimously  resolved to levy the octroi  duty               on  all  the goods imported  within  municipal               limits  of  Raichur under the Schedule  II  of               Mysore  Municipalities  Act,  1964,  from  the               first   day  of  April  1966.    Further   the               Committee resolved that the Hyderabad District               Municipalities   Octroi  Rules,   1959,   will               continue  till the new Octroi Rules  and  Bye-               laws are finalised under Mysore Municipalities               Act, 1964."

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But  this resolution was amended on March 25, 1966, and  the second   paragraph   was  substituted   by   the   following paragraph:-               "Further  the  Committee  resolved  that   the               appended  Bye-laws framed by the  Municipality               in  the  light of Octroi Model  Bye-laws  1965               published  by  the Government  in  the  Mysore               Gazette  dated 11th November, 1965, have  been               fully approved." Approval to the modification in the second paragraph was ob- tained  by  circulation to the members and not  in  an  open general  meeting.   On  March 31, 1966 the  minutes  of  the meeting  dated  February 26, 1966, and the adoption  of  the resolution modifying the second paragraph by circulation  on March 25, 1966, were read, heard and confirmed  unanimously. The  storage fee under bye-law 16 of the model bye-laws  was also adopted.  On April 16, 1966 sanction of the  Government under  s.  96  of  the Act to the levy  of  octroi  and  the adoption  of model bye-laws was given, and on May  3,  1966, the notification under S. 97 of the Act imposing octroi duty under  Sch.   II to the Act and adopting  the  bye-laws  was published.   Thereafter  on various dates in the  months  of July and August 1966, the writ petitions out of which  these appeals arise were filed. There  is no substance in the contention that the  municipal council had not passed a resolution selecting the octroi tax for  imposition.  As stated earlier, on June 11,  1965,  the Standing Committee of the Municipal Council had "resolved to impose  octroi  duty"  under Sch. 11 to the  Act.   But  the resolution also stated that confirmation of the general body meeting  should be obtained.  The Municipal Council  at  its meeting  dated June 28, 1965 treated the resolution  of  the Standing  Committee  as a recommendation and  confirmed  the recommendation.   The  resolution dated June 28,  1965,  was passed by the general body and thereby the Municipal Council adopted  the recommendations of the Standing Committee,  and resolved to select levy of octroi duty at  the maximum rates at the octroi barriers specified therein. It  is  true  that the  resolution  modifying  the  original resolution dated February 26, 1966 was passed by circulation on March 25,                              93 1966.  But in view of the terms of s. 80(5) the validity  of the resolution was not liable to be questioned on the ground of irregularity which manifestly did not affect the merit of the  case.,  It may be recalled that on March 31,  1966  the "circulation  dated 25-3-66 were read, heard  and  confirmed unanimously." The  plea that a resolution passed by the Municipal  Council cannot, under the Act, be modified or cancelled within three months  is  without force.  Section 57 of the  Act  provides that no resolution of a municipal council shall be  modified or  cancelled within three months after the passing  thereof except  by a resolution passed in the manner  prescribed  in that behalf.  There are no materials on the record to  prove that  the requirements of s. 57 were not complied with,  and s.  97(2)  prohibits an enquiry into the regularity  of  the procedure for imposition of the tax after a notice under  s. 97(1) is published.  This Court in Municipal Board, Hapur v. Raghuvendra  Kripal  &  Ors.(1) in dealing  with  a  similar provision  in  s. 135 of the U. P. Municipalities Act  2  of 1916,  held  that  s.  135(3) shuts  out  enquiry  into  the procedure  by which a tax had been  imposed.   Hidayatullah, J., speaking for the majority observed (p. 958) .               "There is a difference between the tax and the

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             imposition of the tax.  The former is the levy               itself and the latter the method by which  the               levy is imposed and collected.  What the  sub-               section  does  is to put beyond  question               the  procedure  by which the tax  is  imposed,               that  is  to say, the various steps  taken  to               impose it." Section  97(2) makes the publication of the notice under  s. 97(1)  conclusive evidence that the tax has been imposed  in accordance with the provisions of the Act and the rules made thereunder.  The expression "imposed in accordance with  the provisions of this Act", in our judgment, means "imposed  in accordance with the procedure provided under the Act".   All enquiry into the regularity of the procedure followed by the Municipal Council prior to the publication of the notice  is excluded  by  s.  97(2).  This is not a case  in  which  the Municipal Council had not selected a tax for imposition by a resolution: nor is it a case in which the Municipal  Council was seeking to levy tax not authorised by law. A Municipal Council when submitting for sanction a  proposal for the imposition of octroi has to submit under s. 123 with the  proposal for imposition of octroi, also’  bye-laws  for the purposes of cl. (m) of sub-s. (1) of s. 324, or to adopt model  bye-laws  made for the said purposes.  It  is  to  be noticed  that under s. 94(3) of the Act the tax has  to  be. assessed, levied and collected in accordance (1)[1966] I S.C.R. 950. 94 with  the  provisions of the Act and the rules made  by  the Government  under s. 323.  Bye-laws contemplated to be  made under s. 324(1)(m) and required to be adopted from the model bye-laws or specially framed and submitted under s. 123 deal with matters of details, such as the exhibition of tables of octroi;  requiring a licence to be obtained for the sale  of any article liable to octroi and prescribing the  conditions on or subject to which such licence may be granted, refused, suspended  or withdrawn-, regulating the system under  which the  refunds  are  to be made when the goods  on  which  the octroi has been paid are again exported; for the custody  or storage  of  goods declared not to be intended  for  use  or consumption or for sale within the municipality; prescribing a  period of limitation after which no claim for  refund  of octroi  shall  be entertained; and prescribing  the  minimum amount for which any claim for refund may be made.  If  bye- laws in respect of these matters specified in cl. (m) of  s. 324(1) are made and submitted for sanction or model bye-laws framed by the Government for those purposes are adopted, the requirements  of  s. 123(1) will be satisfied,  and  if  the State  Government sanctions the resolution of the  Municipal Council  imposing octroi duty under s. 97(1) and the  notice is  duly  published,  octroi duty may be  collected  by  the Municipal  Council.  Defect in the bye-laws will not  affect the  authority of the Municipal Council to collect the  tax, for the authority arises under s. 94(3) from the Act and the rules. The  Municipal Council of Raichur-adopted the model  byelaws made  by  the  Government.  None of the  bye-laws  "for  the purposes"  of  cl. (m) of s. 324 in the model  bye-laws  was defective or incomplete.  The model bye-laws undoubtedly did not  prescribe  the storage fee, and the resolution  of  the Municipal  Council levying storage fee at the rates set  out in the bye-laws and submitted to the Government was not made in conformity with the terms of S.   324(4) & (5). The  High Court held that the bye-laws adopted by the  Muni-

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cipal Council were invalid because (1) the resolution  dated February   26,1966   could  not  have   been   modified   by circulation;  and  (2)  that  it  was  not  shown  that  the Municipal  Council had complied with the requirements of  s. 57  when modifying the resolution dated February  26,  1966; and  (3)  that the State Government had not fixed  the  time prescribed by bye-laws Nos. 23(e), 27, 28 and 32, and  since no  decision  was taken on those bye-laws by  the  Municipal Council,  the enforcement of the octroi levy  was  "rendered difficult". It is clear that under s. 325(3) modifications to the  model bye-laws alone require compliance with sub-ss. (4) & (5)  of s. 324.  It may be assumed that fixing a tariff for  storage fee under bye-law 16 which is not prescribed under the model bye-laws amounts to 95 modification  of the bye-laws, but even on  that  assumption only  bye-law 16 may be deemed to be invalid, and the  power to  collect the storage fee may not be lawfuly exercised  by the Municipal Council: that does not affect the validity  of the  other bye-laws.  If without a particular  bye-law,  the scheme  of the. rest of the bye-laws may be  unworkable,  it may follow by necessary implication that the other  bye-laws have  also become ineffective.  But that cannot be  said  of the defect in adopting the table of fees for the purpose  of bye-law  16.  The Municipal Council may not be  entitled  to levy  any charge for storage under bye-law 16, but  that  is the only effect of non-compliance with the terms of  sub-ss. (4) and (5) of s. 324.  The other bye-laws remain valid  and operative, for they are plainly severable. Bye-law 23(e) of the model bye-laws provides that no refunds shall  be allowed in respect of goods which are  transported outside the municipal limits within one month of their being brought  into the municipal limits, but regarding which  the intimation has not been given to the Municipal  Commissioner or  Chief  Officer within such time as may be fixed  by  the Municipal   Council.    Bye-law  27    provides   that   the application  for refund with the goods to which  it  relates shall be presented at the Octroi Station through which it is transported   outside  the  municipal  limits  within   such interval  from  the  hour of examination  as  the  municipal council  may determine.  Similarly bye-law 28 provides  that the  Octroi  Official-inCharge of the Octroi  Station  shall satisfy  himself  that  the  goods  produced  for  transport outside  the  municipal  limits as  covered  by  the  refund application  correspond  with  the  entries  in  the  refund application form and that they are presented within the time fixed  by  the Municipal Council under bye-law 27.   In  our judgment, the time contemplated to be fixed for the purposes of  bye-laws  23(e), 27 & 28 need not be fixed by  the  bye- laws.   If  time  is fixed by resolution  of  the  Municipal Council even after the bye-laws are sanctioned, there  would be no defect in the bye-laws. Bye-law 32 provides that no person shall sell articles  men- tioned  therein without obtaining a licence granted in  that behalf.   The  model bye-law is silent as  to  the  articles which may not be sold without obtaining a licence.  Bye-laws 313  to  36  depend for their ’operation upon  the  list  of articles  being  effectively  incorporated  in  bye-law  32. Failure to incorporate the list of articles would result  in the  Municipal  Council being unable to  enforce  compliance with  the requirements of taking out a licence.  But we  are unable  to hold that because of the failure to fix the  time under bye-laws 23(e), 27, 28, or for failure to  incorporate the list of articles in bye-law 32, the rest of the bye-laws

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became  ineffective.  We are of the view that  even  without these bye-laws and bye-law 16, octroi duty may be levied  by the  Municipal Council.  In our view, the High Court was  in error  in holding that the model byelaws which were  adopted by the Municipal Council were unenforceable.                              96 The  appeals  must therefore be allowed  and  the  petitions filed by the respondents dismissed with costs in this Court. One  hearing  fee.   The  order passed  by  the  High  Court regarding the costs is maintained. G.C.                                                 Appeals allowed. 97