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PETITIONER: THE STATE OF PUNJAB & ORS.

       Vs.

RESPONDENT: NARAJAN DASS DOOMRA RICE & GEN. MILLS

DATE OF JUDGMENT:       25/11/1997

BENCH: S.P. BHARUCHA, S.C. SEN

ACT:

HEADNOTE:

JUDGMENT:                THE 25TH DAY OF NOVEMBER, 1997 President:                 Hon’ble Mr. Justice S.P. Bharucha                 Hon’ble Mr. Justice S.C. Sen M.R. Sharma, Sr.Adv., (Ms. Puja Anand) Adv. for G.K. Bansal, Adv. with him for the appellant for the State of Punjab). Jayant Dass,  Sr.Adv. and  B.P. Singh, Adv. with him for the appellant. M.S.Ganesh  and  Yogeshwar  Prasad,  Sr.Advs.,  Mrs.  Urmila Sirur, P.N.Puri,  (M.K. Dua)  Adv. (NP),  Mrs. Sheela  Goel, Advs. with them for the Respondents.                       J U D G E M N T      The  following   Judgment  of   the  Court   Court  was delivered:                             WITH CIVIL APPEAL  NOS. 1226-43 OF 1992, 7498 OF 1993 AND 4540 OF 1991 Bharucha, J.      On 30th  November/3rd December, 1990, when the State of Punjab (the  appellant) was under President’s Rule, an order was issued  under the  provisions of  section 71(1)  of  the Punjab Municipal  Act,  1911,  by  the  President  of  India exempting kapas  (raw cotton),  narma and oil seeds from the payment of  octroi with  immediate effect.  On the same day, in exercise  of powers conferred by Section 62-A of the said Act, the  President was "pleased to direct all the Municipal Committees  in   the  state   of  Punjab   to  impose  Urban Development  Cess   on  the  sales/purchase  of  kapas  (raw cotton), Narma  and oil  seeds made  within  the  respective Municipal Areas at the rate of 0.24 per cent ad valorem with immediate effect".   Pursuant  thereto, a Memo was issued on 5th  December,   1990  by   the   appellant   to   Municipal Corporations,  Municipal   Committees  and   Notified   Area Committees.   It noted  that the  appellant had  issued  the notification  for  imposition  of  the  cess  on  sales  and purchases of  kapas, narma  and oil  seeds to compensate for the loss  likely to  be suffered on account of the abolition of octroi.  The Memo gave directions in regard to the manner in which  the cess  was to  be collected.   It appears that, without  more,   the  cess  was  sought  to  be  levied  and

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recovered.   Writ petitions  were, therefore,  filed in  the High Court  of Punjab  & Haryana  challenging the  levy  and collection.   By the  judgment and  orders under appeal, the writ petitions  were allowed  and the appellant was directed to refund  the cess  that had  been  collected  by  it  with interest at  the date  of 12  per cent  per  annum.    These appeals by  special leave  arise out  of  the  judgment  and orders.   At the  stage at  which special leave was granted, the judgment  and orders under appeal were stayed subject to the condition  that, in  the event  of it  being  held  that the respondents  were   entitled  to   refund,  the  amounts collected from  them would  be refunded with interest at the rate of 12 per cent per annum.      Section 62A(1)  and (3)  of the  said Act are relevant, and read thus:      "62A.     Power  of  Government  in      taxation. (1)  The State Government      may, by  special or  general  order      notified in  the official  Gazette,      require a  Committee to  impose any      tax mentioned  in  section  61  not      already imposed  at a such rate and      within  such   period  as   may  be      specified in  the notification  and      the Committee  shall thereupon  act      accordingly.      xxx     xxx                   xxx      (3) If the Committee fails to carry      out any  order  passed  under  sub-      section  (1)   or  (2)   the  State      Government may  by a suitable order      notified in  the  official  Gazette      impose or  modify  the  tax.    The      order so passed shall operate as if      it were a resolution duly passed by      the Committee  as if  the  proposal      was sanctioned  in accordance  with      the procedure  contained in section      62".      Section 62, sub-sections (1), (10) and (12) read thus:      "62. Procedure  to impose  taxes. -      (1) A  Committee may,  at a special      meeting,  pass   a  resolution   to      propose the  imposition of  any tax      under section 61.      xxx     xxx                    xxx      (10) (a) When a copy of order under      sub-section (6)  and (7)  has  been      received, or      (b)  When   a  proposal   has  been      sanctioned  under  sub-section  (8)      the State  Government shall  notify      the  imposition   of  the   tax  in      accordance  with   such  order   or      proposal,   and    shall   in   the      notification  specify  a  date  not      less than  one month  from the date      of notification,  on which  the tax      shall come into force.      xxx       xxx               xxx      (12)   A    notification   of   the      imposition of  a tax under this Act      shall be  conclusive evidence  that      the  tax   has  been   imposed   in      accordance with  the provisions  of

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    the Act."      Learned counsel  for the  appellant submitted  that the cess had  been imposed in lieu of octroi and that, by virtue of Section 62(12), the notification of the imposition of the cess was  conclusive evidence that the cess had been imposed in accordance with the provisions of the said Act.      The argument  proceeds upon  a  misconception.  In  the first place,  the order  dated 30th  November/3rd  December, 1990 does  not impose  the cess  Its language  is clear : it directs the  Municipal Committees  to impose the cess.  This is in  accord with  the terms  of Section 62A(1) under which the order  is issued.   That there is no imposition of a tax by reason  of an  order issued  under the provisions of sub- section (1)  of Section  62A in clear from the provisions of sub-section (3) thereof.  Sub-section (3) states that if the Municipal Committee  has failed  to carry  out an order that has been  passed under sub-section (1), the State Government may itself notify the imposition of the tax, such imposition operates as  if it  were  a  resolution  duly  passed  by  a Municipal Committee  under the  provisions  of  Section  62. Section  62(12)   comes  into  operation  when  a  Municipal Committee has  imposed a  tax after  following the procedure laid down  in section  62.  it is then that the notification of the  tax is conclusive evidence that it has been imposed. Alteratively, if  the Municipal  Committee has failed to act as required by an order under sub-section (1) of Section 62A and the  State Government  has imposed  the tax  under  sub- section (3)  thereof, the provisions of Section 62(12) would then operate because an order passed by the State Government under Section  62A(3) operates  as if  it were  a resolution duly passed by a Municipal Committee.      In the  instant case, the order dated 30th November/3rd December,  1990  was  passed  under  section  62A(1).    The Municipal Committees  failed to impose the cess in pursuance thereof.   The State  Government, thereafter, did not impose the cess  under the  provisions of  Section 62A(3)).   There was, therefore,  no imposition of the cess, and its recovery was without the authority of law.      learned counsel for the appellant drew our attention to the judgment of this Court in Atlas Cycle Industries Ltd. v. State of  Haryana &  Anr., (1972)  1 SCR 127.  The paragraph that was relied upon reads thus:      "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"      (at page 133)      What  is   said  does  not  advance  the  case  of  the

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appellant.   It is,  in fact,  consistent with the view that has been taken by the High Court and which we re inclined to take.      Reliance is  also placed  by learned  counsel  for  the appellant on  the decision of a Division Bench of the Punjab & Haryana  High Court in Shri Krishan Kumar Sanan and Others v. The  Punjab State and another, 74 P.L.R. (1972) page 149. The High  Court has  referred this  decision in the judgment under appeal  and has  pointed out  that  it  is  inapposite because it  was given  in relation to an order that had been issued in exercise of the powers conferred by Section 62A(3) of the said Act.      The appeals must, therefore, fail and re dismissed.      The appellant  shall  refund  to  the  respondents  the amounts collected  from them  as and by way of the cess with interests at  the rate  of 12  per cent  per annum  from the dates of collection till the dates of payment      No order as to costs.