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PETITIONER: MUNICIPAL BOARD, BAREILLY

       Vs.

RESPONDENT: BHARAT OIL COMPANY AND ORS.

DATE OF JUDGMENT04/12/1989

BENCH: FATHIMA BEEVI, M. (J) BENCH: FATHIMA BEEVI, M. (J) SAIKIA, K.N. (J)

CITATION:  1990 AIR  548            1989 SCR  Supl. (2) 376  1990 SCC  (1) 311        JT 1989 (4)   453  1989 SCALE  (2)1269

ACT:     U.P. Municipalities Act 1916/U.P. Municipal Account Code 1925/U.P.  Octroi Rules, 1925: Section  128/Chapter  X/Rules 13123 I--Octroi--Levy Or’on mineral oil--Permissibility of.

HEADNOTE:     The  appellant  is  a Municipal Board  governed  by  the provisions of the U.P. Municipalities Act, 1916. Section 128 of the Act provides for imposition of taxes by the Board. In exercise of the powers under Sections 131 to 135 and 296  of the  Act,  the  Government of the  United  Provinces  framed octroi rules. The said rules were included in the  Municipal Account  Code (Chapter X rules 131 to 231). The  proviso  to Rule 131 provided that octroi shall not be levied on certain articles  which included mineral oil. The rule  was  amended vide  notification dated the 2nd November 1953 and  for  the words  "the mineral oil" in the proviso, the words  "mineral oils  classified  as motor spirit, kerosene or  diesel  oil" were substituted.     Separate  rules  for the assessment  and  collection  of octroi in the Bareily Municipality were framed by the  Govt. of  U.P.  The draft rules were  notified  vide  notification dated the 16th February 1963. Final rules were notified vide notification  dated the 7th May 1963 and published  in  U.P. Gazette dated the 11th May 1963. By a notification dated the 24th  July  1963, published in U.P. Gazette  dated  the  3rd August,  1963,  the appellant Board imposed octroi  duty  on goods and animals brought within the octroi limits of Barei- ly  Municipality for consumption, use and sale at the  rates shown  in  the Schedule subject to certain  exceptions  men- tioned  therein. The said notification came  into  operation from November 16, 1963 and thereafter the levy of octroi  in Bareily Municipality was governed by 1963 rules. The  amend- ments were made in the octroi schedule both in the rates  as well  as  in  the exemption and as a  result  whereof  motor spirit, kerosene and diesel oil were removed from the exemp- tion clause and were subjected to the octroi duty  @ 1 paisa per liter vide notification dated August 27, 1969. The respondents challenged the validity of the  notification dated 377

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the 27th August 1969 by means of a writ petition before  the High Court on the ground that 1925 rules took away the power from  all Municipal Boards to impose octroi duty on  mineral oils  and  until  such power is restored  under  a  contrary notification issued under section 128 of the Act, the  Board did  not have any justification to assess or collect  octroi duty on mineral ohs. The appellant Board contended that Rule 131 was superseded by the 1963 rules which now governed  the imposition  of  octroi by the appellant  Board.  The  single Judge  of the High Court who heard the petition came to  the conclusion  that Rule 131 restricted the power of the  Board to impose the octroi and the subject-matter of the rule  was not  covered  by  the 1963 rules.  The  appellant’s  appeals preferred  before  the Division Bench were  dismissed  which took  the  view that the bar under Rule  131  regarding  the imposition of octroi duty on mineral oils continued notwith- standing the 1963 Rules. Hence these appeals by the  Munici- pal Board. Allowing the appeals, this Court,     HELD: The rule making power under section 296 read  with Section  300(2) of the Act enables the State  Government  to except any one municipality from the operation of the gener- al rule by express provision in that behalf. When the  iden- tical  authority in exercise of its rule making  power  duly frames  the  rules in respect of the same  matter  expressly providing  that  the new rules shah apply  to  a  particular municipality in supersession of the existing rules, it  must be  deemed that existing rules are repealed to that  extent. [384C-D]     The 1963 rules had been framed under Section 296 of  the Act in supersession of the existing rules after the publica- tion  by  the State Government, in the Gazette  as  provided under  Section 300 and therefore rule 131 in the 1925  rules ceased to have any operation in respect of the matters dealt with  therein  so far as the Bareilly municipality  is  con- cerned. [384D]     M/s  Central Distillery Chemicals Works Ltd. &  Anr.  v. State of U.P. & Ors., [1980] All L.J. 62, approved.     Municipality  of Anand v. State of Bombay, AIR  1962  SC 988;  Municipal Board, Hapur v. Raghuvendra Kripal  &  Ors., [1966] 1 SCR 950; Mool Chand v. Municipal Board, Banda,  AIR 1926  All.  517; Zaverbhai Amaidas v. The State  of  Bombay, [1955]  1 SCR 799 and The Municipality or Anand v. State  of Bombay, [1962] 2 Supp. SCR 366, referred to

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal Nos.  993  & 994 of 1976. 378     From  the  Judgment  and Order dated  16.9.1974  of  the Allahabad High Court in Spl. Civil Appeal Nos. 622 & 623  of 1972. R.K. Virmani for the Appellant. M.V. Goswami and S.S. Khanduja for the Respondents. The Judgment of the Court was delivered by     M.  FATHIMA  BEEVI, J. 1. These two appeals  by  special leave  are filed by the Municipal Board,  Bareilly,  against the  judgment of the Allahabad High Court quashing  the  Ga- zette Notification dated August 27, 1969 amending the octroi schedule of the Bareilly Municipality so as to impose octroi on "mineral oil".     2.  The respondents Bharat Oil Company and others  filed writ  petitions  under Article 226 of  the  Constitution  of

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India challenging the notification on the ground inter  alia that the appellant, the Municipal Board Bareilly  (hereinaf- ter  referred to as ’the Board’) had no authority to  impose octroi on mineral oil in view of the proviso to Rule 13 1 of the  octroi  Rules contained in the U.P.  Municipal  Account Code, 1925. This was countered by the appellant stating that the  R. 13 1 was superseded by the 1963 rules  which  govern the imposition of octroi by the appellant Board. The  Single Judge  in  allowing the Writ Petitions took  the  view  that R.131 restricted the power of the Board to impose the octroi and  the  subject-matter of the rule is not covered  by  the 1963  rules.  The appeals preferred were  dismissed  by  the Division Bench of the High Court agreeing that the bar under R.  131 ’regarding the imposition of octroi duty on  mineral oils continued notwithstanding the 1963 rules.     3.  The appellant is a Municipal Board governed  by  the provisions of the U.P. Municipalities Act, 1916 (hereinafter referred  to as ’the Act’). Section 128 of the Act  provides for  imposition of taxes by a Municipal Board. The  relevant part of the said section reads as under:               "128.  Taxes which may be imposed (1)  Subject               to any general rules or special orders or’ the               State  Government  in this behalf,  the  taxes               which  a board may impose in the whole or  any               part of a municipality are--               (i)          x                               x               x               379                     (viii)  an  octroi On goods  or  animals               brought without the municipality for  consump-               tion, use or sale therein."     4.  Sections 13 1 to 135 of the Act  contain  provisions relating  to the framing of proposals for the imposition  of taxes  by  the Municipal Board, inviting objections  to  the said  proposal,  the approval of the said  proposal  by  the State Government, the framing of rules by the State  Govern- ment  on the basis of such proposals, under Section  296  of the Act and for the issue of a notification about the  impo- sition of tax from the appointed date.     5.  Section 153 of the Act provides that assessment  and collection of taxes and other matters relating to taxes  may be  regulated by Rules. Section 296 empowers the State  Gov- ernment  to  make rules in respect of matters  described  in Section 153.     6. In exercise of the powers under Sections 13 1 to  135 and  296 of the Act, the Government of the United  Provinces framed  octroi rules which were published vide  notification dated the 25th October, 1925. The said rules are included in the  Municipal Account Code (Chapter X Rules 13 1 to  23  1) published by the Government of U.P.     7.  Rule  13 1 provided that subject to  the  exceptions contained in the proviso octroi may be ordinarily levied  on commodities  included in the list set-out in the said  rule. The  proviso  to this rule stated that octroi shall  not  be levied on certain articles which included mineral oil.  Rule 131  was amended vide notification dated the  2nd  November, 1953 and for the words "the mineral oil" in the proviso  the words "mineral oils classified as motor spirit, kerosene  or diesel oil" were substituted.     8.  Separate rules for the assessment and collection  of octroi  in  the  Bareilly Municipality were  framed  by  the Government  of U.P. in exercise of the powers  conferred  by Section  296 of the Act. The draft rules were notified  vide notification dated the 16th February, 1963 and published  in the U.P. Gazette dated 23rd February, 1963. The said notifi-

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cation reads as under:               "No..89-B/XI-C-129-60. The following draft  of               the rules for the assessment and collection of               octroi in the Bareilly Municipality, in super-               session of the existing octroi rules contained               in  the  Municipal Account Code in so  far  as               they apply to the said municipality, which the               Governor of Uttar               380               Pradesh  proposes to make, in exercise of  the               powers  conferred by Section 296 of  the  U.P.               Municipalities  Act, 1916 (U.P. Act No. II  of               1916), is published as required by  subsection               (1)  of section 300 of the said Act,  for  the               information  of all concerned with a  view  to               invite  objections and suggestions in  respect               thereof".     9. Final Rules were notified vide notification dated the 7th  May, 1963 and published by the Government in  the  U.P. Gazette dated the 11th May, 1963 as required under S. 300 of the Act.     10. By notification dated the 24th July, 1963  published in  the U.P. Gazette dated the August 3, 1963 the  appellant Board  imposed  octroi  duty on goods  and  animals  brought within  the octroi limits of Bareilly Municipality for  con- sumption, use and sale at the rates shown in the schedule to the  said  notification and subject to the  exceptions  con- tained  therein. Item 29 of the exceptions contained in  the schedule  related  to  "mineral oils"  classified  as  motor spirit, kerosene and diesel oil. The said notification  came into  operation from November 16, 1963. Thereafter the  levy of octroi in the Bareilly Municipality was governed by  1963 rules. The amendments were made in the octroi schedule  both in  the  rates as well as in the exemption and as  a  result thereof  motor spirit, kerosene and diesel oil were  removed from  the exemption clause and were subjected to the  octroi duty @ 1 paisa per litre vide notification dated August  27, 1969.     11.  The  validity of the notification  dated  the  27th August,  1969  was challenged before the High Court  in  the Writ Petitions Nos. 1805 and 4696 of 1970 by respondents  on the  ground  that 1925 rules take away the  power  from  all Municipal Boards to impose octroi duty on mineral .oils  and until  such power is restored under a contrary  notification issued under Section 128 of the Act, the Board did not  have any justification to assess or collect octroi duty on miner- al oils.     12.  The impugned judgment proceeded on the  basis  that Rules  13 1 to 133 of the 1925 rules have been made  by  the State Government in exercise of the powers conferred upon it by  the  opening words of Section 128(1) and  they  are  not rules under section 153 for the assessment and collection of octroi.  It was also held that the subject-matter  of  these rules  is not covered by the 1963 rules and, therefore,  the 1963  rules  cannot supersede R. 13 1 of the 1925  Rules.  A Full  Bench of the Allahabad High Court in M/s Central  Dis- tillery  Chemicals Works Ltd. & Another v. State of  U.P.  & Others, [1980] All L.J. 62 following the 381 decision of this Court in Municipality of Anand v. State  of Bombay,  A.I.R. 1962 SC 988 overruled the impugned  decision holding  that the special rules which are in relation  to  a particular  tax and a particular Municipal Board will  over- ride or supersede the general rules framed by State  Govern- ment  under  Section 153 read with Section 296.  The  appel-

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lant’s learned counsel relied on the Full Bench decision and maintained  that the rules framed by the Board prevail  over the  rules contained in the Municipal Account Code  and  the notification is, therefore, valid. In our view the  approach made  by  the Full Bench of the High Court  in  M/s  Central Distillery Chemicals Works Ltd. v. State of U.P., (supra) is correct and has to be approved.     13.  As  pointed out by this Court in  Municipal  Board, Hapur  v.  Raghuvendra Kripal and Others, [1966] 1  SCR  950 taxes raised by a local authority are not imposed by it as a legislature but as a delegate of the legislature. The tax is valid one if it is one of the taxes the local authority  can raise  and  the delegate imposes it in accordance  with  the conditions laid down by the legislature. The taxes that  can be  raised in exercise of delegated power are  predetermined and  procedure  is  prescribed by the  Municipal  Act.  Thus Section  128 of the U.P. Municipalities Act confers  on  the municipalities in the State the power to levy taxes  enumer- ated thereunder. The power conferred is not absolute but  is subject to any general rules or special orders of the  State Government  in this behalf. Section 128(1) does  not  confer any  independent  rule making power. The general  rules  re- ferred  to  in  that Section can only be the  rules  in  the matter of such levy specified in Section 153 of the Act  and framed  in  exercise of the power under Section 296  of  the Act. The State Government is empowered under Section 296  to make  rules  consistent with the Act in respect  of  matters described  in  Section 153. Rules framed under  Section  153 constitute  the exclusive machinery for assessment and  col- lection of taxes. The relevant part of Section 153 reads  as under:               "153.  Rules as to assessment, collection  and               other matters. The following matters shall  be               regulated  and governed by rules except in  so               far as provision therefor is made by this Act,               namely:               (a) the assessment, collection or  composition               of taxes, and, in the case of octroi or  toll,               the determination of octroi or toll limit;               382               (f)  any  other matter relating  to  taxes  in               respect  of which this Act makes no  provision               or  insufficient provision and provision,  is,               in the opinion of the State Government  neces-               sary." In  prescribing the procedure for the impositon of taxes  by the board, Section 13 1 of the Act requires the board  while framing  the proposal to prepare a draft of the rules  which it  desires the State Government to make in respect  of  the matters  referred  to in Section 153 and publish  the  same. When the proposals have been sanctioned the State Government makes  the necessary rules in respect of the tax under  Sec- tion 296. The rules referred to in Section 128(1) are  rules thus  framed  by the State Government under Section  296  in respect  of  matters  referred to in  Section  153.  Section 300(2)  expressly provides that any rule or regulation  made by  the State Government may be general for all  municipali- ties  or  may be special for anyone municipality as  it  di- rects.     14.  The  Municipal Manual published by  the  Government contains the general rules made by the Government under  the Act and general orders issued in Volume 1. The second volume contains  the Municipal Account Code. The General Rules  and orders  are  contained in Chapter I to XII of  Part  I.  The Explanation in Chapter I reads as under:

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             "The  Rules in this Manual, which are  printed               in  pica  type, together with  their  explana-               tions, illustrations and exceptions, have  the               force of law, having been made by the  Govern-               ment  in exercise of the powers  conferred  by               section  296  of the Act,  and,  except  where               otherwise stated, are applicable to all munic-               ipalities.  The  notifications in  which  they               were published are referred to on the  margins               of the pages." Part II contains the model rules, bye laws and  regulations. Section A deals with Rules with reference to Section 153  of the Act thus:               "The following model rules have been framed by               the Government for the assessment and  collec-               tion of taxes other than octroi under  section               153 and 296 of the Act.                        It  is anticipated that they will  be               found  generally  applicable  to  the  circum-               stances  of the municipalities of these  prov-               inces,  and  it is desirable  that  the  model               forms               383               should be adhered to unless there are  special               reasons justifying any divergence from them.                         In  forwarding  proposals  for   the               imposition of additional taxation, boards  are               reminded  that  the necessary  rules  for  the               assessment  and collection of the taxes to  be               imposed  should be forwarded at the same  time               as  the tax proposals, and it will  facilitate               the  disposal of such cases if any  deviations               from the model forms printed below are specif-               ically referred to in the proposals submitted. Vol. II contains the Municipal Account Code. Chapter X deals with  octroi  and provides in R. 13 1 that  subject  to  the exceptions contained in the proviso octroi shall  ordinarily be levied on commodities included in the list. In Mool Chand v.  Municipal  Board, Banda, AIR 1926 All 5 17 it  was  held that  the rules contained in the Code have as much force  of law as the Act itself. The octroi rules contained in Chapter X of the Municipal Account Code are general rules framed  by the  State Government in respect of matters referred  to  in Section 153 in exercise of power under Section 296 and refer to  the levy and govern the assessment, collection etc.  The rules are general for all municipalities. The 1963 rules are framed  for  the appellant board expressly  superseding  the general  rules  in  so far as they apply  to  the  appellant board. By framing the 1963 rules the government evinced  the intention to cover the field which was covered by 1925 rules in  so far as the Bareilly Municipality was  concerned.  The subject-matter  dealt within 1963 rules is the same as  that dealt  with  in 1925 rules. The intention to  supersede  the earlier  rules is clearly expressed. The rule has the  force of  law. Rule 13 1 of 1925 rules has no longer any  applica- tion in the matter of levying octroi by the appellant board. That  rule stands repealed in so far as the appellant  Board is  concerned. The rule cannot, therefore, be read  as  cur- tailing  the power under Section 128(1)(viii) of the Act  to impose octroi. Rules do not enlarge or restrict the authori- ty  to  impose tax. Authority is conferred by  the  section. Rules  are only regulating the exercise of that  power.  The imposition  of the tax and the regulation of its  assessment and  collections are totally different matters and they  are clearly distinguished. In Zaverbhai Amaidas v. The State  of

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Bombay,  [1955] 1 SCR 799 this Court reiterated the rule  of construction  that  if a later statute deals with  the  same subject-matter and varies the procedure the earlier  statute is  repealed  by the later statute. In The  Municipality  or Anand v. State of Bombay, [1962] 2 Supp. SCR 366  construing s.  ,59 of the Bombay District Municipal Act, 1901 which  is in pari materia with 384 s.  128 of the U.P. Municipalites Act, this Court  said  the word  ’impose’  in s. 59 meant the actual levy  of  the  tax after  authority to levy it had been acquired by rules  duly made  and sanctioned and this imposition was subject to  the general  or special orders of the government.  The  opending words of S. 128 are capable of similar construction and  the imposition  has to be understood as the actual levy  subject to  the general rules and special orders contemplated  under the other provisions of the Act.     15.  The rule making power under Section 296  read  with Section  300(2) of the Act enables the State  Government  to except anyone municipality  from  the  operation of the  general  rule  by express provision in that behalf. When the identical author- ity  in  exercise of its rule making power duly  frames  the rules in respect of the same matter expressly providing that the  new rules shall apply to a particular  municipality  in supersession  of the existing rules, it must be deemed  that existing  rules are repealed to that extent. The 1963  rules had been framed under Section 296 of the Act in supersession of the existing rules after publication by the State Govern- ment,  in  the  Gazette as provided under  Section  300  and therefor  Rule  13 1 in the 1925 rules ceased  to  have  any operation  in respect of the matters dealt with  therein  so far as the Bareilly municipality is concerned.     16. In this view of the matter, we hold that the  appel- lant Board had authority to levy octroi on mineral oils  and challenge against the impugned notification is not  sustain- able.  The High Court was clearly in error in  quashing  the same and restraining the Board from assessing and collecting the tax.     We accordingly allow the appeal and set-aside the  judg- ment of the High Court. In the circumstances of these cases, we, however, make no order as to costs. Y. Lal 385