05 May 1964
Supreme Court


Case number: Appeal (civil) 582 of 1961






DATE OF JUDGMENT: 05/05/1964


CITATION:  1965 AIR  555            1964 SCR  (8) 178  CITATOR INFO :  R          1966 SC 249  (16,32,62)  RF         1976 SC1207  (102)  R          1979 SC 246  (5)

ACT: Octroi-Tax  on  refund-Imposition if valid-Tax,  if  becomes fee-Whocan          claim          refund--Suit          for recovery--Limitation--Availability of 179 benefit--Bombay  Provincial Municipal Corporation Act,  1949 (Bom. 59 of 1949), &v. 127, 487.

HEADNOTE: The  respondent,  who had been carrying on the  business  of securing refund of octroi duty on behalf of persons who  had paid duty and were entitled to refund, claimed the refund of money  paid as octroi duty by his principals in  respect  of the period commencing from February 15, 1950, the date  from which the appellant became a Municipal Corporation under the Provincial Municipal Corporation Act, 1949.  After deducting ten percent of the amount in accordance with r. 18(3) of the Octroi  Rules, framed by the Municipal Authorities, the  ap- pellant--Corporation  paid  the balance to  the  respondent. The representation of the respondent that from the date from which the Corporation had come into existence, the deduction had become invalid in law. was turned down by the appellant. Thereupon  the respondent filed a suit for recovery  of  the balance  with interest.  The defence was that the  deduction was valid; that in any case, the respondent who was not  the person  who paid the amount, was not entitled to  bring  the suit, and that the suit was barred by limitation.  The trial court held the respondent was entitled to bring the suit and also that it was not barred by limitation but the  deduction was  valid  and  it  dismissed the  suit.   On  appeal,  the District  Court disagreeing with the trial court, held  that the  deduction was not valid in law, but the  plaintiff  was not  entitled  to bring such a suit and that  the  suit  was barred  by  limitation and it dismissed the  appeal.   On  a further  appeal  the  High  Court found  in  favour  of  the



respondent on all the three points and allowed the appeal. HELD:-(i)  A  tax on octroi refund is not one of  the  taxes which the Bombay Municipal Corporation could impose.   Apart from  the  absence of power to impose such a tax,  which  is clear from the earlier parts of s. 127 of the Bombay Act  of 1949  there  is the categorical prohibition  in  sub-s.  (4) against the imposition of any such tax by the Cor- poration. (ii)  Assuming,  without deciding, that such a levy  can  be validly made by   way  of fees under s. 466, since no standing order  was made under s.   466 prescribing any fee, it is not possible to  justify the deductions as _    levy of fee. (iii)The  tax did not become a fee merely  because  the new Act (Bom.  Act 59 of 1949), prohibited the imposition of such a tax. (iv)Cl. 5(a) of Appendix IV furnishes no justification  for the levy often percent deduction after February 15, 1950 when the Act 59 of 1949with  its  categorical prohibition  in  s.  127(4) against the imposi- tion by the Corporation of a tax which the State Legislature had  no  power  to  impose  under  the  Constitution  became applicable. (v)The respondent having made the claim in accordance with the rules was the person entitled to receive what amount was legally refundable, and so he was also entitled to bring the suit. / 180 (vi)The suit was not barred by limitation.  The benefit  of s.  487  of  Act  59  of 1949  would  be  available  to  the Corporation only if it was held that this deduction was  "an act  done or purported to be done in pursuance or  execution or intended execution of the Act."

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 582 of  1961. Appeal from the judgment and decree dated August 25, 1959 of the Bombay High Court in Appeal No. 774 of 1956. S.   G. Patwardhan, S. B. Tarkunde, J. B. Dadachanji, O.   C. Mathur and Ravinder Narain, for the appellant. A.Y. Vishwanatha Sastri, M. R. Kotwal and Naunit Lal, for the intervener. May 5, 1964.  The Judgment of the Court was delivered by DAS GUPTA J.-This appeal is by the defendant, the  Municipal Corporation for the City of Poona, in a suit for recovery of money.   The Poona Municipality was formerly a  Municipality under  the Bombay District Municipal Act of 1901 (Act  3  of 1901).   In  1925 it became a Municipal  Borough  under  the Bombay  Municipal Boroughs Act of 1925 (Act XVIII of  1925). Later,  under  the Bombay provincial  Municipal  Corporation Act, 1949, Municipal Authority for the City of Poona  became a Corporation known by the name of Municipal Corporation for the City of Poona. It  appears  that  from  the  time  when  the  City  was   a Municipality  under Act 3 of 1901, an octroi duty was  being levied on goods imported within the Municipal limits of  the City.   When  such  goods  were exported  out  of  the  city municipal limits within specified periods, refund used to be given in respect of the duty so recovered.



The respondent has for many years been carrying on  business of  securing refund of octroi duty on behalf of persons  who had  paid the duty and were entitled to refund.  In  respect of  the  period  from the 15th February, 1950  to  the  14th September,  1950, the respondent made a claim on  behalf  of his principals, for the refund of Rs. 73,650/- to 181 which,  according, to him, they were entitled.  The  Munici- pality however paid to him only 90 per cent of this  amount. The  remaining 10 per cent was deducted in  accordance  with Rule 18(3) of the Octroi Rules which had been framed by  the Municipal Authorities. The respondent then represented to the Corporation that with effect from the 15th February, 1950, the date from which the Corporation   came  into  existence  under  the   Provincial Municipal  Corporation Act, 1949, this deduction of  10  per cent had become invalid in law and claimed that this  amount should  be paid to him.  The Corporation however refused  to concede  this claim.  The respondent then brought this  suit for  recovery  of Rs. 7,364/15/- (being 10 per cent  of  Rs. 73,650/- the amount alleged to have been illegally withheld) with interest. The   main  defence  raised  by  the  Corporation   to   the Plaintiff’s claim was that the deduction of 10 per cent  was legally  valid. It was further urged that, in any case,  the plaintiff  who was not the person who paid the  amount,  was not  entitled to bring the suit.  Lastly, it  was  contended that the suit was barred by limitation. The  trial  Court held that the plaintiff  was  entitled  to bring  the  suit  and  also  that  it  was  not  barred   by limitation.   It held however that the deduction of  10  per cent  from what was paid as tax was valid.  Accordingly,  it dismissed the suit. On appeal by the plaintiff, the District Court, Poona, held, disagreeing  with the trial Court, that the deduction of  10 per cent of what had been realised was not valid in law.  It was  however of opinion that the plaintiff was not  entitled to bring such a suit.  It was also of opinion that the  suit was  barred by limitation.  In this view, it  dismissed  the appeal. The plaintiff then appealed to the High Court of  Judicature at  Bombay.   The  High Court has found  in  favour  of  the plaintiff on all the three points raised.  It held that  the deduction  of  10  per cent was invalid  in  law,  that  the plaintiff  was  entitled to sue, and that the suit  was  not barred 182 by  limitation.   Accordingly, the High  Court  allowed  the appeal, and made a decree in favour of the Plaintiff for Rs. 7,364/15/- with interest thereon at 4 per cent from the date of  the suit and interest at the same rate from the date  of the judgment, with costs throughout. The appellant Corporation challenges the correctness of  the High Court’s decision on all the three points. The  principal  question  for decision  in  this  appeal  is whether the deduction of 10 per cent as provided for in Rule 18(3) is invalid at least from the 15th February, 1950.  The Rule runs thus:-               "A  deduction  of ten per cent  shall  in  all               cases  be made before refunding the amount  of               octroi duty on exportation of goods either  in               transit as per rule 13 or otherwise under rule               II (2). " It is necessary to mention here that the legality of such  a deduction  prior to February 15, 1950 is not in  controversy



before us. We shall proceed on the basis that this provision in  Rule18(3) was valid in law prior to the  15th  February, 1950. The question is whether even though valid then, it has ceased  to be valid in law.  To find the correct  answer  to this  question it is necessary to be clear first as  to  the legal basis on which this levy by way of deduction was being made prior to 15th February, 1950. It  appears  from  Ex.  D 72, the  copy  of  the  Government resolution  dated  the  6th  March,  1922,  that  the  Poona Municipality  started this practice of levying this  10  per cent  deduction  from February 1921.  The  question  of  its legality appears to have been raised quite early.  The Legal Remembrancer to the Government of Bombay expressed his  view on this question in these words:-               "The  special  powers conferred  in  the  last               sentence of clause (f) of section 48(1) of the               Bombay   District  Municipal  Act   seems   to               negative  the  power of the  Municipality  (of               Shirpur)  to  make  any  deduction  from   the               refunds by means               183               of  rules  regulating the system,  for  making               refunds referred to in the earlier part of the               clause.   The charge on refunds appears,  how-               ever, to be a kind of tax which may be imposed               under s. 59(b) (xi) of the Act." On  this,  the  Councillors of, the  Municipality  passed  a resolution  that  a 10 percent tax should be levied  on  all octroi refund, under section 59 (b) (xi).  This proposal was submitted  to the Government of Bombay for sanction and  was duly  approved.   It may be mentioned here that  s.  59  (b) (xi)-  of Act 3 of 1901 which deals with the question  of  a Municipality’s  powers to impose taxes sets out in the  cls. (i) to (x) various taxes which the Municipalities can impose and  then  mentions in cl. (xi) the words "any  other  tax". The  Government  appears to have accepted the  view  of  the Legal  Remembrancer that the levy by way of deduction of  10 per  cent  from;  the  amount  to  be  refunded  should   be authorised  as  a tax on octroi refund,, this  being  "  any other  tax"  within the meaning of s. 59(b)(Xi).  It  is  no longer open to dispute that after Government’s sanction  was received, the Municipality could under the old.  Act legally levy such tax.  It is also not disputed that the  deductions that  continued to be made under Rule 18(3) were  all  along made  under this authority, as a tax levied under  s.  59(b) (xi)  of the Bombay District Municipal Act, 1901.  The  levy of the tax continued even after Act 3 of 1901’ ceased to  be applicable to Poona and it became a Municipal Borough  under the  Bombay Municipal: Boroughs Act, 1925.  The validity  of such:  continuation  does  not  also  appear  to  have  been challenged  The Bombay Provincial Municipal Corporation  Act 1949  was applied to Poona on the 15th February,  1950  From that   date  therefore  the  powers  of  taxation   of   the municipality,  became governed by s. 127 of the  Act.   This section  first  authorises a Corporation under  the  Act  to impose,  (a) property taxes; (b). a tax on  vehicles,  boats and  animals.   It then mentions in the  second  sub-section certain  other  taxes which the Corporation may  impose:  In cls.  (a) to (f)-(a) is octroi, (b) a profession tax, (c)  a tax  on dogs, (d) a theatre tax, (e) a toll on  animals  and vehicles and (f) mentions "any other 184 tax  which  the  State  Legislature  has  power  under   the Constitution  to  impose  in the  State".   Sub-section  (4) provides:-



             "Nothing  in this section shall authorise  the               imposition   of  any  tax  which   the   State               Legislature  has  no power to  impose  in  the               State under the Constitution." A  tax on octroi refund is not thus one of the  taxes  which the Bombay Municipal Corporation could impose’ It is not one of  the  specified taxes.  Nor is it a tax which  the  State Legislature  has power under the Constitution to  impose  in the State.  Apart from this absence of power to impose  such a  tax, which is clear from the earlier parts of s. 127,  we have  the categorical prohibition in, sub-section 4  against the imposition of any such tax by the Corporation. Mr.  Patwardhan next tried to persuade us that even if  this levy could not be made under the new Act as a tax, it  could be  made as a fee.  In support of his argument he  drew  our attention  to s. 147 and s. 466 of the new Act.   The  first sub-section of section 466 provides that the Commissioner of the Corporation may make standing orders consistent with the provisions of the Act and the rules and bye laws in  respect of  the matters specified.  One of the matters specified  is "determining  the  supervision under which,  the  routes  by which  and  the  time within which the  goods  intended  for immediate exportation shall be conveyed out of the City  and the fees payable by persons so conveying the goods." [s. 466 (1)A(f)].  Section 147 dealing with a controversy, that  may arise,  whether the importation of some goods into the  City has  been  for  the  purpose of  consumption,  use  or  sale therein,  says:  "Until the contrary is  ,proved  any  goods imported  into  the  City shall be  presumed  to  have  been imported  for  the  purpose  of  consumption,  use  or  sale therein,  unless such goods are conveyed from the  place  of import  to the place of export by such routes,  within  such time,  under  such supervision and on payment of  such  fees therefor as shall be, determined by the standing orders." It  is obvious that reference to fees in this section is  to such fees as may be prescribed by standing orders under                             185 the  provisions of s. 466(1)A(f).  It is unnecessary for  us to decide for the purpose of the present appeal, whether the I  provision of s. 466 for determination of fess payable  by persons  conveying goods imported into the City is valid  in law  or not.  Assuming, without deciding, that such  a  levy can  be  validly made by way of fees under s. 466,  what  we find  is  that  in fact there has  been  no  standing  order prescribing  any fees.  It may be mentioned in this  connec- tion  that sub-section 2 of s. 466 lays down that  no  order made  by  the Commissioner under cl.  A of  sub-section  (1) shall  be valid unless it is approved by the  Standing  Com- mittee and confirmed by the State Government.  It is not the case  of the appellant Corporation that any  Standing  Order was  made at all under s. 466 prescribing any fees.   It  is not  possible therefore to justify the deductions that  were made in the present case as a levy of fee. The appellant relied next on cl. 5(a) of Appendix IV to  the Act read with s. 493.  Section 493 provides that  provisions of   Appendix  IV  shall  apply  to  constitution   of   the Corporation  and other matters specified therein.   Appendix IV is headed "Transitory Provisions" and is plainly intended to  deal  with the position that arose as a  result  of  the repeal  of the old Act. (s. 490).  The relevant  portion  of cl. 5 (a) is in these words:-               "Save as expressly provided by the  provisions               of  this Appendix or by a notification  issued               under   paragraph  22  or  order  made   under               paragraph 23,



             (a)   any  appointment, notification,  notice,               tax, order, scheme, licence, permission, rule,               bye-law,  or  form made,  issued,  imposed  or               granted  under the Bombay  District  Municipal               Act,  1901  or the Bombay  Municipal  Boroughs               Act,  1925  or any other law in force  in  any               local   area   constituted  to   be   a   City               immediately before the appointed day shall, in               so  far  as it is not  inconsistent  with  the               provisions  of  this Act,  continue  in  force               until it is superseded by               186               any  appointment,  notification,  notice  tax,               order, scheme, licence, permission, rule, bye-               law, or form made, issued, imposed or granted,               under  this Act or any other law as  aforesaid               as the case may be;" Mr.  Patwardhan  readily  conceded  that  the  10  per  cent deduction, as a tax on octroi refund could not get the  pro- tection of el. 5(a) for the simple reason that such taxation is on the face of it inconsistent with s. 127(4) of the Act. He  asked us, however, to regard this levy as a fee, and  on that basis, argued that this should continue in force  under cl. (a) of s. 5 of Appendix IV since the levy of such a  fee is consistent with the provisions of s. 466 of the Act.   If in fact a fee was being realised’ under the old Act, it  may be  that  levy of such fees could continue  in  force  until superseded by any order under the new Act as coming under an order issued "under the District Municipal Act, 1901, or the Bombay  Municipal  Boroughs Act, 1925".  In  fact,  however, this was not levied as a fee, but was levied as a tax.   The tax did not become a fee merely because the new Act (Act LIX of  1949) prohibited the imposition of such a tax.   We  are clearly  of  opinion therefor that cl. 5(a) of  Appendix  IV furnishes no justification for the levy of the ten per  cent deduction’ after the 15th February, 1950 when the Act LIX of 1949  with its categorical prohibition in s. 127(4)  against the  imposition by the Corporation of a tax which the  State legislature  had no power to impose under  the  Constitution became  applicable.  The defence that the deduction of  1  0 per cent of the amount collected as octroi was legally valid has thus been rightly rejected by, the High Court. We  also  agree with the High Court’s conclusion’  that  the plaintiff was entitled to bring the present suit.  The Poona City  Municipality’s Octroi Rules and Bye-laws  under  which the  claim, for refund can be made define "a claimant" as  a per-son "Who produces the duly receipted import bill and the corresponding, export certificates," [Rule 2, cl. (g)].   It is  not  disputed that for the several cases in  respect  of which this deduction of ten per cent had ’been made, by  the Corporation the plaintiff was the person 187 who  produced  "the  duly  receipted  import  bill  and  the corresponding  export  certificate." Indeed, it is  on  that basis  that  90  per cent of the amount  paid  by  different exporters  was refunded by the Corporation to the  claimant. It  is  difficult  to understand how if  the  plaintiff  was entitled’  to claim and obtain refund ’in respect of 90  per cent  of  the amount paid, he was not entitled to  make  the claim with respect to the remaining 10 per cent. It may be pointed out that as the receipted import bill  and the  corresponding  export certificates in  respect  of  the goods  in  question  have  already been  made  over  by  the plaintiff  to  the  defendant Corporation, it  will  not  be possible  for the merchants who actually imported the  goods



and  then exported them, to make any fresh claim.   For,  no claim  would be accepted without the receipted  import  bill and  the corresponding export certificates.  Mr.  Patwardhan faintly  argued  that the definition of a  claimant  in  the Rules  is  only  in respect of 90 per  cent  of  the  octroi refund.  There is obviously no substance: in this  argument. Rule  1 1 deals with the procedure of claims to  refund  and requires  that  claimant  should produce  a  duly  receipted import  bill  and  an export certificate  relating  to  such goods.  [Rule II (2) (iv)].  These provisions  are  entirely independent  of Rule 18(3) which lays down that a  deduction of ten per cent shall in all cases be made before  refunding the amount of octroi duty in certain circumstances.  It  is, in  our  opinion, clear that the plaintiff having  made  the claim  in accordance with the rules was the person  entitled to  receive what amount was legally refundable.  As we  have found  that the deduction of ten per cent could not  legally be  made,  in  other  words,  the  entire  amount  paid  was refundable,  it  follows that the plaintiff was  the  person entitled to obtain the refund and so he was also entitled to bring the suit. There  remains  for consideration the  appellant’s  plea  of limitation.   For this plea, the appellant relies on s.  487 of  Act LIX of 1949.  The material part of the section  runs thus:-               (1)   No suit shall be instituted against  the               Corporation  or against the  Commissioner,  or               the               188               Transport  Manager, or against  any  municipal               officer or servant in respect of any  act-done               or purported to be done in pursuance or execu-               tion  or intended execution of this Act or  in               respect  of any alleged neglect or default  in               the execution of this Act:-               (a)   until  the expiration of one month  next               after notice in writing has been, in the  case               of   the  Corporation,  left  at   the   chief               municipal  office  and,  in the  case  of  the               Commissioner or of the Transport Manager or of               a  municipal officer or servant  delivered  to               him  or left at his office or place of  abode,               stating  with  reasonable  particularity   the               cause  of  action and the name  and  place  of               abode  of the intending plaintiff and  of  his               attorney, advocate, pleader or agent, if  any,               for the purpose of such suit, or               (b)   unless it is commenced within six months               next  after  the  accrual  of  the  cause   of               action." The  benefit  of  this section would  be  available  to  the Corporation  only if it was held that this deduction of  ten per cent was "an act done or purported to be done in  pursu- ance  or  execution or intended execution of this  Act."  We have  already  held that this levy was not in  pursuance  or execution  of the Act.  It is equally clear that in view  of the  provisions  of  s. 127(4) (to  which  we  have  already referred) the levy could not be said to be "purported to  be done in pursuance or execution or intended execution of  the Act."  For, what is plainly prohibited by the Act cannot  be claimed to be purported to be done in pursuance or  intended execution of the Act.  Our conclusion is that the High Court has rightly held that the suit was not barred by limitation. All  the  points raised in the appeal fail.  The  appeal  is accordingly dismissed.



Anneal dismissed. 189