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PETITIONER: ATLAS CYCLE INDUSTRIES LTD.

       Vs.

RESPONDENT: STATE OF HARYANA & ANR.

DATE OF JUDGMENT11/08/1971

BENCH: RAY, A.N. BENCH: RAY, A.N. SIKRI, S.M. (CJ) PALEKAR, D.G.

CITATION:  1972 AIR  121            1972 SCR  (1) 127  1971 SCC  (2) 564  CITATOR INFO :  E          1975 SC2172  (14)  R          1975 SC2193  (11)  R          1984 SC 583  (21)  O          1985 SC1683  (4,7)

ACT: Punjab Municipality Act, 1911, s. 5(4), 62 (10)-Notification imposing  octroi if became automatically applicable  to  new areas  included  in  Municipality  by  virtue  of  s.  5(4)- Notification, bye law difference between.

HEADNOTE: Section  5 (4) of the Punjab Municipality Act, 1911  enacts: "when any local  area  has been included in  a  municipality under sub-section (3)    of  this section of this Act,  and, except as the State Government may otherwise by notification direct  all rules, bye-laws, orders, directions  and  powers made,  or conferred under this Act and in  force  throughout the  whole  municipality  at the time shall  apply  to  such area." By  a  notification  the industrial area  within  which  the appellants’  factory  was situated was included  within  the municipality   of  Sonepat.   Thereafter,  the   respondent- municipality purported to impose, levy and collect from  the appellant  octroi.  The appellant filed a writ  petition  in the High Court for restraining the municipality from levying and collecting the octroi.  The municipality relied upon the provisions  contained in s. 5 (4) of the Act in  support  of the contention that the notification dated 3rd November 1942 issued under s. 62 (10) of the Act notifying the  imposition of octroi within the octroi limits of the Sonepat  municipal limits  became applicable to the areas included.   The  High Court  dismissed  the petition.  It came to  the  conclusion that  by reason of the provisions contained in s. 5  (4)  of the  Act the taxes would "automatically become leviable"  to new  areas included in the municipal limits.   Allowing  the appeals, HELD:     The  High  Court  was wrong in  holding  that  the municipality  was competent to levy and collect octroi  from the appellants by reason of the provision contained in s.  5 (4) of the Act.

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(i)  Section  5  (4) of the Act speaks of  rules,  bye-laws, conducts, directions and powers and does not  significantly, mention  notification.   The  Act  speaks  of   notification ceasing to apply to excluded areas, whereas, in the case  of inclusion  of areas the Act significantly omits any  notifi- cation  being  applicable to such  areas.   The  legislative intent  is, therefore, unambiguous that notifications  would not be applicable to an included area on the strength of  s. 5 (4).  And s. 62 (10) of the Act speaks of notification for the  imposition  of  taxes and such a  notification  is  the statutory basis of the imposition and levy of tax. [133 H] (ii) The  word ’notification’ is not synonymous with  rules, bye laws, orders, directions and powers.  The power to issue notifications orders, rules or bye-laws refers to  different and  separate  methods of expression of  exercise  of  power under the statute.  Bye-laws are entirely 128 different  from notifications imposing tax and the  bye-laws fixing  the  ’limits  and prescribing the  routes  by  Which articles  which  are  subject  to  octroi  may  be  imported obviously cannot be equated with notification of  imposition of octroi. [134 C, G] Bagalkot  City Municipality v. Bagalkot Cement  Co.,  [1963] Supp.  I S.C.R. 710, distinguished.

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeal Nos.  1927  and 2222 of 1970. Appeals  from the judgment and order dated May 18,  1970  of the  Punjab and Haryana High Court in Civil Writ  Nos.  2014 and 2611 of 1967. C.K,  Daphtar and L N. Shroff, for the appellant (in  C.  A. No. 1927 of 1970). I. N. Shroff, for the appellant (in C.A. No. 2222 of 1970). V.   C.  Mahajan, and R. AT.  Sachthey, for  the  respondent No. 1 (in both the appeals). M.   C.. Setalvad, N. S. Das Bahl, P. C. Bhartari, J.  B. Dadachanji and Ravinder Narain, for respondent No. 2 (in  C. A. No. 1927 of 1970). P.   C. Bhartari, J. B. Dadachanji and Ravinder Narain,  for respondent No. 2 (in C. A. No. 2222 of 1970). The Judgment of the Court was delivered by Ray,  J.  These two appeals are by certificate  against  the common  judgment  dated 18 May, 1970 of the  High  Court  of Punjab  and  Haryana  dismissing  the  applications  of  the appellants   for   a  writ  of  mandamus   restraining   the Municipality of Sonepat from levying against and  collecting from the appellants any octroi in respect of raw  materials, components  and  parts imported by the appellants  into  the factory  of  the  appellants situated  at  Industrial  Area, Sonepat. The  factory  of  each of the  appellants  was  situated  at Industrial Area, Sonepat.  The appellants carry on  business of manufacturing bicycles and bicycle components and parts. 129 On  30 September, 1966 a notification dated  15,  September, 1966  was published in the Punjab Government Gazette to  the effect that under section 5(1) of the Punjab Municipal’ Act, 1911  (referred to for the sake of brevity as the  Act)  the President  of India was pleased to declare his intention  of including  within  the municipal limits of  Sonepat  in  the Rohtak  District, the area specified in the Schedule to  the notification.  The Schedule included the Industrial area of,

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Sonepat where the factory of the appellants was situated. Under  section 5(2) of the Act the inhabitants of  the  area who  objected  to the proposed inclusion of  the  said  area could submit their objection in writing within six weeks- of the   date   of  publication  of  the   notification.    The appellants. filed objections in writing. On  1 November, 1966 after the bifurcation, of  Punjab,  the State of Haryana came into existence.  A notification  dated 11  August, 1967 was published in the  Haryana.   Government Gazette.   The Gazette notification was to the  effect  that the Governor of Haryana, was pleased to,, include within the Municipality  of  Sonepat in the Rohtak District  the  areas mentioned  in the notification.  The industrial area  within which  the factory of the appellants was, situated was  thus included  within  the local limits of  the  Municipality  of Sonepat. From 18 August, 1967 the respondent-Municipality,  purported to  impose, levy and collect from the appellants, octroi  in respect  of raw materials, components and parts imported  by the appellants into their factory for consumption or use  in the manufacture of bicycles and bicycle components. The   respondent-municipality  relied  an  the   provisions. contained  in  section 5(4) of the Act in support  of  their contention  that  imposition of octroi which  was  in  force within the municipality applied to the area included  within the  limits of the municipality by the  notifications,  and, therefore, the appellants were liable to payment of  octroi. The provisions of section 5(4) of the Act are as follows:-               "When  any local area has been included  in  a               municipality  under  sub-section (3)  of  this               section of this Act, and, except as the  State               Government may,               otherwise  by notification direct  all  rules,               bye-laws, orders, directions and powers  made,               or  conferred  under  this Act  and  in  force               throughout the whole municipality at the time,               shall apply to such area." The   respondent-municipality  relied  on   the   provisions ,contained  in section 5(4) of the Act that all rules,  bye- laws, orders, directions and powers made, or conferred under the Act and in force throughout the whole municipality would apply to such an area, and, therefore, the notification No. 3798-C-42/60545 dated 3 November, 1942 issued under ,section 62(10) of the Act notifying the imposition of octroi  within the  octroi  limits  of  the  Sonepat  Municipality   became applicable to the area included. The  relevant  provisions for imposition of tax  are  to  be found in sections 61 and 62 of the Act.  Under section 61 of the Act any municipal committee may impose tax of  different kinds  enumerated  there.  The three broad  heads  of  taxes under  section 61 of the Act are those provided in  sections 61(1)(a),61(1)(b)to(f)inclusive and61(2).  Tax mentioned  in section 61(1)(a) of the Act is on buildings and lands.   Tax mentioned in section’ 61 (1)(b) to (f) is tax on profession, ,calling,  trade and of other forms which are  not  material for the purpose of the present appeals.  Under section 61(2) of the Act the municipality may impose with  the  previous sanction  of  the State Government any other tax  which  the State  Legislature  has power to impose in the  State  under the  Constitution.   The levy of octroi  is  under  section 61(2)  ,of the Act.  Competency to impose octroi is  because of item 52 of the State List which reads "taxes on the entry of goods  within  the local limits of the  area  for  sale therein."  The power to levy octroi is indisputable and  was not ,challenged.

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The  contention  on behalf of the appellants  Was  that  the provisions contained in section 62 of the Act should have ’- been  followed.   Section 62 consists  of  12  sub-sections. Broadly  stated,  under section 62 of the  Act  a  Municipal Committee passes a resolution proposing the imposition ,of any  tax under section 61.  When such a resolution has  been passed  the  committee shall publish a notice  defining  the class  of persons or description of property proposed to  be taxed, the amount or rate of the tax to be imposed, and 131 the  system  of assessment to be adopted.   Any  inhabitant, objecting  to the proposed tax may within thirty  days  from the  publication  of  the notice  submit  his  objection  in writing.,  to  the committee.  If the committee  decides  to amend  its proposals it shall publish the  amended  proposal along   with,   a  notice  indicating  that  they   are   in modification  of those previously published  for  objection. Objections  may-within,  thirty  days  be  received  to  the amended proposal and the: committee shall then consider  the objections.   Counsel on behalf of the appellants  contended that  this  procedure. for inviting objections  should  have been followed. In  the case of tax falling under section 6 1 (1)(b) to  (f) of  the Act the municipal committee after settlement of  the proposals   shall  direct  that  the  tax  be  imposed   and forward,;,   a  copy  of  the  order  through   the   Deputy Commissioner  to,, the State Government.  These orders  will be  attracted by, the provisions of section 5(4) of the  Act to the included areas.  But orders by themselves are not the authority for imposition of tax. In the case of tax falling under section 61(1)(b) to, (f) of the Act the State Government one receipt of the  order-shall notify  under section 62 (10) of the Act the  imposition  of the  tax  in  accordance with such order and  shall  in  the notification  specify a date not less than; one  month  from the  date of the notification, on which the  tax-shall  come into  force.   Therefore,  in the  absence  of  notification falling  within the ambit of section 5 (4), of the- Act  the municipality will not be competent to levy or collect tax. In  the case of a proposed tax. under section 61 (1) (a)  of the  Act the municipality has, to submit proposals  together with the objection, if any,, made in connection.,  therewith to  the Deputy Commissioner.  The Deputy,Commissioner  after considering the objections may either.refuse to sanction the proposals or, return them to 1 the municipality for  further consideration or sanction them without modification or  with such.  modification not involving an increase of the  amount to  be imposed, as he deems. fit and then forward  the  same to, the State Government. a copy of the proposals and  his- order. of, sanction.. 132 In  the case of tax falling under section 61 (1) (a) of  the Act the State Government on receipt of the order of sanction of  the Deputy Commissioner shall notify the  imposition  of the tax  in accordance with such order and  in  the  noti- fication  shall specify a date not less than one month  from the  date of the notification, on which the tax  shall  come into ,.force. In  the case of tax falling under section 61(2) of  the  Act the  municipality  has  to submit  proposals  together  with objections   to   the  Deputy  Commissioner.    The   Deputy Commissioner shall submit the proposal and objections with his  recommendation  to  the State  Government.   The  State Government  on  receiving the proposals for  taxation  under section 61(2) of the Act may sanction or refuse to  sanction

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the  same  or  return  them to  the  committee  for  further consideration. In  the case of tax falling under section 61(2) of  the  Act when  the  State Government on receipt of  the  proposal,and objections  along  with  the recommendation  of  the  Deputy Commissioner  sanctions the imposition of the tax the  State Government under section 62(10) of the Act shall notify  the imposition of the tax and shall in the notification  specify a  date  not  less  than one month from  the  ,date  of  the notification, on which the tax shall come into force. Inasmuch as the provisions of section 5(4) of the Act render the  order of the relevant authorities sanctioning  proposal of  municipality  for  levy  of  octroi  applicable  to  the included area, there cannot be any question of following the procedure  for  inviting  objections  to  the  proposed  tax contemplated in section 62.  It may also be stated here that a  contention was advanced on behalf of the appellants  that the  applicability  of octroi to the,  included  area  would offend  Article 14 of the Constitution by reason ,of  denial to  the persons within the included area of right to  object to  the tax.  The provisions contained in section 5  of  the Act and, in particular, sub-section (2) thereof, confer  on inhabitants  within  the area proposed to  be  included  the right  to  object  to the  alteration  proposed  and  submit objections in writing.  The inhabitants. would 133 thereby  have the opportunity of objecting not only  to  the inclusion of the area but also to the incidence of tax as  a result of the inclusion. Section  62 of the Act consists of 12  sub-sections.   These sub-sections  deal with three matters.  The first five  sub- sections  deal  with  the procedure for  proposals  of  tax, objections  by  inhabitants and final consideration  of  ob- jections by the committee.  These sub-sections form part  of a stage anterior to sanction by the relevant authorities  of proposals for tax. Sub-section  (6) to (9) of section 62 of the Act  deal  with the order of sanction by the appropriate authorities of  the proposals  for tax.  These orders are not the provisions  by which  tax  is  imposed.   These  orders  are  sanction  for imposition of tax.  These orders are attracted by virtue  of the  provisions contained in section 5(4) of the Act to  the included  areas.  But in the absence of notification by  the Government  under  section  62(10) of the Act  there  is  no imposition of tax. 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. The controversy in the present appeals is solved by  finding out  as to whether the notification dated 3  November,  1942 imposing   octroi   within  the  limits   of   the   Sonepat Municipality  became applicable by reason of the  provisions contained  in section 5(4) of the Act.  It is noticeable  at the  outset  that section 5(4) of the Act speaks  of  rules, bye-laws, orders, directions and powers and does not  signi- ficantly   mention  ’notifications’.   It  is  apposite   to

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consider 134 sections 6,7 and 8 of the Act which deal with the effect  of exclusion of local area from the municipality.  In the  case of exclusion of an area from the Municipality it is provided in section 8(1) (a) of the Act that "This Act and all  noti- fications,  rules, bye-laws, orders, directions  and  powers issued,  made  or conferred under the Act,  shall  cease  to apply  thereto".   When the Act provided  for  notifications ceasing  to apply in the case of exclusion of  local  areas, and  in the immediately preceding section 5  refrained  from using  the word ’notifications’ becoming applicable  in  the case  of inclusion of areas the legislative intent is  unam- biguous  and  crystal  clear that  notifications  could  not become  applicable  to an included area on the  strength  of section 5(4) of the Act. The word ’notification’ cannot be said to be synonymous with rules,  bye-laws,  orders,  directions and  powers  for  two reasons.  First, the Act in the present case speaks of noti- fications  for imposition of tax and uses the word  ’notifi- cation’  separately from the other words  "rules,  bye-laws, orders,  directions and powers".  In the case of  exclusions of areas, the Act speaks of notification ceasing to apply to excluded areas whereas in the case of inclusion of areas the Act significantly omits any notification being applicable to such area.  Secondly, the General Clauses Act in section  21 speaks  of  power to issue notifications, orders,  rules  or bye-laws  and it is, therefore, apparent that the  power  to issue  notifications,  orders, rules or bye-laws  refers  to different and separate methods of expression of exercise  of power  under the statute.  Section 62(10) of the Act  speaks of   notification  of  the  imposition  of  tax.    Such   a notification  is the statutory basis of imposition and  levy of tax. Bye-laws are entirely different from notifications  imposing tax as will be manifest from section 188 of the Act.   Under that  section the committee may by bye-laws as mentioned  in clause(g)  thereof fix limits for the purpose of  collecting octroi  where collection of octroi has been  sanctioned  and may prescribe routes by which articles which are subject  to octroi  may be imported into municipality.  Bye-laws  fixing the  limits  and prescribing the routes  by  which  articles which are subject to octroi may be 135 imported  obviously cannot be equated with  notification  of imposition of octroi. In  the  present  appeals,  the  High  Court  came  to   the conclusion  that  by reason of the provisions  contained  in section  5(4) of the Act taxes would ’automatically  become’ leviable’  to new areas added to the municipal limits.   The High Court fell into the error of holding that taxes  became automatically leviable in new areas.  The High Court  relied on the decision of this Court in Bagalkot City’ Municipality v.  Bagalkot Cement Co. to support the conclusion  of  taxes becoming  automatically  leviable in extended areas  on  the ground that by reason of the provisions contained in section 5(4) of the Act the inhabitants of the, included area  would ’suffer all the burdens that are inherent in their inclusion within  the municipal limits’.  This conclusion of the  High Court is not supported either by the decision of this  Court or by the provisions of the statute.  In the first place,  a taxing provision always receives a strict interpretation for the  obvious  reason that there must be  clear  and  express language imposing a tax  and  the date from which  such  tax shall come into effect.  Notifications,  under the  Act  are

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the only authority and   mandate  for imposition and  charge of tax. Notifications    are not made applicable to included areas  under section 5(4) of the Act.  There cannot  be  any taxation  by  implication.  Secondly, in the  Bagalkot  City Municipality  case’  there was no  provision  comparable  to section  5(4) of the Act and this Court did not decide  that taxes would become automatically leviable.  On the contrary, this  Court  in  the Bagalkot  City  Municipality  case’  in interpreting  the words ’Municipal district’ occurring in  a bye-law  did not extend the meaning of ’municipal  district, to include areas which were subsequent to the making of  the bye-law  added within the limits of the municipal  district’ The  reason  given  by this Court was  that  the  expression ’municipal   district’  in  the  bye-law  referred  to   the ’municipal  district’  as  existing  when  the  bye-law  was framed.  The words ’municipal district’ in the bye-law  were not construed to relate to extended areas.  In the  Bagalkot City  Municipality  case’ section 48 of  the  Municipal  Act provided that a bye-law could be made only with the sanction of the Government.  The further provisions (1) [1963] Supp.  1 S.C.R. 710. 10-MI245SupCI/71 136 of  section  48  in the  Bagalkot  CitY  Municipality  case’ required   publication  of  a  proposed  bye-law for   the information  of the persons likely to be affected thereby. The  lack  of  publication of the bye-law  to  the  Bagalkot Cement  Company  affected by the bye-law was held to  be  an additional reason for refusing to extend the meaning of  the words ’municipal district’ to include extended areas.  There is no such aspect in the present appeals. The Bagalkot  City Municipality case’ is, therefore, of no aid in  interpreting section 5(4) of the Act in the manner the High Court did. The  High Court was wrong in holding that  the  municipality was competent to levy and collect octroi from the appellants by reason of the provisions contained in section 5(4) of the Act.   The  judgment of the High Court is  set  aside.   The appeals are allowed.  The applications of the appellants are allowed  and  writs of mandamus will go  to  the  respondent municipality  restraining  the  municipality  from   levying against  and  collecting from the appellants any  octroi  in respect  of raw materials, components and parts imported  by the  appellants  into the factory of the  appellants.   Each party will pay and bear their own costs.  Liberty to mention if  the  Respondent  Municipality will fail  to  refund  the monies within a fortnight. K.B.N.                              Appeals allowed. 137