MUNICIPAL BOARD MAUNATH BHANJAN v. SWADESHI COTTON MILLS CO. LTD & Ors.

The challenge to the imposition was made by the Swadeshi Cotton Mills Company Ltd., hereinafter referred to as the Company. The Company started constructing a textile factory, a part of which, at any It applied for and obtained rate, fell within the area of the Board. exemption from the levy of octroi on its building material on It howeVler started bringing more ground that it was a new concern. articles within its premises, and the Octroi Superintendent made a demand for a payment octroi on June 25, 1969. The Com-· parry tried to avoid the levy on the basis of the order of exemption, but the Executive Officer of the Board repeated the demand on May 30, 1970 and June 16, 1970. The Board also wrote to the State Government for permission to realise octroi from the Company. The Government gave the permission to realise the tax. The Company thereupon challenged the levy of the octroi in the High Court by a writ The High Court took the view that the initial imposition petition. of the octroi was illegal, allowed the writ petition, and issued a manda mus directing the Board not .to realise aggrieved and has come up in appeal to this Court. the tax. The Board It appears that the Company took four grounds for challenging the levy of octroi, but the High Court examined only the following ground, as it took the view that it was enough for the Company's F . success in the petition, and did not examine the other grounds,- "that the procedure prescribed for the imposition taxes by municipal boards under sections 131 to 135 of the U.P. Municipalities Act, 1916, was not followed by Municipal Board." G H Counsel for the parties have accordingly confined their arguments to the finding of the High Court in favour of the Company on ground. · As the ground on which the Company has succeeded is quite general and vague, we a~ked counsel for the parties to refer to the precise plea in that respect, in the writ petition. They could however only invite our attention to ground No. 6 of the writ petition where the Cc-mpany has merely stated that the imposition of octroi was void -and illegal "because mandatory provisions for imposition of octroi tax as provided in the U.P. Municipalities Act has not been followed." It is therefore obvious, and has not been disputed before us, that the ~-· MUNICIPAL ~OARD v. SWADESHI COTTON (Shinghal, !.) 867 Company took a very vague ground to challenge the validity of the imposition of octroi, and left it to the High Court to embark on a roving and fishing inquiry, on the off chance of finding some violation of the so-called "mandatory provisions for the imposition of octroi." It has not been disputed be.fore us that the High Court m:1dertook such an inquiry\ and struck down the imposition on the followmg ground,- ( 1) The draft rules for the levy of the tax were not pub lished, and only the rates of octroi were published, so that there was violation of the provisions of section 23 of the General Clauses Act and sections 134 ( 1) and 300 of the Act. (2) The order of the District Magistrate, which was equi valent to the special resolution of the Board under sub-section (2) of section 134 was invalid as it was passed on .June 20, 1950, while the rules were fina- lised and published on July 15, 1950. · (3) There was no "foundation or basis" of the notifica tion under section 135 (2) and no such notification was published. · Counsel for the Company however strenuously argued that there was no compliance with the provisions of sections 131 to 133 also, and made a reference to the decisions in, Municipal Board, Hapur v. Raglmvendra Kripal and others(') and Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur('), for the purpose of showing that parts of sections 131 to 134 were mandatory, and had to be followed. We find that the High Court has categorically stated that the Company did not assert that sub-sections (2) and (3) of section 131 had not been complied with, and that there was "no dispute regarding compliance with the provisions of section 131." The High Court has also stated that the Company "has not asserted! that any of the provisions of section 132 has not been followed." It J1as further stated that there was "no complaint of non-compliance with the provisions of section 133 also." There was thus no challenge to the validity of the imposition of octroi on the ground that there was no compliance with the provisions of sections 131, 132 and 133 and we are not called upon to examine the argument that there was noJJ-·compliance with the provisions of those sections. There was also no dispute in the High Court th•at "the Municipal Board was competent to impose octroi tax." We shall accordingly examine the three grounds, on which the High Court has held the imposi•tion of odroi as invalid, in this background. .. A B c D E F G Ground No. 1. The. High Court has held that there was previous publication of the draft rules for the levy of octroi that only the rates of octroi were published. breach of the provisions of sections 134 ( 1) and 300 of the United H So that there was (1) [l966j 1 S.C.R. 950. (2) [1965] 1 S.C.R. 970. A B c D E F G H 868 SUPREME COURT REPORTS [1977] 2 s.c.R. Provinces Municipalities Act, 1916, hereinafter referred to as the Act and seetion 23 of the General Clauses Act. It will be recalled that ~he H~&h Court has. found that the Company had not challenged the imposition of octro1 on the ground that there was non-compliance with the provisions of sections 131 to 133. It cannot therefore be disputed that the draft rules were puolished as required by sub-section ( 3) of section 131. Moreover we find from the affidavit which has been filed on behalf of the Board that its Officer incharge wrote the prescribed Authority on January 9, 1950, that the draft rules had been published in the "Sansar" on November 1, 1949, and may be sanctioned. A copy of that letter has been placed on the record. It may also be mentioned that the Officer Incharge wrote to the Commis sioner intimating that ·only two objections had been received, which were for reduction of the tax, and that after considering them the rate of the tax had been reduced from Rs. 1/8/- to Re. 1/- per maund, and the necessary amendment had been made in the rate chart. An objection was a'lso received from the Shoe Makers' Association, and the Commissioner directed that if the Board wanted to make modification, it may again publish the modified proposals. This was done on February 14, 1950, but as only the rates had been reduced, and the rules had not been modified, it wasc not necessary to republish sanctioned the draft rules. The Prescribed Authority accordingly the same on April 1, 1950, under section 133. The rules were forwarded to the Prescribed Authority on April 26, 1950, and were published in the State Gazette dated July 7, 1950. stated It was 300 in the notification that the rules were published under section of the Act, which required their previous publication, but there be no doubt that it was a notification under sub-section (2) of section 135 as it was issued after receipt of the Board's special resolution pursuance of the sanction of the Prescribed Authority, and it was direct ed that the rules shall take effect from July 15, 1950. It is therefore futile to contend that the rules were not made in accordance with the provisions of sections 134(1) and 300 of the Act and section 23 of the General Clauses Act which requires certain conditions to observed in regard to the making of rules after previous publication. Ground No. 2. It is not in dispute that the, special resolution for the imposition of the tax was sent by the Officer Incharge of the Municipal Board on June 20, 1950, stating that July 15, 1950 had been fixed for the levy of the tax. It is true that the rules were pub lished under the notification dated July 7, 1950, but that would not necessarily lead to the conclusion that the resolution dated June 20, 1950 was rendered nugatory, or that it was necessary for the Board to p~ss another resolution. The notifica~ion sho~s tha~ the. authority concerned not only published the resolut10n by its notification dated July 7, 1950, but also stated that they shall take. effect from July 15 1950 which was the date fixed by the resolut10n dated June 20, l 9SO, fo; the imposition of the tax. The:e was therefore no justifi cati'on for taking the view that the resolution dated June 20, 1950 could not authorise the imposition of the tax from July 15, 1950, merely because it was passed before the publication ?f the rules. At any rate any technical defect in the date of the resolut10n could not have --- -. .,,.-- ..... MUNICIPAL BOARD v. SWADESHI COTTON (Shinghal, J.) 8 69 the effect of making the imposition void in the facts and circumstances of this case. JI Ground No. 3. As has been shown, the notification dated July 7, 1950, which was published under section 300 of the Act, was, fact and substance, issued under the authority of sub-section (2) of section 133, and it would not matter if it did not make a specific refe- rence to that sub-section and made a reference to section 300 instead. The High Court therefore erred in thinking that there was no notifica- tion under-sub-section (2) of section 135 at all. It is the nature of the notification which is decisive of the section under which it teen issued, and we have no doubt that the impugned notification was really issued under sub-section (2) of section 135. We have thus no doubt that the notification had really been issued in compliance with the requirement of sub-section (2) of section 135 of the Act. That would attract the application of sub-section ( 3) of that section which provides as follows,- ' ' "135(3) A notification of the imposition of a tax under sub section (2) shall be conclusive proof that the tax has been imposed in accordance with the provisions of this Act." So when a probative effect had been given by law making the notifica tion of the imposition of the tax as "conclusivle proof" that the had been imposed "in accordance with the provisions of the Act", no evidence could be allowed to combat that fact, and we have no hesitation in holding that the impos;'i:ion was according to the law. A B c D E F It is not disputed that. Maunath Bhanjan is an industrial town, and its Board was collecting octroi since July 15, 1950. The Company started the construction of its factory in 1968-69, and, as has been stated, it applied for and obtained exemption from the levy of octroi on its building material on the ground that it was a new concern. The Board granted the exemption on July 21, 1967, for a period of 10 years, and that fact was acknowledged in the Company's fotter dated August 18, 1967. The Company prayed for the continuance of the The State Government however exemption even after that time limit. granted the exemption for five years. The Company started "import- ing" certain other articles, and the State Government ultimately gave permission to the Board on April 2, 1973 to realise octroi from the G Company with effect from May, 1974. The Company once again applied for further exemption on August 14, 1973, but without success. It is thus clear that, far from having any doubts about the validity of the imposition and levy of octroi, the Company accepted the validity thereof and prayed 'for exemption. It availed of that exemption, for some years, and applied for its extension until as late as August 14, l 973. the· writ petition. As has been shown, Company thought of filing the Company did not, even then, venture to point out any reason why the imposition could be said to be invalid, and merely stated that the It was only when further exemption was refused, that the H 870 SUPREME COURT REPORTS [1977] 2 S:<;:.R. A "procedure" prescrib_ed under sections 131-135 had not been followed. That was far too vague a plea to justify investigation and interference in the exercise of the· extraordinary jurisdiction of the High Court under artic]e 226 of the Constitution. The appeal is allowed, the impugned judgment of the High- Court dated March 26, 1976, is set aside, and the writ petition is dismissed with costs. B M.R. Appeal al/owed.