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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

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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.

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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

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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..

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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

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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

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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

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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.

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