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CASE NO.:

Appeal (civil) 3609 of 1998

PETITIONER:

JAYALAKSHMI COELHO

Vs.

RESPONDENT:

OSWALD JOSEPH COELHO

DATE OF JUDGMENT: 28/02/2001

BENCH:

Brijesh Kumar, D.P.Mohapatro

JUDGMENT:

L.....I.........T.......T.......T.......T.......T.......T..J

BRIJESH KUMAR, J.

This appeal is preferred against the Judgment and

Order dated February 17, 1998 passed by a Division Bench of

the Bombay High Court in Letters Patent Appeal No.204 of

1997. The Court of the Principal Judge, Family Court,

Bombay, modified its earlier decree which order was

challenged by means of a Writ Petition. The Writ Petition

was dismissed upholding the order passed by the Principal

Judge, Family Court. The impugned order passed by the

Division Bench confirmed the order of the learned Single

Judge giving cause of grievance to the appellant. Hence,

the present appeal. We have heard Ms. Indra Jaising,

learned Senior Counsel appearing for the appellant and Shri

A.S. Bhasme, learned counsel appearing for the respondent.

The appellant Jayalakshmi Coelho and the respondent Oswald

Joseph Coelho got married on January 6, 1977 in accordance

with the Special Marriage Act, 1954. Out of the said

wedlock, a female child Neisha Anne Coelho was born on

August 1, 1978. Later, however, differences seem to have

arisen between the appellant and her husband, ultimately,

culminating into, the parties agreeing for dissolution of

their marriage and they entered into an agreement to that

effect on 26th July, 1991. It is stated in the agreement

that it had become impossible for them to live any longer as

husband and wife so they had decided to dissolve the

marriage by mutual consent. They had also settled other

issues amicably relating to their properties and custody of

the child etc. in terms as indicated in the agreement.

According to the agreement, the flat in which the parties

had been living as husband and wife, on certain terms and

conditions, was to be transferred by the wife in the name of

the husband. The other matters relating to jewelry,

ornaments, utensils, personal belongings etc. had also been

mentioned in the agreement as well as about the fixtures and

furniture in the house. It also mentioned about the custody

of the daughter. The petition for divorce by mutual consent

was filed in the Family Court at Bandra, Bombay on 21.8.1991

under Section 28 of the Special Marriage Act, 1954. Apart

from other averments, made in the petition for mutual

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divorce, in paragraph 8, it was mentioned that Flat No.11 in

Mon-Bijou Cooperative Housing Society was purchased by both

the parties out of their own funds in the year 1976. Though

it was in the name of the appellant yet she was to

relinquish her right, title and interest in the said flat in

the favour of the respondent, namely, the husband, as per

their agreement arrived at earlier on 26th of July, 1991.

It was, thereafter, mentioned that the Memorandum of

Agreement may be treated as part and parcel of the divorce

petition and order be passed accordingly. However, in

paragraph 14 of the petition, only the following reliefs

were prayed :- (a) that the marriage between the

Petitioners solemnized on the 6th day of January, 1977, at

Bombay be dissolved by a decree of divorce;

(b) such other reliefs as this Honble Court may deem

fit think and proper.

The Family Court granted the decree as follows:-

DECREE IN THE FAMILY COURT AT BOMBAY PETITION NO. AA-1221

OF 1991

Jayalakshmi Coelho Residing at No.2 Laxmi Bhawan,

Matunga, Bombay .Petitioner No.1

And

Oswald Joseph Coelho Residing at No.11, Mon-Bijou

Chimbai Road, Bandra Bombay ..Petititoner No.2

1. Jayalakshmi Coelho and Oswald Joseph Coelho have

filed this joint petition under Section 23 of Special

Marriage Act, 1954 to get a decree of divorce by mutual

consent.

2. Marriage between the petitioners Jayalakshmi and

Oswald took place under the provisions of the Special

Marriage Act, 1954 at Bombay on 6th January 1977.

Thereafter they started dwelling together at Bandra. Their

marital life was also fruitful by birth of daughter Neisha

Anne Coelho, who was born on 1st August 1978. But it seems

that thereafter differences arose between the two and in

July 1986, Jayalakshmi left the matrimonial house and went

to her parental house. Both the parties decided to take

divorce by mutual consent.

3. This petition is coming on 7.3.1992 before Shri

S.D. Pandit, Judge, Family Court, Bandra. In presence of

Petitioner No.1 and 2, suit is decreed.

O R D E R

Marriage between the petitioners Jayalakshmi and

Oswald is hereby dissolved by decree of divorce by mutual

consent.

No order as to costs.

The respondent, namely, the husband, after passing of

the consent decree, as indicated above, moved an application

dated June 30, 1992 stating therein that decree by mutual

consent was granted to the parties on 7th March, 1992 but

the order remained silent on other reliefs which were

mentioned in the agreement and in paragraph 8 of the

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petition relating to transfer of Flat No.11, Mon-Bijou Co-

operative Housing Society, 60-D, Chimbai Road, Bombay.

According to the agreement dated 26.7.91, the flat was to be

transferred in the name of the husband on payment of

Rs.1,70,000/- to the wife. But the said prayer was not made

for the reason as indicated below in paragraph 3 of the

petition for modification of decree:-

I say that though all these averments and facts were

put on record, in the petition, both the Petitioners being

lay persons, and appearing in this Honble Court without the

assistance of any lawyer, failed to ask for relief, as per

the said agreement in their prayer clauses. Consequently

the Order passed by this Honble Court remained silent on

those reliefs.

It has not been said that the court wanted to or

intended to pass order about transfer of flat but it was not

so ordered due to any clerical error or accidental slip.

Thereafter, in the application for modification, averments

have been made to the effect that the respondent, namely,

the husband had been approaching the appellant for making

the payment of the balance amount of Rs.1,60,000/-, 10,000/-

having been paid earlier, but she had not been accepting the

same on one pretext or the other and that she was trying to

sell away the flat to some other person. Therefore, it had

become necessary to move the application praying for the

following relief in para 10 of the application :- (a) That

this Honble Court be pleased to modify its order and decree

dt. 7th March, 1992 in M.J. Petition No.AA 1221/91 by

including and granting the following prayers :-

(1) That the Opponent (Original Petitioner No.1) be

directed by an order of mandatory injunction to transfer

Flat No.11, Mon-Bijou Co-op.Hsg. Society Chimbai Road,

Bandra, Bombay 400 050, to the name of Petitioner No.2 on

payment of Rs. 1,60,000/-, (Rupees One Lakh sixty thousand

only) as per the Memorandum of Agreement dated 26th July,

1991.

(2) That the Opponent Original Petitioner No.1 be

directed by an order of mandatory injunction to remove

herself and her belongings from the said flat No.11, Mon-

Bijou Co-op. Hsg. Society, Chimbai Road, Bandra 400 050,

forthwith;

(3) That it be declared that the custody of minor

child Neisha anne Coelho is granted to the Applicant

husband.

(b) Pending the hearing and final disposal of this

application the Opponent Original Petitioner No.1 be

restrained by an order of injunction from disturbing the

Petitioner No.2 is peaceful possession of flat No.11,

Mon-Bijou Co-op. Hsg. Society Chimbai Road, Bandra, Bombay

400 050.

© That the pending the hearing and final of disposal

of this Application opponent the original Petitioner No.1 be

restrained by an order of injunction from selling parting

with possession of or creating any third part rights in the

said flat No.11, Mon-Bijou Co-op. Hsg. Society, Chimbai

Road, Bandra, Bombay 400 050.

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(d) Interim and ad interi orders in terms of prayer

(b) and (c).

(e) For cost of this Application.

(f) Any other orders that this Honble Court deem fit

in the nature and circumstances of the case.

The application was opposed and an affidavit in reply

was filed by the appellant-wife. According to her, no

payment was made by the respondent-husband as per the terms

of the agreement and the allegation that any draft for

payment was prepared and sent to the appellant was false and

incorrect. It is not necessary to mention all other

averments made in reply, about ownership etc. of the flat.

It is also denied that in the absence of lawyers, there was

any handicap, as the parties are quite educated. It was,

however, also submitted in the reply that the payment of

Rs.1,60,000/- was to be made by the husband-respondent to

the appellant-wife within 4 months from the date of

execution of the Memorandum of Agreement. The agreement was

entered into on 26.7.1991 and the decree of divorce was

granted on 7.3.1992, after about 7 to 8 months of the

agreement, but no payment was made. Raising several other

pleas, she prayed for the rejection of the application. The

Family Court, on the aforesaid application, passed an order

on 11.11.1992 amending the decree inserting all the Clauses

(1) to (11) of the agreement in the amended decree. The

order of amendment of the decree first states about the

decree passed on 7.3.1992 and makes the amendment observing

:- It is hereby ordered and decreed that the consent terms

incorporated in Memorandum of Agreement which is the part

and parcel of the Petition be included in decree from

condition No.1 to Condition No.11.

It is to be noticed that no such prayer was made in

the application for incorporating the conditions of

agreement in the decree. The prayers were for grant of

mandatory injunction. So far legal position is concerned,

there would hardly be any doubt about the proposition that

in terms of Section 152 C.P.C., any error occurred in the

decree on account of arithmetical or clerical error or

accidental slip may be rectified by the court. The

principle behind the provision is that no party should

suffer due to mistake of the court and whatever is intended

by the court while passing the order or decree must be

properly reflected therein, otherwise it would only be

destructive to the principle of advancing the cause of

justice. A reference to the following cases on the point

may be made: The basis of the provision under Section 152

C.P.C. is found on the maxim Actus Curiae Neminem

Gravabit i.e. an act of Court shall prejudice no man (Jenk

Cent-118) as observed in a case reported in AIR 1981

Guwahati 41, The Assam Tea Corporation Ltd. versus Narayan

Singh and another. Hence, an unintentional mistake of the

Court which may prejudice cause of any party must be

rectified. In another case reported in AIR 1962 S.C. 633

I.L. Janakirama Iyer and others etc. etc. versus P.M.

Nilakanta Iyer it was found that by mistake word net

profit was written in the decree in place of mesne

profit. This mistake was found to be clear by looking to

the earlier part of the judgment. The mistake was held to

be inadvertent. In Bhikhi Lal and others versus Tribeni and

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others AIR 1965 S.C. 1935 it was held that a decree which

was in conformity with the judgment was not liable to be

corrected. In another case reported in AIR 1966 S.C. 1047

Master Construction Co. (p) Ltd. versus State of Orissa

and another it has been observed that arithmetical mistake

is a mistake of calculation, a clerical mistake is a mistake

in writing or typing whereas an error arising out of or

occurring from accidental slip or omission is an error due

to careless mistake on the part of the Court liable to be

corrected. To illustrate the point, it has been indicated

as an example that in a case where the order may contain

something which is not mentioned in the decree would be a

case of unintentional omission or mistake. Such omissions

are attributable to the Court who may say something or omit

to say something which it did not intend to say or omit. No

new arguments or re-arguments on merits are required for

such rectification of mistake. In a case reported in (1999)

3 S.C.C. 500 Dwarakadas Versus State of M.P. and Another

this Court has held that the correction in the order or

decree should be of the mistake or omission which is

accidental and not intentional without going into the merits

of the case. It is further observed that the provisions

cannot be invoked to modify, alter or add to the terms of

the original decree so as to in effect pass an effective

judicial order after the judgment in the case. The trial

court had not granted the interest pendente lite though such

a prayer was made in the plaint but on an application moved

under Section 152 C.P.C. the interest pendente lite was

awarded by correcting the judgment and the decree on the

ground that non-awarding of the interest pendente lite was

an accidental omission. It was held that the High Court was

right in setting aside the order. Liberal use of the

provisions under Section 152 C.P.C. by the Courts beyond

its scope has been deprecated. While taking the above view

this Court had approved the judgment of the Madras High

Court in Thirugnanavalli Ammal versus P. Venugopala Pillai

AIR 1940 Madras 29 and relied on Maharaj Puttu Lal versus

Sripal Singh

reported in AIR 1937 Oudh 191: ILR 12 Lucknow 759.

Similar view is found to have been taken by this Court in a

case reported in (1996) 11 S.C.C. 528 State of Bihar and

another versus Nilmani Sahu and another where the Court in

the guise of arithmetical mistake on re-consideration of the

matter came to a fresh conclusion as to the number of trees

and the valuations thereof in the matter which had already

been finally decided. Similarly in the case of Bai

Shakriben (dead) By Natwar Melsingh and others versus

Special Land Acquisition Officer and another reported in

(1996) 4 S.C.C. 533 this Court found omission of award of

additional amount under Section 23 (1-A), enhanced interest

under Section 28 and solatium etc. could not be treated as

clerical or arithmetical error in the order. The

application for amendment of the decree in awarding of the

amount as indicated above was held to be bad in law.

As a matter of fact such inherent powers would

generally be available to all courts and authorities

irrespective of the fact whether the provisions contained

under Section 152 C.P.C. may or may not strictly apply to

any particular proceeding. In a matter where it is clear

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that something which the Court intended to do but the same

was accidentally slipped or any mistake creeps in due to

clerical or arithmetical mistake it would only advance the

ends of justice to enable the Court to rectify such mistake.

But before exercise of such power the Court must be legally

satisfied and arrive at a valid finding that the order or

the decree contains or omits some thing which was intended

to be otherwise that is to say while passing the decree the

court must have in its mind that the order or the decree

should be passed in a particular manner but that intention

is not translated into the decree or order due to clerical,

arithmetical error or accidental slip. The facts and

circumstances may provide clue to the fact as to what was

intended by the court but unintentionally the same does not

find mention in the order or the judgment or something which

was not intended to be there stands added to it. The power

of rectification of clerical, arithmetical errors or

accidental slip does not empower the court to have a second

thought over the matter and to find that a better order or

decree could or should be passed.. There should not be

re-consideration of merits of the matter to come to a

conclusion that it would have been better and in the fitness

of things to have passed an order as sought to be passed on

rectification. On a second thought court may find that it

may have committed a mistake in passing an order in certain

terms but every such mistake does not permit its

rectification in exercise of Courts inherent powers as

contained under Section 152 C.P.C. It is to be confined to

something initially intended but left out or added against

such intention. So far the legal proposition relied upon by

the learned Single Judge and the Honble Division Bench

deciding the matter in its LPA jurisdiction, we are totally

in agreement with the same i.e. an unintentional mistake

which occurred due to accidental slip has to be rectified.

The question however which requires consideration is as to

whether on the facts of the present case and the principles

indicated above, it could be said that there was any

clerical or arithmetical error or accidental slip on the

part of the Court or not.

Thus coming to the facts of the case it is to be

noticed that in Paragraph 8 of the main petition for

dissolution of the marriage it has been averred that the

agreement arrived at between the parties on 26.7.91 may be

treated as part and parcel of the petition while passing the

order in the case accordingly. The relief however claimed

in paragraph 14 of the petition as quoted earlier indicates

that specifically decree for divorce alone was prayed for.

There was no prayer to the effect that the agreement may be

made a part of the decree or the terms and conditions given

in the agreement may be incorporated in the decree. It may

be observed that whatever forms part of the petition does

not automatically become a part of the decree unless

specifically it is so provided. It can only be kept in mind

while passing the decree. The same seems to be the averment

in paragraph 8 of the petition. Next, coming to the prayer

made in the application dated June 30, 1992 for modification

of the decree, it is for grant of orders of mandatory

injunctions of different nature and in different terms as

quoted in the earlier part of this judgment. Again, there

is no prayer for incorporating the terms and conditions of

the agreement dated 26.7.1991 in the decree. So it is not

something which can be said to have been left out

accidentally earlier. Paragraph 3 of the application for

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modification quoted earlier, indicates a different reason

for not passing decree relating to other matters. It is not

shown to be on the ground of clerical error or accidental

slip on the part of the Court. We have also perused the

order dated 11.11.1992 passed by the family court allowing

the application for modification. It is a lengthy order

running into 11 pages at places discussing the merits of the

matter as well. Paragraph 5 of the order reads as follows:

It was stated by the appellant that though original

petition contain the agreement which was part and parcel of

the original petition, in which the terms of the modalities

were agreed upon by the parties regarding the disposal of

the matrimonial flat. Inadvertently those terms were not

included in decree and therefore the appellant also prays

that a decree be suitably amended.

According to the observations of the Court as quoted

above the case of the respondent-husband was that it was due

to inadvertence that the terms of the contract were not

included in the decree but we find that this was not the

case of the respondent- husband in Paragraph 3 of his

application for modification of the order. according to

which the parties being lay persons without assistance of

lawyers had failed to ask for the relief as per the

agreement in their prayer clause. Consequently order was

silent on those reliefs. No averment of inadvertence by

reason of which court may not have included those terms in

the decree has been indicated in the application for

modification of the decree. It is only an effort to improve

upon the case as taken up by the respondent in his

application. Again we find that in Para 16 of the order the

learned judge of the family court after referring to certain

decisions cited by the parties holding some of them to be

applicable and others not, held as follows: I have already

pointed out in the earlier paragraph of my judgment that

both the parties intended to get divorce and agreement to

that effect was entered into between the parties which form

part of the pleading and both parties initially accepted

that it should also form part of the decree (underlined by

us to emphasize)

It is to be noticed that no such prayer was ever made

by the parties that the agreement should form part of the

decree. Paragraph 8 of the petition for dissolution of the

marriage only averred that the agreement be treated as part

and parcel of the petition while passing the order

accordingly. We have already adverted to this aspect of the

matter in the earlier part of this judgment. The learned

judge therefore arrived at the conclusion that it appeared

that the predecessor in office has inadvertently forgotten

to incorporate the terms and conditions of the agreement in

the decree which was an accidental omission. It is against

the case as taken up by the respondent in his application

vide its Paragraph 3. The unfounded observation of

accidental omission on the part of the Court as made by the

Family Court seems to have been taken into account by the

learned Single Judge in the writ petition and the learned

Division Bench deciding the matter in appeal. There is

nothing on the record to indicate that the learned judge of

the family court intended to incorporate the terms and

conditions of the agreement in the decree. It would have

been a different case if it was shown that the Court

intended to incorporate those terms but accidentally it

slipped or the court forgot to do so. But there is no

material on the basis of which intention of the family court

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can be inferred for incorporating the terms and conditions

of the agreement in the decree for divorce on the basis of

which it can be said that whatever was intended by the court

could not be reflected in the decree. There is not even a

whisper about the Memo of Agreement dated 26.7.91 in the

narration made in the decree dated 7.3.92. The respondents

prayer for grant of mandatory injunction, as quoted in the

earlier part of this judgment, by way of modification of the

decree dated 7.3.1992, has been rightly not granted. The

application was thus liable to be rejected instead of

incorporating the terms and conditions of the agreement in

the decree in respect of which no prayer was made in the

application for modification of decree. We may also make a

brief mention of one aspect of the matter without meaning to

enter into the merits of that question i.e. in regard to

the transfer of the flat, which seems to be the bone of

contention, on payment of Rs.1,70,000/- by the

husband-respondent to the wife. Much has been said about it

in the application for modification and in reply thereof.

The payment was to be made within four months of entering

into the agreement, that is to say, by 26th November, 1991.

On such payment being made the wife was to transfer the

property in favour of the husband. The decree has been

passed on 7.3.1992. Undisputedly the amount has not been

paid to the wife. The payment was ever offered or in time,

if at all, is a disputed question between the parties which

need not be gone into in these proceedings. But it may

possibly have some bearing on the question by reason of

which the Family Court did not incorporate the terms of the

agreement in the decree or for that reason namely payment

having not been made the parties may have preferred to keep

silent about it before the Family Court on 7.3.1992 while

the Court was passing the decree. The main part of the

agreement related to divorce by mutual consent as it had

become impossible for the couple to live together. This

fact alone finds mention in the decree passed by the family

court dated 7.3.1992. All that we mean to indicate is that

there may be other possible reasons for the family court for

not incorporating the terms and conditions of the agreement

in the decree, or the reason as indicated by the

husband-respondent in Paragraph 3 of his application for

modification of the decree itself. In the above background

and looking to the prayers made by the respondent-husband

for granting mandatory injunction in our view the

application for rectification of decree was totally

misconceived and was only liable to be dismissed rather to

incorporate terms and conditions of the agreement dated

26.7.1991 in respect of which no prayer was made in the

application for modification nor in the original petition

for dissolution of marriage more particularly when no

accidental slip on the part of the Court was indicated in

the application nor the same being substantiated. In view

of the discussion held above we allow this appeal and set

aside the orders passed by the High Court and family court

dated 11.11.1992 allowing the application for

rectification/modification of the decree dated 7.3.1992. In

the facts and circumstances of the case there would however

be no order as to costs.

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4152 OF 1991

Municipal Council, Kota, Rajasthan Appellant(s)

Versus

The Delhi Cloth & General Mills Co. Ltd.,

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Delhi, etc. etc. Respondents

WITH

(Civil Appeal Nos.4153/1991, 2994/1984 & 2842/1989)

J U D G M E N T

RAJU, J.

These appeals involve for consideration an interesting question

as to the nature and character of the levy of Dharmada, as it is called

in the form of an octroi by the Municipal Council, Kota in Rajasthan

State, which, according to respondents, is not really an octroi, but the

levy and demand of dharmada tax as such on the goods imported by

the respective respondent-companies into the municipal limits of Kota.

It is necessary to trace the origin of this levy in this part of the State of

Rajasthan.

From the records and materials placed before us, it transpires

that in 1860 A.D. the late Ruler of Kota, claimed to be the Sovereign

Authority to make even laws, imposed, though on the basis of also a

volition expressed by the traders in the locality to pay one such, the

levy of dharmada on the traders of `Nandgaon (the ancient name of

Kota city), as a compulsory levy by the authority of the said law made

by the Ruler. The Schedule of rates of dharmada, so imposed, was

said to have continued till 1894 when it came to be sanctioned also by

the Resolution dated 6.11.1894 of the Municipality Committee. This

seems to have in succession followed by another Schedule of octroi

dated 22.11.1922 issued by the Superintendent of Custom and Chief

Excise Officer, Kota State, revised subsequently in 1923. It is also

disclosed that prior to 1929 cases of evasion of Chungi/Dharmada

were entertained and decided in the Court of Magistrate, Kota State,

under Section 106 of the Customs Act, then in force and evasion of

octroi and dharmada were said to have been made even as a penal

act punishable under the said Act. In the year 1929, the Kota State

Chungi Act was said to have been passed empowering the levy and

collection of dharmada by the Municipal Board, Kota. In 1959, the

Rajasthan Municipalities Act saved the operation of the Chungi Act,

1929.

The Rajasthan Municipalities Act, 1959 (hereinafter called the

Act) enacted a scheme of taxation for imposition of various

categories of taxes by the local authorities classified as obligatory

taxes in Section 104 and other taxes that may be imposed in Section

105, besides making provisions for levy of property tax, etc. Section

104, as it stood at the relevant point of time, obligated every Municipal

Board by a mandate of law to levy at such rate and from such date

as the State Government may in each case direct by Notification in the

Official Gazette and in such manner as is laid down in this Act and as

may be provided in the rules made by the State Government in this

behalf, the following taxes, namely

(1); (2) An octroi on goods and

animals brought within the limits of the Municipality for consumption,

use or sale therein.

Coming to the Notifications issued stipulating the rates, it may

be stated at this stage that after the coming into force of the

Constitution of India, several Notifications came to be issued from

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time to time such as, i.e., Notification No.F.2(150)LSG/50 dated

21.8.1950; Notification published in the Official Gazette dated

17.12.1951; Notification No.F.150LSG/60 dated 1.2.1962 successively

one after the other, in supersession of the earlier one.

It is seen that subsequently the Government has issued another

Notification dated 13.5.1968 under Section 104(2) of the Act

authorising the Municipal Council, Kota, to levy octroi under three sub-

heads for different and specific purpose and objects, namely, (1)

Octroi proper; (2) Dharmada; and (3) Nirkhi, as follows:-

Rajasthan Gazette

Extraordinary

Jaipur, May 13, 1968

Notification Tax F.144(2) D.L.B. 161 :-

In supersession of current rates of octroi of

Kota Municipal Board, the State Government in

exercise of power conferred by Section 104(2) of the

Rajasthan Municipalities Act, 1959 (Rajasthan Act

No.38/1959) hereby directs that the octroi will be levied

on goods and animals brought within the limits of Kota

Municipality for use, consumption or sale at the rates

specified in the following Schedule from the date of

publication of the Schedule:

Schedule

Name of Goods Specified rate Per quantity

Serial Nos. 1 to 101

DHARMADA

1. Grains all types 0.02 nP per Qntl.

Upto Serial No.18

ANIMALS AND BIRDS, ETC.

Serial Nos.19 to 31

INFLAMABLE & CLEANING MATERIALS FOR USE AS

FUEL, ETC.

Serial Nos.32 to 40

BUILDING & CONSTRUCTION MATERIALS

Serial Nos.41 to 49

MEDICINES, CHEMICALS, PERFUMES, COSMETIC

MATERIALS,ETC.

Serial No.50

SHAHARNAMA NIRKHI, MUNICIPAL COUNCIL, KOTA

Grains all types 1.00 per two

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quintals.

Tukham Roghan 0.01

XX XX XX

By the order the Governor

Sd/- P.N. Seth

Deputy Secretary(Admn.)

We shall now advert to the history of the present litigation and

the stage at which it has been brought to this Court in the above

appeals with particular reference to the facts in C.A. No.4152/91. The

respondent-company in C.A. No.4152/91 filed Civil Suit No.51/79 in

the Court of the Additional Munsif and Judicial Magistrate, First Class

No.2, Kota (South), seeking for a prohibitory relief against the

appellant that it should not raise any demand of dharmada tax on any

of the goods imported by the company or take up any other

proceedings for the recovery of the same and the appellant should

neither impose nor realise any Dharmada tax on the raw materials

enumerated in the plaint, when brought by the company within the

Municipal limits of Kota and for a consequential permanent injunction

to that effect. The sum and substance of the claim of the respondent-

company was that Section 104(2) enabled the State Government to

authorise and as a consequence thereof, empower the appellant to

levy the octroi tax, the kind of which envisaged in Entry 52 of List II of

the Seventh Schedule to the Constitution of India and that the

Notification dated 13.5.1968 insofar as it empowered the appellant to

levy and collect Dharmada is illegal, unauthorised, unacceptable,

unreasonable and, therefore, null and void. In justification of the said

plea, it was urged that there is no provision in any of the Entries

contained in List II of the Seventh Schedule to the Constitution for

imposing dharmada tax and in the absence of any specific law made

by the State Legislature, there can be no legal basis for the levy of

dharmada tax by the municipality. Though, as noticed earlier, in the

judgment of the Division Bench, the English translation of the

Notification issued in 1962 has been extracted, reference is also made

in the plaint to the Notification dated 13.5.1968 with a brief mention of

the contents thereof by stating that under the said Notification the

appellant has been authorised to levy octroi tax on goods brought

within the Municipal limits for sale, consumption and use at the rates

specified in the Schedule to the notification from the date of its

publication in the Official Gazette and that so far as `dharmada is

concerned, below the caption of the word `dharmada various articles

have been enumerated and found divided into 14 categories and in

every such category not only the names of the articles but the rate of

dharmada on each category of those goods are also specified therein.

It is also one of the objections of the respondent - plaintiff that on the

same goods on which octroi tax is payable, dharmada tax cannot be

imposed at all with two different names. The stand taken by the

appellant before the Civil Court was that dharmada is not separate

from the octroi levy but on the other hand is part and parcel of the

same levy for a specific purpose and recovered along with the octroi

and, therefore, was well within the power and competency of the

appellant to levy by virtue of the statutory Notification issued under

Section 104(2) of the Act. Reliance was also placed on Article 277 of

the Constitution of India in addition to relying upon the Kota State

Chungi Act, 1929 and Section 2 of the Rajasthan Municipalities Act

for the continued authority to levy the same.

The learned Trial Judge by his judgment and decree dated

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26.11.1979 held that dharmada levy is also octroi and justified under

Section 104(2) of the Act. Aggrieved, the respondent-companies

pursued the matter in appeal in Civil Regular Appeal No.District

Judge/12/80 and the learned Additional Civil Judge, Kota, by his

judgment dated 8.9.81 concurred with the conclusion of the learned

Trial Judge and dismissed the appeal. Thereupon, the matter has

been pursued before the High Court. The learned Single Judge,

placing reliance upon the earlier decision of a Division Bench in D.B.

Special Appeal No.154/73, which is the subject-matter of Civil Appeal

No.2994 of 1984 before us, allowed the claim of the respondent-

company. It may be pointed out at this stage that the Division Bench

sustained the challenge to the levy at the instance of the respondent-

companies by holding that Section 104(2) of the Act only dealt with the

obligatory taxes like octroi and cannot be held to include `dharmada

tax and, therefore, the State Government could not have authorised

the appellant-Municipality to collect dharmada on the entry of goods

within the municipal limits of Kota. Though the Division Bench while

sustaining the claim of the company therein not only issued a

perpetual injunction restraining the appellant from levying and

collecting any dharmada tax on the goods brought by the company

within the limits of the Municipal Council, but also granted a decree,

though not specifically prayed and sought for as required in law,

directing refund of collections made, the learned Single Judge in the

case dealt with by him though upheld the claim for prohibitory relief,

yet applied the doctrine of undue enrichment and on the view that the

respondent-companies have already realised the dharmada tax paid

by passing over the same to the customer, the company also ought

not to be allowed to retain the same and consequently instead of

ordering refund to the company directed refund of the amounts

collected (within six months) to the State of Rajasthan with a further

direction as to the manner in which such amount has to be utilised by

the State. It is in such circumstances these appeals have been filed

before this Court by the Municipal Council, Kota.

Mr. Altaf Ahmad, learned Additional Solicitor General appearing

for the appellant, strenuously contended that whatever be the

nomenclature in substance, the levy and collection under the heading

of dharmada being a levy on the entry of goods brought within the

limits of the Muncipality for consumption, use and sale therein, it is

essentially an octroi covered by Entry 52 of List-II of the Seventh

Schedule to the Constitution of India and the mere fact that for

historical reasons and administrative purposes, different names and/or

labels were given to the levy would not change the nature and

character of the tax to render it any the less an octroi or different in

content and character than the one which it really is octroi. Placing

reliance on the historical origin of the levy, it is also contended that the

collections from the dharmada are being specifically earmarked for

carrying out the charitable objects and obligations such as for feeding

and clothing of the poor and the needy; for giving financial aid to

educational institutions for maintaining Gaushalas and providing

fodder to animals and rearing destitute cows; for taking care of stray

dogs; for performing the last rites of unclaimed dead-bodies; for

running Aushdhalyas, Dharamshalas, water huts; for distribution of

books to poor boys and clothes and blankets to poor people; for giving

subsidies to School, arranging sports, providing aid; for extension of

hospitals and supplying medical instruments for the same and even so

many such charitable schemes and objects. It is claimed that the levy

thus came to be made as dharmada, though it was well not only open

but within the competency and jurisdiction of the State Legislature as

well as the Government to authorise the Municipality to levy and

collect for all those purposes under the specific category of octroi

itself. The levy otherwise made under various headings such as octroi

proper, dharmada and Nirkhi are stated to be only to continue the long

established practice of maintaining the distinction based upon the

different purposes for which the octroi was being levied under different

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categories or names. Argued the learned counsel further that in the

absence of any specific prohibition or restriction in any law governing

the particular levy, the State is entitled to a larger area of discretion

and latitude in fashioning its own scheme, pattern, method or class of

fiscal measures designed in the best possible manner that suits its

financial and budgetary exigencies and necessities. As long as, in pith

and substance, the levy satisfies the character of octroi, it is asserted,

that how and in what form and manner and for what purposes the

octroi or portions of the octroi are collected or utilised should be left to

the discretion of the State. It is also contended that as a matter of

principle, there is nothing illegal or unlawful and unconstitutional even

to levy more than one tax or rates of tax on the same taxable event as

long as all such levies or rates put together is not shown or

substantiated to be either expropriatory or irrational.

Dr. A.M. Singhvi, learned senior counsel for the appellant in

C.A.No. 4152/91, apart from adopting the submissions of the other

senior counsel, noticed supra, further contended that as long as the

levy satisfied the ingredients of the tax authorised to be imposed, it is

irrelevant as to by what name the same is called or identified and that

the dharmada levy in question having had its origin in pre-constitution

laws at any rate is also saved and protected by virtue of Article 277 of

the Constitution of India as well as Section 2 of both the the 1951 and

1959 Act. Reliance has also been placed on Section 105 (i), (ii), (iii)

and (iv) to justify the levy in question. Both the learned counsel

appearing for the appellants also relied upon the doctrine of

prospective over-ruling by contending that the High Court ought not to

have interfered with the levy and collections made for the period prior

to the declaration of law by the Court and, at any rate should not have

ordered for the refund of the tax already collected and spent on

various charitable objects by the Municipal Council, either to the

respondent-companies or to the Government, particularly when in the

normal course of events the respondent-companies would have

necessarily passed on the same to the consumers with the cost price

of the products manufactured and sold by them.

Shri Shanti Bhushan, learned senior counsel appearing for the

respondent-company, whose submissions have been adopted by the

other learned counsel, with equal vehemence and force, contended

that the levy of tax by the name of dharmada is unknown to law and

there is no authority to provide for imposition of such a tax under the

Constitution either by the State Legislature or the Government and

consequently even by Local Authority and, therefore, the same has

rightly been set aside by the High Court. It was also contended that

Section 104(2) of the Act empowers the Government only to prescribe

the rate and date for the levy of octroi in the manner provided in the

Act and the Rules and, therefore, the very language of the Section

precludes any argument that dharmada could be included in the octroi

in any manner. Dharmada, it is contended, is a well-known concept

and when the same Notification issued by the Government advisedly

stipulates levy of octroi and dharmada separately, both cannot be

claimed to be the same but instead considered as separate levies

altogether. It is also further contended that municipal fund created has

to be applied in respect of various purposes enumerated in Sections

98, 99, 101 and 102 and the sum collected could not be sent on

Gaushalas, an item totally not permitted under law. Anything in

excess of the rates fixed as octroi cannot be said to be octroi at all,

according to the respondents, and therefore, dharmada sought to be

levied over and above, by a separate name cannot also be called

octroi. So far as the relief of refund granted is concerned, it has been

contended for the respondents that there is no material on record to

show that they have passed on the tax to the consumers and that a

levy, which has been held to be unauthorised and illegal, if found to

have been also collected by a public authority, has to be refunded to

the person who paid it under the coercion of law. Reference has also

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been made to the interim orders passed by this Court during the

pendency of the appeals, granting leave to the appellant to recover

from the companies, half of the dharmada tax due with effect from the

date of the High Court Judgment with a further condition that in the

event of the appeal being dismissed the amount recovered should be

refunded to the company with interest at 12% per annum.

Consequently, it is contended that the appellants must be made to

refund the tax collected in terms of the orders of this Court once their

claims in the appeal fail and no plea based either on the `doctrine of

undue enrichment or the principle of prospective over-ruling could be

permitted to be even raised. In traversing the claim of the appellant

based on Articles 277 and 376 of the Constitution of India, it has been

urged that those Articles will have no relevance or application to the

cases on hand. Reliance has been placed upon the decision reported

in The Commissioner of Income Tax, (Central) Delhi, New Delhi

Vs. Bijli Cotton Mills (P) Ltd., Hathras, District Aligarh [(1979) 1

SCC 496], to substantiate the stand based upon the nature and

character of Dharmada sought to be levied and collected.

We have carefully considered the submissions of the learned

counsel appearing on either side in the light of the case law placed

before us for our consideration. The main issue that looms large for

consideration in these appeals is as to the real character and nature of

the levy sought to be imposed and collected under the name of

Dharmada and if the answer is to be that it is in no way different from

octroi and it is one and the same it would become unnecessary for us

to advert to the other aspects of the submission made on either side.

The genetic history of levy of octroi has been judicially noticed

by this Court on many an occasion. In Burmah-Shell Oil Storage

and Distributing Co. of India Ltd., Belgaum Vs. Belgaum Borough

Municipality, Belgaum [AIR 1963 SC 906] a Constitution Bench of

this Court not only traced the emergence of this concept as a limb of

public finance but also succinctly noticed the successive stages of its

development before it got crystallised into a topic of legislative power

as enumerated in Entry 52 of List-II of the Seventh schedule to the

Constitution of India in the following manner:

14. The particular tax was octroi and there

was no description of the tax. The word octroi

comes from the word octroyer which means

to grant and in its original use meant an

import or a toll or a town duty on goods

brought into a town. At first octrois were

collected at ports but being highly productive,

towns began to collect them by creating octroi

limits. They came to be known as Town

duties. These were collected not only on

imports but also on exports see Beuhler:

Public Finance (3rd Edn.) p. 426. Grice in his

National and Local Finance p.303 says that

they were known as ingate tolls because they

were collected at toll gates or barriers.

Normally, they were levied on goods meant for

consumption but in Seligmans Encyclopaedia

of Social Sciences Volume IX page 570,

octrois are described without any reference to

consumption or use. This is how the editors

describe octrois:-

As compared with the facilities of

the National Government the

possibilities of raising revenue by

local bodies are quite limited. All

forms of indirect taxation are

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practically closed to local

authorities. They are unable to

levy customs duties, although they

may collect the so-called octrois;

that is, duties levied on goods

entering town.

15. It will be noticed that in the Government of

India Act octroi was named but not described

and now the Constitution avoids the word

octroi, as did the Government of India Act

1935 before, and gives a description. In the

Boroughs Act the definition of octroi includes

Terminal Tax. Terminal tax, as the Indian

Statutory Commission points out, formerly

meant in Indian fiscal terminology a tax which

was levied at Railway Stations and collected

by the Railway Administration on all goods

imported or exported from the Station. It was

also collected from passengers in some

municipalities. We also learn from the Report

that on the recommendation of a Committee

appointed in 1908 terminal tax took the place

of octroi in a large number of Municipalities at

first in the United Provinces and then in others.

At first the Government of India were not in

favour of such a change. Octrois were levied

on goods brought into a local area for

consumption, use or sale and were indirect

taxes but terminal taxes were regarded as

direct. On July 6, 1917, the Government of

India by a Resolution reversed their former

policy and agreed that the conversion was not

a change from indirect to direct taxation.

Terminal taxes were of the nature of octrois,

but were not quite the same. The main

differences were, that there was no system of

refunds under the Terminal Tax Rules

(Terminal taxes as Findlay Shirras tells us

were sometimes known as octrois without

refunds) and for octroi to be levied the goods

must be brought in for sale, use or

consumption.

16. After the Scheduled-tax Rules the

collection of terminal tax was restricted to

those areas in which octroi was levied on or

before July 6, 1917. Most of the municipal

laws allowed collection of terminal taxes only if

octrois were not levied. As the Taxation

Enquiry Commission observes: (Vol. III Ch. IV

page 401).

the most important

difference lies in the requirement

peculiar to octroi that, for this tax to

become leviable, the goods must

not only enter the area, but must

be for the purpose of

consumption, use or sale therein.

Usually, this requirement is sought

to be satisfied by (a) the ab initio

exemption of the goods which

merely pass through the area,

whether the exit is immediate or

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after an interval, or (b) by the

subsequent refund of the tax

collected on such goods.

Exemptions and refunds, therefore,

are the distinguishing features of

the octroi system.

17. Octrois and terminal taxes were different

taxes though they resembled in one respect,

namely, that they were leviable in respect of

goods brought into a local area. While

terminal taxes were leviable on goods

imported or exported from the Municipal limits

denoting thereby that they were connected

with the traffic of goods, octrois, according to

the legislative practice then obtaining were,

leviable in respect of goods brought into a

Municipal area for consumption or use or sale.

It is not necessary to cite the Municipal Acts

prior to 1935 but a reference to them will amply

prove that such was the tax which was

contemplated as octroi.

18. When the Government of India Act 1935

was enacted terminal taxes became a central

subject, vide entry No. 58 of List 1, which

reads as follows:-

58. Terminal taxes on goods or

passengers carried by railway or

air.

At that time, it was suggested by Sir

Walter Leyton that both octrois and terminal

taxes should be provincial subjects and that it

would perhaps be possible to fuse the two.

The Joint Committee, however, recommended

otherwise and terminal taxes were separated

from octrois and included in the central list.

The proceeds of the terminal taxes, however,

were to be distributed among the provinces. In

allocating octrois to the Provinces, the word

itself was avoided because terminal taxes are

also octroi in a sense and instead a description

of the tax was mentioned in entry No.49, which

has been quoted already, and which read

Cesses on the entry of goods into a local area

for consumption, use or sale. This scheme

has been repeated in the Constitution with the

difference that the entry relative to terminal tax

now reads terminal taxes on goods and

passengers carried by railway, sea or air, and

the word taxes replaced the word cesses in

the entry relative to octrois.

19. The history of these two taxes clearly

shows that while terminal taxes were a kind of

octroi which were concerned only with the

entry of goods in a local area irrespective of

whether they would be used there or not;

octrois were taxes on goods brought into the

area for consumption, use or sale. They were

leviable in respect of goods put to some use or

other in the area but only if they were meant

for such user. When the Government of India

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Act, in its Scheduled Tax Rules, mentioned

octrois, it intended to give the power to levy

taxes in this well-understood sense, namely,

on the entry of goods in a local area for

consumption, use or sale.

There is no challenge in these cases to the levy of octroi as such

but what is questioned is that which is purported to be levied and

collected as Dharmada only which though the appellant Municipal

Council would contend is only a levy of octroi for Dharmada purposes

or to meet the obligations cast upon the council to carry out the

various public charitable objects enumerated under Sections 98, 99,

101 and 102 of the Act, is challenged by the respondent-companies to

be a different and separate tax, unwarranted, unauthorised and

uncalled for under the provisions of the Constitution, the Act and

notification issued under Section 104 (2) of the Act and therefore,

illegal. Though, strong reliance has been placed upon the decision

reported in (1979) 1 SCC 496 (supra) to contend that a payment of

Dharmada is always understood as a gift or voluntary payment by

commercial or trading custom for charitable purposes, in our view the

said judgment though may be of help to understand the nature of

Dharmada collected by traders from customers as a customarily

established trade practice in certain areas or fields can be of no

assistance whatsoever for determining the legality, propriety and

validity of the notification issued under Section 104 (2) of the Act or

the levy and recovery of octroi sought to be made under the heading

of Dharmada. Yet another important fact to be noticed and firmly

recorded is that there is no challenge by the respondent-companies to

the levy on the ground that the levy and collection of Dharmada and

Nirkhi under the Notification taken together with octroi or separately as

octroi renders the levy either expropriatory or irrational, since such

issues pertaining to the constitutional validity of a levy cannot be

raised before ordinary civil courts and that too in a collateral manner,

in a bare suit for injunction.

Entry 52 of List-II of the Seventh schedule to the Constitution of

India enables the State Legislatures to enact a law providing for the

levy and collection of taxes on the entry of goods into a local area for

consumption, use or sale therein otherwise known as octroi and/or

authorise the local authorities concerned to levy and collect the same.

Section 104 (2) of the Act enables every Municipal Board to levy at

such rate and from such date as the State Government direct by

notification in the official gazette and in such manner as provided in

the Act and the rules to be made by the Government an octroi on

goods and animals brought within the limits of the Municipality for

consumption, use or sale therein. The levy of tax envisaged under

Section 104 as a whole, has been classified as `obligatory tax with a

duty to levy, once notified by the Government, unless specifically got

exempted from doing so from the Government by means of a

notification, therefor under the proviso, thereto.

The Notification under challenge issued in the undoubted and

indisputed exercise of powers under Section 104 (2) of the Act provide

a schedule enumerating the class or category of goods and the rate of

tax obligated to be levied by the Municipal Board. In the said schedule

apart from specifying the levy to be made as octroi provision has

been made to levy also Shaharnama Dharmada and Nirkhi

Shaharnama with a specific enumeration and description of the class

or category of goods, as and when such goods are brought into the

Municipal limits for consumption, use or sale therein and the rates as

well. The scheme underlying the notification issued in exercise of the

powers under Section 104 (2) of the Act seem to be to provide for an

additional levy and collection of octroi on certain class or category of

goods, under the nomenclature of Dharmada or Nirkhi, indicative

more of the specific purpose or object of the demand so made but

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again only on goods brought within the limits of the Kota Municipality

for consumption, use or sale demonstrating thereby that the collection

under the name of Dharmada as well as Nirkhi is also by way of an

octroi, the levy being on the very and only incidence of the entry of the

goods and animals within the municipal limits for consumption, use or

sale therein. If that be the correct position could it be legitimately

questioned or challenged on the mere ground or for the only reason of

there being a multiple rates of levy or double taxation.

Whenever a challenge is made to the levy of tax, its validity may

have to be mainly determined with reference to the legislative

competence or power to levy the same and in adjudging this issue the

nature and character of the tax has to be inevitably determined at the

threshold. It is equally axiomatic that once the legislature concerned

has been held to possess the power to levy the tax, the motive with

which the tax is imposed become immaterial and irrelevant and the

fact that a wrong reason for exercising the power has been given also

would not in any manner derogate from the validity of the tax. In M/s

Jullundur Rubber Goods Manufacturers Association vs The

Union of India and another (AIR 1970 SC 1589) this Court while

dealing with a challenge to the levy of rubber cess under Section 12

(2) of the Rubber Act, 1947 as amended in 1960 observed that the tax

in the nature of excise duty does not cease to be one such merely

because the stage of levy and collection has been as a matter of

legislative policy shifted by actually providing for its levy and collection

from the users of rubber, so long as the character of the duty as

excise duty is not lost and the incidence of tax remained to be on the

production or manufacture of goods. Likewise, once the legislature is

found to possess the required legislative competence to enact the law

imposing the tax, the limits of that competence cannot be judged

further by the form or manner in which that power is exercised. In

(Morris) Leventhal and others vs David Jones, Ltd. (AIR 1930 PC

129), the question arose as to the power of the legislature to impose

Bridge Tax, when the power to legislate was really in respect of tax

on land. It was held therein as follows:

The appellants contention that though directly

imposed by the legislature, the bridge tax is

not a land tax, was supported by argument

founded in particular on two manifest facts.

The bridge tax does not extend to land

generally throughout New South Wales, but to

a limited area comprising the City of Sydney

and certain specified shires, and the purpose

of the tax is not that of providing the public

revenue for the common purposes of the State

but of providing funds for a particular scheme

of betterment. No authority was vouched for

the proposition that an impost laid by statute

upon property within a defined area, or upon

specified classes of property, or upon specified

classes of persons, is not within the true

significance of the term a tax. Nor so far as

appears has it ever been successfully

contended that revenue raised by statutory

imposts for specific purposes is not taxation.

[Emphasis supplied]

A Division Bench of the Allahabad High Court, in a decision

reported in Raza Buland Sugar Co. Ltd., Rampur vs Municipal

Board, Rampur (AIR 1962 Allahabad 83) had an occasion to consider

the nature and character of an impost levied by the name, water tax,

when the power was to levy tax on buildings. The Division Bench,

while applying the ratio in AIR 1930 PC 129 (supra) held as

hereunder:

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5. Tax means burden of charges imposed by

the legislative power of a State on person or

property to raise money for public purposes.

The expression fee connotes recompense for

services rendered. There is an element of

quid pro quo in the case of fee. It is not so in

the case of a tax. The learned counsel for the

petitioner pointed out that cl.(b) of Sec.129

provides that water tax is to be imposed solely

with the object of defraying the expenses

connected with construction, maintenance,

extension or improvement of municipal water

works and that all moneys derived therefrom

shall be expended on the aforesaid object. He

argued that the fact that the money raised from

water tax is to be spent only on the supply of

water, introduces an element of quid pro quo.

The argument does not appear to be tenable.

Sec.129 (B) mentions the object of the tax. As

the maintenance of regular supply of water and

extending the supplies is one of the most

beneficial public purposes, the section lays

down that the money realised from this impost

is to be spent on the construction,

maintenance and extension of water works so

that the purpose may not suffer on account of

paucity of funds. In (Morris) Leventhal vs

David Jones Ltd., AIR 1930 PC 129, their

Lordships of the Judicial Committee held that

there was no authority for the proposition that

revenue raised by statutory imposts for specific

purposes is not taxation.

XX XX XX

10. It is obvious that the subject-matter of

water tax is not water. Though it is called

water tax, it is not levied on its production. As

explained by their Lordships of the Judicial

Committee in Governor-General in Council vs

Province of Madras, AIR 1945 P. C. 98, it is

not the name of the tax but its real nature, its

pith and substance as it has sometimes been

said, which must determine into what category

it falls. [Emphasis supplied]

We affirm the statement of law thus made above to be correct

and in our view it is not the nomenclature used or chosen to christen

the levy that is really relevant or determinative of the real character or

the nature of the levy, for the purposing of adjudging a challenge to

the competency or the power and authority to legislate or impose a

levy. What really has to be seen is the pith and substance or the real

nature and character of the levy which has to be adjudged, with

reference to the charge viz., the taxable event and the incidence of the

levy. We are convinced on the indisputable facts on record that the

levy sought to be imposed and recovered as Dharmada being only on

the goods brought within the municipal limits of Kota for consumption,

use or sale therein the same in truth, reality and substance is only an

octroi for the purpose of carrying out the several public charitable

objects statutorily enjoined upon the Municipal Board and enumerated

in Sections 98 and 99 and those undertaken pursuant to the

stipulations contained in Sections 101 and 102 of the Act. The mere

fact that it is called by a different name (all the more so when the word

octroi itself is not found used in Entry 52 of List-II of the Seventh

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Schedule) for historical reason and administrative needs or exigencies

by the draftsmen of the notification does not in any manner either

undermine the nature and character of the levy or render it any the

less a levy envisaged under Entry 52 of List-II of the Seventh

Schedule. The various charitable objects and ameliorative schemes

and projects for which the taxes realised under the classified head of

Dharmada are claimed to be spent cannot as the provisions of the Act

stand enacted be said to be either unauthorised or without the

sanction of law. That, apart, the irregularity or illegality, if any involved

in spending the sum after collection cannot have any impact on or

adversely affect, the otherwise competency of the Authority concerned

to impose a levy, well within its legislative competence and further not

shown to be violative of any provisions of the Constitution of India.

Neither the High Court has gone into any such question of illegality in

the matter of spending the tax realised nor are there any materials on

record placed before us to substantiate any such claim by the

respondent-companies in this regard.

There is no warrant or justification in law for the High Court

proceeding on an assumption that permitting the levy even as octroi

twice over would suffer the vice of double taxation and therefore bad

in law, unmindful of the well settled position of law in this regard, also.

A Constitution Bench of this Court in the decision reported in M/s Jain

Bros. and others vs The Union of India and others (AIR 1970 SC

778) in unmistakable terms declared the position to be as hereunder:

It is not disputed that there can be double

taxation if the legislature has distinctly enacted

it. It is only when there are general words of

taxation and they have to be interpreted they

cannot be so interpreted as to tax the subject

twice over to the same tax (vide Channell, J.,

in Stevens v. The Durban-Roddepoort Gold

Mining Co. Ltd., (1909) 5 Tax Cas 402. The

Constitution does not contain any prohibition

against double taxation even if it be assumed

that such a taxation is involved in the case of a

firm and its partners after the amendment of

Section 23 (5) by the Act of 1956. Nor is there

any other enactment which interdicts such

taxation. It is true that Sec.3 is the general

charging section. Even if Section 23(5)

provides for the machinery for collection and

recovery of the tax, once the legislature has, in

clear terms, indicated that the income of the

firm can be taxed in accordance with the

Finance Act of 1956 as also the income in the

hands of the partners, the distinction between

a charging and a machinery section is of no

consequence. Both the sections have to be

read together and construed harmoniously. It

is significant that similar provisions have also

been enacted in the Act of 1961. Sections 182

and 183 correspond substantially to Section 23

(5) except that the old section did not have a

provision similar to sub-section (4) of Section

182. After 1956, therefore, so far as registered

firms are concerned the tax payable by the firm

itself has to be assessed and the share of

each partner in the income of the firm has to

be included in his total income and assessed

to tax accordingly. If any double taxation is

involved the legislature itself has, in express

words, sanctioned it. It is not open to any one

thereafter to involve the general principles that

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the subject cannot be taxed twice over.

In Avinder Singh etc., vs State of Punjab and another (AIR

1979 SC 321) this Court has once again held as follows:

A feeble plea that the tax is bad because of

the vice of double taxation and is

unreasonable because there are heavy prior

levies was also voiced. Some of these

contentions hardly merit consideration, but

have been mentioned out of courtesy to

counsel. The last one, for instance, deserves

the least attention. There is nothing in Art.265

of the Constitution from which one can spin out

the constitutional vice called double taxation.

(Bad economics may be good law and vice

versa). Dealing with a somewhat similar

argument, the Bombay High Court gave short

shrift to it in Western India Theatres, AIR 1954

Bom. 261. Some undeserving contentions die

hard, rather survive after death. The only

epitaph we may inscribe is: Rest in peace and

dont be re-born! If on the same subject-

matter the legislature chooses to levy tax twice

over there is no inherent invalidity in the fiscal

adventure save where other prohibitions exist.

In Sri Krishna Das vs Town Area Committee, Chirgaon [1990

(3) SCC 645] and Radhakishan Rathi vs Additional Collector, Durg

& Ors. [1995 (4) SCC 309] the same position is found reiterated.

Though taxation of the same thing under different names is

nonetheless double taxation in popular sense, the expertise

exposition of the topic seem to also lean in favour of the revenue, in

that the legislature has been considered to possess the power to levy

one or more tax or rates of tax on the same taxable event and since in

these areas large latitude and wide discretion has always been

allowed to the State to choose its own method or kind of tax or mode

and purpose of levy and recovery, unless there is any prohibition in the

Constitution or the very law enacted by the legislature itself prevents

such a thing happening no infirmity can be said to vitiate such a levy.

Wherever the taxes are imposed by different legislatures or authorities

or where one of the two alone is a tax or where it is for altogether

different purposes or when it is indirect rather than direct, there is no

scope even for making any grievance of double taxation, at all. In the

absence of any impediment specifically created in the Constitution of a

country or the legislative enactment itself, the desirability or need

otherwise to avoid such levies has been held to pertain to areas of

political wisdom of policy making and adjusting of public finances of

the State, and not for the Law Courts, though Courts would unless

there is clear and specific mandate of law in favour of such multiple

levies more than once, in construing general statutory provisions lean

in favour of an interpretation to avoid double taxation. So much are

the principles or statement of law governing a challenge to any levy on

the ground of Double Taxation.

Now coming to the facts and circumstances of the cases before

us, we find that the levy is specific, definite and positive in terms, with

a definitely disclosed object leaving no room for any doubt or any

exercise to clear such assumed doubts. We have carefully gone

through the original Notification in vernacular published in the Gazette

dated 13.5.1968, noticed supra, and we find that the rates of the levy

under challenge have been notified as part and parcel of one and the

same Schedule to the said Notification and not by any different or

more than one Schedule and that too by means of a simultaneous

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exercise of powers under Section 104(2) of the Act and not on

different occasion or time. Though it is seen that some of the

classified items or commodities enumerated in various Entries overlap

those found in the other Entries under different captions including

Dharmada, they are not mere mechanical repetitions in toto, viewed

either from their classification, enumeration or determination of the

rates as well as the measure or quantity with reference to which the

actual levy is to be made and collected. Therefore, the mere

stipulation of plurality of rates in respect of some or the other of the

commodities/goods under different classified groups for different

purpose by itself will not render it to be dubbed or castigated as

`Double Taxation for spearheading a challenge on them. The

Notification under consideration cannot, in our view, be said to involve

the imposition of any double tax and the High Court has gone wrong in

proceeding upon such an erroneous assumption and declaring

thereby the levy for Dharmada purposes to be bad and illegal.

For all the reasons stated above, the appeals are accepted and

allowed. The judgments of the High Court allowing the claims of the

respondent companies by granting injunction and refund are hereby

set aside. The suits filed by the respondent-companies shall stand

dismissed. But in the circumstances of the case, there will be no order

as to costs.

..J.

( V. N. Khare )

..J.

( Doraiswamy Raju )

New Delhi,

March 2, 2001.

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