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PETITIONER:

THE STATE OF PUNJAB & ORS.

Vs.

RESPONDENT:

NARAJAN DASS DOOMRA RICE & GEN. MILLS

DATE OF JUDGMENT: 25/11/1997

BENCH:

S.P. BHARUCHA, S.C. SEN

ACT:

HEADNOTE:

JUDGMENT:

THE 25TH DAY OF NOVEMBER, 1997

President:

Hon'ble Mr. Justice S.P. Bharucha

Hon'ble Mr. Justice S.C. Sen

M.R. Sharma, Sr.Adv., (Ms. Puja Anand) Adv. for G.K. Bansal,

Adv. with him for the appellant for the State of Punjab).

Jayant Dass, Sr.Adv. and B.P. Singh, Adv. with him for the

appellant.

M.S.Ganesh and Yogeshwar Prasad, Sr.Advs., Mrs. Urmila

Sirur, P.N.Puri, (M.K. Dua) Adv. (NP), Mrs. Sheela Goel,

Advs. with them for the Respondents.

J U D G E M N T

The following Judgment of the Court Court was

delivered:

WITH

CIVIL APPEAL NOS. 1226-43 OF 1992, 7498 OF 1993 AND 4540 OF

1991

Bharucha, J.

On 30th November/3rd December, 1990, when the State of

Punjab (the appellant) was under President's Rule, an order

was issued under the provisions of section 71(1) of the

Punjab Municipal Act, 1911, by the President of India

exempting kapas (raw cotton), narma and oil seeds from the

payment of octroi with immediate effect. On the same day,

in exercise of powers conferred by Section 62-A of the said

Act, the President was "pleased to direct all the Municipal

Committees in the state of Punjab to impose Urban

Development Cess on the sales/purchase of kapas (raw

cotton), Narma and oil seeds made within the respective

Municipal Areas at the rate of 0.24 per cent ad valorem with

immediate effect". Pursuant thereto, a Memo was issued on

5th December, 1990 by the appellant to Municipal

Corporations, Municipal Committees and Notified Area

Committees. It noted that the appellant had issued the

notification for imposition of the cess on sales and

purchases of kapas, narma and oil seeds to compensate for

the loss likely to be suffered on account of the abolition

of octroi. The Memo gave directions in regard to the manner

in which the cess was to be collected. It appears that,

without more, the cess was sought to be levied and

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recovered. Writ petitions were, therefore, filed in the

High Court of Punjab & Haryana challenging the levy and

collection. By the judgment and orders under appeal, the

writ petitions were allowed and the appellant was directed

to refund the cess that had been collected by it with

interest at the date of 12 per cent per annum. These

appeals by special leave arise out of the judgment and

orders. At the stage at which special leave was granted,

the judgment and orders under appeal were stayed subject to

the condition that, in the event of it being held that

the respondents were entitled to refund, the amounts

collected from them would be refunded with interest at the

rate of 12 per cent per annum.

Section 62A(1) and (3) of the said Act are relevant,

and read thus:

"62A. Power of Government in

taxation. (1) The State Government

may, by special or general order

notified in the official Gazette,

require a Committee to impose any

tax mentioned in section 61 not

already imposed at a such rate and

within such period as may be

specified in the notification and

the Committee shall thereupon act

accordingly.

xxx xxx xxx

(3) If the Committee fails to carry

out any order passed under sub-

section (1) or (2) the State

Government may by a suitable order

notified in the official Gazette

impose or modify the tax. The

order so passed shall operate as if

it were a resolution duly passed by

the Committee as if the proposal

was sanctioned in accordance with

the procedure contained in section

62".

Section 62, sub-sections (1), (10) and (12) read thus:

"62. Procedure to impose taxes. -

(1) A Committee may, at a special

meeting, pass a resolution to

propose the imposition of any tax

under section 61.

xxx xxx xxx

(10) (a) When a copy of order under

sub-section (6) and (7) has been

received, or

(b) When a proposal has been

sanctioned under sub-section (8)

the State Government shall notify

the imposition of the tax in

accordance with such order or

proposal, and shall in the

notification specify a date not

less than one month from the date

of notification, on which the tax

shall come into force.

xxx xxx xxx

(12) A notification of the

imposition of a tax under this Act

shall be conclusive evidence that

the tax has been imposed in

accordance with the provisions of

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the Act."

Learned counsel for the appellant submitted that the

cess had been imposed in lieu of octroi and that, by virtue

of Section 62(12), the notification of the imposition of the

cess was conclusive evidence that the cess had been imposed

in accordance with the provisions of the said Act.

The argument proceeds upon a misconception. In the

first place, the order dated 30th November/3rd December,

1990 does not impose the cess Its language is clear : it

directs the Municipal Committees to impose the cess. This

is in accord with the terms of Section 62A(1) under which

the order is issued. That there is no imposition of a tax

by reason of an order issued under the provisions of sub-

section (1) of Section 62A in clear from the provisions of

sub-section (3) thereof. Sub-section (3) states that if the

Municipal Committee has failed to carry out an order that

has been passed under sub-section (1), the State Government

may itself notify the imposition of the tax, such imposition

operates as if it were a resolution duly passed by a

Municipal Committee under the provisions of Section 62.

Section 62(12) comes into operation when a Municipal

Committee has imposed a tax after following the procedure

laid down in section 62. it is then that the notification

of the tax is conclusive evidence that it has been imposed.

Alteratively, if the Municipal Committee has failed to act

as required by an order under sub-section (1) of Section 62A

and the State Government has imposed the tax under sub-

section (3) thereof, the provisions of Section 62(12) would

then operate because an order passed by the State Government

under Section 62A(3) operates as if it were a resolution

duly passed by a Municipal Committee.

In the instant case, the order dated 30th November/3rd

December, 1990 was passed under section 62A(1). The

Municipal Committees failed to impose the cess in pursuance

thereof. The State Government, thereafter, did not impose

the cess under the provisions of Section 62A(3)). There

was, therefore, no imposition of the cess, and its recovery

was without the authority of law.

learned counsel for the appellant drew our attention to

the judgment of this Court in Atlas Cycle Industries Ltd. v.

State of Haryana & Anr., (1972) 1 SCR 127. The paragraph

that was relied upon reads thus:

"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"

(at page 133)

What is said does not advance the case of the

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appellant. It is, in fact, consistent with the view that

has been taken by the High Court and which we re inclined to

take.

Reliance is also placed by learned counsel for the

appellant on the decision of a Division Bench of the Punjab

& Haryana High Court in Shri Krishan Kumar Sanan and Others

v. The Punjab State and another, 74 P.L.R. (1972) page 149.

The High Court has referred this decision in the judgment

under appeal and has pointed out that it is inapposite

because it was given in relation to an order that had been

issued in exercise of the powers conferred by Section 62A(3)

of the said Act.

The appeals must, therefore, fail and re dismissed.

The appellant shall refund to the respondents the

amounts collected from them as and by way of the cess with

interests at the rate of 12 per cent per annum from the

dates of collection till the dates of payment

No order as to costs.