State of Punjab & Ors Vs. Narajan Dass Doomra
Rice & Gen. Mills  INSC 849 (25 November 1997)
S.P. BHARUCHA, S.C. SEN
25TH DAY OF NOVEMBER, 1997 President:
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).
Dass, Sr.Adv. and B.P. Singh, Adv. with him for the appellant.
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:
APPEAL NOS. 1226-43 OF 1992, 7498 OF 1993 AND 4540 OF 1991 Bharucha, J.
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 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.
62A(1) and (3) of the said Act are relevant, and read thus:
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 (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".
62, sub-sections (1), (10) and (12) read thus:
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 (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
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 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
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.
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.
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.
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.
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:
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.
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 appellant. It is, in fact, consistent with the view
that has been taken by the High Court and which we re inclined to take.
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.
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.
appeals must, therefore, fail and re dismissed.
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.