The Municipality of Anand Vs. State of
Bombay  INSC 363 (21 December 1961)
SINHA, BHUVNESHWAR P.(CJ) GUPTA, K.C. DAS
AYYANGAR, N. RAJAGOPALA MUDHOLKAR, J.R.
CITATION: 1962 AIR 988 1962 SCR Supl. (2) 355
CITATOR INFO :
R 1990 SC 548 (12)
Octroi, Tax-Imposition by Municipality-order
by Government prohibiting imposition-Validity of- Bombay District Municipal
Act, 1901 (Bom, of 1901), s. 59-Constitution of India, Art. 14.
After following the procedure prescribed by
the Bombay District Municipal Act, 1901, and after obtaining the requisite
sanction of the Government the appellant imposed an octroi tax on milk brought
within its limits for consumption, use or sale therein. Shortly afterwards the Government
passed an 367 order directing that the octroi tax shall not be leviable by the
appellant. The appellant contented that the Government had no power to control
the imposition of the tax once it had been properly imposed.
^ Held, that the Government was competent
under s. 59 of the Act to pass the order. Section 59 provided that subject to
any general or special orders which the State Government may make, a
Municipality may "impose" the tax after following the procedure laid
down and after obtaining the sanction of the Government. The word
"impose" in s. 59 meant the actual levy of the tax after authority to
levy it had been acquired by rules duly made and sanctioned and this imposition
was subject to the general or special orders of the Government. The general and
special orders under s. 59 could not be confined to orders under s. 73 which
gave the Government power to suspend the tax in certain cases.
Held, further, that the order of the
Government was not discriminatory. Subsequently the Government had prohibited
all municipalities from levying octroi tax on milk. For the same reason no
question of mala fides could arise.
Per Ayyangar, J.-Imposition of tax was a
continuing power deriving vitality from the power of the authority to impose
it. The power of the Government to issue special or general order under s. 59
was therefore not exhausted after "imposition" of the tax. There were
provisions in ss. 47, 73 and 74 for other contingencies but except for the
opening words of s. 59 there was no provision to enable Government to intervene
in cases where the continued levy was against public interest. The opening
words of s. 59 clothed the Government with power to direct a municipality to
desist from imposing a tax.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 211 of 1956.
Appeal from the judgment and order dated July
19, 1955, of the Bombay High Court in Special Civil application No. 976 of
A. V. Viswanatha Sastri, S. N. Andley,
Rameshwar Nath and P. L. Vohra, for the appellant.
M. C. Setalvad, Attorney-General for India,
C. K. Daphtary, Solicitor-General of India and B. Sen, for respondent No. 1.
Vithlbhai B. Patel and I. N. Shroff, for
respondent No. 2.
368 1961, December 21. The Judgment of Sinha
J., Sarkar, Das Gupta and Mudholkar JJ., was
delivered by Sarkar J. Ayyangar J., delivered a separate judgment.
SARKAR J.-The appellant is a City
Municipality within the meaning of the Bombay District Municipal Act, 1901 and
is governed by that Act. It had by a resolution duly passed by it, made a rule
under s. 60 of the Act selecting for the purpose of an octroi tax of -/4/-
annas per Bengali maund, milk brought within its octroi limits for consumption,
use or sale therein. On November 29, 1954, the Government of Bombay had given
its sanction to the rule under s. 61 of the Act. The appellant Municipality
thereafter published the rule and the sanction as required by s. 62 of the Act
and the tax was accordingly imposed with effect from January 1, 1955. On April
4, 1955, the Government of Bombay passed an order directing that the octroi tax
shall not be leviable by the appellant Municipality. This order has given rise
to the present proceedings.
The appellant Municipality filed a petition
in the High Court at Bombay under Art. 226 of the Constitution challenging the
validity of the order. This petition was dismissed by the High Court. The
appellant Municipality has now come up to this Court in appeal against the
decision of the High Court.
The questions that arise in this case will be
stated after a few of the sections of the Act have been referred to. Chapter
VII of the Act deals with municipal taxation. We shall be concerned principally
with ss. 59, 60, 61 and 62 which are all contained in this chapter and deal
with imposition of taxes by Municipalities. It will be necessary also to
consider s. 46.
Section 46 gives power to a Municipality to
make rules for various purposes as specified in 369 the several clauses
contained in it. Under cl. (i) of this section a Municipality has power to make
rules for the purpose of "prescribing, subject to the provisions of
Chapter VII, the taxes to be levied". Section 59 is the section on which
the decision of this case will really turn and we, therefore, think it right to
set out that portion of it which is relevant for our purpose.
S. 59. (1) Subject to any general or special
orders the State Government may make in this behalf, any Municipality- (a)
after observing the preliminary procedure required by section 60 and (b) with
the sanction of the State Government in the case of City Municipalities
........... and subject to such modifications or conditions as under section 61
the State Government................ in according such sanction, deems fit, may
impose, for the purposes of this Act, any of the following taxes, that is to
(iv) an octroi on animals or goods, or both,
brought within the octroi limits for consumption, use or sale therein;
Section 60 lays down the procedure to be
observed by a Municipality preliminary to imposing a tax.
It requires that first a resolution shall be
passed at a meeting to the Municipality selecting the tax and making rules for
the proposes of cl.
(i) of s. 46 prescribing the tax. Thereafter
the resolution has to be published with a notice in a specified form inviting
the inhabitants of the Municipal 370 area to submit within a month their
objections, if any, to the tax. After the objections have come in, they are to
be considered by a committee of the Municipality and unless on the report of
the committee the Municipality decides to abandon the tax, it has to submit the
objections with its opinion thereon, any modifications it desires to make and
the rules prescribing the tax to the State Government. Section 61 provides that
on receipt of the rules and the other things mentioned in s. 60 from the
Municipality, the Government may refuse to sanction the rules, or return them
to the Municipality for further consideration or sanctioned them with or
without modifications or subject to conditions prescribed.
Section 62 lays down that the rules as
sanctioned by the Government shall be published by the Municipality and the tax
shall, from the date which shall be specified in the notice publishing the
rules, be imposed accordingly. It is not in controversy that in the present
case the procedure prescribed in the sections mentioned above had been complied
The Government's contention is that the order
made by it was competent as it was order which was authorised by s. 59, subject
to which only a tax could be imposed by a Municipality. The appellant
Municipality does not dispute that it can impose a tax only under s. 59 but it
contents that the general or special orders mentioned in the section subject to
which it has the power to impose tax, are orders which were in existence before
the rule prescribing the tax was framed and once a rule has been framed by it
and the Government has accorded its sanction to that rule, the Government has
no power to control the imposition of tax under it by any order made under s.
59. The question so raised is one of the construction of s. 59. But for such
construction we have to refer also to the other sections earlier mentioned.
371 In our opinion, the Government's
contention is well founded. The Municipality's power to tax arises only under
s. 59. Under that section, it has been given the power of impose a tax after
following the procedure prescribed but subject always to the general or special
orders of the Government. The appellant Municipality can succeed in this appeal
only if the word "impose" in s. 59 means the acquisition of the power
to tax by following the procedure laid down in ss. 60 to 62.
Its appeal must otherwise fail. It seems to
us that the word "impose" in s. 59 has not the meaning for which the
appellant Municipality contends.
It would have been noticed that under s. 59 a
Municipality may impose a tax only after it has framed a rule under s. 60
prescribing the tax to be levied and the Government has given its sanction to
that rule under s. 61. It is this imposition which is made by s. 59
"subject to any general or special orders which the State Government may
make in this behalf". Therefore, it is the imposition after the making of
the rule authorising the tax, that is subject to the Government's orders and
not the making of the rule itself which authorises the tax itself. It is plain
from s. 59 that the control over a Municipality's power to tax imposed by the
requirement of the Government's sanction of the rule prescribing the tax in
contained in s. 61, is not the same thing as the control contemplated by the
general or special orders mentioned in s. 59, for both are mentioned in s. 59.
If it were not so, it would have been unnecessary to provide for the general or
special orders controlling the imposition of the tax in s. 59. This is the
first reason why we think that the appellant Municipality's contention is
The imposition contemplated by s. 59 is
clearly not the passing of the resolutions under 372 s. 60 selecting the tax
and making the rule prescribing the tax to be levied in terms of s.
46(i), for s. 59(1)(a) expressly makes the
imposition something happening after s. 60 has been complied with. This seems
to us to be another reason for not accepting the appellant Municipality's
The third reason is to be found in s. 62. As
we have earlier stated, it provides that the tax shall be imposed from the date
mentioned in the notice publishing the sanctioned rule. The choice of this date
lies with the Municipality and not with the Government. The power to levy the
tax is acquired by a Municipality when the rule prescribing the tax made by it
is sanctioned by the Government. The Municipality at its own choice thereafter
fixes a date from which it will collect the tax. Therefore, the word
"impose" in s. 62 does not refer to the acquisition of power to levy
a tax by making the rule but to the actual levy of the tax under the power so
acquired. It is of some significance to note that in s. 46(i) the words used
are "make......rules.... prescribing.....the taxes to be levied".
What we wish to point out is that in connection with the making of the rules
the Act uses the word "levied" in s. 46 (i) and in connection with an
actual impost, and word "imposed" in s. 62. We, therefore, think that
it would be legitimate to construe the word "impose" in s. 59 in the
sense in which it has clearly been used in a connected provision, that is, s.
Hence, in our view, "impose" in s.
59 means the actual levy of the tax after authority to levy it has been
acquired by rules duly made and sanctioned, and it is such imposition that is
made subject to the general or special orders of the Government. Therefore, the
Government can at any time by any such order prohibit the imposition of the tax.
373 Mr. Sastri for the appellant said that
the general or special orders in s. 59 refer to orders that can be made under
s. 73, but the present order had admittedly not been made under that section.
Section 73 does not empower an order prohibiting the imposition of a tax
altogether as the order in the present case does. It only gives power to
suspend the levy of the tax authorised till the objections to the tax which the
Government required to be removed, had been removed. Because s. 73 gives a
power to suspend the tax, it is, in our opinion, no argument that the general
or special orders in s. 59 must be understood as confined to such orders.
Section 73 cannot help in interpreting the words "general or special
orders" in s. 59.
A third objection to the validity of the
order was that it was discriminatory. It was said that no other Municipality
had been prohibited from collecting a similar tax which it had power under its
rules to collect. Apart from the very interesting question raised by the
learned Attorney General that the Municipality being a local authority, was a
state, and was not therefore entitled to the benefit of Art. 14, as to which we
think it unnecessary to express any opinion we are on the facts satisfied that
there is no discrimination. The Government has now, it is not disputed,
prohibited all Municipalities from levying any octroi tax on milk. Furthermore,
it has not been shown to us that all Municipalities stand on the same footing
with regard to milk.
The last objection was that the order had
been mala fide made. This grievance is completely without foundation. The
Government had earlier requested the appellant Municipality to drop the tax on
the ground, among others, that milk was really being purchased for the
Government and that the Government was not liable to be 374 taxed by a
Municipality. It may be that this ground was not justified on the facts, but as
to this we do not come to any finding. It is clear to us that even if this
stand taken by the Government was not tenable, that is no reason for thinking
that the order was made mala fide. It was said that the Government had made
this order to benefit respondent No. 2, a co-operative union, dealing in milk.
This is a bare allegation and is not supported by facts. In any event, since
similar orders have now been made in respect of all Municipalities within the
State, no question of mala fide can possibly arise.
We think that the challenge to the order
dated April 4, 1955 is without any foundation. In our view, the order was
perfectly legitimate and must be upheld.
We accordingly dismiss the appeal with costs.
AYYANGAR J.-I have had the advantage of
perusing the judgment just delivered and I agree with order passed.
The relevant facts and the statutory
provisions which bear on the points arising in the appeal have all been set out
by Sarkar J. and do not require to be repeated.
There is no dispute that the levy of the duty
by the municipality as and from January 1, 1955 was lawful because the
requirements of ss. 59-62 were satisfied when the levy was made. No general or
special order of the State Government stood in the way of the municipality
making the particular levy and the sanction of the State Government under s. 59
(1) (b) had been accorded to it, and the relevant rules had conformed to the
procedural and other requirements of these sections. The power of the
municipality in the matter of the levy of the tax is, however, not absolute but
it made subject, apart from other provisions to which I 375 shall advert, to
such general and special orders as the State Government might pass by virtue of
the opening words of s. 59 of the Act.
The argument strenuously pressed by Mr. Visvanatha
Sastri was this: The Government had no doubt, a power to prescribe and control
by general or special orders the right of a municipality to impose a tax. These
general or special orders would again, no doubt, be subject to modification
from time to time to suit the changing needs of particular areas, or of
particular interests which would be affected by the tax-levy, but the exercise
of the power of modification or this power too prescribe conditions and
restrictions is exhausted when a municipality does, by conforming to the orders
then in force, impose a levy which has come into force under s. 62.
I am unable to agree with this construction
of the opening words of s. 59 (1). On its language there is nothing to warrant
the doctrine that it gets exhausted by reason of a municipality imposing a tax
in conformity with an order as it stood at a particular date. The limitation
suggested must therefore, be deduced as a necessary implication either from the
fasciculus of sections ending with s. 62 leading to the imposition of a levy,
or from other provisions of the Act.
The other provision of the Act to which
learned Counsel referred was s. 73 which reads:
"If it shall at any time appear to the
Provincial Government, on complaint made or otherwise, that any tax, leviable
by a Municipality, is unfair in its incidence, or that the levy thereof, or of
any part thereof, is obnoxious to the interest of the general public, it may
require the said Municipality, within such period as it shall fix in this
behalf, to take measures for removing any objection which appears to it to
exist to the said tax, 376 and if, within the period so fixed, such requirement
shall not be carried into effect to the satisfaction of the Provincial
Government, it may, by notification in the official Gazette, suspend the levy
of such tax, or of such part thereof, until such time as the objection there to
shall be removed.
The Provincial Government may at any time, by
a like notification, rescind any such suspension." It is obvious that this
section is of limited operation and confined to the subject it actually deals
with. It posts the continued exaction of the impost, but points to the removal
of anomalies and hardships in the details of the levy or of its administration.
The existence of this provision would manifestly not suffice to negative the
right of the Government to forbid the continued imposition of the tax
altogether-such as has been done in the present case. Section 73 cannot
therefore be construed as negativing by implication the right claimed by the
state Government under s. 59, for it refers to and comprehends a totally
Coming now to the construction of ss. 59-62
as themselves supporting theory of the exhaustion of the power, the submission
was this. "The general or special orders" could only restrict the
power of a municipality "to impose a tax". On the scheme of
provisions contained in ss. 59-62 a tax was "imposed" only once,
though when imposed and in operation the levy and collection of such a tax
might be periodic and throughout the life of the imposition. Hence there was no
scope for the exercise of the State Government to make "any special
order" in relation to a tax after it has once been "imposed"
because the power to prescribe conditions or restrictions by general or special
order is with reference to the "imposition" of the tax. I feel unable
to accept this construction.
The whole foundation 377 of the argument is
based on a denial of the premise that a power to impose tax is a continuing
power. In my judgment the "imposition" of a tax is a continuing power
in the sense that so long as it is in force, it points to the existence of and
derives vitality from the power of the authority to impose it. When the
municipality levies the tax in the sense of quantifying it with reference to an
ascertained person and thereby creating a statutory debt payable by the tax
payer, it is in reality exercising the power to "impose" the tax, for
it is the continued existence of the imposition that furnishes the legal basis
for the levy when made. When the power to impose is withdrawn the imposition
falls to the ground. That is the ratio of saving provisions which enable taxes
to be levied and collected not withstanding the deprivation of the right to
impose taxes for the future. In this view it is clear that there is no
exhaustion of the State power under the opening words of s. 59 (1).
In arriving at this construction I have also
taken into consideration the scheme of the Act and the wide powers conferred on
the State Government in the matter of control and supervision over the
municipalities powers designed to ensure, that, subject of course to express
statutory provision, municipal administration is coordinated to secure the
vital interest of the general public.
In this connection reference may be made to
s. 74 of the Act which reads:
"Whenever it appears to the Provincial
Government that the balance of the municipal fund of any Municipality is
insufficient for meeting the expenditure incurred under section 175 or for the
performance of any duties in respect of which they shall have been declared
under section 178 to have committed default, the Provincial Government may be
notification require the Municipality to impose 378 within the Municipal
district, any such tax specified in the notification as may be imposed under
section 59 if no such tax is at the time imposed therein, or to enhance any
existing tax in such manner or to such extent as the Provincial Government
considers fit, and the Municipality shall forthwith proceed to impose or
enhance in accordance with the requisition such tax under the provisions of this
Chapter as if a resolution of the Municipality had been passed for the purpose
under section 60:
(a) the Provincial Government shall take into
consideration any objection which the Municipality or any inhabitant of the
Municipal district may make against the imposition or enhancement of such tax,
(b) it shall not be lawful for the Municipality to abandon or modify or to
abolish such tax when imposed, and (c) the Provision Government may at any time
cancel or modify any requisition made by it under this section, and the levy of
tax or the enhancement, except as to arrears theretofore accrued due. shall
thereupon cease or be modified accordingly." Government are thus empowered
both to direct the municipality to impose tax when Government consider the same
necessary in the interest of municipal finance and administration as also to
direct the municipality to desist from continuing the imposition when the
necessity ceases. In cases where a tax is imposed by the municipality by virtue
of the provisions in ss. 59-62, the municipality 379 itself could revoke the
tax if the rules so provide, for s. 47 of the Act enacts:
(1) Subject to the requirements of clause (a)
of the proviso to section 46 every Municipality may, except as otherwise
provided in clause (b) of the proviso to section 74, at any time for any
sufficient reason, suspend, reduce or abolish any existing tax by suspending,
altering or rescinding any rule describing such tax under the provisions of
clause (1) and of the first clause of the proviso to section 46.
(2) The provisions of Chapter VII relating to
the imposition of taxes shall, so far as may be, apply to the suspension,
reduction or abolition of any tax and to the suspension, alteration or
rescission of any rule prescribing a tax." But for the opening words of s.
59(1) there is no specific provision in the Act to enable Government to
intervene in cases where the continued levy of a tax is contrary to public
interest. I do not consider that any such gap was intended and in my judgment
the opening words in s. 59(1) are both apt and sufficient to clothe Government
with power to direct by 'special order' a municipality to desist from
'imposing' a tax when satisfied that public interest so requires.
The points raised regarding discrimination
and mala fides are without substance and for the reasons stated by Sarkar J. I
would reject them.
The appeal therefore fails and has to be
dismissed with costs. The Writ Petition which raises the same points as the
appeal will also stand dismissed but without any order as to costs.