Municipal Board Maunath Bhanjan Vs.
Swadeshi Cotton Mills Co. Ltd. & Ors  INSC 37 (28 January 1977)
CITATION: 1977 AIR 1055 1977 SCR (2) 865 1977
SCC (1) 875
U.P. Municipalities Act, 1916, Ss. 131(3),
134(1.) & (2), 135(2) and 300--Draft rules for levying octroi not changed
after publication u/s 131 (3)--Whether their Republication necessary on mere
reduction of tax rates--Re-publication only of reduced tax rates, whether
violates S. 300 and the General Clauses Act. S. 23--Resolution u/s 134(2),
whether rendered nugatory if passed before publication of rules--Notification
u/s 135(2), whether requires specific reference to section.
In 1968-69 the respondent was constructing a
textile factory within the area of the appellant Board, and obtained exemption
from the levy of octroi on its incoming building material on the ground that it
was a new concern. It then started bringing more articles within its premises
with the result that octroi was demanded from it. The Board got permission from
the State Government for realising the same.
In a writ petition by the respondent to
challenge the levy, the High Court struck down the imposition of octroi on
I. The provisions of Ss. 134(1) and 300 of
the Act and S. 23 of the General Clauses Act were violated owing to publication
only of the tax rates and not the draft rules for the levy of octroi.
II. The resolution of the Board u/s 134(2)
could not authorise the imposition of tax as it was passed before the
publication of the rules.
III. No notification was published as
required u/s 135 (2).
Allowing the appeal by special leave, the
HELD: 1. The draft rules were once published
as required by sub-s. (3) of s. 131, and as only the rates had been reduced and
the rules had not been modified, it was not necessary to re-publish them. [868
A-F] Municipal Board, Hapur v. Raghuvendra Kripal & Ors.
 1 SCR 950 and Raza Butand Sugar Co.
Ltd. v. Municipal Board, Ramput,  1 SCR 970, referred to.
2. The Resolution dated June 20, 1950, could
authorise the imposition of the tax from July 15, 1950, although it was passed
before the publication of the rules. The resolution was not rendered nugatory
and it was not necessary for the Board to pass another one. [868 G-H]
3. It is the nature of the notification which
is decisive of the section under which it has been issued and it would not
matter if it did not make a specific reference to sub-section (2) of section
135 and made a reference to Section 300 instead. [869 B]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 527 of 1976.
Appeal by Special Leave from the Judgment and
Order dated the 26-3-1976 of the Allahabad High Court in Civil Misc. Writ No.
6277 of 1974.
866 L.N. Sinha, Sol. General, S.C. Agarwala
and V.J. Francis for the Appellant.
Yogeshwar Prasad and (Miss) Rani Arora for
Respondent No. 1.
O.P. Rana for Respondent No. 2.
The Judgment of the Court was delivered by
SHINGHAL, J. This appeal by special leave is directed against the judgment of
the Allahabad High Court dated March 26, 1976. It relates to the validity of
the imposition of octroi with effect from July 15, 1950, on certain goods
brought within the Maunath Bhanjan Municipality, hereinafter referred to as the
The challenge to the imposition was made by
the Swadeshi Cotton Mills Company Ltd., hereinafter referred to, as the
Company. The Company started constructing a textile factory, a part of which,
at any rate, fell within the area of the Board. It applied for and obtained
exemption from the levy of octroi on its building material on the ground that
it was a new concern. It however started bringing more articles within its
premises, and the Octroi Superintendent made a demand for a payment octroi on
June 25, 1969. The Company tried to avoid the levy on the basis of the order of
exemption, but the Executive Officer of the Board repeated the demand on May
30, 1970 and June 16, 1970.
The Board also wrote to the State Government
for permission to realise octroi from the Company. The Government gave the
permission to realise the tax. The Company thereupon challenged the levy of the
octroi in the High Court by a writ petition. The High Court took the view that
the initial imposition of the octroi was illegal, allowed the writ petition,
and issued a mandamus directing the Board not to realise the tax. The Board
feels aggrieved and has come up in appeal to this Court.
It appears that the Company took four grounds
for challenging the levy of octroi, but the High Court examined only the
following ground, as it took the view that it was enough for the Company's
success in the petition, and did not examine the other grounds,-"that the
procedure prescribed for the imposition of taxes by municipal boards under
sections 131 to 135 of the U.P. Municipalities Act, 1916, was not followed by
the Municipal Board." Counsel for the parties have accordingly confined
their arguments to the finding of the High Court in favour of the Company on
As the ground on which the Company has
succeeded is quite general and vague, we asked counsel for the parties to refer
to. the precise plea in that respect, in the writ petition.
They could however only invite our attention
to3 ground No. 6 of the writ petition where the Company has merely stated that
the imposition of octroi was void and illegal "because mandatory
provisions for imposition of octroi tax as provided in the U.P. Municipalities
Act has not been followed." It is therefore obvious, and has not been disputed
before us, that the 867 Company took a very vague ground to challenge the
validity of the imposition of octroi, and left it to the High Court to embark
on a roving and fishing inquiry, on the off chance of finding some violation of
the so-called "mandatory provisions for the imposition of octroi." It
has not been disputed before us that the High Court undertook such an inquiry
and struck down the imposition on the following ground,-(1) The draft rules for
the levy of the tax were not published, and only the rates of octroi were
published, so that there was violation of the provisions of section 23 of the
General Clauses Act and sections 134(1) and 300 of the Act.
(2) The order of the District Magistrate,
which was equivalent to the special resolution of the Board under sub-section
(2) of section 134 was invalid as it was passed on June 20, 1950, while the
rules were finalised and published on July 15, 1950.
(3) There was no "foundation or
basis" of the notification under section 135(2) and no such notification
Counsel for the Company however strenuously
argued that there was no compliance with the provisions of sections 131 to 133
also, and made a reference to the decisions in Municipal Board, Hapur v.
Raghuvendra Kripal and others(1) and Raza Buland Sugar Co. Ltd. v. Municipal
Board, Ratnpur(2), for the purpose of showing that parts of sections 131 to 134
were mandatory, and had to be followed. We find that the High Court
has.categorically stated that the Company did not assert that sub-sections (2)
and (3) of section 131 had not been complied with, and that there was "no
dispute regarding compliance with the provisions of section 131." The High
Court has also stated that the COmpany "has not asserted. that any of the
provisions of section 132 has not been followed." It has further stated
that there was "no complaint of non-compliance with the provisions of
section 133 also." There was thus no challenge to the validity of the
imposition of octroi on the, ground that there was no compliance with the
provisions of sections 131, 132 and 133 and we are not called upon to examine
the argument that there was non-compliance with the provisions of those sections.
There was also no dispute in the High Court that "the Municipal Board was
competent to impose octroi tax." We shall accordingly examine the three
grounds, on which the High Court has held the imposition of octroi as invalid,
in this background.
Ground No. 1. The High Court has held that
there was no previous publication of the draft rules for the levy of octroi and
that only the rates of octroi were published.
So that there was breach of the provisions of
sections 134(1)and 300 of the United (1)  1 S.C.R. 950.
(2)  1 S.C.R. 970.
868 Provinces Municipalities Act, 1916,
hereinafter referred to as the Act, and section 23 of the General Clauses Act.
It will be recalled that the High Court has found that the Company had not
challenged the imposition of octroi on the ground that there was non-compliance
with the provisions of sections 131 to 133. It cannot therefore be disputed
that the draft rules were published as required by sub-section(3) of section
131. Moreover we find from the affidavit which has been filed on behalf of the
Board that its Officer in-charge wrote to the prescribed Authority on January
9, 1950, that the draft rules had been published in the "Sansar" on
November 1, 1949, and may be sanctioned. A copy of that letter has been placed
on the record. It may also be mentioned that the Officer In-charge wrote to the
Commissioner intimating that only two objections had been received which were
for reduction of the tax, and that after considering them the rate of the tax
had been reduced from Rs.1/8/to Re. 1/per maund, and the necessary amendment
had been made in the rate chart. An objection was also received from the Shoe
Makers' Association, and the Commissioner directed that if the Board wanted to
make any modification, it may again publish the modified proposals.
This was done on February 14, 1950, but as
only the rates had been reduced, and the rules had not been modified, it was
not necessary to republish the draft rules. The Prescribed Authority
accordingly sanctioned the same on April 1, 1950, under section 133. The rules
were forwarded to the Prescribed Authority on April 26, 1950, and were
published in the State Gazette dated July 7, 1950. It was stated in the
notification that the rules were published under section 300 of the Act, which
required their previous publication, but there can be no doubt that it was a
notification under sub-section (2) of section 135 as it was issued after
receipt of the Board's special resolution in pursuance of the sanction of the
Prescribed Authority, and it was directed that the rules shall take effect from
July 15, 1950. It is therefore futile to contend that the rules were not made
in accordance with the provisions of sections 134(1) and 300 of the Act and
section 23 of the General Clauses Act which requires certain conditions to be
observed in regard to the making of rules after previous publication.
Ground No. 2. It is not in dispute that the
special resolution for the imposition of the tax was sent by the Officer In-charge
of the Municipal Board on June 20, 1950, stating that July 15, 1950. had been fixed
for the levy of the tax. It is true that the rules were published under the
notification dated July 7, 1950, but that would not necessarily lead to the
conclusion that the resolution dated June 20, 1950, was rendered nugatory, or
that it was necessary for the Board to pass another resolution. The
notification shows that the authority concerned not only published the
resolution by its notification dated July 7, 1950, but also stated that they
shall take effect from July 15, 1950, which was the date fixed by the
resolution dated June 20, 1950, for the imposition of the tax. There was
therefore no justification for taking the view that the resolution dated June
20, 1950 could not authorise the= imposition of the tax from July 15, 1950,
merely because it was passed before the publication of the rules. At any rate
any technical defect in the date of the resolution could not have 869 the
effect of making the imposition void in the facts and circumstances of this
Ground No. 3. As has been shown, the
notification dated July 7, 1950, which was published under section 300 of the
Act, was, in fact and substance, issued under the authority of sub-section (2)
of section 133, and it would not matter if it did not make a specific reference
to that subsection and made a reference to section 300 instead. The High Court
therefore erred in thinking that there was no notification under-sub-section
(2) of section 135 at all.
It is the nature of the notification which is
decisive of the section under which it has been issued, and we have no doubt
that the impugned notification was really issued under sub-section (2) of
We have thus no doubt that the notification
had really been issued in compliance with the requirement of sub-section (2) of
section 135 of the Act. That would attract the application of sub-section (3)
of that section which provides as follows,-"135(3) A notification of the
imposition of a tax under subsection (2) shall be conclusive proof that the tax
has been imposed in accordance with the provisions of this Act." So when a
probative effect had been given by law making the notification of the
imposition of the tax as "conclusive proof" that the tax had been
imposed "in accordance with the provisions of the Act", no evidence
could be allowed to combat that fact, and we have no hesitation in holding that
the imposition was according to the law.
It is not disputed that Maunath Bhanjan is an
industrial town, and its Board was collecting octroi since July 15, 1950. The
Company started the construction of its factory in 1968-69, and, as has been
stated, it applied for and obtained exemption from the levy of octroi on its
building material on the ground that it was a new concern. The Board granted
the exemption on July 21, 1967, for a period of 10 years, and that fact was
acknowledged in the Company's letter dated August 18, 1967. The Company prayed
for the continuance of the exemption even after that time limit.
The State Government however granted the
exemption for five years. The Company started "importing" certain
other articles, and the State Government ultimately gave permission to the
Board on April 2, 1973 to realise octroi from the Company with effect from May,
1974. The Company once again applied for further exemption on August 14, 1973, but without success. It is thus clear that, far from having any doubts
about the validity of the imposition and levy of octroi, the. Company accepted
the validity thereof and prayed for exemption. It availed of that exemption,
for some years, and applied for its extension until as late as August 14, 1973. It was only when further exemption was refused, that the Company thought
of filing the writ petition. As has been shown, the Company did not, even then
venture to point out any reason why the imposition could be said to be invalid,
and merely stated that the 870 "procedure" prescribed under sections
131-135 had not been followed. That was far too vague a plea to justify investigation
and interference in the exercise of the extraordinary jurisdiction of the High
Court under article 226 of the Constitution.
The appeal is allowed, the impugned judgment
of the High Court dated March 26, 1976, is set aside, and the writ petition is
dismissed with costs.
M.R. Appeal allowed.