Firm Surajmal Banshidhar, Vs. The
Municipal Board, Ganganagar  INSC 214 (25 October 1978)
CHANDRACHUD, Y.V. ((CJ) UNTWALIA, N.L.
CITATION: 1979 AIR 246 1979 SCR (2) 169 1979
SCC (1) 303
Rajasthan Town Municipalities Act
1951-Section 179(2)- Scope of Section if authorises levy of terminal tax.
Words and Phrases "for anything done or
purporting to be done" meaning of.
Section 179(1) of the Rajasthan Town
Municipalities Act, 1951 provides that no suit shall be instituted against any
municipal board "for anything done or. purporting to be done" under
the Act except in accordance with the procedure laid down therein. The period
of limitation for institution of a suit against the municipality was six months
from the accrual of cause of action under. sub-s. (2).
The respondent Board realised terminal tax on
goods experted by the appellants. In suits filed by the appellants for refund
of the amounts which they claimed were collected without authority of law, the
respondent Board pleaded that the levy was in accordance with law and that the
suits where barred by limitation. The trial court decreed the suits and on
appeal the District Judge affirmed the trial Court's decrees. In second appeal
the High Court held that the levy was illegal. The High Court, however, allowed
the appeals in respect of those amounts which were found to be within
limitation under s. 179(2) of the Act and dismissed the others.
On the question whether the levy could be
said to be a thing done or purported to be done under the Act.
Allowing the appeal, ^ HELD: The suits did
not fall within the purview of s. 179 of the Act and were not barred by
limitation. [172 D]
1. (a) It is well established that if levy of
a tax is prohibited by an Act and is not in pursuance of it, it could not be
said to be purported to be done in pursuance of the execution or intended
execution of the Act. [172 B] Poona City Municipal Corporation v. Dattatraya
Nagesh Deodhar,  8 S.C.R. 178 followed.
(b) The terminal tax could not be imposed
under any of The provisions of the Act. The High Court was right in holding
that the amounts ` paid by the appellants by way of terminal tax were
recoverable by the suits. [173 F-G 174 Al
2. The Bikaner State Municipal Act, 1923
(which was the predecessor of the present Act) authorised the levy of terminal
tax and the Board accordingly levied the tax until January 26, 1950. With the
coming into force 12-SCI/78 170 of the Constitution, by virtue of art. 277 it
was permissible for the Board to continue to levy the terminal tax until
provision to the contrary was made by Parliament by law. But with effect from
December 22, 1951 the Bikaner Act was repealed and the present Act was brought
the repeal, however, did not affect the
validity of those taxes which had already been imposed and which could be
"deemed`' to have been imposed under the Act. But the provisions of the
Act the clear that the terminal tax in question could not be imposed there under.
The levy could not, therefore, be saved by cl. (b) of the proviso to s. 2.
on the other hand it is clear that the State
Legislature had decided to discontinue the levy by excluding it from the
purview of the saving clauses. The further levy of the tax, therefore, became
illegal and it was not permissible to continue it any longer under Art. 277
which merely gave the authority concerned the option to continue to levy if it
so desired. [173A, F-G]
CIVIL APPELLATE JURISDICTION: Civil Appeal
Nos. 372-382 of 1969.
Appeals by Special Leave from the Judgment
and order dated 10-10-1968 of the Rajasthan High Court in C.S.A. Nos.
18 and 29, 27, 28. 30-35 of 1960 and 54 and
58 of 1961.
S. N. Jain and S. K. Jain for the Appellants.
B. P. Maheshwari and Suresh Sethi for the
The Judgment af the Court was delivered by
SHINGHAL, J.,-These appeals by special leave arise out of a common judgment of
the Rajasthan High Court dated October 10, 1968, by which the suits which were
filed by the present appellants were dismissed in pursuance of the earlier
judgment of the same court dated November 9, 1964, on the ground that they were
governed by section 179(2) of the Rajasthan Town Municipalities Act, 1951,
hereinafter referred to as the Act, and were barred by limitation.
The facts giving rise to the appeals were
different in details, but they were examined in the High Court with reference
to the common questions of law which arose in all of them and formed the basis
of that Court's, decision against the plaintiffs. We have heard these as
companion appeals, and will decide them by a common judgment.
It is not necessary to give the detailed
facts of all the cases as it will be enough to refer to the suit which was
filed by M/s Surajmal Banshidhar and the developments connected with it, in
order to appreciate the controversy.
The plaintiff firm referred to above carried
on business in "pakka arat" and exported goods of various kinds from
Ganganagar. The Municipal Board of Ganganagar realist "export duty",
by way of ter- 171 minal tax, on the exported goods. The plaintiff therefore
raised a suit on October 19, 1957, challenging the Board's right to
"impose or to reales" any export duty during the period June 5, 1954
to March 10 1957, amounting to Rs. 10,729/-. It however confined the suit to
the recovery of Rs. 10,000/- alongwith interest and gave up the balance. The
Board denied the claim in the suit and pleaded, inter alia, that the levy of
the terminal tax was in accordance with the law and the suit was barred by
limitation. The trial court rejected the defence and decreed the suit, and its
decree was upheld by the District Judge on appeal. Similar decrees were passed
in the other suits, for various sums of money.
The Board took the matter to the High Court
in second appeals. The appeals were heard by a Single Judge who, while deciding
that the suits were governed by section 179(2) of the Act, referred the
question on the legality of the levy to a larger Bench. A Full Bench of the
High Court held that the levy of the terminal tax was illegal, and sent the
cases back to the Single Judge who allowed the appeals only for those amounts
which were found to be within limitation under section 179(2) of the Act and
dismissed the other suits. The plaintiffs obtained special leave and have come
up to this Court in these circumstances.
The question which arises for consideration
is whether the suits fall within the purview of section 179(2) of the Act. The
first two subsection of section 179 which bear on the controversy read as
follows,- "179. Limitation of suits, etc. -(1) No suit shall be instituted
against any municipal board, president, member, officer, servant or any person
acting under the direction of such municipal board, chairman, member, officer
or servant for anything done or purporting to be done under this Act, until the
expiration of two months next after notice in writing, stating the cause of
action, the name and place of abode of the intending plaintiff and the relief
which he claims, has been, in the case of a municipal board, delivered or left
at its office, and, in case of a chairman, member, officer, or servant, or
person as aforesaid, delivered to him or left at his office or usual place of
abode; and the plaint shall contain a statement that such notice has been so
delivered or left.
(2) Every such suit shall, unless it is a
suit for the recovery of immovable property or for a declaration of title
thereto, be dismissed if it is not instituted within six months after the
accrual of the alleged cause of action." The question therefore is whether
the illegal levy of terminal tax (assuming that it was illegal as held by the
High Court) could be said to 172 be a thing "done or purporting to be
done" under the Act. A similar question arose for the consideration of this
Court ill Poona City Municipal Corporation v. Dattatraya Nagesh Deodhar(l) with
reference to the provision in section 127 (4) of the Bombay Provincial
Municipal Corporation Act, 1949, and it was held that if the levy of a tax was
prohibited by the Act concerned and was not in pursuance of it, it 'could not
be said to be 'purported to be done in pursuance of execution or in tended
execution of the Act'." It was observed that what was plainly prohibited
by the Act could not be "claimed to be purported to be done in pursuance
or intended execution of the Act." It was therefore held that the suit was
outside the purview of the section 127(4) and was not barred by limitation. We
are in respectful agreement with that view, and we have no hesitation in
holding, in the circumstances of the pre sent cases, which are governed by a
provision similar to section 127(4) or the Poona City Municipal Corporation
Act, that the suits did not fall within the purview of section 179 of the Act
and were not barred by limitation. It may be mentioned that it has not been
argued before us, and is nobody's case, that the suits would be barred by
limitation even if they did not fall within the purview of section 179(2) of
the Act. The decision of the High Court to the contrary is not correct and will
have to be set aside.
It has however been argued on behalf of the
respondents that the High Court erred in taking the view that the levy of the
terminal tax was illegal, and our attention has been invited to the relevant
provisions of the law including the Bikaner State Municipal Act, 1923, article
277 of the Constitution and section 2 of the Act.
It is not in controversy before us that the
Bikaner State Municipal Act, 1923, authorised the levy of terminal tax and such
a tax was levied by the Ganganagar Municipal Board under the authority of that
law upto January 26, 1950, when the Constitution came into force. On and from
that date, the power to levy export duty vested in the Parliament but article
277 saved that and some other taxes as follows,- "277. Any taxes, duties,
cesses or fees which, immediately before the commencement of this Constitution,
were being lawfully levied by the Government of any State or by any
municipality or other local authority or body for the purposes of the State,
municipality, district or other local area may, not withstanding that those
taxes, duties, cesses or fees are mentioned in the Union list, continue to be
levied and to be applied to the same purposes until provision to the contrary
is made by Parliament by law.' (1)  8 S.C.R. 178.
173 it was therefore permissible for the
Municipal Board to continue to levy A the terminal tax until provision to the
contrary was made by Parliament by law. But it so happened that the Bikaner
Municipal Act, 1923 was repealed and the Act was brought into force with effect
from December 22, 1951. Section 2(b) of the Act, which dealt with the repeal of
the Bikaner Act and the saving of some of its provisions, expressly provided
that on the coming into force of the Act, the laws and enactments specified in
the First Schedule of the Act shall be repealed in so far as they relate to the
Town Municipalities covered by the Act. So as the Bikaner State Municipal Act,
1923, was included in the first Schedule, it was repealed by the aforesaid section
2. That section however contained a proviso, clause (b) whereof was to the
following effect,- "(b) all town municipalities constituted under the said
laws or enactments, and members appointed or elected, committees established,
limits defined, appointments, rules, orders and bye-laws made, notifications
and notices issued, taxes imposed, contracts entered into, and suits and other
proceedings instituted, under the said laws or enactments or under and laws or
enactments thereby repealed shall, so far as may be and so far as they relate
to town municipalities be deemed, unless the Government directs otherwise, to
have been respectively constituted, appointed, elected, establish ed"
defined, made, issued, imposed, entered into and instituted under this Act."
The repeal did not therefore affect the validity of those taxes which had
already been imposed and which could be "deemed" to have been imposed
under the Act, unless there was a direction to the contrary by the State
Government. It is quite clear from the provisions of the Act, and is in fact
not disputed before us, that the terminal tax in question could not be imposed
under any of the provisions of the Act. Its, levy could not therefore be saved
by clause (b) of the proviso to section (2) of the Act. On the other hand, it
could be said with justification that the State Legislature had decided to
discontinue the levy by excluding it from the purview of the saving clause. The
further levy of the tax therefore became illegal and it was not permissible to
continue it any longer under article 277 which merely gave the authority
concerned the option to continue the levy if it so desired.
So as the levy of the tax after December 22,
1951, was illegal, there is nothing wrong with the view taken by the High Court
that the amounts 174 paid by the plaintiffs by way of terminal tax were
recoverable by the suits which have given rise to these appeals, and there is
no force in the argument to the contrary.
The appeals are allowed with costs, the
decrees of the High Court are set aside and those of the lower appellate court
P.B.R. Appeals allowed.