State of
M.P. Vs. Maganlal Nathulal [1993] INSC
402 (5 October 1993)
RAY,
G.N. (J) RAY, G.N. (J) BHARUCHA S.P. (J) CITATION: 1994 SCC (1) 585
ACT:
HEADNOTE:
ORDER
1.Both these appeals arise out of the common judgment disposing of the Misc.
Petition No. 200 of 1976 and Misc.
Petition
No. 199 of 1976 by the Division Bench of the High Court of Madhya Pradesh, Indore Bench. The respondents in these
appeals filed applications under Article 226 of the Constitution of India
before the Madhya Pradesh High Court challenging the imposition of tax by Anjad Municipality on cotton bales whereby the existing tax rate was increased
w.e.f. November 24,
1973. It appears that Anjad Municipality which was initially within the erstwhile State of Barwani, had imposed tax at the rate of Re
1 per cotton bale and that rate continued till November 24, 1973 when it was increased to Rs 2 per bale by the Administrator
of the Municipality who was also the Naib Tahsildar. After reconstitution of
the Municipality, the Municipality also passed resolution for recovering tax at
the said increased rate. In view of such increase in the rate of tax on cotton
bales, writ petitions were filed before the Madhya Pradesh High Court. It was
contended by the petitioners in the writ proceedings that imposition of such
increased rate of tax was vitiated on account of excessive delegation but such
contention was not accepted by the High Court. The High Court however upheld
the second contention of the petitioners that in the absence of fixation of limit
prescribing the maximum and minimum rate of tax by the State Government the
imposition of tax by increasing the existing rate of tax under Section 130 of
the M.P. Municipal Act was illegal and could not be enforced.
2.It
is not disputed that the State Government has not prescribed the maximum and
minimum limits of the rate of tax as required to be fixed by sub-section (2) of
Section 127 of the Municipalities Act. The High Court has held that if such
limits are not prescribed by the State Government the Municipal Council has no
power to increase the rate of tax.
The
High Court has held that there are two restrictions on the power of the
Municipal 587 Council before it embarks to increase the rate of tax. The first
is that the maximum limit must be prescribed under the rules. Secondly, the
increase must be confined within the limits so prescribed. Since no rule was
framed for the said purpose by the State Government under clause (c) of
sub-section (2) of Section 127 of the Act, the increase of the rate of tax by
the Anjad Municipality was held illegal and the demands were quashed by the High
Court.
3. The
learned counsel appearing for the appellant- Municipality has contended before us that if the
Municipality has been clothed with the power to impose tax, imposition of tax
should not be struck down unless such imposition is arbitrary, capricious,
excessive and unjust.
It
cannot be contended that the Municipality cannot impose tax or increase the
rate of tax simply because rules have not been framed by the State Government
prescribing the maximum and minimum limits of tax. In such event, the power to
impose tax is not confined to any limit but the Municipality can impose a fair
and just tax. We are, however, not inclined to accept such contention of the learned
counsel. The High Court, in our view, has rightly indicated that such power of
the Municipality to impose tax under Section 130 of the Municipalities Act can
be exercised only within the parameter of maximum and minimum limits of tax
prescribed by the State Government. In the absence of such prescription of
limits, no exercise for imposition of tax can be made. We therefore, find no
reason to interfere with the impugned decision of the High Court. The appeals
are accordingly dismissed without any order as to cost.
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