IMPORTANT POINT
Imposition of maximum rates of tax by the State Government u/s 114(3) of the City of Nagpur Corporation Act, 1948, is an enabling provision and it is not a condition precedent to the exercise of taxing power by the Corporation u/s 114(1) r/ws 115 of the Act.

Headnote:(i) TAXATION-City of Nagpur Corporation Act, 1948-Section 115 r/ws 114(1)(e)-Imposition and levy of octroi-Notification dated 10-12-79 issued by State sanctioning octroi rates proposed by Corporation u/s 115 r/ws 114(1)(e)-Legality challenged on ground that in absence of State not framing any rules fixing maximum rates of octroi tax u/s 114(3), impugned notification was invalid-Whether imposition of ceiling of rates of taxes u/s 114(3) by the State was a condition precedent to the exercise of powers u/s 114(1)(e) r/ws 115?-(No)-Both these powers and functions are independent of each other-Provisions of Section 114(3) being directory in nature and not mandatory or compulsory- Impugned notification held valid.
       Held : A mere glance at Section 114(3) shows that imposition of maximum rates of tax by the State Government is an enabling provision and it is not a condition precedent to the exercise of taxing power by the Corporation under Section 114(1) read with Section 115. Both these powers and functions are independent of each other and operate in their own fields subject to the rider that if the State Government chooses to impose maximum amounts of rates of any tax imposed by Corporation, in exercise of State s powers under Section 114(3), that ceiling would get engrafted on the rates of tax as imposed by the Corporation under Section 114 read with Section 115 of the Act. But so long as that ceiling is not imposed by the State Government the rates of taxes imposed by the Corporation would operate unrestricted and uninhibited by any such ceiling. (Para 11)
       Further held : It is difficult for us to read the provisions of Section 114(3) as mandatory requiring the State Government to ncessarily regulate imposition, assessment and collection of all the taxes imposable by the Corporation under Section 114(1) of the said Act. The several clauses in sub-section (3) must be read distinctively and the powers which are given to the State Government under sub-section (3) must be read as independent powers for making rules with regard to the assessment and collection of the taxes. A power to make rules prescribing maximum rates of taxes could be independently exercised by the State Government but there is nothing in the Section which would make it obligatory for it to first specify the maximum amounts of rates of tax before it exercises its another independent power of making rules for imposition of a tax under Section 115 of the said Act read with Section 114 thereof. We cannot agree with the contention of learned counsel for respondents that the power to make rules for imposition of tax conferred on the Corporation and the State Government under Section 114(1) and Section 115 must be read as being subject to the imposition of maximum rates of any tax under Section 114(3) or that the two powers are interlinked, intertwined or interdependent. (Para 11)
       (ii) City of Nagpur Corporation Act, 1948-Section 115 r/ws 114(1)(e)-Imposition and levy of octroi-Notification issued by State sanctioning Octroi rates proposed by Corporation u/s 115 r/ws 114(1)(e)-Earlier maximum rates fixed by the then local Government u/s 66(2) of C.P. & Berar Municipalities Act, 1922 would become inconsistent. (Para 10)

JUDGMENT

S.B. Mujmudar, J.-City of Nagpur Corporation has brought in challenge the order passed by the High Court of Bombay, Nagpur Bench in Writ Petition No. 1224 of 1980 by obtaining special leave to appeal against the said judgment. Respondents herein had moved the said writ petition challenging the impugned notification dated 10th December 1979 issued by the State of Maharashtra sanctioning the octroi rates proposed by the appellant - Corporation under Section 115 read with Section 114(1)(e) of the City of Nagpur Corporation Act, 1948 (hereinafter referred to as the said Act ) on the ground that as the State of Maharashtra had not framed any rules fixing the maximum rates of octroi tax under Section 114 sub-section (3) of the said Act, the impugned notification was of no legal effect. The aforesaid challenge to the impugned notification was upheld by the High Court and that is how the appellant-Corporation is in appeal before us.

Background facts

2. A few relevant background facts leading to these proceedings deserve to be noted at the outset. The respondents, original writ petitioners before the High Court, are manufacturers of incense sticks (agarbatties). They carry on their manufacturing activities within the limits of the appellant-Municipal Corporation. Through a notification dated 10th December 1979 issued by the State of Maharashtra the appellant-Corporation sought to revise the rates of octroi duties on various items including aromatic chemicals, perfumery and natural oils in which the respondents were dealing and which were raw materials for the purpose of their business of manufacturing incense sticks. They had to import within the octroi limits the said raw materials from outside. According to the respondents the impugned notification sought to revise upwards the rates of octroi duty on these articles which went beyond the maximum rates of octroi fixed by the State of Madhya Pradesh under C.P. & Berar Municipalities Act, 1922 (hereinafter referred to as the 1922 Act ) and was, therefore, ultra vires and illegal. This contention of the respondents was accepted by the High Court. We may now have a look at the relevant events preceding the issuance of the impugned notification.

3. The C.P. & Berar Municipalities Act came into force in 1922. On 5th September 1923 a notification was issued by the then local Government under Section 66 sub-section (2) of the 1922 Act regulating the imposition of octroi and also imposing maximum amounts of rates for the said tax. The said notification applied to the local area which now is comprised in the appellant-Corporation. On 3rd February 1926 a further notification was issued framing Imposition Rules for Terminal Tax under Section 66(1)(o) of the 1922 Act. The said terminal tax was imposable on the goods imported within the limits of the local municipality which was the predecessor of the appellant-Corporation. One further notification under Section 66(2)(e) of the 1922 Act was issued by the then local Government on 29th April 1950 laying down the maximum rates of octroi tax. On 21st February 1951 rules were promulgated under Section 66(1)(c) of 1922 Act for levy of octroi as per Section 66(1)(e) of the 1922 Act. These octroi rules came into force from 1st March 1951 in the local area then comprising the Nagpur city. On 2nd March 1951 the City of Nagpur Corporation Act, 1948 came into force. It is not in dispute between the parties that the said Act governs the controversy raised in this litigation. In supersession of the octroi rules framed on 21st February 1951 a fres notification was issued by the appellant-Corporation framing Octroi Imposition Rules under Section 114(1)(e) of the said Act and the said rules having obtained the requisite sanction from the State of Maharashtra came into force 1st June 1966. Octroi duty was thereafter being levied by the appellant-Corporation as per the rates imposed on the notified goods covered by the said rules of 1.6.1996. These rules were f

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1996 Supreme(SC) 1237

IMPORTANT POINTImposition of maximum rates of tax by the State Government u/s 114(3) of the City of Nagpur Corporation Act, 1948, is an enabling provision and it is not a condition precedent to the exercise of taxing power by the Corporation u/s 114(1) r/ws 115 of the Act.

Cases Referred (1)

IMPORTANT POINT
Imposition of maximum rates of tax by the State Government u/s 114(3) of the City of Nagpur Corporation Act, 1948, is an enabling provision and it is not a condition precedent to the exercise of taxing power by the Corporation u/s 114(1) r/ws 115 of the Act.