1. Municipality imposed octroi tax on milk under Bombay District Municipal Act, 1901 — State Government order prohibiting the tax — Challenge to validity of the order. (Para 1 , 2 )
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1961 Supreme(SC) 412
SUPREME COURT OF INDIA
21st December, 1961
B.P. SINHA, C.J.I., A.K. SARKAR, K.C. DAS GUPTA, N. RAJAGOPALA AYYANGAR, AND J.R. MUDHOLKAR, JJ.
Municipality of Anand, Appellant
Versus
State of Bombay and another, Respondent.
Civil Appeal No. 211 of 1956. 989
Advocates appeared
Mr. A.V. Viswanatha Sastri, Senior Advocate (M/s. S. N. Andley, Rameshwar Nath and P. L. Vohra, Advocates of M/s. Rajinder Narain and Co., with him), for Appellant; Mr. M. C. Setalvad, Attorney General for India Mr. C. K. Daphtary, Solicitor-General if India and Mr. B. Sen, Senior Advocate (Mr. T. M. Sen, Advocate, with them), for Respondent No. 1; M/s. Vithalbhai B. Patel and I. N. Shroff, Advocates, for Respondent No. 2.
Advocates:
A.V.VISHWANATHA SASTRI, B.SEN, C.K.DAFTARY, I.M.SHROFF, M.C.SETALVAD, P.L.VOHRA, RAMESHWAR NATH ROY, S.N.ANDLEY, T.M.SEN, Vithalbhai B.Patel
A.V.VISHWANATHA SASTRI, B.SEN, C.K.DAFTARY, I.M.SHROFF, M.C.SETALVAD, P.L.VOHRA, RAMESHWAR NATH ROY, S.N.ANDLEY, T.M.SEN, Vithalbhai B.Patel
The state government's power to issue general or special orders controlling the imposition of a tax by a municipality is a continuing power. "Imposition" refers to the actual levy, allowing the government to prohibit the tax even after it has been sanctioned and rules framed.
Headnote:(A) District Municipal Act - Sections 46, 59, 60, 61, 62, 73, 74 - Power of State Government to control imposition of taxes - The power of a local authority to impose a tax is subject to general or special orders of the State Government. The term "impose" refers to the actual levy of the tax after the authority to levy has been acquired through the framing of rules and obtaining sanction. Consequently, the State Government retains the power to prohibit the imposition of the tax at any time, as the power to impose is a continuing power and not exhausted upon the initial sanction of the rules. (Paras 6, 7, 9, 21)
(B) Constitution of India - Article 14 - Discrimination - An order prohibiting the collection of a tax is not discriminatory if the government has prohibited all similar local authorities from levying the same tax. (Para 11)
(C) Administrative Law - Mala fides - An order is not considered mala fide simply because the grounds for the order may be debatable or based on a particular view of the facts, especially when the order is applied uniformly across all similar entities. (Para 12)
Facts of the case:
A city municipality imposed an octroi tax on milk after following the prescribed statutory procedure, which included passing a resolution, obtaining state government sanction, and publishing the rules. Subsequently, the state government issued an order directing that the tax shall not be leviable. The municipality challenged the validity of this order, contending that the government's power to control the imposition of tax via general or special orders was exhausted once the rules were sanctioned and the tax was imposed.
Findings of Court:
The order passed by the state government was legitimate and valid. The power of the state government to issue general or special orders under the Act is not exhausted by the municipality's act of imposing a tax in conformity with orders in force at a particular date. The state government's supervisory power is intended to ensure that municipal administration is coordinated to secure the vital interests of the general public.
Issues: Whether the state government's power to issue general or special orders to control the imposition of a tax is exhausted once the tax is sanctioned and imposed; and whether the order was discriminatory or made mala fide.
Ratio Decidendi: The court held that "impose" in the context of the Act refers to the actual levy of the tax rather than the mere acquisition of the power to levy. Since the imposition is explicitly made subject to general or special orders of the state government, the government can prohibit the actual levy at any time. The power to impose is a continuing power; when the power to impose is withdrawn, the imposition falls.
Result: Appeal dismissed with costs.
Legal Category Hierarchy
Table of Contents
2. Whether the State Government's power to issue general or special orders under Section 59 persists after a tax rule has been sanctioned and imposed. (Para 5 )
3. The term impose refers to the actual levy of tax, which is a continuing power subject to government control to ensure coordination of municipal administration. (Para 6 , 7 , 8 , 9 , 21 , 22 , 24 )
4. Power to impose tax under Section 59 is a continuing power subject to general or special government orders, enabling the State to prohibit the levy. (Para 6 , 7 , 9 , 21 )
5. Appeal dismissed and order prohibiting the tax upheld. (Para 13 , 14 , 26 )
6. What is the meaning of the word impose in Section 59 of the Bombay District Municipal Act, 1901?
It refers to the actual levy of the tax after the authority to levy has been acquired through sanctioned rules, rather than the mere acquisition of the power to tax. (Para 9 , 21 )
7. Does the State Government's power to issue general or special orders under Section 59 get exhausted once a tax is imposed?
No, the power to impose a tax is a continuing power. As long as the tax is in force, it derives vitality from the authority to impose it, which remains subject to government orders. (Para 19 , 21 )
8. How does the power to prohibit a tax under Section 59 differ from the power to suspend a tax under Section 73?
Section 73 is limited to suspending a tax to remove anomalies or hardships, whereas Section 59 allows the government to prohibit the imposition of the tax altogether. (Para 10 , 20 )
9. When is a government order prohibiting a municipal tax considered discriminatory or mala fide?
An order is not discriminatory if applied uniformly to all similar entities. It is not mala fide simply because the government's stated grounds for the order are later found to be untenable. (Para 11 , 12 , 25 )
Judgment
SARKAR, J. : (On behalf of himself, B. P. Sinha C.J.I. and K. C. Das Gupta and J. R. Mudholkar JJ.) The appellant is a city Municipality within the meaning of the BOMBAY DISTRICT MUNICIPAL ACT , 1901 & 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 type purpose of an octroi tax of 0-4-0 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.
2. 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.
3. 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.
4. Section 46 gives power to a Municipality to make rules for various purposes as specified in 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 which the State Government may make in this behalf, any Municipality-
(a) after observing the preliminary procedure required by S. 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 S. 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 say,
. . . .. . . . . . . . . . . . . . . . . . . . . . ... ..
..... ............... . ..........
(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 stall be passed at a meeting of the Municipality selecting the tax and making rules for the purposes 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 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 had 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 sanction them with or without modifications or subject to conditions prescribed: Section 62 lays down that the rules as sanctioned by the Government
