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SUPREME COURT OF INDIA
3rd of March, 1964
P.B. GAJENDRAGADKAR, C.J.I, K.N. WANCHOO, K.C. DAS GUPTA, J.C. SHAH AND N. RAJAGOPALA AYYANGAR, JJ.
The Town Municipal Committee Amraoti, Taluq, Appellant
Versus
Ramchandra Vasudeo Chimote and another, Respondents.
Civil Appeals Nos. 598, 695 and 700 of 1962.
Advocates appeared
Mr. M. C. Setalvad, Senior Advocate, (Mr. S. Shaulkat Hussain, Advocate, with him), for Appellant (In C. A. No. 598 of 1962) : Dr. W. S. Barlingay, Senior Advocate, (Mr. A. G. Ratnaparkhi, Advocate, with him), for Respondent No. 1 (In C. A. No. 598 of 1962); Mr. S. G. Patwardhan, Senior Advocate, (M/s. Udai Pratap Singh and M. S. Gupta, Advocates, with him), for Appellant (In C. A. No. 695 of 1962); Mr. A. N. Goyal, Advocate, for Respondent No. 1 (In C. A. No. 695 of 1962); Mr. I. N. Shroff, Advocate, for Respondent No. 2 (In C. A. No. 695 of 1962); Mr. M. C. Setalvad, Senior Advocate, (Mr. M. S. Gupta, Advocate, with him), for Appellant (In C. A. No. 700 of 1962); Mr. G. S. Pathak, Senior Advocate, 1167 (M/s. J. B. Dadachanji O. C. Mathur and Ravinder Narain Advocates of M/s. J. B. Dadachanji and Co., with him), for Respondents Nos. 1 to 4 and 6 to 9. (In C. A. No. 700 or 1962); Mr. I. N. Shroff, Advocate, for Respondent No. 10 (In C. A. No. 700 of 1962).
The sole object sought to be achieved by Article 277 for "continuance" of taxes is to avoid dislocation of the finances of the State and local authorities, by depriving them of the revenues which they were deriving at the commencement of the Constitution. The intention was to permit the existing range of the taxes to be continued. The Article did not confer on them the authority to expand the range of their taxation by subjecting new items to taxation or by increasing the rates of duties. The words in the Article "was being lawfully levied" mean "was actually levied", and it would not be sufficient to satisfy those words that the Municipal authority could lawfully levy the tax, but had not availed itself of that power.
The word "levy" is to be understood as including the collection of the tax, for it is only when a tax is collected that any question of its application to a particular purpose would arise. This is indicated by the words in the last portion of Article 277 "continue to be levied" and "to be applied to the same purposes". 1956 MBLJ 740 approved. 1961 JLJ 792 Confirmed. 1962 JLJ-SN 317 referred to. [Paras 6 & 10
(2) Municipalities Act, 1922 (C. P. & Berar) - S. 66 (1) (o) and Constitution of India, Art. 277 - only taxes legally imposed and collected can be continued - new items cannot be subjected to tax by notification after 26-1-1950.
By a notification of 2-6-1921 the Town Municipal Committee Amravati imposed a terminal tax on certain goods imported into or exported from the Municipal area by rail. Under the scheme of distribution of taxing powers between the Provinces and the Central Government under the Government of India Act, 1935, terminal tax s on good; carried by rail were assigned exclusively to the Federal Centre under Item 58 of List I to Schedule VII, but the validity of the levy and collection in force before 1-4-1937 was continued by section 143. The taxes thus imposed by the pre-Constitution Notification could be legally levied and collected after the Constitution by reason of Article 277. On 1-12-1959 a notification was issued by which new items were subjected to tax at the same rates. It was contended that the tax imposed subsequent to 26-1-1950 was not valid on the ground of legislative incompetency which was not saved by Article 277.
Held: The levy of tax after 26-1-1950 was illegal. 1961 JLJ 792 Confirmed. [Paras 5-10
Judgment
AYYANGAR, J. : These three appeals which are on certificates of fitness granted by the High Courts- the first by the High Court of Bombay at Nagpur and the two others by the High Court of Madhya Pradesh-raise a common question as regards the construction of Art. 277 of the Constitution and the validity of certain terminal taxes imposed by the respective appellant municipal authorities under notifications issued under Ch. IX of the C. P. and Berar Municipalities Act, 1922, subsequent to the coming into force of the Constitution, and so have been heard together.
2. Civil Appeal 598 of 1962 is an appeal from the High Court of Bombay at Nagpur has been filed by the Municipal Committee of Amravati against a decision of the High Court allowing the 1st respondent s petition under Art. 226 of 227 of the Constitution. The Municipal Committee of Amravati has been established under the C. P. and Berar Municipalities Act, 1922 (C. P. and Berar Act II of 1922) hereinafter referred to as the Act. Chapter IX of the Act deals with the imposition, assessment and collection of taxes which might be imposed by the Municipal Committee. Section 66 specifies the taxes which, subject to the provisions of the Chapter, the Committee may from time to time impose. Its first sub-section specifies in its several clauses 15 varieties of taxes and among them is cl. (o) which reads :
"The terminal tax on goods or animals imported into or exported from the limits of the Municipality provided that terminal tax under this clause and an octroi under cl. (e) shall not be in force in any municipality at the same time;"
The other sub-clauses which are relevant for the consideration of the question arising in the appeal are sub-cls. (2), (3) and (4) Section 66 and they read :
"(2) The State Government may, by rules made under this Act, regulate the imposition of taxes under this section, and impose maximum amounts of rates for any tax.
(3) The first imposition of any tax specified in sub-sec. (1) shall be subject to the previous sanction of the State Government.
(4) Subject to the control of the State Government, a committee may abolish any tax already imposed and specified in sub-sec. (1) cls. (a) to (m) inclusive, or may, within the limits imposed under sub-sec. (2), vary the amount or rate of any such tax :
Provided that in the case of any municipality indebted to the Government, the abolition of any tax or a reduction in the amount or rate thereof shall be subject to the previous sanction of the State Government."
Section 67 lays down the procedure for the imposition of taxes and it provides :
"67. (1) A committee may, at a special meeting, pass a resolution to propose the imposition of any tax under S. 66.
2. When such a resolution has been passed, the committee shall publish in accordance with rules made under this Act a notice defining the class of persons or description of property proposed to be taxed, the amount or rate of the tax to be imposed and the system of assessment to be adopted.
(3) ....... ...... ......
(4) ....... ...... ......
(5) The State Government, on receiving such proposals may sanction or refuse to sanction the same or sanction them subject to such modifications as it may think fit, or return them to the committee for further consideration.
(6) No modification affecting the substance shall be made under sub-sec. (5), unless and until the modification has been accepted by the committee at a special meeting.
(7) .... .... .... ....
(8) A notification of the imposition of tax under this section shall be conclusive evidence that the tax has been imposed in accordance with the provisions of this Act."
The procedure for the variation of the taxes is to be found in S. 68 and it reads :
"68. (1) A committee may, at a special meeting pass a resolution to propose the abolition of any tax already imposed, or a variation in the amount or rate thereof.
(2) ...... ...... ....
(3) If the proposal is to increase the amount or rate of any tax the committee shall publ
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