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1964 Supreme(SC) 166
SUPREME COURT OF INDIA
P.B. GAJENDRAGADKAR, C.J.I., M. HIDAYATULLAH, K.C. DAS GUPTA, J.C. SHAH AND RAGHUBAR DAYAL, JJ.
The Poona City Municipal Corporation, Appellant
Versus
Dattatraya Nagesh Deodhar, Respondent;
Fulchand Purshottam Shah, Intervener.
Civil Appeal No. 582 of 1961. 556
Advocates appeared
Mr. S. G. Patwardhan, Senior Advocate, (Mr. S. B. Tarkunde, Advocate and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., with him), for Appellant; Mr. A. V. Vishwanatha Sastri, Senior Advocate, (M/s. M. R. Kotwal and Naunit Lal, Advocates, with him), for Intervener.
A.V.VISHWANATHA SASTRI, J.B.DADACHAN, M.R.KOTWAL, NAUNIT LAL, O.C.MATHUR, Ravindra Narayan, S.B.TARKUNDE
A tax not specifically authorized by the governing statute and prohibited by constitutional limits is invalid. Statutory limitation periods for acts done "in pursuance" of an act do not apply to acts expressly prohibited by that act.
Headnote:(A) Bombay Provincial Municipal Corporation Act, 1949 - Sections 127, 466, 487 and Appendix IV, Clause 5(a) - Validity of tax on octroi refund - Deduction of 10% from refund amount - Whether such deduction is valid under the new Act - Whether the levy can be treated as a fee or protected by transitory provisions - Whether the suit is barred by limitation. (Paras 10-21)
(B) Locus Standi - Person producing receipted import bill and export certificate as per rules is a "claimant" and entitled to sue for the full refundable amount. (Paras 19-20)
(C) Limitation - Section 487 - Notice requirement applies only to acts done in pursuance or execution of the Act - An act plainly prohibited by the Act cannot be claimed to be purported to be done in pursuance of the Act. (Para 21)
Facts of the case:
A municipal corporation levied a 10% deduction from octroi duty refunds under specific rules. After a new municipal corporation act came into force, a claimant challenged the validity of this deduction, asserting it was no longer legally sustainable. The corporation contended the deduction was valid, the claimant lacked standing, and the suit was barred by limitation.
Findings of Court:
The 10% deduction, previously treated as a tax under an older act, is invalid under the current act as it is not among the authorized taxes and is specifically prohibited by the statutory limitations on taxation powers. It cannot be classified as a fee due to the absence of necessary standing orders, nor is it protected by transitory provisions. The claimant is entitled to sue as the person who fulfilled the procedural requirements for the refund. The suit is not barred by limitation because the illegal levy was not an act done in pursuance of the act.
Issues: Whether the 10% deduction from octroi refunds was valid after the commencement of the new municipal act; whether the agent who processed the refund claims had the standing to sue; and whether the suit was barred by the statutory notice period for suits against the corporation.
Ratio Decidendi: A tax not specifically authorized by the governing statute and prohibited by a categorical bar on imposing taxes beyond the state's constitutional power is invalid. Transitory provisions cannot save a tax that is inconsistent with the new act. Furthermore, statutory limitation periods applying to acts done "in pursuance" of an act do not apply to acts that are expressly prohibited by that same act.
Result: Appeal dismissed.
DAS GUPTA, J. :
This appeal is by the defendant, the Municipal Corporation for the City of Poona, in a suit for recovery of money. The Poona Municipality was formerly a Municipality under the BOMBAY DISTRICT MUNICIPAL ACT of 1901 (Act 3 of 1901). In 1925 it became a Municipal Borough under the BOMBAY MUNICIPAL BOROUGHS ACT of 1925 (Act XVIII of 1925). Later, under the BOMBAY PROVINCIAL MUNICIPAL CORPORATION ACT , 1949, the Municipal Authority for the City of Poona became a Corporation known by the name of Municipal Corporation for the City of Poona.
2. It appears that from the time when the City was a Municipality under Act 3 of 1901, an octroi duty was being levied on goods imported within the Municipal limits of the City. When such goods were exported out of the City Municipal limits within specified periods, refund used to be given in respect of the duty so recovered.
3. The respondent has for many years been carrying on business of securing refund of octroi duty on behalf of persons who had paid the duty and were entitled to refund. In respect of the period from the 15th February 1950 to the 14th September 1950, the respondent made a claim on behalf of his principals, for the refund of Rs. 73,650/- to which, according to him, they were entitled. The Municipality however paid to him only 90% of this amount. The remaining 10% was deducted in accordance with R. 18(3) of the Octroi Rules which had been framed by the Municipal Authorities.
4. The respondent then represented to the Corporation that with effect from the 15th February 1950, the date from which the Corporation came into existence under the Provincial Municipal Corporation Act, 1949, this deduction of 10% had become invalid in law and claimed that this amount should be paid to him. The Corporation however refused to concede this claim. The respondent then brought this suit for recovery of Rs. 7,364/ 15/ - (being 10% of Rs. 73,650/ - the amount alleged to have been illegally withheld) with interest.
5. The main defence raised by the Corporation to the plaintiffs claim was that the deduction of 10% was legally valid. It was further urged that, in any case, the plaintiff who was not the person who paid the amount, was not entitled to bring the suit. Lastly, it was contended that the suit was barred by limitation.
6. The Trial Court held that the plaintiff was entitled to bring the suit and also that it was not barred by limitation. It held however that the deduction of 10 per cent from what was paid as tax was valid. Accordingly, it dismissed the suit.
7. On appeal by the plaintiff, the District Court, Poona held, disagreeing with the Trial Court, that the deduction of 10% of what had been realised was not valid in law. It was however of opinion that the plaintiff was not entitled to bring such a suit. It was also of opinion that the suit was barred by limitation. In this view, it dismissed the appeal.
8. The plaintiff then appealed to the High Court of Judicature at Bombay. The High Court has found in favour of the plaintiff on all the three points raised. It held that the deduction of 10% was invalid in law, that the plaintiff was entitled to sue, and that the suit was not barred by limitation. Accordingly, the High Court allowed the appeal, and made a decree in favour of the plaintiff for Rs. 7,364/15/- with interest thereon at 4% from the date of the suit and interest at the same rate from the date of the judgment, with costs throughout.
9. The appellant Corporation challenges the correctness of the High Court s decision on all the three points.
10. The principal question for decision in this appeal is whether the deduction of 10 per cent as provided for in Rule 18(3) is invalid at least from the 15th February 1950. The Rule runs thus :-
"A deduction often per cent shall in all cases be made before refunding the amount of octori duty on exportation of goods either in transit as per rule 13 or otherwise under Rule 11(2)."
11. It is necessary to mention here that the le
