Judgment

SHELAT, J.:- In 1948, several States of the then known Kathiawar entered into a Covenant and formed thereunder the United States of Saurashtra later called the State of Saurashtra. Article 9 (3) of the Covenant empowered the Rajpramukh to promulgate ordinances for the peace and good government of the State and provided that, when so promulgated, they would have the force of law as Acts passed by the legislature of the State. Pursuant to the said power, the Rajpramukh promulgated Ordinance 40 of 1949 adopting and applying the Bombay Municipal Boroughs Act, XVIII of 1925 to the State of Saurashtra. The Rajpramukh thereafter promulgated the Saurashtra Terminal Tax and Octroi Ordinance 47 of 1949, which was brought into force with effect from August 31, 1949. The object of the Ordinance was to enable the State Government to levy and collect octroi duty in the towns and cities of the State and to pass on the duty so collected by it to those cities and towns until municipalities therein were constituted under the Act and those municipalities made by laws and rules enabling them to levy and collect octroi and other usual municipal taxes. To that end, Section of the Ordinance empowered the Government to impose octroi duty in towns and cities specified in Schedule I thereof, which Schedule included the town to Rajkot. Section 4 authorised the Government to make rules for the imposition and collection of octroi duty. In exercise of the said power, the State Government made rules for the Rajkot Borough Municipality by a notification dated December 5, 1949. These rules were brought into force with effect from December 1950. Under these rules, the respondent-Municipality collected octroi duty until August 1, 1953 when it framed its own rules and bye-laws in exercise of the power so to do under the Act. On the respondent-Municipality bringing those rules and bye-laws into operation, the Government issued a notification dated September 10, 1956 deleting the name of the respondent-Municipality from Sch. I to the said Ordinance No. 47 of 1949. The result contemplated by the said notification was that on and from August 1, 1953 it would be the rules and bye-laws framed by the respondent-Municipality, and not the State rules, which would be applicable in relation to octroi duty and other taxes leviable by the respondent-Municipality.

2. The appellant-firm was at the material time carrying on business as dealers in grains and was for that business importing from time to time grains and other commodities with the limits of the respondent-Municipality. The appellant-firm was served with two bills dated February 10, 1959 for octroi duty payable by it for the period from February 17, 1954 to March 28, 1954 and from April 5, 1954 to November 10, 1954, and also a demand notice therefor dated March 9, 1959.

3. The appellant-firm thereupon filed a suit, being Suit No. 186 of 1959, challenging the validity of the rules and bye laws made by the respondent-Municipality on the ground of non-compliance of the procedure laid down in the Act for making such rules and bye-laws and following upon that challenge disputed the legality of the said bills and the demand notice. In the alternative, the appellant-firm contended that the Municipality had maintained under Section 99 of the Act a current account in its name in respect of octroi duty payable by it, but as that account had not been settled within a month as required by that section, the respondent-Municipality had no power to issue the said bills, and the demand notice or to recover the amounts thereunder by distress warrant permissible under Chapter VIII of the Act. The appellant-firm prayed for a declaration of the illegality of the said rules and bye-laws, the said bills and the said demand notice, and for an injunction against the respondent-Municipality restraining it from recovering octroi duty under the said bills. It also pleaded that as the name of the respondent-Municipality had been deleted