JUDGMENT

R. B. MISRA, J.:—The present appeal by special leave is directed against the judgment of the High Court of Orissa dated 5th January 1977 (reported in 1977 Tax LR 2177) dismissing a petition under Arts. 226 and 227 of the Constitution for quashing imposition of octroi under S. 131 (1) (kk), of the Orissa Municipal Act. 1950 (hereinafter referred to as the Act) and for a declaration that the notifications dated 31st July 1973 and 12th August. 1975 issued by the State Government in exercise of powers vested under S. 4 of the Act are illegal and unenforceable and for a further declaration that the Octroi Bye-laws of the Jharsuguda Municipal Council are also void and inoperative.

2. Jharsuguda Municipality. respondent No. 1. is a municipality incorporated under the Act. In. March 1962 the State Government accorded sanction for the imposition of octroi in terms of S. 131 (1) of the Act. A set of octroi bye-laws was framed by the Municipal Council in terms of S. 388 of the Act and the same were. also approved by the State Government in exercise of powers under S. 390 of the Act on 19th March. 1968. Octroi was levied for the first time after 31st March 1962 when the State Government accorded sanction under S. 131 (1) (kk) of the Act.

3. The appellant is a company duly incorporated under the Companies Act. 1956 having its mills located at village Ektali under the Jharsuguda police station in District Sambalpur, Orissa. The said area of the village was included within the Ektali Panchayat. The company mainly carries on spinning of cotton which in the manufacturing process is transformed from loose fibres into finished yarn.

4. The area under the Ektali village in which the appellants factory was located was constituted. along with other villages as a Grama by a declaration made under S. 3 of the Orissa Grama Panchayat Act. 1964. On or about 25th March. 1970 Jharsuauda Municipality passed a resolution for the inclusion of Ektali and other villages in the Jharsuguda Municipality and thus extending the area of the said Municipality. Against the proposed extension the appellant made a representation to the State Government inter alia on the ground that the said village Ektali could not under the relevant rules be included in the Municipality under S. 4 (1) (c) of the Orissa Municipal Act. 1950 in view of the proviso to S. 4 (1) which contemplates that a declaration shall not be made under this sub-section unless the State Government are satisfied that two-thirds of the adult male population of the town to which it refers are chiefly employed in pursuits other than agriculture and that such a town contains not less than 10.000 inhabitants and an average number of not less than 1000 inhabitants to a square mile of the area of such a town. The appellant alleged that the male population of the said village Ektali was 2640 as per 1971 census report out of which only 1586 were chiefly employed in pursuits other than agriculture and thus two-thirds of such male population were not employed in non-agricultural pursuits.

5. The State Government, however, by a notification dated 31st July 1973 declared their intention under S. 4 (1) (c) of the Municipal Act. 1950 to include within the Jharsuguda Municipality, the local area of a number of villages including the village Ektali. By the said notification published in Orissa Gazette Extraordinary dated 22nd August, 1973 the Government invited objections within six weeks from the date of publication. The appellant did file objection to the said notification. Objection was also filed by Grama Panchayat of Ektali to the effect that the Ektali Grama was duly constituted by the State Government in Community Development and Panchayat Raj Department in exercise of powers under S. 3 (1) of the Orissa Grama Panchayat Act and in the absence of any notification under S. 3 (2) and S. 149 of the Grama Panchayat Act. village Ektali still continues to be a Grama.

6. The objections were examined by the District Magi