Judgement

HANSARIA, J.:- The journey to decide the fate of these appeals has to start from 1881 as it was on 12 th March of that year that Notification No. 165 was gazetted stating inter alia that octroi duties in the Cantonment of Poona would be imposed at the rates"for time being" leviable and in respect of the several articles "for the time being" dutiable in the Municipality of Poona, when such articles would enter into the cantonment from any place situate without the limits of the said Municipality. The Poona Cantonment Board authorised the Municipality and thereafter to divide the proceeds as agreed upon. The municipality of Poona having become a Corporation under the Municipality Corporation 1950, it continued to collect octroi on the strength of the aforesaid Notification and agreement . The respondents challenged the legality of the collection of the octroi made as per 1963 Schedule to the Octroi Rules framed by the appellant. This was done by approaching the Bombay High Court by filing petitions under Article 226 of the Constitution which have come to be allowed by the impugned judgment. Hence these appeals by the Municipal Corporation for the City of Pune hereinafter referred as the Municipal Corporation.

2. The challenge to the collection was broadly on two counts :-

(1) The 1881 Notification does not in fact permit the collection ; and

(2) even if factually the Notification were to so permit, the appellant could not have done so in law.

3. The High Court accepted both the contentions, the correctness of which has been assailed in these appeals.

Factual matrix

4. Poona Cantonment (the Cantonment) came into existence in 1817. The Bombay Municipal Act, 1872, provided for levy of taxes including octroi. Similar was the provision in Bombay District Municipal Act, 1873. Poona City Municipality started levy and recovery of octroi from 1875-76. The Cantonments Act, 1880 was enacted on 5th February, 1880. Section 21 of this Act permitted imposition by the Local Government, with the previous sanction of the Governor-General in Council, by notification in the Official Gazette, any tax which could be imposed in a Municipality. Section 22 of this Act permitted the Local Government by notification in Official Gazette to apply and adapt to any cantonment provisions and rules in force under any enactment for assessment and recovery of any tax in Municipality.

5. The Government of Bombay by its Resolution No. 234 adopted on 26-1-1881 approved the levy of octroi in the Cantonment on the same articles and at the same rate as in Poona City; and it approved the proposal to divide the proceeds on some terms, the details of which are not required to be noted. The Government of India conveyed its sanction to the levy of octroi in the Cantonment by its telegram dated 4-3-1981. Thereafter came the aforesaid Notification of 21th March, 1881 and the Municipality started collection of octroi duties for the Cantonment from that year itself.

6. The aforesaid arrangement smoothly continued till 1912 by which year the Cantonments Act of 1910 had come into force. The Cantonment then wanted a new method of apportionment as it thought that the existing agreement relating to apportionment was unjust to it. The State Government did not, however, agree and the disagreement was conveyed 2858 to the Cantonment. The Municipality proposed to revise its Schedule of Octroi Rules in 1917 by enhancing the same, which was opposed by the Cantonment Committee. On the matter being examined by the Government, it approved the revised Octroi Schedule as mentioned in its Order No. 6649 dated 25 th September, 1918. This Order required the General Officer Commanding of the Cantonment to be informed that the Government saw no reason to modify its earlier decision.

7. In the meantime the Government had issued four Notifications bearing Nos. 4160 to 4163 dated 17th June, 1981 which were gazetted on June 20, 1918. Notification No. 4160 had been issued in exercise of powers conferre