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Andhra Pradesh High Court
Judges : A.GOPAL RAO
Shaik Sheriff - Appellant
Versus
Mahado Seetha Ram - Respondent
Decided On : 04-07-66
OCTROI - LEVY - CONSTITUTIONALITY - REASONABLENESS - PUBLIC INTEREST - FOOD - DEFINITION - HYDERABAD DISTRICT MUNICIPALITIES ACT, 1956 - HYDERABAD MUNICIPAL CORPORATION ACT - INTERPRETATION OF STATUTES IN PARI MATERIA.
Fact of the Case:
The petitioner, a businessman, challenged the levy of octroi on groundnut oil by the respondent Municipality. The petitioner contended that the levy of octroi offends Article 301 of the Constitution of India and that since the Municipality failed to prove that octroi, which puts restriction on the freedom of trade, is reasonable and that it is in the interest of public, the relevant provisions authorising the Municipality to levy octroi ought to be struck down as unconstitutional.
Finding of the Court:
The court held that the levy of octroi is not an infringement of the freedom of trade and commerce conferred by Article 301 of the Constitution of India. The court further held that even if the levy of octroi is regarded as a restriction on the freedom of trade, the requirements of Article 304 (b) of the Constitution are satisfied in this case. The court also held that the groundnut oil is food within the meaning of the Hyderabad District Municipalities Act, 1956.
Issues: 1. Whether the levy of octroi is an infringement of the freedom of trade and commerce conferred by Article 301 of the Constitution of India? 2. Whether the levy of octroi is reasonable and in the public interest as required by Article 304 (b) of the Constitution? 3. Whether groundnut oil is food within the meaning of the Hyderabad District Municipalities Act, 1956?
Ratio Decidendi: 1. The court held that the levy of octroi is not an infringement of the freedom of trade and commerce conferred by Article 301 of the Constitution of India because: a. The provisions relating to octroi do not profess to regulate or control "trade or commerce." b. The said provisions and the transactions on which they operate are not actually commercial dealings or the trade dealings because they do not prevent or restrict the free-flow of goods for commercial or trade purposes. c. The provisions have come into force for the purpose of levying a tax on goods, which are brought in local areas for use, consumption or sale therein. d. The tax is meant for the bona fide purpose of collecting revenue and that it does not put heavy burden on the trade so as to call it an infringement of the freedom of trade, and that it does not offend Article 301. 2. The court held that even if the levy of octroi is regarded as a restriction on the freedom of trade, the requirements of Article 304 (b) of the Constitution are satisfied in this case because: a. The restriction is required in the public interest as the octroi fetches considerable revenue to the local bodies, which is utilized for providing civic amenities to the public of local area. b. The tax is reasonable as the rates at which different commodities are taxed and the scheme of refund make the octroi a tax tolerable for the trade and in no way it can be argued that it puts heavy burden on the freedom of trade. 3. The court held that the groundnut oil is food within the meaning of the Hyderabad District Municipalities Act, 1956 because: a. The definition of `food' in the Hyderabad Municipal Corporation Act, which is in pari materia with the Hyderabad District Municipalities Act, includes every article other than drugs and water used by human beings for purposes of eating or drinking, any material or substance used or admixed in the composition, preparation, favouring or colouring of such article and all confectionery, spices and condiments. b. The same meaning therefore, will have to be given to the term `food' in the District Municipalities Act although there is no such definition appearing in the Act.
Final Decision: The court dismissed the writ petitions challenging the levy of octroi and held that the groundnut oil is food within the meaning of the Hyderabad District Municipalities Act, 1956.
( 1 ) THESE three Writ Petitions and the civil revision petition raise common questions of law. They can, therefore, be disposed of by a common judgment. Since the facts of W. P. No. 163/65, if state, would cover all the points raised, I will briefly narrate the facts of that Writ Petition.
( 2 ) THE petitioner is a businessman doing business at Adilabad in groundnut oil and other commodities. The respondent, City Municipality, Adilabad, issued a letter No. 40, dated 31-7-1963 informing the petitioner that octroi is leviable on the articles, list of which was appended to it. Of 52 items groundnut oil is one such item. The petitioner thereupon took objection that no octroi can be levied on groundnut oil. But the Municipality maintained that octroi was legally leviable and started levying it from 1-5-1963.
( 3 ) THE petitioner carried the matter in appeal to the District Judge, Adilabad. The learned District Judge allowed the appeal and held that groundnut oil and some other articles mentioned in the judgment are not subject to levy of octroi. He, however, held other articles to be chargeable in his judgment dated 7-10-1963. It is this judgment which is sought to be quashed in W. P. Nos. and 40/64 by the City Municipality, Adilabad W. P. Nos. 163/65 and C. R. P. No. 1661 of 1963 dispute the very levy of octroi as that was held against the petitioners by the learned District Judge.
( 4 ) THE principal contentions raised by Mr. K. Jagannadha Rao, the learned Counsel for the Writ petitioner in W. P. No. 163/65 are that the levy of octroi offends article 301 of the Constitution of India and that since the Municipality failed to prove that octroi, which puts restriction on the freedom of trade, is reasonable and that it is in the interest of public, the relevant provisions authorising the Municipality to levy octroi ought to be struck down as unconstitutional. In the alternative, it was contended that the groundnut oil is not food within the meaning of the Act and that no octroi can be levied.
( 5 ) ALTHOUGH the term octroi is not used in the Constitution, the tax itself, which goes by that name, is covered by entry 5 2 of the State List, which mentions "taxes on the entry of goods into a local area for consumption, use or sale therein. " The peculiar requirement of levy of octroi is that the goods must not only enter the local area, but must be for the purpose of consumption, use or sale therein.
( 6 ) BEARING in mind the above special feature of octroi, its effect on the freedom of trade, commerce and intercourse, conferred by Art, 301 of the Constitution of India, required to be considered. Two questions arise for determination in this respect. The first is whether the levy of octroi per se is an infringement of freedom of trade and commerce conferred by Article 301 and secondly, if it is an infringement of such freedom of trade and commerce, is the tax reasonable and required in public interest as required by Article 304 (b) of the Constitution.
( 7 ) CONSIDERING the first question, the larger problem, which has to be necessarily answered is whether the freedom provided in Art. 301 for trade commerce and intercourse is merely freedom from restrictions, practical or total, on the free-flow of commodities or does it include freedom from taxation also, which may indirectly or incidentally affect the freedom of trade and commerce by reason of the financial burden, it necessarily imposes. It is clear that, if a tax is not regarded as amounting to infringement of the freedom of trade, commerce and intercourse at all, there would be no question of the tax having to be justified as reasonable or is in the public interest as is visualised by Article 304 (b ).
( 8 ) IT must also be remembered in this connection that both Articles 301 and 304 (b) contemplate the freedom not only of inter-State trade, but also of intra-State trade. No decision was brought to my notice, which determines as to what will amount to infringement o
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