The power of the State Government under section 105 of the Maharashtra Municipalities Act, 1965 is not as wide as it is claimed to be. The power can be exercised only in the matter of imposition of the tax and does not extend to a purpose other than the imposition of the tax.

Headnote:
OCTROI - LEVY - ROCK PHOSPHATE - WHETHER A CHEMICAL MANURE OR NOT - WHETHER LIABLE TO BE TAXED UNDER ENTRY NO. 85 AS A CHEMICAL MANURE OR UNDER RESIDUARY ENTRY NO. 86 - CONSTRUCTION OF ENTRIES 85 AND 86 OF SCHEDULE I TO THE MAHARASHTRA MUNICIPALITIES (OCTROI) RULES, 1968 - WHETHER CIRCULAR ISSUED BY STATE GOVERNMENT DIRECTING MUNICIPAL COUNCIL TO RECOVER OCTROI ON ROCK PHOSPHATE UNDER ENTRY NO. 86 IS VALID - WHETHER SUCH CIRCULAR IS AN ORDER CONTEMPLATED BY SECTION 105 OF THE MAHARASHTRA MUNICIPALITIES ACT, 1965 - SCOPE OF POWER OF STATE GOVERNMENT UNDER SECTION 105 - WHETHER POWER UNDER SECTION 105 CAN BE EXERCISED TO OVERRIDE ALL OTHER PROVISIONS OF THE ACT - WHETHER POWER UNDER SECTION 105 CAN BE EXERCISED TO VARY THE RATE OF TAX ON AN ARTICLE ACCORDING TO THE USE TO WHICH IT WILL BE PUT - WHETHER CIRCULAR DATED 6TH AUGUST 1969 ISSUED BY STATE GOVERNMENT IS IN EXCESS OF POWER UNDER SECTION 105.
Fact of the Case:

The petitioners, manufacturers of fertilizers, imported rock phosphate from abroad. The Municipal Council published an octroi schedule of their own making certain alterations in the schedule attached to the Octroi Rules and under entry No. 86, octroi was made payable on rock phospate at 2%. The petitioners challenged the rate at which octroi has been levied because, according to them, octroi should have been levied at the rate of Re. 1 per metric tonne, as rock phosphate as a chemical manure would fall within entry 85 to the schedule and they were liable to pay only Rs. 17,290.57. The Municipal Council took shelter under a circular issued by the State Government in the Urban Development, Public Health and Housing Department, being Circular No. MMA / 1069 /20444 / A dated 6th August 1969. This circular refers to the earlier Government letter No. MMR 1069/90915- Unification IV in which the Government had taken the view that rock phosphate was a chemical manure and was subject to levy of octroi under entry No. 85 of Schedule I of the Octroi Rules, 1968. According to the State Government, they had reconsidered the position and their view now was that rock phosphate, if used as a raw material for the manufacture of superphosphate, should be subject to levy of octroi under entry No. 86 of Schedule I to the Octroi Rules and otherwise it will be covered by entry No 85 of Schedule I as a chemical manure.
Finding of the Court:

The Court held that rock phosphate is a chemical manure and it would squarely fall under entry 85. The circular of the Government dated 6th August 1969 purporting to direct the Municipal Council to recover octroi on the basis of the use to which rock; phosphate was put was wholly unjustified. Thus on a true construction of entry 85, the construction placed by the State Government in the circular dated 6th August 1969 would have to be ignored. The Court further held that the power of the State Government under section 105 is not as wide as it is claimed to be. It is no doubt true that there are no words of limitation in the words of section 105, but the limitation is to be found in the words "in that behalf". The words "in that behalf" obviously refer to the duty of the Municipal Council to impose the taxes specified in section 105. In other words, the general or special order contemplated by section 105 can be issued only in the matter of imposition of the tax. The control which can be exercised by the State Government in the matter of imposition of the tax is a control which must extend to controlling the power to impose the tax and in the context of section 105, such a power could be exercised, in our view, only for the limited purpose of restraining the Municipal Council from imposing any particular tax. The width of the power does not extend to a purpose other then the imposition of the tax, but at the same time, since the power is uncontrolled, that power could be exercised at any time or from time to time. The Court also held that the circular dated 6th October 1969 by which the Municipal Council was required to recover octroi on rock phosphate under the residuary item would thus be clearly in excess of the power of the State Government under section 105 and is, therefore, liable to be quashed.
Issues: 1. Whether rock phosphate is a chemical manure or not? 2. Whether rock phosphate is liable to be taxed under entry No. 85 as a chemical manure or under residuary entry No. 86? 3. Whether the circular issued by State Government directing Municipal Council to recover octroi on rock phosphate under entry No. 86 is valid? 4. Whether such circular is an order contemplated by section 105 of the Maharashtra Municipalities Act, 1965? 5. Whether power under section 105 can be exercised to override all other provisions of the Act? 6. Whether power under section 105 can be exercised to vary the rate of tax on an article according to the use to which it will be put?
Ratio Decidendi: 1. Rock phosphate is a chemical manure and it would squarely fall under entry 85. 2. The circular of the Government dated 6th August 1969 purporting to direct the Municipal Council to recover octroi on the basis of the use to which rock; phosphate was put was wholly unjustified. 3. The power of the State Government under section 105 is not as wide as it is claimed to be. 4. The circular dated 6th October 1969 by which the Municipal Council was required to recover octroi on rock phosphate under the residuary item would thus be clearly in excess of the power of the State Government under section 105 and is, therefore, liable to be quashed.
Final Decision: Rule made absolute.

JUDGMENT

CHANDURKAR J.-The only one question which arises in this petition is whether for the purposes of the levy of octroi by Ambernath Nagarpalika Parishad (hereinafter referred to as the "Municipal Council") 'rock phosphate' falls within entry No. 85 as a chemical manure in Schedule I to the Maharashtra Municipalities (Octroi) Rules, 1968 (hereinafter referred to as the "Octroi Rules"), or whether it was liable to be taxed in the residuary entry No. 85 of the Schedule.

2. It is not in dispute that the petitioners are manufacturers of fertilizers and for that purpose, they import rock phosphate from abroad. Rock phosphate is used by the petitioners as raw material in the manufacture of superphosphate and triple superphosphate. The Municipal Council had published an octroi schedule of their own making certain alterations in the schedule attached to the Octroi Rules and under entry No. 86, octroi was made payable on rock phospate at 2%. This levy remained in force for the purposes of the Municipal Council up to 31st March 1970 and it was in accordance with the rate prescribed by the Municipal Council at 2%that octroi was demanded from the petitioners in respect of rock phosphate brought in within the municipal limits during the months of October, November and December 1969. The total duty on rock phosphate for these three months amounted to Rs. 53,674.36. The three bills in respect of the demands for these three months are filed by the petitioners as Ex. I (collectively), the bills for the months of October, November and December 1969 being dated 18th December 1969, 26th February 1970, and 28th February 1970. The petitioners challenge the rate at which octroi has been levied because, according to them, octroi should have been levied at the rate of Re. 1 per metric tonne, as rock phosphate as a chemical manure would fall within entry 85 to the schedule and they were liable to pay only Rs. 17,290.57. The petitioners, therefore, seek to have the three notices quashed on the ground of an illegal levy of the octroi duty. In addition, the petitioners also seek a direction for a refund of the amount of Rs. 12,863 on account of excess payment in accordance with the bill dated 10th December 1969.

3. The petition is strenuously opposed both on behalf of the Municipal Council and the State Government. The Municipal Council takes shelter under a circular issued by the State Government in the Urban Development, Public Health and Housing Department, being Circular No. MMA / 1069 /20444 / A dated 6th August 1969. This circular refers to the earlier Government letter No. MMR 1069/90915- Unification IV in which the Government had taken the view that rock phosphate was a chemical manure and was subject to levy of octroi under entry No. 85 of Schedule I of the Octroi Rules, 1968. According to the State Government, they had reconsidered the position and their view now was that rock phosphate, if used as a raw material for the manufacture of superphosphate, should be subject to levy of octroi under entry No. 86 of Schedule I to the Octroi Rules and otherwise it will be covered by entry No 85 of Schedule I as a chemical manure. The material pare of the circular reads as follows :-

"Government has reconsidered the question on receiving some representations and is now pleased to clarify that whenever "Rock phosphate" is used as a raw material for manufacture of Superphosphate, it should be subject to levy of octroi under entry No. 86 of Schedule I of Maharashtra Municipalities Octroi Rules, 1968, otherwise as a chemical manure it will be covered by entry 85 of Schedule I."

Both the Municipal Council and the State Government have contested the position that rock phosphate is generally used as manure and. according to them rock phosphate is essentially used as raw material for the manufacture of the fertilizers and it would, therefore, not fall under entry No. 85 and will, therefore, have to fall under residuary entry No. 86.

4. It will be convenient

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Judicial Analysis