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HIGH COURT OF BOMBAY
SHAH, GOKHALE, JJ.
The Municipality of Chopda
Versus
Motilal Manekchand
A. F. O. D. No. 62 of 1954, from decision of Civil Judge, Sr. Divn., Jalgaon, in Special Civil Suit No. 32 of 1952.
Decided On : 10-09-1957
TAXATION - Cotton Manufacturing Tax - Levy by Municipality - Competence - Bombay District Municipal Act (3 of 1901), Ss. 59, 167-A - Government of India Act, 1935, S. 142-A - Constitution of India, Art. 276 - Whether the cotton manufacturing tax levied by the Chopda Municipality is valid and within the limits prescribed by Art. 276 of the Constitution.
Fact of the Case:
The Chopda Municipality levied a cotton manufacturing tax at the rate of one rupee per bale of cotton full-pressed within the municipal limits. The tax was challenged by the owner and manager of a pressing factory on the grounds that it was ultra vires, contravened S. 142-A of the Government of India Act, 1935, and Art. 276 of the Constitution, and that the suit was maintainable without serving the statutory notice under S. 167-A of the Bombay District Municipal Act.
Finding of the Court:
The court held that the cotton manufacturing tax levied by the Municipality was a tax on trade and subject to the ceiling provided by Article 276 of the Constitution. However, the court also held that the plaintiffs were not entitled to an order for refund of the tax already paid by them under protest, as the suit was barred by limitation under S. 167-A of the Bombay District Municipal Act.
Issues: 1. Whether the cotton manufacturing tax levied by the Chopda Municipality is a tax on trade and subject to the ceiling provided by Art. 276 of the Constitution? 2. Whether the plaintiffs are entitled to an order for refund of the tax already paid by them under protest?
Ratio Decidendi: 1. The court held that the cotton manufacturing tax levied by the Municipality was a tax on trade and subject to the ceiling provided by Article 276 of the Constitution, as it was imposed upon the manager of the pressing factory and was in respect of a skilled occupation which is not of the nature of a learned profession. 2. The court held that the plaintiffs were not entitled to an order for refund of the tax already paid by them under protest, as the suit was barred by limitation under S. 167-A of the Bombay District Municipal Act, which provides that a suit will not lie against a Municipality in respect of any act done in pursuance or execution or intended execution of the Act, unless it is commenced within six months next after the accrual of the cause of action and until the expiration of one month after notice in writing has been delivered or left at the office of the Municipality.
Final Decision: The court modified the decree passed by the trial Court and deleted paragraphs 2 and 3 of the decretal order. For the first paragraph of the decretal order, the court substituted the following: "It is hereby declared that the Municipality of Chopda is not entitled to levy from the plaintiffs the Cotton Manufacturing Tax under the Rules framed by the Municipality and brought into operation on 1-07-1950 at a rate exceeding Rs. 250 per annum."
SHAH, J. :- In this appeal, the question as to the competence of the Municipality of Chopda in the district of East Khandesh to levy under the Bombay District Municipal Act a tax designated the "cotton manufacturing tax at the rate of one rupee per bale of cotton full-pressed within the municipal limits of Chopda, falls to be determined.
2. The Chopda Municipality is declared to be a District Municipality under the Bombay District Municipal Act (Act 3 of 1901) by the Government of Bombay. By S. 59 of the Act, the Municipality is entitled, subject to the general or special orders which the State Government may pass in that behalf, to impose for the purposes of the Act the taxes specified in that section. In 1919 the Municipality imposed a cotton manufacturing tax, with the sanction of the Provincial Government, at the rate of one anna for every bale of cotton pressed within the municipal limits, and the tax was made payable at the time when the bales were pressed by the owner (of the bale) to the tax collecting Karkun. Sanction to the levy of this tax was accorded by the Government of Bombay as from 7-4-1920. On 25-3-1924, the Commissioner, Central Division, sanctioned enhancement of the tax to eight annas on each pressed cotton bale, and the tax continued to remain payable by the owner. In 1946 the rules framed by the Municipality under S. 46 (1) of the Bombay District Municipal Act were modified, and the tax was made payable by the manager of the pressing factory within fifteen days from the presentation of the bill demanding payment of the tax. The tax, however, continued to be leviable at the rate of eight annas for every bale of cotton full-pressed or repressed within the municipal limits of Chopda. Under the bye-laws of the Municipality duty to furnish information about the pressing of bales was imposed upon the managers of the pressing factories. In 1949 the rules were again amended and the Municipality, with the sanction of the State, enhanced the tax to one rupee for every bale of cotton full-pressed within the municipal limits of Chopda. Certain other modifications were made in the rules, but the liability to pay the tax continued to remain imposed upon the managers of the pressing factories. The amendment of the rules came into operation as from 1st July, 1950.
3. For the period between 29-12-1950 and 29-5-1951 the Municipality of Chopda presented to the manager of "the Motilal Manekchand Press. Factory bills for payment of Rs. 6,580 as cotton manufacturing tax at the rate of one rupee for bales of cotton pressed or re-pressed within that period. The manager of the factory paid the amount under protest. The owner of the factory Motilal Manekchand and its manager Dattatraya Prabhakar Tare then served a notice upon the Municipality on 20-5-1952 challenging the validity of the tax and calling upon the Municipality to refund the tax already paid under protest and to refrain from realising the tax demanded. The Municipality having failed to carry out the requisition, the owner of the factory Motilal Manekchand and the Manager Dattatraya Prabhakar Tare filed Civil Suit No. 32 of 1952 in the Court of Civil Judge, Senior Division at Jalgaon against the Municipality of Chopda for a decree for refund of Rs. 8,328 with interest of Rs. 676-3-0 as interest due thereon or, in the alternative, for refund of Rs. 7,828 and Rs. 631-3-0 as interest due thereon, and for an injunction restraining the municipality from levying and realising the cotton manufacturing tax. The plaintiffs pleaded that the levy of the tax was illegal and ultra vires, because (1) the plaintiffs had no ownership or interest in the cotton bales pressed in their factory, and (2) the levy of the cotton manufacturing tax contravened S. 142-A of the Government of India Act, 1935, and Art. 276 of the Constitution in that the amount demanded as tax from the plaintiffs was in excess of the maximum permissible.
4. The suit was resisted by the Municipality of Chopda
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