( 1 ) THE petitioners carry on business as wholesale mer- chants within the limits of Modasa Town. The first respondent is the Modasa Nagar Panchayat and the second respondent is the State of Gujarat. The petitioners challenge in this petition the levy of octroi duty by the first respondents Panchayat under Resolution dated December 20 1975 In order to determine the merits of the challenge it would be necessary to set out a few facts.

( 2 ) THE case of the petitioners is that in the course of their business as wholesale merchants they import various goods from large commercial towns into Modasa. Modasa being the premier town of Sabarkantha District it is the centre for purchase of goods so far as the surrounding villages are concerned. Hardly ten to fifteen percent of the goods brought within the limits of Modasa according to the petitioners are meant for sale consumption or use by the ultimate consumer within the town and nearly 85 to 90 percent of the goods are reexported to different villages in the surrounding areas.

( 3 ) A meeting of the respondent Panchayat was called on November 10 1975 for transacting business as set out in the agenda fixed for the said meeting. A copy of the said agenda is annexed to the petition at Exhibit A. In all 13 items of business were set out in the agenda. Item No. 8 of the said agenda was in the following terms : to seriously and actively consider and decide about the measures to be taken for increasing the revenue of the Panchayat. Item No. 13 on the agenda was to the following effect such other business as may be brought up by the Presiding Officerthe meeting of the respondent Panchayat whose membership consists of 21 members was accordingly held on the day in question. The Chairman of the Panchayat was absent since he was indisposed and in his absence the meeting was presided over by the Vice-Chairman Punjabhai Bhikha- bhai Suthar. At the meetings it was pointed out that the income of the Panchayat was very small and that it was not possible to meet the day to day expenses of the administration out of the said income. No development projects could also be undertaken for want of funds and the Government auditor had indicated that the income of the Panchayat should be aug- mented by levying octroi. Thereupon one Ratilal Bhogilal Shah (member) proposed a resolution which was seconded by one Mahmad Husein N. Manva (another member) and under the said resolution octroi was selected as one of the taxes and statutory rules relating to the levy of octroi were also placed before the house. At that stage one of the members one Navnitlal Mathurdas Gandhi took an objection to the transaction of the said business on the ground that the meeting was called merely for considering the proposal to increase the revenue of the Panchayat and that there was no specific item on the agenda for selecting any of the taxes which could be levied under the Gujarat Panchayats Act 1961 (hereinafter referred to as the Act ). The said objection was overruled by the presiding authority and the resolution was passed by 17 against 3 members of the Panchayat. A copy of the said resolution is annexed at Exhibit B. Under the said resolution the Chairman was authorised to take necessary legal steps to enforce the tax.

( 4 ) IN due course objections were invited by the Panchayat in respect of the levy of octroi and necessary formalities were complied with it is the case of the Panchayat that out of the several objections received by it only one representation signed by about 40 merchants had totally opposed the levy of octroi. Thereafter another meeting of the Panchayat was summoned on December 20 1975 whereat all the objections were duly considered. The objectors including the petitioners and other representatives of the business commu- nity were requested to remain present and they were heard in person. There is some dispute between the parties as to what transpired at the said meeting between the objectors and