( 1 ) INTRODUCTORY facts: In order to appreciate the contours of controversy between the parties relevant introductory facts are required to be noted at the outset. The appellant in First Appeal No. 48 of 1974 is Dhrangadhra Municipality which is at present functioning under the Gujarat Municipalities Act but which was earlier a district Municipality under the Bombay District Municipal Act 1901 The respondent in the first appeal is Dhrangadhra Chemical Works. Dhrangadhra Municipality was the original defendant while Dhrangadhra Chemical Works was the original plaintiff in Civil Special jurisdiction suit No. 76 of 1963 which was filed in the Court of Civil Judge (S. D.) Surendranagar to recover Rs. 6 29 66 on the ground that the said amount was illegally retained and collected by the defendant Municipality from the plaintiff towards octroi. Special Civil Application No. 1729 of 1977 has been moved by the plaintiff directly in this Court against the State of Gujarat and defendant-Municipality challenging the vires of Gujarat Act 6 of 1978 viz. Dhrangadhra Municipality (Imposition of tax) Validation Act 1977 For the sake of convenience we shall refer to Dhrangadbra Municipality as the defendant and Dhrangadhra Chemical Works as the plaintiff in the later part of this judgment.

( 2 ) THE plaintiff alleged in its aforesaid suit that the defendant had no authority to levy or recover octroi from the plaintiff and that the action of the defendant in recovering and retaining octroi from the plaintiff was illegal and ultra vires. The plaintiffs case was that it is a company registered under the Indian Companies Act and is carrying on business of manufacturing Soda Ash and other Chemicals. For that purpose it is having its factory within the Municipal limits of defendant Municipality at Dhrangadhra town in Surendranagar District. That Bombay District Municipal Act 1901 was applied to the merged territories of Saurashtra from 1-7-1949 and the defendant Municipality has been constituted as District Municipality under the said Act from 1949. It is the case of the plaintiff that by Ordinance dated 27-8-1949 published in the Saurashtra Government Gazette part I Sec. 1 the then Raj Pramukh had issued the Saurashtra Terminal Tax and Octroi Ordinance under the said Ordinance it was only the Government which can impose octroi in the cities and towns specified in Schedule I of the Ordinance Dhrangadhra town was one of the towns listed Octroi on the goods entering the limits of Dhrangadhra town can be levied by the State and not by the Municipality. The plaintiff raised various other contentions in the plaint for supporting its case that the defendant Municipality had no power to levy octroi on the goods brought by the plaintiff within the Municipal limits and therefore the said levy and collection of octroi were ultra vires the provisions of the Ordinance as well as Bombay District Municipal Act 1901 For the purpose of the present proceedings it is not necessary to refer to in details diverse contentions centering round the levy of octroi by the defendant Municipality from the plaintiff. As will be seen hereafter these proceedings can be disposed of on a short point which will become obvious from the discussion in the later part of this judgment. It appears that earlier the plaintiff had filed a writ petition being Special Civil Application No. 769 of 1962 in this Court against the defendant Municipality challenging the right of the defendant to recover octroi and that petition was dismissed by this Court. However the plaintiff preferred Appeal No. 1103 of 1967 in the Supreme Court that appeal came to be allowed by the Supreme Court decision whereof is reported in Dhrangadhra Chemical Works Ltd. v. State of Gujarat AIR 1973 SC 1041.

( 3 ) IT is the further case of the plaintiff that earlier various amounts were paid as deposits under protest to the defendant and these deposits were ultimately appropriated towards octroi dues by t