Civil Appeal No 487 of 1977
Appeal by Special leave from the Judgment and order dated the 5th January 1977 of the orissa High Court in OJC No 810 of 1976
V S Desai Parveen Kumar and Ashok Mathur for the Appellant
CV Murty K PrabhaKar Rao and CM Murty for the Respondents
RK Mehta for Respondent No 3
BD Sharma for Respondent No 2
The Judgment of the Court was delivered by MISRA J
 The present appeal by special leave is directed against the judgment of the High Court of Orissa dated 5th January 977 dismissing a petition under articles 226 and 227 of the Constitution  for quashing imposition of octroi under section 1311kk of the Orissa Municipal Act 1950 hereinafter referred to as the Act  and for  
a declaration
that the notifications dated 31st July 1973 and 12th August 1975 issued by the State Government in exercise of powers 
vested under s4 of the Act are illegal and unenforceable and for a further declaration that the octroi Bye laws of the Jharsuguda Municipal Council are also void and inoperative
Jharsuguda Municipality respondent No 1 is a municipality incorporated under the Act
In March 1962 the State Government accorded sanction for the imposition of octroi in terms of s3 of the Act  A set of octroi bye laws were framed by the Municipal Council in terms of s388 of the Act and the same were also approved by the State Government in exercise of powers under s390 of the Act on 19th March 1968
octroi was levied for the first time after 31st March 1962 when the State Government accorded sanction under s131 ikk of the Act
The appellant is a company duly incorporated under the Indian having its mills located at village Ektali under the Jharsuguda police station in District Sambalpur Orissa
The said area of the village was included within the Ektali Panchayat
The company mainly carries on spinning of cotton which in the manu  404 facturing  process is transformed from loose fibres into finished yarn
The area under the Ektali village in which the appellants  factory was located was constituted along with other villages as a Gram by a declaration made under s3 of the Orissa  Grama Panchayat Act 1964
On or about 25th March 1970 Jharsuguda Municipality passed a resolution for the inclusion of Ektali and other villages in the Jharsuguda Municipality and thus extending the area of the said Municipality
Against the proposed extension the appellant made a representation to the State Government inter alia on the ground that he said village Ektali could not under the relevant rules be included in the Municipality under s41c of the Orissa Municipal Act 1950 in view of the proviso to s41 which contemplates that a declaration shall not be made under this sub section unless the State Government are satisfied that two thirds of the adult male population of the town to which it refers are chiefly employed in pursuits other than agriculture and that such a town contains not less than 10000 inhabitants and an average number of not less than 1000 inhabitants to a square mile of the area of such a town
The appellant alleged that the male population of the said village Ektali was 2640 as per 1971 census report out of which only 1586 were chiefly employed in pursuits other than agriculture and thus two thirds of such male population were not employed in non agricultural pursuits
The State Government however by a notification dated 31st July 1973 declared their intention under s41c of the Municipal Act 1950 to include within the Jharsuguda Municipality the local area of a number of villages including the village Ektali
By the said notification published in Orissa Gazette Extraordinary dated 22nd August 1973 the Government invited objections within six weeks from the date of publication
The appellant did file objection to the said notification
Objection was also filed by Grama Panchayat of Ektali to the effect that the Ektali Grama was duly constituted  by the State Government in Community Development and Panchayat Raj Department in exercise of powers under s31 of the Orissa Grama Panchayat Act and in the absence or any notification under s31 and s149 of the Grama Panchayat Act village Ektali still continues to be a Grama
The objections were examined by the District Magistrate Sambalpur and the Revenue Division Commissioner Northern Division 
Sambalpur and the same were rejected
On 12th August 1975 notification under s433b declaring the inclusion of the said villagsa 405 including the village Ektali into Jharsuguda Municipality was issued
Soon thereafter on Ist September 1975 the said Jharsuguda Municipality sent a letter to the appellant directing it to pay octroi as per provisions of s5 of the Orissa Municipal Act
The said octroi was payable at the rate of 1 per cent ad valorem on cotton as soon as it entered the municipal check post for the purpose of its being spun into yarn
The levy or octroi duty was challenged by filing a petition under articles 226 and 227 of the Constitution on various grounds viz
a the inclusion of village Ektali in the area of Jharsuguda Municipality was illegal and ultra vires the provisions of the Orissa Municipal Act and b the levy of octroi duty at the rate of I percent ad valorem was arbitrary coercive and violative of article 301 of the Constitution and therefore the appellant prayed for quashing the notifications referred to above
The writ petition was however dismissed by a Division Bench of the Orissa High Court by its order dated 5th January
1977 The appellant filed an application under article 1331 of the Constitution for the grant of a certificate for leave to appeal to this Court which was dismissed by the High Court by its order dated 19th January 1977
The appellant has now filed the present appeal after obtaining special leave from this Court
The learned counsel for the appellant raised the following contentions 
In the absence of a notification cancelling the declaration constituting Ektali village as part of Grama it was not legally permissible for the State Government acting  under the Orissa Municipal Act 1 950 to include within the area of the municipality the area of the said Grama 2
The mandatory requirements of proviso to sub sl of s4 of the Orissa Municipal Act 1950 have not beer satisfied
The objection filed by the appellant under sub s2 of s4 has not been considered by the State Government
a The liability to octroi arises when any of the three alternatives mentioned in s311kk of the Municipal Act is satisfied viz when the goods are brought 406 within the municipal limits for i consumption ii use or iii sale
b The tax already imposed within the limits of the Municipality of Jharsuguda could not be automatically made applicable to the extended limits of the municipality without obtaining the sanction of the State Government under s1311 kh of the Act
c The rate levied is per se unreasonable and arbitrary
We take up these grounds seriatim
Admittedly village Ektali where the factory of the appellant is located was a part of the duly constituted Ektali Grama Panchayat prior to 1973 within the meaning of s3 of the Orissa Grama Panchayat Act
Sub section 1 of s3 authorises the State Government to constitute any village or group of contiguous villages as a Grama by a declaration notified in the Gazette and assign to such Grama a name which shall be of one of the villages comprised within the Grama
Subsection 2 of 53 provided that whenever the State Government deems it fit so to do they may cancel any notification in respect of a Grama under sub s 1 on may alter the area comprised in a Grama by reducing or adding to the number of villages comprised within such Grama by a declaration notified in the Gazette constituting such altered area or areas as a Grama or Gramas as the case may be
The precise contention raised on behalf of the appellant is that there was a declaration by notification for the
constitution of the Grama within the meaning of sub sl but there has been no notification as required by sub s2 of s3 for taking village Ektali out of Grama Panchayat and therefore village Ektali continues to be a Grama and the inclusion of village Ektali in Jharsuguda Municipality by notifications dated 31st July 1973 and 12th August 1975 will have no effect
This contention has considerable force When a duly constituted Grama is to go out of existence an order of the Magistrate cancelling the notification in terms of sub s2 of s3 of the Grama Panchayat Act is necessary
But there are circumstances which take away the force of the argument
The Grama Panchayat never  challenged the notification of inclusion of the village Ektali in Jhar 407 suguda Municipality
From un controverted averment made in para 6 of the counter affidavit of the State filed before the High Court it appears that the Grama Panchayat was consulted before the impugned notification
Therefore we do not feel persuaded to accept the contention at the instance of the appellant
This leads us to the second ground
In order to
appreciate the second ground it is appropriate at this stage to refer to the provisions of s1 in so far as it is relevant for the purposes of the case 41 The State Government may by notification declare their intention a to constitute any town together with or exclusive of any railway station village land or building in the vicinity of any such town a municipality under this Act or b        c to include within a municipality any local area contiguous to the same and defined in the notification or d    e   
f    g    h   
Provided that a declaration shall not be made under this sub section unless the State Government are satisfied that two thirds of the adult male population of the town to which it refers are chiefly employed in pursuits other than agricultural and that such town contains not less than ten thousand inhabitants and an average number of not less than one thousand inhabitants to the square mile of the area of such town 408 2 Any inhabitant of the town or local area or any rate payer of the municipality in respect of which any 
such notification has been published under sub section l may if he objects to anything contained in the notification submit his objection in writing to the State Government
through the Magistrate of the district within six weeks from the date of the publication of the notification and the  State 
Government shall take his objections into consideration
3   The emphasis of the appellant is that two third of the adult male population of the Grama should be chiefly employed in pursuits other than agricultural
The appellant has referred to 1971 census figures
On the basis of these census figures it is argued that out of the total male population of 2640 of Grama Ektali only 1586 adults were engaged in non agricultural pursuits hut the requirement of law was that two third of the male population should have been employed in the non agricultural pursuits which comes to 1760
The argument proceeds on the assumption that the proviso to s41 applies
But a bare persual of the proviso clearly indicates that the requirement is that two thirds of the adult male population of the town to which it refers should be engaged in non agricultural  pursuits
The provision to our mind applies not to all the classes of sub sl of s4 but it applies only to cla of sub sl of s4 because it is cla of s41 which talks of town
Therefore the proviso in 
Our opinion has no application to the present case and that cannot be taken to be a ground for challenging the notification for inclusion of village Ektali in the Jharsuguda Municipality
This takes us to the third ground
The appellant had filed an objection under sub s2 of s4
The said objection was examined by the District Magistrate Sambalpur and the Revenue Divisional Commissioner Northern Division Sambalpur They overruled the objection treating it to be of general nature
Thereafter the Community Development and the Panchati Raj Grama Panchayat Department were consulted to agree with this proposal to which they agreed and it was thereafter
that the Urban Development Department issued a final notification dated 12th August 1975 to include the above village into the municipal limits of Jharsuguda Municipality
The contention of the appellant that the objection had not been considered by the State Government 409 cannot be accepted in as much as the objection is required to be made through the Magistrate of the district
Naturally the District Magistrate while forwarding the objection to the State Government made his comment
The Revenue Divisional Commissioner intervenes in the channel of communication between the District Magistrate and the State Government and he therefore had an occasion to
process the matter
The State Government while dealing with the matter consulted the
Panchayati Raj Department and ultimately notified in terms of notification dated 12th August 1975
In the circumstances it cannot be accepted that the objection filed by the appellant had not been considered by the State Government
It was next contended that the liability for octroi arises when ally of the three alternatives mentioned in s1311kk of the Municipal Act are satisfied namely when the goods are brought within the municipal limits fol i consumption ii use or iii sale
Section 1311 of the Municipal Act empowers the Municipal Council to impose various kids of taxes within the limits of the Municipality with the sanction of the State Government
One of the taxes contemplated by s313 l is octroi as provided in cl
According to the appellant the goods are brought into the municipal area not for the purpose of sale or for consumption but for the purpose of manufacture of yarn
The appellant took support from Burmah Shell Oil Storage  Distribution Co India Ltd vs The Belgam Borough Municipality in which this Court had an occasion to consider the word Consumption 
This Court took the view that the word consumption  in is primary sense means the act of con summing and in ordinary parlance means the use of an article in a way which destroys wastes or uses up that article but in some legal contexts the word Consumption has a wider meaning and that it is 
not necessary that by the act of consumption the commodity must be  destroyed or used up
On the strength of this authority it is con tended that the goods were brought into the municipal limits neither 
For consumption nor for sale
Assuming the contention to be correct there is no escape from the conclusion that the goods are brought into the municipal limits at
least for the purpose of use
In this view of the legal position the imposition of octroi by the Municipality cannot be challenged on this ground
The next ground of attack is based on s372 of the Orissa Municipal Act
Section 392 pertinently reads H 410 392
The State Government before making any rules under sub section 2 of section 81 and section 387 and a municipal council before making any regulation or by laws under section 388 shall publish in such manner as the State Government deem sufficient for giving information to persons interested the proposed rules or regulations or by laws together with a notice specifying a date on or after which the same will be taken into consideration and shall before making such rules or regulations or by laws receive and consider any objection or suggestion which may be made by any person with respect to the same before the date so specified
Every such rule or regulation or by law shall be published in the Gazette in English and in Oriya and such publication shall be evidence that the rule or regulation or by law has been made as required by this section
 It is contended that the mandatory requirements having not been complied with the imposition of octroi is vitiated on this account
The appellant in para 3 of the Writ petition had alleged that the bye laws were not published in the State Gazette either in Oriya or in English
This allegation has however been controverted by the State Government in para 8 of the counter affidavit
It was specifically averred that the bye laws were approved and confirmed by the Government in Urban Development Department vide
Order No 1903Legis 43 67UD dated nil published in Orissa Gazette for information of the general public on 23rd May 1969 at pages 691 to 697
There is a statutory presumption under s3 of the Act that the publication of the rules or regulations or by laws in the Gazette shall be evidence that the rule or regulation or bye law has been made as required by this section
In view of this statutory presumption the Court will assume that the bye law has been made in accordance with law in the absence of anything more from the side of the appellant
As a second limb to this argument it was contended by the appellant that even assuming that the bye laws when initially enforced might be presumed to be in accordance with law in the absence of similar steps being taken at the time of extension of bye Jaws to the newly added area the bye laws are not enforceable in the new area
411 This argument has proceeded in utter oblivion of the provisions of s5 of the Municipal Act
It reads 5
When any local area is included in a municipality by a notification under clause b or c of sub section 3 of section 4 all the provisions of this Act and of any rules by laws notifications or orders made thereunder which immediately before such inclusion were in force throughout such municipality shall be deemed to apply to such area unless the State Government in and by the notification otherwise direct The learned counsel for the appellant however has placed strong reliance upon Visakhapatnam Municipality vs Kandrequla Nukaraju  Ors
In that case the question that fell for consideration was whether the property tax which could lawfully be levied under the District Municipalities Act 1929 can be levied after the repeal of that Act on property situated in the areas included within the municipal limits after the constitution of the municipality
Section 3911 of the Andhra Pradesh Municipalities Act 1965 expressly repealed the
District Municipalities Act 1920 from which it must follow that ordinarily no action can be taken under the Act of 1920 after April 1 1966 when the repeal became effective on the coming into force of the Act
It was however contended in that case that cl
la of Schedule 9 of the Act keeps the repealed enactment alive for tax purposes and therefore the municipality had the authority to impose the property tax under the Act of 1920 notwithstanding its repeal by the new Act
This Court however took the view that the provisions contained in the Schedule are of a transitional nature
They were intended to apply during the period of transition following upon the repeal of old municipal laws and the introduction of the li new law
The object of clause 12 of Schedule 9 was to authorise the levy of taxes which on the commencement of the Act Were levied under the repealed laws
This Court further added that the municipality might have been levying property tax since long on properties situated within its limits but until April 1 1966 the villages of Ramakrishnapuram and Sriharipuram were outside those limits
Qua the areas newly included within the municipal limits the tax was being imposed for the first time and therefore it was incumbent on the municipality to follow the procedure prescribed by the first proviso to section 812
Residents and tax payers of those areas never had 412 an opportunity to object to the imposition of the tax and that valuable opportunity cannot be denied to them
It is obligatory upon the municipality not only to invite objections to the proposed tax but also to consider the objections received by it within the specified period
For the State however reliance was placed in that case on s34 of the Act to contend that the inclusion of the two villages within the municipal area attracts of its own force every provision of the Act with effect from the dale on which the final notification is published
by the Government under s33
In support of this contention it cited the decision of this Court in Atlas Cycle Industrial Ltd vs State of Haryana  Anr
This argument on behalf of the State was however repelled and the Court observed 
Far from supporting the argument we consider that the decision shows how a provision like the one contained in Section 34 cannot have the effect contended for by the appellant
In the Atlas Cycle case section 54 of the Punjab Municipality Act 1911 provided that when any local area was included in the municipality this Act and all 
rules bye laws orders directions and powers made issued or conferred under this Act and in force throughout the whole municipality at the time shall apply to such areas
 But this Court took the view that since section 54 of the Punjab Act did not significantly refer to notifications and since section 621 of the Punjab Act spoke of notification for the imposition of taxes it was not competent to the municipality to levy and collect octroi from the company on the strength merely of the provision contained in section 54 of the Punjab Act
That case however is distinguishable and cannot be of much assistance for solving the problem before us
Section 5 of the orissa Municipal Act makes all the provisions of the Act and of any rules by laws notifications or orders made thereunder which immediately before such inclusion were in force throughout such municipality applicable to such area unless the State Government in and by the notification otherwise direct
This section therefore includes not only the provisions of the Act rules and bye laws but also includes notifications
This distinguishes the
present case from the Visakhapatnam Municipality s case supra
413 For the appellant next reliance was placed upon Bagalkot City Municipality vs Bagalkot Cement1 In that case also at the time of the imposition of the octroi duty the respondent s factory was situated outside the municipal district and was not subject to the octroi duty
Subsequently the Government extended the municipal district so that the factory came to be included within that district
The appellant in that case contended that upon such extension its octroi limits also stood extended to include the factory and the respondent became liable to pay octroi duty in respect of goods brought into the factory
The majority view was that the expression municipal district in the bye law referred to the municipal district as existing when the bye law was framed
The context prevented the definition of municipal 
district in the Act namely the municipal district as from time to time existing from being applied under s20 of the Bombay General Clauses Act to interpret the bye law The bye law had been made without being published to the respondent and if it was so read referring to the municipal district from time to time existing it would be invalid for non compliance with the provisions of s48 of the Act
This case again is distinguishable in view of the wording of s5 of the orissa Municipal Act 
Lastly it is urged that the octroi duty levied in this case by the Municipality is unreasonable and excessive
The Municipality is required to provide certain amenities not only for the permanent residents within the municipality but also even for casual visitors who may on occasions enter the limits of the municipality
The entry of large quantities of goods within the municipality almost daily from outside necessarily creates innumerable problems such as provisions of water supply lighting facilities facilities for conservancy sanitation maintenance of good roads and markets etc
which the Jharsuguda Municipality has done and there is no allegation to the contrary by the appellant
From the material placed before us we are of the view that the levy is not an unreasonable one
It is not also excessive
The imposition of octroi cannot therefore be challenged on the ground that there is violation of article 191g of the Constitution
Considering the case from any aspect the imposition of octroi duty in our opinion does not suffer from any infirmity
414 For the foregoing discussion the appeal cannot succeed
It is accordingly dismissed
In the circumstances of the case however we allow the parties to bear their own costs
SR Appeal dismissed


Summary:
The appellant Textile Mills is a company duly incorporated under the Indian having its mills located at Village Ektaji under the Jharsuguda police station in district Sambalpur Orissa
The company mainly carries on spinning of Cotton which in the manufacturing process is transformed from loose fibres into finished yarn The area under the Ektaji village in which the appellant s factory was located was earlier constituted as a Grama by a declaration made under Section 3 of the Orissa Grama Panchayat Act 1964
On or about March 25 1970 Jharsuguda Municipality passed a resolution for the inclusion of the Ektaji and other villages within its jurisdiction
After considering the objections and representations against the inclusion of Ektaji village in the Municipal Limit and after following once again the other statutory requirement of further notice etc
 the State Government published in the Orissa Gazette dated 1281975 a notification approving the inclusion
Soon thereafter on September 1 1975 the said Jharsuguda Municipality sent a letter to the appellant directing it to pay octroi duty at the rate of I percent ad valorem on cotton as soon as it entered the Municipal check post for the purpose of its being spun into yarn
The levy of octroi was challenged by filing a petition under articles 226 and 227 of the Constitution on various grounds but the writ Petition was dismissed
Petition seeking permission for issuance of a certificate under Article 1331 of the Constitution was also dismissed
Hence the appeal after obtaining Special Leave of the Court
Dismissing the appeal the Court
 HELD 1
Considering the case from any aspect the imposition of Octroi duty under section 5 of the Orissa Municipal Act 1950 does not suffer from any infirmity 413 H 2
The levy being neither an unreasonable one nor also excessive cannot 
be challenged on the ground that there is violation of Article 191e of the Constitution
413 a 402 3
It is true that when a duly constituted Grama under sub section I of section 3 of the Grama
Panchayat Act is to go out of existence an order of the Magistrate cancelling the Notification in terms of sub section 2 of Section 3 of the said Act is a pre requisite
But in the instant case the Gram Panchayat never challenged the Notification of inclusion of the Village Ektaji in Jharsuguda  Municipality
Rather on the other hand the Gram panchayat was consulted before the impugned notification dated 12th August 1975 was issued
406 H 407 A 4
The proviso to sub section 1 of Section 4 of the Orissa Municipal
Act 1950 has no application to the present case and that cannot be taken to be a ground for challenging the Notification for inclusion of Village Ektaji hl the Jharsuguda Municipality
A bare perusal of the proviso clearly indicates that the requirement is that two thirds of the adult male population of the town to which it refers should be engaged in non agricultural pursuits The proviso applies not to all the clauses of sub section I of section 4 but it
applies only to clause a of sub section 1 of Section 4 because it is clause a of section 4 1 which talks of town
408 E F 5
The contention that the objection raised by the appellant against the inclusion of the village in question into Municipality has not been considered by the State has no force
The objection is required to be made through the Magistrate of the District
Naturally the District Magistrate
while forwarding the objection to the State Government made his comment
The Revenue Divisional officer who intervenes in the channel of communication between the District Magistrate and the State Government had an occasion to process the matter
The State Government while dealing with the matter consulted the Panchayat Raj Department and ultimately notified in terms of the notification dated August 12 1975
408H 409A B 6
Section 1311 of the Municipal Act empower the Municipal Council to impose various kinds of taxes which includes octroi as provided in Clause kk with the sanction of the Government since the goods are brought into the municipal limits at least for the purpose of use one of the three conditions laid down in clause kk the imposition of Octroi is valid
Burmah Shell Oil Storage  Distribution Co vs The Belgam Borough Municipality  1963 Supp 2 SCR 216 referred to and held inapplicable
409 D E 71
There is a statutory presumption under section 392 of the Orissa Municipal Act 1950 that the publication of the rules or regulations or bye laws in the Gazette shall be evidence that the rule pr regulation or bye law has been mad as required by the section Therefore the court will assume that the bye law has been made in accordance with law in the absence of anything more from the site of the appellant
1410 F G 7 2 The argument that even assuming that the bye laws when initially enforced might be presumed to be in accordance with law in the absence of similar steps being taken at the time of extension of bye laws to the newly added area the bye laws are not enforceable in the new areas is not correct as it has proceed in utter oblivion of the provisions of section 5 of the Municipal Act
410H 411 A Vishakhapatanam Municipality vs Kandregula Nukarajau  Ors   Atlas Cycle Industries Ltd vs State of Haryana and Anr   Bagalkot City Municipality v Bagalkot Cement 1963 2 Supp SCR 710 distinguished 403