Appeal No 1323 of 1966
Appeal by special leave from the judgment and order dated September 10 1965 of the Allahabad High Court in Civil Miscellaneous Writ No 3567 of 1965
Niren De Addl
Solicitor General and N H Hingorani for the appellant
RK Garg D K Agarwala and M V Goswami for respon dent No 1
The appellant will be so entitled if it is held to be a railway  as contended on behalf of the appellant
The High Court of Allahabad in its order and judgment under appeal has held that the appellant is not a railway but only a tramway and as such not eligible for exemption from the tax in question
The short facts leading to this appeal may now be briefly set out
The appellant is a limited liability company and it runs a railway between Shahdara in Delhi and Saharanpur in the State of Uttar Pradesh a distance of about 95 miles or 148865 kilo meters
The appellant company also operates within the municipal area of Saharanpur
The company was originally registered as a tramway under the Act XI of 1886 hereinafter called the Tramways Act on November 20 1905
By Notification No 5752 dated July 5 1907 the Governor General in Council extended to the appellant company the whole of the Indian Railways Act 1890 Act I of 245 1890 hereinafter called the Railways Act excepting the provisions of Section 135
The Municipal Board of Saharanpur the first respondent herein imposes a terminal tax under the provisions of section 1281xiii of the United Provinces Municipalities Act 1916 as amended by Act I of 1918
Under the said Act the first respondent has prohibited the importation of goods within the local limits of the Saharanpur Municipality by rail until the tax leviable thereon or in respect thereof has been paid in accordance with the provisions of the Act and the Rules
The Board has also framed rules for the assessment and collection of Terminal Tax as authorized by the Government Notification No 856XI DT 3 dated May 1 1919
The rules have been amended as per another notification No 5965XI DT 3 dated September 21 1939
Item 2 of Schedule B of these rules provides for a list of articles being exempted from payment of Terminal Tax
The said item is as follows  Railway stores and materials which are required for use on Railways whether in construction maintaining or working the same and which are not removed outside the Railway land boundaries but not stores imported into Municipal limits for purchase and consumption by Railway employees nor stores with which Railway Cooperative Stores are stocked for sale to Member
 It is the claim of the appellant that till 1961 the first respondent has never imposed any terminal tax on railway stores and materials  required for use on the railway of the appellant company for the purposes mentioned in item 2 of Schedule B
But for the first time in January 1962 according to the appellant the first respondent imposed tax on such stores and attempted to make the appellant liable
The appellant company protested against this levy on the ground that it being a railway was entitled to the exemption provided in respect of railway stores and materials which are required for use on railway 
But the first respondent by its order dated October 11 1962 over ruled the appellant s objections in this regard
An appeal taken by the appellant company to the Additional District Magistrate Saharanpur under section 160 of the Municipalities Act read with the relevant Rules did not meet with success as the said Magistrate rejected the appeal by his order dated May 25 1965
The appellant company filed Civil Miscellaneous Writ No 3567 of 1965 in the High Court of Allahabad challenging the levy of terminal tax and claimed exemption under item 2 of Schedule B referred to earlier
The learned Judges of the Allahabad High Court by their judgment dated September 10 1965 dismissed 246 the writ petition
They were of the view that the appellant company was not a railway  but a tramway  constructed tinder the Tramways Act
In this connection the learned Judges adverted to the Railways Act which defines both the terms tramway  and  railway 
It is their view that when a tramway and a railway are both separately defined in an Act a tramway cannot also be a railway
The learned Judges of the High Court then referred to the fact that so far as the appellant company was concerned the Central Government had not applied section 135 of the Railways Act though all the other provisions of that Act had been applied
They further held that a mere application of the Railways Act in whole or in part to a tramway will not convert the tramway into a railway and that in order to be a railway it has to be opened in accordance with the provisions contained in Chapter IV of the Railways Act
So they concluded that inasmuch as the appellant railway was not opened in accordance with the provisions of the Railways Act it had been from its inception and it continued to be not a railway but only a tramway
On this line of reasoning the High Court further held that in the rules framed by the Municipal Board the expression railway  must be intended to refer only to railways  coming under the Railways Act and could not include a tramway  like the appellant opened under the Tramways Act
In consequence the claim of the appellant for exemption was according to the High Court rightly rejected by the authorities
The result was the dismissal of the appellant s writ petition by the High Court
We shall now refer to the main features of the appellant company
The appellant railway is worked by steam or other mechanical power and is not wholly within a Municipal area
The railway line comprises narrow gauge track of 2 6 gauge and consists of main line transportation sidings and commercial sidings Me line passes through four districts viz Saharanpur Muzaffarnagar Meerut and Delhi within the provinces of Uttar Pradesh and Delhi
The system has about 155 level crossings comprising of Special Class A class B class and C class
Some of the level crossings are provided with signalling and interlocking arrangements and the system takes in 406 bridges and 26 railway stations  in all
The bridges and culverts are maintained in accordance with the instructions contained in Way and Works Manual  of the Indian Railways and the railway stations are fitted with Morse speakers and instruments for working trains as per general rules applicable to all railways
There is annual inspection of the railway line by the Additional Commissioner of Railways Safety appointed by the Government to inspect Indian Railways
There are arrangements for through booking of goods and passengers
From 247 what is stated above it will be seen that the appellant company is a railway  as commonly understood and described in ordinary parlance
The Tramways Act was an Act passed to facilitate the con struction and to regulate the working of Tramways
Section 35 defines tramway  as follows   tramway  means a tramway having one two or more rails and includes aany part of a tramway or any siding turnout connection line or track belonging to a tramway b any electrical equipment of a tramway and c any electric supply line transmitting power from a generating station or sub station to a tramway or from a generating station to a sub station from which power is transmitted to a tramway
 The expression order  under section 36 means an order authorizing the construction of a tramway under the Act and includes a further Order substituted for or amending extending or varying that order
There are various other provisions in this Act relating to the construction and maintenance of tramways orders authorizing the construction of tramways and other incidental matters
The Railways Act was an Act to consolidate amend and add to the law relating to Railways in India
Section 31 defines tramway  as meaning a tramway constructed under the Tramways Act
or any special Act relating to tramways
Section 34 defines railways  and is as follows  railway  means a railway or any portion of a railway for the public carriage of passengers animals or goods and includes aall land within the fences or other boundary marks indicating the limits of the land appurtenant to a railway ball lines of rails sidings or branches worked over for thepurposes of or in connection with a railway call stations offices warehouses wharves work shopsmanufactories fixed plant and machinery and other works constructed for the purposes of or in connection with a railway and d all ferries ships boats and rafts which are used on inland waters for the purposes of the traffic of a railway and belong to or are hired or worked by the autho rity administering the railway
 248 This Act also contains various provisions relating to the opening of railways inspection of railways construction and maintenance of works working of railways and several other incidental matters
Section 135 occurring in Chapter X containing supplemental provisions relates to taxation of railways by local authorities
That section reads   135
Notwithstanding anything to the contrary in any enactment or in any agreement or award based on any enactment the following rules shall regulate the levy of taxes in respect of railways and from railway adminis trations in aid of the funds of local authorities namely  1A railway administration shall not be liable to pay any tax in aid of the funds of any local authority unless the Central Government has by notification in the Official Gazette declared the railway administration to be liable to pay the tax
2While a notification of the Central Government under clause 1 of this section is in force the railway administration shall be liable to pay to the local authority either the tax mentioned in the notification or in lieu thereof such sum if any as an officer appointed in this behalf by the Central Government may having regard to all the circumstances of the case from time to time determine to be fair and reasonable
3The Central Government may at any time re voke or vary a notification under clause 1 of this section
4Nothing in this section is to be construed as debarring any railway administration from entering into a contract with any local authority for the supply of water or light or for the scavenging of railway premises or for any other service which the local authority may be rendering or be prepared to render within any part of the local area under its control
5 Local authority  in this section means a local authority as defined in the General Clauses Act 1887 and includes any authority legally entitled to or entrusted with the control or management of any fund for the maintenance of watchmen or for the conservancy of a river
 The point to be noted in this provision is that unless a notification has been issued by the Central Government under sub section
1 of section 135 declaring a railway administration to be liable to pay a tax a railway administration shall not be liable to pay any tax in 249 aid of the funds of any local authority
Section 146 giving power to the Government to extend the Railways Act to certain tramways is as follows 146
1 This Act or any portion thereof may be extended by notification in the Official Gazette a to any tramway which is wholly within a municipal area or which is declared not to be a railway under clause 20 of article 366 of the Constitution by the State Government and b to any other tramway by the Central Government
2 This section does not apply to any tramway not worked by steam or other mechanical power
 We have already pointed out that all the provisions of the Railways Act except section 135 have been extended to the appellant company
The next enactment to be referred to is the Act X of 1895 which provided for the payment by railway companies registered under the Indian Companies Act 1 882 of interest out of capital during construction
Section 21 defines railway  as meaning a railway as defined in section 3 cl
4 of the Railways Act
Section 3 provided for a railway company paying interest on its paid up share capital out of capital for the period and subject to the conditions and restrictions contained in that section
There are other consequential provisions in this Act
The Act IV of 1902 was one to apply the provisions of the  to certain tramway companies
The preamble to this Act IV of 1902 stated that it was expedient to apply the provisions of the  to companies formed for the construction of tramways not differing in structure and working from light railways 
This preamble will clearly show that even as early as 1902 the Legislature considered that though certain systems were called tramways substantially they did not differ in structure and working from light railways
The expression railway  is defined in section 3112 of the Government of India Act 1935 as follows   railway  includes a tramway not wholly within a municipal area
 It is to be noted that if a system though a tramway is wholly not within a municipal area that system will be a railway 
Entry 250 58 of List 1 Federal List of the Seventh Schedule to the 1935 Act was  Terminal taxes on goods or passengers carried by railway or air taxes on railway fares and freights
 It is again to be noted that under this Entry in respect of a tramway which is not wholly within a municipal area and which will therefore be a railway  under section 3112 the levy of terminal tax on goods or passengers carried by such a system will be within the competence of the Federal Legislature
Under article 36620 of the Constitution the expression rai lway  is dealt with as follows   railway  does not include a a tramway wholly within a municipal area or b any other line of communication wholly situate in one State and declared by Parliament by law not to be a railway
 It may be noted here that the appellant s system does not come within the exclusions mentioned in cls
a or b of this definition
Entry 89 of List 1 Union List of the Seventh Schedule to the Constitution is as follows  Terminal taxes on goods or passengers carried by railway sea or air taxes on railway fares and freights  It may be noted that the competent legislative body to levy terminal taxes on goods or passengers carried by the appellant s system which will be a railway  under article 36620 is the Parliament
The only other Act to be referred to is the Act XXV of 194 1  which was an Act to regulate the extent to which railway property shall be liable to taxation imposed by an authority
Section 31 of that Act provided that a railway administration shall be liable to pay any tax in aid of the funds of any local authority if the Central Government by notification in the Official Gazette declared it to be so liable
Section 4 provided for the Central Government by notification in the Official Gazette revoking or varying any notification issued under section 1351 of the Railways Act
The learned Additional Solicitor General appearing for the appellant pointed out that the expression railway  had not been defined in the United Provinces Municipalities Act or in the Terminal Tax Rules
In the absence of any special definition contained in the provisions granting the exemption in question the expression railway  occurring in item 2 of Schedule B of the Terminal Tax Rules must bear the commonly understood meaning of a carriage of passenger and goods on iron rails 
By virtue of the definition in section 3112 of the 1935 Act and the provision 251 corresponding to it in the Constitution viz article 36620 the appellant s system though registered under the Tramways Act was a railway
The mere fact that section 135 of the Railways Act had not been applied to the appellant s system is not a decisive factor against the appellant as had been assumed by the High Court
In view of the various features of the appellant s system and pointed out by us earlier it is argued that the appellant s system is a railway  both in law and in fact
It satisfies all the ingredients of a railway and if that is so the appellants are entitled to the exemption provided for under item 2 of Schedule B of the Terminal Tax Rules
On the other hand Mr Garg learned counsel appearing for the respondent Board pressed before us for acceptance the various reasons given by the High Court for holding that the appellant is not entitled to claim be exemption
In particular counsel pointed out that there were two different enactments one dealing with tramways  and the other with railways  being the Tramways Act and the Railways Act respectively
Therefore there were two diff erent systems under two different names namely tramways  and railways  which was clearly known to the authorities concerned at the time when the Terminal Tax Rules were framed and so when the expression railway  was used in the exemption clause it must have been the intention of the framers of the Rules to bring within its ambit only the railways  constructed under the Railways Act
The appellant s system though called a railway  and though it might have ill the features of i railway it is pointed out nevertheless that inasmuch is it has been constructed under a different enactment viz the Tramways Act it cannot be treated as a railway  for the purposes of the exemption
Counsel also stressed that section 135 of the Railways Act had not been applied to the appellant
We are not impressed with the approach made by the learned Judges of the High Court for negativing the claim for exemption made by the appellant
It must be borne in mind that the expression railway has not been defined either in the concerned Municipalities Act orthe Rules if such is the case
 the definition must hold the field
Going by the definition of the expression  railway  containedin section 3112 of the Government of India Act 1935 and the corresponding provision in article 36620 of the Constitution the appellant s system is a railway 
All the provisions of the Railways Act have been extended to the appellant excepting section 135
In our opinion if the appellant is a railway  otherwise the mere fact that the provisions of section 135 of the Railways Act have not been applied is of no consequence
We have already referred to the fact which is not in dispute that the appellant s railway passes through four districts in UP and 252 Delhi and that it has got all the features of a railway as ordinarily understood
In this connection we may refer to certain English decisions where the claim made on behalf of a system for being taxed at a concessional rate had come up for consideration
In Blackpool and Fleetwood Tramroad Company vs Thornton Urban Council1 the Court of Appeal had to consider as to how far the Blackpool  Fleetwood Tramroad Company the appellant before them was entitled to the assessment at a lower rate under section 211 1 b of the Public Health Act 1875 38  39 Viet
c 55
The material portion of that section was  the occupier of any land 
used only as a canal 
or as a railway constructed under the powers of any Act of Parliament for public conveyance shall be assessed in respect of the same in the proportion of one fourth part only of the net annual value thereof
 The question was as to whether the appellant in that case was a railway  to whom the said provision would apply
The appellant company had constructed and maintained a tramroad connecting two systems of tramways under the local Acts of 1896 and 1898
Various provisions of the Railways Clauses Consolidation Act 1845 had been applied to the tramroad
The tramroad in that case was on rails laid on sleepers fenced off from adjoining land excepting at the level crossings of roads
The Divisional Court had rejected the claim of the appellant but the Court of Appeal held that the tramroad was land used only as a railway constructed under the power of an Act of Parliament for public conveyance within the meaning of section 21 1 1b of the Public Health Act 1875 and that the company was consequently entitled to be assessed in respect of the said railway  at onefourth of its net annual value
The appellants contended that the tramroad was and could only be worked as a railway and was in fact and in law used as a railway and in consequence they urged that the tramroad maintained by them is land  used only as a railway
The Court of Appeal noted that the rails were raised and laid on sleepers just as a railway is laid and that was the main distinction between the appellant s system and a tramway which ran along public streets and in grooved rails
No doubt it was pointed out for the Urban Council that the appellant company had been incorporated under the Tramways Act and the very fact that certain provisions of the Railway Clauses Consolidation Act were applied to the appellant s system showed that the appellant was not a railway
The Court of Appeal held that it was impossible to distinguish the piece of tramroad owned by the 1 L R 190711 KBD 568
253 appellants from a railway and that the exemption provided for in the Public Health Act applied to the tramroad of the appellants as it would to any ordinary railroad passing through parts where it was not deriving the full benefit from the district rates in those parts
The Court of Appeal also rejected the contention of the Urban Council that the tramroad owned by the appellants could be treated as a railway  only for particular purposes and not for the purpose of claiming the exemption under the Public Health Act because according to the Court of Appeal a reading of section 211 1 b of the Public Health Act showed that it applied to land used as a railway ie constructed as a railway in fact
This decision was taken up in further appeal before the House of Lords whose decision is reported as Thornton Urban Council vs Blackpool and Fleetwood Tramroad Company1 and the decision of the Court of Appeal was confirmed
In the course of the judgment after referring to section 211 of the Public Health Act Lord Macnaghten observed at p 267  Now it cannot be denied that the rails on which the tramcars run with the embankment or foundation on which they rest and everything that supports them do form a road or way and that that road or way was constructed under parliamentary powers for public conveyance
Is it a railway  There is nothing in the Public Health Act 1875 or in the earlier Acts in which the same provision is found to confine the word  railway  as used in those Acts to a particular kind of railway or to limit the generality of the expression in any way
 His Lordship further observed at p 268  It seems to me that if it is a railway in fact not differing from other railways in any material particular it is nonetheless a railways because the promoters in their special Act chose to call it a tramroad  a very convenient term to use for the title of their Act and the name under which they sought incorporation
Nor is it the less a railway because some only of the sections of the Railways Clauses Consolidation Act are incorporated in the special Act or because if one did not know what the thing really was the language used for the purpose of applying the sections which are incorporated might seem to import that it was not properly speaking a railway at all
You must look at the special Act to see that it confers the appropriate powers of construction
Every thing else in the Act is I think beside the question which this House has now to determine 1 254 In our opinion the observations of the House of Lords ex tracted above are apposite to the case on hand
We have already pointed out that neither the Municipal Act nor the Terminal Tax Rules give any special definition of the expression railway  and so far as we could see there is nothing in the said Act or the Rules to indicate that the word railway  in item 2 of Schedule B is used only to refer to a railway  registered under the Railways Act or to limit the generality of the expression railway  in any way
Under those circumstances if the appellant is a railway  in fact as commonly understood there does not appear to be any serious controversy on that point it will be a rail way  notwithstanding the fact that it is registered as a tramway  under the Tramways Act
The legislature itself has applied the various provisions of the Railways Act to the appellant and the appellant also satisfies the definition of a railway  under the Government of India Act 1935 and the Constitution
The provisions of the  have also been applied to the tramways constructed under the Tramways Act by the Indian Tramway Act of 1902
The second preamble to the last mentioned Act clearly shows that the tramways to which the Indian Railway Companies Act was made applicable lo not differ in structure and working from railways 
The object underlying the exemption under item 2 of Sche dule B to the Terminal Tax Rules is also not far to seek
The railways pass through areas where it is not deriving the full benefit of all the amenities provided by the Municipal Boards
Therefore in our opinion the appellant satisfies the definition of a railway  so to be entitled to the exemption provided under item 2 of Schedule B
Before we close the discussion we ill also refer to the decision of th House of Lords in Tottenham Urban Council vs Metropolitan Electric Tramways Ltd1
The same question regarding the eligibility of a tramway  for exemption under section 21 11b of the Public Health Act 1 875 came up for consideration in that case
From the judgment it will be seen that the company were working as a connected system a tramway and a light railway which were constructed in and along certain public streets and roads in the district of the urban Council
The tramway  was constructed under the Tramway Acts and Orders and the railway  under the Light Railways Act 1896
Both were identical as to the mode of construction and materials used
The claim of the company in respect of the railway  as such for assessment at a lower rate
was accepted but so far as the tramway  as concerned the House of Lords held that it is not a railway  within the meaning of section 21 11b of the Public Health Act 1875
The 1 L R 19131 A C 702
255 reason given by the House of Lords for not accepting the claim of the tramway was that in the great bulk of public legislation relating to railways the legislation has universally been understood and interpreted by Courts as applying only to that which is popularly known as a railway  and not to that which is Popularly known as a tramway 
And special emphasis is laid by the House of Lords that the legislature has used the word railways  and not railways and tramways  in section 211 of the Public Health Act 1875
We are only adverting to this decision to show that on the basis of an interpretation placed by the Courts the House of Lords held that the word railways  in the Public Health Act 1875 will not take in tramways 
But no such circumstances as pointed out by the House of Lords in the said decision exist in the present case before us
On the other hand the position is exactly the opposite as will be seen from the Government of India Act 1935 and the Constitution
Even applying the popular test adopted by the House of Lords in this case the appellant is undoubtedly a railway 
In our opinion the principles laid down by the House of Lords in Thornton Urban Council vs Blackpool and Fleetwood Tramroad Company1 apply to the particular matter on hand and we hold that the appellant being a railway  is entitled to the exemption under item 2 of Schedule B to the Terminal Tax Rules in question
We accordingly allow the appeal and set aside the judgment of the High Court and further direct that a writ will issue as prayed for by the appellant
The appellant will be entitled to its costs from the first respondent both in this Court and in the High Court
G C Appeal allowed


Summary:
The appellant company ran a narrow gauge railway between Shahdara and Saharanpur
As it operated partly within the Municipal area of Saharanpur the Municipal Board of that place sought to subject railway stores and materials brought within the municipal area to terminal tax as provided by the Rules framed under the United Provinces Municipalities Act 1916 as amended by Act 1 of 1918
The exemption from terminal tax given to railway stores and materials by item 2 to Schedule B of the said rules was denied to the appellant company on the ground that it was a tramway  and not a railway 
The company had been originally registered in 1905 under the  Act 11 of 1886 in 1907 the whole of the Indian Railways Act 1890 Act 1 of 1890 with the exception of section 135 had been extended to the company by the Governor General in Council
The Company s claim that it was a railway  entitled to the exemption under item 2 of Schedule B aforesaid was rejected by the Municipal authorities as well as in appeal by the Additional District Magistrate
The company therefore filed a writ petition before the High Court which was rejected
By special leave appeal was filed to this Court
It was contended on behalf of the appellant that  i in the absence of any special definition contained in the provisions granting the exemption in question the expression railway  occurring in item 2 of Schedule B of the Terminal Tax Rules must bear the commonly understood meaning of a carriage of passenger send goods on iron rails ii by virtue of the definition in section 3112 of the Government of India Act 1935 and the provision corresponding to it in the Constitution viz article 36620 the appellant s system though registered under the Tramway Act was a railway iii the mere fact that section 135 of the Railways Act had not been applied to the appellant s system was not a decisive factor against the appellant as assumed by the High Court
It was not in dispute that appellant s system had all the features of a railway
HELDNeither the Municipal Act nor the Terminal Tax Rules give any special definition of the expression railway  and there is nothing in the said Act or Rules to indicate that the word railway  in item 2 of Schedule B is used only to refer to a railway  registered under the Rail ways Act or to limit the generality of the expression railway  in any way
Under those circumstances if the appellant was a railway  in fact
 as commonly understood there did not appear to be any controversy on the point it would be a railway notwithstanding the fact that it was rep
CI67 3 244 gistered as a tramway  under the Tramways Act
The legislature itself had applied the provisions of the Railway Act to the appellant and the appellant also satisfied the definition of a railway  under the Government of India Act 1935 and the Constitution
254B D If the appellant was a railway  otherwise the mere fact that the provisions of section 135 of the Railways Act had not been applied to it was of no consequence
251H Blackpool and Fleetwood Tramroad Company vs Thornton Urban Council LR 1907 1 KBD 568 Thornton Urban Council vs Blackpool and Fleetwood Tramroad Company LR 1909 AC 264 and Tottenham Urban Council vs Metropolitan Electric Tramways Ltd  referred to