Civil Appeal No 211 of 1956
Appeal from the judgment and order dated July 19 1955 of the Bombay High Court in Special Civil application No 976 of 1955
A V Viswanatha Sastri section N Andley Rameshwar Nath and P L Vohra for the appellant
M C Setalvad Attorney General for India C K Daphtary Solicitor General of India and B Sen for respondent No 1
Vithlbhai B Patel and I N Shroff for respondent No 2
368 1961 December 21
The Judgment of Sinha C J Sarkar Das Gupta and Mudholkar JJ was delivered by Sarkar J Ayyangar J delivered a separate judgment
SARKAR J
The appellant is a City Municipality within the meaning of the Bombay District Municipal Act 1901 and is governed by that Act
It had by a resolution duly passed by it made a rule under section 60 of the Act selecting for the purpose of an octroi tax of 4 annas per Bengali maund milk brought within its octroi limits for consumption use or sale therein
On November 29 1954 the Government of Bombay had given its sanction to the rule under section 61 of the Act
The appellant Municipality thereafter published the rule and the sanction as required by section 62 of the Act and the tax was accordingly imposed with effect from January 1 1955
On April 4 1955 the Government of Bombay passed an order directing that the octroi tax shall not be leviable by the appellant Municipality
This order has given rise to the present proceedings
The appellant Municipality filed a petition in the High Court at Bombay under article 226 of the Constitution challenging the validity of the order
This petition was dismissed by the High Court
The appellant Municipality has now come up to this Court in appeal against the decision of the High Court
The questions that arise in this case will be stated after a few of the sections of the Act have been referred to
Chapter VII of the Act deals with municipal taxation
We shall be concerned principally with sections 59 60 61 and 62 which are all contained in this chapter and deal with imposition of taxes by Municipalities
It will be necessary also to consider section 46
Section 46 gives power to a Municipality to make rules for various purposes as specified in 369 the several clauses contained in it
Under cl
i of this section a Municipality has power to make rules for the purpose of prescribing subject to the provisions of Chapter VII the taxes to be levied
Section 59 is the section on which the decision of this case will really turn and we therefore think it right to set out that portion of it which is relevant for our purpose
section 59
1 Subject to any general or special orders the State Government may make in this behalf any Municipality a after observing the preliminary procedure required by section 60 and b with the sanction of the State Government in the case of City Municipalities    and subject to such modifications or conditions as under section 61 the State Government   in according such sanction deems fit may impose for the purposes of this Act any of the following taxes that is to say         iv an octroi on animals or goods or both brought within the octroi limits for consumption use or sale therein Section 60 lays down the procedure to be observed by a Municipality preliminary to imposing a tax
It requires that first a resolution shall be passed at a meeting to the Municipality selecting the tax and making rules for the proposes of cl
i of section 46 prescribing the tax
Thereafter the resolution has to be published with a notice in a specified form inviting the inhabitants of the Municipal 370 area to submit within a month their objections if any to the tax
After the objections have come in they are to be considered by a committee of the Municipality and unless on the report of the committee the Municipality decides to abandon the tax it has to submit the objections with its opinion thereon any modifications it desires to make and the rules prescribing the tax to the State Government
Section 61 provides that on receipt of the rules and the other things mentioned in section 60 from the Municipality the Government may refuse to sanction the rules or return them to the Municipality for further consideration or sanctioned them with or without modifications or subject to conditions prescribed
Section 62 lays down that the rules as sanctioned by the Government shall be published by the Municipality and the tax shall from the date which shall be specified in the notice publishing the rules be imposed accordingly
It is not in controversy that in the present case the procedure prescribed in the sections mentioned above had been complied with
The Government s contention is that the order made by it was competent as it was order which was authorised by section 59 subject to which only a tax could be imposed by a Municipality
The appellant Municipality does not dispute that it can impose a tax only under section 59 but it contents that the general or special orders mentioned in the section subject to which it has the power to impose tax are orders which were in existence before the rule prescribing the tax was framed and once a rule has been framed by it and the Government has accorded its sanction to that rule the Government has no power to control the imposition of tax under it by any order made under section 59
The question so raised is one of the construction of section 59
But for such construction we have to refer also to the other sections earlier mentioned
371 In our opinion the Government s contention is well founded
The Municipality s power to tax arises only under section 59
Under that section it has been given the power of impose a tax after following the procedure prescribed but subject always to the general or special orders of the Government
The appellant Municipality can succeed in this appeal only if the word impose in section 59 means the acquisition of the power to tax by following the procedure laid down in sections 60 to 62
Its appeal must otherwise fail
It seems to us that the word impose in section 59 has not the meaning for which the appellant Municipality contends
It would have been noticed that under section 59 a Municipality may impose a tax only after it has framed a rule under section 60 prescribing the tax to be levied and the Government has given its sanction to that rule under section 61
It is this imposition which is made by section 59 subject to any general or special orders which the State Government may make in this behalf
Therefore it is the imposition after the making of the rule authorising the tax that is subject to the Government s orders and not the making of the rule itself which authorises the tax itself
It is plain from section 59 that the control over a Municipality s power to tax imposed by the requirement of the Government s sanction of the rule prescribing the tax in contained in section 61 is not the same thing as the control contemplated by the general or special orders mentioned in section 59 for both are mentioned in section 59
If it were not so it would have been unnecessary to provide for the general or special orders controlling the imposition of the tax in section 59
This is the first reason why we think that the appellant Municipality s contention is untenable
The imposition contemplated by section 59 is clearly not the passing of the resolutions under 372 section 60 selecting the tax and making the rule prescribing the tax to be levied in terms of section 46i for section 591a expressly makes the imposition something happening after section 60 has been complied with
This seems to us to be another reason for not accepting the appellant Municipality s contention
The third reason is to be found in section 62
As we have earlier stated it provides that the tax shall be imposed from the date mentioned in the notice publishing the sanctioned rule
The choice of this date lies with the Municipality and not with the Government
The power to levy the tax is acquired by a Municipality when the rule prescribing the tax made by it is sanctioned by the Government
The Municipality at its own choice thereafter fixes a date from which it will collect the tax
Therefore the word impose in section 62 does not refer to the acquisition of power to levy a tax by making the rule but to the actual levy of the tax under the power so acquired
It is of some significance to note that in section 46i the words used are make rules prescribing the taxes to be levied
What we wish to point out is that in connection with the making of the rules the Act uses the word levied in section 46 i and in connection with an actual impost and word imposed in section 62
We therefore think that it would be legitimate to construe the word impose in section 59 in the sense in which it has clearly been used in a connected provision that is section 62
Hence in our view impose in section 59 means the actual levy of the tax after authority to levy it has been acquired by rules duly made and sanctioned and it is such imposition that is made subject to the general or special orders of the Government
Therefore the Government can at any time by any such order prohibit the imposition of the tax
373 Mr Sastri for the appellant said that the general or special orders in section 59 refer to orders that can be made under section 73 but the present order had admittedly not been made under that section
Section 73 does not empower an order prohibiting the imposition of a tax altogether as the order in the present case does
It only gives power to suspend the levy of the tax authorised till the objections to the tax which the Government required to be removed had been removed
Because section 73 gives a power to suspend the tax it is in our opinion no argument that the general or special orders in section 59 must be understood as confined to such orders
Section 73 cannot help in interpreting the words general or special orders in section 59
A third objection to the validity of the order was that it was discriminatory
It was said that no other Municipality had been prohibited from collecting a similar tax which it had power under its rules to collect
Apart from the very interesting question raised by the learned Attorney General that the Municipality being a local authority was a state and was not therefore entitled to the benefit of article 14 as to which we think it unnecessary to express any opinion we are on the facts satisfied that there is no discrimination
The Government has now it is not disputed prohibited all Municipalities from levying any octroi tax on milk
Furthermore it has not been shown to us that all Municipalities stand on the same footing with regard to milk
The last objection was that the order had been mala fide made
This grievance is completely without foundation
The Government had earlier requested the appellant Municipality to drop the tax on the ground among others that milk was really being purchased for the Government and that the Government was not liable to be 374 taxed by a Municipality
It may be that this ground was not justified on the facts but as to this we do not come to any finding
It is clear to us that even if this stand taken by the Government was not tenable that is no reason for thinking that the order was made mala fide
It was said that the Government had made this order to benefit respondent No 2 a co operative union dealing in milk
This is a bare allegation and is not supported by facts
In any event since similar orders have now been made in respect of all Municipalities within the State no question of mala fide can possibly arise
We think that the challenge to the order dated April 4 1955 is without any foundation
In our view the order was perfectly legitimate and must be upheld
We accordingly dismiss the appeal with costs
AYYANGAR J I have had the advantage of perusing the judgment just delivered and I agree with order passed
The relevant facts and the statutory provisions which bear on the points arising in the appeal have all been set out by Sarkar J and do not require to be repeated
There is no dispute that the levy of the duty by the municipality as and from January 1 1955 was lawful because the requirements of sections 59 62 were satisfied when the levy was made
No general or special order of the State Government stood in the way of the municipality making the particular levy and the sanction of the State Government under section 59 1 b had been accorded to it and the relevant rules had conformed to the procedural and other requirements of these sections
The power of the municipality in the matter of the levy of the tax is however not absolute but it made subject apart from other provisions to which I 375 shall advert to such general and special orders as the State Government might pass by virtue of the opening words of section 59 of the Act
The argument strenuously pressed by Mr Visvanatha Sastri was this The Government had no doubt a power to prescribe and control by general or special orders the right of a municipality to impose a tax
These general or special orders would again no doubt be subject to modification from time to time to suit the changing needs of particular areas or of particular interests which would be affected by the tax levy but the exercise of the power of modification or this power too prescribe conditions and restrictions is exhausted when a municipality does by conforming to the orders then in force impose a levy which has come into force under section 62
I am unable to agree with this construction of the opening words of section 59 1
On its language there is nothing to warrant the doctrine that it gets exhausted by reason of a municipality imposing a tax in conformity with an order as it stood at a particular date
The limitation suggested must therefore be deduced as a necessary implication either from the fasciculus of sections ending with section 62 leading to the imposition of a levy or from other provisions of the Act
The other provision of the Act to which learned Counsel referred was section 73 which reads If it shall at any time appear to the Provincial Government on complaint made or otherwise that any tax leviable by a Municipality is unfair in its incidence or that the levy thereof or of any part thereof is obnoxious to the interest of the general public it may require the said Municipality within such period as it shall fix in this behalf to take measures for removing any objection which appears to it to exist to the said tax 376 and if within the period so fixed such requirement shall not be carried into effect to the satisfaction of the Provincial Government it may by notification in the official Gazette suspend the levy of such tax or of such part thereof until such time as the objection there to shall be removed
The Provincial Government may at any time by a like notification rescind any such suspension
 It is obvious that this section is of limited operation and confined to the subject it actually deals with
It posts the continued exaction of the impost but points to the removal of anomalies and hardships in the details of the levy or of its administration
The existence of this provision would manifestly not suffice to negative the right of the Government to forbid the continued imposition of the tax altogether such as has been done in the present case
Section 73 cannot therefore be construed as negativing by implication the right claimed by the state Government under section 59 for it refers to and comprehends a totally different subject matter
Coming now to the construction of sections 59 62 as themselves supporting theory of the exhaustion of the power the submission was this
The general or special orders could only restrict the power of a municipality to impose a tax
On the scheme of provisions contained in sections 59 62 a tax was imposed only once though when imposed and in operation the levy and collection of such a tax might be periodic and throughout the life of the imposition
Hence there was no scope for the exercise of the State Government to make any special order in relation to a tax after it has once been imposed because the power to prescribe conditions or restrictions by general or special order is with reference to the imposition of the tax
I feel unable to accept this construction
The whole foundation 377 of the argument is based on a denial of the premise that a power to impose tax is a continuing power
In my judgment the imposition of a tax is a continuing power in the sense that so long as it is in force it points to the existence of and derives vitality from the power of the authority to impose it
When the municipality levies the tax in the sense of quantifying it with reference to an ascertained person and thereby creating a statutory debt payable by the tax payer it is in reality exercising the power to impose the tax for it is the continued existence of the imposition that furnishes the legal basis for the levy when made
When the power to impose is withdrawn the imposition falls to the ground
That is the ratio of saving provisions which enable taxes to be levied and collected not withstanding the deprivation of the right to impose taxes for the future
In this view it is clear that there is no exhaustion of the State power under the opening words of section 59 1
In arriving at this construction I have also taken into consideration the scheme of the Act and the wide powers conferred on the State Government in the matter of control and supervision over the municipalities powers designed to ensure that subject of course to express statutory provision municipal administration is coordinated to secure the vital interest of the general public
In this connection reference may be made to section 74 of the Act which reads Whenever it appears to the Provincial Government that the balance of the municipal fund of any Municipality is insufficient for meeting the expenditure incurred under section 175 or for the performance of any duties in respect of which they shall have been declared under section 178 to have committed default the Provincial Government may be notification require the Municipality to impose 378 within the Municipal district any such tax specified in the notification as may be imposed under section 59 if no such tax is at the time imposed therein or to enhance any existing tax in such manner or to such extent as the Provincial Government considers fit and the Municipality shall forthwith proceed to impose or enhance in accordance with the requisition such tax under the provisions of this Chapter as if a resolution of the Municipality had been passed for the purpose under section 60 Provided that a the Provincial Government shall take into consideration any objection which the Municipality or any inhabitant of the Municipal district may make against the imposition or enhancement of such tax b it shall not be lawful for the Municipality to abandon or modify or to abolish such tax when imposed and c the Provision Government may at any time cancel or modify any requisition made by it under this section and the levy of tax or the enhancement except as to arrears theretofore accrued due
shall thereupon cease or be modified accordingly
 Government are thus empowered both to direct the municipality to impose tax when Government consider the same necessary in the interest of municipal finance and administration as also to direct the municipality to desist from continuing the imposition when the necessity ceases
In cases where a tax is imposed by the municipality by virtue of the provisions in sections 59 62 the municipality 379 itself could revoke the tax if the rules so provide for section 47 of the Act enacts 1 Subject to the requirements of clause a of the proviso to section 46 every Municipality may except as otherwise provided in clause b of the proviso to section 74 at any time for any sufficient reason suspend reduce or abolish any existing tax by suspending altering or rescinding any rule describing such tax under the provisions of clause 1 and of the first clause of the proviso to section 46
2 The provisions of Chapter VII relating to the imposition of taxes shall so far as may be apply to the suspension reduction or abolition of any tax and to the suspension alteration or rescission of any rule prescribing a tax
 But for the opening words of section 591 there is no specific provision in the Act to enable Government to intervene in cases where the continued levy of a tax is contrary to public interest
I do not consider that any such gap was intended and in my judgement the opening words in section 591 are both apt and sufficient to clothe Government with power to direct by special order  a municipality to desist from imposing  a tax when satisfied that public interest so requires
The points raised regarding discrimination and mala fides are without substance and for the reasons stated by Sarkar J I would reject them
The appeal therefore fails and has to be dismissed with costs
The Writ Petition which raises the same points as the appeal will also stand dismissed but without any order as to costs
Appeal dismissed


Summary:
After following the procedure prescribed by the Bombay District Municipal Act 1901 and after obtaining the requisite sanction of the Government the appellant imposed an octroi tax on milk brought within its limits for consumption use or sale therein
Shortly afterwards the Government passed an 367 order directing that the octroi tax shall not be leviable by the appellant
The appellant contented that the Government had no power to control the imposition of the tax once it had been properly imposed
 Held that the Government was competent under section 59 of the Act to pass the order
Section 59 provided that subject to any general or special orders which the State Government may make a Municipality may impose the tax after following the procedure laid down and after obtaining the sanction of the Government
The word impose in section 59 meant the actual levy of the tax after authority to levy it had been acquired by rules duly made and sanctioned and this imposition was subject to the general or special orders of the Government
The general and special orders under section 59 could not be confined to orders under section 73 which gave the Government power to suspend the tax in certain cases
Held further that the order of the Government was not discriminatory
Subsequently the Government had prohibited all municipalities from levying octroi tax on milk
For the same reason no question of mala fides could arise
Per Ayyangar J Imposition of tax was a continuing power deriving vitality from the power of the authority to impose it
The power of the Government to issue special or general order under section 59 was therefore not exhausted after imposition of the tax
There were provisions in sections 47 73 and 74 for other contingencies but except for the opening words of section 59 there was no provision to enable Government to intervene in cases where the continued levy was against public interest
The opening words of section 59 clothed the Government with power to direct a municipality to desist from imposing a tax