- 1 - IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.4692 OF 2003 ... Mahratta Chamber of Commerce, Industries & Agricultural and Ors. ...Petitioners v/s. State of Maharashtra & Ors. ...Respondents ... Mr.Milind Sathe with Mr.B.B.Saraf i/b ALMT Legal for the Petitioners. Mr.Patne, AGP for State. Mr.P.K.Dhakephalkar with Mr.Deepak More for Respondents Nos. 2 & 3. - 2 - ... CORAM: D.K.DESHMUKH & V.M.KANADE, JJ. DATED: 15TH APRIL,2008 P.C.:( PER D.K.DESHMUKH, J.) 1. This petition is filed by the petitioners, Mahratta Chamber of Commerce, Industries and Agriculture and others, for an appropriate writ, direction or order restraining respondent Nos. 1 and 2, State of Maharashtra as well as Pimpri-Chinchwad Municipal Corporation, seeking to levy and recover from the petitioners octroi at an increased rate as per Pimpri-Chinchwad Municipal Corporation (Octroi) Rules, 2001, for the period between 6th January, 2002 and 14th February, 2002 and between 17th February, 2002 and 7th May, 2002, as the same is illegal, unlawful and contrary to law. 2. In accordance with the provisions of the Bombay Provincial Municipal Corporations Act,1949 (hereinafter referred to as "the Act"), octroi can be - 3 - levied by respondent No.2-Corporation by framing Octroi Rules. Such rules were framed by respondent no.2 Corporation. They were sanctioned by the Government on November 29, 2001. It is also an admitted fact that the Government granted the sanction in November,2001 and they were gazetted on 6th December,2001. They were brought into force from 6th January,2002 i.e. on completion of one month from the date of publication in Gazette. It appears from the record as well as from the decision of a Division Bench of this Court in Public Interest litigation No.31 of 2002 decided on 22nd January,2003 (Citizens Forum for Scientific Development of Pimpri-Chinchwad vs. State of Maharashtra and Ors.) that stay against implementation of the Rules and seeking recovery of octroi was granted by the Government on 6th January,2002 which remained operative upto 14th February,2002. On 14th February,2002 stay was vacated. Hence, from 15th February,2002, recovery could be effected and was in fact effected. It is, however, on record that only on two days recovery could be effected i.e. 15th and 16th February,2002. Again, there was "oral" stay from "Mantralaya" and recovery could not be effected from 17th February,2002 onwards. Finally, on 8th - 4 - May,2002, stay was vacated by the State Government and from 9th May,2002, recovery could be effected. 3. In the PIL, a prayer was sought that the action of the State as well as respondent no.2-Corporation of not effecting recovery for the intervening period; i.e. 6th January,2002 to 14th February,2002 and 17th February,2002 to 7th May,2002 was illegal, unlawful and an appropriate direction by issuing a writ of mandamus was required to be issued to the respondent-authorities to effect recovery by issuing notices and called upon the parties to pay the amount of octroi. 4. The Division Bench, upholding the said contention, ordered that the respondent-authorities shall take appropriate proceedings to recover the said amount of octroi by taking appropriate steps. 5. The Division Bench observed: "14. In our opinion, once the required procedure has been followed, the Rules were required to be brought into force. Once the sanction had been granted by the - 5 - State Government, it had no power, authority or jurisdiction to suspend enforcement of the Rules or to grant any interim order. From the facts it is clear that at two stages the State directed the respondent-Corporation not to enforce new Rules and to collect octroi under the new Rules but continued to collect octroi under the old Rules only firstly during 6th January,2002 to 14th February,2002 and secondly, from 17th February, 2002 to 7th May,2002. 15. So far as the first period is concerned, it was stated by the State that there were elections to the Corporations and under the code of conduct the Rules could not be implemented. No provision, however, was brought to our notice by the learned Assistant Government Pleader as to how code of conduct would prevent enforcement of Rules which were framed in accordance with the provisions of the Act. Once the Rules were sanctioned by the State Government, a notification was - 6 - issued and the time after which they were to come into force was over, in our considered view, the State Government could not prevent or prohibit enforcement of Rules on the ground that election was to take place and under the code of conduct, octroi Rules could not be enforced. Hence, the said action was clearly illegal and outside the purview of the Act. Since it was not within the power of the State Government, octroi ought to have been imposed and collected by the Corporation under the new Rules. 16. Regarding the second stage, no written order at all has been brought on record. The petitioner has stated that there was a telephonic message from the State Government directing the Commissioner of the respondent-Corporation not to collect octroi under the new Rules. The said assertion has not been controverted by the State Government, though an affidavit in reply is filed. On the contrary, in the affidavit in reply, - 7 - the action is sought to be justified on the ground that some representations were made. In our opinion, however, when the draft rules were approved by the State Government and one month after which they were to bring into force was over, no power had been left with the State and no direction could be issued to the Corporation not to enforce the Rules. It is further stated in the affidavit that after the State Government was satisfied that the Octroi Rules were proper, legal and valid, vide a letter dated 7th May,2002, the Commissioner of the respondent-Corporation was permitted to collect octroi under the new Rules. The fact, however, remains that from 17th February,2002 to 7th May,2002, octroi could not be collected under the new Rules and it was only with effect from 8th May,2002 that octroi could be recovered under the new Rules. Thus, even for that period, the action on the part of the State Government could not be said to be legal and valid. No provision has been - 8 - shown to us under which such power was exercised by the State Government. 17. We are, therefore, of the opinion that at both stages, the action of the State Government was neither legal nor valid nor supported by any provision of law. ..... ........ .......... 19. In our opinion, when there is no provision in the Act to suspend implementation and enforcement of the Octroi Rules and when we are of the view that at both the stages, action of the respondent-State was not legal and valid, appropriate directions will have to be issued to the respondent Corporation to collect octroi from 6th January,2002 under the new Rules, as per the available record with the Corporation. 6. At that stage, respondent No.4-petitioner - 9 - herein (Maharashtra Chamber of Commerce and Agriculture), contended that if such an order will be issued, it would adversely and prejudicially affect the members of respondent No.4-Corporation. The Division Bench, in the light of the said contention observed: "18. At this stage, the learned Counsel for respondent no.4 submitted that if this Court will issue a writ of mandamus directing the respondent-Corporation to implement new Octroi Rules from 6th January,2002 to 14th February,2002 and then from 17th February,2002 to 7th May,2002, serious prejudice will be caused to the fourth respondent. The counsel submitted that the fourth respondent adopted a proper, permissible and democratic course in such matters i.e. to make a representation to the Chief Minister, the highest authority of the State by putting forward its grievances and objections. The Chief Minister also saw substance in the grievance voiced by respondent no.4 and accordingly, - 10 - enforcement was stayed. It is because of the fact that the prayer was granted by the State Government that the fourth respondent did not choose other remedies which were available to it. If this Court orders recovery of octroi under the new Rules now, for that period also, it may cause substantial loss to respondent no.4 and several others. ..... ....... ........ ........ 20. We may, however, observe that if respondent no.4 is aggrieved by the new Rules, it is open to it to take appropriate proceedings in accordance with law and orders passed by us in the present petition would not come in its way." Taking clue from the above observations, the present petition has been filed by the petitioners." 7. This petition was disposed of by Division Bench by order dated 28th July, 2003. The Division Bench found that the appropriate alternate remedy is - 11 - available to the Petitioner and therefore, the petition under Article 226 of the Constitution cannot be entertained at this stage. 8. This order of the Division Bench was challenged before the Supreme Court. It appears that the order passed by the Division Bench in the PIL referred to above was also challenged before the Supreme Court. The Supreme Court disposed of the Appeal against the order passed in the PIL and the order dated 28th July, 2003 passed in this petition by a common order dated 19th July, 2006. The Supreme Court confirmed the order passed by the Division Bench in the PIL, however, the Supreme Court set aside the order passed by the Division Bench in this petition and admitted the petition for final hearing. The Supreme Court in its order passed in Civil Appeal No.4533 of 2005, which was appeal filed against the order passed by the Division Bench in this petition observed thus:- "We find that although appellants have given up their challenge to the vires of the Rules but still they have, at some places in their writ petition, questioned the procedure followed while framing the Rules and stressed - 12 - that the due procedure was not followed, which was mandatory, before framing the Rules. The question regarding the procedure followed in the present case touches upon the validity of the Rules which cannot be examined by a court other than the High Court or this Court." 9. Thus, according to the above observations of the Supreme Court the Petitioners are challenging the validity of the Rules only on one ground namely that the statutory procedure which according to them is mandatory was not followed before framing the Rules. 10. On behalf of the Petitioners, it was submitted that the procedure for levy and recovery of taxes under Section 127(2) is prescribed under Section 149 of the Act. According to the Petitioners upon sanction being given to the Rules, the Corporation becomes competent to levy the tax. However, on the sanction of the Rules and even after coming into force of the Rules the tax does not become operative until the rates are fixed in accordance with Section 99 of the Act. According to the Petitioners, the levy of tax without complying with the mandatory provisions of Sections 95 to 99 is illegal and - 13 - without authority of law. According to the Petitioners, Sections 95 to 99 of the Act basically stipulate the procedure that is followed by the Corporation in preparing the Annual Budget Estimates. It is submitted that the only way in which money collected from the levy of the taxes is by way of a budget. The preparation of the budget involves four stages i.e. the stages prescribed by Section 95, Section 96 and sub-section 3 and 4 of Section 96 and finally the stage prescribed by Section 99. It is submitted that the rate of tax to be determined by the Corporation under Section 99 is required to be determined on or before 20th February and these taxes are to be imposed in the next official year i.e. from 1st April following the date on which the Corporation approves the standing Committee’s proposals. It was submitted that this indicates that even after the sanction of the State Government given under Section 149, the actual levy of the new tax or new rate is not automatic, but takes effect only if and when and after the Corporation has followed the mandatory procedure prescribed in sections 95 to 99 of the Act. It was submitted that imposition of a new tax or new rate without following the budgetary process is completely invalid and bad in law and - 14 - hence without authority of law. 11. Then it was submitted that Section 149(3) and 149(4) stipulate the date on which the sanction given by the State Government is to come into force. It was submitted that the State Government is required to specify the date from which the rules are come into force. However, the State Government cannot specify the date which will be less than one month from the date on which the State Government gives its sanction. It is submitted that the Corporation is allowed to levy tax from the date later than 1st April after two conditions are satisfied, (i) the State Government does not give its sanction by the first day of March immediately preceding and (ii) the State Government has specifically specified a date later than 1st April in its order of sanction. It was submitted that in the present case the State Government in its order has not specified any definite date and therefore, in the present case the rules could not have been enforced before 1st April, 2002. It was then submitted that the levy of octroi from 6-1-2002 at higher rate without complying with mandatory provisions of Section 99 is without any authority of law. It was submitted that in any case - 15 - even if it is held that the Rules have come into force on 6-1-2002, the Corporation is not entitled to levy octroi on goods which have already entered the municipal limits and on which the octroi has been charged under the then existing Rules because of the stay granted by the Government. It was submitted that therefore levy of octroi during the period the stay granted by the State Government was operative is invalid. 12. On behalf of the Corporation, on the other hand, it was submitted that the procedure for framing Rules for levy and collection of octroi is governed by Sections 127, 149, and Section 99 which is the budgetary provision, it does not play any role in so far as levy and collection of octroi is concerned. It is submitted that under Section 149 the rate on which the octroi is to be collected is to be provided in the Rules and therefore, when the Rules provide minimum rate of tax and the maximum rate of tax, if the Corporation does not determine any rate of tax between the maximum and minimum , then the Corporation would be entitled to levy the tax at the minimum rate on the date on which rules came into force. It is submitted that it is not necessary - 16 - after the Rules come into force to fix the rate under the provisions of Section 99. It was further submitted that it is clear from the order of the Supreme Court referred to above that the only question to be considered in this Writ Petition was whether the statutory procedure was followed before framing the Rules and validity of the Rules was challenged only on that ground. But in the argument as also in the written submission filed, the principal submission made on behalf of the Petitioners is that after framing of the rules, rate of tax should have been fixed under Section 99 and then only recovery could have been made of the octroi at the enhanced rate. It is submitted that in view of the judgment of the Supreme Court referred to above, the Petitioners cannot advance such an argument. It was also submitted that in view of the directions issued by the Division Bench of this Court in the PIL, which order has been confirmed by the Supreme Court, to the Corporation to recover octroi at the enhanced rate during the period the stay granted by the State Government was operating subject to the right of the Petitioners to challenge the validity of the Rules the Corporation has to recover the tax at the enhanced rates. It is submitted that - 17 - from the written submissions it is absolutely clear that the Petitioners are not challenging the validity of the Rules but they are merely challenging recovery of octori/tax at the minimum rates specified in the Rules, because according to them unless rates are fixed under Section 99, recovery of octroi even at minimum rate is not valid. 13. Now, taking up the question whether in view of the judgment of the Division Bench in the PIL, can the Petitioners argue that recovery of octroi at the enhanced rate fixed in the Rules during the period the stay granted by the State Government was operating cannot be made. We have quoted above the observations of the Division Bench in its judgment in the PIL, specially the observations made in paragraph 17, 18, 19 & 20, which has been confirmed by the Supreme Court. It is clear that on behalf of the Petitioners before the Division Bench it was contended that despite the Division Bench finding that the Chief Minister and the State Government had no authority to grant stay, recovery at the enhanced rate of octroi during the period the stay was operating should not be ordered. But the Division Bench rejected that argument and held that - 18 - appropriate directions will have to be issued to the Respondent/Corporation to collect octroi from 6-1-2002 under the new Rules as per the available record of the Corporation. This, however, was subject to the right of the Petitioners to challenge the validity of the new Rules. Therefore, in case the challenge of the Petitioners to the validity of the new Rules fails, then as per the judgment of the Division Bench referred to above which has been confirmed by the Supreme Court, the Corporation is under a duty to make recovery of octori/tax in accordance with new Rules as per the records available with the Corporation. The Petitioners, therefore, are not justified in submitting that even if the new Rules are found to be valid, the Corporation should be restrained from making recovery as per the new Rules for the period during which the stay was operating. 14. One added feature that according to us has to be noted is that the new Rules became operative from 6-1-2002. The first stay granted by the Chief Minister operated from 6-1-2002 till 14-2-2002. On 14-2-2002 the stay was vacated. The Division Bench in its judgment in the PIL has noted that from - 19 - 15-2-2002 recovery of octroi was made as per the new Rules. Recovery of octroi was also made as per the new Rules on 16-2-2002. However, on 17-2-2002 again oral stay was granted by the State Government. Therefore, recovery of octroi at the new rate was stopped from 17-2-2002. The stay granted by the State Government on second occasion was vacated on 8-5-2002 and therefore from 9-5-2002 again octroi was recovered as per the new Rules. The prayer clauses of the petition show that the Petitioners are challenging recovery of octroi as per the new Rules during the period from 6-1-2002 to 14-2-2002. The Petitioners, thus, do not challenge the recovery of octroi as per the new Rules made on 15-2-2002 and 16-2-2002, though on those dates octroi was recovered in accordance with the New Rules. 15. The Supreme Court in its order setting aside the order passed by the Division bench in this petition has observed that the Petitioners have given up their challenge to the virus of the rules, but according to the Petitioners the rules have been framed without following the statutory procedure required to be followed before framing the rules. Thus, according to the order of the Supreme Court the only contention - 20 - of the Petitioner in this petition is that the mandatory procedure which is required to be followed before framing the rules has not been followed. But while arguing the petition and also in the written submission filed, the principal argument raised on behalf of the Petitioners is not that any mandatory procedure required to be followed before framing the rules was not followed. The argument was that though the new rules have been framed, the recovery of the octroi at the enhanced rate cannot be made without fixing the rate under Section 99. The precise submission found in the written submission filed on behalf of the Petitioners reads thus: "The procedure for levy of the discretionary taxes under section 127(2) is prescribed under section 149 of the Act. On the sanction being given, the Corporation becomes competent to levy the tax. However, on the sanction of the rules and even after the coming into force, the tax does not become operative until the rates are in accordance with Section 99. - 21 - Levy of tax without compliance of mandatory provisions of sections 95 to 99 is illegal and without authority of law. 16. Now, firstly, as per the order of the Supreme Court, this was not the challenge in the petition of the Petitioners. The Supreme Court set aside the order passed by this court dismissing the petition on the ground that alternate remedy is available, because according to the Supreme Court the Appellate authority could not have decided the question of validity of the Rule for failure of the Corporation and the State Government to follow the mandatory procedure before framing the rules. That argument, as is obvious from the portion quoted above from the written submission, has been given up by the Petitioners and altogether new argument is being advanced. On page 22 of their written submission the Petitioners have stated in clear terms, "All this indicates that even after the sanction of the State Government given under section 149, the actual levy of the new tax or new rate is not automatic but takes effect only if and when and after the Corporation has - 22 - followed the mandatory procedure prescribed in sections 95 to 99 explained above. In other words, any imposition of a new tax or new rate without following the budgetary process is completely invalid and bad in law and hence without authority of law. 17. Now, even though this argument was not to be raised in this petition, still if this argument is examined in the light of the statutory provisions, it becomes clear that there is no substance in this submission. Section 127 lays down the taxes that can be imposed by the Corporation, sub-section 1 and sub-section 2 of that provision are relevant. It reads as under:- 127(1) For the purposes of this Act, the Corporation shall impose the following taxes, namely:- (a) property taxes. (b) a tax on vehicles, boats and animals. (2) In addition to the taxes specified in - 23 - sub-section (1) the Corporation may for the purposes of this Act and subject to the provisions thereof impose any of the following taxes, namely:- (a) octroi; (aa) a cess on entry of goods into the limits of the City for consumption, use, or sale therein to be levied in lieu of octroi with the previous sanction of the State Government. (b) deleted; (c) a tax on dogs; (d) a theatre tax; (e) a toll on animals and vehicles, entering the City; (f) any other tax not being a tax on professions, trades, callings and employments which the State Legislature has power under the Constitution to impose in the State. - 24 - (2A) Notwithstanding anything contained in sub-section (1) or sub-section (2) no tax or toll shall be levied on motor vehicles save as provided