Case: Visakhapatnam Municipality Vs. Kandregula Nukaraju &amp; Ors

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 81( 2). Residents and taxpayers of those areas, like respondents 1 to 36, never had 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. Such period has to be reasonable, not being less than one month. The policy of the law is to afford to those likely to be affected by the imposition of the tax a reasonable opportunity to object to the proposed levy.According to the appellant, the residents of Ramakrishnapuram and Sriharipuram had an opportunity to object to the imposition of the tax when the State Government issued a notification under section 3(1)(b) of the Act declaring its intention to include the two villages within the limits of the municipality. It is not possible to accept this submission either. When the State Government issues a notification under any of the clauses of section 3(1), any resident of the local area concerned or any tax payer of the municipality can "object to anything therein contained" meaning thereby, anything contained in the notification. A notification issued under section 3 (1) (b) contains only the declaration of the Governments intention "to include within a municipality any local area in the vicinity thereof and defined in such notification". The rig ht of objection would therefore be limited to the question whether a particular area should, as proposed, be included within the municipal limits. It would be premature at that stage to offer objections to the imposition of any tax because it is only after the final Notification is issued under section 3(3) that the question would at all arise as regards the imposition of a tax on the newly included areas. A notification under section 3(3) has to be followed by a resolution under section 81(1) if the municipality wants to impose a tax, and for the resolution to be effective, the procedure prescribed by the first proviso to section 81(2) has to be followed. The appellant municipality short- circuited this mandatory procedure and thereby deprived respondents 1 to 36 of the valuable right of objecting to the imposition of the tax.9. Finally, relying on section 3(4) of the Act, learned counsel for the appellant contended 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 date on which the final notification is published by the Government under section 3(3). This argument is said to find support in a decision of this Court in Atlas Cycle Industries Ltd. v. State of Haryana &Anr.([1972] 1 S.C.R. 127.). Far from supporting the argument, we consider that the decision shows how a provision like the one contained in Section 3(4) cannot have the effect contended for by the "appellant in the Atlas Cycle case, section 5(4) of the Punjab Municipality Act. 1911 provided that when any local area was included in a 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". The industrial area within which the factory of the Atlas Cycle was situated was by a notification included with in the municipality of Sonepat. The municipality thereafter purported to impose octroi duty on the goods manufactured, by the company without following the procedure corresponding to that prescribed by sections 81 and 83 of the Act. It was held by this Court that since section 5(4) of the Punjab Act did not, significantly, refer to notifications and since section 62(10) 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 5(4) of the Punjab Act. In the instant case, what section 3(4) provides is that once a notification including any area within a municipality is published under section 3(3), "The provisions of this Act shall come into force into ........ any municipality or part thereof.. .....on the date of publication of the notification under sub-section (3), if such date is the first day of April, or in any other case, on the first day of April immediately succeeding the date of publication of such notification". Thus. by section 3(4), once a notification is issued under section 3(3), all the provisions of the Act come into force. That means that sections 81 and 83, which are a part of the act, would also apply to the entire Municipal area. It would then be obligatory for the municipality to follow the procedure prescribed in these sections. Taxes can be imposed under the Act only by passing appropriate resolutions under section 81. Section 3(4) does not provide that on the inclusion of a new area within a municipality, the resolutions passed by the municipal council before such inclusion will automatically apply to the new area. Plainly, such could not be the intention of the legislature in view of the importance which it has attached to the right of the citizens to object to the imposition of a proposed tax. Though, therefore , by reason of section 3(4) the provisions of the Act would apply to the new areas included within a municipality, it is not competent to the municipality to take resource to the resolution passed for imposing tax on the old areas for the purpose of levying taxes on new areas. The procedure prescribed by section 81 and 83 must be followed if a tax is proposed to be levied on the new areas.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The circumstance that whereas the preliminary notification declaring the intention of the State Government to include new areas within the municipal limits was issued under the District Municipalities Act 1920, the final notification confirming that intention was issued under the Act presents no difficulty. In so far as relevant, Schedule IX clause 13 of the Act, read with clause 1, provides that any action taken under the District Municipalities Act, 1920 by any authority before the commencement of the Act shall, unless inconsistent with the Act be deemed to have been taken by the authority competent to take such action under the Act. The preliminary notification, though issued under section 4(1) (c) of the 1920 Act must therefore be deemed to have been issued under section 3(1)(b) of the Act. The inclusion of the villages of Ramakrishnapuram and Sriharipuram within the limits of the Visakhapatnam Municipality is accordingly inprovision cannot justify the imposition of tax under the repealed Act of 1920 on properties situated in the newly included areas. In the first place, as the very title of Schedule IX shows, the provisions contained in the Schedule are of a transitional nature. They are intended to apply during the period of transition following upon the repeal of old municipal laws and the introduction of the new law. Some time must necessarily elapse before a municipality can act under the new law but taxes have all the same to the imposed and collected during thethe procedure prescribed by the first proviso to section 81(2) was not followed in regard to the period prior to October 1, 1970 the levy of property tax on the properties of respondents 1 to 36 for that period is without the authority of law and consequentlyis not possible to accept this submission. The Municipality might have been levying property tax since long on properties situated within its limits but until April 1, 1966 the villages of Rarmakrishnapuram and Shriharipuram 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 81( 2). Residents and taxpayers of those areas, like respondents 1 to 36, never had 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. Such period has to be reasonable, not being less than one month. The policy of the law is to afford to those likely to be affected by the imposition of the tax a reasonable opportunity to object to the proposedis not possible to accept this submission either. When the State Government issues a notification under any of the clauses of section 3(1), any resident of the local area concerned or any tax payer of the municipality can "object to anything therein contained" meaning thereby, anything contained in the notification. A notification issued under section 3 (1) (b) contains only the declaration of the Governments intention "to include within a municipality any local area in the vicinity thereof and defined in such notification". The rig ht of objection would therefore be limited to the question whether a particular area should, as proposed, be included within the municipal limits. It would be premature at that stage to offer objections to the imposition of any tax because it is only after the final Notification is issued under section 3(3) that the question would at all arise as regards the imposition of a tax on the newly included areas. A notification under section 3(3) has to be followed by a resolution under section 81(1) if the municipality wants to impose a tax, and for the resolution to be effective, the procedure prescribed by the first proviso to section 81(2) has to be followed. The appellant municipality short- circuited this mandatory procedure and thereby deprived respondents 1 to 36 of the valuable right of objecting to the imposition of thefrom supporting the argument, we consider that the decision shows how a provision like the one contained in Section 3(4) cannot have the effect contended for by the "appellant in the Atlas Cycle case, section 5(4) of the Punjab Municipality Act. 1911 provided that when any local area was included in a 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 suchthe instant case, what section 3(4) provides is that once a notification including any area within a municipality is published under section 3(3), "The provisions of this Act shall come into force into ........ any municipality or part thereof.. .....on the date of publication of the notification under sub-section (3), if such date is the first day of April, or in any other case, on the first day of April immediately succeeding the date of publication of such notification". Thus. by section 3(4), once a notification is issued under section 3(3), all the provisions of the Act come into force. That means that sections 81 and 83, which are a part of the act, would also apply to the entire Municipal area. It would then be obligatory for the municipality to follow the procedure prescribed in these sections. Taxes can be imposed under the Act only by passing appropriate resolutions under section 81. Section 3(4) does not provide that on the inclusion of a new area within a municipality, the resolutions passed by the municipal council before such inclusion will automatically apply to the new area. Plainly, such could not be the intention of the legislature in view of the importance which it has attached to the right of the citizens to object to the imposition of a proposed tax. Though, therefore , by reason of section 3(4) the provisions of the Act would apply to the new areas included within a municipality, it is not competent to the municipality to take resource to the resolution passed for imposing tax on the old areas for the purpose of levying taxes on new areas. The procedure prescribed by section 81 and 83 must be followed if a tax is proposed to be levied on the new areas.