Case: Municipal Board, Hapur Vs. Raghuvendra Kripal And Others

1. The Municipal Board, Hapur (shortly the appellant Board) passed a Special Resolution (No. 296) on September 28, 1956 imposing water tax in Hapur from April 1, 1957 and a notification by the Government of Uttar Pradesh was published in the Uttar Pradesh was published in the Uttar Pradesh Gazette under S. 135 (2) of the U. P. Municipalities Act (Act 2 of 1916) dated December 11, 1956 notifying the resolution. Fifteen house owners of Hapur who received notices from the appellant Board for the payment of the tax assessed in respect of their houses, petitioned to the High Court at Allahabad under Art. 226 of the Constitution and asked for a writ or order preventing the appellant Board from realising the tax. Their contention was that the tax was illegal as it was imposed in contravention of the provision of the Municipalities Act. The main grounds of Objection were (a) that the resolution of the appellant Board framing the proposal was not published in a local paper of Hapur printed in Hindi, and (b) that the rules framed for the imposition of the tax did not accompany the resolution which was affixed on the notice board at the office of the appellant Board in purported compliance with the requirements for publication. The imposition was also challenged on the ground that Arts. 14 and 19 of the Constitution were violated2. The petition was heard by Mr. Justice James who decided all the points against the appellant Board. He held that the tax was illegal inasmuch as the mandatory requirements of the Municipalities Act were not complied with by the appellant Board while imposing the tax, and that S. 135 (3) of the Act (which cures all defects in the imposition of tax by making the notification of Government conclusive evidence of the legality of the imposition) was ultra vires Art, 14 of the Constitution because it created a bar against proof and left no remedy to the tax payers thereby making a discrimination between them and other litigants. He further held that the sub-section, by making Government the sole judge of compliance with the Act conferred judicial power on Government contrary to the intendment of the Constitution. The appellant Board was accordingly ordered not to collect the tax from the petitioners. The appellant Board appealed under the Letters Patent. The Divisional Bench hearing the special appeal agreed with Mr. Justice James. The case was, however, certified as fit for appeal to this court and the present appeal has been filed

Reasoning:
There is at the very start the fundamental fact that the power to tax in a State can only be exercised by the State Legislature, the extent of the power being fixed by the Constitution. The taxes which the State Legislatures are allowed to raise are enumerated in the Seventh Schedule to the Constitution. The State Legislature can impose all these taxes itself but it is usual to authorise the levy of some of them by local authorities for their own purpose Taxes so raised by a local authority are not imposed by it as a legislature but as a delegate of the legislature. What is done is binding by the authority of the legislature and the tax is valid only if it is one of the taxes the delegate can raise and the delegate imposes it in accordance with the conditions laid down by the legislature8. Itis thus that we find an elaborate procedure prescribed by all the Municipal Acts. In the U.P. Municipalities Act also, as we have seen, a Board must first pass a special Resolution framing a proposal and the draft rules, invite objections, consider them, and then get them approved by Government. After this approval there must be a final special resolution imposing the tax from a particular date and the Government then notifies the imposition of the tax. It is the duty of Government to see that the various steps laid down for the imposition of the tax are followed. Before it notifies the resolution Government satisfies itself about the requirements. The notification is made conclusive proof that the tax is imposed in accordance with the provisions of the Act. The question arises: Is this rule of conclusive evidence such as to shut out all enquiry by Courts? We have no hesitation in answering the question in the negative. There are certain matters which, of course, cannot be established conclusively by a notification under S. 135 (3). For example, no notification can issue unless there is a special resolution. The special resolution is the sine qua non of the notification. The State Government cannot impose a tax all by itself by notifying the imposition of the tax, without a resolution by the Board. Again, the notification cannot authorise the imposition of a tax not included in S. 128 of the Municipalities Act. Neither a Municipal Board nor a State Government can exercise such a power. A tax can only be said to be imposed in accordance with the provisions of the Municipalities Act, if it is contemplated by the Act. There is a difference between the tax and the imposition of the tax. The former is the levy itself and the latter the method by which the levy is imposed and collected. What the sub-section does is to put beyond question the procedure by which the tax is imposed, that is to say, the various steps taken to impose it. A tax not authorised can never be within the protection afforded to the procedure for imposing taxes. Such a tax may be challenged, not with reference to the manner of the imposition but as an illegal impost9. Itwould thus appear that at the very start the selection of the tax must be with reference to the delegated powers. The Municipal Board or the State Government cannot select a tax which the legislature has not mentioned in S. 128 of the Municipalities Act. As the State Government cannot itself impose the tax it must have before it, the special resolution of the Board before notifying the imposition. Between the special resolution selecting a tax for imposition and the special resolution imposing it sundry procedure is gone through and section 135 (8) says that the notification by Government is conclusive proof that the procedure was correctly followedAs observed already some of the provisions controlling the imposition of a tax must be fully complied with because they are vital and therefore mandatory, and the others may be complied with substantially but not literally, because they are directory. In either case the agency for seeing to this compliance is the State Government. It is hardly to be expected that the State Government would not do its duty or that it would allow breaches of the provision to go uncertified One can hardly imagine that an omission to comply with the fundamental provisions would ever be condoned. The law reports show that even before the addition of the provision making the notification conclusive evidence of the proper imposition of the tax, complaints brought before the courts concerned provisions dealing with publicity or requiring ministerial fulfillment. Even in the two earlier cases which reached this Court and also the present case, the complaint is of a breach of one of the provisions which can only be regarded as directory. In cases of minor departures from the letter of the law especially in matters not fundamental, it is for the Government to see whether there has been substantial or reasonable compliance. Once Government condones the departure, the decision of Government is rightly made final by making the notification conclusive evidence of the compliance with the requirements of the Act.It is not necessary to investigate whether a complete lack of observance of the provisions would be afforded the same protection. It is most unlikely that this would ever happen and before we pronounce our opinion we should like to see such a caseIt is impossible for the Legislature to pass statutes for the imposition of such taxes in local areas. The power must be delegated. Regard being had to the democratic set up of the municipalities which need the proceeds of these taxes for their own administration, it is proper to leave to these municipalities the power to impose and collect these taxes. The taxes are, however, predetermined and a procedure for consulting the wishes of the people is devised. But the matter is not left entirely in the hands of the Municipal Boards. As the State Legislature cannot supervise the due observance of its laws by the Municipal Boards, power is given to the State Government to check their actions. The imposition of the tax is left to the Municipal Boards but the duty to see that the provisions for publicity, and obtaining the views of the persons to be taxed are fully complied with is laid upon the State Government. The proceedings for the imposition of the tax, however, must come to a conclusion at some stage after which it can be said that the tax has been imposed. That stage is reached, not when the special resolution of the Municipal Board is passed, but when the notification by Government is issued. Now it is impossible to leave the matter open so that complaints about the imposition of the tax or the breach of this rule or that may continue to be raised. The door to objections must at some stage be shut and the Legislature considers that, if the Sate Government approves of the special resolution, all enquiry must cease. This is not a case of excessive delegation unless one starts with the notion that the State Government may collude with the Municipal Board to disregard deliberately the provisions for the imposition of the tax. There is no warrant for such a supposition. The provision making the notification conclusive evidence of the proper imposition of the tax is conceived in the best interest of compliance of the provisions by the Boards and not to facilitate their breach. It cannot, therefore, be said that there is excessive delegationThe first is the question of discrimination which is said to arise from the proviso which makes the notification conclusive in respect of the procedure by which the tax is imposed. There are numerous statutes, including the Evidence Act, in which a fact is taken to be conclusively proved from the existence of some other fact. The law is full of fictions and irrebuttable presumptions which also involve proof of facts. It has never been suggested before that when the Legislature says that enquiry into the truth or otherwise of a fact shall stop at a given stage and the fact taken to be conclusively proved, that a question of discrimination arises. The tax payers in the Municipality are allowed under the Municipalities Act to object to the proposal for the tax and the rules and to have their objections considered. They cannot, of course, be allowed to keep on agitating and a stage must come when it may be said that the provisions of the Act have been duly observed. That stage is reached after Government has scrutinized the proposal, the rules, the objections and the orders and has approved of the proposal, a special resolution is passed by the Municipal Board and a notification is issued. It cannot be said that sub-s. (3) of S. 135 which leads to the conclusion that the imposition of the tax is according to the Municipalities Act is discriminatory because it only concludes objections against the procedure followed in the imposition of the taxThe next objection that the impugned sub-section involves the exercise of judicial functions not open to the Legislature, is wholly erroneous. The sub-section only shuts out further enquiry and makes the notification final. There is no exercise of a judicial function. In our country there is no rigid separation of powers and the legislature often frames a rule such as is incorporated in the third sub-section of S. 135. The Evidence Act is full of such provisions. In the United States of America where the separation of powers is extremely rigid in some of the constitutions of the States it may be open to objection that the Legislature in shutting out enquiry into the truth of a fact encroaches upon the judicial power of the State. Such disability has never been found to exist in our country although legislation of this type is only too frequent. The objection is, therefore, without substance.