Case: M/s. Rama Krishna Ram Nath &amp; Another Vs. Janpad Sabha

It is sufficient to refer to the facts in Civil Appeal 188 of 1956 because, except for the identity of the appellants and the amounts involved, the matter in controversy is exactly similar Rama Krishna Ramanath-appellant in Civil Appeal 188 is a Proprietary concern carrying on business, inter alia, in manufacturing and selling bidis. In the course of that business they export bidis to various places outside the territorial limits of the Janpad Sabha, Gondia. The Janpad Sabha, Gondia, demanded and collected taxes when the export took place from railway stations within its territorial jurisdiction. Between January 26,1950, and June 30, 1952, the respondent Sabha had collected tax totalling Rs. 3,818/15-3, the appellant concern contending that from the date of the coming into force of the Constitution the imposition and collection of the terminal tax by the respondent Sabha was illegal, because the right to levy terminal taxes was vested exclusively in the Government of the Union under entry 89 in the First List to the 7th Schedule to the Constitution and sought the refund of this sum of tax from the respondent Sabha and also required that it should desist from continuing the imposition and levy of this tax, and when the request was not heeded, served notice on the Sabha. In consequence of this notice though the Sabha discontinued the collection of the tax, it refused to refund the tax already collected. Thereupon the appellant instituted a civil suit in the Court of the Civil Judge at Gondia praying for a decree for the sum of Rs. 3,818/15/3 and costs. The suit was resisted and thereafter this along with several similar suits including three by the appellants in the other three appeals were all withdrawn to the High Court under Art. 228 of the Constitution for deciding the substantial question of law as to the interpretation of the Constitution and of the Government of India Act as to whether the levy of the tax by the respondent Sabha was lawful or not. These suits were consolidated and were disposed of by a common judgment dated April 13, 1955, by which all the suits were dismissed but a certificate was granted under Art. 132 of the Constitution. On the strength of this certificate four of the aggrieved plaintiffs filed appeals to this Court and that is how the matter is before us(1) The tax being one on goods exported out of the local area by rail would answer the description of a terminal tax falling within the exclusive jurisdiction of the Central Legislature under the Government of India Act, 1935. The position has continued to be the same under the distribution of legislative power in relation to taxes under the Constitution. The result would, therefore, be that but for the saving contained in S. 143 (2) of the Government of India Act, 1935, it would not have been legally competent for the local authority to continue to levy the tax after the Government of India Act came into force; similarly but for Art. 277 that levy could not have been continued beyond January 26, 1950. On the facts stated earlier it would be seen that the right of the local authority to levy the tax would be ultimately dependent on the same being authorised by S. 143 (2) of the Government of India Act(2) The tax that was sought to be levied by the respondent-Sabhas and which was challenged as unauthorised and illegal was identical in its incidence as the tax which the District Council of Bhandara lawfully levied just prior to the commencement of Part III of the Government of India Act, 1935. By incidence we mean the subject-matter of the tax, the taxable event as well as the rate of the duty. In other words, the tax now sought to be levied and that which was lawfully imposed and collected prior to April, 1,1937, were exactly identical in their effect and operation. Similarly there was no controversy as regards either the identity of the area in aid of whose local administration the tax was now sought to be collected, nor as regards the purposes for which they were utilised as compared with what prevailed on April 1, 19377. The principal contention however, raised on behalf of the appellant before the High Court was based upon a denial of the identity of the authorities-three Janpad Sabhas with the District Council, Bhandara which levied and collected the tax prior to April 1, 1937. The learned Judges of the High Court rejected this contention and held that the three Janpad Sabhas which replaced the District Council of Bhandara were in substance identical with the latter principally for the reason that the area covered by the three newly created Janpads was the same as that for which the District Council functioned and that the purposes for which the tax collected would be utilized-which are the criteria specified in S.143(2)-were exactly the same. Just as it could not be disputed that it there were any change in the composition of the District Council the identity of a local authority would not be altered for the purposes of S. 143 (2), the mere splitting up of that local area for being administered by a plurality of Local Government Units would not effect any change material for the purposes of the continued eligibility of the tax under S. 143 (2). The learned Attorney-General therefore very properly did not press before us this point based upon the disappearance of the District Council and its being replaced by the respondent-Sabhas as any ground for denying to the respondent-Sabhas the right to levy the tax.

Court's reasoning:
The provincial Legislature of Central Provinces and Berar in exercise of its Legislative power under item 13 of the Provincial Legislative List enacted the Local Government Act, 1948, and validly repealed the Act of 1920 under which this tax was levied. As part of the same legislation and taking effect at the same time it was open to that Legislature to have continued the provisions of the repealed Act of 1920, under which the impugned tax was levied so as to enable the newly created Janpad Sabhas to exercise the fiscal powers of the District Councils which they replaced, thus so to speak modifying or qualifying the repeal. Such a continuance could be provided by a saving clause couched in appropriate phraseology to effectuate such an intention. If this had been done, the source of legal authority to levy the tax would, even after the Act of 1948 came into force, have been the repealed Act of 1920 which to the extent of the saving would be deemed to have continued in force. But this was not done. There was, no doubt, a saving under the proviso to S. 192 but the saving in respect of the taxes which was contained in sub-cl. (c) to the proviso was confined to the recovery of taxes which had accrued due on the date of the repeal but which still remained uncollected and the purpose of the sub-clause was to effect a distribution of those assets, viz., of the accrued arrears among the several Janpad Sabhas which replaced each District Council, so that when on June 11, 1948, the Act of 1948 came into force, the effect of it was that the repeal of the Act of 1920 was for all purposes relevant to the matter now in controversy complete and with it the power to levy the tax in future stood extinguished, save only as regards the right to collect the arrears, which had accrued due to the District Councils before that date. No doubt the Provincial Legislature effected an amendment to S. 192 in 1949 by which the saving was extended to include the right of the Janpad Sabhas to continue to levy the impugned tax and this amendment was given retrospective effect as from June 11, 1948, bill this amendment was beyond the legislative competence of the Provincial Legislature since in pith and substance it was virtually a legislation expressly conferring upon the Janpad Sabhas the right to levy a terminal tax-a right which they did not possess before that date and unless the Legislature was competent to enact a law in relation to such a tax it could not validly confer upon the local authority what in legal effect should be considered to be a fresh right to levy the tax. The argument was also presented in a slightly different form by saying that on the terms of S. 143(2) of the Government of India Act there was a provision only for the continuance of the tax and that when once that continuity was broken by a valid piece of legislation such as took place in this case when the Local Self-Government Act, 1920, was repealed without a properly drafted saving clause enabling the continued levy of the tax, the discontinuity created thereby could not thereafter be repaired and the gap filled by further legislation even though it purported to be with retrospective effectWe must express our inability to accept this extreme contention.Section 143 (2) which is a saving clause and obviously designed to prevent a dislocation of the finances of Local Governments and of local authorities by reason of the coming into force of the provisions of the Government of India Act distributing heads of taxation on lines different from those which prevailed before that date, cannot be construed as one conferring a plenary power to legislate on those topics till such time as the Central Legislature intervened. Such a construction would necessarily involve a power in the Provincial Legislature to enhance the rates of taxation-a result we must say from which Mr. Sanyal did not shrink, but having regard to the language of the section providing for a mere continuity and its manifest purpose this construction must be rejectedWe find it difficult to accept this submission either. The difficulty in accepting it is created only in part by the use of the expression "due" but the main hurdle in the way of the respondent is that what is saved by the sub-clause (and is distributed among the Janpad Sabhas which replaced the District Councils), is specified as a cess, rate etc. due to a District Council. The rate, cess or duty due to a District Council could obviously be only that which had accrued due to a District Council while that body was in existence and with the extinction of the District Councils by the repeal of the Act of 1920 there could be no question of any further sums being due to such a body. Mr. Sanyal however sought to get over this situation by suggesting that the words "due to a District Council" were merely descriptive of the nature of the tax and did not predicate that it was an amount due to a particular body on the date when it became due. In our opinion, this is not an interpretation which the words could reasonably bear and we have, therefore, no hesitation in rejecting this argument. We consider that this submission also deserves, in the circumstances of the present case, to be rejected. It is a cardinal principle of statutory construction that the intention of the legislature should be gathered from the words of the enactment. If, as we have held, those words are incapable of the construction that there was a saving of the right of the Janpad Sabhas to impose and collect the tax-apart from the right to collect the arrears of tax which accrued due while the District Council was in existence that construction cannot be modified and the legislative intent with which that proviso was enacted supplemented by a reference to what the legislature did later. No doubt, there is authority for the position that when the meaning of the words used in an enactment is ambiguous or obscure, subsequent statutes might sometimes be used as what has been termed "a parliamentary exposition" of the obscure phraseology. It is hardly necessary to discuss the permissible limits of this mode of construction for the purpose of the present case, because the prime conditions for invoking that rule are absent here-there is no obscurity or ambiguity in the words of cl. (c) and secondly if the learned Attorney-General is right, the Provincial Legislature had no legislative capacity to enact the Amending Act of 1949 and this must include legislation either by way of explanation or exposition, and of course by positive enactment. If there is incapacity to enact retrospective legislation on the matter, the position is not rendered different by viewing it as a Parliamentary exposition. The validity of the amendment effected by the Act of 1949 must be judged independently and on its own merits and its terms cannot be used as a guide to the interpretation of what the legislature in enacting S. 192 of the Act of 1948 intended by the words in cl. (c)It must, however, be mentioned that the learned Attorney-General was not oblivious of this feature of the legislation of 1949, viz., that it purported to operate as it were to close the gap, but his submission was that if, in fact, the gap. existed and there was factually a period of discontinuity, the legislature which had no authority to enact positive legislation with reference to the topic in May, 1949, was incompetent to pass an enactment with retrospective effect13. In our opinion, this argument of Mr. Sanyal requires serious consideration and the answer would turn on the proper construction of the terms of S. 143 (2) of the Government of India Act. The first matter to be considered would be the source of the legislative power to enact the Local Government Act of 1948. In so far as the constitution of local authorities, their territorial distribution, the endowing them with powers, jurisdiction and authority in general are concerned, the legislative power therefor is to be found in Entry 13 of the Provincial Legislative List II to Sch. VII of the Government of India Act, 1935,14. It must however be observed that merely because the legislature is empowered under this entry to constitute local authorities and vest them with powers and jurisdiction it would not follow that these local bodies could be vested with authority to levy any and every tax for the purpose of raising revenue for the purposes of local administration. They could be validly authorized to raise only those taxes which the province could raise under and by virtue of the relevant entries in the Provincial Legislative List. This is on the principle that the Province could not authorise local bodies created by it to impose taxes which it itself could not directly levy for the purposes of the Provincial Government. Now comes the question whether the Provincial Legislature was competent, by legislation, to discontinue the levy of the tax by effecting a repeal of the taxing provision contained in the Local Self-Government Act of 1920. There is no doubt that the general principle is that the power of a legislative body to repeal a law is co-extensive with its power to enact such a law, as would be seen from the following passage in the judgment by Lord Watson in Attorney-General for Ontario v. Attorney-General for the Dominion, 1896 A CBut obviously its application in particular instances would be controlled by express constitutional provision modifying the same. We have such a provision in the case on hand in S.143 (2) of the Government of India Act, 1935. In the context the relevant words of the sub-section could only mean "may continue to be levied it so desired by the Provincial Legislature" which is indicated by or is implicit in the use of the expression "may" in the clause "may be continued until provision to the contrary is made by the Federal Legislature."This would therefore posit a limited legislative power in the Province to indicate or express a desire to continue or not to continue the levy. If in the exercise of this limited power the Province desires to discontinue the tax and effects a repeal of the relevant statute the repeal would be effective. Of course, in the absence of legislation indicating a desire to discontinue the tax, the effect of the provision of the Constitution would be to enable the continuance of the power to levy the tax but this does not alter the fact that the provision by its implication confers a limited legislative power to desire or not to desire the continuance of the levy subject to the overriding power of the Central Legislature to put an end to its continuance and it is on the basis of the existence of this limited legislative power that the right of the Provincial Legislature to repeal the taxation provision under the Act of 1920 could be rested. Suppose for instance, a Provincial Legislature desires the continuance of the tax but considers the rate too high and wishes it to be reduced and passes an enactment for that purpose, it cannot be that the legislation is incompetent and that the State Government must permit the local authority to levy tax at the same rate as prevailed on April 1, 1937, if the latter desired the continuance of the tax. If such a legislation were enacted to achieve a reduction of the rate of the duty, its legislative competence must obviously be traceable to the power contained in the words "may continue to be levied in S. 143 (2) of the Government of India Act. If we are right so far it would follow that in the exercise of this limited legislative power the Provincial Legislature would also have a right to legislate for the continuance of the tax provided, if of course, the other conditions of S. 143 (2) are satisfied, viz., (1) that the tax was one which was lawfully levied by a local authority for the purposes of a local area at the commencement of Part III of the Government of India Act. (2) that the identity of the body that collects the tax, the area for whose benefit the tax is to be utilised and the purposes for which the utilisation is to take place continue to be the same, and (3) the rate of the tax is not enhanced nor its incidence in any manner altered, so that it continues to be same tax. If as we have held earlier there is a limited legislative power in the Province to enact a law with reference to the tax levy so as to continue it. the validity of the Act of 1949 which manifested the legislative intent to continue the tax without any break the legal continuity being established by the retrospective operation of the provision, has to be upheld.