Case: Atlas Cycle Industries Ltd Vs. State of Haryana

2. The relevant facts of the first writ petition may be noted. On 3rd November 1942 a notification was issued under Section 62(10) of the Punjab Municipal Act (hereinafter called "the said Act") which stated that the Municipal Committee of Sonepat had imposed a tax called `Octroi on the articles mentioned in the Schedule to the notification when imported into the octroi limits of Sonepat municipality. On 11th February 1948 it was notified that the limits of Sonepat municipality for the purpose of collection of octroi would be the boundaries of the municipality as fixed from time to time. On 15th September, 1966 a notification was issued in pursuance of the provisions of Section 5(1) of the said Act whereby the intention of including the areas specified in the Schedule thereto within the municipal limits of Sonepat was declared and the inhabitants of the municipality and of the local area in respect of which the notification was published were invited to submit objections in writing to the proposed inclusion. The area upon which the factories of the petitioners are situated was proposed to be included within the municipal limits of Sonepat. On 3rd November, 1966 the petitioner filed objections to the inclusion of the proposed areas within the municipal limits of Sonepat. The petitioner stated that it understood that the proposed inclusion was intended to increase the income of the Sonepat municipality by bringing the different industries around Sonepat within its limits thereby making them pay all municipal taxes. Such additional taxes would add considerably to the cost of production of the petitioners bicycles and the octroi alone would be Rs. 1.30 per bicycle manufactured. The petitioner was "already groaning under the heavy Central and State taxes. If saddled with additional local taxes, the burden will become unbearable." The petitioner therefore asked that the proposed inclusion of the industrial area within the municipal limits of Sonepat should be dropped. On 11th August, 1967 a notification was issued under Section 5(3) of the said Act by the Governor of Haryana. (This was because the State of Haryana had been created on 1st November, 1966 by bifurcation of the State of Punjab). The notification under Section 5(3) included within the municipal limits of Sonepat the area upon which the factories of both the petitioners stood. On and from 18th August 1967 octroi was levied upon materials imported by them into the municipal limits of Sonepat.In 1968 the Manufacturers Association of Sonepat, of which the petitioners were members, made a representation, consequent upon which the Sonepat municipality reduced the rate of octroi chargeable upon cycles, tyres, tubes and parts imported, inter alia, by the petitioners.In 1967 the petitioners filed writ petitions in the High Court of Punjab and Haryana for writs of mandamus restraining the municipality of Sonepat from levying against and collecting from them any octroi in respect of raw materials, components and parts imported by them into their factories situated in the industrial area of Sonepat. The High Court having dismissed the writ petitions, appeals were filed in this Court. This Court based its judgment Atlas Cycle Industries Ltd. v. State of Haryana, 1972(1) SCR 127 upon the provisions of Section 5(4) of the said Act, as it then read. Section 5(4), as it then read, spoke of rules, bye-laws, orders, directions and powers. It did not mention notifications. Notifications under the said Act were the only authority and mandate for the imposition and charge of taxes. Notifications were not made applicable to included areas under Section 5(4). Therefore, the appeals were allowed and the Sonepat municipality was restrained from levying against and collecting from the petitioners any octroi in respect of raw materials, components and parts imported by them into their factories.Consequent upon this judgment the petitioners were refunded the octroi that had been collected from them.On 15th November, 1971 was passed the Punjab Municipal (Haryana Validation and Amendment) Act (hereinafter called "the Validation and Amendment Act") which amended Section 5(4) to include within it the word `notification. The Validation and Amendment Act also validated with retrospective effect and levy and collection of octroi in these termsValidation. (1) Notwithstanding any judgment, decree or order of any Court or other authority to the contrary, any assessment, re-asessment, levy or collection of any tax made or purporting to have been made at the rate of fifteen per centum instead of twelve and-a-half per centum and any octroi levied, charged or collected or purporting to have been levied, charged or collected before the commencement of this Act and any action taken or thing done before such commencement in relation of the principal Act and the rules made thereunder shall be deemed to be as valid and effective as if such assessment, re-assessment, levy or collection or action or thing had been made, taken or done under the principal Act as amended by this Act and the rules and bye-laws made thereunder....Thereupon the present writ petitions were filed.1. In the instant case on 15.9.1966, in exercise of powers under Section 5(1), the intention to alter the limits of Sonepat Municipality was notified. The area to be included was mentioned in the Schedule. Objections were invited. Accordingly, the petitioner on 3.11.1966 filed his objections. Inter alia, it was stated as under2 : That it is now proposed to extend the municipal limits of Sonepat by including therein the industrial area, hitherto outside the municipal limits. This, the petitioner understands, is proposed to be done with the sole aim to increase the income of the Municipality by bringing the different industries around Sonepat within municipal area, thereby making them to pay all municipal3 : That the additional taxes to be levied by the Municipality will add considerably to the cost of production of bicycle manufactured by the petitioner. The octroi alone on 30 Kgs. of raw material required for manufacture of on bicycle are likely to be about Rs.it was prayed on behalf of the petitioner that the proposal to extend the municipal limits may be dropped. On a consideration of those objections, they were overruled by a notification dated 11.8.1967. It was stated thus5998-2CI-67(B-12)/19979 - with reference to Punjab Government Notification No. 8365-I CI-66/26616 dated the 15th September, 1966, published in the Punjab Government Gazette on the 30th September, 1966 and in pursuance of the provisions of sub-section (3) of Section 5 of the Punjab Municipal Act, 1911, the Government of Haryana is pleased to include within the Municipality of Sonepat in Rohtak District, the area lying between the existing boundary as defined in Punjab Government Notification No. 13295-C-55/32245, dated the 10th December, 1955, as subsequently amended, vide Punjab Government Corrigendum Notification No. 1567-CII-57/5488, dated the 25th March, 1957 and the boundary now proposed as specified in the Schedule hereto appended."

Court's reasoning:
9. Mr. Salve, learned counsel for the petitioner, submitted that the right of representation was an important safeguard and he relied upon the judgments of this Court in Prakash Chandra Mehta v. Commissioner and Secretary, Government of Kerala, 1985(3) SCR 697, and Baldev Singh v. State of H.P., 1987(2) SCC 510 : 1988(1) RRR 491 (SC).There can be no doubt about the correctness of this proposition.The object of the inquiry under Section 5 is different from the object of the inquiry under Section 62. There is, therefore, in our view, no scope for the plea that the petitioners have been discriminated against in that they were given no opportunity to object to the imposition of octroi under Section 62.The object of the inquiry under Section 5 is bar broader. It would be open to an inhabitant of the local area proposed to be included within the municipality to object under Section 5 to such inclusion even upon the ground that a municipal tax should not be imposed upon that local area. In fact, the petitioners had raised the objection, under the provisions of Section 5, that the inclusion of the local area upon which their factories were situated within the municipality would make them liable to any octroi which they would be ill able to afford. This re-inforces our conclusion that they have not been discriminated against.We may also note that there is power conferred by Section 70(2)(c) and Section 71 of the said Act upon the committee and the State Government respectively to exempt wholly or in part any person or class of persons or any property or description of property from payment of any tax. The petitioners, and other manufacturers, sought such exemption and were given partial exemption from the payment of octroi.Having regard to what we have held in respect of the differences in the object of Section 62 and Section 5 and of the inquiries thereunder, there is no discrimination against the petitioners even in so far as the retrospective operation of Section 5(4) is concerned. Further, it should be noted that, it is not quite correct to say that the petitioners had no opportunity to represent against the levy of octroi from 18th August 1967. They had made a representation before that date against the inclusion within the municipality of the area upon which their factories stood on the ground that the levy of octroi was uneconomic for them. The representation had been considered but the area was included within the municipality, and octroi was levied. Thereafter this Court struck down the levy and the levy was validated by the Amendment and Validation Act.The observations of this Court in the Visakhapatnam Municipality case (ibid) appear to us to have been made in the specific context of the provisions of the statute under consideration. Emphasis was laid in the judgment upon the fact that the proviso to the sub-section, which required the resolution of the council determining to levy tax to specify the rate at which and the date from which the tax would be levied, stated that "before passing a resolution imposing a tax for the first time" the council should publish a notice declaring that intention, to which objections were sought. There is no provision in the said Act which requires objections to be invited and considered before the committee of a municipality passes a resolution imposing a tax "for the first time".