Case: Municipal Council, Kota, Rajasthan Vs. The Delhi Cloth &amp; General Mills Co.Ltd

2. From the records and materials placed before us, it transpires that in 1860 A.D. the late Ruler of Kota, claimed to be the Sovereign Authority to make even laws, imposed, though on the basis of also a volition expressed by the traders in the locality to pay one such, the levy of Dharmada on the traders of `Nandgaon (the ancient name of Kota city), as a compulsory levy by the authority of the said law made by the Ruler. The Schedule of rates of Dharmada, so imposed, was said to have continued till 1894 when it came to be sanctioned also by the Resolution dated 6.11.1894 of the Municipality Committee. This seems to have in succession followed by another Schedule of octroi dated 22.11.1922 issued by the Superintendent of Custom and Chief Excise Officer, Kota State, revised subsequently in 1923. It is also disclosed that prior to 1929 cases of evasion of Chungi/Dharmada were entertained and decided in the Court of Magistrate, Kota State, under Section 106 of the Customs Act, then in force and evasion of octroi and Dharmada were said to have been made even as a penal act punishable under the said Act. In the year 1929, the Kota State Chungi Act was said to have been passed empowering the levy and collection of Dharmada by the Municipal Board, Kota. In 1959, the Rajasthan Municipalities Act saved the operation of the Chungi Act, 1929.3. The Rajasthan Municipalities Act, 1959 (hereinafter called the "Act") enacted a scheme of taxation for imposition of various categories of taxes by the local authorities classified as "obligatory taxes" in Section 104 and other taxes that may be imposed in Section 105, besides making provisions for levy of property tax, etc. Section 104, as it stood at the relevant point of time, obligated every Municipal Board by a mandate of law to levy "at such rate and from such date as the State Government may in each case direct by Notification in the Official Gazette and in such manner as is laid down in tis Act and as may be provided in the rules made by the State Government in this behalf, the following taxes,......................;(2) An octroi on goods and animals brought within the limits of the Municipality for consumption, use or sale therein.Coming to the Notifications issued stipulating the rates, it may be stated at this stage that after the coming into force of the Constitution of India, several notifications came to be issued from time to time such as, i.e., Notification No. F.2(150)LSG/50 dated 21.8.1950; Notification published in the Official Gazette dated 17.12.1951; Notification No. F.150LSG/60 dated 1.2.1962 successively one after the other, in supersession of the earlier one.5. It is seen that subsequently the Government has issued another notification dated 13.5.1968 under Section 104(2) of the Act authorising the Municipal Council, Kota, to levy octroi under threefor different and specific purpose and objects, namely, (1) Octroi proper; (2) Dharmada; and (3) Nirkhi, as followsGazetteExtraordinaryJaipur, May 13, 1968Notification Tax F.144(2) D.L.B. 161supersession of current rates of octroi of Kota Municipal Board, the State Government in exercise of power conferred by Section 104(2) of the Rajasthan Municipalities Act, 1959 (Rajasthan Act No. 38/1959) hereby directs that the octroi will be levied on goods and animals brought within the limits of Kota Municipality for use, consumption or sale at the rates specified in the following schedule from the date of publication of the Schedule : Schedule Name of Goods Specified rate Per quantity Serial Nos. 1 to 101 Dharmada 1. Grains al types upto Serial No. 18 0.02 nP per Qntl. Animals and Birds, etc. Serial Nos. 19 to 31 Inflamable and Cleaning materials for use as fuel, etc. Serial Nos. 32 to 40 Building and Construction materials Serial Nos. 41 to 49 Medicines, Chemicals, Prefumes, Cosmetic materials, etc. Serial No. 50 Shaharnama Nirkhi, Municipal Council, Kota Grains all types 1.00. per two quintals. Tukham Roghan 0.01,P.N. SethDeputy Secretary (Admn.We shall now advert to the history of the present litigation and the stage at which it has been brought to this court in the above appeals with particular reference to the facts in C.A. No. 4152/91. Thein C.A. No. 4152/91 filed Civil Suit No. 51/79 in the Court of the Additional Munsif and Judicial Magistrate, First Class No. 2, Kota (South), seeking for a prohibitory relief against the appellant that it should not raise any demand of Dharmada tax on any of the goods imported by the company or take up any other proceedings for the recovery of the same and the appellant should neither impose nor realise any Dharmada tax on the raw materials enumerated in the plaint, when brought by the company within the Municipal limits of Kota and for a consequential permanent injunction to that effect. The sum and substance of the claim of thewas that Section 104(2) enabled the State Government to authorise and as a consequence thereof, empower the appellant to levy the octroi tax, the kind of which envisaged in Entry 52 of List II of the Seventh Schedule to the Constitution of India and that the notification dated 13.5.1968 insofar as it empowered the appellant to levy and collect Dharmada is illegal, unauthorised, unacceptable, unreasonable and, therefore, null and void. In justification of the said plea, it was urged that there is no provision in any of the Entries contained in List II of the Seventh Schedule to the Constitution for imposing Dharmada tax and in the absence of any specific law made by the State Legislature, there can be no legal basis for the levy of Dharmada tax by the municipality. Though, as noticed earlier, in the judgment of the Division Bench, the English translation of the Notification issued in 1962 has been extracted, reference is also made in the plaint to the notification dated 13.5.1968 with a brief mention of the contents thereof by stating that under the said notification the appellant has been authorised to levy octroi tax on goods brought within the Municipal limits for sale, consumption and use at the rates specified in the Schedule to the notification from the date of its publication in the Official Gazette and that so far as `Dharmada is concerned, below the caption of the word `Dharmada various articles have been enumerated and found divided into 14 categories and in every such category not only the names of the articles but the rate of Dharmada on each category of those goods are also specified therein. It is also one of the objections of thethat on the same goods on which octroi tax is payable, Dharmada tax cannot be imposed at all with two different names. The stand taken by the appellant before the Civil Court was that Dharmada is not separate from the octroi levy but on the other hand is part and parcel of the same levy for a specific purpose and recovered along with the octroi and, therefore, was well within the power and competency of the appellant to levy by virtue of the statutory notification issued under Section 104(2) of the Act. Reliance was also placed on Article 277 of the Constitution of India in addition to relying upon the Kota Sate Chungi Act, 1929 and Section 2 of the Rajasthan Municipalities Act for the continued authority to levy the same.7. The learned trial Judge by his judgment and decree dated 26.11.1979 held that Dharmada levy is also octroi and justified under Section 104(2) of the Act. Aggrieved, thepursued the matter in appeal in Civil Regular Appeal No. District Judge/12/80 and the learned Additional Civil Judge, Kota, by his judgment dated 8.9.1981 concurred with the conclusion of the learned trial Judge and dismissed the appeal. Thereupon, the matter has been pursued before the High Court. The learned Single Judge, placing reliance upon the earlier decision of a Division Bench in D.B. Special Appeal No. 154/73, which is theof Civil Appeal No. 2994 of 1984 before us, allowed the claim of theIt may be pointed out at this stage that the Division Bench sustained the challenge to the levy at the instance of theby holding that Section 104(2) of the Act only dealt with the obligatory taxes like octroi and cannot be held to include `Dharmada tax and, therefore, the State Government could not have authorised theto collect Dharmada on the entry of goods within the municipal limits of Kota. Though the Division Bench while sustaining the claim of the company therein not only issued a perpetual injunction restraining the appellant from levying and collecting any Dharmada tax on the goods brought by the company within the limits of the Municipal Council, but also granted a decree, though not specifically prayed and sought for as required in law, directing refund of collections made, the learned Single Judge in the case dealt with by him though upheld the claim for prohibitory relief, yet applied the doctrine of undue enrichment and on the view that thehave already realised the Dharmada tax paid by passing over the same to the customer, the company also ought not to be allowed to retain the same and consequently instead of ordering refund to the company directed refund of the amounts collected (within six months) to the State of Rajasthan with a further direction as to the manner in which such amount has to be utilised by the State. It is in such circumstances these appeals have been filed before this Court by the Municipal Council, Kota.

Court's reasoning:
18. We affirm the statement of law thus made above to be correct and in our view it is not the nomenclature used or chosen to christen the levy that is really relevant or determinative of the real character or the nature of the levy, for the purpose of adjudging a challenge to the competency or the power and authority to legislate or impose a levy. What really has to be seen is the pith and substance or the real nature and character of the levy which has to be adjudged, with reference to the charge viz., the taxable event and the incidence of the levy. We are convinced on the indisputable facts on record that the levy sought to be imposed and recovered as `Dharmada being only on the goods brought within the municipal limits of Kota for consumption, use or sale therein the same in truth, reality and substance is only an octroi for the purpose of carrying out the several public charitable objects statutorily enjoined upon the Municipal Board and enumerated in Sections 98 and 99 and those undertaken pursuant to the stipulations contained in Sections 101 and 102 of the Act. The mere fact that it is called by a different name (all the more so when the word `octroi itself is not found used in Entry 52 of List II of the Seventh Schedule) for historical reason and administrative needs or exigencies by the draftsmen of the notification does not in any manner either undermine the nature and character of the levy or render it any the less a levy envisaged under Entry 52 of List II of the Seventh Schedule. The various charitable objects and ameliorative schemes and projects for which the taxes realised under the classified head of Dharmada are claimed to be spent cannot as the provisions of the Act stand enacted be said to be either unauthorised or without the sanction of law. That, apart, the irregularity or illegality, if any involved in spending the sum after collection cannot have any impact on or adversely affect, the otherwise competency of the Authority concerned to impose a levy, well within its legislative competence and further not shown to be violative of any provisions of the Constitution of India. Neither the High Court has gone into any such question of illegality in the matter of spending the tax realised nor are there any materials on record placed before us to substantiate any such claim by the23. Now coming to the facts and circumstances of the cases before us, we find that the levy is specific, definite and positive in terms, with a definitely disclosed object leaving no room for any double or any exercise to clear such assumed doubts. We have carefully gone through the original Notification in vernacular published in the Gazette dated 13.5.1968, noticed supra, and we find that the rates of the levy under challenge have been notified as part and parcel of one and the same schedule to the said notification and not by any different or more than one Schedule and that too by means of a simultaneous exercise of powers under Section 104(2) of the Act and not on different occasion or time. Though it is seen that some of the classified items or commodities enumerated in various Entries overlap those found in the other Entries under different captions including Dharmada, they are not mere mechanical repetitions in toto, viewed either from their classification, enumeration or determination of the rates as well as the measure or quantity with reference to which the actual levy is to be made and collected. Therefore, the mere stipulation of plurality of rates in respect of some or the other of the commodities/goods under different classified groups for different purposes by itself will not render it to be doubbed or castigated as `Double Taxation for spearheading a challenge on them. The notification under consideration cannot, in our view, be said to involve the imposition of any double tax and the High Court has gone wrong in proceeding upon such an erroneous assumption and declaring thereby the levy for Dharmada purposes to be bad and illegal.