Case: Shahdara (Delhi) Saharanpur Light Railwayco. Ltd Vs. The Municipal Board, Saharanpur

2. The High Court of Allahabad, in its order and judgment, under appeal, has held that the appellant is not a railway, but only a tramway encl. as such, not eligible for exemption, from the tax, in question. The short facts, leading to this appeal, may now be briefly set out. The appellant is a limited liability company, and it runs railway, between Sahadara, in Delhi and Saharanpur, in the State of Uttar Pradesh-a distance of about 95 miles or 148.865 kilo meters. The appellant company also operates within the municipal area of Saharanpur. The company was, originally, registered as a tramway, under the Indian Tramway Act, 1886 (Act 11 of 1886) (hereinafter galled the Tramways Act), on November 20, 1905. By Notification No. 5752, dated July 5, 1907, the Governor-General in Council extended to the appellant company, the whole of the Indian Railways Act, 1890 (Act 1 of 1890) (hereinafter called the Railways Act), excepting the provisions of S. 1353. The Municipal Board of Saharanpur, the first respondent herein imposes a terminal tax, under the provisions of S. 128(1) (xiii) of the United Provinces Municipalities Act 1916 as amended by Act I of 1918. Under the said Act, the first respondent has prohibited the importation of goods, within the local limits of the Saharanpur Municipality, by rail, until the tax leviable thereon, or in respect thereof, has been paid, in accordance with the provisions of the Act and the Rules. The Board has also framed rules for the assessment and collection of Terminal Tax, as authorized by the (government Notification No. 856/XI-D.T. 3, dated May l, 1919. The rules have been amended, as per another notification No. 5965 /XI-D.T. 3, dated September 21, 1939.4. Item 2 of Sch. B of these rules, provides for a list of articles being exempted from payment of Terminal Tax. The said item is asstores and materials, which are required for use on Railway whether in construction, maintaining or working the same and which are not removed outside the Railway land boundaries but not stores imported into Municipal limits for purchase and consumption by Railway employees nor stores with which Railway Co-operative Stores are stocked for sale tois the claim of the appellant that, till 1961., the first respondent has never imposed any terminal tax, on railway stores and materials required for use on the railway of the appellant company, for the purposes mentioned in Item 2 of Sch. B. But, for the first time, in January 1962, according to the appellant, the first respondent imposed tax on such stores and attempted to make the appellant liable. The appellant company protested against this levy, on the ground that, it being a railway, was entitled to the exemption provided in respect of railway stores and materials, which are required for use on railways. But, the first respondent, by its order, dated October 11, 1962, overruled the appellants objections in this regard. An appeal, taken by the appellant company, to the Additional District Magistrate. Saharanpur, under S. 160 of the Municipalities Act, read with the relevant Rules, did not meet with success, as the said Magistrate rejected the appeal, by his order, dated May 25, l965.5. The appellant company filed Civil Miscellaneous Writ No. 3567 of 1965, in the High Court of Allahabad challenging the levy of terminal tax and claimed exemption, under Item 2 of Sch. B, referred to earlier. The learned Judges of the Allahabad High Court, by their judgment, dated September 10, 1965, dismissed the writ petition. They were of the view that the appellant company was not a railway, but a tramway constructed under the Tramways Act. In this connection, the learned Judges adverted to the Railways Act, which defines both the terms tramway and railway. It is their view that when a tramway and a railway, are both separately defined in an Act a tramway cannot also be a railway.6. The learned Judges of the High Court, then referred to the fact that so far as the appellant company was concerned the Central Government had not applied S. 135 of the Railways Act, though all the other provisions of that Act had been applied. They further held that a mere application of the Railways Act, in whole or in part, to a tramway, will not convert the tramway into a railway and that, in order to be a railway it has to be opened. in accordance with the provisions contained in Chap. IV of the Railways Act. So, they concluded that, inasmuch as the appellant railway was not opened in accordance with the provisions of the Railways Act, it had been from its inception, and it continued to be, not a railway, but only a tramway. On this line of reasoning, the High Court further held that in the, rules framed by the Municipal Board, the expression railway must be intended to refer only to railways coming under the Railways Act and could not include a tramway, like the appellant, opened under the Tramways Act. In consequence, the claim of the appellant, for exemption, was, according to the High Court, rightly rejected by the authorities. The result was the dismissal of the appellants writ petition, by the High Court.

Court's reasoning:
17. We are not impressed with the approach made by the learned Judges of the High Court, for Negativing the claim for exemption, made by the appellant. It must be borne in mind that the expression railway has not been defined either in the concerned Municipalities Act, or the Rules, if such is the case, the definition must hold the field. Going by the definition of the expression railway, contained in S. 311 (2) ofthe Government of India Act, 1935, and the corresponding provision in Art. 366 (20) of the Constitution, the appellants system is a railway. All the provisions of the Railways Act have been extended to the appellant, excepting S. 135. In our opinion, if the appellant is a railway, otherwise, the mere fact that the provisions of S. 135 of the Railways Act, have not been applied, is of no consequence. We have already referred to the fact, which is not in dispute, that the appellants railway passes through four districts in U. P. and Delhi, and that it has got all the features of a railway, as ordinarily understood.In our opinion, the observations of the House of Lords, extracted above, are apposite, to the case on hand. We have already pointed out that neither the Municipal Act, nor the Terminal Tax Rules give any special definition of the expression railway; and, so far as we could see, there is nothing in the said Act or the Rules to indicate that the word railway, in Item of Sch. B, is used only to refer to A railway registered under the Railways Act or to limit the generality of the expression railway in any way. Under those circumstances, if the appellant is a railway in fact, as commonly understood there does not appear to be any serious controversy on that point-it will be a railway, notwithstanding the fact that it is registered as a tramway, under the Tramways Act. The legislature itself has applied the various provisions of the Railways Act to the appellant; and the appellant also satisfies the definition of a railway underthe Government of India Act, 1935 and the Constitution. The provisions ofthe Indian Railway Companies Act, 1895, have also been applied to the tramways constructed, under the Tramways Act by the Indian Tramways Act of 1902. The second preamble to the last mentioned Act, clearly shows that the tramways to which the Indian Railway Companies Act was made applicable, do not differ in structure and working from railways.23. The object underlying the exemption under Item 2 of Sch. B to the Terminal Tax Rules. is also not far to seek. The railways pass through areas where it is not deriving the full benefit of all the amenities provided by the Municipal Boards. Therefore, in our opinion, the appellant satisfies the definition of a railway, so as to be entitled to the exemption provided under Item 2 of Sch. B.We are only adverting to this decision to show that on the basis of an interpretation placed by the Courts, the House of Lords held that the word railways, in the Public Health Act, 1875, will not take in tramways. But, no such circumstances, as pointed out by the House of Lords, in the said decision, exist in the present case before us. On the other hand, the position is exactly the opposite, as will be seen fromthe Government of India Act, 1935, and the Constitution. Even applying the popular test, adopted by the House of Lords, in this case, the appellant is undoubtedly a railway.26. In our opinion, the principles laid down by the House of Lords in 1909 AC 264, apply to the particular matter on hand and, we hold that the appellant, being a railway, is entitled to the exemption under Item 2 of Sch. B to the Terminal Tax Rules, in question.