1989 (12) TMI 324 - SC - VAT and Sales Tax

Whether Allahabad High Court correct in quashing the Gazette Notification dated 27th August, 1969, amending the octroi Schedule of the Bareilly Municipality so as to impose octroi on mineral oil ? Held that - Appeal allowed. The 1963 rules had been framed under section 296 of the Act in supersession of the existing rules after publication by the State Government, in the Gazette as provided under section 300 and therefore rule 131 in the 1925 rules ceased to have any operation in respect of the matters dealt with therein so far as the Bareilly Municipality is concerned. 16.. In this view of the matter, we hold that the appellant-Board had authority to levy octroi on mineral oils and the challenge against the impugned notification is not sustainable. The High Court was clearly in error in quashing the same and restraining the Board from assessing and collecting the tax.

Issues Involved:
1. Authority of the Municipal Board to impose octroi on mineral oil.
2. Applicability and supersession of Rule 131 of the 1925 Octroi Rules by the 1963 Rules.
3. Validity of the Gazette Notification dated 27th August 1969.

Issue-wise Detailed Analysis:

1. Authority of the Municipal Board to impose octroi on mineral oil:
The respondents challenged the Municipal Board's authority to impose octroi on mineral oil based on the proviso to Rule 131 of the Octroi Rules in the U.P. Municipal Account Code, 1925. The appellant countered that Rule 131 was superseded by the 1963 rules, which govern the imposition of octroi by the Board. The Supreme Court held that under Section 128 of the U.P. Municipalities Act, 1916, the Municipal Board has the power to levy taxes, including octroi, subject to general rules or special orders by the State Government. The Court emphasized that the power to impose taxes is conferred by Section 128, and rules only regulate the exercise of that power. Thus, the Board had the authority to levy octroi on mineral oils.

2. Applicability and supersession of Rule 131 of the 1925 Octroi Rules by the 1963 Rules:
The High Court quashed the notification imposing octroi on mineral oil, holding that Rule 131 of the 1925 Rules restricted the Board's power and continued to apply despite the 1963 Rules. The Supreme Court disagreed, stating that the 1963 Rules, framed under Section 296 of the Act, expressly superseded the 1925 Rules in so far as they applied to the Bareilly Municipality. The Court noted that the 1963 Rules covered the same subject matter as the 1925 Rules and were intended to replace them. Therefore, Rule 131 of the 1925 Rules no longer applied to the Bareilly Municipality, and the Board's power to impose octroi was not curtailed by these older rules.

3. Validity of the Gazette Notification dated 27th August 1969:
The respondents argued that the 1925 Rules prevented the imposition of octroi on mineral oils unless a contrary notification was issued under Section 128 of the Act. The Supreme Court held that the 1963 Rules, which superseded the 1925 Rules, provided the necessary legal framework for the imposition of octroi by the appellant-Board. The notification dated 27th August 1969, which amended the octroi schedule to include mineral oils, was valid as it was issued under the authority granted by the 1963 Rules. The Court concluded that the High Court erred in quashing the notification and restraining the Board from assessing and collecting the tax.

Conclusion:
The Supreme Court allowed the appeals, set aside the judgment of the High Court, and upheld the validity of the notification imposing octroi on mineral oils. The Court confirmed that the Municipal Board had the authority to levy octroi on mineral oils under the 1963 Rules, which superseded the 1925 Rules. The appeals were allowed, and no order as to costs was made.

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