1957 (9) TMI 79 - HC - Indian Laws

Summary

Issues Involved:
1. Competence of the Municipality to levy the "cotton manufacturing tax".
2. Validity of the tax under Section 142-A of the Government of India Act, 1935, and Article 276 of the Constitution.
3. Requirement of notice under Section 167-A of the Bombay District Municipal Act.
4. Limitation period for filing the suit.
5. Entitlement to refund of the tax paid under protest.
6. Award of interest on the refunded amount.

Detailed Analysis:

1. Competence of the Municipality to Levy the "Cotton Manufacturing Tax":
The Chopda Municipality, declared a District Municipality under the Bombay District Municipal Act, 1901, imposed a "cotton manufacturing tax" with the sanction of the Provincial Government. The tax was initially set at one rupee per bale and later modified. The Municipality levied this tax under Section 59 of the Act, which allows the imposition of specified taxes and any other tax with the State's leave. The court held that the Municipality is competent to levy such a tax from the manager of the pressing factory, as it is for the facility of collection and not invalidated by the Bombay District Municipal Act or the Constitution.

2. Validity of the Tax under Section 142-A of the Government of India Act, 1935, and Article 276 of the Constitution:
The plaintiffs argued that the tax contravened Section 142-A of the Government of India Act, 1935, and Article 276 of the Constitution, as it exceeded the permissible limit. The court examined the legislative history and concluded that the cotton manufacturing tax is a tax on trade within the meaning of Article 276. The tax, levied per bale but imposed on the manager, is considered a tax on the trading activity of the manager. The court affirmed that the tax is subject to the ceiling provided by Article 276, which limits the tax to Rs. 250 per annum.

3. Requirement of Notice under Section 167-A of the Bombay District Municipal Act:
The Municipality contended that the suit was not maintainable without serving the statutory notice under Section 167-A. The court held that the suit, filed nearly three years after the cause of action, was barred as it was not filed within six months. The tax was levied and collected in "execution or intended execution of the Act," and thus, the requirement of notice applied.

4. Limitation Period for Filing the Suit:
The trial court found the suit to be within limitation, even though filed after six months from the date of payment under protest. However, the appellate court disagreed, emphasizing that the suit was not maintainable as it was filed beyond the six-month limitation period prescribed by Section 167-A.

5. Entitlement to Refund of the Tax Paid under Protest:
The trial court awarded a decree for refund of Rs. 7,828 with interest. However, the appellate court reversed this decision, stating that the plaintiffs were not entitled to a refund as the suit was barred by limitation and the tax was collected in execution of the Act.

6. Award of Interest on the Refunded Amount:
The plaintiffs' cross-objections for interest on the decretal amount were dismissed. The appellate court found it unnecessary to consider the cross-objections, given that the plaintiffs were not entitled to a refund.

Conclusion:
The appellate court modified the trial court's decree, declaring that the Municipality of Chopda is not entitled to levy the cotton manufacturing tax exceeding Rs. 250 per annum. The plaintiffs were not granted a refund or interest, and each party was ordered to bear their own costs.