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Issues Involved:
1. Exemption from payment of taxes based on a specific notification. 2. Applicability of Section 266 of the Gujarat Municipalities Act, 1963, to newly included areas. 3. Requirement of a hearing before issuing an order under Section 266(1). Detailed Analysis: Issue 1: Exemption from Payment of Taxes The petitioner argued that its factory, being a new industry, was entitled to a five-year exemption from taxes based on a notification dated October 9, 1961. However, the court did not find it necessary to express an opinion on this ground since the petition could be disposed of on other grounds. Issue 2: Applicability of Section 266 of the Act The core of the petitioner's argument was that the first respondent-Municipality could not extend and levy taxes in the newly included factory area without following the prescribed legal procedure. The court focused on two main contentions under this issue: (a) Definition of "Local Area" and Applicability of Section 266: The petitioner contended that the factory area was not a "local area" within the meaning of Clause (a) of Sub-section (1) of Section 266, and hence the other provisions of the section were not applicable. The court examined the definition sections and relevant provisions of the Act, concluding that the addition of a local area to an existing municipal borough does not result in the creation of a new municipal borough or a "successor borough municipality." Therefore, the provisions of Clause (x) of Sub-section (1) of Section 266, which deal with the extension and commencement of taxes, were not applicable in this situation. (b) Requirement of Corresponding Taxes: The petitioner argued that Clause (x) of Sub-section (1) of Section 266 could only be applied if there were corresponding taxes in force in the newly included area before the appointed day. The court agreed, stating that the extension of taxes imposed by the existing municipality to the newly added area could only occur if there were corresponding taxes already in force in that area. Since no such taxes were in force in the factory area before its inclusion, the provisions of Clause (x) were inapplicable. Issue 3: Requirement of a Hearing The petitioner also argued that the first respondent was bound to afford an opportunity of being heard before issuing an order under Section 266(1). However, the court did not find it necessary to express an opinion on this ground, as the petition could be disposed of on the contentions under Issue 2. Conclusion: The court held that the impugned order (Annexure 'F') issued by the State Government was illegal and invalid in so far as it extended and brought into force the taxes imposed by the first respondent-Municipality to the factory area of the petitioner. The court quashed the order to the extent that it sought to extend and bring into force the taxes, etc., imposed by the first respondent-Municipality in its area immediately before the appointed day to the factory area of the petitioner. The rule was made absolute with costs.
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