2001 (3) TMI 91 - SC - Indian Laws

Nature and character of the levy of dharmada Held that - The levy is specific, definite and positive in terms, with a definitely disclosed object leaving no room for any doubt or any exercise to clear such assumed doubts. Carefully going through the original notification in the vernacular published in the Gazette dated May 13, 1968, it is 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 dubbed 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. Appeal allowed.

Issues Involved:
1. Nature and character of the levy of "dharmada".
2. Legislative competence and authority to levy "dharmada".
3. Validity and legality of the notification issued under section 104(2) of the Rajasthan Municipalities Act, 1959.
4. Allegation of double taxation.
5. Relief of refund of the tax collected as "dharmada".

Detailed Analysis:

1. Nature and Character of the Levy of "Dharmada":
The appeals involve the question of whether the levy of "dharmada" by the Municipal Council, Kota, is a form of octroi or a separate tax. The respondents argued that "dharmada" is not octroi but a separate tax on goods imported into the municipal limits. Historical records show that "dharmada" was imposed by the Ruler of Kota in 1860 and continued under various notifications and acts, including the Rajasthan Municipalities Act, 1959. The notification dated May 13, 1968, authorized the Municipal Council to levy octroi under three sub-heads: octroi proper, dharmada, and nirkhi.

2. Legislative Competence and Authority to Levy "Dharmada":
The respondents contended that section 104(2) of the Rajasthan Municipalities Act only authorized the levy of octroi and did not include "dharmada". They argued that there is no provision in the Constitution or any law authorizing the levy of "dharmada". The appellants countered that "dharmada" is part of the octroi levy, authorized under section 104(2) of the Act, and is used for specific charitable purposes. They also relied on Article 277 of the Constitution and the Kota State Chungi Act, 1929, to justify the levy.

3. Validity and Legality of the Notification Issued Under Section 104(2) of the Rajasthan Municipalities Act, 1959:
The notification under challenge was issued under section 104(2) of the Act, which allows the State Government to authorize the Municipal Council to levy octroi. The notification specified rates for octroi, dharmada, and nirkhi. The respondents argued that the notification was illegal and unauthorized. The appellants argued that the levy of "dharmada" was within their power and competency, and the collections were used for charitable purposes as mandated by the Act.

4. Allegation of Double Taxation:
The respondents claimed that the levy of "dharmada" in addition to octroi amounted to double taxation, which is illegal. The appellants argued that multiple rates of levy on the same taxable event are permissible, and the levy of "dharmada" was for specific charitable purposes. The court held that the mere stipulation of multiple rates does not constitute double taxation and that the levy of "dharmada" was essentially octroi for specific purposes.

5. Relief of Refund of the Tax Collected as "Dharmada":
The High Court had granted an injunction against the levy of "dharmada" and ordered a refund of the tax collected. The appellants argued that the respondents had passed on the tax to consumers and should not be allowed to retain it. The court held that the levy of "dharmada" was valid and set aside the High Court's judgment, dismissing the suits filed by the respondents and denying the refund.

Conclusion:
The Supreme Court held that the levy of "dharmada" was essentially octroi, authorized under section 104(2) of the Rajasthan Municipalities Act, 1959. The court found no illegality in the notification and rejected the claim of double taxation. The appeals were accepted, and the judgments of the High Court were set aside, dismissing the suits filed by the respondents. The court did not order any refund of the tax collected as "dharmada".

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