1961 (12) TMI 6 - SC - Indian Laws

Whether the general or special orders mentioned in the section subject to which it has the power to impose tax, are orders which were in existence before the rule prescribing the tax was framed and once a rule has been framed by it and the Government has accorded its sanction to that rule, the Government has no power to control the imposition of tax under it by any order made under section 59? Held that - It is the imposition after the making of the rule authorising the tax, that is subject to the Government s orders and not the making of the rule itself which authorises the tax. It is plain from section 59 that the control over a municipality s power to tax imposed by the requirement of the Government s sanction of the rule prescribing the tax contained in section 61, is not the same thing as the control contemplated by the general or special orders mentioned in section 59, for both are mentioned in section 59. If it were not so, it would have been unnecessary to provide for the general or special orders controlling the imposition of the tax in section 59. This is the first reason why we think that the appellant municipality s contention is untenable. The imposition contemplated by section 59 is clearly not the passing of the resolutions under section 60 selecting the tax and making the rule prescribing the tax to be levied in terms of section 46(1), for section 56(1)(a) expressly makes the imposition something happening after section 60 has been complied with. This seems to us to be another reason for not accepting the appellant municipality s contention. Impose in section 59 means the actual levy of the tax after authority to levy it has been acquired by rules duly made and sanctioned, and it is such imposition that is made subject to the general or special orders of the Government. Therefore, the Government can at any time by any such order prohibit the imposition of the tax. Apart from the very interesting question raised by the learned Attorney-General that the municipality, being a local authority, was a State, and was not therefore entitled to the benefit of article 14, as to which we think it unnecessary to express any opinion, we are on the facts satisfied that there is no discrimination. The Government has now, it is not disputed, prohibited all municipalities from levying any octroi tax on milk. Furthermore, it has not been shown to us that all municipalities stand on the same footing with regard to milk. The last objection that the order had been mala fide made is completely without foundation as the Government had earlier requested the appellant municipality to drop the tax on the ground, among others, that milk was really being purchased for the Government and that the Government was not liable to be taxed by a municipality. Appeal dismissed.

Summary

Issues Involved:
1. Validity of the Government's order prohibiting the municipality from levying an octroi tax.
2. Interpretation of the term "impose" in Section 59 of the Bombay District Municipal Act, 1901.
3. Whether the Government's order was discriminatory.
4. Allegation of mala fides in the Government's order.

Detailed Analysis:

1. Validity of the Government's Order Prohibiting the Municipality from Levying an Octroi Tax
The appellant municipality challenged the validity of the Government of Bombay's order dated April 4, 1955, which prohibited the municipality from levying an octroi tax on milk. The municipality argued that once the tax was sanctioned by the Government and imposed following the procedures laid down in Sections 59 to 62 of the Bombay District Municipal Act, 1901, the Government had no power to issue such an order.

The Court held that the Government's order was valid. The power to tax under Section 59 is always subject to any general or special orders of the Government. The term "impose" in Section 59 refers to the actual levy of the tax, not merely the acquisition of the power to levy it. Therefore, the Government can prohibit the imposition of the tax at any time by issuing a general or special order.

2. Interpretation of the Term "Impose" in Section 59
The appellant municipality contended that the term "impose" in Section 59 should be interpreted as the acquisition of the power to levy a tax by following the procedures in Sections 60 to 62. The Court rejected this interpretation, stating that "impose" refers to the actual levy of the tax after acquiring the authority to levy it through the prescribed procedures. The Court emphasized that the imposition of the tax is always subject to the Government's general or special orders, even after the rule prescribing the tax has been sanctioned.

3. Whether the Government's Order was Discriminatory
The appellant argued that the Government's order was discriminatory because no other municipality had been prohibited from collecting a similar tax. The Court found no evidence of discrimination, noting that the Government had prohibited all municipalities from levying any octroi tax on milk. Furthermore, it had not been shown that all municipalities were on the same footing regarding milk.

4. Allegation of Mala Fides in the Government's Order
The appellant alleged that the Government's order was mala fide, intended to benefit a co-operative union dealing in milk. The Court found this allegation baseless, noting that the Government had earlier requested the municipality to drop the tax on the grounds that milk was being purchased for the Government, which was not liable to be taxed by a municipality. Even if this ground was not justified, it did not indicate mala fides. Since similar orders were issued to all municipalities, the question of mala fides did not arise.

Separate Judgment by Ayyangar J.
Ayyangar J. concurred with the judgment delivered by Sarkar J., emphasizing that the power to impose a tax is a continuing power. The imposition of a tax derives its vitality from the ongoing authority to impose it. Therefore, the Government's power under Section 59 to issue general or special orders remains effective even after a tax has been initially imposed. Ayyangar J. also dismissed the arguments regarding discrimination and mala fides, agreeing with the reasons provided by Sarkar J.

Conclusion
The appeal was dismissed with costs, and the Court upheld the Government's order prohibiting the municipality from levying the octroi tax on milk. The writ petition raising the same points was also dismissed without any order as to costs.