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TMI Blog1987 (12) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... time to time, at a meeting convened expressly for the purpose, of which due notice shall have been given subject to the provisions of this Act impose within the limits of the municipality the following taxes and fees or any of them- * * * (kk) an octroi on goods brought within the limits of a municipality for consumption, use or sale therein;" Obviously, this power is derived from entry 52 of List II of the Seventh Schedule of the Constitution of India relating to "taxes on the entry of goods into the local area for consumption, use or sale therein". The Puri Municipality has also framed bye-laws in this regard which have been approved by the State Government. Bye-law No. 11 which is relevant reads as follows: *Here italicised. "11. (1) Every person in-charge of goods or articles subject to octroi shall as soon as they are brought within the octroi limits, take them to the nearest octroi check-post if required by any octroi official to be dealt with in accordance with these bye-laws. (2) If any goods or articles are brought within the limits by evading payment of octroi and is proved to the satisfaction of the Octroi Superintendent that the goods or articles are liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners were procuring fish and prawn within the limits of Puri Municipality in similar manner and thereafter despatching them to outside places. Collection of octroi was being done at Atharanala check-post at the time of their outward journey. The action of the municipality to charge octroi at the exit point was challenged, and on a consideration of a large number of authorities and the entire scheme of the Municipal Act and the ambit of the bye-laws, it was held that the provision of octroi on goods is the point of entry and, therefore, imposition of octroi on the petitioners at the Atharanala check-post was not valid. 5.. The present writ application was filed almost simultaneous with the above case which was decided long back in July, 1978. But in view of special leave being granted by the Supreme Court against the said judgment of this Court, and the matter happened to be pending in Civil Appeal No. 199 of 1979, hearing of the present writ application was kept pending for a long time. Earlier, orders were passed to await the decision of the Supreme Court. But subsequently, by order dated 14th September, 1982, it was observed that since "this case is already five years old..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site parties have supported the imposition of octroi in their counter-affidavit. The main stand taken in the counter-affidavit is that the petitioner and the other person were found to be in possession of fish and prawn brought from outside which was subject-matter of a sale transaction within the Puri Municipal limits and the "person found in-charge of such fish and prawn at the check gates have only been called upon to pay octroi as these goods had not been subjected to realisation of the same at any earlier point of time and had escaped assessment, the bye-laws authorise the council to realise tax from the persons found to be in possession of the goods which are liable for such payment and that the subsequent transaction does not exonerate the petitioner from paying octroi". 10.. I am tempted to repeat an illustration given by the Division Bench in the earlier judgment to repel this submission of Mr. Rath: "Suppose a person brings ten quintals of fish into the municipal limits and sells the same to ten different persons, namely, one quintal to everyone. It is not the bounden duty of the purchaser to inquire whether octroi tax has been paid and these persons cannot be liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sale but for processing the same into yarn and on this account it was contended that the import having been not for sale, octroi was not exigible. The plea was rejected on the ground that it was a case where the cotton was actually used by the mill and thus covered by the mischief of the provision. The petitioner being dissatisfied with the decision of this Court took the matter to the Supreme Court where the view of this Court was affirmed in AIR 1984 SC 583 (Bhaskar Textile Mills Ltd. v. Jharsuguda Municipality). In this case, the Supreme Court directly considered section 131(1)(kk) and the bye-laws in question and approved that. In my considered opinion, therefore, now there is hardly any scope for much discussion of this part as it stands concluded by the aforesaid authoritative decision of the Supreme Court. In the case of Automobile Transport Ltd. v. State of Rajasthan AIR 1962 SC 1406, the Supreme Court was considering a State law of Rajasthan imposing certain tax on motor vehicles carrying passengers and goods within or through the State. The court upheld the imposition holding that article 301 could not be interpreted as contemplating only freedom from restrictions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e "person in-charge" or the owner. In support of this stand, reliance has been placed upon the Khyerbari Tea Company's case AIR 1964 SC 925. Bye-law No. 11(2) which is relevant reads as follows: "(2) If any goods or articles are brought within the limits by evading payment of octroi and it is proved to the satisfaction of the Octroi Superintendent that the goods or articles are liable to payment of octroi and have been brought without payment of such octroi, the said Superintendent may, after giving reasonable opportunity to the owner or person in-charge by serving a notice on him, make the necessary assessment and on such assessment the owner or person in-charge of goods or articles shall pay the octroi. * * * It may be noticed that sufficient safeguard has been provided under bye-law No. 11 for protecting the interest of the municipality in regard to imposition and recovery of the octroi duty. A provision for issuing "transit pass" is also made in bye-law No. 24 in relation to the goods which enter the municipal area in course of transit. The validity of these bye-laws was also considered on the earlier occasion. Section 388(3) of the Municipal Act empowers the municipal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions and reiterated in Hiralal Thakorlal Dalal v. Broach Municipality AIR 1976 SC 1446. The case of Khandelwal Traders v. Akola Municipal Council AIR 1985 Bom 218 was a case for refund of the octroi tax illegally collected on goods which were in transit from one octroi limit to another and neither consumed nor used within the municipal area. The relevant rule of the municipal law was in similar terms as ours. There, the time-limit for export out of the octroi limit, however, was six months from the date of their import into the area. In view of the fact that the consignments in question were found to have been only temporarily detained in the municipal octroi limits for export after following the prescribed procedure, the refund was allowed. 15.. Mr. Misra also referred to a recent decision of the Supreme Court in Kamaljeet Singh v. Municipal Board, Pilkhwa AIR 1987 SC 56. This was a case touching on the first question of vires. In this case, the question was as to whether the toll tax levied by a Municipal Board on the vehicles or stage carriages making use of National Highways could be treated as a compensatory tax and was liable to be struck down as ultra vires. He also referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld. The municipal authorities must refund the tax, if any, collected in this regard from the petitioners. In the circumstances, I would leave the parties to bear their own costs. P.C. MISRA, J.-I agree. K.P. MOHAPATRA, J.-I have read the judgment of my Lord the Chief justice and with respect agree with the ultimate result. I do not repeat facts. I would, however, state reasons of my own. 19.. Mr. G. Rath, learned counsel appearing for opposite party No. 1, raised a preliminary point about maintainability of the writ petition by petitioner No. 1 on the ground that it is not a legal entity nor a juristic person and does not itself carry on the business in purchase and sale of fish and prawn. It is only an association of fish and prawn merchants and thus has no locus standi. He placed reliance on AIR 1962 SC 1044 [Calcutta Gas Company (Proprietary) Ltd. v. State of West Bengal], in which the question of locus standi in filing a writ petition under article 226 of the Constitution was discussed in detail and it was held that unless a party has got a legal right to enforce which has been infringed, he cannot maintain a writ petition under article 226 of the Constitution. Mr. Misra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it was unconstitutional and ultra vires article 304(b) of the Constitution. A Bench of this Court relying upon an earlier decision of the Supreme Court reported in AIR 1959 SC 586 (Western India Theatres Ltd. v. Municipal Corporation, Poona), held that section 131(1)(kk) of the Act was not unconstitutional and ultra vires article 304(b) of the Constitution. Relying upon the dictum laid down in Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406, it was further held that taxes which are essentially regulatory or compensatory in nature cannot be held to impose any unreasonable restrictions on the freedom of trade, commerce and intercourse. A working test for deciding whether a tax is compensatory or not is to enquire whether the trades people are having the use of certain facilities for the better conduct of their business and paying not patently, much more than what is required for providing those facilities. It would be impossible to judge the compensatory nature of the tax by a meticulous test and in the nature of things that cannot be done. judged by these principles there can be no doubt that an octroi duty levied by the municipality is essentially a compensatory tax. The m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was held that collections of toll or tax for the use of roads, bridges or aerodromes, etc., do not operate as barriers or hindrance to trade. For a tax to become a prohibited tax, it has to be a direct tax, the effect of which is to hinder the movement part of the trade. If the tax is compensatory or regulatory, it cannot operate as a restriction on the freedom of trade or commerce. In view of the facts of the particular case, it was held that tax imposed on contract carriages by the impugned notification was compensatory in character and could not, therefore, restrict the freedom of trade and commerce guaranteed by article 301 and as such need not comply with the provisions of article 304(b) of the Constitution. The Bhaskar Textile Mills' case ILR 1977 Cut 48; (1977) 1 CWR 183 was taken to the Supreme Court and it was challenged that section 131(1)(kk) of the Act violated articles 14, 19(1)(g) and 301 of the Constitution and was liable to be struck down. In the decision reported in AIR 1984 SC 583 (Bhaskar Textile Mills Ltd. v. Jharsuguda Municipality), it was held that imposition of octroi duty under section 131(1)(kk) of the Act for goods brought into the municipal limits f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antities of fish and prawn are sold in the daily markets for use and consumption by the local people. But huge quantities of fish and prawn are packed in baskets with ice and brought to the Puri Railway Station by fish merchants for despatch mostly to the Howrah Railway Station booked in their own names for sale through commission agents. At the octroi check gates, octroi is imposed at the time of entry as usual. It has also been the practice of opposite party No. 1 to impose octroi on fish and prawn booked at the Puri Railway Station for being despatched to Calcutta. Mr. Misra does not challenge imposition of octroi at the points of entry, namely, check gates. His objection is confined to imposition of octroi at the exit point, namely, at the Puri Railway Station, at the time of booking and despatch of the goods. Mr. Rath, on the other hand, urged that if the fish and prawn brought inside the municipal area have escaped imposition of octroi at the entry points, the goods can be followed up to the exit points for imposition of octroi. So the core question for consideration is whether fish and prawn can be subjected to imposition of octroi at the exit point at the time of booking an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the State Legislature is competent to levy a tax only on the entry of goods for consumption, use or sale into a local area, the municipality cannot under a legislation enacted in exercise of the power conferred by item 52, List II have power to levy tax in respect of goods brought into the local area for purposes other than consumption, use or sale. The authority of the State Legislature itself being subject to a restriction in that behalf, section 126 may reasonably be read as subject to the same limitations. When the power of the legislature with limited authority is exercised in respect of a subject-matter, but words of wide and general import are used, it may reasonably be presumed that the legislature was using the words in regard to that activity in respect of which it is competent to legislate and to no other; and that the legislature did not intend to transgress the limits imposed by the Constitution: See In re Hindu Women's Rights to Property Act, 1937, 1941 FCR 12 (AIR 1941 FC 72). To interpret the expression 'brought into the city' used in section 126(1) as meaning brought into the city for any purpose and without any limitations would, in our judgment, amount to attr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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