BHASKAR TEXTILE MILLS LTD. versus JHARSUGUDA MUNICIPALITY & OTHER

MISRA J. The present appeal by special ieilve is directed against the judgment of the High Court of Orfasa dated 5th January 1977 dismissing a petition under Arts. 226 and 227 of the Constitution for quashing imposition of octroi under s. 131(1)(kk) of the Orissa Municipal Act, 1950 (hereinafter referred to as .the 'Act') and for . a declaraiion that the notifications dated 31st July 1973 and 12th August, 1975 issued by the State Government in exercise of powers vested under s.4 of the Act arc illegal and unenforceable and for a further declaration that the Octroi Bye-laws of the Jharsuguda Municipal Council are also void and inoperative. • · · Jharsuguda MuniCipality; respondent No. I, is ·a municipality incorporated under the Act. In March 1962 the. Stat~ Government ·accorded sanction for the imposition. of octrc°i in terms of s.131(1) of. the. Act. A set of octro( bye-laws were framed by the Municipal Council in terms of s.388 of the Act and the same were also appro.ved by the State Government in exercise of powers under s.390 of the Act on 19th March, .1968. Octroi was levied. for the first ·time after 31st March 1962 when the State G~vernment accorded sanction under sJ3l{i)(kk) of th' Act.

p. 403, margin C

The appellant is a compa~ny duly incorporated under the Indian Companies Act, 1956 having ·its mi!Js located at viJJagc Ektali under the Jharsuguda poli.ce station ii) District Sambalpur, Orissa. The said area of the village was included within the Ektali Panchayat. The company mainjy ca.rries on fillinning of cotton which in the manu· . facturing proc.ess is transformed from loose fibres into finished yarn.

pp. 403–404, margin G

The area under the Ektali village in which the appellants' fa~tory was located was constituted, along with other viJlages as a Gram by . a declaration made under. s.3 of the Oris'sa Grama Panchayat. Act, 1964 .. On or ab0ut. 25th Much, 1970 Jharsuguda Municipality'. passed a resolution for the inclusion of Ektali and other viilages in the· Jharsuguda Munfcipality and t.hus extending the area of the said . · Munic'pality. Against the proposed extension t.he ·appellant made a r.epresentation to the ·state Goveniment inter alia on the ground that the said village Bkta!i could not· und.er the relevant rules be included in the Municipaiity under s.4(I)(c) of the Orissa Municipal Act; 1950 in view of the proviso to s.4(1) which contemplates that a declaration shall not be made under this,sub-section unless the State· Gove.rnment.~re satisfied tha1 !wo-thi.rds ofthe ad,ultmale population of the town to which it refers are chiefly employed in pursuits other ·than agriculture and that .such a town contains not less· than· 10,oOO inhabitants· and an average number of not less than 1000 inhabitants to a square mlle of the area of such a town: The. appeliant alleged that the male population of the ;aid village Ektali was 2640 as. per 1971 census report; out of which only 1586 were cniefly employed in pursuits other than agriculture and th~s twc-thirds of such male population were not employed in non-agcicultural pursui5s.

p. 404, margin A

· : The State Government,. however, by a notificafon dated 31st· July 1973 dedarcd their intention under s.4(I)(c) of the Municipal Act, · 1950. t·1 include withi11 the Jharsuguda Mu~icipality, the local area of a number of viilages including the village· Ektali. By the said • notification published in Orissa .Gazette Extraordinary dated 22nd August,· 1973 tlle Gov~rnment iilvited obj~ctions within_ six week$ from the date of pubiication. - The appellant did. file objection to. : the said notification. Objection was also filed by Grama Panchayat of Ektali. to. the effect that the ·Ektali Grama was duly constitutted by the State .Government in Com1nunity Development and Panchayat Raj Department in exercise of powers under s.3(1) of the Orissa Grama . P~nchayat Act and in the absence of any notification µnder s.3(1) and s.149 of the Grama Panchayat Act, village f\ktali .still continues to be a Grama. · ·

p. 404, margin E

The objections were examined by the District Magistrate, 'Sambalpur and the Revenu~ Division Commissioner.Northern Divisio'n, Sainbalpur an<j the'.same were rejected.· On 12th August, . 1975e, notification :under s.4(3)(b) declaring the•inclusion. of the said vj1!agsa

p. 404, margin G

v. (Mirsa, J.) 40? including the villa~e Ektali, into Jharsuguda Municipality was iSsued. . Sooil thereafter on 1st 'September, 1975 the said Jharsuguda' Municipality sent 'a letter to the appellant directing it t<; pay octroi as per provisions of s.5 of the Orissa Municipal Ac.t.. · Tie said octroi was payable at the rate· of 1 per.cent_ ad-va!tJ1:em on cotton as soon as it entered the municipal check-post for· the purpose of its being spun. into yarn.

p. 405

The levy of octroi duty was challenged_ by filing a petition -under Arts. 226 and 227 of the Constitution various grounds viz.,(a} the inclusion. of village Ektali in the area of Jharsuguda Municipality was illegal and ultra. vires' the proviSions of the Orissa M~niCjpal A~t, and (b) the levy of octroi duty at the rate of per cent ad valorem was arbitrary, coercive~nd violative of Art. _301 of the Constitution· ·:and, therefore, the appellant prayed for. quashin.g the nctification.s referred- to above·.

p. 405, margin B

The writ petition was, however, dismissed by. a .Division Bench of the Orissa High Court hy it_s o.fder _dated 5th January, I 977. The appellant filed an application under Art: 133(1) of the Constitution for the grant of a certificate-for leave tc appeal to this Court, which was dimissed by the High Courr by its order <lated 19th January, 1977._ The appellant has_ now filed the-present appeal after obtaining special leave from this Court. • ·

p. 405, margin C

.. The learned counselforthe appellant raised the following contentions : · · ·

p. 405, margin E

I. In·the absence ofa notification canceiling the declaration constituting Ektali village. as part of Grama, it was not·· legally permi.ssible · for t.he. State Government acting Under the·Onssa Municipal Act 1950 to include within

p. 405, margin E

the area of the municiphlity the area of the said Grama .

p. 405, margin E

2. · Themandator;' requ.irements of proviso to:sub-s.(J) of sA ·

p. 405, margin E

of the Orissa Municipal Act, 1950 have pot been satisfied.

p. 405, margin E

3. The objectio1; filed by the appellant uiider sub-'s.(2) of s.4 has not been considered by the State ~vernment.

p. 405, margin G

•·

p. 405, margin G

4. (a) The li~bility to .ocfroi arises when any of the three alternatives mentioned in s.Bl(l)(kk) of the Municipal Act is satisfied viz., wlien, the, goods are brought· within ·the mu\1icipal limits f9r (i) consumption, (ii) use, or (iii) sale .

pp. 405–406, margin G

.• (b). Th!!' tax alre.11dy imposed within the limits of the Municipality oj Jharsuguda could riot be ·automati- .. cally made ·applicable to the extended limits of the municipaiity without obtaining the sanction of.the

p. 406, margin A

State Governm'ent under s.131(1) (kh) of the Act. (c) ·The rate leviediis per se unreasonable an'a arbitrary.

p. 406, margin B

We take up these grounds seriatim. . . .

p. 406, margin B

Admittedly village Eki:lli where. the facto~y of \he appellant is located was a part of the d1:1ly constituted Ektali Orama Panchayat prior to 1973, within the meatffng of s.3 of the Orissa Orama Panchayat Act.· Sub-section (1) of. s'.3 authorises· the State Government to constitute any village. or gro1'.1p of contiguous villages as a Orama by a. declaration notified in the C)iazette arid assign to such Gram·a a name which shall be of one of the ·villages. comprised w.ithin the· Grama. Sub-section (2) of s.3 provi~es that· whenever the State Government deems it fit so to do, they rr:.ay cancel any notification in respect of a Orama under sub-s.· (l)'or rnay alter the area co"mpriscd in a Orama . by. reducing. or adding to t'he number of villages comprised within ·s.tich Orama by a dec!aiation notified in the Gazette constituting such· altered area or areas ~s a· Orama or Gramas, as the case may be. ·

p. 406, margin C

The. precise contentioi1 raised on behalf of the appellant is that there was a declaration b}· notification for the constitution of th_e Orama within the meaning!of sub-s.(I), but there has been.no notification as tequired by sub-s'.(2) of s.3 for taking village Ektali out of .Grama panchayat and, therefore, vi'llage Ektali continues to be a Orama and the inclusion o!' village. Ektali in Jharsuguda Municipality by notificati'ons dated 31st July, 1973 and 12th· August; 197) will have no. effect. · ·

p. 406, margin E

..

p. 406, margin F

This contention has' considera bie force. When a duly constituted Orama is;,o go out ofexiste~ce an order pf the Magistrate cancelling the notification terms of ~ub-s.(2) of s.3 of the Grarria Panchayat Act is necessar:( But there are circumstances whkh take away the force of the argument. The Orama Panchayat never chaHenged .the notijication of mclusion of the village ·Ektali in Jharsuguda Municipality. From un-controverted averment made in para 6 of the counter-affidavit of the State filed before the High Court it appears that the Gra;,,a Panchayat was consulted befote the impugned not'fication. Therefore, we do not feel persuaded to accept the contention at the instance of the appelJant. This leads us to the second ground.

pp. 406–407, margin G

In order to appreciate the second ·ground it is appropriate at this stage to refer the provisions of s.4 in so far as it is relevant for the purposes of the case :

p. 407, margin B

"4.(1) The State Government may, by notification declare

p. 407, margin C

their intention- (a) to constitute any town, together with, or exclusive of, any railway station, village, land or building in the vicinity of any such town, a municipality under this

p. 407, margin C

Act; or (b) ................................................. . (c) to include within a municipality any local area .contiguous

p. 407, margin C

to the same and defined in the notification ; or (d) ............... . (e) ............... . (f) .............. .. • (g) .............. .. (h)

p. 407, margin D

Provided that a declaration shall not be made under this sub-section unless the State Government are satisfied that two-thirds of the adult male population o( th_e town to which it refers, are chiefly employed in pursuits other than agricultural. and that such town contains nor less than ten thousand inhabitants and an average number of not less than one thousand inhabitants to the square mile of the area of such town.

p. 407, margin F

(2) Any inhabitant of the town or local area, or any,, .· · rate-payer of the rnimicipality, in respect of which an~,·: ' such notification has been- published urider sub-section (1) . · ·may, if he ~bjects to anything contained in the notificatfo~ •. · submit his objection in writing to the State Government,,: through the Magistrate of the district within six weeks from, . the date of the publication of the notification and the State. Government shall take his objections into consideration .

p. 408, margin A

. '

p. 408, margin A

(3) ........ " · . The emphasis of the appellant is .that two-third of the aduh male popu)ation 'or the Grama sho'uld be ch.iefly employed in pursuits

p. 408, margin A

·other than agricultural. The appellant has referred to 1971 census · · figures,.: On the basis or' these cerisus figures it is argued that out of the.total male population of 2640 of Grama Ektali only 1586 adults were.engaged in non-agricultural pursuits but the requirement of law was that two-third of the male population should have been employed in the non-agricultural pursuits, which. comes to 1760.

p. 408, margin A

· The argument ·proceeds on the ass~ption· that the proviso to s.4(1) applies. 8ut a bare persual of the proviso clearly indicates. that the requirement is that two-thirds of the adult male population of the town to which it refers should be engaged in non-agrlculturar · pursuits. The proviso, to our mind, applies not to all the clauses of sub-s.(I) of s.4 but it applies only to cl.( a) of sub-~.(!) of s.4, because it is cl.(a) of s.4(1) which ta1ks of town. Therefore, the proviso, in our opinion, has no application to the present case and that ean~ot be taken to be a ground for challenging the notification for inclus10n of village' Ektali in the 1harsuguda Municipality. This takes ·us to the third ground.

p. 408, margin A

'The appellant had filed an objection under sub-s'.(2) of s.4. The said objection was examined by the District Magistrate, Sambalpur and the Revenue Divisional Commissioner fNorthern Division), Sarnbalpur: They over-ruled the objection treating it to be of general nature. Thereafter, the Community Development and the Panchayati Raj· (Grama Panchayat) Department were consulted to agree with this proposal, to which they agreed, and it was thereafter that the Urban Development Department issued a final notification dated 12th August, 1975 to include the above village into the municipal limits -0f 1harsuguda .Municipality. The contention of the appellant that the objection had not been considered by the State Government cannot be accepted in as mnch as the objection is required to be made through the Magistrate of the district. Naturally, the District M1gistrate while forwarding the objection to the State Government made his comment. The Revenue Divisional Commisioner intervenes in the channel of communication between the District Magistrate and the State Government and he, therefore, had an occasion to process the matter. The State Government while dealing with the

pp. 408–409, margin A

matter consulted the Panchayati Raj Department and ultimately .... . · notified in terms of notification dated 12th August, 1975. In the

p. 409, margin B

c·ircumstances it cannot be accept~d that the objection filed by the '(~appellant had not been considered by the State Government.

p. 409, margin B

It was next contended that the liability for qctroi arises when any of the three alternatives mentioned in s.13l(l)(kk) of the Municipal Act are satisfied, namely, when the goods are brought within the.municipal limits for (i) consumption, (ii) use, or (iii) sale. Section 131(1) of the Municipal Act empowers the Municipal Council to impose various kinds of taxes within the limits of the Municipality with the sanction of the State Government. One of the taxes contemplated by s.313 (!) is octroi, .as provided in cl. · (kk). According to the appellant the .goods are brought into the municipal area not for the purpose of sale or for consumption but for the purpose of manufacture of yarn. The appellant took support from Burm2h Shell Oil Storage & Distribution Co. India Ltd. v. The Belgam Boro2f;h,Municipa/ity in which this Court had an occasion to consider the word 'consumption'. This Court took the view that the word 'consumption' in its· primary sense means the act of consuming and in ordinary pariance means the use of an article in a way which destroys, wastes or uses up that article, but in some legal contexts, the word 'consumption' has a. ·wider meaning, and that i.t is not necessary that by the act of consumption the commodity must be destroyed or used up. On the strength of this authority it is contended that the goods were brought into the municipal limits neither . for consumption, nor for sale. Assuming the contention to be correct1, there is no escape from the conclusion that the goods are brought into the municipal iimits at least for the purpose of use. In this view of the legal position the imposition ··of octroi by' the Municipality cannot be challenged on this ground.

p. 409, margin C

The next ground of attack is based on s,372 of the Orissa Municipal Act. Section 392 pertinently reads [1963] Supp. 2 S.C.R, .

p. 409, margin G

"392. The State Government before making any rules under sub-section (2) of section 81 and section 387, and a municipal council, before making any regulation or by-laws under section 388, shall publish, in such manner as the State Government deem sufficient for giving information to persons interested, the proposed rules or regulations or by-laws together with a notice specifying a date on or after which the same will be taken into consideration; and shall before making such rules or regulations or by-laws, receive and consider any objection or suggestion which may be made by any person with respect to the same before the date so specified.

p. 410, margin A

Every such rule or regulation or by-law shall be published in the. Gazette in English and in Oriya and such publication shall be evidence that the rule or regulation or by-law has been made as required by this section."

p. 410, margin C

It is· contended tliat the mandatory requirements having not been complied with the imposition of octroi is vitiated on this account.

p. 410, margin D

The appellant in para 3 of the Writ petition had alleged that the bye-laws were not published in the State Gazette either in Oriya or in Englis]1. This allegation has, however, been controverted by the State Government in para 18 of the counter-affidavit. It was specifically averred that the bye-laws were approved and ·confirmed by the Government in Urban Development Department vide order No. 1903/Legis-43-67/UD dated. nill published in. Orissa Gazette for information of the general public on 23rd May, 1969 at pages 691 to 697. There is a statutory presumption under s.372 of the Act that the publication of the rules or regulations or by-laws in the Gazette shall be evidence that the rule or regulation or bye-law has been made as required by this section. Jn view of this statutory presumption the Court will assume that the bye-law has been made in accordance with law in the absence of anything more from the side of the appellant.

p. 410, margin D

As a second limb to this argument it was contended by the app·ellant that even assuming that the bye-laws when initially enforced might be presumed to be·in accordance with law, in the absence of similar steps being taken at the time of extension of bye-laws to the newly lidded area, the by~-laws are not enforceable in the new area. This argument has proceeded in utter oblivion of the .provisions of s.5 of the Municipal Act. It reads :

pp. 410–411, margin G

"5. When any local area is jncluded in a municipality, by a notification under clause (b) or (c) of sub-section (3) of section 4, all the provisions of this. Act and of any rules, by-laws, notifications, or orders made thereunder, which immediately before such inclusion were in force tl1roughout

p. 411, margin A

such municipality, shall be deemed to appli to such area, • unless the State Government, and by the notification, otherwise direct."

p. 411, margin B

The learned counsel for the appellant, however, has placed .c strong reliance upon Visakhapatnam M¥nicipality v. Kandrequla Nukaraju & Ors. In that case the question that fell for considerac · tion was whether the property tax which could lawfullv be levied under the Dis.trict Municipalities Act 1929 can be levied after the repeal of that Act, on property situated in the areas included within the municipal limits after the constitution of the municipality. Section 391(1) of the Andhra Pradesh Municipalities Act 1965 expressly repealed the District Municipalities Act, 1920 from which it must follow that ordinarily no action can be taken under the Act of 1920 after April I, 1966 when the repeal became effective on the coming

p. 411, margin C

into force of the Act. It was, however, contended in that case that ... cl. 12 of Schedule 9 of the Act keeps the repealed enactment alive

p. 411, margin D

for tax purposes and, therefore, the municipality had the authority . to impose the property tax under the Act of J 920 notwithstanding . \il its repeal by the new Act. This Court, however·, took the view that ~the provisions contained in the Schedule ~re of a transitional nature.

p. 411, margin E

They were intended to apply during the period of transition following

p. 411, margin E

upon the repeal of old municipal laws and the introduction of the ..- new law. The object of clause 1~ of Schedule 9 was to authorise the levy of taxes which, on the commencement of .the Act, were levied 'under the repealed laws. This Court further added that the muni.cipality might have been levying property tax since long on properties situated within its limits, but until April I, 1966 the villages of Ramakrishnapuram and Sriharipuram were outside those limits. Qua the areas newly included within the municipal limits, the tax was being

p. 411, margin F

imposed for the first time and ·therefore it was incumbent on the· ""' municipality to follow the procedure pres~ribed ]ly the first proviso to section 81(2). Residents and tax payers of those areas never had [1976] I S.C.R. 544.

p. 411, margin G

an ~pportunity to object to the i~position of the tax and that valuable opportunity cannot be denied to them. It i's obligat~ry upon the municipality not only to invite objections· to the proposed tax but also to· consider the objec;tions 'received by it within the specified period.

p. 412, margin A

For the State, however, reliance was placed in that case on s.3(4) of the Act to contend that the inclusion of the two villages within the municipal area attracts of its· own force every provision of the Act with effect from the date on which the final notification is published by the Govero,ment under s.3(3). In support of this con: tention it cited the decision of this Court in Atlas Cycle Industries Ltd. v. State of Haryana & Anr. This argument on behalf of thtf State was, however, repe!Jcd and the Court observed :

p. 412, margin B

"Far from supporting the argument, we consider that the decision shows how a provision like the one contained in Section 3(4) cannot have the effect contended for by the appellant. In the Atlas Cycle case, section 5(4) of the Punjab Municipality Act, 1911 provided that when any local area was included in the municipality; "this Act and ... all rules, bye-laws, orders, directions and powers made, issued or conferred under this Act and i.n force throughout the whole municipality at.the time, shall apply to such areas."."

p. 412, margin C

But this Court took the view that since section 5(4) of the Punjab Act did not, significantly, refer to notifications and since section 62(1) of the Punjab Act spoke of "notification" for the imposition of taxes, it was not competent to· the municipality to levy a.nd collect octroi from the company on the stre11gth '!lerely of. the provision contained in s. 5(4) of the Punjab Act. That case, however, is distinguishable and cannot be of much assistance for solving the problem before us. Section 5 of the Orissa Municipal Act makes all the provisions of the Act and of any rules, by-laws, notifications, or orders made thereunder which immediately before· such inclusion ·were in force throu~hout such municipality, applic~ble to such area, unless the State Government, in and by the notification, otherwise direct. This section, therefore, includes not only the provisions of the Act, rules and bye-laws but also includes notifications. This distingnishes the present case from the Visakhapatnam Municipality's case (supra). (I) [1972J I S.C.R. 127.

p. 412, margin E

For the· appellant, next reliance was pl.aced upon Bag~!kot City Municipality v. Bagalkot Cement.<" In that case also at the time o( the imposition of the octroi duty the respondent's factory was situat.ed . outside the municipal district and w:is not subject to the ectroi duty. ·Subsequently, the Government extended 'the municipal district so that. t\1.e _factory ca.me to be included within that district. The appellant ii1that case contended that upon such extension its octroi limits also stood extended to include the factory and the respondent became liable to pa.y octroi dnty in respect of goods brought into the factory. The majority view was that the expression "municipal district" in _the bye-law referred to the municipal district as existing when the bye-law was framed. The context preventea ·the definition. of · ·"mnnicipal district" in. the Act, naniely, the municipal district as from time to time existing from being applied und0-r s.20 of the Bombay General Clanses Act to interpret the bye-law. The bye-law had been made without being published to the respondent, and if it was so read referring to the municipal district from time to time existing it would be invalid for non-compliance with the provisions of s.48 of the Act. this case again is distinguishable in view of the wording of s.5 of the Orissa Municipal Act.

p. 413, margin A

Lastly it is urged that the octroi duty levied in this case by the Municipality is unreasonable and excessive.· The Municipality is required to provide certain amenities not only for the permanent residents within the municipality, but also even for .casual visitors who may on occasions enter the limits of the . municipality. The entry of large quantities of goods within the municipality almost daily from outside necessarily creates innnmerable problems such as provisions .of water supply, lighting facilities, facilities for conservancy, sanitation, maintenance of good roads and markets etc. which the . Jharsuguda Municipality has done and theie is no allegation to the contrary by . tlie appellant. From the material placed before us we are of the view that the levy is not an nnreasonable one. It is not also excessive. The imposition qf .octroi cannot, therefore, be challenged on the ground that there is violation of Art. 19(1)(g) of .. the Constitution.

p. 413, margin D

Considering tlie case from any aspect the imposition of octroi duty, in our opinion, does not suffer from any infirmity. (!) (1963] Supp. I S.C.R. 710.

p. 413, margin G

For the foregoing discussion the appeal cannot succeed. It is accorrungly dismissed. In the circumstances of the case, owever, we allow the parties to bear their own costs. S.R. Appeal dismissed.

p. 414, margin A