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PETITIONER: NAGAR PANCHAYAT, UNA

       Vs.

RESPONDENT: UNA TALUKA SAHAKARI KHARID VECHAN SANGH LTD.

DATE OF JUDGMENT: 17/09/1970

BENCH: GROVER, A.N. BENCH: GROVER, A.N. SHAH, J.C.

CITATION:  1971 AIR 1078            1971 SCR  (2) 407  1971 SCC  (1)  21

ACT: Gujarat  Panchayat  Act,  1961,  s.  307(e)  and   (k)-Nagar Panchayat  continuing  to collect  octroi  under  Saurashtra Terminal   Tax  and  Octroi  Ordinance,   1949,   previously collected  by  Municipality for the  same  area  constituted under Bombay Municipal Act, 1901-if competent to do so.

HEADNOTE: The  Appellant,  Nagar  Panchayat, Una, a  local  body,  was constituted  under  the Gujarat Panchayat Act,  1961,  which came  into  force  ’from  April  1,  1963.   Prior  to  this enactment,  the Bombay Municipal Act, 190 1, as  applied  to Saurashtra, was in force in that region of the present State of Gujarat and under its provisions the Una Municipality was constituted.   This  Municipality was collecting  octroi  on commodities imported into the municipal limits of Una  under the  Saurashtra  Terminal  Tax and  Octroi  Ordinance  1949. Section  3 of that Ordinance empowered the State  Government to  impose  the tax mentioned thereunder in the  cities  and towns  specified  or included later in Schedule  1.  One  of these  taxes  was a terminal tax on goods imported  into  or exported  from  the terminal, tax limits.   Section  4  gave powers  to the Government to make rules by notification  for the  purpose of carrying out the purposes of the  Ordinance. Rule 4, which was framed in Gujarati language, provided that collection of octroi and terminal tax would be done  through the  "Sudhrai"  of the area entered in the schedule  to  the Ordinance. After  the  Act  of  1961 came, into  force  and  the  Nagar Panchayat replaced the Municipality, it continued to collect the  actroi till 1967, when the respondent filed a  petition under  Article 226 challenging the competence of  the  Nagar Panchayat  to collect the octroi.  The High Court held  that since  in  the  Rules promulgated  under  the  Ordinance  in Gujarati  the  collecting  Agency  had  been  described   as "Sudhrai" which means Municipality, the Nagar Panchayat  was not  competent to collect the octroi under the Ordinance  as it did not fall within the meaning or definition of the term "Municipality". On appeal to this Court, HELD : Allowing the appeal : The High Court was in error  in

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coming  to the conclusion that the Nagar Panchayat  was  not entitled to carry on the work of collection of octroi  under the  Ordinance  even  though  the  Ordinance  which  imposed liability to pay remained in force. Section  307  of  the  Act leaves no  room  for  doubt  that wherever  a Nagar Panchayat was constituted in Place of  the municipality, the municipality disappeared and all its funds including  the right to realise taxes etc. vested  in  the Nagar Panchayat.  In other words it was the Nagar  Panchayat which  was  to  function  as the  local  body  in  the  area previously constituted as a municipality.  Clause (k) of  s. 307 clearly saved all laws or rules which were applicable to the local area which formed a municipality and they were  to continue  to, apply and to remain in force in the  area  for which the Nagar Panchayat came to be constituted.  There was no force in the contention that the Ordinance did not become applicable  to the cities and towns specified in Schedule  I which  came to be constituted as Grams or Nagars  under  the Act. [410 C] 408 Even  if  in the rules framed under  the  Ordinance  certain expression  created a difficulty that could not  defeat  the right and the power conferred on the Nagar Panchayat by  the Act  of realising and collecting the octroi which was  being done  under the Ordinance as saved by clause (k) of s.  307. [410 H]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1059 of 1970. Appeal from the judgment and order dated February 18,  1970, of  the Gujarat High Court in Special Civil Application  No. 387 of 1968. D.   V. Patel and Vineet Kumar, for the appellant. I.   N. Shroff, for the respondent. The Judgment of the Court was delivered by Grover,  J. This appeal by certificate arises out of a  writ petition  filed  by  the  respondent  which  is  a   Society registered  under the Bombay Cooperative Societies Act  1925 challenging the collection of octroi by the appellant  which is the Una Nagar Panchayat. The appellant is a local body constituted under the  Gujarat Panchayat Act 1961, hereinafter called the "Act, which  came into  force  with effect from April 1, 1963.  Prior  to  its enactment  the  Bombay  Municipal Act 1901,  as  applied  to Saurashtra, was in force in that region of the present State of  Gujarat.   Under  its provisions  Una  Municipality  was constituted.  It was collecting octroi on commodities  which were  imported  into the municipal limits of Una  under  the Saurashtra Terminal Tax and Octroi Ordinance 1949.  Under S. 3  of  that Ordinance the Government could  impose  the  tax mentioned  thereunder in the cities and towns  specified  or included  later  in  Schedule 1. One of these  taxes  was  a terminal  tax  on goods imported into or exported  from  the terminal tax limits.  Octroi as defined by s. 2(2)  included a terminal tax.  Section 4 gave the power to the  Government to  make rules by notification for the purpose  of  carrying out the purposes of the Ordinance.  Rules were framed  under s. 4 in the Gujarati language.  It was provided therein that the  collection  of Octroi and terminal tax  would  be  done through the Sudhrai  of the area entered in the schedule  to the  ordinance.  It is apparent that under the Ordinance  it was’  the State Government which imposed the octroi  or  the terminal  tax  in  the cities and  towns  specified  in  the

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Schedule  and the Sudhrai was only an agency for  collection thereof. By  a notification dated December 12, 1949 issued under  the Ordinance   the  Government  of.  the  erstwhile  State   of Saurashtra  included the town of Una in the Schedule’to  the Ordinance.  Thus 409 octroi  and  terminal tax, became leviable in that  town  on certain.  commodities  imported  there.  Section  9  of  the Ordinance  must  also  be  noticed.   According  to  it  the Government  was to maintain it separate fund in  respect  of all  monies  received by it on account of any of  the  taxes specified  in  s. 3 for every city or town  or  ’local  area specified in Schedule I and such fund after deducting there- from  the expenditure incurred in connection with  the  levy and collection of such tax was to be applied for the benefit of  the  inhabitants of the city or town or local  area  for which it was maintained.  The purpose of levying the  octroi duty  or  terminal tax. under the Ordinance clearly  was  to add t o the revenue of the local body for the benefit of the people  residing within the Jurisdiction of that  particular local body. So long as Una Municipality remained a municipality as  con- stituted  under the Act of 1901, there was no difficulty  in the matter of collection of the octroi.  After the Act  came into force the Nagar Panchayat replaced the Municipality  in Una.  It continued to collect the octroi till 1967 when  the respondent, for the first time, raised an objection that  it was not entitled to do so.  As the Nagar Panchayat persisted in  making the collection a petition. under Art. 226 of  the Constitution  was filed in the Gujarat High Court.   It  has been  held  by  the  High Court that  since  in  the  Rules, promulgated  under the Ordinance in Gujarati the  collecting agency   has  been  described  as  Sudhrai  which  means   a municipality  the  Nagar  Panchayat  was  not  competent  to collect  the octroi under the Ordinance as it did  not  fall within the meaning or definition of the term "municipality". In,  our judgment the High Court was in error in  coming  to the conclusion that the Nagar Panchayat was not entitled  to carry  on  the  work  of  collection  of  octroi  under  the Ordinance even though, the Ordinance which imposed liability to pay remained in force.  Under s. 307 of the Act where any local area was declared to be a grain or nagar under s.  9- and  if  that  area was co-extensive with the  limits  of  a municipal  district  or municipal borough  the  municipality functioning in such local area was to cease to exist and  in its  place an Interim Gram Panchayat was to be  constituted. According  to  clause  (c) of that  section  the  unexpended balance of the municipal fund and property including arrears of  rates, taxes and fees belonging to the municipality  and all rights and powers which vested in the municipality  were to vest in the Interim Gram or Nagar Panchayat fund until  a new  panchayat  was  constituted  in  accordance  with   the provisions  of  s.  308(1).  Clause (g)  provided  that  all officers and servants in the employ of the municipality were to  become officers and servants. of the  Interim  Panchayat under the Act.  Clause (k) was in the following terms 410               "Any law (other than the municipal law) or any               rule,  by-law,  notification or  order  issued               under such law, which was applicable to and in               force in the local area immediately before  it               was declared as a gram or nagar under  section               9,  shall  continue to apply to and to  be  in               force   in   the  local  area  until   it   is super

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seded". Section  308  dealt with the term of office  of  an  Interim Panchayat  and the steps to be taken to hold election for  a new  Gram or Nagar Panchayat.  The appellant in the  present case is indisputably the duly constituted Nagar Panchayat. Section  307  of  the  Act leaves no  room  for  doubt  that wherever it Nagar Panchayat was constituted in place of  the municipality the municipality disappeared and all its  funds including  the  right to realise taxes etc., vested  in  the Nagar Panchayat.  In other words it was the Nagar  Panchayat which  was  to  function  as the  local  body  in  the  area previously constituted as a municipality.  Clause (k) of  s. 307  clearly saved all laws or rules which were applicable to the local area which formed a municipality and they  were to continue to, apply and to remain in force in the area for which  the  Nagar Panchayat came to be constituted.   By  no stretch  ,of reasoning could it be said that  the  Ordinance did not become applicable to the cities and towns  specified in  Schedule  I  which came to be constituted  as  Grams  or Nagars  under the Act.  It is true that no fresh rules  were promulgated under the Ordinance adapting the new terminology but even about the word Sudhrai It is, a moot point  whether it  means only a municipality as constituted under the  Act of 1901. An argument was raised before the High Court that the  Guja- rati  expression  "sudhrai" meant any  local-self  governing authority.  The High Court observed that this expression  as used in the Octroi rules could not have a wider  connotation than  the  expression  "   municipality"  in  s.  9  of  the Ordinance.  When s. 307(k) of the Act saved the operation of all,  laws and rules etc., other than the municipal law  the intention of the legislature was precise and definite and it is  futile to suggest that the Ordinance was not covered  by this saving clause.  The object underlying clause (c) of  S. 307 was to vest in the Nagar Panchayat the entire  municipal fund  including  the arrears of taxes and fees as  also  the powers  and rights relating thereto which previously  vested in  the municipality.  The octroi which was being  collected under the Ordinance clearly fell within the ambit of  clause (c).  The power and the right, therefore, had passed to  the Nagar  Panchayat and it was fully entitled to  exercise  it. Even  if in the rules framed  under the  Ordinance  certain expression  created a difficulty that could not  defeat  the right and the power conferred on the Nagar Panchayat 411 by the Act of realising and collecting the octroi which was being done under the Ordinance as saved by clause (k) of  s. 307. If  on  account of the absence of proper adaptation  in  the rules  made  under  the Ordinance any  difficulty  is  being experienced in the collection of octroi it is always open to the  State  Government  to  make  those  clarifications  and adaptations  and indeed it would be expedient and  desirable to do so.  So long as the new rules are not framed under the Ordinance  or adaptations are not made thereunder the  Nagar Panchayat can certainly make the (collection and through the officers  who  discharge  the  same  duties  as  were  being performed  by  their counterparts mentioned in  the  rules.. This  is what seems to have been done up till  1967  without any objection by any one. In  the  result the appeal succeeds and it is  allowed  with costs, in this Court as also in the High Court, R.K.P.S.                   Appeal allowed.. 412

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