Bata Shoe Co. (Pvt). Ltd. vs Municipal Board, Bhopal

T.C. Shrivastava, J.—This jndgment governs the disposal of two other First Appeals Nos. 75 and 76, both of 1959, also. These appeals arise out of civil Suits Nos. 2, 3 and 18 of 1958 decided by the 3rd Additional District Judge, Bhopal. These suits were consolidated try agreement of parties and have been disposed of by the trial Court by one common judgment. We shall refer to the suits respectively as the first, second and the third suits.

The Bhopal State Municipalities Act, 1916 (III of 1916), which is material in the case, is the Act of 1916, which is in Urdu. The Act has been replaced by the Bhopal State Municipalities Act, 1955 (Act No. III of 1956). The provisions in the second Act are more or less mere translations of the provisions in the earlier Act. In this judgment we shall refer to the provisions of the Act of 1955.

The undisputed facts are as follows. The Appellant Bata Shoe Company manufactures footwear and other articles and sends them to Bhopal for sale by its wholesale and retail shops in the city. The prices at which the articles are to be sold finally to the consumers are marked on them. The Respondent Municipal Board, Bhopal, is entitled to levy octrol duty at certain rates on the costs of the articles the octrol barrier.

The Appellant alleges that prior to 1-12-2951 the Respondent used to charge octroi duty on the invoice prices which means the labelled prices on the articles minus per cent of such value which was deducted on account of the expenses which have to be in curred in selling the goods at Bhopal. In the first suit, the Appellant had imported goods during the period 1-6-1949 to 31-3 1950 and had paid the necessary octroi duty following this method of valuation. However, on 1955 the Respondent Municipal Board gave a notice to the appelant to pay an extra sum of Rs. 1,081-3-0, within one month from the date of the notice and threatening to take proccedings u/s 144 of the Bhopal State Municipalities Act. 1955. The Appellant filed the first suit alleging that the notice was illegal, as the demand for extra amount was not authorized by law and therefore the threat to prosecute him was unjustified The Appellant, therefore, prayed for an injunction to restain the Respondent from revovering the amount or from launching any prosecution. The second and the third suits relate to the octroi duty for goods brought within the Bhopal Municipal limits during the period 1-12-1951 to 22-10-1952 and 1353 to September 1955 respectively. The Municipal Board, Bhopal, insisted upon payment of octroi duty on a valuation of the goods at the labelled price minus 121/2 per cent only and the Appellant was forced under protest to pay the amount The Appellant claimed that a rebate of 40 per cent on the labelled price was justified and thus asserted that a sum of Rs. 4,660-7-0 and Rs. 12,48 -2-0 respectively was. paid in excess of the proper duty during the period. These two suits were for the refund of the excess amount paid.

The Respondent pleaded that the recovery of the octroi duty in all the three cases was justified under the provisions of the Bhopal State Municipalities Act and the matter could not be challenged in civil Court, It was also stated that the requisite notice of two months, which is necessary u/s 335, was not given. It was further pleaded that the suits were barred by time.

The trial Court found that no notice was necessary in the first suit, as it was for injunction; that no notice was given in the second suit; and that in the third suit the requisite notice had been given. However, the Court held that all the three suits the jurisdiction of the civil Court was excluded under the Bhopal State Municipalities Act and the suits were also barred by time.

We shall first consider the question whether the civil Court had jurisdiction to try the suits. The material sections on this point are as follows:

In the case of a tax assessed upon the annual value of buildings or lands or both, an appeal against an order passed under Sub-section (3) of Section 127 or under Sub-section (2) of Section 131, and, in the case of any other tax, an appeal against an assessment, or any alteration of an assessment shall be made to such officer as may be empowered by the Government in this behalf.

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(1) No objection shall be taken to a valuation or assessment, nor shall the liability of a person to to be assessed or taxed be questioned in any other manner or by any other authority than is provided in this Act.

(2) The order of the appellate authority confirming, setting aside or modifying an order in respect of valuation or assessment or liability to assessment or taxation shall be final:

Provided that it shall be lawful for the appellate authority upon application or on his own motion, to review any order passed by him in appeal by a further order passed within three months from the date of his original order.

The Respondent contends that the jurisdiction of the civil Court is excluded u/s 152.

Similar provisions occur in the Central Provinces and Berar Municipalities Act, 1922, and the City of Jabalpur Corporation Act, 1948, which have been construed in several decisions of this Court. We may refer to Messrs Mesuram Kishunpershad v. Municipal Committee Jabalpur, ILR 1948 Nag. 766. The following observations are material:

The powers of the Municipal Committee in these matters are circumscribed by these rules. So long as the Committee acts within these powers no one has jurisdiction to interfere with its actions but as soon as it transgresses these limits it acts ultra vires. In the present case, the power of the Municipal Committee is to assess the octroi tax on the price of the goods imported and such price is to be made up of only the Cast price and the cost of carriage and nothing else. In assessing the octroi tax after including into the price of the goods the amount paid by the importer as Excise duty, the Municipal Committee did, in ray view, act illegally and ultra vires. The amount so collected in the shape of octroi duty is an illegal collection.

In that case, the view taken was that if an illegal collection had been made in the guise of a tax, civil Court had jurisdiction to give relief.

Several decided cases on the point were considered by a Divis on Bench of this Court in City Jabalpur Corporation v. Bata Shoe Company Ltd., F.A. No. 138/52. decided on 25-10-57. We may refer to the following passage from that judgment:

There is no doubt that cases in which there is a challenge to the vires of a provision or where the matter goes beyond the limits of a statute, stand on a different footing. Thus in Chairman of Girdih Municipality v. Shrish Chandra M zumdar, ILR 35 Cal. 589, the Bengal Municipal Act, 1884, was not held to bar the jurisdiction as the civil Courts in a case where the assessment was challenged on the ground that it was ultra vires. So also in AIR 1949 190 (Nagpur) , the levy of tax in excess of Rs. 50 per annum was prohibited by Section 142-A of the Government of India Act, 1935, and on this ground the civil Courts'' jurisdiction was maintained. Likewise, in Municipal Committee Montogmery v. Sant Singh, ILR 21, Lah. 707, the jurisdiction of the civil Courts was not held to be barred under the Punjab Municipal Act, 1911, on the ground that the tax could not be assessed on a person who was only a hirer and not the owner of lorries. Similarly, Devi Prasad Vs. Municipal Board, and Rama Shanker Tewari Vs. State, , are cases where tax was illegally imposed. These are cases, therefore, in which the question of vires was involved and that was the ground on which the jurisdiction of the civil Courts was not held to be barred. No such question however, arises in the present case where there is no dispute that the articles were dutiable and the Municipal Committee had the right to levy octroi thereon. The only question was regarding the assessment of duty. And this being a matter which fell within the competence of the appellate authority, the civil Courts'' jurisdiction must be held to be excluded.

In another case, Singhal Tantilal v. City of Jabalpur Corporation 1960 JLJ 214, another Division Bench of this Court considered the question and concurred with the above observations.

We need not refer to the several cases cited by the parties before us in view of the fact that they have all been examined in the two decisions, referred to above. It has consistently been held by this Court that the civil Courts would have jurisdiction to examine the fact whether the special authority acted within the ambit of the power conferred by the law. If the special authority is found to have acted in excels of the powers, it is not only open to the civil Court to examine the question but also to declare inoperative that part of the order which is in excess of such powers.

That being the legal position, we have now to see whether the demand for payment made in these cases was justified in law. In the first suit, the octroi tax as demanded at the time of the entry of the goods had already been paid. It appears from the report of the Audit tor, dated 10th October 1952, that he had objected to the valuation of the goods being made at 40 per cent below the lebelled price and had suggested that only 121/2 per cent should be deducted as was being done at Jabalpur. It was in pursuance of this objection that the notice, dated 7-10-1952, was given to the Appellant demanding an extra payment of Rs. 1,081-3-0. It is clear from the first sentence in the notice that the demand was being made only on account of the objection of the auditor, an extract of which was enclosed with the notice. It is obvious from this notice that the assessing authorities of the Committee did not apply their mind to the matter at all and did not ask the Appellant to show how the rebate on lebelled price allowed could not exceed 121/2 per cent. In the Bhopal State Municipalities Act of 1916 or of 1955 there is no provision for revising the assessment which has once been made in respect of octroi tax. Shri Ram Panj-wani for the Respondent was unable to show us any provision in the Municipal Rules which were prevalent during the material period authorising alteration of the assessment in the case of octroi tax. The only authority which he could show us was an amendment made in Rule 70 on 24-11-1955 according to which the Executive Officer has been authorised to inspect the accounts of the party concerned and to call upon him to make good any loss of octroi which may be so deducted. These rules were amended on 24-11-1955, that is, after the periods for which octroi duty is being levied in these three cases. The amendment has, therefore, no application. Shri Ram Panjwani further relied upon the General Clauses Act contending that any authority which has been given the power to assess has the power to alter the assessment at any time. We are unable to infer any such power from the provisions of the General Clauses Act. In the Income Tax Act or the Sales Tax Act of different States a power to reopen assessment has been expressly given to correct any under assessment or escaped assessment. No such power finds place in the Bhopal State Municipalities Act. Accordingly, we must hold that the Municipal Board, Bhopal had no power to reopen the assessment which was finally closed in the first suit at the time of the entry of the goods and the imposition of the excess tax is thus without any authority of law.

In the second and the third suits, the amount was demanded at the octroi barrier and it has been paid. Under the Bhopal State Municipalities Act and the Rules relating to assessment and recovery of octroi duty, dated 4-7-1937, the octroi moharir has the power to assess octroi duty and to realise it from the person bringing the goods within the Bhopal Municipal limits. An octroi tax differs materially from other taxes inasmuch as the scheme for realisation of octroi tax has to provide for quick assessment and quick realisation. It is for this reason that the provision has been made in the Rules for a demand of octroi tax and for immediate payment by the person concerned and power has been given to follow the goods while in transit to realise the amount. It has also been provided in Rule 26 that if the person concerned disputes the amount demanded by the octroi moharir, the matter can be decided by the superintendent. Shri R.S. Dabir for the Appellant argues that there was really no assessment when the demand was made; but this contention is without any merit. In Munna Lal and Sons Vs. Chairman Municipal Board, , corresponding provisions of the U.P Municipalities Act, 1916, were considered in the context of octroi tax. The contention that there is no assessment was repelled with the following observations:

Argument was made by learned Counsel that there is no assessment in the case of octroi. I consider that the process by which an octroi moharir examines goods and refers to his schedule and comes to the conclusion that certain goods come under certain heads of that schedule and should pay a certain tax is a process which is correctly described as ''assessment''. Therefore the correct remedy open to the applicant was to proceed by way of appeal to the District Magistrate u/s 160, Municipalities Act, and u/s 164, Municipalities Act, the applicant was precluded from making the claim in Court which he has made.

Section 160 of the U. P. Municipalities Act, which is referred to in this passage, corresponds to Section 149 of the Bhopal State Municipalities Act and Section 164 to Section 152. We find ourselves in respectful agreement with this decision and hold that in the case of octroi tax the octroi moharir makes an assessment of the tax when he demands the amount payable and such an assessment can be challenged in appeal u/s 149 of the Bhopal State Municipalities Act.

It was also open to the Appellant to make an application for refund of the excess amount paid under Rule 18 of the Octroi Rules explaining the reasons for the claim. The matter would then have been inquired into by the superintendent; and if he had passed an adverse order, an appeal could have been preferred to the proper authorities.

We hold that the payment of the octroi tax made in the second and the third suits could be challenged only in the manner provided by the Bhopal State Municipalities Act and the civil Court had no jurisdiction to order refund of the amount.

The second point which arises in these appeals relates to the question of notice as required by Section 335 of the Bhopal State Municipalities Act. In first suit, admittedly no notice was given. It is contended by Shri Dabir that no notice was necessary, as the suit relates to injunction; but we need not go into this contention. As we have found, the demand for the excess amount made by the Municipal Board is not justified under any provision of the Municipalities Act, it cannot be considered to be "an act done or purporting to have been done" under the Act. Section 335 has, therefore, no application and no notice under that section is necessary In the second suit, the trial Court has found that the giving of notice has not been proved and in the third suit the trial Court found that the necessary notice was given. We accept these findings. The question of notice is not material, as we have held that the civil Court had no jurisdiction to try these two suits.

The third point relates to limitation. The trial Court has held that all the three suits were barred u/s 335 of the Bhopal State Municipalities Act which provides that no suit to which that section applies shall be commenced after six months next after the accrual of the cause of action. In order to attract that section, it is necessary that it must be "in respect of an act done or purporting to have done" in official capacity. Now, so far as the first suit is concerned, the demand of Octroi tax is not supported by any provision of law. It is based merely on the recommendation of the auditor. The proceedings are wholly unauthorized and cannot be related to any provision of law. The notice cannot, therefore, be said to be an act done or purporting to have been done under the Act. Section 335 has, therefore, no application and the special limitation does not apply to such unauthorised demands. In the second and the third suits, the assessment made by the Octroi Moharir at the time of the entry of the goods is undoubtedly "an act done" or at least an act which "he purported to do under the Act." Section 335, therefore, applies to both these suits and the suits were filed more than six months after the date of the accrual of the cause of action, they are barred by time.

In view of the above discission, the second and the third suits were correctly decided by the trial Court and the Appellant is not entitled to any relief in those two cases. The question of relief in the first suit presents some difficulty. In the plaint, the Appellant had asked for an injunction (i) to restrain the Municipal Board, Bhopal, from realising Rs. 1,081-3-0 and (ii) not to prosecute him. As regards the first part of the relief, there is no indication in the notice that the Municipal Board is going to realise the amount. There is therefore, no cause for granting any injunction. As regards the second part of the relief, it is not usual to restrain the parties from taking'' recourse to the criminal Court or any other Court. Whatever opinion we may have regarding the applicability or non-applicability of Section 144 of the Bhopal State Municipalities Act, it is really a matter for the criminal Court to decide. At the same time, we feel that as the demand incorporated in the notice is not authorised by any law, some relief should be given to the Appellant. Accordingly, the relief which we consider appropriate in the first suit is of a declaration that the demand as contained in the notice, dated 7 10-1952, is not legal; but this declaration shall not come in the way of the Municipal Board, Bhopal, in instituting any proceedings which they may lawfully be entitled to in respect of the alleged evasion of the octrai tax.

Accordingly we pass the following orders in these three appeals.

(i) First Appeal No. 77 of 1959; The appeal is allowed and the decree of the trial Court is set aside. It is declared that the demand of Rs. 1,081-3-. as contained in the notice, dated 7-10-1952, is illegal and unauthorised by law. This declaration shall not, however, preclude the Municipal Board, Bhopal, from taking such proceedings as they may be authorised by law to recover the evaded octroi duty. The costs of the Appellant shall be paid by the Respondent in this Court and in the Court below.

(ii) First Appeals Nos. 75 and 76 of 1959. The appeals are dismissed with costs.