The Administrator, Bhiwani Municipality, Bhiwani vs Sh. Prabhudayal Himmatsinghka and others

This judgment disposes of Regular Second Appeals Nos. 1536 and 1709 of 1978 since a common question of law based on identical facts arise for consideration.

These regular second appeals are directed against the judgment and decree of the first appellate Court whereby the suit of the respondent (hereinafter referred to as the plaintiff) for recovery of Rs. 15886-87 was decreed and the defendant was also permanently restrained from charging enhanced rate of surcharge on octroi duty from 50% to 75%.

The plaintiffs filed a suit for declaration to the effect that the surcharge on the octroi duty levied in June, 1972 by_ the defendant is ultra vires, null and void. The defendant passed a resolution dated December 30, 1970 proposing levy tax (increase of surcharge on octroi duty from 50% to 75%.) Notice as required by S. 62(2) of the Punjab Municipal Act, 1911 (in short the Act) proposing levy in surcharge on octroi duty was published on January 29, 1971. Objections to the proposed increase in the rate of surcharge on octroi duty could be filed by any inhabitant, objecting to the proposed tax, within 30 days from the publication of the said notice. The limitation of 30 days as contemplated by sub-sec. (2) of S. 3 of the Act expired on February 28, 1971. It is undisputed that February 28, 1971 was Sunday and the office of the defendant-Committee was closed on that date and that the objections were filed on March 1, 1971. In view of S. 10 of the General Clauses Act, 1897, tbe objections have to be considered as having been filed intime, because tbe office of the defendant-Committee was closed on February 28, 1971 on account of Sunday, and reopened on March 1, 1971. The objections were primarily rejected by the Committee on the ground that these were filed after 30 days of the notice. The proposal for enhancement of surcharge on octroi duty was sent to the Haryana Government. The proposal was accepted by the Haryana Government vide notification No. 2147-3C(I)-72/9699 dated April 4, 1972, the defendant was authorised to levy enhanced rate of surcharge on octroi duty w.e.f. June 1, 1972. In pursuance to the notification dated April 4, 1972, the defendant realised Rs. 15,886.97 from the plaintiffs being the enhanced surcharge on octroi duty. The validity of the Haryana Government notification dated April 4, 1972 was challenged in the suit on the ground that it was void and ineffective for the reason that the objection filed by the plaintiffs were not considered and were summarily rejected as brought after the expiry of 30 days; whereas, as a matter of fact the same were filed within the prescribed limitation of 30 days.

The defendant resisted the suit and stressed that the objections were filed beyond limitation and were rightly rejected. It also averred that the realisation of the disputed amount for the reason of enhanced levy in surcharge on octroi duty Was rightly made from the plaintiffs and the notification issued under S. 62(10) of the Act was valid.

From the pleadings of the parties the following issues were framed :--

Whether Birla Education Trust is a Public Charitable Trust and as such whether the suit has been filed on its behalf by duly authorised or properly appointed Trustee?

If issue No. 1 is proved in the affirmative, whether Technological Institute of Textile Bhiwani is a business concern, if so its effect?

Whether the dispute regarding the imposition of surcharge of octroi levy has ever been agitated between the parties in competent courts in the past and if so whether the matter was ever compromised, if so its effect?

Whether suit No. 549/242 of 1968 is pending between the parties and whether imposition of surcharge is a point in dispute in that case too, and if so to what effect?

Whether the imposition of disputed surcharge on octroi duty qua the plaintiffs is ultra vires, invalid, malacious, capricious or illegal as alleged?

Relief.

The trial Court under issue No. 1 held that the Trust was not Public Charitable Trust. Nevertheless it has been held that it will not deprive the plaintiffs of their locus standi to maintain the present suit as ordinary tax payer. It was further held that the suit was brought on behalf of the plaintiffs by their duly authorised attorney. Issue Nos. 2, 3 and 4 were not pressed. Under issue No. 5, it was held that the objections filed by the plaintiffs were wrongly rejected on the ground of limitation, but the plaintiffs could not maintain the suit for want of compliance of Ss. 64 and 86 of the Act. In view of the findings under issue No. 5, the suit filed by the plaintiffs was dismissed.

On appeal, the first Appellate Court relying upon Firm Seth Radha Kishan (Deceased) Represented by Hari Kishan and Others Vs. The Administrator, Municipal Committee, Ludhiana, and Nau Bahar Hussain Shah v. Municipal Committee Batala, AIR 1935 Lah 970 came to the conclusion that Civil Court had jurisdiction to entertain the suit and the provisions of Ss. 64 and 86 of the Act excluded the jurisdiction of the Court in respect of the tax levy made under the Act. The First Appellate Court further held that the Committee acted in violation of S. 62(3) of the Act for the reasons that the objections made by the plaintiffs were not considered by the defendant. Since there has been a violation of mandatory provisions of the statute, the notification was invalid and the claim made on the basis of the notification could not be sustained.

In Second Appeal, the defendant has only challenged the finding of the Appellate Court to the extent to which it has held that the notification in pursuance thereof the surcharge on octroi duty was levied was violative of S. 62(3) of the Punjab Municipal Act. To appreciate the submissions made, it will be useful to reproduce S. 62 of the Act:--

"62(1) A committee may, at a special meeting pass a resolution to propose the imposition of any tax under S. 61.

(2) When such a resolution has been passed the committee shall publish a notice, defining the class of persons or description of property proposed to be taxed, the amount or rate of the tax to be imposed, and the system of assessment to be adopted.

(3) Any inhabitant objecting to the proposed tax may, within thirty days from the publication of the said notice, submit his objection in writing to the committee; and the committee shall at a special meeting take his objection into consideration.

(4) If the committee decides to amend its proposals or any of them, it shall publish amended proposal along with a notice indicating that they are modifications of those previously published for objection.

(5) Any objections which may within thirty days be received to the amended proposal shall be dealt with in the manner prescribed in sub-sec. (3).

(6) When the committee has finally settled its proposals it shall, if the proposed tax falls under Cl.(b) to (f) of sub-sec. (I) of S.61 direct that the tax be imposed, and shall forward a copy of its order to the effect through the (Deputy Commissioner) to the State Government and if the proposed tax falls under any other provision it shall submit its proposals together with the objection if any made in connection therewith to the (Deputy Commissioner).

(7) If the proposed tax falls under Cl. (a) of sub-sec.(1) of S.61, the (Deputy Commissioner) after considering the objections received under Ss. (3) and (5) may either refuse to sanction the proposals or return them to the committee for further consideration, or sanction them without modification or with such modification not involving an increase of the amount to be imposed, as he deems fit, forwarding to the (State) Government a copy of the proposals and his order of sanction; and if the tax falls under sub-sec. (2)(--) of S. 61, (Deputy Commissioner) shall submit the proposals and objections with his recommendations to the State Government

(8) The (State) Government on receiving proposals for taxation under sub-sec. (2)(--) may sanction of refuse to sanction the same or return to the committee for further consideration.

(9) (-)

(10) (a) When a copy of order under subsections (6) and (7) has been received, pr

(b) when a proposal has been sanctioned under sub-sec. (8)(--) the State government shall notify the imposition of the tax'' in accordance with such order or proposal, and shall in the notification specify a date not less than (one month) from the date of notification, on which the tax shall come into force.

(11) A tax leviable by the year comes into force on the first day of January or on the first day of April or on the first day of July, or on the first day of October in any year, and if it conies into force on any other than the first day of the year by which it is leviable shall be leviable by the quarter till the first day of such year then next ensuing.

(12) A notification of the imposition of a tax under this Act shall be conclusive evidence that the tax has been imposed in accordance with the provisions of the Act."

The learned counsel for the appellant maintained that once a notification has been issued under sub-sec. (10) of S. 62 of the Act, it will be a conclusive proof that the tax has been imposed in accordance with the provisions of the Act. Once the notification has been issued, no fault can be found with it on the ground that the objections, as contemplated by sub-sec. (3) of S. 62 of the Act were not considered by the Municipal Committee. According to him, the consideration of the objections was only a procedural formality.

The precise question which arises is whether the provisions of sub-sec. (8) of S. 62 of the Act regarding the filling of the objections to the proposed imposition of tax and the consideration thereof by the Committee is mandatory or directory. Somewhat identical provisions of the Uttar Pradesh Municipalities Act, 1916 (for short the U.P. Act) came up for consideration before the Apex Court in Raza Buland Sugar Co. Ltd. Vs. Municipal Board, Rampur, , in the following circumstances :--

That was a case for levy of tax by the Municipal Board, Rampur, under S. 131 of the U.P. Act. S. 131 of the U.P. Act says that when Municipal Board desires to impose tax it shall by a resolution to frame proposals specifying the tax and the persons or class of persons to be made liable and that the Board shall prepare draft rules, which if desired by the State Government may refer the matter under S. 153. S. 153 of the U.P. Act is with regard to realisation of tax. Sub-sec. (3) of S. 153 of the U.P. Act says that the Board shall in the manner prescribed in S. 94 shall forward the proposals under sub-sec. (1) and the draft rules framed under sub-sec. (2) of S. 131 of the U.P. Act along with a notice in the form Schedule III. S. 132 of the U.P. Act lays down that any inhabitant of the Municipal Committee may within fortnight of the publication of the notification submit to the Board, any objections in writing under the preceding section and the Board shall take into consideration and pass order thereon by special resolution. It further lays down that when the Board has finally settled the objections, it shall submit them to the prescribed authority. It would, thus, appear that the provisions of Ss. 131 and 132 of the U.P. Act are analogous of S. 62 of the Act reproduced above. Their Lordships of the Apex Court held thus (Para 9):--

"Per Majority:-- "Section 131(3) of the U.P. Municipalities Act, 1916, can be divided into two parts. The first part lays down the Board shall publish proposals and draft rules along with a notice inviting objections to the proposals or the draft rules so published within a fortnight from the publication of the notice (see Sch. III.). The second part provides for the manner of publication and that manner is according to S. 94(3). The first part of S. 131(3) is mandatory and it is necessary to comply with it strictly before any tax can be imposed. In spite of S. 135(3) the Legislature intended that there must be publication as provided in the first part of 8.131(3). This part of S. 131(3) is mandatory considering its language, the purpose for which it has been enacted, the setting in which it appears and the intention of the Legislature which obviously is that no tax would be imposed without hearing tax-payers. Lastly, there is no serious general inconvenience or injustice to any one if this part of the provision is held to be mandatory; on the other hand it will be unjust to tax-payers if this part of the provision is held to be directory, inasmuchas the disregard of it would deprive them of the opportunity to make objections to the proposal, and the draft rules."

It has further been held that all conditions of the first kind including of hearing of objections on merits by the Municipal Committee are mandatory because they lie at the very root of the exercise of power. By imposing this levy (enhanced surcharge tax on octroi duty) the defendant has acted in violation of S. 62(3) of the Act for the reason that the objections made by the plaintiffs were not considered and were turned down in a wrongful manner as having been made after the prescribed period of limitation. Infact, these were filed in time and ought to have been considered before finally settling the proposal. Since there has been violation of mandatory provision of the statute by the defendant-Committee, the final proposal submitted by the Committee was suffering from a serious infirmity, on the basis of which no action could be taken. The issuance of the notification under sub-section (10) of Section 62 of the Act by the State Government will not rectify the patent illegality in the proposal submitted by the Municipal Committee under sub-section (6) of Section 62 of the Act. The consideration of the objection submitted under sub-section (3) of Section 62 of the Act was mandatory before the Committee could finally settle the proposal under sub-section (6) of Section 62. The impugned notification is, thus, illegal.

The learned counsel for the Municipal Committee has relied upon Municipal Board, Hapur Vs. Raghuvendra Kripal and Others, ; Municipal Council, Raichur Vs. Amar Chand Prasanna etc., and Municipal Board, Sitapur Vs. Prayag Narain Saigal and Firm Moosaram Bhagwan Das, , which have no applicability to the facts of instant case.

For the reasons recorded above, both the appeals are dismissed. No order as to costs.

Appeal dismissed.