- (1.) These three appeals which are on certificates of fitness granted by the High Courts- the first by the High Court of Bombay at Nagpur and the two others by the High Court of Madhya Pradesh-raise a common question as regards the construction of Art. 277 of the Constitution and the validity of certain terminal taxes imposed by the respective appellant municipal authorities under notifications issued under Ch. IX of the C. P. and Berar Municipalities Act, 1922, subsequent to the coming into force of the Constitution, and so have been heard together.
(2.) Civil Appeal 598 of 1962 is an appeal from the High Court of Bombay at Nagpur has been filed by the Municipal Committee of Amravati against a decision of the High Court allowing the 1st respondent's petition under Art. 226 of 227 of the Constitution. The Municipal Committee of Amravati has been established under the C. P. and Berar Municipalities Act, 1922 (C. P. and Berar Act II of 1922) hereinafter referred to as the Act. Chapter IX of the Act deals with the imposition, assessment and collection of taxes which might be imposed by the Municipal Committee. Section 66 specifies the taxes which, subject to the provisions of the Chapter, the Committee may from time to time impose. Its first sub-section specifies in its several clauses 15 varieties of taxes and among them is cl. (o) which reads : "The terminal tax on goods or animals imported into or exported from the limits of the Municipality provided that terminal tax under this clause and an octroi under cl. (e) shall not be in force in any municipality at the same time;" The other sub-clauses which are relevant for the consideration of the question arising in the appeal are sub-cls. (2), (3) and (4) Section 66 and they read : "(2) The State Government may, by rules made under this Act, regulate the imposition of taxes under this section, and impose maximum amounts of rates for any tax. (3) The first imposition of any tax specified in sub-sec. (1) shall be subject to the previous sanction of the State Government. (4) Subject to the control of the State Government, a committee may abolish any tax already imposed and specified in sub-sec. (1) cls. (a) to (m) inclusive, or may, within the limits imposed under sub-sec. (2), vary the amount or rate of any such tax : Provided that in the case of any municipality indebted to the Government, the abolition of any tax or a reduction in the amount or rate thereof shall be subject to the previous sanction of the State Government." Section 67 lays down the procedure for the imposition of taxes and it provides : "67. (1) A committee may, at a special meeting, pass a resolution to propose the imposition of any tax under S. 66. 2. When such a resolution has been passed, the committee shall publish in accordance with rules made under this Act 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. (5) The State Government, on receiving such proposals may sanction or refuse to sanction the same or sanction them subject to such modifications as it may think fit, or return them to the committee for further consideration. (6) No modification affecting the substance shall be made under sub-sec. (5), unless and until the modification has been accepted by the committee at a special meeting. (8) A notification of the imposition of tax under this section shall be conclusive evidence that the tax has been imposed in accordance with the provisions of this Act." The procedure for the variation of the taxes is to be found in S. 68 and it reads : "68. (1) A committee may, at a special meeting pass a resolution to propose the abolition of any tax already imposed, or a variation in the amount or rate thereof. (3) If the proposal is to increase the amount or rate of any tax the committee shall publish, in the manner prescribed by rules made under this Act, a notice showing in detail the effects of the proposal. (4) Any inhabitant of the municipality objecting to the proposed increase may, within thirty days from the publication of the notice submit his objection in writing to the committee. (5) The committee shall take the proposal and all objections received thereto into consideration at a special meeting, and may modify the proposals as it may think fit, and may pass a final resolution on the proposal. (6) If the proposal requires the previous sanction of the State Government under the provisions of S. 66 sub-sec. (4) or sub-s. (5), the committee shall forward it to the State Government and it shall be dealt with in the manner provided in S. 67, sub-secs. (4), (5) and (6). (7) ....... ....... ...... (8) ....... ....... ...... (9) The publication in the manner prescribed of the abolition or variation of any tax under this section shall be conclusive proof that such abolition or variation has been made in accordance with the provisions of this Act." From even before the constitution of the municipality under the Act and at a time when the municipal committee was governed by the Berar Municipal Law of 1886 which was in force prior to the Act and whose taxation provisions were continued by the Act of 1922, a terminal tax on goods imported by road or rail had been imposed by the Municipality by virtue of a notification dated August 10, 1916 on several specified kinds of goods. This notification exempted silver, bullion and coin from the operation of this tax. This was superseded by a notification of June 2, 1921 under which the Schedules were modified and the terminal tax imposed was confined to goods imported into or exported out of the Municipal area by rail. The notification of June 1921 was amended from time to time by other items being added and the rates being increased but no change was effected in the taxes imposed after 1936. Under the scheme of the distribution of taxing powers between the provinces and the Central Government under the Government of India Act, 1935 terminal taxes on goods carried by rail were assigned exclusively to the Federal Center under Item 58 of List I to Sch. VII, but the validity of the levy and collection of the terminal tax in force before the 1st April, 1937 was continued by S. 143 of the Government of India Act, 1935 and it was by virtue of this continuance that these taxes were continued to be levied after April 1, 1937. Their continuance after January 26, 1950 when after the repeal of the Government of India Act, 1935, the Constitution came into force with the same scheme of distribution of taxing power on the relevant item identical with that under the Government of India Act was by reason of Art. 277 which was practically in the same terms as S. 143 of the Government of India Act, 1935. The taxes imposed by the pre-Constitution notification could, therefore be legally levied and collected even after the Constitution came into force.
(3.) Subsequent to January 26, 1950, there was a notification on December 1, 1959, under which to the list of goods liable to terminal tax imported into or exported out of the Municipal area not merely by rail but also by road were added three new items- silver and silver jewellery, gold and gold jewellery, and precious stones, and these three specified items were subjected to the tax at the same rates as had been imposed on other articles by the notifications which were in force from before the Constitution. Before the notification was issued the procedure indicated by S. 67 was gone through and the Government accorded their sanction to the rules made by the Municipal Committee for the imposition of the tax on the newly added articles. The validity of the tax imposed by this notification was challenged by the 1st respondent who was carrying on business within Amravati municipality in gold, silver and precious stones on the ground of legislative incompetency which had not been saved by Art. 277 of the Constitution, in a petition under Art. 226. The learned Judges of the High Court by a majority accepted the contention raised by the respondent and allowed the petition but granted a certificate of fitness and hence this appeal. The facts of the other two appeals are nearly similar but we shall refer to them after dealing with the common question which arises in these appeals.;