P.V. Dixit, C.J. - (1.) THE petitioners in this case carry on business at Gotegaon which is within the limits of the Municipal Committee, Chhota -Chhindwara. By a notification dated the 17th March 1926 the Government sanctioned the imposition by the said Municipal Committee under Section 66 (1) (o) of the C. P. and Berar Municipalities Act, 1922, of a terminal tax at the rates and on the Articles specified in the Schedule to the notification, exported from and imported in to the said Municipality by rail. The terminal tax came into force from 1st April 1926. In 1960 the Municipal Committee amended the Schedule specifying the rates of tax and the articles taxed. This amendment was confirmed by the Government under Section 67 (5) of the Act by a notification dated the 23rd September 1960 published in the Gazette of the 4th November 1960. The notification ran as follows: - "In exercise of the powers conferred by Section 67 sub -Section (5) of the Central Provinces and Berar Municipalities Act 1922 (II of 1922) the State Government is pleased to confirm the following amendment made by the M. C. Chhota Chhindwara in the Narsimhpur District under Section 66 Sub -Section (1) clause (o) of the said Act for the imposition of the Terminal Tax on import and export of goods by rail within the Chhota -Chhindwara M. C. sanctioned under the Local Self Government department of the former State of Madhya Pradesh Notification No. 972 -609 -VIII dated the 17th March 1926. The amendment shall come into force from the 1st April 1960: - Amendment In the said rules for the existing schedule, the following schedule shall be substituted; namely: - ...................................................... The notification then proceeded to set out the Schedule. The Schedule which superseded the Schedule of 1926, included some articles which were not included in the taxable articles given in the Schedule of 1926. Thus a terminal tax was imposed for the first time in 1960 on bidi leaves, matches, cigarettes, tobacco, gold, silver, medicines, all soaps, gunny bags and certain other articles. It also enhanced the rate of tax on taxable articles included in the previous Schedule. The petitioners claim that the taxes the imposition of which was notified on 4th November 1960 were terminal taxes on goods carried by railway and as such were not imposable after the coming into force of the Constitution by any State of local authority by reason of item No. 89 in List -1 of the seventh Schedule which gives to the Union Government alone the power to levy terminal taxes on goods and passengers carried by Railway sea orair, They, therefore, contend that the imposition of the tax notified on 4th November 1960is illegal and pray that appropriate direction be issued restraining the opponents from imposing or collecting terminal taxes in accordance with this notification.
(2.) IN the return filed by the opponents opposing the petition, it is not disputed that on certain articles a terminal tax was imposed for the first time in 1960 and that the rate in respect of some others has been enhanced. It is, however, averred that despite item No. 89 in List -1 of the seventh Schedule of the Constitution the State and the Municipal Committee have the power to impose the tax under Article 277 of the Constitution which saves the levy of terminal tax in the case of a Municipal Committee which has been imposing one prior to the commencement of the Constitution. It is further submitted by the respondents that in 1926 the Municipal Committee could under Section 66 (1) (o) of the Act, with the sanction of the local Government, impose the terminal tax it did; that as on the date of the commencement of the Constitution it was a tax which was being lawfully levied by the Municpal Committee, the Municipal Committee could continue to levy it under Article 277; and that the inclusion of certain Articles in the list of taxable articles or the enhancement of rates on some other articles did not amount to a fresh imposition of the tax The Municipal Committee has further Stated in the return that the tax is boing collected only from 8th November 1960 after the publication of the notification dated the 23rd September 1960 on 4th November 1960. It is not disputed that after the coming into force of the Constitution a new terminal tax could not be imposed by the Municipal authority as the imposition of such a tax was not within the legislative competence of a State Legislature. There is also no dispute that the tax notified on 4th November 1960 was a terminal tax within the meaning of item No. 89. It is evident from the notifications issued in 1926 and 1960 that the impugned tax is a terminal tax confined to certain articles carried and imported within the municipal limits or exported outside them by rail; It is not a tax falling under item No. 52 of the State List, that is, a tax on the entry of goods into a local area for consumption, use or sale therein. The main question which arises for decision, and which was debated before us, is whether by substituting a new Schedule subjecting certain articles to the terminal tax for the first time and enhancing the rate of tax on others for the Schedule issued in 1926 the Municipal Committee was imposing a new terminal tax or was merely continuing to levy the terminal tax lawfully imposed by it from 1926 onwards. The respondents contend that this is no fresh imposition but merely a continuation of the old one, and that the Municipal Committee has the power to include new articles in the Schedule and enhance the original rate of tax on others under Article 277 of the Constitution.
(3.) BEFORE considering the contention whether the terminal tax imposed by the notification published on 4th November 1960 is in substance a continuation of the old tax, it is necessary to examine the provisions of Article 277. That article runs as follows - "Any taxes, duties, cesses or fees which, immediately before the commencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the State, Municipality, district or other local area may. notwithstanding that those taxes, duties, cesses or fees are mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by law." This Article saves existing taxes, duties, cesses or fees levied by State or local authorities on subjects which are now included in the Union List, and only those taxes, duties, cesses or fees have been saved which immediately before 26th January 1950 were being lawfully levied. Article 277 is a saving provision. It does not give a right to any State or any municipal or other authority to impose a tax, duty, cess or fee mentioned in the Union List. It is a provision for the continuance of taxes, duties, cesses or fees which immediately before the commencement of the Constitution were being lawfully levied, that it to say, which were being actually collected under some law sanctioning the collection. The word 'levy' as used in Article 277 does not mean the imposition of a tax but the collection of a tax. Article 277 is grouped with the provisions which deal with the allocation between the Union and the State of the proceeds of taxes and duties which can only be imposed by the Government of India. Articles 268 to 373 deal with (a) the appropriation by the States of certain duties imposed by the Union but collected by the States, (b) the appropriation by the States of the proceeds of certain duties and taxes imposed and collected by the Government of India; (c) the distribution between the Union and the States of the yeild of certain taxes and duties imposed and collected by the Union Government, and (d) the appropriation by the Union Government of surcharge on certain duties and taxes. Article 277 is concerned with the application and collection of taxes. duties, cesses or fees of those taxes now included in the Union List which before the commencement of the Constitution could be validly imposed by any State or by any municipality for other local authority or body and were so imposed. That Article does not either give continuity to laws imposing taxation which were in force before 26th January 1950. The continuance of such laws is under Article 372. When Article 277 says that the taxes, duties, cesses or fees mentioned earlier therein shall "continue to be levied and to be applied to the same purpose", it emphasizes the question of collection and application of proceeds of such taxes and duties and not the imposition or the continuation of laws imposing them. Now, there cannot be any question of the application of the proceeds of any tax unless there is first collection. The imposition of a tax is not a continuous or a periodical act. It is one which has to be done once for all. In the expression "continue to be levied and to be applied" occurring in Article 277 the word 'levy' can, therefore, mean only collection. If the word 'levy' as used in the tatter part of Article 277 means collection, then according to the ordinary rules of construction it would have the same meaning in the expression used earlier in the article, namely, "were being lawfully levied". Again, the word 'continue' in the expression "continue to be levied and to be applied" also points to the fact that if in this expression 'levy' means collection, then it must have the same meaning when it is used earlier in the Article. For, there can be no question of the continuation, after the commencement of the Constitution, of collection and application of any tax if before the commencement of the Constitution there has never been any collection or application. It is thus clear that the only natural and proper construction that can be placed on the expression "which immediately before the commencement of the Constitution were being lawfully levied" is 'which immediately before the commencement of the Constitution were being actually collected under some law sanctioning the collection". This is the view which was expressed by one of us in Chhuttilal vs. Bagmal, 1956 MBLJ 1088:, AIR 1956 M. B. 177 and in Ramprasad vs War Profits Tax Officer, 1952 MBLJ 175:, AIR 1953 M. P. 20. This view is also supported by the decision of the Madras High Court in Nageswara Rao vs. State of Madras : AIR 1954 Mad. 643. That was a case in which the State Government levied certain duties on medicinal preparations prior to the Constitution. After the coming into force of the Constitution a new duty was imposed by a notification dated 18th November 1952. In the meantime the subject of duty on medicinal preparations was transferred to the Union List. While considering the legality of the levy of duty under the aforesaid notification Venkatarama Aiyar J. referred to Article 277 of the Constitution and expressed himself thus: - "This provision would enable the Government to continue to levy such duties on medicinal preparations as were being levied by them prior to the Constitution and that would save the levy of duty under Notification No. 473. But we are here concerned with a new duty imposed for the first time by the notification, dated 18 -11 -1952. As neither the Legislature nor the Government of Madras had on that date any competence to impose a duty on medicinal preparations, the imposition under Notification No. 941 is not within the saving of Art. 277 and must be held to be ultra vires." ;