- (1.) THIS is an application by the Maharaja Shri Umaid Mills Ltd. Pali under Art. 226 of the Constitution against the Municipal Board, Pali (hereinafter referred to as the Board) and the State of Rajasthan in connection with the Octroi tax levied by the Board.
(2.) THE applicant's case is briefly this. THE applicant is a company manufacturing cloth. In this connection, it has to import cotton from various parts of India into Pali. After the cotton is woven, it is exported to different parts of India and major part of the manufactures of the Mill goes out of the limits of Pali municipality. THEre was previous litigation between the applicant and the Board which has been narrated in the application, but to which we need not refer. It is enough to say that the Board has started levying octroi tax with effect from the 5th of September, 1956 under the Rajasthan Town Municipalities Act, 1951 (Act No. XXIII of 1951) (hereinafter called the Act ). It has framed octroi-rules and by-laws under the Act with the sanction of the Government of Rajasthan. In that connection, the Board asked the applicant to pay octroi duty on all goods imported by it within the municipal limits, applicant contends that it was illegal on the part of the Board to levy octroi duty on all goods imported by it within the municipal limits and relying in this connection on sections 46 (l) (k), 59 and 81 of the Act, it is contended that it was the duty of the Board to provide for refund by passing suitable bye-laws under sec, 46 (1) (k) and as this had not been done, the Board was not authorised to levy any tax on goods imported by the applicant, particularly cotton. THE main grievance of the applicant is that as most of the goods manufactured out of cotton imported by the applicant are exported out of the municipal limits, the Board should have provided for refund of octroi on that part of the imported cotton which was used for the manufacture of goods exported out of the municipal limits. It is also said that the bye-laws and the rules have not been printed as required by sec. 47 of the Act. The application has been opposed on behalf of the Board and the. State. Their contention is that law under S. 46 (1) (k) is an enabling provision The main charging section, according to them, is sec 59 and if the tax is validly charged under that section, the applicant cannot insist on a provision as to refund. Before we consider the arguments addressed to us on both sides, we should like to set down the three main sections to which reference has been made The relevant part of sec. 59 is as follows: "any municipal board: - (a) after observing the preliminary procedure required by sec. 60, and (b) with the sanction of the Government and subject to such modification or conditions as under sec. 61 the Government according such sanction deems fit, may impose, for the purposes of this Act, any one or more of the following taxes, namely: - (iv) an octroi on animals or goods or both brought within the octroi limits for consumption or use therein. " Sec. 81 is as follows: - "every municipal board when submitting for sanction a proposal for the imposition of octroi, shall submit therewith for sanction a draft of bye-laws for the purposes of clause (k) of sub-sec. (i) of sec. 46, after observing the requirements of sub-secs. (2) and (3) of that section. " Sub-sec. 46 (1) (k) is as follows : - "every municipal board may from time to time, with the previous sanction of the Government, make, alter or rescind bye-laws, not inconsistent with this Act: - (k) fixing octroi limits and stations ; providing for the exhibitions of tables of octrai; requiring a licence to be obtained for the sale of any article liable to octroi and prescribing the conditions on or subjects to which such licence may be granted, refused, suspended or withdrawn, regulating subject to any general or special orders which the Government may make in this behalf, the system under which refunds are to be made on account thereof when the animals or goods on which the octroi has been paid, or articles manufactured wholly or in part from such animals or goods are again exported and the custody or storage of animals or goods declared not to be intended for use or consump tion within the municipality and prescribing a period of limitation after which no claim for refund of octroi shall be entertained and the minimum amount for which any claim to refund may be made. " The contention of the applicant is that sec. 46 (1) (k) requires the Board to frame bye-laws for refund of octroi when the goods on which the octroi has been paid, or articles manufactured wholly or in part from such goods are again exported. It is said that the Board must provide for refund of octroi in cases where articles manufactured out of the goods on which octroi has been paid have been exported. It is pointed out that in actual effect what the Board has done in this case is to frame bye-laws for refund of octroi where goods are exported in the same form and in the same package in which they are imported, but has made no provision for refund of octroi where articles made from imported goods on which octroi has been paid are exported. It is not in dispute that the Board has not made and bye-laws for refund where articles manufactured out of goods imported or exported out of the municipal limits. The question that falls for consideration is whether the Board was bound under sec. 46 (1) (k) to provide for refund in such cases. It may be pointed out at the outset that sec. 46 is an enabling section. It gives power to the Board to make, alter or rescind bye-laws for various purposes and these purposes are enumerated in clauses (a) to (z) and (aa), i. e. 27 in all. Now it is obvious that a board is not bound to make provision on all these 27 matter, if it is not necessary to do so. These clauses provide the limits of the board's power, in our opinion, and sec. 46 cannot be interpreted to mean that the Board must provide for each and every one of the matters mentioned in these 27 clauses. Take clause (k) itself. It provides, for example, that the board may make bye-laws for requiring a licence to be obtained for the sale of any article liable to octroi. But no one can seriously contend that the board must provide for such a licence and if the board does not do so, it has failed in its duty and the octroi levied is illegal. Of course, certain bye-laws have got to be framed, as for example, fixing of octroi limits and stations because that is necessary for the administration of the tax. But it is abundantly clear that sec. 46 provides for the powers of the board and does not necessarily compel the board to exercise each and everyone of those powers. It is, however, said that even if section 46 merely prescribes the powers of the board, sec. 81 makes it compulsory that the board should submit draft bye-laws for the purposes of clause (k) of sub-sec. (1 ). But here again, sec. 81 cannot be read to mean that the board must submit draft-bye-laws on every point contained in clause (k) of sec. 46 (1 ). Sec 81 is merely a reminder to the board that it is its duty when levying octroi to provide for all such administrative matters through bye-laws as are necessary. It is also a remainder that if this is not done, the sanction for levying the octroi tax may not be granted by Government. Therefore, even if we read sec. 81 with sec. 46 (1) (k), we cannot come to the conclusion that framing of bye-laws for refund of octroi On articles manufactured out of imported goods which are later exported is compulsory under the law. The real section, which may be called the charging section, is sec. 59 and it is on the interpretation of this section that the question whether cotton imported into Pali by the applicant can be subject to an octroi tax has to be decided. Now what does section 59 lay down ? It gives power to the board to impose an octroi on animals or goods or both brought within the octroi limits for consumption or use therein. It is clear that octroi can only be charged on animals or goods which are brought within the municipal limits for consumption or use therein. It cannot be charged on goods which are just passing through municipal limits or on goods which, though they remain for some time in the municipal limits, are exported. The reason why sec. 46 (1) (k) provides for refunds is thus obvious. So far as goods which are just passing through municipal limits are concerned, there is not much difficulty. The difficulty arises with respect to goods which remain for some time within municipal limits and are then exported. In such cases, it may not be possible to know at the moment when the goods are actually imported within municipal limits whether they will be exported or not later on. Therefore, for administrative convenience, octroi is charged on all such goods. But if they are later exported within the time permitted by the bye-laws, a provision is made for refund. The reason for this is that if no provision were made for refund, there would be octroi tax on animals or goods which had not been brought within the municipality for consumption or use therein. It seems, therefore, that the scheme in all municipal acts for such tax is that the octroi is paid at the time of import ; but if later the goods are exported within a certain prescribed time, the octroi is refunded. This is to carry out the purpose of the law which is that the tax should only be on goods meant for consumption and use within municipal limits. That is why in the bye-laws, the Board has provided for refund when goods go out in the shape in which they had come within a certain time. The case, however, of goods from which other article are manufactured stands on a different footing. The first question that arises is whether such goods out of which manufactured articles are made are liable to octroi tax at all. Now, take the case of the applicant itself. It is a cotton mill and uses all kinds of things in the manufacture of cloth. Among other things, it uses cotton and coal. Now, it can hardly be said that it should be allowed refund on coal which has been consumed in the boilers of the mill because the cloth, which is eventually manufactured with the help of this coal, is exported out of Pali. Learned counsel for the applicant also did not contend this and his submission was that the applicant could not claim refund of octroi paid on coal (supposing there is any) because the coal was consumed within the municipal limits and nothing manufactured out of coal was export. But he contends that the cotton was not consumed within municipal limits and cloth manufactured out of that cotton was exported out of the municipal limits and, therefore, there must be refund on cotton ; for it was not consumed or used within the municipal limits. We are of opinion that this argument is not correct. It is not in dispute that the cotton which is imported by the applicant is used by it in manufacturing cloth and is all consumed in the mill. After the cotton has been used and consumed in the mill, it no longer exists (just as coal does not exist) and has been converted into cloth. Can it be said in these circumstances that this cotton was not imported by the applicant within the municipal limits of Pali for use and consumption therein ? The answer to this question can only be one, namely that the cotton was imported by the applicant within the municipal limits of Pali for use and consumption therein, namely for use and consumption in the manufacture of cloth in the mill. Therefore, the Board would be justified in levying octroi on cotton imported by the applicant for the use or consumption of the mill. Even if there is any doubt about consumption, there can be no doubt that the cotton was imported by the applicant for the use of the mill. Actually, it may also be said that it was imported for being consumed in the mill in the sense that by consumption it was converted into cloth. Consequently, the Board was entitled to levy octroi on such cotton under sec. 59 (iv) of the Act. It was not necessary, therefore, for the Board to provide for refund in this case in order to meet the provision of the law under sec. 59 (iv), as it is necessary in these cases where the actual goods or animals imported on one date or exported in that very form out of the municipal limits within the prescribed time. In the latter case, there is no use or consumption within municipal limits and tax cannot be levied. Refund has to be made because of the system of levying the tax on the ground of administrative convenience, otherwise refund is no part of the provision of the law under sec. 59 which gives power to the municipality for levying the tax. Therefore, when section 46 (1) (k) provides for refund in cases where the same animals or goods are exported, there is no doubt that some provision in the bye-laws must be made, as if it is not done,, sec. 59 (iv) will be violated. But where the actual article imported is consumed or used, as in the case of cotton or coal imported by the applicant, there is, in our opinion, no compulsion for providing refund, simply because the cloth made out of cotton and with the help of coal is exported outside the municipal limits. It was urged that if that is so, there was no reason for providing under sec. 46 (1) (k) that bye-laws should provide for refund on articles manufactured wholly or in part out of such animals or goods. It is enough to say that there is a purpose behind such provision. That purpose is that the municipal board may not impose such taxation so that a manufacturing concern within a certain area may not suffer in competition as compared to similar manufacturing concerns in other municipal towns where there may not be an octroi tax. Refunds may also be provided in order to encourage establishment of manufacturing concerns within certain municipal areas. But merely because the refund is provided, it does not follow that it must be given where the terms of sec. 59 (iv) are wholly complied with and the goods imported have been used or consumed within the municipal limits. Finally, it was urged that there is no such difference in the language of sec. , 46 (1) (k) which provides for refunds both where actual goods are exported and where articles manufactured out of those goods are exported. It was, in our opinion/not necessary that there should beany difference in the language used in clause (k) in this connection, for as we have already pointed out, the whole sec. 46 is an enabling provision, though it may become necessary by virtue of the charging section, namely sec. 59 to make certain provisions under sec. 46 as a matter of necessity. On a careful consideration, therefore, of all these sections we have no doubt that as cotton and other goods are imported within the municipal limits by the applicant for its use or consumption therein, they were liable to octroi tax. Sec 46 (1) (k) does not make it incumbent upon the board to give a refund in cases where articles manufactured out of such goods are exported. That is a matter for the discretion of the board and if the board has not exercised its discretion in favour of the applicant in this case, the applicant can have no complaint in law. We may also in this connection refer to corresponding provisions in the U. P. Municipalities Act, 1916 (U. P. Act II of 1916 ). The charging section there is sec. 128 with only this difference that after the words "consumption and use", the word "sale" also appears in the U. P. Act. The section as to refund is 153. The provision there is very general in these words - "the following matters shall be regulated and governed by rules. . . . . . . . . . . . . (c) the system on which refunds shall be allowed and paid. " The difficulties, which have arisen out of the wordings of sec. 46 (1) (k), have all been avoided by the framers of the U. P. Municipalities Act. In U. P. also there are towns like Kanpur, where there are many cotton mills and as the law stands in U. P. they can never claim as of right that they must be allowed refund on cotton when they export out of Kanpur goods manufactured out of cotton imported by them. We do not think that the legislature in Rajasthan intended anything different. Just as the general words in the U. P. Act make it possible for the board to allow refunds even where manufactured articles go out of municipal limits, the same must be the intention in the Rajasthan Act, though as we have said before, it is rather differently worded. We are satisfied, therefore, that the applicant's contention that the Board must provide for refund where articles manufactured out of goods imported or exported out of municipal limits is not correct.
(3.) AS to sec. 47, which provides for printing of rules and bye-laws, it is enough to say that it is merely a directory provision and even if there is some irregularity or delay in complying with it, it will not invalidate the bye-laws or rules framed by the board. There is therefore no force in this application and it is hereby dis-missed with one set of costs to the opposite parties as their defence was one. .;