TMI Blog1983 (6) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... ailway siding situated within their Sugar Factory which was within the limits of the Pilibhit Municipal Board for purposes of consumption or use three wagon loads of sugarcane weighing in all 804 maunds for which octroi of ₹ 8.48 P. was payable under the bye-laws of the Municipal Board published under notification dated May 18, 1960 without paying the said octroi. The said complaint was filed on September 12, 1968. During the proceedings before the Magistrate the appellants pleaded that since the payment of octroi by the factory of the appellants on sugarcane brought by railway had been exempted by an order of the Government of the United Provinces bearing G. O. No. 3613(1)/XI-395 dated November 20, 1936, the prosecution should fail. The relevant part of the Government order which is contained in a letter addressed by the Municipal Department of the Government of the United Provinces to the Commissioner of Rohilkhand Division reads thus: I am directed to say that Government have, after full examination of the question of local taxation of sugarcane imported for the manufacture of sugar in factories situated within the limits of certain municipalities, decided that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n June 3, 1982, the levy of octroi on sugarcane brought by sugar factories into the municipalities in the State of Uttar Pradesh for crushing purposes is generally exempted irrespective of the mode of transport used to bring such sugarcane. The relevant part of that communication reads thus: Sub: Exemption from octroi on sugarcane brought for crushing in sugar mills within municipal limits. Sir, On the above subject, in continuation of the radiogram of the Government No. 2065 B/11-9-82 dated 27.5.1982, I have been directed to state that in exercise of the powers conferred under sec. 157(3) of the U.P. Municipalities Act, 1916, the Governor exempts sugarcane brought within municipal limits for crushing in sugar mills from octroi duty with immediate effect. You are requested to ensure that the order is carried out and acknowledge receipt of the Government order. Yours faithfully, Sd/- Shashi Kant Jain Under Secretary This communication may, however, have no bearing on the period in question but only shows how the State Government has understood the scope of its power under section 157(3) of the Act. Since all the facts are admitted the only question which req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. It may be noted that while the power of exemption under sub-sections (1) and (2) of section 157 of the Act is vested in the Municipal Board, the power of exemption under sub- section (3) of section 157 is exercisable by the Local Government. Under sub-section (2) of section 157 the resolution of the Municipal Board granting exemption should, however, be confirmed by the Local Government or the Commissioner, as the case may be. The first submission made before us is somewhat subtle and needs to be considered in some detail. It is argued that since the exemption had been given under the order dated November 20, 1936 on the ground that there was no justification for the continuance of the levy of taxes on rail-borne sugarcane as the municipalities were not rendering any service in regard to it, the levy from which exemption had been given by that order was either a terminal tax or a fee and not a tax. Since what is being levied as octroi from the year 1960 was a tax, the order of exemption would be inapplicable to it. In support of the first part of this argument that the tax referred to in the order of exemption could only be a terminal tax reliance was placed on a decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal taxes and cesses which can be levied on goods imported into a local area for purposes of use, consumption or sale therein rejected the contention of the company with these observations: There appears to us a definite distinction between the type of taxes referred to as terminal taxes in entry No. 58 of List 1 of the Seventh Schedule and the type of taxes referred to as cesses on the entry of goods into a local area in entry No. 49 of List II. The former taxes must be (a) terminal (and) (b) confined to goods and passengers carried by railway or air. They must be chargeable at a rail or air terminus and be referable to services (Whether of carriage or otherwise) rendered or to be rendered by some rail or air transport organisation. The essential features of the cesses referred to in entry No. 49 of List II are on the other hand simply (a) the entry of goods into a definite local area and (b) the requirement that the goods should enter for the purpose of consumption, use sale therein. It is to be noted that there is no limitation on the manner by which the goods to be subjected to such cesses may enter. There is no ground for suggesting that entry of goods by rail or air is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied under the Act and fall within the State List both under the Government of India Act, 1935 and under the Constitution. It was not a terminal tax falling under entry 58 of List I of the Seventh Schedule to the Government of India Act, 1935. It does not also fall under entry 89 of List I of the Seventh Schedule to the Constitution now. The said levy came within entry 49 of List II of the Seventh Schedule to the Government of India Act, 1935 and now falls under entry 52 of List II of the Seventh Schedule to the Constitution. The exemption granted in the year 1936 should be construed as an exemption from all taxation by way of octroi leviable and levied under the Act on rail-borne sugarcane and that exemption would continue until it is either rescinded or modified or becomes inapplicable for any other reason. The second part of the above submission was that the levy was in the nature of a fee and not a tax as it had been described as a cess in entry 49 of List II of the Seventh Schedule to the Government of India Act, 1935. There is no merit in this submission also. A cess may either be a tax or a fee. Whether a cess in a given context is a tax or a fee depends upon the purpose f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no element of quid pro quo between the person who pays the octroi and the Municipal Board. Hence octroi being a tax it was competent to the Provincial Government to make an order under section 157 (3) of the Act exempting railborne sugarcane from payment of octroi. The next submission urged before us is that the appellants having failed in an earlier writ petition in which they had questioned the validity of the levy of octroi cannot now be permitted to challenge the levy again in these proceedings. The facts bearing on the above contention are these: In the year 1960, by a notification published in the Official Gazette dated April 23, 1960 the Municipal Board of Pilibhit promulgated new rules relating to the levy of octroi and also published a fresh schedule of rates of octroi in the Official Gazette dated May 18, 1960. This was done with the previous sanction of the State Government under section 133 of the Act. The octroi imposed by these notifications related to number of articles including sugar, sugarcane etc. The appellants who were liable to pay octroi on many of those articles challenged in a petition filed under Article 226 of the Constitution in Civil Misc. Writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. An order under section 157 (3) operates only after a tax is validly imposed with the sanction of the State Government or of the Commissioner as the case may be, as stated in section 133 of the Act. It is, therefore, open to the appellants to contend even after the dismissal of their earlier petition that they are entitled to the limited exemption granted by the order of 1936, generally in favour of a number of sugar factories in several municipal areas. The decision of the High Court of Allahabad in Vir Singh Ors. v. Municipal Board Anr. also has no bearing on this question. The next question is whether the nature of the tax levied under clause (viii) of section 128(1) of the Act has undergone any change after the commencement of the Constitution. The said clause has not been materially amended after the commencement of the Constitution. While it formerly read as 'an octroi on goods or animals brought within the municipality for consumption or use therein' now it reads as 'an octroi on goods or animals brought within the municipality for consumption, use or sale therein' by reason of the addition of the word 'sale' by an amending Act passed subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates of tax imposed by the Municipal Board with the sanction of the Government under section 133 which are totally inconsistent with the exemption granted earlier under section 157(3) the exemption would cease, in the instant case we do not find any such irreconcilable inconsistency between the notification published in 1960 and the order of exemption made in the year 1936 which is in respect of a number of municipalities. While under the notification of 1960 octroi is payable on the import of sugarcane into the municipal limits for purposes of sale, use or consumption, by virtue of the order made in 1936 under section 157(3) sugarcane brought by rail and delivered at the railway siding inside the factory premises alone is exempted from the levy of octroi. Sugarcane brought by other means of transport would be governed by the notification issued in 1960. It is worthy of note that there is no provision in the notification of 1960 to the effect that the said exemption is either withdrawn or that sugarcane brought by rail would be taxable. The order of exemption does not say that it relates to a particular tax levied under a specific notification issued by a particular Municipal Board ..... X X X X Extracts X X X X X X X X Extracts X X X X
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