TMI Blog2001 (3) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to which the actual levy is to be made and collected. Therefore, the mere stipulation of plurality of rates in respect of some or the other of the commodities/goods under different classified groups for different purposes by itself will not render it to be dubbed or castigated as "double taxation" for spearheading a challenge on them. The notification under consideration cannot, in our view, be said to involve the imposition of any double tax and the High Court has gone wrong in proceeding upon such an erroneous assumption and declaring thereby the levy for dharmada purposes to be bad and illegal. Appeal allowed. - Civil Appeal No. 4152-4153 of 1991, 2994 of 1984, 2842 of 1989, - - - Dated:- 2-3-2001 - Judge(s) : V. N. KHARE., DORAISWAMY RAJU Senior Advocates: Dr. A.M. Singhvi and Shanti Bhushan, for the parties. Other Advocates: Sushil Kumar Jain, A.P. Dhamija, Ms. Anjali Doshi, Saif Mahmood, Prashant Bhushan, Sanjeev Kapoor, Narinder Kr. Verma, P.S. Sudheer and K.J. John, for the parties. Additional Solicitor-General of India: Altaf Ahmad, for the parties. JUDGMENT The judgment of the court was delivered by DORAISWAMY RAJU J.--- These appeals involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification in the Official Gazette and in such manner as is laid down in this Act and as may be provided in the rules made by the State Government in this behalf, the following taxes, namely :--- "(1). . . (2) An octroi on goods and animals brought within the limits of the municipality for consumption, use or sale therein." Coming to the notifications issued stipulating the rates, it may be stated at this stage that after the coming into force of the Constitution of India, several notifications came to be issued from time to time such as, i.e., Notification No. F.2(150)LSG/50, dated August 21, 1950 ; Notification published in the Official Gazette dated December 17, 1951 ; Notification No. F. 150LSG/60, dated February 1, 1962, successively one after the other, in supersession of the earlier one. It is seen that subsequently the Government has issued another notification dated May 13, 1968, under section 104(2) of the Act authorising the Municipal Council, Kota, to levy octroi under the three sub-heads for different and specific purpose and objects, namely, (1) octroi proper ; (2) dharmada ; and (3) nirkhi, as follows : "Rajasthan Gazette, Extraordinary, Jaipur, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits of Kota and for a consequential permanent injunction to that effect. The sum and substance of the claim of the respondent-company was that section 104(2) enabled the State Government to authorise and as a consequence thereof, empower the appellant to levy the octroi tax, the kind of which is envisaged in entry 52 of List II of the Seventh Schedule to the Constitution of India and that the notification dated May 13, 1968, in so far as it empowered the appellant to levy and collect dharmada is illegal, unauthorised, unacceptable, unreasonable and, therefore, null and void. In justification of the said plea, it was urged that there is no provision in any of the entries contained in List II of the Seventh Schedule to the Constitution for imposing dharmada tax and in the absence of any specific law made by the State Legislature, there can be no legal basis for the levy of dharmada tax by the municipality. Though, as noticed earlier, in the judgment of the Division Bench, the English translation of the notification issued in 1962 has been extracted, reference is also made in the plaint to the notification dated May 13, 1968, with a brief mention of the contents thereof by stating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmada tax" and, therefore, the State Government could not have authorised the appellant-municipality to collect dharmada on the entry of goods within the municipal limits of Kota. Though the Division Bench while sustaining the claim of the company therein not only issued a per petual injunction restraining the appellant from levying and collecting any dharmada tax on the goods brought by the company within the limits of the Municipal Council, but also granted a decree, though not specifically prayed and sought for as required in law, directing refund of collections made, the learned single judge in the case dealt with by him though upheld the claim for prohibitory relief, yet applied the doctrine of undue enrichment and on the view that the respondent-companies have already realised the dharmada tax paid by passing over the same to the customer, the company also ought not to be allowed to retain the same and consequently instead of ordering refund to the company directed refund of the amounts collected (within six months) to the State of Rajasthan with a further direction as to the manner in which such amount has to be utilised by the State. It is in such circumstances these appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea of discretion and latitude in fashioning its own scheme, pattern, method or class of fiscal measures designed in the best possible manner that suits its financial and budgetary exigencies and necessities. As long as, in pith and substance, the levy satisfies the character of octroi, it is asserted, how and in what form and manner and for what purposes the octroi or portions of the octroi are collected or utilised should be left to the discretion of the State. It is also contended that as a matter of principle, there is nothing illegal or unlawful and unconstitutional. even to levy more than one tax or rates of tax on the same taxable event as long as all such levies or rates put together is not shown or substantiated to be either expropriatory or irrational. Dr. A. M. Singhvi, learned senior counsel for the appellant in C. A. No. 4152 of 1991, apart from adopting the submissions of the other senior counsel, noticed supra, further contended that as long as the levy satisfied the ingredients of the tax authorised to be imposed, it is irrelevant as to by what name the same is called or identified and that the dharmada levy in question having had its origin in pre-constitution law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to be levied over and above, by a separate name cannot also be called octroi. So far as the relief of refund granted is concerned, it has been contended for the respondents that there is no material on record to show that they have passed on the tax to the consumers and that a levy, which has been held to be unauthorised and illegal, if found to have been also collected by a public authority, has to be refunded to the person who paid it under the coercion of law. Reference has also been made to the interim orders passed by this court during the pendency of the appeals, granting leave to the appellant to recover from the companies, half of the dharmada tax due with effect from the date of the High Court judgment with a further condition that in the event of the appeal being dismissed the amount recovered should be refunded to the company with interest at 12 per cent. per annum. Consequently, it is contended that the appellants must be made to refund the tax collected in terms of the orders of this court once their claims in the appeal fail and no plea based either on the "doctrine of undue enrichment" or the principle of "prospective over-ruling" could be permitted to be even rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to consumption or use. This is how the editors describe octrois : 'As compared with the facilities of the National Government the possibilities of raising revenue by local bodies are quite limited. All forms of indirect taxation are practically closed to local authorities. They are unable to levy customs duties, although they may collect the so-called octrois ; that is, duties levied on goods entering town.' 15. It will be noticed that in the Government of India Act 'octroi' was named but not described and now the Constitution avoids the word 'octroi', as did the Government of India Act, 1935, before, and gives a description. In the Boroughs Act the definition of 'octroi' includes terminal tax. Terminal tax, as the Indian Statutory Commission points out, formerly meant in Indian fiscal terminology a tax which was levied at railway stations and collected by the railway administration on all goods imported or exported from the station. It was also collected from passengers in some municipalities. We also learn from the report that on the recommendation of a committee appointed in 1908 terminal tax took the place of octroi in a large number of municipalities at first in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 58 of List I, which reads as follows : '58. Terminal taxes on goods or passengers carried by railway or air.' At that time, it was suggested by Sir Walter Leyton that both octrois and terminal taxes should be provincial subjects and that it would perhaps be possible to fuse the two. The joint Committee, however, recommended otherwise and terminal taxes were separated from octrois and included in the Central list. The proceeds of the terminal taxes, however, were to be distributed among the provinces. In allocating 'octrois' to the provinces, the word itself was avoided because terminal taxes are also octroi in a sense and instead a description of the tax was mentioned in entry No. 49, which has been quoted already, and which read 'cesses on the entry of goods into a local area for consumption, use or sale'. This Scheme has been repeated in the Constitution with the difference that the entry relative to terminal tax now reads 'terminal taxes on goods and passengers carried by railway, sea or air', and the word 'taxes' replaced the word Icesses' in the entry relative to octrois. 19. The history of these two taxes clearly shows that while terminal taxes were a kind of octroi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... too in a collateral manner, in a bare suit for injunction. Entry 52 of List II of the Seventh Schedule to the Constitution of India enables the State Legislatures to enact a law providing for the levy and collection of taxes on the entry of goods into a local area for consumption, use or sale therein otherwise known as octroi and/or authorise the local authorities concerned to levy and collect the same. Section 104(2) of the Act enables every municipal board to levy at such rate and from such date as the State Government directs by notification in the Official Gazette and in such manner as provided in the Act and the Rules to be made by the Government an octroi on goods and animals brought within the limits of the municipality for consumption, use or sale therein. The levy of tax envisaged under section 104 as a whole, has been classified as "obligatory tax" with a duty to levy, once notified by the Government, unless specifically got exempted from doing so from the Government by means of a notification therefor under the proviso thereto. The notification under challenge issued in the undoubted and undisputed exercise of powers under section 104(2) of the Act provides a schedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd collection from the users of rubber, so long as the character of the duty as excise duty is not lost and the incidence of tax remained to be on the production or manufacture of goods. Likewise, once the Legislature is found to possess the required legislative competence to enact the law imposing the tax, the limits of that competence cannot be judged further by the form or manner in which that power is exercised. In Leventhal (Morris) v. David Jones Ltd., AIR 1930 PC 129, the question arose as to the power of the Legislature to impose "bridge tax", when the power to legislate was really in respect of "tax on land". It was held therein as follows : "The appellants' contention that though directly imposed by the Legislature, the bridge tax is not a land tax, was supported by argument founded in particular on two manifest facts. The bridge tax does not extend to land generally throughout New South Wales, but to a limited area comprising the city of Sydney and certain specified shires, and the purpose of the tax is not that of providing the public revenue for the common purposes of the State but of providing funds for a particular scheme of betterment. No authority was vouched for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Governor-General in Council v. Province of Madras, AIR 1945 PC 98, it is not the name of the tax but its real nature, its 'pith and substance' as it has sometimes been said, which must determine into what category it falls." We affirm the statement of law thus made above to be correct and in our view it is not the nomenclature used or chosen to christen the levy that is really relevant or determinative of the real character or the nature of the levy, for the purpose of adjudging a challenge to the competency or the power and authority to legislate or impose a levy. What really has to be seen is the pith and substance or the real nature and character of the levy which has to be adjudged, with reference to the charge viz., the taxable event and the incidence of the levy. We are convinced on the indisputable facts on record that the levy sought to be imposed and recovered as "dharmada" being only on the goods brought within the municipal limits of Kota for consumption, use or sale therein the same in truth, reality and substance is only an "octroi" for the purpose of carrying out the several public charitable objects statutorily enjoined upon the municipal board and enumerated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amendment of section 23(5) by the Act of 1956. Nor is there any other enactment which interdicts such taxation. It is true that section 3 is the general charging section. Even if section 23(5) provides for the machinery for collection and recovery of the tax, once the Legislature has, in clear terms, indicated that the income of the firm can be taxed in accordance with the Finance Act of 1956 as also the income in the hands of the partners, the distinction between a charging and a machinery section is of no consequence. Both the sections have to be read together and construed harmoniously. It is significant that similar provisions have also been enacted in the Act of 1961. Sections 182 and 183 correspond substantially to section 23(5) except that the old section did not have a provision similar to sub-section (4) of section 182. After 1956, there fore, so far as registered firms are concerned the tax payable by the firm itself has to be assessed and the share of each partner in the income of the firm has to be included in his total income and assessed to tax accordingly. If any double taxation is involved the Legislature itself has, in express words, sanctioned it. It is not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the legislative enactment itself, the desirability or need otherwise to avoid such levies has been held to pertain to areas of political wisdom of policy making and adjusting of public finances of the State, and not for the law courts, though courts would unless there is clear and specific mandate of law in favour of such multiple levies more than once, in construing general statutory provisions lean in favour of an interpretation to avoid double taxation. So much are the principles or statement of law governing a challenge to any levy on the ground of double taxation. Now coming to the facts and circumstances of the cases before us, we find that the levy is specific, definite and positive in terms, with a definitely disclosed object leaving no room for any doubt or any exercise to clear such assumed doubts. We have carefully gone through the original notification in the vernacular published in the Gazette dated May 13, 1968, noticed supra, and we find that the rates of the levy under challenge have been notified as part and parcel of one and the same schedule to the said notification and not by any different or more than one schedule and that too by means of a simultaneous ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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