# 196# March 3 IfM Town Mu tn,.I COlflMltltt' v. a-cfNllllN

- **Citation:** [1964] 6 S.C.R. 947
- **Court:** Supreme Court of India
- **Decided:** 1961-03-18
- **Case number:** Civil Appeal No. 598 of 1962
- **Bench:** P. B. Gajendragadicar, K. N. Wanchoo, K. c. DAS GUPTA, J.C. Shah, N. Rajagopala Ayyangar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/196-march-3-ifm-town-mu-tn-i-colflmltltt-v-a-cfnlllln-3234
- **Pages:** 15

## Headnote

Terminal Tax-Imposition of ttrminal tax by Municipality on silver ond
•ilvtr i•w•ll•ry, gold and told i•w•ll•ry and pr.cioiu llon.. In
1960-Th•" tax" not l<vi•d b•for.
by Municipality-Wh•lhtr
1aved by Art. 277 of the COMtitution-''Continut to bt levied and
to b• applitd to th• 111m• purposd'-Mtaning of--C.P. and Btrar
Municipalititt Act, 1922, •· 55-Gov•rnmtnt of InJia Act, 1935, 1.
143(2)--ColUlitutlon of India, Art. 277.
'
196#
St•l1 of Madra3
"·
D. Nam°'iwrfo
Mudaliar
Shah J.
196#
March 3
IfM
Town Mu..tn,.I
COlflMltltt'
v.
.
a-cfNllllN
SUPREME COURT REPORTS
A terminal tu oa 1ood1 imported by road or rail w11 imposed by
the AmraTati Municipality by virtue of a notification dated August 10,
1916. This notification exempted silver, bullion and coins from
th•
operation of this tax. When terminal taxes on 1oods imported by rail
were assigned exclusively lo the Federal Centre under the Government
of India Act. 1935. the municipality was authorised by s. 143 to con~
tinue lo levy the terminal taxeo which were actually levied before the
enforcement of the Act. Likewise, the terminal taxes imposed by the
pre-Constitution notification were allowed to be lnied and collected even
after the Constitution came into force by virtue of Art. 277 of the
Constitution. In 1960, the Municipality levied terminal taxes on three
new items, v;z., sill'er and silver jewellery, gold and' gold jewellery and
precious stonea.
In a writ petition filed under Art. 226 of the Constitution, the validity of the newly imposed terminal tax was challengell by the respondent
who was carrying on business, within the limits of the Municipality, in
gold, silYer and precious stones on the ground of legislative incompetence.
The writ petition was granted by the High CofJrt and the appellant came
to this court after obtainina a certificate of fitness from the Hiah Court.
Dismissing . the appeal:
·Held: The newly imposed terminal taxes on silver and silver jewellery,
gold and gold jewellery and precious stones had never been imposed
by the Municipality and hence it could not be said that those were
"being lawfully levied" by the Municipality and "•pplied to the same
purposes" before the commencement of the Constitution a! required by
Art. 277 of the Constitution. Ari. 277 was not intended to confer an
unlimited legislative power to impose what in effect were new taxes,
though of the same type or nature as existed before the Constitution.
Rama Krishna Ramanath v. The Janpad Sabha, Gandia, f1962]
Supp. 3 S.C.R. 70 and Chutti/al v. Bagmal and Ba/wantrai, l.L.R. [1956)
M.B. 339. referred to.

## Text

6 S.C.R.
SUPREME COURT REPORTS
947
without taking into consideration the value of non-agricultural improvements made after that date, must be regarded
as invalid.
We are not called upon to express any opinion on the
question whether the power reserved under s. 17 of the Land
Acquisition Act as amended by s. 2 of Madras Act XI of
. 1953 to take possession of lands under the emergency clause
for the purpose of working lignite mines in the areas to
which the Madras Lignite (Acquisition of Land) Act, 1953,
extends is invalid.
No argument has been advanced by
either side before us on this question.
Nor was the High
Court called upon to consider the validity of that provision.
The appeals therefore fail and are dismissed.
The
respondents in this group of appeals, except in appeal No. 11
of 1963. have not appeared in this Court.
Therefore in
appeal No. I 1 of 1963 alone, the State of Madras will pay
the costs of the respondent. There will be no order as to
costs in other appeals.
Appeals dismissed.
THE TOWN MUNICIPAL COMMITTEE, AMRAVATI
I'.
RAMCHANDRA VASUDEO CHIMOTE AND
ANOTHER
(P. B. GAJENDRAGADICAR, C.J., K. N. WANCHOO, K. c. DAS
GUPTA, J.C. SHAH AND N. RAJAGOPALA AYYANGAR, JJ.)
Terminal Tax-Imposition of ttrminal tax by Municipality on silver ond
•ilvtr i•w•ll•ry, gold and told i•w•ll•ry and pr.cioiu llon.. In
1960-Th•" tax" not l<vi•d b•for.
by Municipality-Wh•lhtr
1aved by Art. 277 of the COMtitution-''Continut to bt levied and
to b• applitd to th• 111m• purposd'-Mtaning of--C.P. and Btrar
Municipalititt Act, 1922, •· 55-Gov•rnmtnt of InJia Act, 1935, 1.
143(2)--ColUlitutlon of India, Art. 277.
'
196#
St•l1 of Madra3
"·
D. Nam°'iwrfo
Mudaliar
Shah J.
196#
March 3
IfM
Town Mu..tn,.I
COlflMltltt'
v.
.
a-cfNllllN
SUPREME COURT REPORTS
A terminal tu oa 1ood1 imported by road or rail w11 imposed by
the AmraTati Municipality by virtue of a notification dated August 10,
1916. This notification exempted silver, bullion and coins from
th•
operation of this tax. When terminal taxes on 1oods imported by rail
were assigned exclusively lo the Federal Centre under the Government
of India Act. 1935. the municipality was authorised by s. 143 to con~
tinue lo levy the terminal taxeo which were actually levied before the
enforcement of the Act. Likewise, the terminal taxes imposed by the
pre-Constitution notification were allowed to be lnied and collected even
after the Constitution came into force by virtue of Art. 277 of the
Constitution. In 1960, the Municipality levied terminal taxes on three
new items, v;z., sill'er and silver jewellery, gold and' gold jewellery and
precious stonea.
In a writ petition filed under Art. 226 of the Constitution, the validity of the newly imposed terminal tax was challengell by the respondent
who was carrying on business, within the limits of the Municipality, in
gold, silYer and precious stones on the ground of legislative incompetence.
The writ petition was granted by the High CofJrt and the appellant came
to this court after obtainina a certificate of fitness from the Hiah Court.
Dismissing . the appeal:
·Held: The newly imposed terminal taxes on silver and silver jewellery,
gold and gold jewellery and precious stones had never been imposed
by the Municipality and hence it could not be said that those were
"being lawfully levied" by the Municipality and "•pplied to the same
purposes" before the commencement of the Constitution a! required by
Art. 277 of the Constitution. Ari. 277 was not intended to confer an
unlimited legislative power to impose what in effect were new taxes,
though of the same type or nature as existed before the Constitution.
Rama Krishna Ramanath v. The Janpad Sabha, Gandia, f1962]
Supp. 3 S.C.R. 70 and Chutti/al v. Bagmal and Ba/wantrai, l.L.R. [1956)
M.B. 339. referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 598
of 1962.
Appeal from the judgment and order dated March 18,
1961 of the Maharashtra High Court (Nagpur Bench) at
Nagpur in Special Civil Application No. 30 of 1960.
WITH
Civil Appeals Nos. 695 and 700 of 1962.
Appeals from the judgment and orders dated October
12, 1961 and March 18, 1961 of the Madhya Pradesh High
Court in Misc. Petitions Nos. 122 of 1961 and 319 of t 960
,
respectively,
'
6 S.C.R.
SUPREME COURT REPORTS
949
1961
M. C. Setalvad and S. Shaukat Hussain, for the appellant
_
(in C.A. No. 598/62).
Terrn
MunlcitMI
J
Committn
W. S. Barlingay and A. G. Ratnaparkhi, for respondent
No. 1 (in C.A. No. 598 of 1962).
S. G. Patwardhan, Udai Pratap Singh and M. S. Gupta,
for the appellant (in C.A. No. 695/62).
·
A. N. Goyal, for respondent No. 1 (in C.A. No. 695/
62).
I. N. Shroff, for respondent No. 2 (in C.A. No. 695/
62).
M. C. Setalvad and M. S. Gupta, for the appellant (in
C.A. No. 700/62).
G. S. Pathak, I. B. Dadachan1i, 0. C. Mathur and
Ravinder Narain, for the respondents Nos. 1 to 4 and 6 to 9
(in C.A. No. 700/62).
I. N. Shroff, for respondent No. 10 (in C.A. No. 700/
62).
March 3, 1964. The Judgment of the Court was
delivered by
A YYANGAR, J.-These three appeals which are on
A11•nftll 1.
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. & Berar
Municipalities Act, 1922, subsequent to the coming into
force of the Constitution, and so have been heard together.
Civil Appeal 598 of 1962 is an appeal from the High
Court of Bombay at Nagpur and has been filed by the
Municipal Committee of Amravati against a decision of the
High Court allowing the 1st respondent's petition under
Arts. 226 and 227 of the Constitution. The Municipal
Committee of Amravati has been established under the
950
SUPREME COURT REPORTS
19fl
C.P. & Berar Municipalities Act, 1922 (C.P. & Berar Act Il
r ... 11 -;j,;nlclpal of 1922) hc:reinafter referred to as the Act.
Chapter IX
c_,.,,,.,
of the Acf deals with the imposition, assessment and
111...eh'..-
collection of 'taxes which might be imposed by the Municipal
Committee. ' Section 66 specifies the taxes which, subject
Ayy.,,..r /,
to the provjsions of the Chapter, the Committee may from
time to tinie 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 tho 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 consider&•
tion of the question arising in the appeal are sub-els. (2),
(3) and ( 4) of s. 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 subsection ( 1) shall be subject to the previmL'
sanction of the State Government.
( 4 J Subject to the control of the State Government,
a committee may abolish any tax already
imposed and specified in sub-section ( 1) clauses
(a) to (m) inclusive, or may, within the limits
imposed under sub-section ( 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 anv tax
or a reduction in the amount or rate thereof
shall be subject to the previous sanction of. the
State Government."
6 S.C.R.
SUPREME COURT REPORTS
951
Section 67 lays down the procedure for the imposition of
""
taxes and it provides :
Tn11 MIUlid,.,
Commiltu
"67. (l) A committee may, at a special meeting,
•·
pass a resolution to propose the imposition of
Riunclrandta
any tax under section 66.
"'".,,,,.,. 1.
(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.
(3) ................... .
(4)
(5)
(6)
(7)
(8)
....................
The State Government, on receiving sue~ 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.
No modification affecting the substance shall
be made under sub-section ( S), unless and
until the modification has been accepted by the
committee at a special meeting.
A notification of the imposition of a 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. (18 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 tho
amount or rate thereof.
(2) .......•........
T »rn ,14uniclpal
Gomtnitue
v. '
l!umchandra
Ayyan1ar J.
952
SUPREME COURT REPORTS
[r964J
( 3) If the proposal is to increase the amount or
rate of any tax, the committee shall pttblish, in
the manner prescribed by rules made under
this Act, a notice showing in detail the effects
(4)
(5)
( 6)
(7)
(8)
(9)
of the proposal.
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.
The committee shall take the proposal and all
objections received thereto Jinto consideration
at a special meeting, and may modify the proposals as it may think fit, and may pass a final
resolution on the proposal.
If the proposal requires the previous sanction
of the State Government under the provisions
of section 66, sub-section ( 4) or sub-section
(5), the committee shall forward it to the State
Government and it shall be dealt whh in the
manner provided in section 67, sub-sections
(4), (5) and (6).
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 committ~ was
governed by the Berar Municipal Law of 1886 which wa;
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 !ffiposed 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
6 S.C.R.
SUPREME COURT REPORTS
953
19M
imposed was confined to goods imported into or exported
out of the Municipal area by rail. The notification of June
1921 was amended from ume to time by other items being
added and the rates being mcreased but no change was
effected in the taxes imposed after 1936. Under the scheme
of the distribution of taxing powers between the provinces
and rhe Central Government under the Government of India
Act, 1935 terminal taxes on goods carried by rail were
assigned i;xdusively to the Federal Centre under item 53
of List 1 to Sch. VII, but the validity of the levy and
coilect10n of the terminal tax in force, before the 1st April,
1937 was continued by s. 14J of the Government of India
Act, 1935 and it was by virtue of this continuance that
the;e taxes were continued to be levied after April 1, 1937.
Their continuance after January 26, 1950 when after the
repe;ii oi the Government of India Act, 1935, the Constitution c3me 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 .!he same terms as s. 143 of
the Government of India Act, 1935.
The taxes imposed
by the pre-Constitution notification could, therefore, be
legaLy levied and collected even after the Constitution came
into force.
Town
Munici~a!·
Com11'11tte~
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
/
Y.
1lwn•cha11dra
Anangar J,
954
SUPREME COURT REPORTS
(1964)
1961
on the ground of legislative incompetency which had not
·row•
M_u"'"""1 been saved by Article 277 of the Constitution, in a petition
Commllt••
under Article 226. The learned Judges of the High Court
'¥ ,,
Y.
b
Rt.mchandrt1
y a majority accepted the contention raised by the respondAyyonpr J.
ent 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.
It is common ground that the right to levy a terminal
tax is now vested in the Union Parliament under Entry 89
of the Union List which reads :
"Terminal taxes on goods or passengers carried by
railway, sea or air; taxes on railway fares and
freights",
so that if the levy by the appellant of the terminal tax on
the newly added items, and the same principle would apply
to an increase in the rate of the duty, had to rest on the
independent taxing power of the State, the same would have
to be struck down for want of legislative competence.
Besides it is necessary to add that whereas under the
notifications in force prior to 1st April 1937-when Part III
of the Government of India Act was brought into force,
articles importeg into or exported out of the municipal area
by road were not subject to the tax, and that state of affairs
continued till long after the Constitution came into force,
a terminal tax was imposed by the impugned notification
of December 1959 on goods imported or exported by roada tax which it was not open to the State to impose even
with the aid of Art. 277. But ignoring this feature of the
impugned notification, insofar as it brought in goods carried
by road within the scope of the terminal tax, it is admitted
that the validity of the imposition cannot be justified if it
was a fresh imposition. What is, however, urged in support
of the validity of the imposition is that the same is saved by
Art. 277 which mos:
"277. Any taxes, duties, cesses or fees which. immediately before
tl>e
commencement of this
Constitution, were being lawfully levied by the
<i S.C.R.
SUPREME COURT REPORTS
955
Government of any State or by any municipality or other local authority or body for the TawN MuNfl'i,.I
purposes of the State, municipality, district or
Calltlft111u
other local area may, notwithstanding that those
bM<'tlldra
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."
If learned Counsel for the appellant is right in his contention
that the impugned tax which he is now seeking to sustain,
was the tax which "was being lawfully levied" by the
municipality before the commencement of the Constitution
he would certainly be well-founded in the submission that
the fact that the terminal taxes are under the distribution
<>f taxing powers under the Constitution assigned to the
Union would make no difference for the valid continuance
of the levy.
The question, therefore, is whether this was
1he tax which was being levied by the municipal authority
before the Constitution and for whose continuance the
Article provides.
The first submission of Mr. Setalvad for the appellants
was that this condition would be satisfied whenever a
terminal tax (without reference either to the article on
which it was Iev'ed or the rate) was being lawfully levied
by the municipality prior to the commencement of the
Constitution and as in this case admittedly a terminal tax
was being levied on certain articles that condition was
satisfied.
His argument was that the words 'tax or duty'
in the opening part of Art. 277 should be read as meaning
a tax or duty under a' specified legislative Entry, and if such
a tax or duty was being levied before the commencement
of the Constitution other duties of the same type or falling
within the same category might be imposed after the
Constitution notwithstanding that such duties or taxes were
mentioned in the Union Li<t by reason of the words "shall
continue to be levied".
Secondly, he said that the word
'levy' meant not merely the ascertainment, i.e., assessment
\
and collection of the tax hut included its imposition, i.e.,
also the charging a,11d i{ that exllression were understood in
that wide sense it would comprehend a case where other
196'
Town M11nu·ip4il
Comm1tt1•
••
Rmnchandra
Ayyang4r 1.
y56
SUPREME COURT REPORTS
[1964]
items than those originally specified were brought into the
fold of the taxing provision.
The learned Attorney-General
who appeared for the State and supported Mr. Setalvad,
however, went a step further and submitted that it was
not even necessary that a terminal tax should be actually
imposed and was being collected prior to the Constitution,
but that it was sufficient if the State enactment had vested
in the municipality a power to levy such a tax. The argument of the learned Attorney-General has to be rejected as
lacking any substance, for on no construction, wide or
narrow, of the expression 'levy' in the rphrase 'continue to
be levied' can such a case be comprehended.
From the·
mere fact that a State enactment has authorised a municipa:ity to levy a tax it cannot be said that a tax which had
never been imposed was "being lawfully levied" by the
municipality, not to speak of the tax etc. collected being
"applied to the same purposes" before the commencement
of the Constitution as contemplated by the concluding
portion of the Article.
Coming next to what one might term the narrower
submission of Mr. Setalvad we do not find it possible to
agree with it either. His first submission may be expanded
thus : The expression "taxes, duties, cesses" with which
Art. 277 opens, ha-s to be read in the context of Part XU
in which the Article occurs and so read has to be understood as referring to the class or category of taxes which
were levied and collected by the State, municipality etc.
before the commencement of the Constitution.
In other
words, the reference here is to the entries in the legislative
lists which permit such taxes to be levied, and so read and
taken in conjunction with the circumstance that the Article
is one designed to prevent the dislocation of the finances
of the State or other local authorities, the terms of the
Article would be satisfied and the legislative power to
continue to levy the tax would be conferred "notwithstanding that the tax, etc. are mentioned in the Union List". This
argument, in our opinion, proceeds on ignoring the terms
.....
of Art. 277.
If, as is admitted, the sole object sought to
I
be achieved by this provision for "continuance" is to avoid
dislocation of the finances of the State and local authorities,
'
6 S.C.R.
SUPREME COURT REPORTS
957
by depriving them of the revenues which they were deriving
at the commencement of the Constitution, it would mean
that the intention was to permit the existing range of taxes
to be continued, not that the Article conferred on them
authority to expand the range of their taxation by subjecting
new items to taxation or by increasing the rates of duty.
This consideration apart, it is not possible to read the words
"notwithstanding that the taxes etc. are mentioned in the
Union List" as conferring an unlimited legislative power to
impose what in effect the argument involves new taxes,
thougl1 of the same type or nature as existed before the
Constitution.
The question of the proper construction of
s. 143(2) of the Government of India Act, 1935 which is
for all practical purposes identical with Art. 277 came up
for consideration before this Court in Rama Krishna
RamanaJh v. The Janpad Sabha, Gandia('). There it was
submitted on behalf of the respondent-local authority that
by virtue of s. 143(2) of the Government of India Act
the Provincial Legislature was vested with a plenary power
to legislate in respect of every tax which was being lawfully
levied by local authorities prior to the commencement of
the Government of J ndia Act.
This Court rejected that
contention and observed :
"Section 143 ( 2) which is a saving clause and
obviously designed to prevent a dislocation of
the finances of Local Governments and of local
authorities by reason of the coming into force
of the provisions of the Government of India
Act distributing heads of taxation on lines
different from those which prevailed before that
date, cannot be construed as one conferring a
plenary power to legislate on those topics till
such time as the Central Legislature intervened.
Such a construction would necessarily involve
a power in the Provincial Legislature to enhance
the rates of taxation-a result we must say
from which Mr. Sanyal did not shrink, but
having regard to the language of the section
(I) [1962) Supp. 3 S.C.R. 70,
Tow•
Municipal
Committee
"·
Ramc/candra
A.yyan1u I.
1961
Town Municip4d
Committte
v.
Rmnchandra
.Ayyangar /,
SUPREME COURT REPORTS
(rg64)
providing for a mere continuity and its manifest
purpose this construction must be rejected."
No doubt, even the words "continue to be levied and
to be applied to the same purposes" might import and imply
a limited legislative power i!1 the State. The scope of this
limited power was also examined by this Court in the same
case and it was stated :
"In the context the relevant words of the sub-section
could only mean 'may continue to be levied if
so desired by the Provincial Legislatur·e• which
is indicated by or is implicit in the use of the
expression 'may' in the clause 'mav be continued until provision to the contrary is made
by the Federal Legislature.' This would therefore ipOsit a limited legislative power ~n the
Province to indicate or express a desire to
continue or not to continue the levy. If in the
exercise of this limited power the Province
desires to discontinue the tax and effects a
repeal of the relevant statute the repeal would
be effective.
Of course, in the absence of
legislation indicating a desire to discontinue
the tax, the effect of the provision of the
Constitution would be to enable the continuance of the power to levy the tax but this does
not alter the fact that the provision by its
implication confers a limited legislative power
to desire or not to desire the continuance of
the levy subject to the overriding power of the
Central Legislature to, put an end to its continuance and it is on the basis of the existence
of this limited legislative power that the right
of the Provincial Legislature to repeal the
taxation provision under the Act of 1920 could
be rested.
Suppose for instance, a Provincial
Legislature desires the continuance of the tax
but considers the rate too high and wishes it
to be reduced and passes an enactment for that
purpose, it cannot be that the legislation is
incompetent and. that the State Government
'
f
f
. .
6 S.C.R.
SUPREME COURT REPORTS
959
must permit the local authority to levy tax at
the same rate as prevailed on April 1, 1937
if the latter desired the continuance of the tax.
If such a legislation were enacted to achieve
a reduction of the rate of the duty, its legis·
lative competence must obviously be traceable
to the power contained in words 'may continue
to be levied' in s. 143(2) of the Government
of India Act."
Dealing next with the import ot the words 'may continue
to be levied' the same was summarised in these terms :
( 1) The tax must be one which was lawfully levied by a
local authority for the purpose of a local area, ( 2) the
identity of the body that collects the tax, the area for whose
benefit the tax is to be utilised and the purposes for which
the utilization is to take place continue to be the same, and
( 3) the rate of the tax is not enhanced nor its incidence in
any manner altered, so that it continues to be the same tax.
It is obvious that if these tests were applied the submission
on behalf of the appellant cannot be accepted.
But authority apart, we cannot, even if this decision
were put aside, accede to the construction for which
Mr. Setalvad contends. lt is not disputed that in ultimate
analysis the answer to the question raised should turn on
the meaning of the word 'levied' in the phrase 'continue to
be levied' which is the operative word conferring a power.
Mr. Setalvad submits that 'levied' is a word of wide and
varying import and includes in its denotation not merely
the actual coilection of the tax, but the imposition in the
sense of the creation of the charge by the statute, as well
as the ascertainment of the amount due from the tax payer.
Mr. Setalvad is right, for before a tax can be collected from
any tax payer, its quantum must be ascertained and assessed,
and for this to be lawfully done there must be legislative
sanction-in other words an imposition of the chargebecause it is the charge under the Statute that is quantified
by the authorities acting under the taxing enactment. The
acceptance of this construction however does not lead to
the result desired, for what can "continue to be levied" is
what "was being lawfully levied" in the same sense of the
1961
T""'" Munidl"'l'
Committt~
Y.
Ramchandra
A.yyangar /,
SUPREME COURT REPORTS
196~
word "levied", prior to the Constitution. Admittedly, there
Town Muntci,ol was no imposition of the charge now sought to be recovered
Committ..
prior to the Constitution, i.e., the Act did not impose the
P.amc";;,.ndr•
charge by s. 66 but merely enabled the Municipal Committee by appropriate procedure to impose the tax. If, of
A.yyangu /,
course, this power had been availed of and a charge had
been imposed it would be a different matter.
So long as
the Municipal Committee did not pass the necessary resolutions and impose the tax there was no charge levied on
the commodity, so that it could not be said that the tax "was
being lawfully levied" before the commencement of the
Constitution. The words "was being lawfully levied''
obviously mean "was actually levied" and it would not be
sufficient to satisfy those words that the Municipal authority
could lawfully levy the tax, but had not availed itself of that
power.
There is another circumstance to which also i;ofere.nce
-
1
may be made. The last portion of Art. 277 uses the words
"continue to be levied" and "to be applied to the same
purposes''.
By reason of this collocation between the concept of the levy and of application of the proceeds of the
tax. the Constitution makers obviously intended the word
'levy' to be understood as including the collection of the
tax, for it is only when a tax is collected· that any question
of its application to a particular purpose would arise. It
is apparent that if the word "levied" were understood in
the sense which Mr. Setalvad contends, there could be no
"application" of the proceeds of the tax to the same purposes as at the commencement of the Constitution.
For
ex concessis at that date there were no proceeds to be applied.
In this connection learned Counsel for the respondent
referred us to the decision in Chuttilal v. Bagmal and
Balwantrai (1) where the relationship between the levy and
the application of the tax has been referred to as an aid to
the construction of the expression "continue to be levied"
in Art. 277. We find ourselves in agreement with the views
there expressed.
The decision of the High Court is, therefore, correct and
'.he appeal fails.
;'
(I) I.LR. [1956! Madhya Bharat 339.
..
6 S.C.R.
SUPREME COURt REPORTS
9"!
CIVIL APPEAL No. 695 OF 1962.
In this appeal a notificatiolt was issued under sub-ss. (5)
and (7) of s. 67 of the C.P. & Berar Municipalities Act,
1922, on December 9, 1960 imposing a terminal tax on
gun-powder imported into or exported out of the munici!lal
area by rail. It is admitted that previous to the Constitution
there was no tax imposed on gun-powder.
The position
in this case is, therefore, identical with that in Civil Appeal
No. 598 of 1962 which we have just disposed of and it
follows that this appeal also fails and should be dismisseJ.
CIVIL APPEAL No. 700 OF 1962.
In Civil Appeal 700 of 1962 the original notification
imposing terminal taxes in respect of goods coming into or
going out of the municipal area by rail was one dated March
17, 1926 which was operative from April 1, 1926.
This
was amended by a notification under s. 67(5) of the C.P.
Berar Municipal Act, 1922 dated Septetnbet 23, 1960 by
which new articles were inci uded to the list of items imported into or exported from the municipal area by rail subject
to the terminal tax and besides the rate of tax on the
previously existing items was also increased.
It was this
inclusion of new articles for the levy of terminal tax by the
notification of 1960 and the increase in the rate of duty
on articles already subjected to tax, that was impugned in
the writ petition filed by the respondent before the High
Court.
On our reasoning on the basis of which we have
dismissed Civil Appeal 598 of 1962 it would follow that
this appeal should also fail. We can see no difference
between the inclusion of new items and the increase in the
rate of duty because if there is an increase it would not
be a mere continuance of the duty which had been lawfully
levied which is the only purpose and function of Art. 217.
The judgment of the High Court allowing the writ petition
of the respondent was therefore correct.
In the result, all the three appeals fail and are dismissed
with costs of the contesting respondent or respondents in
each appeal.
Appeals dismissed.
134-159 S. C.-61
l!llH
Town M......,
Commi,,_.
"·
Ramchandna
AyY••gar I.
.I