# ATLAS CYCLE INDUSTRIES LTD v. STATE OF HARYANA & ANR

- **Citation:** [1972] 1 S.C.R. 127
- **Court:** Supreme Court of India
- **Decided:** 1971-08-11
- **Case number:** Civil Appeal Nos. 1927 and 2222 of 1970
- **Bench:** S. M. S!Kri, A. N. Ray, D.G. Palekar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/atlas-cycle-industries-ltd-v-state-of-haryana-anr-5336
- **Pages:** 10

## Headnote

Punjab Municipality Act, 1911, s. 5 (4), 62 (10)--Notification imposing
octroi if became automatically applicable to new areas included in Mimicipa/ity by virtue of s. 5(4)-Notification, bye law difference bef1rep1.
Section 5 (4) of the Punjab Municipality Act, 1911 enacts: "when
any local area has been included in a municipality under sub-section
(3) of this section of this Act, and, except as the State Government may
otherwise by notification direct all rul<s, bye-laws, orders, diiections and
powers made, or conferred under this Act and in force throughout the
whole municipality at the time shall apply to such area."
By a notification the industrial area within which the appellants'
factory was situated was included within the municipality of Scnepat.
Thereafter, the respondent-municipality
purport<d
to impose, levy
and rollect
from the aprdlant cctroi. The <:fPelient filed a writ
petition in the High Court for restraining the municipality f1cm levying and collecting the octroi. The municipality relied upon the
provisions contained ins. 5 (4) of the Act in support of the contention
that the notification dated 3rd November 1942 issued m:der s. 62
(IO) .of the Act notifying the imposition of octroi within the octroi
limits of the Sonepat municipal limits became applicable to the areas
included. The High Court dismissed the petition.
It came to the
conclusion that by reason of the provisions contained in s. 5 ( 4) of the
Act the taxes would "automatically become leviable" to new areas
included in the municipal limits. Allowing the appeals,
HELD: The
High Court was wrong in holding that the municipality was competent to levy and collect octroi from the appellants
by reason of the provision contained ins. 5 (4) of the Act.
(i) Section 5 (4) of the Act speaks of rules, bye-laws, 01dw, d'J<ctions and powers and does not significantly, mention notification. The
Act speaks of notification ceasing to apply to excluded areas, whereas,
in the case of inclusion of areas the Act significantly omits any notification being applicable to such areas. The legislative intent is, therefore, unambiguous that notifications would not be applicable to an
included area on the strength of s. 5 (4). And s. 62 (10) of the Act
speaks of notification for the imposition of taxes and such a notification
is the statutory basis of the imposition and ltvy of tax. [133 HJ
H
(ii) The word 'notification' is not synonymous with rules, bye laws,
-orders, directions and powers. The power to issue notifications orders, rules or bye-laws refers to different and separate methods of expression of exercise of power under the statute. Bye-laws are entiiely
128
SUPREME COURT REPORTS
(1972] I S.C.R
different from notifications imposing tax ar.d the bye-l£ws fixing the
limits and prescribing the routes by which articles which are subject
to octroi may be imported obviously cannot be equated with notification of imposition of octroi. [134 C, G]
Bagalkot City Municipality v. Bcgalkot Cement Co., [1963] Supp.
A
l S.C.R. 710, distinguished.
Jl;

## Text

A
B
c
D
E
F
G
127
ATLAS CYCLE INDUSTRIES LTD.
v.
STATE OF HARYANA & ANR.
August 11, 1971
[S. M. S!KRI, C.J., A. N. RAY AND D.G. PALEKAR, JJ.]
Punjab Municipality Act, 1911, s. 5 (4), 62 (10)--Notification imposing
octroi if became automatically applicable to new areas included in Mimicipa/ity by virtue of s. 5(4)-Notification, bye law difference bef1rep1.
Section 5 (4) of the Punjab Municipality Act, 1911 enacts: "when
any local area has been included in a municipality under sub-section
(3) of this section of this Act, and, except as the State Government may
otherwise by notification direct all rul<s, bye-laws, orders, diiections and
powers made, or conferred under this Act and in force throughout the
whole municipality at the time shall apply to such area."
By a notification the industrial area within which the appellants'
factory was situated was included within the municipality of Scnepat.
Thereafter, the respondent-municipality
purport<d
to impose, levy
and rollect
from the aprdlant cctroi. The <:fPelient filed a writ
petition in the High Court for restraining the municipality f1cm levying and collecting the octroi. The municipality relied upon the
provisions contained ins. 5 (4) of the Act in support of the contention
that the notification dated 3rd November 1942 issued m:der s. 62
(IO) .of the Act notifying the imposition of octroi within the octroi
limits of the Sonepat municipal limits became applicable to the areas
included. The High Court dismissed the petition.
It came to the
conclusion that by reason of the provisions contained in s. 5 ( 4) of the
Act the taxes would "automatically become leviable" to new areas
included in the municipal limits. Allowing the appeals,
HELD: The
High Court was wrong in holding that the municipality was competent to levy and collect octroi from the appellants
by reason of the provision contained ins. 5 (4) of the Act.
(i) Section 5 (4) of the Act speaks of rules, bye-laws, 01dw, d'J<ctions and powers and does not significantly, mention notification. The
Act speaks of notification ceasing to apply to excluded areas, whereas,
in the case of inclusion of areas the Act significantly omits any notification being applicable to such areas. The legislative intent is, therefore, unambiguous that notifications would not be applicable to an
included area on the strength of s. 5 (4). And s. 62 (10) of the Act
speaks of notification for the imposition of taxes and such a notification
is the statutory basis of the imposition and ltvy of tax. [133 HJ
H
(ii) The word 'notification' is not synonymous with rules, bye laws,
-orders, directions and powers. The power to issue notifications orders, rules or bye-laws refers to different and separate methods of expression of exercise of power under the statute. Bye-laws are entiiely
128
SUPREME COURT REPORTS
(1972] I S.C.R
different from notifications imposing tax ar.d the bye-l£ws fixing the
limits and prescribing the routes by which articles which are subject
to octroi may be imported obviously cannot be equated with notification of imposition of octroi. [134 C, G]
Bagalkot City Municipality v. Bcgalkot Cement Co., [1963] Supp.
A
l S.C.R. 710, distinguished.
Jl;
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
1927 and 2222 of 1970.
Appeals from the judgment and order ctated May 18,
1970 of the Punjab and Haryana High Court in Civil Writ c
Nos. 2014 and 2611 of 1967.
C.K. Daphtary and /. N. Shroff, for the appellant
(in C. A. No. 1927 of 1970).
I. N. Shroff, for the appellant (in C.A. No. 2222 of
1970).
D
V. C. Mahajan, and R. N. Sachthey, for the respondent
No. I (in both the appeals).
M. C. Setalvad, N. S. Das Bahl, P.
C. Bhartari•
J.B. Dadachanji and Ravinder Narain, for respondent
No. 2 (in C. A. No. 1927 of 1970).
E.
P. C. Bhartari,
J. B.
Dadachanji
and Ravinder
Narain, for respondent No. 2 (in C. A. No. 2222 of
1970).
.
The Judgment of the Court was delivered by
F'
Ray, J. These two appeals are by certificate against
the common judgment dated 18 May, 1970 of the High
Court of Punjab and Haryana dismissing the applications
of the appellants for a writ of mandamus restraining the
Municipality of Sonepat from levying against and collectG
ing from
the appellants any octroi in respect of
raw materials, components and parts imported by the
appellants into the factory of the appellants situated at
Industrial Area, Sonepat.
The factory of each of the appellants was situated at
Inciustrial Area, Sonepat. The appellants carry on busiH
ness of manufacturing bicycles and bicycle components
and parts.
ATLAS CYCLE INDUSTRlES v. HARYANA (Ray, J.)
12!1
A
On 30 September, 1966 a notification dated 15 September, 1966 was published in the Punjab Government Gazette
to the effect that under section 5(1) of the Punjab Municipal
Act,.1911 (referr~d to for the sake of brevity as the Act) the
President of India was pleased to declare his intention of
B including :-vit~in the municipal limits of Sonepat in the
Rohtak D1stnct, the area specified in the Schedule to the
notification. The Schedule included the Industrial area of
Sonepat where the factory of the appellants was situated.
Under section 5(2) of the Act the inhabitant~ of the area
c who objected to the proposed inclusion of the said area
could submit their objection in writing within six weeks of
the date of publication of the notification. The appellants
filed objections in writing.
On 1 November, 1966 after the bifurcation of Punjab
D the State of Haryana came into existence. A notification
dated 11 August, 1967 was published in the Haryana
Government Gazette. The Gazette notification was to
the effect that the Governor of Hacyana was pleased ta
include within the Municipality of Sonepat in the Rohtak
District the areas mentioned in the notification. The fodus--
E trial area within which the factory of the appellants was.
situated was thus included within the local. limits of the
Municipality of Sonepat.
From 18 August, 1967 the respondent-Municipality
purported to impose, levy .and collect from the appellants
F octroi in respect of raw materials, components and parts
imported by the appellants into their factory for consumption or use in the manufacture of bicycles and bicycle
components.
The respon~ent-municipality relied on the provisions
contained in section 5( 4) of· the Act in support of their
G contention that imposition of octroi whieh was in force:
within the municipality applied to the area included within
the limits of the municipality by the n'Oti;fications, and, therefore, the appellants were liable to payment of octroi. The:
provisions of section 5(4) of the Act are as follows:-
H
"When any local area has been included in a
municipality under sub-section (3) of this section
of this Act, and, except as the State Government.may
,,
130
SUPREME COURT REPORTS
[1972] l S.C.R.
otherwise by notification direct all rules, bye-laws,
·orders, directions and powers made, or conferred
under this Act and in force throughout the whole
municipality at the time, shall apply to such area."
A
B
The respondent-municipality relied on the provisions
contained in section 5( 4) of the Act that all rules, bye-laws,
orders, directions and powers made, or conferred under the
Act and in force throughout the whole municipality would
apply to such an area, and, therefore, the notification No.
3798-C-42/60545 dated 3 November, 1942 issued under
section 62(10) of the Act
notifying the imposition of c
octroi within the octroi limits of the Sonepat Municipality
became applicable to the area included.
The relevant provisions for imposition of tax are to be
found in sections 61 and 62 of the Act. Under section 61 of
the Act any municipal committee may impose tax of different
0
kinds enumerated there. The three broad heads of taxes
under section 61 of the Act are those provided in sections
61(l)(a), 61(l)(b) to (f) inclusive and 61(2), Tax mentioned
in section 61(1)(a) of the Act is on buildings and lands.
Tax mentioned in section 6l(l)(b) to (f) is tax on profession,
calling, trade and of other forms which are not material for
E
the purpose of the present appeals. Under section 61(2) of
the Act the municipality may impose with the previous
sanction of the State Government any other tax which the
State Legislature has power to impose in the State under
the Constitution. The levy of octroi is under section 61(2)
of the Act. Competency to impose octroi is because of F
item 52 of the State List which reads ''taxes on the entry of
goods within the local limits of the area for sale therein."
The power to levy octroi is indisputable and was not
challenged.
The contention on behalf of the appellants was that the
G
provisions contained in section 62 of the Act should have
been followed.
Section 62 consists of 12 sub-sections.
Broadly stated, under section 62 ofthe Act a Municipal
Committee passes a resolution proposing the imp0siton
of any tax under section 61. When such a resolution has
been passed the committee shall publish a notice defining
H
the class of persons or description of property proposed
to be taxed, the amount or rate of the tax to be imposed, and
ATLAS CYCLE INDUSTRIES V. HARYANA (Ray, J.)
I3l
A the system of assessment to be adopted. Any inhabitantobjecting to the proposed tax may within thirty days from
the publication of the notice submi~ his objection in writing
to the committee. If the committee decides to amend its
proposals it shall publish the amended proposal along with
B a notice indicating that they are in modification of those
previously published for objection. Objections may within
thirtv days be received to the amended proposal and the
committee shall then consider the objections. Counsel
on behalf of the appellants contended that this procedure.
for inviti~ objections should have been followed.
c
In the case of tax falling under section 6l(l)(b) to (f) of
the Act the municipal committee after settlement of the proposals shall direct that the tax be imposed and forward
a copy of the order through the Deputy Commissioner to
the State Government. These orders will be attracted by
D the provisions of section 5(4) of the Act to the included areas.
But orders by themselves are not the authority for imposition of tax.
In the case of tax falling under section 6l(l)(b) to
E (f) of the Act the State Government on receipt of the order
shall notifiy under section 62 (10) of the Act the imposition
of the tax in accordance with such order and shall in the
notification specify a date not less than one month from
the date of the notification, on which the tax shall come into
force.
Therefore, in the absence of notification falling
F within the ambit of section 5 (4) of the Act the municipality will not be competent to levy or collect tax.
In the case of a proposed tax underi section 61 (I)
(a) of the Act the municipality has to submit proposals
G together with the objection, if any, made in connection
therewith to the Deputy Commissioner. The Deputy
Commissioner after considering the objections may either
refuse to sanction the proposals or return them to th..:
municipality for further consideration or sanction them
without modification or with such modification not involH ving an increase of the amount to be imposed, as he deems
fit and then forward the same to the State Government
a copy of the proposals and his order of sanction.
.132
·SUPREME COURT REPORTS
[1972] I 5.C. K
In the case of tax falling under section 61 (1) (a) of the
A
Act the State Government on receipt of the order of sanction
•Of the Deputy Commissioner shall notify the imposition
of the tax in accordance with such order and in the notification shall specify a date not less than one month from the
date of the notification, on which the tax shall come into
B
force.
In the case of tax falling under section 61 (2) of the Act
the municipality has to submit proposals together with
objections to the Deputy Commissioner. The Deputy
Commissioner shall submit the proposal and objections c
with his recommendation to the State Government. The
State Government on receiving the proposals for taxation
•under section 61(2) of the Act may sanction or refuse to
sanction the same or return them to the committee for
.further consideration.
D
In the case of tax falling under section 61 (2) of the Act
when the State Government on receipt of the proposal
and objections along with the recommendation of the
Deputy Commissioner sanctions the imposition of the
tax the State Government under section 62(10) of the Act E
shall notify the imposition of the tax and shall in the notification specify a date not less than one month from the
.date of the notification, on which the tax shall come into
force.
Inasmuch as the provisions of section 5(4) of the Act F
:render the order of the relevant authorities sanctioning
proposal of municipality for levy of octroi applicable to
the included area, there cannot be any question of following the procedure for inviting objections to the proposed
tax contemplated in section 62. It may also be stated
here that a contention was advanced on behalf of the
G
appellants that the applicability of octroi to the included
area would offend Article 14 of the Constitution by reason
of denial to the persons within the included area of right
to object to the tax. The provisions contained in section
5 of the Act and, in particular, sub-section (2) thereof,
confer on inhabitants within the area proposed to be
H
incl~ded the right to object to the alteration proposed
and submit objections in writing. The inhabitants would
•
ATLAS CYCLE INDUSTRI!l,S V. HARYANA (Ray, J.)
!33
.\
thereby have the opportunity of object~g not only to the
inclusion of the area but also to the incidence of tax as a
result of the inclusion.
Section 62 of the Act consists of 12 sub-sections. These
sub-sections deal with three matters. The first five sub8
sections deal with the procedure for proposals of tax,
objections by inhabitants and final consideration of objections by the committee. These sub-sections form part
of a stage anterior to sanction by the relevant authorities
of proposals for tax.
c
Sub-section (6) to (9) of section 62 of the Act deal with
ihe order of sanction by the appropriate authorities of
the proposals for tax. These orders are not the provisions
by which tax is imposed. These orders are sanction for
imposition of tax. These orders are attracted by virtue of
0
the provisions contained in section 5(4) of the Act to the
included areas. But in the absence of notification by the
Government under section 62(10) of the Act there is no
imposition of tax.
Section 62 (10) of the Act indicates that there
is
E imposition of tax only when the State Government
shall notify the imposition of the tax and shall in
the notification specify a date on which the tax shall
come into force. In
the
absence of imposition of
tax by a notification under section 62 (10) of the
Act the municipality is not competent to impose,
F levy or collect tax. Section 62(12) of the Act enacts that
a notification of the imposition of tax shall be conclugive
evidence that the tax has been imposed in accordance with
the provisions of the Act. It iS. the :notification under
the statute which is conclusive evidenc,e of the imposition
of tax.
G
The coniroversy in the present appeals is solved by
finding out as to whether the notification dated 3 November,
1942 imposing octroi within the liinits of the Sonepat
Municipality became applicable by reason of the provisions
contained in section 5(4) of the Act. It is noticeable at the
u outset that section 5(4) of the Act Sileaks of rules, JJyelaws, orders, directions and powers and does not significantly mention 'notifications'. It is apposite to consider
134
SUPREME COURT REPORTS
[1972] I S.C.R.
sections 6, 7 and 8 of the Act which deal with the effect of A
exclusion of local area from the municipality. In the case
of exclusion of an area from the Municipality it is provided
in section 8(1) (a) of the Act that "This Act and all notifications, rules, bye-laws, orders, directions and powers
issued, made or conferred under the Act, shall cease to
B
apply thereto". When the Act provided for notifications
ceasing to apply in the case of exclusion of local areas,
and in the immediately preceding section 5 refrained from
using the word 'notifications' becoming applicable in the
case of inclusion of areas the legislative intent is unambiguous and crystal clear that notifications could not become c
applicable to an included area on the strength of section
5( 4) of the Act.
The word 'notification' cannot be said to be synonymous
with rules, bye-Jaws, orders, directions and powers for two
reasons.
First, the Act in the present case speaks of notiD
fications for imposition of tax and uses the word 'notification' separately from the other words "rules, bye-laws,
orders, directions and powers". In thecase of exclusions
of areas, the Act speaks of notification ceasing to apply
to excluded areas whereas in the case of inclusion of areas
the Act significantly omits any notification being applicable
E
to such area. Secondly, the General Clauses Act in section
21 speaks of power to issue notifications, orders, rules or
bye-laws and it is, therefore, apparent that the power to
issue notifications, orders, rules or bye-laws refers to
different and separate methods of expression of exercise of F
power under the statute.
Section 62(10) of the Act
speaks of notification of the imposition of tax. Such a
notification is the statutory basis of imposition and levy
of tax.
I
Bye-laws are entirely different from notifications imposG
ing tax as will be manifest from section 188 of the Act.
Under that section the committee may by bye-laws as
mentioned in cl~use(g) thereof ~x limits for the purpose of
collectmg octro1 where collect10n of octroi
has been
sanctioned and may prescribe routes by which articles
which are subject to octroi may be imported into municiH
pality.
Bye-~aws ~xing th.e limits il;nd
prescribing the
routes by which articles which are subject to octroi may be
ATLAS CYCLE IND1JSTRIES V. HARYANA (Ray, /.)
!3S
A imported obviously cannot be equated with notification of
imposition of octroi.
·
In the present appeals, the High Court came to the
conclusion that by reason of the provisions contained in
section 5(4) of the Act taxes would 'automatically become
B leviable' to new areas added to the municipal limits. The
High Court fell into the error of holding that taxes became
automatically leviable in new areas. The High
Court
relied on the
decision of
this Court in
Bagalkot
City Municipality v. Bagalkot Cement Co.
to support
the
conclusion
of taxes
becoming
automatically
C leviable in extended .areas on the ground that by
reason of the provisions contained in section 5( 4) of the
Act the inhabitants of the included area would 'suffer all
the burdens that are inherent in their inclusion within the
municipal limits'. This conclusion of the High Court is
not supported either. by the decision of this Court or by the
provisions of the statute. In the first place, a taxing provi-
. 0
sion always receives a strict interpretation for the obvious
reason that there must be clear and eiipress language
imposing a tax and the date from which such tax shall come
into effect.
Notifications under the Act are the only
E authority and mandate for imposition and charge of tax.
Notifications are not made applicable to included areas
under section 5( 4) of the Act. There cannot be any taxation
by implication. Secondly, in the Bagalkot City Municipality
case1 there was no provision comparable to section
5(4) of the Act and this Court did not decide that taxes
F would becom~ automatically leviable. On the contrary,
this Court in the Bagafkot City
Municipality case'
in interpreting the words 'Municipal district' occurring in a
bye-law did not extend the meaning of 'municipal district,
to include areas which were subsequent to the making of
the bye-law added within the limits of the municipal district'
G The reason given by this Court was that the expression
'municipal district' in the bye-law referred to the 'municipal
district' as existing when the bye-law was framed. The
words ·municipal district' in the bye-law were not construed
to relate to extended areas.
T n the Bagalkot City Municipality
case1
section
48
of the
Municipal Act
H provided that a bye-law could be made only with the
sanction of the Government. The
further provisions
(I) [1963] Supp. l S.C.R. 710.
10-Ml245SupCl/7l
136
SUPFEME COURT REPORTS
[1972] l S.C.R.
of section 48
in the
Bagalkot
City
Municipality
A
case1
required publication of a proposed
bye-law
for the information of the persons likely to be affected
thereby. The lack of publication of the bye-law to the
Bagalkot Cement Company affected by the bye-law was
held to be an additional reason for refusing to extend the
B
meaning of the words 'municipal district' to include extended areas. There is no such aspect in the present appeals.
The Bagalkot City
Municipality
case1
is, therefore,
of no aid in interpreting section 5(4) of the Act in the manner
the High Court did.
The High Court was wrong in holding that the municic
pality was competent to levy and collect octroi from the
appellants by reason of the provisions contained in section
5(4) of the Act. The judgment of the High Court is set
aside. The appeals are allowed. The applications of the
appellants are allowed and writs of mandamus will go to
the respondent municipality restraining the municipality
D
from levying against and collecting from the appellants any
octroi in respect of raw materials, components and parts
imported by the appellants into the factory of the appellants.
Each party will pay and bear their own costs. Liberty to
mention if the Respondent Municipality will fail to refund
E
the monies within a fortnight.
K.B.N.
Appeals allowed.