(1) Criminal cases pending before the Magistrate against the respondents were withdrawn to this Court by an order. dated July 15, 1966, for decision on important questions of law which involved a reference to constitutional provisions. The dispute is regarding the validity of the terminal tax imposed by the Municipality which is now described as the petitioner. We were told that large number of the litigations were pending in the Magistrate's Court, as the residents within the limits of the Municipality refused to pay the tax. We therefore, treated the matter as very urgent and fixed the hearing in about three weeks before us,. with the consent of respondents.
(2) The Municipal Committee since about 1922 was imposing terminal tax in respect of the export and import of goods out of and within its limits. The first notification is, dated October 12, 1922, specifying the items on the export of which terminal tax had to be paid, in List No. 1 and specifying the items of the import of goods, either by rail or road, on which tax was to be paid in List NO. 2, Originally List No. 1 consisted of seven items and List No. 2 consisted of thirteen items. On April 23, 1930, in the items under the heading 'Maniari and Kirana', certain additional items were specified. Similarly, on January 19, 1933, further items were added. In 1942, the item 'Manirai': was amplified to contain several other articles, and again the item 'Kirana' was amended to include several other items. This went on until 1947. On May 11, 1962, the rules made under Section 67, sub-section (5), imposing terminal tax under Section 66 sub-section (1), clause (o), of the C. P. Municipalities Act, 1922, were superseded and new rules were sanctioned by the State Government imposing terminal tax on import and ex port of listed articles. List (a) which related to import of goods by rail or by road comprised as many as 103 items. On all these varying rates of terminal taxes were levied. The respondents-accused relying on the decision in Town Municipal Committee, Amraoti v. Ramchandra Vasudeo. : 53ITR444(SC) , refused to pay the tax, on the ground that this was a new imposition of terminal tax which was not within the competence of the Municipal Committee to impose, by reason of the constitutional limitations and, therefore, it was void. As similar attitude was taken by a large number of citizens, exporting and importing goods within the Municipal Committee, the Municipal Committee instituted a large number of criminal complaints against defaulting persons. The question is whether the tax is validly levied.
(3) The Municipal Committee is governed by the C. P. and Berar Municipalities Act, 1922, Section 66 of which gives powers to the Committee to impose taxes So far as relevant for the purposes of discussion the section reads thus:
'66 (1) A committee may, from time to time, and subject to the provisions of this Chapter, impose in the whole or in any part of the municipality any of the following taxes, for the purposes of this Act, namely-
(a). . . .
(b) . . .
(c) . . .
(d) . . .
(e) an octroi on animals or goods brought within the limits of the municipality for sale, consumption or use within those limits:
(f) . . .
(g) . . .
(h) . . .
(I) . . .
(j) . . .
(k) . . .
(l) . . .
(m) . . .
(n) . . .
(o) a terminal tax on goods or animals imported into or exported from the limits of a municipality:
Provided that a terminal tax under this clause and an octroi under clause (e) shall not be in force in any municipality at the same time; and
(p) a tax on-
(i) persons travelling by railway to or from a municipality to which pilgrims resort, or
(ii)pilgrims visiting a shrine within the limits of a municipality.'
By Entry No. 89 List I, Seventh Schedule of the Constitution. 'terminal taxes on goods or passengers, carried by railway sea or air and taxes on railway fares and freights' are within the competence of the Central Legislature. Therefore, it was contended by the respondents that the Municipal Committee was not competent to levy the terminal tax.
(4) Article 227 saves taxes that were already being levied. It is 'any taxes, duties, cesses or fees which, immediately before the commencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the State. municipality district or other local area may notwithstanding that those 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.' In the above case, : 53ITR444(SC) , the Municipal Committee was imposing terminal taxes as in the present case. In 1959, the Municipal Committee added three items, i.e. silver and silver jewellery, gold and gold jewellery and precious stones, to the list on which such duty was imposable, and the contention was that the imposition was invalid. The Court construed Article 277 of the Constitution. The Supreme Court relying on the decision in Ram Krishna Ramnath v. Janpad Sahba. : AIR1962SC1073 , held that in order that Article 277 shall apply. (1) the tax must be one which was lawfully levied by a local authority for the purposes of a local area at the commencement of Part III of the Government of India Act (2) that 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 utilisation 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 same tax. Since the Municipal Committee which was imposing the tax which it called terminal tax, altered by the notification of 1962 in the rate of the tax and also added new items to the list existing at the commencement of the Constitution, the tax cannot be protected under Article 277 unless it can be protected as being of a different nature within its competence. In view of the said decision any addition to the items or increase in the rates became void.
(5) Mr. Chandurkar appearing on behalf of the Municipal committee, contends firstly that the levy of the said tax would be valid by reason of Entry 56 in the State List (List II). The entry is 'taxes on goods and passengers carried by road or on inland water ways.' He argues the case really falls under Entry No. 56 in List II. He says in the above case the Supreme Court was dealing with terminal taxes imposed on goods carried by Railway and hence the ruling has no application.
(6) He argues that the label attached by the Municipality to a tax does not determine what the real nature of the tax is. The Court must find out the real intention of the Municipal Committee and determine what was the incidence of the tax intended in order to arrive at the correct conclusion. This follows from the decision in Punjab Flour and General Mills Co. Ltd., Lahore v. Lahore Corporation AIR 1947 PC 14. The question whether it is terminal tax or a tax which falls within Entry No. 56 List II, which is within the competence of the State Legislature, must now be considered.
(7) What is a terminal tax has been considered in a few cases by the Federal Court and also by the Supreme Court. The first case which may usefully be referred in this connection is the decision in AIR 1947 FC 14. In that case originally the Lahore Municipal Committee was imposing terminal tax, but after the Government of India Act came into force it imposed in 1938 what is called 'octroi' but there was no provision for refund. The contention that was raised on behalf of the appellant was that though these taxes were called 'octroi taxes' in reality they were 'terminal taxes' and, therefore, not within the competence of the Corporation. The Court traced the history of these taxes pointing out the distinction being terminal taxes and taxes called octroi, and, held that the tax in substance and effect was in respect of entry of goods into a local area for consumption, use or sake therein and nothing else. Chief Justice Spens, in paragraph 9, points out what a terminal tax is. He says, it 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. In the Government of India Act, 1935, and the Constitution, the power to impose the terminal taxes so far imposed on goods transported between two terminate by local Governments was done away with. Only Central Government was given the power to impose terminal taxes on goods and passengers carried by rail or air.
(8) The nature of terminal tax has again been pointed out in the Central Indian Spinning and Weaving and . v. Municipal Committee, Wardha : 1SCR1102 . The Court in that case was considering the question as to whether the goods in transit could be taxes under the heading 'tax on import and export of goods'. The word 'terminus' came to be considered. The Court held that 'terminus means the point to which motion or action tends, goal end, finishing point; sometimes that from which it starts; starting point. An end; extremity; the point at which something comes to an end.' In Corpus Juris, Vol. 62, it is stated at page 729 that 'terminal' in connection with transportation means inter alia 'the fixed beginning or ending point of a given run' Applying somewhat strict construction, these being taxing provisions, the Court held that the word 'terminal' must in the context be construed as having reference to the terminus and has to be read to connote with motion and not that of an intermediate stage of a journey. The Court observed that the incidence of the terminal tax is similar in its incidence and is payable on goods on the journey ending within the municipal limits and not merely through the municipal limits and at their terminus elsewhere.
(9) We must next consider what is the nature of the tax falling within Entry No. 56 on which Mr. Chandurkar was substantially based his argument. The entry is 'taxes on goods and passengers carried by road or on inland waterways.' The nature of this tax has been considered by the Supreme Court in Ramkrishna v. State of Bihar., : 50ITR171(SC) , and M/s. Sainik Motor, Jodhpur v. State of Rajasthan, : 1SCR517 . In M/s. Sainik Motors' case. : 1SCR517 , the Court was considering Section 3 of the Rajasthan Passengers and Goods Taxation Act. In that case, the argument was that inasmuch the tax was claimed on the basis of the actual fare charged to the passengers, it was a tax on income and, therefore, without the competence of the State Legislature. The Court relying upon the terms of Section 3 held that it was a tax in respect of passengers carried and goods transported by motor vehicles, that is, the tax was upon the passengers and goods and freight was merely a measure for the levy of the tax and, therefore, it was within Entry No. 56. The meaning of the expression 'carried by road or on inland waterways' in relation to the passengers and goods was considered in : 50ITR171(SC) . The Supreme Court pointed out that-
'It is not on all goods and passengers that taxes can be imposed under this entry; it is on goods and passengers carried by road or on inland waterways that taxes can be imposed. The expression 'carried by road or on inland waterways' is an adjectival clause qualifying goods and passengers, that is to say, it is goods and passengers of the said description that have to be taxed under this entry.'
In this case, it has been pointed out that the incidence of the taxes is on the carriage of goods either by road or on inland waterways. Unless the incidence is on the carriage of goods by road or on inland waterways, it is impossible to hold that tax levied by the Municipality falls within this entry.
(10) In this connection, it must be pointed out that even the Constitution itself has made a distinction between 'terminal tax' and 'tax on carriage of passengers and goods.' This is evident from Entry No. 30 in List I, which enables the Central Legislature to tax 'Carriage of passengers and goods by railway, sea or air, or by national waterways in mechanically propelled vessels.' This tax is entirely a different tax covered by Entry No. 89 in list I, Seventh Schedule, which relates to 'Terminal taxes on goods or passengers, carried by railway, sea or air; taxes on railway fares and freights.' Similarly, we may refer to Entry No. 52 in List II, which is 'Taxes on entry of goods into a local area for consumption, use or sale therein.'
(11) In the present case, the tax is clearly imposed on goods which enter and leave the municipal limits, and has no relation to transport of goods as such. It is really a tax that is imposed at the terminus. The incidence of the tax not being the transport of goods but entry and exit of goods in and out of the limits, it cannot fall within Entry 56, List II. This contention, therefore, must fail.
(12) Even if it were possible to hold otherwise, i.e. even if the tax fell within Entry 56 of List II, it would be beyond the competence of the Municipal Committee inasmuch as Section 66 of the C. P. and Berar Municipalities Act, 1922. does not transfer this head of the taxes to Municipalities governed by it. There is no residuary clause that we have in the Bombay counterpart of the Municipal Act which enables the Municipal Committee to levy such taxes as the State Government could levy. It is therefore, impossible to hold that the Municipal Committee, was entitled to levy a tax under Entry No. 56,. List II Seventh Schedule, of the Constitution.
(13) Mr Chandurkar had not contended when he opened the case, that at least the tax on the entry of goods within the municipal limits should be held to be valid as falling within Entry 52 in List II of the Schedule. it was only when judgment was being dictated that, he said, that was also his argument. The entry is 'taxes on the entry of goods into a local area for consumption, use or sale therein.' This was Entry 49 in List II in Government of India Act, 1935. The nature of this tax was considered by the Federal Court in AIR 1947 FC 14, already referred to and more recently in Burmah Shell Oil Storage and Disturbing Co. of India Ltd. v. Belgaum Borough Municipality, : AIR1963SC906 : where the difference between 'terminal tax' and 'an octroi' was more clearly enunciated. In the latter case in paragraph 17, Mr. Justice Hidayatullah for the Court points out that 'Octroi and terminal taxes were different though they resembled in one respect, namely that they were leviable in respect of goods brought into a local area. While terminal taxes were leviable on goods 'imported or exported' from the Municipal limits. denoting thereby that they were connected with the traffic of goods, octroi, according to the legislative practice then obtaining were, leviable in respect of goods brought into a Municipal area for consumption or use or sale. It is not necessary to cite the Municipal Acts prior to 1935 but a reference to them will amply prove that such was the tax which was contemplated as octroi.'
(14) This is well illustrated by the provisions of the present Act where they are differently referred to. Section 66(1) (e) of the C. P. Municipalities Act, 1922. enables the Municipal Committee to levy an Octroi on animals or goods brought within the limits of the Municipality for sale, consumption or use within those limits while clause (o) of sub-section (1) of S. 66 enables the Municipal Committee to levy a terminal tax on goods or animals imported into or exported from the limits of a municipality. Of course, it has a proviso which it is not necessary to refer. As to the scheme of the Government of India Act, 1935. the learned Judge says:
'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'........'
'The history of these two taxes clearly shows that while terminal taxes were a kind of control which where concerned only with the entry of goods in a local area irrespective of whether they would be used there or not; octrois were taxes on goods brought into the areas for consumption, use or sale.'
(15) Inasmuch as the tax is imposed on the traffic of goods coming in and going out of the municipal limits irrespective of other considerations it cannot therefore fall in Entry 52 of List II.
(16) Having regard, therefore, to the nature of the tax levied by the notification and the fact that the amount of the tax has been increased in respect of every item and new items are added the notification is clearly invalid.
(17) Mr. Chandurkar then contended that since the notification, dated May 11, 1962 is held now to be invalid and beyond the powers of the Municipal Committee. the earlier notifications imposing the tax can well be regarded as continuing. This argument is founded on the decision in Shriram Gulabdas v. Board of Revenue ILR 1953 Nag 332 = AIR 1952 Nag 378 where it was held that an amending provision being invalid, its effect was to rehabilitate the old provision, because the amendment failed to work any change in the law. The argument appears to be attractive and we would probably have been willing to accept it, but for the fact that the Supreme Court in Firm Mehtab Majid & Co. v. State of madras, : AIR1963SC928 and B. N. Tewari v Union of India, : 2SCR421 , has rejected this contention. In the first case, the Supreme Court observed:
'Once the old rule has been substituted by the new rule, it ceases to exist and it dose not automatically get revived when the new rule is held to be invalid.'
(18) We, therefore, decide that the notification, dated May 11, 1962, is wholly invalid and the power of the Municipal Committee to impose the terminal taxes is not available under that notification, or under the notifications existing prior to that date.
(19) Mr. Chandurkar applied for a certificate under Article 133(1)(c) of the Constitution that the case is a fit one for appeal to the Supreme Court. Mr. Manohar is not in a position to object to the grant of such a certificate. We accordingly grant the certificate under Article 133(1)(c) of the Constitution. There will be no order as to costs.
(20) Order accordingly.