1. This petition tinder Article 226 of the Constitution Involves the validity of imposition of octroi by the Municipal Council, Raigarh, the petitioner, on unhydrogenated oils at the rate of 75 paise per tin of four gallons. This imposition, which was in supersession of previously sanctioned rate, was sanctioned by the State Government under Notification No. 121-U-XVIII of 27th April, 1960. The notification which is exhibited as Annexure A-1 in so far as it is relevant reads as follows:
'(Madhya Pradesh Gazette, dated 3 June 1960) Local Government (Urban) Department Bhopal, the 27th April 1960-Vaisakha 7, 1882 No. 121-U-XVIII -- In exercise of the powers conferred by Sub-sections (5) and (7) of Section 67 of the Central Provinces and Berar Municipalities Act, 1922 (2 of 1922) and in supersession of the rules sanctioned under the Local Self-Government (Municipal) Department of the former Government of Madhya Pradesh Notification No. 893-226-M-XIII, dated the 22nd February 1951, the State Government hereby sanctions the following rules for the imposition of an Octroi-tax within the limits of the Raigarh Municipality under Clause (e) of Sub-section (1) of Section 66 of the said Act, the same having been previously published as required by Sub-section (3) of Section 68 of the said Act.
These rules shall come into force with effect from the date of their publication in the 'Madhya Pradesh --Gazette.'
1. Octroi shall be ordinarily levied on commodities including in the following classes and specified in the schedule hereto annexed and at the rates herewith entered :
Class I: Articles of food ordrink or use for men or animals
'Schedule of Goods liableto Octroi duty in Raigarh MunicipalityName of articles
Cart load drawn by two animals
Ad valorem rate per cent.
Alternative rate permaund
Class I- Articles of foods ordrink or use for men or animals.
5. All kinds of unperfumedcountry oils except mineral oils not provided elsewhere including caster oil.......
0.75 per tin of four gallons.
6. Vegetable ghee hydrogenatedoil and solidified ghee......
2. The events that led to this petition are that the respondents Nos. 1 to 7, who were assessed to octroi on un-hydrogenated oil at the rate of 75 paise per tin in accordance with the above notification, appealed to the Sub-Divisional Officer, Raigarh under Section 83 (1) of the C.P. and Berar Municipalities Act, 1922. The grievance of the respondents in these appeals was that the Council was not authorised to impose octroi-tax in respect of unhydrogenated oils in excess of 25 paise (4 annas) per maund, which was the maximum rate fixed under a rule made by the State Government in exercise of its power conferred by Section 66 (2) of the Act.
This rule which was published under Notification No. 1584-1661-M-XIII dated 29th April, 1950 is as under:
'Octroi tax shall not be imposed on any article specified in column (2) of the table below at a rate in excess of the rate specified in the corresponding entry in column (3) thereof :--
Name of article
Rs. a. p.
5. Oils (vegetable) nothydrogenated.
0 4 0 per maund.'
The Sub-Divisional Officer on 4th August, 1962 dismissed the appeals filed by the respondents Nos. 1 to 7, who then went up in revision to the State Government under Section 83 (1-A) of the Act. These revisions, which were 50 in number, were allowed on 4th January, 1966. The State Government held that the Council was not authorised to levy octroi on unhydrogenated oils in excess of the maximum limit of 25 paise per maundand the Council was directed to refund to the respondents the amount of octroi collected in excess of the aforesaid rate. The Council then filed this petition under Article 226 of the Constitution for issuance of a writ in the nature of certiorari to quash the orders of the State Government passed in the said revisions.
3. Shri J.V. Jakatdar, the learned counsel for the petitioner has raised before us the following three contentions :
(A) The authorities functioning under the Act, including the appellate and re-visional authorities, had no jurisdiction to decide upon the validity of the rate of tax imposed by notification Annexure A-1;
(B) the notification (Annexure A-1) by virtue of Section 67 (8) was by itself conclusive evidence that the tax had been imposed in accordance with the provisions of the Act and was not open to challenge on the ground that the tax imposed was in excess of the maximum limit fixed by a rule made under Section 66 (2); and
(C) the notification (Annexure A-1) was also a rule made by the State Government and in so far as it permitted the imposition of octroi in excess of the maximum rate fixed by the earlier rule made under Section 62 (2), it must be taken to have amended or repealed the same.
4. As we are accepting the third contention raised by the learned counsel, we have not found it necessary to express any opinion on the first two contentions.
5. The subject of imposition, assessment and collection of taxes relevant for the purposes of this petition was governed by the provisions contained in Chapter IX of the C. P. and Berar Municipalities Act, 1922. Sub-section (1) ofSection 66 authorised a Municipal Committee, subject to other provisions contained in Chapter IX, to impose in the whole or in any part of the Municipality any of the taxes enumerated in Clauses (a) to (p) of the sub-section. Octroi was included in Clause (e) as one of the taxes which could be imposed. Sub-section (2) of Section 66 empowered the State Government by rules made under the Act to regulate the imposition of taxes and 'impose maximum amounts of rates for any tax.' By virtue of the provisions contained in Sub-section (4), a committee was empowered to abolish the taxes mentioned in Clauses (a) to (m) (which included octroi) and to vary the amount of rate of such taxes 'within the limits imposed By Sub-section (2). The procedure for imposing taxes was contained in Section 67 and the procedure for abolishing or varying taxes was contained in Section 68. Section 71 empowered the State Government to make rules regulating the assessment of taxes and for preventing evasion of assessment. Rules regulating the imposition of taxes were framed from time to time from 1924 to 1926 and they are contained at page 230 of the M. P.. Municipal Manual.
6. The only ground on which the notification (Annexure A-1) was held to be invalid by the State Government was that the altered rate of octroi fixed by this notification was in excess of the maximum rate sanctioned under Section 66 (2) and the notification thus contravened Section 66 (4) which permitted the variation of the rate of tax within the limits imposed under Section 66 (2).
7. The Municipal Council had filed in this case along with a supplementary affidavit, Annexures 6 to 10, which go to show that in making proposals for changes in the rates of octroi levied on different commodities, including unhydrogenated oils, the procedure that was followed from beginning to end was as required by the rules for the first imposition. In a special meeting held on 9th May, 1958 a resolution was passed for imposition of octroi according to the new rates; draft rules containing the amended rates were also passed in this meeting the proposals and the draft rules were sent for publication to the Government and were published in the Government Gazette and objections were invited; some objections were received, which were considered again in the special meeting dated 26th November, 1959; the proposals, the rules, the objections and the final decision were then sent to the State Government for sanction; the State Government, as already stated, by the notification (Annexure A-1), sanctioned the proposals as also the draft rules and the rules were published along with the notification in the Gazette and came into force from the date of publication.
The rules after they were sanctioned by the State Government and published under its authority became rule made by the State Government. Rule 1 of these rules imposed octroi on unhydrogenated oils at the rate of 75 paise per tin of four gallons. The maximum rate for imposition of octroi was prescribed by the State Government under a rule made by it in exercise of power conferred by Section 66 (2). That rule we have already quoted. As Rule 1 in Annexure A-1, which was sanctioned in 1960, was in conflict with the rule made in 1950 relating to maximum rate, the earlier rule must be taken to have been modified in so far as the petitioner Municipality was concerned.
It is no doubt true that the earlier rule was made under Section 66 (2), whereas the rule contained in Annexure A-1 did not contain that label. But the efficacy of a rule does not depend upon the label that it carries. As the authority to impose a maximum limit was in the State Government, which could be exercised by framing a rule, the State Government could also by another rule alter, modify or remove the restriction. Though the new rule contained in Annexure A-1 made in 1960 did not refer to Section 66 (2), but as it was made by the State Government itself, it must be referred to all the enabling powers vested in the State Government.
There is a presumption in favour of the validity of subordinate legislation and, therefore, the exercise of power of making subordinate legislation is, if possible, referable to a power which confers validity upon it; (see, Afzal Ullah v. State of Uttar Pradesh, AIR 1964 SC 264 and Hukumchand Mills Ltd. v. State of M.P., AIR 1964 SC 1329). On these principles, it must be held that the rule imposing octroi at the rate of 75 paise in so far as it contravened an earlier rule, made by the State Government under Section 66 (2), was effective under that very provision and had the effect of modifying the earlier rule to that extent. The fetter on the power of the Municipal Council to impose octroi not in excess of a particular rate was created by a rule made by the State Government. That fetter was removed when the State Government itself sanctioned and made another rule imposing octroi in excess of the limit fixed by the earlier rule as proposed by the Municipal Council.
In this view of the matter, it was not open to the State Government to hold that the new rule contravened the earlier rule by which a maximum limit as to rate of octroi was fixed. The learned counsel for the respondents realised this difficulty and argued that the rule in Annexure A-1 was not really a rule, buta mere sanction of a proposal. In our opinion, this argument must be rejected. On the face of it the authority of the State Government for the levy of octroi at the rate of 75 paise was in the shape of a rule. Even the notification speaks of sanctioning of 'the following rules for the imposition of octroi tax'. The language of the notification and the form and shape of the rules do not leave any manner of doubt that the rules were real rules made by the State Government and not merely sanction of the proposal to levy octroi.
In this context it must be kept in view that according to the rules at page 230 of the Municipal Manual, when proposals for imposition of a tax are sent to the Government, the Municipal Committee is also required to send draft rules. Thus, the procedure of imposition of a tax with the sanction of the State Government itself contemplates making of rules by the State Government incorporating the tax. In this background, there can hardly be any doubt about the character of rules contained in Annexure A-1. These rules, though initially proposed by the Municipal Committee, were rules made by the State Government under its own authority. They had, therefore, the effect of modifying the maximum limit of rate of octroi contained in the earlier rule made in 1950 under Section 66 (2). In our opinion, the rules in Annexure A-1 were valid and were wrongly held to be invalid by the State Government.
8. The petition is allowed. The order of the State Government in revision No. 8959 of 1964 (Annexure A-5) and the orders in 49 other connected revision applications particularised in the schedule attached to the order (Annexure A-5) are hereby quashed. Having regard to the circumstances of the case, there will be no order as to costs. The amount of security deposit shall be refunded to the petitioner.