Holding

The order under Section 62A(1) did not impose the cess; without a municipal committee resolution or a subsequent Section 62A(3) notification, the cess could not be lawfully levied.

Summary

During President's Rule in Punjab, the President of India issued an order exempting raw cotton, narma and oilseeds from octroi and directing municipal committees to impose an Urban Development Cess on these items. The State of Punjab issued a memo to municipal bodies, the cess was levied and collected, and the affected parties challenged the levy in the High Court, which ordered a refund with interest. On appeal, the Supreme Court examined whether the President's order under Section 62A(1) of the Punjab Municipal Act actually imposed the cess and whether Section 62(12) made the subsequent notification conclusive evidence of imposition. The Court held that the order merely directed the committees to impose the cess; since the committees failed to act and the State did not subsequently notify under Section 62A(3), no legal imposition occurred. Consequently, the collection was unauthorized and the State must refund the amounts with interest. The appeal by the State was dismissed.

Issues considered

Whether the President's order dated 30 November/3 December 1990 imposed the Urban Development Cess under the Punjab Municipal Act.
Whether a notification under Section 62(12) of the Punjab Municipal Act is conclusive evidence of tax imposition when the order is issued under Section 62A(1).
Whether the State Government could lawfully collect the cess in the absence of a municipal committee resolution or a Section 62A(3) notification.

Legislation cited

Punjab Municipal Act, 1911s. 62(10), s. 62(12), s. 62A(1), s. 62A(3)

Subjects

octroi exemptionurban development cessmunicipal taxationPresident's Ruletax impositionrefund with intereststatutory interpretation

Judgment

THE STATE OF PUNJAB AND ORS. A
v.
NARANJAN DASS DOOMRA RICE AND
GEN. MILLS AND ORS. ETC.

NOVEMBER 25, 1997
B
[S.P. BHARUCHA AND S.C. SEN, JJ.]

Punjab Municipal Act, 19/J: Sections 62-A(J), (3), 62(12) and 71(1)-
President's order dated 30th Nov./3rd December 1990-Kapas, Narma and C
Oilseeds-Exemption from payment of octroi-Direction to Municipal
Committee to impose Urban Development Cess-levy and collection ofCess-
Held, in the absence of imposition of cess by Municipal Committees or State
Govt., levy and collection of cess was without any authority of laW-:-Refund
allowed.
D
During the President's Rule in the State of Punjab, the President of
India by an order dated 30th Nov./3rd Dec.1990 exempted Kapas (raw cotton),
Narma and Oilseeds from the payment of octroi. On the very day, the President
directed all the Municipal Committees in the State of Punjab to impose
Urban Development Cess on the sales/purchases of the above mentioned
items. Pursuant thereto, a memo was issued by the appellants to Municipal E
Corporations, Municipal Committees and Notified Area Committees, giving
directions in regard to the manner in which the Cess was to be collected.
Accordingly, the Cess was levied and collected. It was challenged before the
High Court which directed the appellants to refund the Cess collected with
interest. Hence the present appeal.
F
The contention of the appellants was that the Cess had been imposed
in lieu of octroi and that by virtue of Section 62(12) of Punjab Municipal Act,
. 1911 the notification of the imposition of the Cess was conclusive evidence
that the Cess had been imposed in accordance with the provisions of the said
Act
G
Dismissing the appeal, this Court

HELD : l. The order dt 30th November/3rd December, 1990 does not
impose the Cess. It directs the Municipal Committees to impose the Cess.
This is in accord with the terms of Section 62A(l) of the Punjab Municipal
453 H
454 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A Act, 1911 under which the order is issued. That there is no imposition of
a tax by reason of an order issued under the provisions of sub-section(I) of
Section 62A of the Act is clear from the provisions ofsub-section(3) thereof,
Sub-section(3) states that if the Municipal Committee has failed to carry out
an order that has been passed under sub-section(I ), the State Government
B may itself notify the imposition of the tax; such imposition operates as if it
were a resolution duly passed by a Municipal Committee under the provisions
of Section 62 of the Act. Section 62(12) of the Act comes into operation when
a Municipal Committee has imposed a tax after following the procedure laid
down in section 62 of the Act. It is then that the notification of the tax is
conclusive evidence that it has been imposed. Alternatively, ifthe Municipal
C Committee has failed to act as required by an order under sub-section(l) of
Section 62A of the Act and the State Government has imposed the tax under
sub-section(3) thereof, the provisions of Section 62(12) of the Act would then
f:!perate because an order passed by the State Government under Section
62A(3) of the Act operates as if it were a resolution duly passed by a
Municipal Committee. [456-G-H; 457-A-B[
D
Atlas Cycle Industries ltd. v. State ofHaryana & Anr., [1972) I SCR
127, held inapplicable.

Shri Krishan Kumar Sanam and Ors. v. The Punjab State and Anr., 74
P.L.R. (1972) 149, disapproved.
E
2. The appellant shall refund to the respondents the amount collected
from them as and by way of cess with interest at the rate of 12 per cent per
annum from the dates of collection till the dates of payment. [458-B)

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4451-68 of
F 1991 Etc.

From the Judgment and Order dated 19.8.91 of the Punjab & Haryana
High Court in C.W.P. Nos. 838-40, 713-15, 901-04, 983,986, 1081, 2578, 3456,
2981/91 and 16924 and 16764 of 1990.

G M.R. Sharma, (Ms. Puja Anand) and G.K. Bansal for the Appellant for
the State of Punjab.

Jayant Dass and B.P. Singh for the Appellant.

M.S.Ganesh and Yogeshwar Prasad, Mrs.Urmila Sirur, P.N.Puri (M.K.Dua) .
H (NP) and Mrs.Sheela Goel for the Respondents.
STATE v. NARANJAN DASS DOOM RA RICE GEN. MILLS [BHARUCHA, J.] 455
The Judgment of the Court was delivered by A

BHARUCHA, J. On 30th November/3rd December, 1990, when the State
- J
of Punjab (the appellant) was under Presi9ent's Rule, an order was issued
under the provisions of section 71 (I) of the Punjab Municipal Act, 1911, by
the President of India exempting kapas (raw cotton), narma and oil seeds from
the payment of octroi with immediate effect. On the same day, in exercise of B
powers conferred by Section 62-A of the said Act, the President was "pleased
to direct all the Municipal Committees in the State of Punjab to impose Urban
Development Cess on the sales/purchase of kapas (raw cotton), Narma and
oil seeds made within the respective Municipal Areas at the rate of 0.25 per
cent ad valorem with immediate effect''. Pursuant there to, a Memo was issued C
on 5th December, 1990 by the appellant to Municipal Corporations, Municipal
Committees and Notified Area Committees. It noted that the appellant had
issued the notification for imposition of the Cess on sales and purchases of
kapas, narma and oil seeds to compensate for the loss likely to be suffered
on account of the abolition of octroi. The Memo gave directions in regard to
the manner in which the Cess was to be collected. It appears that, without D
more, the Cess was sought to be levied and recovered. Writ petitions were,
therefore, filed in the High Court of Punjab & Haryana challenging the levy
and collection. By the judgment and orders under appeal, the writ petitions
were allowed and the appellant was directed to refund the Cess that had been
collected by it with interest at the rate of 12 per cent per annum. These E
appeals by special leave arise out of the judgment and orders. At the stage
at which special leave was granted, the judgment and orders under appeal
were stayed subject to the condition that, in the event of it being held that
the respondents were entitled to refund, the amounts collected from them
would be refunded with interest at the rate of 12 per cent per annum.
F
Section 62A(l) and (3) of the said Act are relevant, and read thus :

"62-A. Power of Government in taxation. (1) The State Government
may, by special or general order notified in the official Gazette, require
a Committee to impose any tax mentioned in section 61 not already G
imposed at such rate and within such period as may be specified in
the notification and the Committee shall thereupo_n act acc?rdingly.

xxx xxx xxx

(3) If the Committee fails to carry out any order passed under sub- H
456 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.
•
A section ( 1) or (2) the State Government may by a suitable order
noti'fied in the official Gazette impose or modify the tax. The order so
passed shall operate as if it were a resolution duly passed by the
Committee as if the proposal was sanctioned in accordance with the
procedure contained in section 62."

B .Section 62, sub-sections ( 1), (IO) and (12) read thus :
"62. Procedure lo impose laxes. -(1) A Committee may, at a special
meeting, pass a resolution to propose the imposition of any tax under
section 61.

c xxx xxx xxx

(10) (a) When a copy of order under sub-section (6) and (7) has been
received, or
(b) When a proposal has been sanctioned under sub-section (8) the
D State Government shall notify the imposition of the tax in accordance
with such order or proposal, and shall in the notification specify a
date not less than one month from the date of notification, on which
the tax shall come into force.

xxx xxx xxx
E
(12) A notification of the imposition ofa tax under this Act shall be
conclusive evidence that the tax has been imposed in accordance with
the provisions of the Act."

Learned counsel for the appellant submitted that the Cess had been
F imposed in lieu ofoctroi and that, by virtue of Section 62(12), the notification
of the imposition of the Cess was conclusive evidence that the Cess had been
imposed in accordance with the provisions of the said Act.

The argument proceeds upon a misconception. In the first place, the
G order dated 30th November/3rd December, 1990 does not impose the Cess. Its
language is clear : it directs the Municipal Committees to impose the Cess.
This is in accord with the terms of Section 62A(1) under which the order is
issued. That there is no imposition of a tax by reason of an order issued under
the provisions Of sub-section (I) of Section 62A is clear from the provisions
of sub-section (3) thereof. Sub-section (3) states that ifthe Municipal Committee
H has failed to carry out an order that has been passed under sub-section (1 ),
STATE r NARAN.IAN DASS DOOMRA RICE GEN. MILLS [BHARUCHA,J.] 457

the State Government may itself notify the imposition of the tax; such A
imposition operates as if it were a resolution duly passed by a Municipal
Committee under the provisions of Section 62. Section 62(12) comes into
operation when a Municipal Committee has imposed a tax after following the
procedure laid down in Section 62, It is then that the notification of the tax
is conclusive evidence that it has been imposed, Alternatively, ifthe Municipal B
Committee has failed to act as required by an order under sub-section (I) of
Section 62A and the State Government has imposed the tax under sub-section
(3) thereof, the provisions of Section 62(12) would then operate because an
order passed by the Statt Government under Section 62A(3) operates as if
it were a resolution duly passed by a Municipal Committee,

In the instant case, the order dated 30th November, 1990 was P.assed
c
under section 62A(I ), The Municipal Committee failed to impose the Cess
in pursuance thereof, The State Government, thereafter, did not impose the
Cess under the provisions of Section 62A(3), There was, therefore, no
imposition of the Cess, and its recovery was without the authority of law.
D
Learned couAsel for the appellant drew our attention to the judgment
of this Court in Atlas Cycle Industries ltd. v. State of Haryana & Anr,, [ 1972]
I SCR 127. The paragraph that was relied upon reads thus :
"Section 62 (10) of the Act indicates that there is imposition of tax
only when the State Government shall notify the imposition of the tax E
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,
levy or collect tax. Section 62(12) of the Act enacts that a notification
of the imposition of tax shall be conclusive evidence that the tax has
been imposed in accordance with the provisions of the Act. It is the F
notification under the statute which is conclusive evidence of the
imposition of tax."

- (at page 133)
What is said does not advance the case of the appellant. It is, in fact,
consistent with the view that has been taken by the High Court and which G
we are inclined to take.

Reliance is also placed by learned counsel for the appellant on the
decision of a Division Bench of the Punjab & Haryana High Court in Shri
Krishan Kumar Sanan and Others v. The Punjab State and another, 74 P.L.R.
(1972) page 149. The High Court has referred this decision in the judgment H
458 SUPREME COURT REPORTS [1997] SUPP. 5 S.C.R.

A under appeal and has pointed out that it is inapposite because it was given
in relation to an order that had been issued in exercise of the powers conferred
by Section 62A(3) of the said Act.

The appeals must, therefore, fail and are dismissed. .
B The appellant shall refund to the respondents the amounts collected
from thefo as and by way of the Cess with interest at the rate of 12 per cent
per annum from the dates of collection till the dates of payment.

No order as to costs.

C S.V.K.I. Appeals dismissed.