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Judgment
T.P. Naik, J.
The Appellant. Municipal Committee, Harda, on 1-4-1961 filed AComplaint in the Court of the Judge Magistrate, Harda, inter alia, alleging that the Respondent-accused had, on the 8th and 9th July 1960, in contravention of Rule 13 (b) of the Rules (hereinafter called ''the Rules'') framed under Sections 71, 76 and 85 of the Central Provinces and Berar Municipalities Act, 1922 (II of 1922) (hereinafter called ''the Act'') brought within the municipal limits of HardACertain goods which were liable for octroi-tax, that he had wilfully and deliberately not paid octroi-tax due on them, and that he had thus made himself liable to punishment under Rule 43 of the Rules.
The defence was that the goods brought by the accused within the municipal limits of Harda were not liable to octroi-tax as they had been brought therein for purposes of ''sale'' and not for ''consumption or use'', which latter purposes alone would have attracted the incidence of the tax on them.
A few facts may now be narrated to clearly bring out the defence raised in this case.
The Respondent-accused is the proprietor of a shop known as ''Messrs. Baijnath Banshilal, Harda''. He had on 8-7-1960 brought within the municipal limits of Harda 4 cases of distilled water and one case of motor parts. On being asked to pay octroi-tax on them, he had intimated in writing that as the articles brought by him were for ''sale'' and not for ''use or consumption'', no octroi-tax was payable on them Similarly, he indented from Bombay a Tank-Wagon of light diesel oil on 9 7-1960 for which again he did not pay any octroi-tax, on the allegation that it was also not meant for ''use or consumption'' but for ''sale''.
Chapter IX of the Act deals with imposition, assessment and collection of taxes by a municipal committee. Section 66 (1) therein enumerates as the various taxes which a municipal committee may, subject to the purpose of the Chapter, from time to time, in the whole or any part of the municipality, impose. Section 66 (1) (e) thus provides for the imposition of ''an octroi on animals or goods brought within the limits of the municipality for sale, consumption or use within those limits''. u/s �6 (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; and under Sub-section (3) the first imposition of the tax has to be subject to the previous sanction of the State Government. Procedure for imposing the tax is provided for in Section 67. First ACommittee, at a special meeting, has to pass a resolution proposing the imposition of the tax; the resolution is then published and objections invited from the inhabitants of the municipality; and after considering the objections, at a special meeting, it sends its final proposals to the State Government for its sanction. u/s 67(5) the State Government, on receiving such 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; and thereafter if the proposals for taxes are sanctioned by it, it may u/s 67(7) by notification direct the imposition of the tax as sanctioned from such date as may be specified in Such notification, and thereupon the tax shall come into effect as from the date so specified. Sub-section (8) then says ''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. Under Sections 71, 76 and 85 of the Act, the State Government has been empowered to make rules regulating the assessment of taxes and for preventing evasion of assessment, for regulating collection of taxes and for providing for evasion of payment, for the payment of lump sums in composition, and for the fixing of fees payable for notices of demand, and for regulating the refund of taxes.
Acting under the provisions of Section 67 aforesaid, the State Government by its notification No. 1572 269 2-M XIII dated 29-3-1955, sanctioned the imposition of octroi-tax by the Municipal Committee, Harda, on ''animals and goods brought for sale, consumption or use'' within the limits of the municipality of Harda.
On this very date, viz , 29- 3-1955, the State Government by its notification No. 1571-2962-M-XIII under Sections 71, 76 and 85 of the Act also published rules for the assessment, collection and refund of octroi tax so imposed. Rule 9, so far as relevant for our purpose, then says:
(a) a person in charge of articles subject to octroi duty shall, as soon as they are brought within the octroi limits, take them to the nearest outpost, to be dealt with according to these rules.
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(c) On the arrival of dutiable articles at an outpost, the moharrir on duty shall call upon the person in charge-
(1) to declare whethrr they are intended-
(i) for consumption, or use within the Municipal Committee, Harda, or
(ii) for immediate export beyond the limits of the Municipal Committee, Harda;
(2) to give their weight and description and where duty is leviable ad valorem, their value. Every person making a declaration as to the nature, quantity and value of goods liable to octroi duty imported by him shall be bound to make a true declaration concerning them to the best of his knowledge and belief.
Rule 10 then says:
(a) If the articles are stated to be intended for consumption or use within the Municipal Committee, Harda, the moharrir shall, on being satisfied as to the correctness of the description, weight and value as given assess the duty and demand its payment, and on such payment being made, grant a pass for the articles in the prescribed form.
Rule 13 (b) provides that:
Any person bringing any dutiable article within the limits of the municipal committee without paying the duty or without giving declaration to the octroi moharrir shall be liable to pay double the duty and shall, in addition, be liable to be prosecuted for evasion of duty.
Rule 43, inter alia, makes infringemant of Rule 9 and 13 punshable with fine which may extend to Rs 50.
The whole defence defence is based on the omission of the word ''sale'' from rules 9 (c) (1) (i) and 10 (a), from which it is sough to be argued that in order validly levy a tax not only must it be a imposed but that a machinery for its assessment and collection must also be provided by the Act or the Rules. In the instant case, by the omission of the word ''sale'' from rules 9 and 10 the State Government had deliberaely ommited to provide a machinery for the assessment and collection of octroi tax on goods brought within the municipal limits of Harda for sale; and consequently even though tax may have, been validly imposed on such goods, it could not be said to be validly levied in the absence of such a machinery.
The contention was accepted by the learned Magistrate and the Respondent-accused acquitted. The complainant Municipal Committee has, therefore, come up in appeal.
In view of the notification under Sub-sections (5) and (7) of Section 67 of the Act read with Sub-section (8) thereof, there can be ho doubt that an octroi-tax had been validly imposed on the goods brought within the municipal limits of Harda for the purpose -of ''sale, consumption or use''. Consequently, the Respondent, who had admittedly brought the goods within the municipal limits for the purpose of ''sale'', had brought goods on which octroi-tax; had been imposed.
Rules framed under Sections 71, 75 and 85 of the Act are rales for the assessment, collection and refund of the tax. They provide the machinery for the collection of the tax.
Rules 9 and 10 are two such rules. The former [ru1e9 (c)], inter alia, deals with a declaration to be made by the person in charge of the dutiable articles as regards their weight, description etc. together with the fact whether they are for ''use or consumption'' within the municipal limits of Harda or whether they are for immediate export beyond the limits of that Municipal Committee to facilitate the assessment of octroi-tax due on them; and the latter (rule 10) deals with the actual assessment and demand of the tax on the basis, of such a declaration. The question is whether the omission of the word ''sale'' from the aforesaid rules justifies the contention that the Respondent, who had brought dutiable articles on which octroi-tax had been validly imposed by the Municipal Committee within the limits of the Harda Municipality, was not liable to the octroi-tax otherwise due on them.
The principles on which taxing statutes which impose a burden on ACitizen are construed are well settled. In the words of Rowlatt J. in Cape Brandy Syndicate v. Inland Revenue Commissioners (1921) 1 KB 64 at p. 71:
In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a taxi Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.
But this applies to the construction of charging sections only and not to machinery sections which only provide, a machinery for the assessment and collection of the tax. This principle was enunciated by Lord Parker in Drummond v. Collins 6 T C 525 at p. 540 wherein he said:
This section is ACollecting section and not a taxing section, and there is no reason in principle why it should not receive a liberal interpretation.
In the leading case of Witney v. The Commissioners of Inland Revenue 10 T C 88 at p. 110 Lord Dunedin in his speech in the House of Lords said:
My Lords, I shall now permit myself a general observation. Once that it is fixed that there is liability, it is antecedently highly improbable that the, statute should not go on to make that liability effective. A statute is designed to be workable, and the interpretation thereof by ACourt should be to secure that object, unless crucial omission or clear direction makes that end unattainable. Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay.
Now I have already dealt with the first stage. I come to the second, and that, so far as super-tax is concerned, is dealt with in Section 7. Sub-section (1) says that super-tax shall be assessed and charged by the Special Commissioners That does away with all of what I may call the territorial arrangements which apply to ordinary income tax Next follow a set of Sub-sections which provide for means which may help the Soecial Commissioners in their task It is here that I part company with the noble and learned Lord Chancellor. Holding that Sub-sections (2), (3) and (4) setting forth the request for and the making of the return of income from all sources are inapplicable to an alien nonresident in the United Kingdom, he concludes that where no return has been made there can be no failure in the sense of Sub-section (5), and that accordingly no assessment can be made. My Lords, I cannot help feeling with the utmost respect that that is tantamount to making liability dependent on failure to make a return, and yet ex hypothesi a liability is already established. But my real reason for differing from my noble and learned friend is that I look on these Sub-sections as mere aids to the Special Commissioners in their task, and not as conditions of their powers That power is, to my mind, conferred by Sub-section (1).
In the words of Viscount Sumner in The Commissioners of Inland Revenue v. Countess of Longford 13 TC 593 at p 620:
I think that it is irrelevant to refer to the cases in which it has been said that sections merely providing a machinery for collection of ACharge, which is imposed in general terms elsewhere, cannot restrict the attachment of the charge, being ''in aid'' and not in ''derogation of it''.
In The Commissioners of Inland Revenue v. Longmans Green and Co., Ltd 17 TC 272 at p. 282 Finlay J. said:
It was pointed out to me, and it was pointed out with truth, that you have got to get the charge imposed and you have got to get the necessary machinery for levying the tax. That is true, although, if you get the charge imposed, I see no reason why a specially rigorous construction should be imposed upon the machinery section. I should have thought if there was any intendment in the matter it would be rather the other way, but the truth of the matter is that I do not think that these general rules with regard to construction help very much. What one has to do is to find out whether the charge is imposed and whether the machinery is adequate to support the charge and to enable the Crown to get its money.
Similarly in Allen and Anr. (As Murray''s Executors) v. Trehearne (H.M. Inspector of Taxes) 22 T C 15 at p. 27 after citing with approval the aforesaid principle enunciated in Drummond''s case and Witney''s case, Scott, L.J. said:
I confess that during the argument of the case I have had some doubt, but having regard to the fact that the intention to impose liability is clear in this case by reason of the, wording of Rule 1 of Schedule E, in my view we ought to have no hesitation in giving what I may call ACommonsense interpretation the machinery sections, Sub-section (5) and Sub-section (6) of Section 45 of the Act of 1927;
The aforesaid principle was enunciated by their Lordships of the Privy Council in (1940) 8 ITR 442 (Privy Council) where Lord Normand speaking for the Board said:
The section, although it it part of a taxing Act, imposes no charge on the subject, and deals merely with the machinery of assessment. In interpreting provisions of this kind the rule is that that construction, should be preferred which makes the machinery workable, ut res valeat potius quam pereat. (See page 126-127.)
In India United Mills Ltd. Vs. Commissioner of Excess Profits Tax, Bombay, at p. 25 the Supreme Court, while construing Section 15 of the Excess Profits Tax Act (XV of1940), said:
That section is, it should be emphasised, not ACharging section, but a machinery section. And a machinery section should be so construed as to effectuate the charging sections.
Later in Gursahai Saigal v. Commissioner of Income tax, Punjab (1963) 48 I T R 1 at p. 5 after enumerating the principles governing the interpretation of taxing Acts on which the Assessee relied said:
Now it is well recognised that the rule of construction on which the Assessee relies applies only to a taxing provision and has no application to all provisions in a taxing statute. It does not, for example, apply to a provision not creating ACharge for the tax but laying down the machinery for its calculation or procedure for its collection. The provisions in. taxing statute dealing with machinery for assessment have to be construed by the ordinary, rules of construction, that is to say, in accordance with the clear intention of the Legislature which is to make ACharge levied effective.
We have, therefore, no hesitation in holding that the limited words ''consumption or use'' used in rules 9 and 10 of the Rules, which are the machinery sections of the taxing provisions relating to imposition and collection of octroi-tax by the Municipal Committee, Harda, must be construed ''in aid and not in derogation'' of the provisions imposing the tax on all articles brought within the municipal limits of Harda for ''sale, consumption or use''. We are also clear that in that way alone we shall be making the charging sections effective and enabling the Municipal Committee to get its tax from those articles on which it had been validly imposed.
It is at this stage pertinent to note that the expression ''consumption or use'' occurring in Section 12(1)(f) of the Rewa State Municipalities Act, 1946 had been construed by a Division Bench of this Court in Panchamlal Sikrilal Vs. Municipal Board and Another, where, repelling the contention that the expression was not wide enough to include within its ambit ''sale'' also, their Lordships said at p. 95:
Now, the plain meaning of Clause (f) is that an octroi-tax can be levied on goods or animals brought within the Municipality for consumption or use therein. The words ''consumption'' or ''use'' do not connote the idea that the person bringing the goods should himself consume or use the goods. If he sells the goods brought within the municipal limits, then there would be ''consumption or use'' of the goods by the purchaser. Even if the ultimate consumption or use is by the purchaser, the goods brought by the seller continue to remain as those brought within the Municipality for consumption or'' use. There are no words in Clause (f) to indicate that the person bringing the goods within the municipal limits must himself use or consume the goods. The word ''there'' is very significant and has been used to stress the fact that the goods or animals brought within the Municipality must be for consumption or use within the municipal limits and not for the purpose of being exported out or in transit." Again in Burmah Shell Oil Storage and Distributing Co. India Ltd. Vs. The Belgaum Borough Municipality, at p 912 while construing the expression "consumption or use" occurring in Bombay Municipal Boroughs Act(l8 of 1925) wherein again the argument was that ''sale'' was not comprised in that expression, Hidayatullah J. speaking for the Court said:
The goods must be regarded as having been brought in for purposes of consumption when a person brings them either for his own use or consumption, or to put them in the way of others in the area, who are to use and consume. In this process the act of sale is merely the means for putting the goods in the way of use or consumption. It is an earlier stage, the ultimate destination of the goods being ''use or consumption''. The earlier stage, namely, the sale by him, does not save the person who brought the goods into the local area from liability to the tax if the goods were brought inside for consumption or use. In other words, a sale of the goods brought inside, even though not expressly mentioned in the description of octroi as it stood formerly, was implicit, provided the goods were not re-exported out of the area but were bought inside for use or consumption by buyers inside the area.
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In our opinion, even without the word ''sale'' in the Boroughs Act the position was the same provided the goods were sold in the local area to AConsumer who bought them for the purpose of use or consumption or even for resale to others for the purpose of use or consumption by them in the area. It was only when the goods were re-exported out of the area that the tax could not legitimately be levied and in this case the municipality has agreed to refund the amount of tax on goods re-exported without being used or consumed in the municipal area.
In both the aforesaid cases the expression ''consumption or use'' occurring in Acts imposing octroi-tax was held to include ''sale'' on the ground that it was only a means for putting the goods in the way of use or consumption. In other words, it was an earlier stage leading to the same process the ultimate destination of the goods being ''use or consumption''. And if that be so, we do not see any difficulty in construing the expression ''consumption or use'' occurring in the machinery provisions of the Rules framed by the Municipal Committee, Harda, for the assessment and collection of octroi-tax as including within its amplitude the goods brought into the municipal limits for sale.
It is, however, contended that the omission of the word ''sale'' from the Rules is fatal to the prosecution for the following reasons: the notification imposing the tax uses the expression ''sale, consumption or use'' as exhaustive of the purposes in respect of which the tax could be imposed; as the expression uses three words ''sale'', ''consumption'' or ''use'', they must be understood as comprising three non-over-lapping concepts so that neither the word ''consumption'' nor the word ''use'' would include a ''sale'' which must be understood in its ordinary sense of a transfer for a price; the rules regarding assessment and collection only restrict themselves to two of the aforesaid purposes, namely, consumption or use - Rule 9 thus asks for a declaration if the goods are intended for ''consumption'' or ''use'' and Rule 10 then proceeds to assess the tax if they are declared to be for any of the aforesaid purposes; and the rules, do not in terms provide for assessment and collection in respect of goods brought within the municipality for ''sale'', so that the sale was not of the purposes for which, under the Rules as they stand, octroi-tax be assessed or collected.
Reliance is placed on to (sic )decision of a Division Bench of this Court in Anand Transport Co. (Pri.) Ltd, Raipur and Anr. v. Board of Revenue, At. P., Gwalior and Ors. 1962 M P L J 775 wherein the learned Judges at pp. 779-780 said:
As clause, (e) [Section 66 (1) of the act shows, octroi tax can be levied only when goods and animals are brought with the limit of a municipality for certain specified purpose, namely for ''sale, consumption use within, those limits''. If the word ''use'' were given the wide meaning commended to us it would include both sale and consumpt-. ion and would thereby render the words ''sale'' and'' consumption'' superfluous In our opinion, the very fact that ''use'' has been employed along with the other two words is contra-indicative of the wide meaning sought to be ascribed to it. If, as we think, the meaning of ''use'' in Clause (e) is not so wide, the question is what meaning should be ascribed to it To ascertain the true meaning, we call in aid inter alia a rule of interpretation of statutes. When the meaning of a word of wide significance is doubtful, it is legitimate to ascertain its meaning by reference to the meaning of words associated with it. Nosciture a sociis. Maxwell explained this rule at page 332 in this manner:
When two or more words which are susceptible of analogous meaning are coupled together, proscuntur a sociis. They are understood to be used in their cognate sense. They take, as it were, their colour from each other, that is, the more general is restricted to a sense analogous to the less general.
In our opinion the contention has no force. In the first place, it would have no application to the interpretation of the words ''consumption or use'' used in the machinery provsions of the Octroi Rules which must be interpreted ut res valeat potius quam pereat i. e. to make the machinery workable and the liability effective. Secondly, according to the Supreme Court in Burma Shell''s case (supra) so long as the tax is octroi which always implies a tax on goods and animals brought within municipal limits for their sale consumption or use, even the omission of the word ''sale'' in the charging sections of the Bombay Municipal Boroughs Act (18 of 1925) was of no consequence as the word ''consumption'' used therein was wide enough to cover goods and animals brought within municipal limits far their sale. And thirdly, even in the Anand Transport''s case (supra), the Division Bench was careful to state that notwithstanding the restricted interpretation put on the word ''use'', the word ''consumption'' should yet be understood in a larger sense as indicated by it in Panchamlal case (supra)
We are, therefore, of opinion that the goods brought within the municipal limits for sale were liable to the octroi-tax due on them
The question, then arises whether the Respondent could be held guilty of evasion of octroi tax within the meaning of Rule 13 (b) read with Rule 43 of the Rules
22 As pointed out in Simns v. Registrar of Probates 1900 AG 323 at p. 334, the word ''evade'' is ambiguous and has ordinarily two meanings: one suggesting underhand dealing, and the other intentional avoidance of something disagreeable. It is also an undisputed fact that from time to time devices have been invented, especially to avoid payment of taxes. But, so long as a person acts within the law, he is free to so arrange his affairs that his case falls outside the scope of the law. In the words of Viscount Sumner in Levenev. Inland Revenue Commissioners 1928 AC 217 at p. 227
It is trite law that His Majesty''s subjects are free, if they can, to make their own arrangements, so that their cases may fall outside the scope of the taxing Acts. They incur no legal penalties and, strictly speaking, no moral censure if, having considered the lines drawn by the Legislature for the imposition of taxes, they make it their business to walk outside them.
It is equally clear that where a person employs a device or a stratagem to cheat the municipal committee of its legitimate revenues, he would be liable for such evasion In between the two, there may be border-line cases, in which a person honestly, in the bona fide belief that he is a person who is not liable to any tax under the Act and the Rules as framed, refuses to pay it. Can it be said that he had evaded to pay it ? An act evaded is not necessarily an act infringed, even though often times the two expressions are used synonymously.
As pointed on by a Division Bench of this Court in Secretary, Municipal Committee, Sajar v. Vrajlal 1958 MPLJ 84 at p. 87:
The ordinary meaning of the word ''evade'' is to escape or avoid artfully; to baffle: See Chamber''s Twentieth Century Dictionary. It is no doubt true, as held in Simms v. Registrar of Probates, that it may also mean nothing more than the intentional avoidance of something disagreeable''. However, in the case of penal statutes; it should generally be held to suggest underhand dealing: See Simmt v. Registrar of Probates, Bullivant v. A.G. for Victo, a 1901 AC 196, Pavne v. Rex 1902 AC 552 , Commissioner of Stamp Duties v. Byrnes 1911 AC 386 and A.G. v. Richmond 1909 AC 466. It is in this sense chat it should be read in Rule 17 (b) of the Octroi Collection Rules, since it is a penal provision even if the double duty is deemed to be in the nature of a tax as has been held by the lower Court.
The rule that we are construing(sic) is also a penal provision as it seeks to punish persons for evasion of octroi-tax, and con squently it must be understood as suggesting an underhand dealing, the adoption of a device or a stratagem to cheat the municipal committee of its legitimate dues Consequently mere non-payment of a tax by a person under a bona fide and honest belief reasonably entertained that on a proper interpretation of the Act and the Rules made thereunder the tax was not due from him cannot bring the case within the mischief of rules 9 and 13 read with Rule 43 of the Rules. It is not suggested - nor could it be suggested - that the objection of the accused was a mere pretence for the deliberate purpose of avoiding the payment of the tax ; and, under the circumstances of the case, where the point was not completely free from doubt, it could not reasonably be suggested that the objection was one which could not reasonably be taken by any person similarly situated. We are, therefore, of opinion that even though the accused Respondent was liable for the octroi-tax on the goods brought by him within the municipal limits of Harda for the purpose of their sale, he had not on the facts of this case evaded its payment within the meaning of Rule 13 (b) of the Rules so as to be. liable to any punishment under Rule 43 ibid.
The question may be considered from another point of view also, viz., whether mens rea was an essential ingredient of the offence and whether it could be said, under the circumstances established in the case, that the accused-Respondent had the requisite mens rea to be guilty of the offence complained of.
In Brend v. Wood, (1946) 110 JP 317 at p 318: (1946) 175 LT 306 the Lord Chief Justice of England said:
It is in my opinion of the utmost importance for the protection of the liberty of the subject that the Court should always bear in mind that, unless the statute, either clearly or by necessary implication, rules oat mens red as constituent part of a Crime, a Defendant should not be found guilty of an offence against the criminal law unless he has got a guilty mind.
The aforesaid observation was cited with approval by the Judicial Committee of the Privy Council in Sriniwas Mall v. Emperor at p 139.
In the instant case, it is not mere de facto non-payment of the tax which creates ACriminal liability but its evasion which expression as understood in penal laws must necessarily connote the presence of mens rea - a guilty mind - as an essential constituent of the offence. On the facts of this case, we cannot say that the accused had the requisite mens rea or a guilty mind to be liable for any punishment under Rule 43 of the Rules.
The appeal, therefore, fails and is dismissed.