The Saraswati Industrial Syndicate Limited vs The State of Haryana

Rajive Bhalla, J.—The petitioner prays for quashing of Annexures P-3, P-5, P-7, P-8 and P-11 i.e., notices issued by the Municipal Council, Yamuna Nagar demanding payment of enhanced rate of octroi on sugarcane imported into the territorial limits of Municipal Council, Yamuna Nagar. Counsel for the petitioner submits that though the State of Haryana issued notification dated 22.11.1995 and corrigendum dated 8.7.1996 enhancing the levy of octroi from 5 Ps. to 50 Ps. per quintal but as the "Municipal Committee" has not passed a resolution accepting the aforesaid notification, as required by Section 75(2) of the Haryana Municipal Act, 1973 (hereinafter referred to as, the Act) nor has the State of Haryana passed order in terms of Section 75(3) of the said enactment, the demand for additional octroi raised by the Municipal Council is null and void for want of a resolution by the Municipal Committee and an order by the State Government.

Counsel for the Municipal Council admits that the Municipal Committee did not pass a resolution in terms of Section 75(2) of the Act but states that as the Municipal Council has implemented notification, issued by the Government, by passing orders requiring payment of octroi at 50 Ps. Per quintal, the demand for enhanced octroi cannot be said to be illegal. It is further submitted that the absence of a resolution is a mere a formality that cannot be pressed into service to set aside the enhancement of tax duly notified by the State Government. It is further contended that even otherwise as the petitioner has paid this amount and octroi is no longer leviable in the State of Haryana, the writ petition is infructuous. It is further submitted that the petitioner is not entitled to any refund as it has not pleaded that it has not passed on the burden of octroi paid, to its purchasers, thereby rendering its prayer for grant of refund untenable much less acceptable.

Counsel for the State of Haryana fairly concedes that no order has been passed u/s 75(3) of the Act but states that he adopts the reply filed by the Municipal Council and arguments addressed by counsel for the Municipal Council.

We have heard counsel for the parties, perused the pleadings and considered the relevant provisions.

The main question that requires an answer is whether failure of the "Municipal Committee" to pass a resolution in terms of Section 75(2) of the Act accepting notification, issued by the State, enhancing the rate of octroi and failure of the Government to pass an order u/s 75(3) of the Act empowers the Municipal Council to levy and recover octroi at enhanced rates. Admittedly, prior to enactment of the amendment, the Municipal Council was levying octroi, on the import of sugarcane within municipal limits, at 5 Ps. per quintal. It is not denied that the State of Haryana issued notification dated 22.11.1995, u/s 75 of the Act, followed by a corrigendum dated 8.7.1996, enhancing the rate of octroi to be paid on import of sugarcane to 50 Ps. per quintal. Section 75 of the Act reads as follows:

"75. Power of Government in respect of 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 70 not already imposed at such rate and within such period as may be specified in the notification and the committee shall thereupon act accordingly.

(2) The State Government may require a committee to modify the rate of any tax already imposed and thereupon the committee shall modify the tax as required within such period as the State Government may direct.

(3) If the committee fails to carry out any order passed under sub-section (1) or sub-section (2), the State Government may, by a suitable order notified 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 and as if the proposal was sanctioned in accordance with the procedure contained in section 74."

Section 75(1) of the Act postulates that the State Government may, by a special or general order, notified in the Official Gazette require a "Committee" to impose any tax and the Committee shall act thereupon. Section 75(2) of the Act empowers the State Government to require a "Committee" to modify the rate of any tax. Upon issuance of such a notification, a "Committee" is mandatorily required to modify the tax within such period as the State Government may direct. Where, however, a "Committee" does not pass a resolution in terms of Section 75(2) of the Act, imposing or modifying tax, as directed, Section 75(3) of the Act, reserves power to the State Government to issue an order/notification imposing or modifying the tax so notified and upon the order being notified it shall operate as if it were a resolution passed by the "Committee".

Admittedly, the State Government issued a notification u/s 75(1) of the Act enhancing the rate of octroi from 5 Ps. to 50 Ps. It is not denied that the "Committee" did not pass a resolution in terms of Section 75(2) of the Act accepting the modification. It is also admitted that the State Government has not passed an order u/s 75(3) of the Act, bringing into effect the rate of octroi modified pursuant to a notification, issued u/s 75(1) of the Act. Despite these legal infirmities, the Municipal Council has implemented the enhanced rate of octroi and counsel for the Municipal Corporation argues that as orders have been passed demanding octroi at enhanced rate, the "Committee" shall be deemed to have accepted the notification enhancing the rate of octroi.

At this stage, it would be appropriate to clarify that a Municipal Committee is comprised of elected members and is separate and distinct from a Municipal Council that comprises of its administrative officers. A Municipal Committee functions by passing resolutions. A statutory duty enjoined upon a "Municipal Committee" can only be performed by the "Municipal Committee" by passing a resolution. An Executive or Administrative Officer of a Municipal Council cannot, in the absence of a resolution by the "Municipal Committee" u/s 75(2) of the Act or an order passed by the Government u/s 75(3) of the Act, pass an order imposing or enhancing tax. An administrative order passed by an officer of the Municipal Council cannot take the place of a resolution statutorily required to be passed by a Municipal Committee, or an order required to be passed by the State of Haryana. A tax or its modified rate, notified by the State, cannot take effect without a Municipal Committee passing a resolution u/s 75(2) of the Act and where the Municipal Committee has not passed such a resolution without an order passed by the State Government, u/s 75(3) of the Act. It is admitted that neither has the Municipal Committee passed a resolution u/s 75(2) of the Act nor has the State Government passed an order u/s 75(3) of the Act. The absence of a resolution u/s 75(2) of the Act or an order u/s 75(3) of the Act, did not empower officers of the Municipal Council to demand octroi at enhanced rates and, therefore, renders demand of octroi at enhanced rates and tax so collected null and void for want of statutory sanction.

The petitioner''s prayer for refund, of octroi paid, can only be accepted if the petitioner has not passed on the burden of octroi paid to its customers. The petitioner may, therefore, approach the concerned officer of the Municipal Committee/Corporation for refund. The officer shall pass an order of refund only if the petitioner is able to prove that octroi paid has not been passed on to its customers. The needful be done within six months. As a consequence of the above discussion, the writ petition is allowed, notices of demand Annexures P-3, P-5, P-7, P-8 and P-11 are quashed with liberty to the petitioner to approach the concerned officer of the Municipal Council for refund of the octroi paid, in terms of order passed in the preceding paragraph.

No order as to costs.