PETITIONER:
THE CENTRAL INDIA SPINNING ANDWEAVING AND MANUFACTURING COMP
Vs.
RESPONDENT:
THE MUNICIPAL COMMITTEE, WARDHA
DATE OF JUDGMENT:
18/12/1957
BENCH:
KAPUR, J.L.
BENCH:
KAPUR, J.L.
BHAGWATI, NATWARLAL H.
SINHA, BHUVNESHWAR P.
IMAM, SYED JAFFER
GAJENDRAGADKAR, P.B.
CITATION:
1958 AIR 341 1958 SCR 1102
ACT:
Terminal tax-Goods in transit passing through Municipal
limits-If can be taxed-Imported into and exported from-
Connotation of-C. P. & Berar Municipalities Act, 1922 (C.P.
11 Of 1922), s. 66(1)(0).
HEADNOTE:
Section 66(1)(0) of the C. P. and Berar Municipalities
Act, 1922, empowered the municipalities to impose “a
terminal tax on goods or animals imported into or exported
from the limits of a municipality”. The respondent framed
rules for the imposition of terminal tax. The appellant
transported bales of cotton from Yeotmal to Nagpur by road
and the vehicles carrying the goods passed through the
limits of respondent municipality. The goods were neither
unloaded nor reloaded at Wardha bat were merely carried
across through the municipal area. The respondent collected
terminal tax on these goods on the ground that they were
exported by the appellant from the limits of the respondent
municipality. The appellant disputed his liability to pay
terminal tax, and claimed a refund :
Held, that the goods which were in transit and were
merely carried across the limits of the municipality were
not liable to terminal tax. Terminal tax on goods imported
into or exported
1103
from the limits of a municipality was payable on goods on
their journey ending within the municipal limits or
commencing therefrom and not where the goods were merely in
transit and had their terminus elsewhere. Terminal tax
leviable under s. 66(1)(o) must have reference to some
activity within the municipal area i.e., the entry for the
purpose of remaining within that area or the commencement of
the journey from that area.
The words “imported into” do not merely mean “bringing
into”but comprise something more i.e., incorporating and
mixing up of the goods with the mass of the property in
the local area. Similarly, the words “exported from” do not
merely indicate, “taking out” but have reference to the
taking out of goods which’ had become part and parcel of the
mass of the property of the local area and will not apply to
goods in transit i.e. brought into the area for the purpose
of being transported out of it.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 119 of
1953.
Appeal by special leave from the order dated September
11, 1950, of the Nagpur High Court in Miscellaneous Civil
Case No. 77 of 1946.
C.K. Daphtary, Solicitor-General of India and M.S. K.
Sastri, for the appellants.
A.V. Vishwanatha Sastri, G. J. Ghate and Naunit Lal, for
the respondent.
1957. December 18. The following Judgment of the Court
was delivered by
KAPUR J.-This is an appeal by Special Leave against a
Judgment and order of the High Court of Judicature at Nagpur
dated February 14, 1950 and the question for decision turns
upon the construction of s. 66(1)(0) of the C. P. & Berar
Municipalities Act (Act II of 1922) which in this judgment
will be termed the Act.
A short recital of the facts of the case will suffice for
its decision. The appellant is a company which has its
spinning and weaving mills at Yeotmal. The appellant’s
bales of cotton are transported from Yeotmal to Nagpur by
road and vehicles carrying them pass through the limits of
Wardha Municipality. The goods being in transit, the
vehicles carrying them do no more than use the road which
traverses the municipal limits of Wardha and is a P.W.D.
road. The goods are neither unloaded nor reloaded at
1104
Wardha but are merely carried across through the municipal
area. The Municipal Committee purporting to act under s.
66(1)(0) of the Act and r. I of the rules made thereunder
collected Rs. 240 as terminal tax on these goods on the
ground that they were ex ported by the appellant from the
limits of the Municipality of Wardha. The appellant
thereupon claimed a refund of this sum. On refusal by the
Municipality the appellant took an appeal to the Deputy
Commissioner, Wardha which was sent for disposal to the Sub-
Divisional Officer, who, on March 11, 1946, referred the
following two questions under s. 83(2) of the Act to the
High Court for its opinion:
(1)Whether goods passing through the limits of Wardha
Municipality by road despatched from Yeotmal to their
destination at Nagpur without being unloaded or reloaded at
Wardha are liable for an export terminal tax ?
(2)Whether the respondent Municipal Committee is not
liable to refund the export terminal tax collect-ed on such
goods ?
The reference in the first instance came up for hearing
before Sheode, J., who referred the matter to a Division
Bench and the Division Bench in turn referred it to a Full
Bench. The High Court after referring to a number of
decided cases was of the opinion that the tax had been
validly imposed and the appellant was therefore not entitled
to a refund.
The powers of the Municipality to impose, assess and
collect taxes are set out in chapter 9 of the Act and s.
66(1) enumerates the taxes which may be imposed. Clause (d)
of sub-section (1) deals, with tolls; cl. (e) with octroi
and cl. (o) with terminal tax. The sub-section provides:
“ 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) a tax payable by the owners of buildings or lands
situate within the limits of the municipality,
1105
with reference to the gross annual letting value of the
buildings or lands;
(b) a tax on persons exercising any profession or art,
or carrying on any trade or calling, within the limits of
the municipality;
(c) a tax, payable by the owner, on all or any(
vehicles or animals used for riding, driving, draught or
burden, or on dogs, where such vehicles, animals or dogs are
kept within the limits of the municipality ;
(d) a toll on vehicles and animals used as aforesaid
entering the limits of the municipality, and on boats moored
within those limits:
Provided that a toll under this clause shall not be
payable on any vehicle or animal on which a tax under clause
(c) has been imposed.
(e) an octroi on animals or goods brought within the
limits of the municipality for sale, consumption or use
within those limits;
(f)market dues on persons exposing goods for sale in
market or in any place belonging to or under the control of
the Government or of the committee ;
(g) fees on the registration of cattle sold within the
limits of the municipality;
(h) a latrine or conservancy tax payable by the
occupier (or owner) upon private latrines, privies or
cesspools, or upon premises or compounds cleansed by
municipal agency;
(j) a tax for the construction and maintenance of
public latrines;
(k) a water-rate, where water is supplied by the
committee ;
(l) a lighting rate where the lighting of public
streets,places and buildings is undertaken by the committee
;
(m) a drainage tax, where a system of drainage has
been introduced;
(n) a tax payable by the occupiers of buildings or
lands within the limits of the municipality, according to
their circumstances and property within those imits;
1106
(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
Rule I of the Terminal Tax Rules made under the Act relates
to exports and r. 2 to imports. They provide:
(1) On the following goods exported by rail or road a
terminal tax shall be levied at the rate noted against
each ;
at 2 as. per maund of 40 seers; Cotton………………
(2) On the following goods imported by rail or road a
terminal tax shall be levied at the rate noted against each.
Then follows the schedule.
The High Court was of the opinion that “The words ‘ export
‘ and I import ‘ have no special meaning. They bear the
ordinary dictionary meaning, which has been the foundation
for the decisions to which I have referred in the opening
portion of my opinion. These words mean only ‘taking out of
and bringing into ‘. ”
The appellant’s contention is that the words’imported into
or exported from’ do not merely mean ‘to bring into’ or to
carry out of or away from but also have reference to and
imply the termination or the commencement of the journey of
the goods sought to be taxed and therefore goods in transit
which are transported across the limits of a Municipal
Committee are neither imported into the municipal limits nor
exported therefrom. It is also contended that even if the
words ,imported into or exported from’ are used merely to
mean “to bring into” or “to carry out of or away from” the
qualifying of the tax by the adjective “terminal”
1107
is indicative of the terminus ad quem or terminus a quo of
the journey of the goods and excludes the goods in transit.
The respondent on the other hand submits that the tax is
leviable merely on the entry of the goods into the municipal
limits or on their exit there. from and the word “terminal”
has reference to the termini of the jurisdictional limits of
the municipality and not to the journey of the goods. The
efficacy of the relative contentions of the parties
therefore requires the determination of the construction to
be placed on the really important words of which are
“terminal tax”, “imported into or exported from” and “ the
limits of the Municipality”. In construing these words of
the statute if there are two possible interpretations then
effect is to be given to the one that favours the citizen
and not the one that imposes a burden on him.
‘Import’ is derived from the Latin word importare which
means’to bring in’ and ‘export’ from the Latin word
exportare which means to carry out but these words are not
to be interpreted only according to their literal
derivations. Lexico-logically they do not have any
reference to goods in’transit’a word derived from transire
bearing a meaning similar to transport, i.e., to go across.
The dictionary meaning of the words ‘import’ and ‘export’ is
not restricted to their derivative meaning but bear other
connotations also. According to Webster’s International
Dictionary the word “import” means to bring in from a
foreign or external source; to introduce from without;
especially to bring (wares or merchandise) into a place or
country from a foreign country in the transactions of
commerce; opposed to export. Similarly “export” according
to Webster’s International Dictionary means “to carry away;
to remove; to carry or send abroad especially to foreign
countries as merchandise or commodities in the way of
commerce; the opposite of import “. The Oxford Dictionary
gives a similar meaning to both these words.
The word “transit” in the Oxford Dictionary means the
action or fact of passing across or through; passage
141
1108
or journey from one place or point to another; the passage
or carriage of persons or goods from one place to another ;
it also means to pass across or through (something) to
traverse, to cross. Even according to the ordinary meaning
of the words which is relied upon by the respondent, goods
which are in transit or are being transported can hardly be
called goods ‘imported into or exported from’ because they
are neither being exported nor imported but are merely goods
carried across a particular stretch of territory or across a
particular area with the object of being transported to
their ultimate destination which in the instant case was
Nagpur.
The respondent’s counsel sought to support his argument
by referring to the following cases decided by various
Indian High Courts where the words ,import’ and ‘export’
were construed as meaning ‘bring in’ or ‘take out of or away
from’ and it was also held that goods in transit are also
covered by the words ‘imported into’or ‘exported from’.
In Re Rahimu Bhanji (1) which was a case of a criminal
prosecution for refusal to pay octroi on the ground that
octroi was not due on goods in transit, the court gave a
literal meaning to the word “import” and held that as the
goods had been brought within the limits of the Municipality
they were liable to octroi under the Rules which provided
for a refund, which could be applied for. The definition of
octroi seems to have been ignored in that case.
In Narottamdas Harjivandas & Co. v. Bulsar Town Municipality
(2) the tax was imposed on goods in transit and the
argument raised was that the municipality had no power to
impose a terminal tax upon such goods as were not meant for
consumption within the limits of the Municipality. The
court held:
“In our opinion there is no force in this contention.
The Municipal Rules and Bye-laws dealing with the terminal
tax define it as ‘an octroi levied on the import into the
said Municipality of goods specified in the Terminal Tax
Schedule, such octroi not
(I) (1897) I.L.R. 22 Bom. 843.
(2) I.L.R. (1941) Bom. 97, 103.
1109
being liable to be refunded.’ ‘Import’ is defined in the
Rules as meaning ‘conveying goods by Railway or by Ship or
otherwise into Municipal limits’. It is clear therefore
that the tax is leviable on all goods entering Municipal
limits whether they are intended for consumption within the
city or whether they are’, merely in transit through the
city to some other place “.
This decision rested on the definition of the words ”
import “ and “ terminal tax “ without taking into
consideration the meaning of ‘octroi’ which implies
consumption, use or sale. Besides these observations were
really obiter because the court held that the goods never
entered the limits of the Municipality and consequently no
tax was chargeable.
Dalvadi -Maganlal Bhagwandas v. Ahmedabad Municipality
(1) was a case in which bricks manufactured within the
limits of the Ahmedabad Municipality had in order to be
carried to the place of business of the manufacturer, which
was in another part of the town, to be temporarily taken out
of the limits of the Municipality and re-entered at another
point. The re-entry was held to be ” import ” on the basis
of the dictionary meaning of the word and because “ import”
had no reference to and was not qualified by any
consideration of the place of manufacture or place of
consumption. Rajadhyaksha J., said at p. 137:
“ There is no such limitation on the meaning of the word
import ” which must be given its ordinary meaning
and at p. 140 the learned Judge observed:
” We are of the opinion that the word ” import in r. 380,
Ahmedabad Municipal Code must be given its ordinary meaning,
and that is ” to bring something within the Municipal limits
from a place without its boundaries “, irrespective of the
consideration as to whether the goods were manufactured
within the Municipal limits, how long they were outside
those limits and for what purpose”.
(1) I.L.R. (1945) Bom. 132.
1110
The two Nagpur cases relied upon were Bhagwandas
Harikishandas v. Municipal Committee, Yeotmal (1) and
Kashiram Jhabarmal Firm v. Municipal Committee, Nagpur (2).
In the former case the decision was again based solely on
the literal dictionary meaning of the words ” imported into
or exported from “, and a further argument relying on the
existence of the word ” or ” between “imported and exported
“ instead of ”and…….. as an argument against the
,imposition of the tax on goods in transit was also
repelled. In the latter case where the goods were brought
into the municipal limits for being despatched by rail the
court again relied on the ” plain meaning of the words
“imported into or exported from “ and also on certain
government instructions which were in favour of the
imposition of tax on goods in transit. There are also some
unreported judgments of the Nagpur High Court taking a
different view of the words” imported into or exported from”
and those have been referred to in the judgment of Grille C.
J. in Kashiram’s case (2) and in the referring order of
Sheode J., in the present case.
Emperor v. Har Dutt (3) was a case of payment of toll tax
in respect of a lorry brought within the limits of the
Municipality through the toll barrier. The word used in
Rule I in that case was ” bring ” and it was held that
bringing has no element of pause or repose. This case is
hardly relevant to the facts of the case now before us.
In an earlier case Nek Mohammad v. Emperor (4) to the
words “ bring ” and ” import ” an element of pause and
repose was attached, but this case was not approved of in
Hardwarimal Harnath Das v. Municipal Board, Dehradun (5)
which also was a case of goods in transit. The word ”
import ” was there given the meaning ” carried into “. But
the decision was based on the definitions given in the
Statutory Rules to the word ” import ” which was “ bringing
into the terminal tax limits from outside those limits “.
(1) A.I.R (1945) Nag. 197. (2) I.L.R. (1946) Nag.
99.
(4) A. I. R. (1936) All. 83.
(3)A.I.R. (1936) All. 743.
(5) I. L. R. (1940) All. 4.
1111
In none of these cases was the argument as to the
qualification stemming from the use of the words “terminal
tax” considered nor was the signification of the word
“terminal ” as a prefix to the word tax discussed.
The respondent also relied on Muller v. Baldwin (1) where
it was held that ” coals exported from the Port” must be
taken to have been used in its ordinary meaning of ” carried
out of the Port ” and therefore included coals taken out of
the port in a steamer as ” bunker coals ” that is, coals
taken on board for the purpose of consumption on the voyage.
The argument that the term ” exported “ must receive a
qualified interpretation and that it means taken for the.
purpose of trade only was rejected. Lush J. said at p. 461
:-
“ There is nothing in the language of the Act to shew
that the word “exported ” was used in any other than its
ordinary sense…………. Construing the words of the Act
upon this principle, we feel bound to hold that coals
carried away from the port, not on a temporary excursion, as
in a tug or pleasure-boat, which intends to return with more
or less of the coals on board, and which may be regarded as
always constructively within the port, but taken away for
the purpose of being wholly consumed beyond the limits of
the port, are coals ” exported ” within the meaning of the
Act “.
Now three things clearly emerge from that (Muller’s)
case; (1) that the word “export ” was not applied to coals
in transit because the coals were taken from the port and
started journey from there and would be included in the
phrase “taken out” of the port and (2) that temporary taking
out was not ” export ” as was held in Maganlal Bhagwandas v.
Ahmedabad Municipality (2); (3) that the test is the
intention with which the goods were brought in or taken out.
It was urged that in accordance with the current
authority of the different courts of India, a different
interpretation should not be placed on the words of the
section but this argument is of little avail in a case
(1) (1874) 9 Q B- 457.
(2) I.L.R. (1945) Bom. 132.
1112
where the decision has not been acquiesced in for long or
the authorities are not absolutely unanimous. Moreover it
is not a case of disturbing the course of construction which
has continued unchallenged for such a length of time as to
acquire the sanction of continued decisions over a very long
period and there is therefore no principle which will
preclude this court from correcting the error. See William
Hamilton and John Hamilton v. William Baker (1). The
Lancashire and Yorkshire Railway Company v. The Mayor,
Alderman, and Burgesses of the Borough of Bury (2). Pate v.
Pate (3).
In another case Wilson v. Robertson (4) under the
statute the duty was imposed on all goods “imported into or
exported from Berwick harbour” which extended down the Tweed
to the sea but no part of it extended above the bridge.
Goods were brought up the river in a sea-going vessel which
having first used rings and posts put up by the Harbour
Commissioners in order to moor while lowering the masts,
passed through Berwick Bridge, and unloaded her cargo about
two hundred yards above the bridge and beyond the limits of
the harbour. It was held that goods were not “ imported
into ” the harbour so as to make any dues payable in respect
of them. The argument raised there was that as there was no
harbour down the Tweed except Berwick and though the goods
were actually unloaded above the Berwick bridge and out of
the limits of the harbour it was substantially imported into
the harbour. The vessel in that case was obliged to stop
before passing the bridge and avail herself of the benefits
of the machinery and works provided by the Commissioners and
that was part of the means used towards the unloading of the
vessel and it was argued that this would amount to import.
Lord Cambell C. J. said:
“ The argument on behalf of the plaintiff would be very
pertinent if addressed to a Committee of the House of
Commons in favour of making the harbour dues payable in such
a case as the present. We can,
(1) (1889) 14 App. Cas. 209, 220, 222. (2) (1889) 14
App. Cas. 417, 420.
(3) (1915) A. C. 1100, 1108. (4) (1855) 24 L. J. Q. B.
185.
1113
however, look only to what the legislature has enacted, in
order to see whether this burthen is cast upon the
defendants. The dues are only to be paid upon goods
imported into the harbour of Berwick, the limits of which
are defined by the Act, and which does not extend above the
bridge. Now, has this iron been so imported ? It is
admitted that, if it had been carried through the bridge to
a port higher up the river, no dues would have been payable;
and the plaintiff’s counsel by that admits himself out of
court………….. These observations support the
submissions against the meaning of ” export ” or ” import ”
being merely taking out of or bringing into.
Mersey Docks and Harbour Board v. Twigge (1) was a case
of goods shipped from a foreign port under a through bill of
lading to Liverpool, landed in London and sent from there to
Liverpool in another ship and it was held that such goods
were imported into Liverpool ports beyond the seas and not
from London. The transit began at Singapore and ended at
Liverpool and was not broken by the transhipment in London.
By giving to the words ” imported into or exported from ”
their derivative meaning without any reference to the
ordinary connotation of these words as used in the
commercial sense, the decided cases in India have ascribed
too general a meaning to these words which it appears from
the setting, context and history of the clause was not
intended. The effect of the construction of ” import ” or ”
export ” in the manner insisted upon by the respondent would
make railborne goods passing through a railway station
within the limits of a Municipality liable to the imposition
of the tax on their arrival at the railway station or
departure therefrom or both which would not only lead to
inconvenience but confusion, and would also result in
inordinate delays and unbearable burden on trade both inter
State and intra State. It is hardly likely that that was
the intention of the legislature. Such an interpretation
would lead to absurdity which has, according to the rules of
interpretation, to be avoided.
(1) (1898) 67 L.J. Q. B. 604.
1114
Chief Justice Marshall dealing with the word “ im-
portation ” said in Brown v. State of Maryland (1):
The practice of most commercial nations conforms to this
idea. Duties, according to that practice, are charged on
those articles only which are intended for sale or
consumption in the country. Thus seastores, goods imported
and re-exported in the same vessel, goods landed and carried
over land for the purpose of being re-exported from some
other port, goods forced in by stress of weather, and
landed, but not for sale are exempted from the payment of
duties. The whole course of legislation on the subject
shows that in the opinion of the legislature the right to
sell is connected with the payment of the duties “.
Continuing the learned Chief Justice at p. 447 observed:
“Sale is the object of importation, and is an essential
ingredient of that intercourse, of which importation
constitutes a part. It is as essential an ingredient, as
indispensable to the existence of the entire thing, then, as
importation itself……………… ” This supports the
contention raised that ” import ” is not merely the bringing
into but comprises something more i.e. ” incorporating and
mixing up of the goods imported with the mass of the
property ” in the local area. The concept of ” import “ as
implying some. thing brought for the purpose of sale or
being kept is supported by the observations of Kelly C. B.
in Harvey v. The, Mayor and Corporation of Lyme Regis (2).
There the claim for a toll was made under the Harbour Act
and the words for construction were ” goods landed or
shipped within the same cobb or harbour Construing these
words Kelly C. B. said:
“ The ordinary meaning and purport of the words is
perfectly clear, namely, that tolls are to be paid on goods
substantially imported; that is, in fact, carried into the
port for the purpose of the town and neigh-
bourhood.”
Similarly the word ” export ” has reference to taking out
of goods which had become part and parcel of the mass of the
property of the local area and will not
(1) (1827) 12 Wheat 419, 442; 6 L. Ed 678, 686.
(2) (1869) 4 EX. 260, 262.
1115
apply to goods in transit i.e. brought into the area for the
purpose of being transported out of it. If the intention
was to tax such goods then the word used should have been ”
re-exported ” which means to export (imported goods) again;
Re-exportation means the exportation of imported goods.
Even assuming that the words “imported into or ” exported
from ” could be restricted only to their derivative meaning
and thus construed to mean only “brought into or taken out
or away from” this general meaning it was submitted by the
appellant is qualified by the use of the prefix “terminal”
used adjectively with the word “ tax”, which makes it
necessary to determine the meaning of the term terminal tax
“. And the question then arises does it have reference to
the jurisdictional limits of the Municipality or to the
ultimate termination or the commencement of the journey of
the goods as the case may be. In dealing with this the High
Court said:
“ It remains to consider what is signified by the word ”
terminal “. It is obvious that it could refer either to the
termini of the goods or the termini of the Municipality. It
is clear to me that the word ” terminal ” refers not to the
destination or origin of the goods but to the termini of the
Municipal limits. Digby, J., pointed out that it refers to
the traffic rather than the origin of the goods “.
According to the Oxford Dictionary ” terminal means end,
boundary ; situated at or forming the end or extremity of
something; situated at the end of a line of railway; forming
or belonging to, a railway terminus.
“ 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 p. 729 that
terminal “ in connection with transportation means inter
alia ” the fixed beginning or ending point of a given run
142
1116
if ” terminal “ besides the above meaning has an
additional meaning also and that meaning signifies the
termini or the jurisdictional limits of the municipal area
even then the construction to be placed on the term should
be the one that favours the tax-payer, in accordance with
the principle of construction of taxing statutes, which must
be strictly construed and in case of doubt must be construed
against the taxing authorities and doubt resolved in favour
of the taxpayer. In Crawford on Statutory Constructions in
para. 257 at p. 504 the following passage pertaining to
construction of taxing statutes taken from Bedford v. Johnson
(1) is quoted:
” Statutes levying taxes or duties upon citizens will not
be extended by implication beyond the clear import of the
language used, nor will their operation be enlarged so as to
embrace matters not specifically pointed out, although
standing upon a close analogy, and all questions of doubt
will be resolved against the government and in favour of the
citizen, and because burdens are not to be, imposed beyond
what the statute expressly imparts”.
In that case the court refused to regard automobile
parking lots as falling within the scope of a statute which
imposed a tax on general warehouse storage establishments.
On this principle the word ” terminal ” must in the context
be construed as having reference to terminus and has to be
read to connote the idea of the end of something connected
with motion and not that of an intermediate stage of a
journey.
It would be quite legitimate to examine the legislative
history of these ” terminal taxes ” which would be a useful
aid to construction of clause (o) of s. 66(1). In the last
century a tax known as Octroi payable on the entry of goods
in a local area for consumption, use or sale therein was
introduced. In 1920 an optional substitute called “terminal
tax ” came into existence by virtue of item 8 of Schedule 11
of the Scheduled Tax Rules framed under s. 80 A (3)(a) of
the Government
(1) I02 COIO 203, 78 Pac (2) 373.
1117
of India Act, 1915 as amended in 1919.Item 8 was as follows:
Item 8 “A terminal tax on goods imported into or exported
from, a local area, save where such tax is first imposed in
a local area in which a octroi was not levied on or before
the 6th July, 1917.” In the Government of India Act, 1935
this item was replaced by two items one dealing with ”
terminal tax ” and the other with the right of a local area
to impose tax on entry of goods into a local area. The
former was put in the Central List (List 1) and the latter
in the Provincial List (List II). (1) Item No. 58 in List I
of Schedule 7 of the Constitution Act was:
“ Terminal taxes on goods or passengers carried by
railway or air ; taxes on railway fares and freights” and
(2) in the Provincial List another item was introduced-item
No. 49 which was as follows:
“ Cesses on the entry of goods into a local area for
consumption, use or sale therein.”
The Constitution of India maintains this distinction in the
Seventh Schedule and item No. 89 in List I corresponding to
the above mentioned item No. 58 is “terminal taxes on goods
or passengers, carried by railway, sea or air; taxes on
railway fares and freights.”
In the State List the item No. 52 which is as follows :
“Taxes on the entry of goods into a local area for
consumption, use or sale therein and Item No. 56 is:
” Taxes on goods and passengers carried by road or on inland
waterways “.
The legislative history of this tax thus shows that octroi
was leviable on the entry of goods in a local area when the
goods were for consumption, use or sale therein. The
substituted tax was terminal tax on goods imported into or
exported from a local area and by rules this tax in the case
of Wardha Municipal Committee was imposed on certain class
of goods imported and on others exported by railway or road.
In 1935 the terminal tax was made leviable on goods
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carried by railway or air but the tax on entry of goods was
imposable on goods for consumption, use or sale in a local
area. Both these taxes have been continued by the
Constitution. If the pre 1920 octroi and the post 1935 cess
or tax on entry of goods is payable on -goods for
consumption, use or sale, can it be said that the
Constitution Act of 1915 as amended in 1919 or the Rules
made thereunder intended to vary the nature of the tax by
the introduction of item 8 in Sch. II ,under the Scheduled
Tax Rules i.e. the tax became leviable on entry of goods or
on their being taken out without their acquiring the
qualification of incorporation with the mass of property of
the local area. The presumption is against the imposition
of new burdens. In the absence of clear intention to the
contrary the incidence of the tax leviable under item 8 of
Sch. II of the Schedule Tax Rules is incapable of having a
different complexion from that which it had before 1920 or
that which was clearly given after 1935. It was said in U.
S. v. Fisher (1):
“that it is in the last degree improbable that the
legislature would overthrow fundamental principles, infringe
rights, or depart from the general system of law., without
expressing its intention with irrestible
clearness………………..
It is also a recognised principle of construction that
general words and phrases however wide and comprehensive
they may be in their literal sense must usually be construed
as being limited to the actual objects of the Act. There is
no evidence that the actual object of the Act in the present
case was to extend the powers of the Municipalities to
imposing the tax on articles which were in the course of
transit.
That by the substitution of terminal tax on goods
imported into a local area the nature of the tax had not
been altered from what it was when octroi was in force or
when instead of ” terminal tax ” octroi (without refund, was
substituted is clear from the decision of the Federal Court
in Punjab Flour and General Mills’ case (2) which is
discussed in a later part of
(1) (1804) 2 Cranch 358, 390; 2 L. Ed.’ 304.
(2) [1947] F.C.R. 17.
1119
this judgment. Therefore terminal tax on goods imported or
exported is similar in its incidence and is payable on goods
on their journey ending within the municipal limits or
commencing therefrom and not where the goods were merely in
transit through the municipal limits and had their terminus
elswhere.
The vires of the tax has not been assailed but the
difference in the language of the two items in List I and II
has been pressed before us for the purpose of showing that
the word ” terminal ” implies the terminus of a journey and
not the end of the jurisdictional limits of a Municipality.
Terminal in item No. 58 of List I of the 1935 Constitution
Act has reference to the terminus of carriage of goods.
There is no reason to give to this word a different meaning
in item No. 8 of Scheduled Tax Rules under the Government of
India Act of 1915 or in clause (o) of s. 66(1) of the Act.
The two sets of taxes in Lists I and 11 have different
qualities. The “terminal tax” under item No. 58 of List I
arises at the end of journey by railway wherever the end may
be in relation to particular goods’ and under item No. 49 of
List 11 the tax or cess on entry of goods whatever the
nomenclature is imposable when the goods enter a local area
for consumption, use or sale therein. The two sets of taxes
are so distinct that they may be imposed simultaneously, one
when they reach their destination at the end of a railway
journey and the other when they enter the limits of a local
area for the object above mentioned. But in both cases the
activity in regard to the motion of the goods ends, in the
one case as the goods are carried no further by railway and
in the other as their entry is for consumption, use or sale.
Keeping in view the terms and language and the legislative
history of the section 66(1) we are unable to enlarge the
terms of the section by mere construction so as to include
within its operation goods which are in transit and are
being transported across the jurisdictional limits of the
Municipality.
The Federal Court in Punjab Flour and General Mills Co.
Ltd. v. Chief Officer, Corporation of City of Lahore (1)
considered the meaning of the word
(1) [1947] F.C.R. 17.
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” terminal” in a case which was brought from Lahore. There
the Municipality of Lahore imposed a terminal tax in 1926
calculated on the gross weight Of Consignments or per tail
as the case might be, at the rates and on the articles
specified in the schedule, imported into the Municipality by
rail or by road. By a notification of 1938 the Municipality
in supersession of that tax imposed a new tax called “Octroi
(without refund)” which was to be similarly calculated on
the gross weightage of the consignments imported into the
limits of the Municipality. This in turn was replaced by
the imposition of a new tax also called “Octroi (without
refund)” on consignments imported into the limits of the
Municipality. The appellant’s contention in that case was
that the tax imposed was a ” terminal tax ” on goods carried
by railway and as such not imposable. The Municipality
argued on the other hand that it was a tax within the
provisions of Entry No. 49 of List 11 and as such could be
imposed with the previous sanction of the Provincial
Government under s. 61(2) of the Punjab Municipalities Act.
The following passage from the judgment of Spens C. J. shows
the meaning to be attached to the word ” terminal “:
” There appears to us a definite distinction between the
type of taxes referred to as terminal taxes in Entry No. 58
of List I of Sch. 7 and the type of taxes referred to as
cesses on the entry of goods into a local area in Entry No.
49 of List II. The former taxes must be (a) terminal (b)
confined to goods and passengers carried by railway or air.
They must be chargeable at a rail or air terminus and be
referrable to services (whether of carriage or otherwise)
rendered or to be rendered by some rail or air transport
Organisation. The essential features of the cesses referred
to in Entry No. 49 of List II are on the other hand simply
(a) the entry of goods into a definite local area and (b)
the requirement that the goods should enter for the purpose
of consumption, use or sale
therein……………………………………………..
In our judgment there is no limitation to be implied in
Entry No. 49, List II, in regard to the manner in which
goods may be transported into a local area. It follows
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that so far as rail-borne goods are concerned the same goods
may well be subjected to taxation under Entry No. 58 of List
I as well to local taxation under Entry No. 49 of List II.
The grounds of taxation under the two entries are, as
indicated above, radically different, and there is no case
for suggesting that taxation under the one entry limits or
interferes in any way with taxation under the other.”
Therefore according to the Federal Court “ terminal” has
reference to the terminus of the railway or air i.e., the
end of journey. The tax imposed in that case was held not
to be a terminal tax but merely a cess on entry of goods
into the local area within Entry No. 49 of List II even
though it was imposed on railborne goods entering the
municipal area.
It is a noticeable feature of s. 66(1) that apart from
the terminal tax there are 14 other heads of taxation
imposable by the Municipality and in the case of each one of
these 14 heads the tax is on some activity which takes place
within the jurisdictional limits of the Municipality. This
supports the contention of the appellant that the terminal
tax leviable under cl. (o) properly construed must have
reference to some activity within the municipal area i.e.,
the entry for the purpose of remaining within that area or
commencement of journey from that area.
We are, therefore, of the opinion that the terminal tax
under s. 66(1)(o) is not leviable on goods which are in
transit and are only carried across the limits of the
Municipality, and would therefore allow this appeal, reverse
the decision of the Nagpur High Court. The appellant will
have its costs in this court and in the High Court.
Appeal allowed.
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