Bombay High Court
Indian Oil Corporation Ltd vs // on 11 November, 2011
Author: B.P. Dharmadhikari
Bench: B.P. Dharmadhikari, A.P. Bhangale
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY,
NAGPUR BENCH, NAGPUR
WRIT PETITION NO.1596 OF 2011
Indian Oil Corporation Ltd.,
a Government Company
under Section 617 of the Indian
Companies Act, having its Regd.
Office at Indian Oil Bhavan, G/9,
Ali Yawar Jung Marg, Bandra (East),
Mumbai through Shri P.T. Nimje,
Senior Depot Manager, Khapari
Depot, District - Nagpur. ........ PETITIONER.
// VERSUS //
1. The Nagpur Municipal Corporation,
Nagpur through its Commissioner.
2. The State of Maharashtra,
Through its Secretary,
Urban Development Department,
Mantralaya, Mumbai 400 032. ........ RESPONDENTS
Mr. S.V. Manohar, Senior Advocate with Mr. Rohit Joshi, Adv. for
petitioner.
Mr. S.K. Mishra, Advocate for Respondent No.1.
Mr. T.R. Kankale, A.G.P. for Respondent No.2.
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2
Date of reserving the judgment : 26th September, 2011.
Date of pronouncement of the judgment : 11th November, 2011.
********
Coram: B.P. DHARMADHIKARI &
A.P. BHANGALE, JJ.
JUDGMENT :(PER B.P. DHARMADHIKARI, J.) 1 Rule made returnable forthwith. Heard finally the learned Counsel for the respective parties by consent.
2 The prayer in this writ Petition is to hold and declare that the Rules 14 (a), 14 (d), 14(f) 14(h) and Rule 44 of the Octroi rules for the assessment, collection and refund of cess, octroi duty imposed under Section 114 (1) (e) of the City of Nagpur Corporation Act, 1948 ( hereinafter referred to as " CNC Act)" and for the prevention of evasion thereof are unconstitutional, illegal, null and void being contrary to Article 265 of the Constitution of India and Section 152 of the CNC Act. Said impost is on goods and animals brought within the octroi limits of Nagpur Corporation for sale, consumption or use ::: Downloaded on - 09/06/2013 17:54:51 ::: 3 therein. The Petitioner also prays for the declaration that Nagpur Municipal corporation is not entitled to recover any penalty from the Petitioner under it's bill for penal octroi duty No. NMC/OCT/1107/AMC, dated 18/02/2011 and the notice of demand No. NMC/OCT/1166/AOS10-11, dated 07/03/2011 sent by it with a prayer to set aside and to quash that Bill and the notice. In other words, the Petitioner has challenged validity of the above-mentioned Rules for the assessment, collection and refund of the Octroi imposed under Section 114 (1) (e) of the CNC Act on the ground that they are contrary to Article 265 of the Constitution of India and Section 152 of the CNC Act.
3 The Petitioner is a registered Government Company while the Respondent/Nagpur Municipal Corporation-NMC for short, is a body constituted under the City of Nagpur Corporation Act( "State" within the meaning of Article 12 of the Constitution of India ). The respondent/NMC is claiming that out of total liability of octroi duty of Rs 28,37,651/-, the Petitioner paid only Rs. 19,50,489/- and it remained in the deficit of Rs. 8,87,162/-. Thus, notice dated ::: Downloaded on - 09/06/2013 17:54:51 ::: 4 07/01/2011 was issued as per Rule 44 of the Octroi Rules calling upon the Petitioner as to why ten times octroi duty should not be levied against it. Bill No. NMC/OCT/1107/AMC, dated 18/02/2011 for penal octroi duty (ten times) in the amount of Rs. 2,64,26,021/- was issued. The Petitioner gave reply dated 23/02/2011 stating that it had no intention to avoid payment and further requesting waiver of penal octroi duty as the Petitioner is a respectable Government Company.
The Respondent raised their demand by notice dated 07/03/2011 bearing No. NMC/OCT/1166/AOS/10-11 asking the Petitioner to pay a sum of Rs.2,64,26,021/- on account of unpaid arrears of Octroi duty and also informing the Petitioner that the proceeding would be taken against it for recovery of the dues in accordance with the provisions of the CNC Act unless the amount demanded was paid within 21 days from the date of service of the demand notice. The Petitioner, by letter dated 11/03/2011, inquired about the copy of the order on the basis of which penal octroi bill was issued. The respondent/NMC informed by letter dated 16/03/2011 that the action was taken in accordance with Section 154(1) and (2) (power to issue Bill) and also 155(1) ( power to issue Notice of Demand as Bill was not paid) of the CNC ::: Downloaded on - 09/06/2013 17:54:51 ::: 5 Act, 1948. It is the grievance of the Petitioner that the respondent/NMC had not passed any order before issuing the show cause notice and demand Bill for levying penal octroi duty. The Petitioner submitted an objection on 22/03/2011, but the NMC rejected it by communication dated 25/03/2011 received by Petitioner on 28/03/2011. This Court has on 31.3.2011 issued notice and permitted Petitioner to deposit sum of Rs. 8 Lac and stayed coercive recovery.
4 Learned Senior Advocate for the Petitioner Mr. Sunil Manohar submitted that Section 152 of the CNC Act provides for levy of penalty in cases where goods, on which octroi duty is leviable are brought /imported within the City limits without payment/tender of octroi duty with an intention to defraud the Municipal Corporation. The provision gives discretion to the CNC to quantify penalty. The Government of Maharashtra had framed the Octroi Rules for the assessment, collection and refund of cess in exercise of power under section 420(2) (t) of the CNC Act, 1948. Those rules are "The Octroi rules for the assessment,collection & refund of cess (octroi duty) ::: Downloaded on - 09/06/2013 17:54:51 ::: 6 imposed under section 14(1)(e) of the City Of Nagpur Corporation Act,1948, and for prevention of evasion thereof, on goods and animals brought within the octroi limits of the Nagpur Corporation for sale,consumption or use therein"; mentioned as Octroi Rules hereafter.
These Octroi Rules are in force since 01/06/1966. Octroi duty i.e. tax is imposed under section 114 (1) (e) of the CNC Act. Rule 39A enables and permits the Municipal Commissioner to allow the Oil Companies to import goods within the Corporation limits without making payment of Octroi duty at the Corporation Outpost subject to such company filing a monthly statement by the end of 5th day of each month, of the imports and exports of dutiable articles to the corporation. Municipal Commissioner can scrutinize it and settle the account of octroi duty payable and recoverable. The amounts due are adjusted out of the periodical deposits made by Oil Companies in view of Rule 39A of the Octroi Rules. Accordingly, there exists a valid & binding agreement between parties & it is paying amount of Rs. 50 Lac in advance to NMC by 5th of each month and no declaration is required to be submitted at check post at each import. Hence, due to this arrangement there can be no intention on part of Petitioner to evade octroi and inadvertent ::: Downloaded on - 09/06/2013 17:54:51 ::: 7 error resulting in less payment was noticed because of communication dated 2.12.2006 sent by NMC pointing out the difference in rate of its product on which octroi was charged. The head office upon knowledge carried out necessary price revision and on 3.1.2011 it was informed to NMC. Thereafter above mentioned notice under Rule 44 of Octroi Rules came to be issued on 7.1.2011. Because of the agreement for advance payment of octroi, it is his contention that there was no intention here to defeat the claim of NMC and hence, demand of ten times duty as penal duty is unwarranted & arbitrary. He also relies upon immediate rectification to show absence of dishonest intention.
Chapter XII of the CNC Act provides machinery and procedure for recovery of the amount of octroi duty. Clauses (a), (d), (f) and (h) of Rule 14 and Rule 44 (read with section 152 of the CNC Act ) of the Octroi Rules provide for levy of penal octroi duty. The penal provision under Section 152 also prescribes punishment of fine (Ten times of octroi duty) for the offence of or an attempt to introduce any article within Municipal limits without payment of toll or cess or its abetment.
Shri Manohar submitted that the Commissioner ought to have applied his mind before the show cause notice was issued. Other rules like Rule ::: Downloaded on - 09/06/2013 17:54:51 ::: 8 14(a) in the Octroi Rules are read out to urge that imposition of maximum penalty is not the only solution but it has to be "up to ten times". There is no power to delegate this determination & quantification in Octroi Rules and therefore, the Assistant Municipal Commissioner or Octroi Superintendent could not have assumed to himself that power to issue show cause notice. Shri Manohar argued that an endorsement in the note sheet does not amount to an order since it is capable of being changed/canceled/corrected till it is communicated to aggrieved person. According to him, the Petitioner did not know nor did countersign the note-sheet. No such order which adversely affects it is as yet passed & served. Shri Sunil Manohar, to drive home the importance of such communication, relied upon (2010) 2 SCC 422-AIR 2010 S.C. 3455- Union of India v. Kartick Chandra Mondal , (1998) 7 SCC 569 Union of India vs. Dinanath Shantaram Karekar & AIR 1966 SC 1313- State of Punjab, v. Amar Singh Harika,.
5 It is urged by the Petitioners that section 152 of the CNC Act gives discretion about the quantum of penal octroi duty & the Octroi ::: Downloaded on - 09/06/2013 17:54:51 ::: 9 Rules have the effect of amending said Section 152 & are in conflict with it. Rule 14(a) 14(h) are read out to show the discretion available to the NMC or Commissioner. Word "may" in Rule 44 needs to be construed as conferring said discretion as otherwise Rule itself becomes bad. It is submitted that in this light & as held in AIR 1983 SC 130- D.S. Nakara vs. Union Of India, Rule 44 of the Octroi Rules needs harmonious construction & same discretionary power must be read into it. Hence, on the basis of the relevant material, the Commissioner must arrive at a satisfaction that the importer has not paid the octroi duty or has failed to pay the full 0ctroi duty and such satisfaction must be recorded in writing before issuance of the show cause notice to the importer. The commissioner is further required to consider the explanation ,if any, submitted by the importer and pass a reasoned written order justifying the need & quantum of penalty. The prosecution envisaged in Rule 44 is also only a directory measure.
Learned Senior Counsel for the petitioner submitted that the condition precedent to demand of such penalty is a finding of deliberate avoidance on the part of the importer to pay due octroi duty. Here, Petitioner was given time till 28.1.2011 to file reply and on 14.2.2011, ::: Downloaded on - 09/06/2013 17:54:52 ::: 10 Assistant Mpl. Commissioner/Octroi Superintendent merely approved a note in office file put up by octroi inspector that as no reply was filed, there should be no objection to issue a bill for recovery of ten times penalty under S. 154(1) of the CNC Act. Thus there is no satisfaction either previous or then later of either said authority or of Municipal Commissioner in the matter. AIR 1978 SC 851-Mohinder Singh Gill and another, v. The Chief Election Commissioner, New Delhi and others, -para 8, is pressed into service to show need of recording of reasons in such matters. Interpretation of "may recover"
in S. 85B of Employees State Insurance Act and use of discretion therein to decide not to not to recover, in AIR 2008 SC 1322- Employees State Insurance Corporation vs. H.M.T. Ltd is also heavily relied upon.
6 Bill for penal octroi duty dated 18.2.2011 is shown to this Court to indicate that it contains a demand of Rs. 2,64,26,021/ towards deficit duty & penalty at 10 times for the period from 14.7.2009 till 25.11.2010. He points out that single or normal duty demanded is 28,37,651/- while Petitioner has paid Rs.19,50,489/-.
Shortfall claimed is of Rs. 8 Lacs only and on an average, it works out ::: Downloaded on - 09/06/2013 17:54:52 ::: 11 to Rs. 50,000/- per month. As advance payment per month by Petitioner to NMC is Rs. 50 Lac, the alleged shortfall is not decisive of intention. As there is no mens-rea & no legal finding on it, not only computation but then vires of entire exercise are required to be assailed by Petitioner and hence, remedy before this Court is the only remedy available in law. Learned senior counsel made a reference to Mysore Breweries Ltd vs. Commissioner of Income Tax , Civil Petition no. 129 of 1981 decided by Karnataka High court on 10/06/1982 reported in (1987) 64 CTR (KAR) 288 to canvass the proposition that the Tribunal is a creature of the statute and can only decide a dispute between the assessee and the Commissioner in accordance with the terms of the provisions of the Act and the questions of the constitutionality and vires of the provisions are foreign to the scope of its jurisdiction. It is urged that even if ultimately these contentions of Petitioner are to be turned down, that can be done by this Court only and the JMFC, as an appellate authority under S. 164, can not examine this controversy. In the alternative & without prejudice, learned Senior Counsel further submitted that remedy of appeal under Section 164 of the CNC Act is not available against the ::: Downloaded on - 09/06/2013 17:54:52 ::: 12 order passed under Rule 44 of the Octroi Rules. The scope of Appeal under section 164 of the CNC Act is limited to cases where the value or amount of tax, cess, penalty etc is in question, but it does not cover the cases wherein the constitutional validity of the Rules or the liability to be taxed/penalized are in dispute. AIR 1977 SC 955-Bata shoe Co.
Ltd vs. Jabalpur Corporation- is pressed into service to urge that S.169 of CNC Act does not use word "levy" while S. 84(3) of 1922 Act looked into by Hon. Apex Court used it. To explain the law on the point, he invites attention to two judgments reported at AIR 1978 Bom. 92--Municipal Council Morshi vs. Tulshiram & 1978 Mah.
L.J.826-Shivmanik vs. Latur Municipal Council - in an attempt to show the view that "levy" can not form subject of such an appeal. Later view of learned Single Judge at 1982 Mah. L.J. 866--Dagadabai Manakchand vs. Municipal Council, Aurangabad after noticing the Bata shoe Co. Ltd vs. Jabalpur Corporation and division bench judgment at 2000(3) Mah. L.J. 233-Ketan Ranjit vs. Panaji Municipal Council- overruling this learned Single Judge are also cited.
It is further contended that the delegation order dated 12/11.2010 itself shows non-application of mind qua the Octroi Rules & can at ::: Downloaded on - 09/06/2013 17:54:52 ::: 13 most be limited to allow the Assistant Commissioner (Octroi) to initiate action by issuing show cause notice but the adjudicatory powers of Commissioner under Rule 44 are incapable of being delegated by virtue of section 59(5) of the CNC Act and hence, entire action of levying the penalty is without authority in law. Said section permits delegation of powers only under the CNC Act & not under the Rules framed thereunder. It is urged that thus when legality of entire exercise is seriously in issue, as per settled law, Civil Suit will be maintainable. As JMFC can not take different view than already reached & "reading down" is prerogative of Constitutional Courts, the Appeal under S. 164 is not tenable. AIR 1966 SC 1089--M/s. K. S. Venkataraman and Co. (P) Ltd., Appellant v. State of Madras, is shown to support the argument that for same reasons, remedy of appeal or revision under S. 387 of CNC Act is also not open. Relevant provisions in CNC Act & Goa Act are read out & compared to explain the arguments. AIR 1967 SC 1801--New Manek Chowk Spg. & Wvg.
Mills Co. Ltd. vs. Municipal Corporation of the City of Ahmedabad & Others is also relied upon in this connection.
::: Downloaded on - 09/06/2013 17:54:52 ::: 147 Learned Counsel Mr. Manohar invited our attention to stand in Petitioner's explanation dated 23.2.2011 filed before NMC pointing out software error in defence, with contention that it is not disbelieved by Commissioner and the objection raised by it is still not decided by Commissioner. He further states that even while replying to demand of copy on 17.3.2011, NMC did not point out Rule 44 as basis for its action. Valid objections raised on 22.3.2011 by Petitioner have been decided on 25.3.2011 without any notice & hearing to Petitioner.
Stand of mens-rea in reply affidavit by NMC and allegations of deliberate supply at less rate to Manewada COCO petrol pump did not figure in SCN. Our attention is invited to S.420(2)(t) r/w S.421 to urge that aspect of "fine" or "penalty" is not left to Rules by Legislature. It is urged that rule making power under S. 114(3) can not override S. 152. AIR 1963 SC 906-Burmah Shell oil Storage and Distributing Co. of India Ltd., Belgaum v. Belgaum Borough Municipality, Belgaum, is relied upon to buttress this proposition.
8 Learned Counsel Mr. S.K. Mishra for NMC vehemently countered these submissions. He states that S.152 of CNC Act speaks of ::: Downloaded on - 09/06/2013 17:54:52 ::: 15 punishment of penalty up to ten times of octroi duty & certain situations are attempted to be taken care of in Octroi Rules. Rule 44 does not contemplate passing of any orders but proceeds on satisfaction as to proof of evasion. Petitioner was given due opportunity and time till 28.1.2011 was given to it to file reply to the show cause notice. He points out how Petitioner avoided to file reply and having waited for reasonable period, the NMC took further steps & satisfaction about ten times penalty was reached. The learned counsel states that facts on record as can be gathered from the documents of Petitioner, are sufficient to support said satisfaction. Petitioner has got two COCO (company owned company operated) petrol pumps within municipal limits and rate of supplying very same product to both these pumps was found different. Rate for supply at Medical College pump is more & less rate is communicated towards supply to Manewada pump.
Hence, alleged technical problem in software is false excuse. Petitioner deliberately kept away from fact finding inquiry & this Court should refuse to interfere as Petitioner has not approached this Court with clean hands. The so called defence is not being substantiated before this Court. NMC has applied rate used by Petitioner only for admitted ::: Downloaded on - 09/06/2013 17:54:52 ::: 16 quantities supplied to Manewada COCO pump during 14.7.2009 to 25.11.2010 and correctly worked out short payment of octroi duty & penalty. This calculation is also not in dispute. The admission of rectification of alleged mistake on 21.12.2010 "prospectively"
demonstrates malafides of Petitioner. Petitioner's effort to obtain waiver on 23.2.2011 is also pointed out with stand that waiver under Rule 46A is absolute discretion of Municipal Commissioner available in just circumstances. Objection of Petitioner dated 22.3.2011 is after notice of demand dated 7.3.2011 under S. 155(1) of the CNC Act. As only remedy available thereafter is appeal before JMFC under S. 164, it was rejected on 25.3.2011 and steps as per S. 156 have been initiated. According to Adv. Mishra there are two appeals contemplated after bill under S. 154 is served & even evidence can be recorded in that appeal before the JMFC. Legislature has imposed condition of pre-
deposit for that appeal. Learned Counsel states that no other forum or remedy is open to Petitioner in present circumstances and reliance is being placed on 2011(2) Mah. L.J. 306 -- Indian Bank vs. Nagpur Municipal Corporation & 2004 (4) Mah. L.J. 634--Alok Traders vs. Corporation for the City of Nagpur to make good this stand. He ::: Downloaded on - 09/06/2013 17:54:52 ::: 17 invited our attention to the ruling in Indian Bank vs. Nagpur Municipal Corporation reported in 2011 Mh. L.J .306, in which it is held by the Division Bench of this Court that the Bill under Section 154 itself operates as declaration prima- facie showing the amount of tax due and recoverable in the opinion of the Corporation. It is asserted that Petitioner Company practiced falsehood when it declared less rate for calculation of octroi duty. This aspect can be taken care of in statutory appeal & as alternate equally efficacious remedy is available, this Court should refuse to interfere. Judgment reported at AIR 1965 SC 1942 -- M/s Kamala Mills Ltd. vs. State of Bombay & Bata shoe Co. Ltd vs. Jabalpur Corporation & also a judgment of learned Single Judge at 2007(3) BCR 732-Commissioner, Sangli Miraj Kupwad Cities Municipal Corporation vs. Bhide and sons Pvt. Ltd.
are relied upon by him. In last judgment, the suit filed by the respondent for reclaiming money recovered as octroi was held bad and not maintainable He also attempted to distinguish the Division Bench judgment at 2000(3) Mah. L.J. 233--- Ketan Ranjit vs. Panaji Municipal Council. In present facts as everything is admitted, there is no scope to dispute valuation and rate at which octroi duty is to be ::: Downloaded on - 09/06/2013 17:54:52 ::: 18 charged is not decided by NMC. Hence only issue of legality of demand raised under S.154 is amenable to appeal under S. 164.
9 He contends that S. 152 is applicable when it is case of goods in transit and here the case is squarely governed by Rule 44 of Octroi Rules. Said Rule is valid & he draws support from Parekh Brothers Nagpur vs. Corporation of the City of Nagpur & others,-
1975 Mh LJ 86 where the Petition challenging validity of the Rules 43, 45, 47 of the Octroi Rules was rejected. Rule 14 clauses (a)(d)(f)(h) and Rule 44 all operate in their respective specified fields. At one stage, he also urged that S.152 needs to be understood in the light of S.150/151 and fine therein is after conviction under S. 380 of CNC Act. He also argued that liability to be taxed can not form subject matter of S. 164 appeal. Show cause under Rule 44 is after recording "satisfaction" and here, in absence of any defence, said "satisfaction"
attained finality. Rule 44 does not envisage any "order" & liability is fastened or crystallizes via S. 154 bill. The same can then be assailed in an appeal under S. 164 and thereafter in further appeal under S. 387 of CNC Act.
10 Mr. Mishra, Advocate argued that the power is delegated ::: Downloaded on - 09/06/2013 17:54:52 ::: 19 under the CNC Act to fix the rate of tax to NMC, to State Government to devise procedure for its levy, recovery and to prevent its evasion & such legislation is not being challenged. It is submitted that the goods may be brought in such a way that they may not be subjected to inspection or verification at the Octroi post/Naka, but still the person incurs the liability if he brings goods liable to octroi duty in the city limits of the Corporation intending for consumption, use or disposal thereof. The submission is that the rates of Tax in respect of different classes of the goods are matters of details left to be determined by the executive. It is further submitted that, in view of the finding recorded by this Court in connection with and in respect of the scheme of Rule 14 (h) in the Octroi Rules, in Alok Traders vs. Corporation for the City of Nagpur reported in 2004(4) Mh.L.J. 634, it is duty of the Petitioner to make true and correct declaration in respect of the goods brought within the Municipal limits. To justify exercise of power under Rule 44 by Assistant Mpl. Commissioner, he points out S.59(5) of CNC Act which enables Commissioner to delegate his powers to other NMC officers & delegation order dated 12.11.2010 passed by present Municipal Commissioner.
::: Downloaded on - 09/06/2013 17:54:52 ::: 2011 In this backdrop, we find that following are some of the questions which need to be answered to resolve the controversy. We proceed to answer the same & resolve controversy in course of the discussion beginning in next paragraph.
a) Whether Rule 44 is ultra-vires the CNC Act or its S.152? .
b) Is power under Rule 44 capable of delegation under S. 59(5) ?
c) What is scope of appeal under S. 164 of the CNC Act?
d) What is procedure for use of power under Rule 44?
12 Objection of the NMC that alternate equally efficacious remedy is available to Petitioner first warrants attention. Said remedy in the shape of S. 164 finds placement in Chapter XII and Part IV of CNC Act. Chapter XII is about recovery of Corporation Claims. Said Part IV contains only one more Chapter i.e. prior Chapter XI which deals with the subject of 'Taxation'. Its Section 114(1) gives the list of mandatory taxes to be imposed and sub-section (2) of non-
mandatory taxes. Property Tax imposed on annual letting value or capital value is one of the mandatory or compulsory taxes. As per ::: Downloaded on - 09/06/2013 17:54:52 ::: 21 section 114(1) (e) imposition of "a cess on the animals or goods brought within the City for sale, consumption or used therein" is also a mandatory tax. S. 115 prescribes procedure for "imposing" taxes.
Corporation may at a special meeting, bring forward a resolution to propose the "imposition" of any tax under S.114. Section 114(1) obliges Corporation to "impose" certain taxes and some taxes are left to its discretion. Thus after steps as laid down in S.115 are complete, the property tax or the octroi becomes applicable in municipal limits.
S. 115A is placed below the heading - "The Property Taxes" and sub-
heading- "Imposition of Property Taxes leviable on Annual Value or Capital Value". Thus the process of "imposition" is a preparatory stage compliance with which enables NMC to undertake exercise of its "levy"
in individual cases. Process of "Imposition" thus has a wider or general effect and its actual impact on individual or particular case is possible only when it is "levied" i.e. such personal liability is computed by applying those general principles. To enable us to determine the scope of an appeal under S. 164 in Chapter XII, we find it proper to begin discussion with scheme of Chapter XI as both these Chapters are complimentary with each other. It is necessary to point out here three ::: Downloaded on - 09/06/2013 17:54:52 ::: 22 words used in last Section i.e. S. 169 in Chapter XII i.e. "valuation, assessment & liability". This S. 169 expressly bars objection to any valuation or assessment, or liability of any person to be assessed or taxed, in any other manner or by any other authority than as provided in CNC Act.
13 Next relevant provision in CNC Act is S. 119 which gives mechanism for working out annual value or capital value of immovable property so that on it the levy can then be made i.e. property tax can be assessed. Modalities therefor, collection of data, requisitioning name of owner, treatment of properties let out to two or more tenants, employment of the assessor etc. are taken care of till S. 125 in Chapter XI. Section 125 then contemplates preparation of assessment list and for that purpose calling upon the owner or occupier to furnish relevant data. S. 126 prescribes opportunity to all to inspect the valuation reached & for that purpose, a public notice. S. 128 enables aggrieved person to submit his objection to said valuation and S. 129 provides investigation into it after notice & hearing to him.
The assessment list needs to be amended in accordance with said ::: Downloaded on - 09/06/2013 17:54:52 ::: 23 decision reached after investigation. S. 130 thereafter allows aggrieved person remedy of further appeal before the District Court, if dispute arises about liability of any land or building to the assessment or as to the basis or principles of assessment. Decision of District Court is given finality. Under S. 131(1), assessment made by Commissioner under S. 124 is final but subject to S.128,129 & 130 of CNC Act. Order of Commissioner under S. 129 is final subject to orders by District Court in an appeal under S. 130. S. 132 postulates maintenance of one or more municipal assessment lists. S. 133 of CNC Act stipulates the authentication of such list after all objections & appeals are disposed of, by the Commissioner under his signature. Sub-section(2) then makes it a conclusive evidence, subject to S. 130(5) & S. 136 , of the amount of property tax leviable on such immovable property in the relevant financial year to which list relates. Thus in scheme of CNC Act, authentication is not subject to further change after District Court decides the appeal filed before it. It also shows that "levy" of tax is in fact exercise of valuation & then calculation i.e., assessment.
14 Chapter XII then springs into action and recovery can ::: Downloaded on - 09/06/2013 17:54:52 ::: 24 begin by serving a bill under S. 154 which is its first section. In other words, if analogy of judgment & decree is to be followed, the proceedings in Chapter XI culminate into a decree under S. 133 of CNC Act where Commissioner authenticates the assessment list under his signature. Execution of that decree or recovery on the strength of authenticated list then commences under Chapter XII. S. 154(1) itself contemplates that amount declared by or under provisions of CNC Act to be recoverable as per Chapter XII or then payable on account of any tax, has become due. Thus a bill can not be issued till liability crystallizes under CNC Act & amount becomes due & recoverable. Bill has to contain period in which amount claimed is to be paid and property, occupation or thing in respect of which the sum is claimed. It also gives notice of liability incurred in default & of time within which appeal can be preferred "as hereinafter provided against such claim".
Thus bare reading of this provision is sufficient to show that appeal has to be in respect of sum claimed or property, occupation, thing in respect of which that sum is claimed and is to be filed in accordance with later Sections in Chapter XII. Section 154 only gives to assessee, notice of remedy made available by S. 164 and it is not itself ::: Downloaded on - 09/06/2013 17:54:52 ::: 25 providing a remedy of appeal. The assertion of not availing appellate remedy under S. 154 contained in paragraph 3 of its reply affidavit dated 22.9.2011 by NMC is erroneous. Old S. 155 has been replaced w.e.f. 7.4.2010 to enable NMC to serve bill on occupier and to hold him responsible for payment of property tax. S. 156 permits warrant of attachment to be issued if bill served as per S. 154 remains unpaid & noticee has not filed appeal in accordance with S. 164 against the "claim". Thus, in scheme of Chapter XII, there is no other provision for appeal except s. 164 and words "as hereinafter provided against such claim" employed in S. 154(2)(ii) of CNC Act indicate this remedy of appeal only. Thus Chapter XII does not envisage remedy of two appeals at all. S. 164 then speaks of said appeal to Judicial Magistrate.
In present matter, it is not necessary to go into scheme of said appeal or its procedure. S. 168 in this Chapter also provides for other method of recovery of toll & cess on imports but here as NMC has opted to issue bill under S. 154, S. 168 is not relevant. S. 169(1) then states that -- "No objection shall be taken to any valuation or assessment, nor shall liability of any person to be assessed or taxed be questioned in any other manner or by any other authority than as provided in this Act."
::: Downloaded on - 09/06/2013 17:54:52 ::: 2615 This scheme therefore reveals that exercise of "imposition"
which is general and required to be undertaken as part of policy by NMC is not open to challenge in appeal under S. 130 before the District Court. "Levy" which implies its specific application or then a particular instance or determination of individual liability or of any land or building to actual assessment or then basis or principle applied while undertaking such actual levy or assessment i.e. used for computation, forms subject matter of appeal under S. 130. After final adjudication thereof & authentication of assessment list under S. 133, the recovery in pursuance thereof commences through Chapter XII.
Hence, scope of appeal made available under S. 164 in that Chapter XII is narrowed down to only heads of "claim" as contained in S. 154 bill. Legislature can not & has not permitted controversy settled by a court like District Court which is at the top of judicial hierarchy in District to be re-examined by first judicial forum available in District.
The assessment list is made final by Legislature in S. 133 and that finality is not diluted by providing a limited appeal against "claims"
under S. 164 to the Judicial Magistrate. The Legislature has found it appropriate to place a more complex challenge before District Court & ::: Downloaded on - 09/06/2013 17:54:52 ::: 27 a comparatively simpler issue before the court of JMFC. It divided the challenges available after "imposition" in the tax-matters in to two classes. Those which affect crystallization of liability are treated differently than those which have no bearing on its determination but reveal errors while actually proceeding to recover as per crystallization. First type is regulated by Chapter XI while the later are governed by S.154 r/w S. 164 in Chapter XII. The well settled Civil Procedure Code concept of executing court not in position to go behind decree has to be made use of here to hold that in S. 164 appeal, JMFC can not tinker with the finality of duly authenticated assessment list under S. 133 of CNC Act.
16 Concept of executing court not in position to go behind decree can be directly made use of in property tax levy. But here, we are concerned with octroi and Chapter XI does not deal with the procedure to be adopted to fasten that liability. Sections 149 to 152 therein deal with some procedural aspects like power of NMC to search,inspect for octroi purposes also and for punishment of fine on evaders. But it does not contain any procedure at par with property tax ::: Downloaded on - 09/06/2013 17:54:52 ::: 28 to give finality to such levy or assessment of octroi. Question is whether in its absence, remedy of appeal under S. 164 can be given a wider scope or then without predetermination of liability, bill under S. 154 itself could not have been issued? S. 374 enables NMC to take recourse to Chapter XII for recovery of its octroi dues or penalty. But then S. 374 or S. 154 are only procedural and operate on some earlier determination as a result of which the issue as to demand for octroi or penalty is decided & liability is fastened. S. 374 itself makes a reference to liability arising under Rules framed under CNC Act. The Octroi Rules are the relevant Rules which need to be perused for this purpose. Opening section in Chapter XI i.e. S. 114 itself is important & its sub-section 3 reads -- "The State Government may, by Rules made under this Act, regulate the imposition, assessment and collection of taxes under this section and specify maximum amounts of rates for any tax and for preventing evasion of assessment and payment of taxes."
One has to note that in CNC Act, procedure in detail is enacted only for most important tax viz. Property Tax & laying down the same i.e. suitable procedure to determine liability or its extent & fasten it,in so far as other mandatory or optional taxes are concerned, is left to rule-
::: Downloaded on - 09/06/2013 17:54:52 ::: 29making authority i.e. State Government. State Government has accordingly framed the Octroi Rules on 16.5.1966. Various contingencies like rate at which tax is to be charged on different commodities or articles, procedure for collection of octroi at entrance naka, mechanism for resolution of disputes raised by importer, for detention of goods when ever necessary, for temporary detention for eventual export, for checking evasion thereof, for search & inspection, for calling information and declarations, for establishing octroi free zones, for levying penal duty at ten times or upto ten times the single duty, for refund etc., all find provided for in said Octroi Rules.
Reference to some of these Rules in more details is being made little later. In present case, action is taken under Rule 44 and hence, we refer to the procedure prescribed therein. It springs into life after it is proved to the satisfaction of the Municipal Commissioner that importer has not paid any octroi duty or has failed to pay full octroi duty. After said satisfaction, he has to give sufficient notice to such importer to show cause why ten times duty on such goods shall not be recovered from him, and after considering the importer's explanation, he may recover ten times duty leviable in accordance with Chapter XII of the ::: Downloaded on - 09/06/2013 17:54:52 ::: 30 CNC Act. Rule 44 also mandates/states that such importer shall also be liable for prosecution. Thus recovery under Chapter XII by serving bill under S. 154 is possible only after a decision is taken by Commissioner to recover ten times duty. Petitioner before us is contending that there is no previous satisfaction recorded by the Commissioner before issuance of show cause notice to it. Though it could not file reply to such SCN, there is no order by Commissioner to recover ten times the duty and hence, entire action for recovery is without jurisdiction.
Presently, we are considering the issue of alternative remedy & hence, not concerned with finding out whether there is any substance in said challenge or not. We have to only find out whether such challenge could have been raised in appeal under S. 164 before the learned JMFC. The challenge raised pertains to period prior to fixation of liability. Effort is to point out errors in fastening the liability on Petitioner. Moreover, validity of exercise of power or action taken by a officer other than Municipal Commissioner under Rule 44 and delegation of that power by Commissioner to such subordinate officer is also questioned. Other contention is of conflict between Rule 44 and S. 152. All these questions have bearing on determination of liability of ::: Downloaded on - 09/06/2013 17:54:52 ::: 31 Petitioner to pay ten times duty and are not available within limited scope of S. 164 appeal before learned JMFC. Here, the liability to pay octroi or ten times duty as penalty is required to be decided in light of & in compliance with provisions of the Octroi Rules and after it attains finality, recourse to Chapter XII is possible. Alleged conflict between S. 152 & Rule 44 or then examination of validity of delegation by Municipal Commissioner to some subordinate like Assistant Mpl.
Commissioner could not have been undertaken by any authority or officer functioning under CNC Act or Rules or then in an appeal under S. 164 by the JMFC. Hence, Petitioner had no alternate remedy available in the matter and its writ petition can not be rejected on that account. Various challenges noted above can not be labeled as an effort to avoid any alternative equally efficacious remedy. In New Manek Chowk Spg. & Wvg. Mills Co. Ltd. vs. Municipal Corporation of the City of Ahmedabad & Others (supra), Hon. Apex Court holds adoption of flat rate method for determining rent for fixing ratable value violative of Art. 14 of Constitution of India. It is also observed that remedy of objection and appeal was of no use.
Division Bench of Karnataka High Court in Mysore Breweries Ltd. vs. ::: Downloaded on - 09/06/2013 17:54:52 ::: 32 CIT at (1987) 166 ITR 723 (KAR) has reached same finding. Learned counsel Mr. Mishra had referred to Bata shoe Co. Ltd vs. Jabalpur Corporation (supra) to argue that NMC possesses the right and the power to assess and recover octroi duty and penal duty on the goods which are brought within the Municipal limits . Though he may be right in stating that acting in excess of or irregularly in exercise of that power can not support conclusion that the assessment or recovery of the octroi is without jurisdiction, still it does not open S. 164 jurisdiction for Petitioner. Said judgment revolves round a provision like S.169 of CNC Act to declare absence of jurisdiction in Civil Court to that extent. Other citation in Commissioner, Sangli Miraj Kupwad Cities Municipal Corporation vs. Bhide and sons Pvt. Ltd.,(supra) relied on by NMC shows that learned Single Judge while holding the suit filed by the respondent before him for reclaiming money recovered as octroi bad and not maintainable & against interference in writ jurisdiction,accepts & presupposes availability of alternate remedy.
Hence, it not relevant here.
17 Bata Shoe Co. Ltd. vs. Jabalpur Corporation (supra) and other related judgments consider provisions akin to S.169 of CNC Act ::: Downloaded on - 09/06/2013 17:54:52 ::: 33 to find out whether jurisdiction of Civil Court under S. 9 CPC is barred or not. That is not the issue involved before us. Said S.169 covers challenges available ,both under S. 130 or S. 164. We are required to note in this writ petition difference in scope of both these appellate provisions. In Ketan Ranjit vs. Panaji Municipal Council(supra), Division Bench of this Court at Goa has considered all these precedents in the light of the provisions of Goa, Daman & Diu Municipalities Act,1968. Shri Manohar has also made that enactment available for our perusal. It can be noticed that in Goa enactment, because of its S.165(2), authentication under S. 117 is not final. But then there can be no quarrel with the correctness of finding therein that legality & validity of tax itself can not be assailed in an appeal under S. 164 of Goa Act. Section 122 of Maharashtra Municipalities Act, 1965 (now The Maharashtra Municipal Councils, Nagar Panchayats & Industrial Townships Act,1965) also shows that authentication of assessment list there is subject to result of appeal & revision under S. 169 or S. 171 thereof. These Enactments have thus basically a different scheme than CNC Act. CNC Act divides the adjudication after "imposition" in two classes & regulates it depending precisely upon the stage at which ::: Downloaded on - 09/06/2013 17:54:52 ::: 34 "cause" arises. We therefore do not find it necessary to refer to other judgments cited before us by the parties.
18 Ingredients of Rule 44 are already noted above. It reads:--
"If it is proved at any time to the satisfaction of the Municipal Commissioner that the importer has not paid any octroi duty or has failed to pay full octroi duty, he may, after giving sufficient notice to show cause why ten times duty on such goods shall not be recovered from him, and after taking into consideration the importer's explanation, may recover ten times duty leviable in accordance with provisions of Chapter XII of the City of Nagpur Corporation Act. Such importer shall also be liable for prosecution."
Section 152 of the CNC Act reads:--
"Punishment for evading payment of toll or cess. If animals or articles passing the limits of the Corporation are liable to the payment of toll or cess on imports, then every person who, with intention to defraud Corporation causes or abets the introduction of, or himself introduces or attempts to introduce within said limits, any such animals or articles upon which payment of the toll or cess on imports due on such introduction has neither been made nor tendered, shall be punishable with fine which may extend either to ten times the value of such toll or cess on imports, or to fifty rupees, which ever may be greater."::: Downloaded on - 09/06/2013 17:54:52 ::: 35
Thus S. 152 contemplates prosecution when taxable commodities are introduced or such attempt is made without paying octroi and it is established in Court. Action under Rule 44 is not prosecution as it expressly mandates prosecution separately. It does not deal with attempt at all. Part XI, Chapter XXXVIII of CNC Act deals with punishment of offences. S.421 therein prescribes certain offences punishable with fine. S.422 to S.427 deal with other offences. But then none of these Sections deal with offences prescribed by S.152. Language used in Rule 44 shows acquisition of knowledge of non-payment or short payment by NMC belatedly and hence, emphasis in it is on opportunity to show cause and then recovery through machinery in Chapter XII. Due to passage of time, though prosecution is envisaged, it appears to be given secondary status. It is not the case of Petitioner that Rule 44 has created any new offence.
19 Sub-section (3) of section 114 which forms source of Octroi Rules reads as under:-
::: Downloaded on - 09/06/2013 17:54:52 ::: 36"The State Government may, by Rules made under this Act, regulate the imposition, assessment and collection of taxes under this section and specify maximum amounts of rates for any tax and for preventing evasion of assessment and payment of taxes."
It is not even whispered by Petitioner that Octroi Rules as framed are contrary to this provision. Said Section also enables making of a provision in such Rule to prevent evasion of assessment and payment also. Accordingly a deterrent but civil provision has been made in these Rules and no arguments are advanced to show that such a provision for civil liability could not have been made.
Provision no doubt speaks of penalty but it is independent of prosecution. Several contingent factors may render prosecution a non-deterrent measure and logic seen by Rule making authority in such a civil provision can not be said to be arbitrary or irrational or beyond its powers. Its effectiveness in guaranteeing payment of its "due" revenue to NMC can not be ignored. As both provisions operate in distinct fields & Legislature has placed S.114(3) as also S. ::: Downloaded on - 09/06/2013 17:54:52 ::: 37 152 in same Chapter to form part of same scheme, both are obviously designed to supplement each other and to advance public interest by safeguarding revenue recovery. We see no conflict between the two i.e. S.152 & Rule 44. Rule 44 therefore can not be said to be bad on any count. No question of any reconciliation between the two arises & there is no need to read down Rule 44 or for alleged harmonious interpretation. Hence, reference to any precedent here is uncalled for. In Employees State Insurance Corporation vs. H.M.T. Ltd (supra), S.85B of Employees State Insurance Act,1948 is held to be an enabling provision. It has been held that levy of damages is not mandatory thereunder in all situations. Mens-rea is found to be essential. Here, Rule 44 comes into force after recording of "satisfaction" & show cause is issued to recover ten times duty. Thus, scheme of Rule 44 is different than S.85B. Moreover, in Octroi Rules, the seriousness of the error is used as a scale to determine the quantum of penalty & its quantification & demand is as per such arrangement in Rules. This scheme or legislative wisdom behind it, is not assailed before us. Hence, the Apex Court judgment can not be a precedent in present matter. Our ::: Downloaded on - 09/06/2013 17:54:52 ::: 38 attention was also invited to the Division Bench decision of this Court in the case of Parekh Brothers (supra), in which validity of these very Octroi Rules notified on 16th May of 1966 has been upheld, repelling a contention of being void due to the absence of fixation of maximum rates as contemplated under section 114(3).
We do not see any reason to take a different view on scheme of Rule
44. 20 The challenge to exercise of powers under Rule 44 by Assistant Municipal Commissioner is based on express language of said Rule with other Rules like Rule 14(a)(d)(f)(h) etc. NMC has relied on delegation order dated 12.11.2010 passed by the Municipal Commissioner (present incumbent) and S. 59(5) of CNC Act to support that exercise. Delegation order itself mentions that Section with Section 354, all other enabling provisions, Octroi Rules & Bye-
laws. S. 415 of the CNC Act enables NMC to frame various byelaws, but no particular byelaw or any specific clause therein or then a specific rule of the Octroi Rules is quoted. Even during arguments, only S. 59(5) has been pointed out. Delegation is to 5 NMC officers ::: Downloaded on - 09/06/2013 17:54:52 ::: 39 viz. Additional Deputy Mpl. Commissioner, Assistant Commissioner, Asst. Octroi Superintendent, Inspector & Junior Inspector of Octroi Department to exercise, perform or discharge all the powers, duties or functions conferred or imposed upon or vested in the Municipal Commissioner by CNC Act, subject to conditions & limitations indicated "below" in that order. What appears as mentioned "below"
are really not the terms & conditions but is list of powers or functions delegated. This shows the casual approach and absence of application of mind. Part of clause 7, Clause 8 & Clause 11 can only be construed as terms or conditions. Various functions are then delegated to these officers vide its clauses 1 to 7 including power to inspect, inquire, verify, call for documents or accounts, investigation into offences, to seize or detain, to sell by public auction the seized properties. After this, clause 8 states that a person aggrieved by order of Asst. Commissioner can file appeal to the Additional Deputy Municipal Commissioner. Then delegation continues & in clause 9 power to initiate all actions under Rules 43 & 44, in clause 10 power to issue notices, bill & demand mentioned in Chapter XII of CNC Act stands also delegated to all above officers. By last clause 11, ::: Downloaded on - 09/06/2013 17:54:52 ::: 40 Municipal Commissioner has reserved the power & right to review any or all the orders passed by any of his subordinates. These words "any or all the orders" clearly indicate that even an appellate order passed by the Additional Deputy Municipal Commissioner in terms of clause 8 of the delegation order, can also be reviewed by Municipal Commissioner. Thus all powers or functions comprised therein are delegated to all the 5 officers or servants mentioned in its opening part simultaneously. Hence, action under Rule 44 can be initiated even by the Junior Inspector of Octroi.
21 Section 59(5) of CNC Act permits delegation by Municipal Commissioner. S. 354 permits entry on premises for inspection, survey or for execution of necessary work. Any municipal officer duly authorized by Commissioner can enter for said purpose. Thus , it is S. 59(5) which only permits general delegation. S. 59(5) reads :--
"Any of the powers, duties or functions conferred or imposed upon or vested in the Commissioner by this Act may be exercised, performed or discharged under ::: Downloaded on - 09/06/2013 17:54:52 ::: 41 the Commissioner's control & subject to his superintendence and to such conditions & limitations, if any, as he may think fit to prescribe, by any municipal officer whom the Commissioner may generally or specially empower in writing in this behalf."
S.5(9) defines Commissioner to mean one appointed under S. 45 and to include acting commissioner appointed under S.48(3) and any municipal officer empowered under CNC Act to exercise, perform or discharge any of the powers,duties or functions of the Commissioner to the extent to which such officer is so empowered. But then this definition is qualified by opening words in S. 5 which read:- "In this Act, unless there is anything repugnant in the subject or context-". Thus a delegate under S. 59(5) may become a Municipal Commissioner for the purposes of CNC Act, if context or subject does not militate with it. However, in Octroi Rules, Commissioner is again defined & Definition Rule 1 begins with similar words of warning-- "Unless there is anything repugnant in the subject or context:" Sub-Rule (2) then reads- "Municipal ::: Downloaded on - 09/06/2013 17:54:52 ::: 42 Commissioner shall include any municipal officer empowered by the Commissioner under S. 59(4) of the Act to exercise, perform or discharge the powers,duties or functions conferred or imposed upon or vested in the Commissioner by or under the provisions of these rules."
Thus a delegate under S. 59(5) may become a Municipal Commissioner for the purposes of Octroi Rules, only if such placement does not militate with context or subject i.e. scheme in Octroi Rules. Therefore, even for the purposes of the Octroi Rules, fact of delegation itself can not always be the answer, if positioning such delegate as Commissioner is not warranted due to combined reading of various provisions contained therein.
22 Hence, perusal of some provisions contained in Octroi Rules is called for. Rule 13(b) deals with doubtful declarations given under Rule 9 by an importer or when importer disputes his assessment. If in such case, upon verification the actual weight, description, number or quantity or value exceeds the declared figure by more than 12.5%, importer is liable to pay up to ten times the amount of duty leviable. This penal duty is recoverable on whole ::: Downloaded on - 09/06/2013 17:54:52 ::: 43 consignment. The power is exercisable by the Municipal Commissioner or by any officer authorised in this behalf by him by general or special order. Rule 14(c) empowers Municipal Commissioner, Deputy Municipal Commissioner, Octroi Superintendent, Deputy Octroi Superintendent, any Assistant Octroi Superintendent, Inspector of Octroi department or any other officer authorised by Municipal Commissioner to call upon importer whom he comes across within octroi limits, to show octroi pass and to inspect & verify dutiable goods with him or in the vehicle. If at any time, it is noticed by any officer or official of Octroi department that importer or his agent has filed a false declaration or produced a fraudulent document or otherwise attempted to evade the duty in part or in full, such importer is liable to pay ten times the amount of duty leviable and may in addition be prosecuted as provided for in Rule 14(h). Under Rule 16(c), Municipal Commissioner may, if he deems necessary, issue orders for obtaining a deposit fee equal to duty before the issue of transit pass on certain categories of goods or from habitual offenders. Rule 16(g) enables Municipal Commissioner or any other officer authorised by him, to condone the ::: Downloaded on - 09/06/2013 17:54:52 ::: 44 recovery of penal duty for not surrendering transit pass upon satisfaction of actual export of the concerned goods. Rule 16(h) empowers Municipal Commissioner to authorise by general or special orders, Octroi Superintendent or his assistants or naka officials to seal goods in certain contingencies. Proviso to Rule 17(b) enables Octroi Superintendent to auction the properties subject to speedy decay as prescribed but with the orders of Municipal Commissioner. Rule 36 stipulates that all refund under the Rules shall be sanctioned by Municipal Commissioner or by any officer not below the rank of Octroi superintendent so empowered by the Municipal Commissioner. Rule 39A is a special arrangement for oil companies like Petitioner and Municipal Commissioner can permit them to import dutiable goods without paying duty at the outpost subject to such conditions & safeguards as may be found necessary.
The Company has to send a monthly statement showing imports & exports before 5th day of ensuing month to the Municipal Commissioner. These companies have to furnish such information as may be required by Municipal Commissioner. Amount remaining unpaid after adjustment against deposit can be recovered by ::: Downloaded on - 09/06/2013 17:54:52 ::: 45 Municipal Commissioner as per Chapter XII of CNC Act. Rule 42 permits Municipal Commissioner to grant rewards to informants & employees to lead to detection of more & more cases of evasion of octroi duty. Rule 43 envisages an officer authorised by Municipal Commissioner or Superintendent or Deputy or Assistant Superintendent of Octroi to exercise powers thereunder. Every person, importing or exporting goods may be required under said Rule & thereafter, is bound to produce any document, make statement or furnish information to the best of his knowledge & belief. Rule 44 is already extracted by us above. Rule 45 empowers Municipal Commissioner or officer authorised by him, if satisfied that in the interest of Corporation revenue it is necessary to do so, to issue the requisition requesting any importer or dealer to file a declaration in prescribed form regarding imports made by him during specified period. If Municipal Commissioner or such officer has reason to believe that said declaration is false, thereafter importer may be required to produce books of account and furnish its relevant extracts. If satisfied that due octroi duty has not been paid, its sub-rule (2) enables Municipal Commissioner only, to ask ::: Downloaded on - 09/06/2013 17:54:52 ::: 46 concerned importer to pay ten times the duty and importer is stipulated to be bound to comply. Rule 46 enables Municipal Commissioner to depute any officer or official for going outside municipal limits for investigation of offences committed under Octroi Rules. Rule 46A enables Municipal Commissioner, at his discretion & in genuine difficulties, to reduce rate of octroi duty or penal duty for reasons to be recorded in writing & by passing a order. Rule 47 makes infringement of various Rules & of Rule 14(a),(b),(f)(h), Rule 16(b)(v), (f),(h), 41,43,44 & 45 punishable with fine which may extend to Rs. 500/-.
23 Thus even cursory perusal of Octroi Rules shows that State Government at some places expressly refers to other officers along with Municipal Commissioner. In some Rules, he is permitted to issue general or special orders authorizing other officers while at places, expressly only Municipal Commissioner is envisaged. The delegation order dated 12.11.2010 however proceeds to delegate all powers,duties & functions of Municipal Commissioner. Rule 17(b) speaks of auction by Octroi Superintendent with the orders i.e. previous orders of Municipal Commissioner. This post of Octroi ::: Downloaded on - 09/06/2013 17:54:53 ::: 47 Superintendent is now re-designated as Assistant Commissioner. This duty or power under Rule 17(b) is also delegated by this delegation order to others including same Assistant Commissioner & even his subordinates like Assistant Octroi Superintendent, Inspector & Junior Inspector. Power to confirm public auction is given by delegation order to Deputy Municipal Commissioner or Additional Deputy Municipal Commissioner. Rule 45 empowers Municipal Commissioner or officer authorised by him to take steps as stated in its sub-rule(1) while sub-rule(2) empowers Municipal Commissioner only to demand ten times amount. Delegation order even delegates this power under sub-rule (2) to all subordinates right till the cadre of Junior Inspector in Octroi department. There is nothing to show that power of Municipal Commissioner to authorise any officer for the purpose of exercise of powers under Rule 43 or even in other rules is not delegated to all 5 officers as per order dated 12.11.2010. Powers under Rule 46A, 16(c) & 16(g) also stand delegated to all 5 cadres/officers. The resultant inconsistent position is not consistent & sustainable in the scheme under said Rule. When Rule like Rule 16(g) contemplates officer of the status of ::: Downloaded on - 09/06/2013 17:54:53 ::: 48 Municipal Commissioner to exercise power of condonation or waiver of recovery of penal duty, it is clear officer to be authorised by him to perform that job for him has to be cautiously selected. Power under Rule 46A is also equally important and may not be available for parting at least in favour of junior officers. Rule 3(a) expects Municipal Commissioner to determine location of Octroi Nakas (posts/booths) for collection of tax on import, number of such Nakas and strength as also type of staff in it. Rule 5 expects Commissioner only to consider desirability of having one or more branch offices to facilitate working. It is not possible to recognize subordinates like Inspectors or Junior Inspectors in Octroi department as Municipal Commissioner even for purposes of Rule 3(a) or Rule 5 because of above mentioned general delegation order dated 12.11.2010. There is no general provision like S.59(5) of CNC Act in Octroi Rules to show delegability of the powers, functions or duties of Municipal Commissioner. Only source is S.59(5) which is general power and mentions power with Municipal Commissioner to empower any municipal officer "in this behalf" generally or specially. Emphasis on general or special orders of delegation is obviously due to or as per ::: Downloaded on - 09/06/2013 17:54:53 ::: 49 nature of the function in relevant Section or Rules. Thus this power to nominate or authorise "any officer & in this behalf", presupposes appropriate evaluation by the Municipal Commissioner of the "situation" before him and then select officer of appropriate rank as such delegate as also type of delegation i.e. "general or special" .
There may not or need not be a blanket delegation of all powers by invoking S. 59(5) of CNC Act to all officers from bottom to top by ignoring case-specific approach necessitated by Octroi Rules or CNC Act. As can be gathered from Rule 1 (2), "Framers of Octroi Rules"
are aware of this power to delegate conferred upon the Commissioner by S.59(5) and have , while recognizing those delegates also as Municipal Commissioner, proceeded to save the scheme in Octroi Rules. Primacy given to this scheme is with intention to avoid resulting anomalies like few noted by us already.
Thus definition of "Municipal Commissioner" in Rule 1(2) can be acted upon only when there is nothing repugnant in the subject or context. It is first condition imposed by opening words of Rue 1 viz. "
Unless there is anything repugnant in the subject or context". In present facts language of delegation order dated 12.11.2010 itself ::: Downloaded on - 09/06/2013 17:54:53 ::: 50 shows loose approach and non-application of mind. It ignores the various indications in scheme of Octroi Rules repugnant to such general delegation & similar provisions recognizing need of general or special authorisation in Octroi Rules. Decision to delegate all powers under Octroi Rules does not appear to be informed & conscious exercise. The purpose & requirement of Rules, need of a provision for general authorization or special authorization, nature of function to be discharged, gravity of situation, circumstances-
simple or complex to be addressed, place at which function is to be performed or used, capacity or status of officer to be chosen as delegate or for such authorization as also its impact on system may be some of the guiding factors to be weighed by the Municipal Commissioner before taking any such decision. Not only this, but type or nature of check to be provided to control exercise of that power by delegate within framework of S. 59(5) with due attention to its compatibility with statutory remedy of Appeal or Revision in S. 387 of CNC Act , must also enter the mind of Commissioner. As we find such application of mind absent, we are not examining this facet in more details.
::: Downloaded on - 09/06/2013 17:54:53 ::: 5124 Repugnance to such general delegation is apparent from various Rules as State Government (Rule making authority) has indicated officers like Deputy Mpl. Commissioner, Octroi Superintendent, Deputy as also Asst. Octroi Supdts. or Inspectors when ever & where ever it found it essential either with or without Municipal Commissioner. Rule 44, when viewed in the background of other Rules, becomes conspicuous due to absence of any other officer in it or mention of grant of power to Municipal Commissioner to authorise any body else "in this behalf". It therefore establishes that power under Rule 44 can be exercised only by him and its delegation is not contemplated by Octroi Rules. If delegation order dated 12.11.2010 is given primacy, due to Rule 1(2) which contains an inclusive definition of "Municipal Commissioner", the Junior Inspector in octroi can also exercise said power in Rule 44 as also other powers as he then becomes Commissioner for all purposes. The initial satisfaction on recording of which Rule 44 becomes available, therefore, must be of Municipal Commissioner only. Later action of consideration of explanation to show cause notice or absence of such reply, also needs to be by ::: Downloaded on - 09/06/2013 17:54:53 ::: 52 Commissioner only. Said power can not be delegated by him and in any case, there can not be a general or blanket delegation by him of said power or duty to one & all officers in Octroi department. It is admitted position before us that initial satisfaction here is not reached & recorded by Municipal Commissioner and consideration necessary to proceed with recovery under Chapter XII is also not by him. It is by his delegate i.e. Assistant Municipal Commissioner.
According to Petitioner, the same is also not legal but we do not find any need of that scrutiny. As we find the function inalienable & delegation order dated 12.11.2010 bad to that extent, said exercise & recourse to Chapter XII for recovery is unsustainable. It is, therefore, not necessary for us to consider other aspects in relation to delegation order dated 12.11.2010 or to examine the factual dispute in this matter. Division Bench in Parekh Brothers (supra) was not called upon to consider these aspects and hence, it can not save the situation for NMC.
25 Now question whether Rule 44 contemplates passing of any order and whether any remedy is available within framework of CNC Act against it to a aggrieved person! Availability of an ::: Downloaded on - 09/06/2013 17:54:53 ::: 53 appeal before JMFC after service of bill of demand issued under S. 154 & its limited scope are already looked into above by us. That bill can be issued only after the liability to pay ten times the duty crystallizes and it is possible only under Rule 44 of the Octroi Rules.
This Rule shows that the Municipal Commissioner first should be satisfied that material before him is legally sufficient to gather that the importer has not paid any octroi duty or has failed to pay full octroi duty. Looking to the drastic consequences which may follow, it is apparent that his comprehension about is legally justifiable and can,in any case, be reviewed judicially by this Court. This challenge or review is not possible, if Municipal Commissioner does not record reasons in support of satisfaction reached by him. Satisfaction is his conclusion, based on records, of need to proceed to recover ten times penal duty. Rule expressly permits recourse to recovery only after giving delinquent sufficient notice to show cause. It extends to such importer an opportunity to file his defence and obliges Commissioner to consider it. Rule making authority has put word "sufficient" before word "notice" and it is important in the scheme of Rule 44. It does not imply a notice of a particular duration but ::: Downloaded on - 09/06/2013 17:54:53 ::: 54 qualifies contents thereof. Show cause notice, to qualify to be "sufficient", must communicate to importer the material on which it is based & reasons which weighed with Municipal Commissioner to reach satisfaction that a case to proceed further to recover such many-fold penal duty is made out. Then only it will be an effective opportunity to importer to submit his explanation to it. Thus these requirements, cardinal to exercise of jurisdiction under Rule 44, can be fulfilled only when the material on record & mind application to is communicated to the importer. There is one more reason. The explanation furnished by importer warrants "consideration" by Municipal Commissioner. According to Webster's New World Dictionary, "consideration" means "act of considering; careful thought or attention; deliberation or meditation; something that is, or should be, considered, as in making a decision; a thought or opinion produced by considering; a reflection." In Shorter Oxford English Dictionary the same word is defined as having the meaning "the action of looking at; beholding; the keeping of a subject before the mind; attentive thought, reflection, meditation; the action of taking into account". Thus, it is not Commissioner's conclusion, ::: Downloaded on - 09/06/2013 17:54:53 ::: 55 either way on the issue of recovery, which constitutes "consideration", but it is the entire process of critical appreciation leading to a particular decision. Service of bill of demand as per S. 154, as contended, is not that consideration but it only puts an end to that process. It can not be forgotten that even this "consideration"
can form subject matter of challenge and judicial review, independently or along with attack on "satisfaction" . Hence, even at this stage "consideration" in Rule 44 has to manifest itself in the shape of a written order. Contention of Respondent NMC that bill under S. 154 is that consideration therefore, is without any merit.
Here, there is no such order passed either by Municipal Commissioner or even by his delegate. Fact that Petitioner avoided to file explanation after show cause, can not be a justification for absence of such order. Issuance of bill under S. 154 to Petitioner is thus unsustainable. Said recourse to Chapter XII & consequential steps to proceed with recovery without such order are also illegal.
26 The question can be approached in the light of very defence of delegation of Rule 44 power by Commissioner to various subordinates. Delegation order dated 12.11.2010 itself vide its ::: Downloaded on - 09/06/2013 17:54:53 ::: 56 clause 8 & 11 makes two remedies available to Petitioner. One is of appeal before the Additional Deputy Municipal Commissioner & other is of Review by the Municipal Commissioner himself. It is settled law that the appellate jurisdiction can not be exercised or review on merits may not be undertaken, when there are no reasons recorded by said delegate. The appeal or then review may be required to be allowed only due to absence of reasons with a direction to that delegate to write an order assigning reasons or else filing of such appeal or request for review would be an empty formality as such higher authorities may also not record any reasons.
As we have already found this delegation of Rule 44 power by the Commissioner bad, it is not necessary for us to delve more into this requirement of recording reasons & need of its communication. But what holds good to vitiate such an exercise by the delegate has also to affect similarly the similar exercise by Municipal Commissioner.
Rule 44 mandates consideration of explanation submitted by the importer and therefore, an order proving to all that it has been done.
It can not be a secret kept in chest by mind applying authority. Said order will have the effect of fastening the liability to pay ten times ::: Downloaded on - 09/06/2013 17:54:53 ::: 57 duty on Petitioner. If this order is final or attains finality, recovery through Chapter XII can begin. Shri Mishra has at one stage contended that the bill under S. 154 is itself an order which can then be assailed in an appeal under S. 164 and thereafter in further appeal under S. 387 of CNC Act. We have found that in Chapter XII only appeal made available by the legislation is one under S. 164 & that too with limited scope. Though, for reasons already recorded his contention is misconceived, still order required to be passed by Municipal Commissioner under Rule 44 which fixes liability for the first time in the scheme to pay ten times duty can be assailed in said appeal under S. 387 and order under S. 387 would be final in so far as said scheme or purpose of S. 169 is concerned. In property tax levy, the liability crystallization is in Chapter XI and recovery begins in Chapter XII. In octroi matters, liability is fastened through procedure under S.114(3) read with Octroi Rules and an appeal against order levying either octroi duty or penal duty under S. 387 of the CNC Act. After this S.387 Appeal or subject to it, NMC may proceed to recover octroi duty or penal duty under Chapter XII.
Importer in that event has a limited remedy of filing appeal before ::: Downloaded on - 09/06/2013 17:54:53 ::: 58 JMFC under S. 164 as already noticed above. Scope of appellate remedy under S. 164 of CNC Act, whether in property tax case or octroi duty or any other tax, remains same. Division Bench of this Court in Indian Bank vs. Nagpur Municipal Corporation-(supra) was not called upon to examine availability of S. 387 appeal at liability determination stage i.e. before Chapter XII can be resorted to. The petitioner Indian Bank did submit that the bill sent by NMC stated that an objection to the bill could be taken within 15 days from the date of its presentation. However, no such statutory provision existed in the CNC Act or Rules and hence, no objection could be raised to the Bill. This deprived it of its substantive right of appeal under section 387 of the Act as the appeal under Section 164 is not a substitute to that appeal. In an appeal under section 387 substantive findings adverse to the petitioner bank leading to the quantification of the amount could have been challenged; whereas no such challenge was open in an appeal filed under Section 164..
According to the bank, the appeal under section 164 of the Act can only be in respect of any discrepancies or follies in the bill presented under section 155 and not against the reasoned order determining ::: Downloaded on - 09/06/2013 17:54:53 ::: 59 amount of octroi duty. Said petitioner had claimed that it was deprived of its substantive right of appeal for want of reasoned order declaring its liability which could have been challenged under section 387 of the Act only. In the light of this contention, said Division Bench examined the scheme of Chapter XII and found S. 387 remedy not available. It has observed:-
"Chapter XII is, thus, a self contained code. Section 164 thereof being a specific provision providing for appeal against any notice of demand, that remedy alone is a remedy available against the notice of demand and no other appellate remedy could be resorted to against the notice of demand under section
155. Section 387 provides for appeal as a general remedy; whereas Section 164 provides a specific remedy against the notice of demand."
Thus attention of this Court was not invited to deletion of S. 155 or then to position that S.164 appeal was the appeal envisaged in S. 154 of CNC Act. It therefore does not help the Respondent NMC in present controversy. In Alok Traders vs. Corporation for the City of Nagpur (supra), on facts Rule 14(h) of Octroi Rules was found violated & hence, levy of penal octroi duty has been upheld & challenges of present nature did not fall for ::: Downloaded on - 09/06/2013 17:54:53 ::: 60 consideration. Thus, we find that passing of a reasoned order & its communication to importer is vital in the working of Rule 44. It is therefore not necessary for us to consider the precedents cited for said purpose by the Petitioner.
27 Though we have to allow the Petition, power & jurisdiction with NMC or its Commissioner under Rule 44 of Octroi Rule can not be denied and hence, we leave it free to exercise the same again, if it finds it expedient. It would now be open to the Municipal Commissioner to initiate fresh proceedings under Rule 44 against Petitioner as per law. Impugned bill under S. 154 of CNC Act dated 18.2.2011 for penal octroi duty , Notice of demand dated 7.3.2011 are accordingly quashed & set aside. However challenge to Rule 44, 14(a),14(d),14(f) & 14(h) of Octroi Rules has to fail. Writ Petition is thus partly allowed. But in present circumstances, there shall be no order as to costs. Rule made absolute accordingly.
JUDGE JUDGE ::: Downloaded on - 09/06/2013 17:54:53 ::: 61 At this stage, Shri. S.K.Mishra, learned Standing Counsel for Nagpur Municipal Corporation prays for stay of the present judgment as large number of other matters pending will automatically got affected because of our finding on delegation.
Shri. Joshi, learned Counsel appearing on behalf of petitioners is opposing the request for stay and he states that the moment stay is granted, the Corporation may again follow the same procedure which is held defective by this Court.
In this situation, we stay the operation and effect of the said finding for a period of eight weeks and the same shall cease to operate on expiry of said period of eight weeks. However, if the respondent/Corporation wish to proceed further for recovery against petitioner or to initiate fresh action in the meanwhile against them, the same shall be in accordance with the findings recorded hereinabove.
JUDGE JUDGE
jaiswal
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