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1. The petitioner, the Indian Rayon Corporation Ltd., is a company registered under the Indian Companies Act. It is engaged in the business of manufacturing rayon filament yarn. It holds about 250 acres of land which was, till recently, situate outside the municipal limits of Veraval town. Its factory is located on the said land and occupies approximately 163 acres out of the said land.

2. The first respondent-Municipality (Veraval-Patan Joint Municipality) is a municipality constituted under the provisions of the Gujarat Municipalities Act, 1963 (hereinafter referred to as "the Act"). It was incorporated in 1955-56. Its jurisdiction extends to the areas comprised ,within the limits of the towns of Veraval and Patan. The second respondent is the State of Gujarat.

(1) All appointments, notifications, notices, taxes, orders, schemes, licences, permissions, rules, bye-laws, or forms made, issued, imposed or granted or deemed' to have been made, issued, imposed or granted by or under the said Act in respect of Veraval-Patan Joint Municipality and in force within its areas immediately before the said date shall extend to and commence in the-said areas in supersession of corresponding appointments, notifications, notices, taxes, orders, schemes, licences, permissions, rules, bye-laws or forms in force in the said areas immediately before the said date until the matters so extended and brought into force are further superseded or modified under the said Act.

4. The case of the petitioner is that its factory was established in the backward area of Veraval at a point of time when no civic amenities ware available. The petitioner made its own provision for facilities such as street-lights, water, roads, drainage, recreation, school, garden, temple, etc. at a considerable cost. There was no local authority constituted either under the Act or under any corresponding law, having jurisdiction over the factory area of the petitioner, and till the inclusion of the factory area within the limits of the first respondent Municipality, the petitioner bad not to pay any local taxes. According to the petitioner, even after the extension of the municipal limits under the impugned notification (Annexure 'E'), the first respondent-Municipality is not competent to levy and collect octroi and other taxes in the factory area of the petitioner for two reasons. First, since such taxes were to be imposed for the first time qua the areas newly included within the municipal limits, it was incumbent on the first respondent-Municipality to follow the procedure prescribed by law and, secondly, having regard to the notification dated October 9, 1961 (Annexure 'A') issued by the second respondent, in exercise of the powers conferred by Section 4 of the Saurashtra Terminal Tax and Octroi Ordinance, 1949, whereby Rule 9 was introduced in the Rules made under the said Ordinance, the petitioner's industry, which was a new industry within the meaning of the said Rule, was entitled to exemption for a period of five years from the date of the extension of the municipal limits so as to cover the factory area of the petitioner.