CITY OF NAGPUR CORPORATION versus M/S. KHEMCHAND KHUSHALDAS AND SONS AND ORS.

Citation: [1996] SUPP. 4 S.C.R. 547 · Decided: 12-08-1996 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

CITY OF NAGPUR CORPORATION 
v. 
MIS. KHEMCHAND KHUSHALDAS AND SONS AND ORS. 
AUGUST 12, 1996 
(S.P. BHARUCHA AND S.B. MAJMUDAR, JJ.] 
City of Nagpur Corporation Ac~ 1948: Sections 3(2), 114( 1)(e) & (3) 
and 115. 
A 
B 
Octroi duty-Imposition of fresh rates of by Corporatio1.-Duly sane-
C 
tioned by State Government-No mil.ximum rate fixed by State Govern-
ment-Rates went beyond maximum ra_tes fixed under S.66( 1) and (2) of C.P. 
and Berar Municipalities Act, 1922-£ffect of-Held: rates fixed earlier under 
S.66(1) and (2) of C.P. and Berar Municipalities Act, 1922 would cease to 
be operative-Even if State Government did not fix maximum rate, that fixed 
under 1922 Act would· not prevail-Fixation of maximum rate by State D 
Government was directory and not a condition precedent for exercise of taxing 
power-Hence, absence thereof did not whittle down or cu( across the rates 
of octroi-C.P. & Berar Municipalities Act, 1922, S.66(1) & (2). 
The respondents were manufacturers of incense sticks (Agar-
E 
bathies). They carried on their manufacturing activities within the limits 
of the appellant-Municipal Corporation. The State Government through a 
notification sanctioned the octroi rates proposed by the appellant-Cor-
poration under Section 115 read with Section 114(1)(e) of the city of 
Nagpur Corporation Act, 1948. Through this notification the appellant· 
Corporation sought to revise the rates of octroi duties on various items F 
including aromatic chemicals, perfumery and natural oils in which the 
respondents were dealing and which were raw materials for the purpose 
of their business of manufacturing incense sticks. They had to import 
within the octroi limits the said raw materials from outside. 
The respondents filed a writ petition in the High Court challenging 
the aforesaid notification and it was allowed. Aggrieved by the High 
Court's judgment the appellant-Corporation preferred the present app_eal. 
G 
On behalf of the appellant-Corporation it was contended that im· 
position of new rates of octroi as per Section U4(1)(e) read with Section H 
547 
548 
SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R. 
A 
115 of the Act after getting them sanctioned by the State Government was 
within its statutory power; that no ceiling was prescribed by the Act in 
respect of rates of octroi; and that the High Court had wrongly assumed 
that imposition of ceiling of such rates by the State Government under 
Section 114 sub-Section (3) was a condition precedent to the exercise of 
B 
statutory powers of the Corporation and the State Government under 
Section 114(1)(e) read with s.115. 
On behalf of the respondents it was contended that the rates of octroi 
went beyond maximum rates of octroi fixed by the then local Gove•nment 
under Section 66(2) of the C.P. & Berar Municipalities Act, 1922 and were, 
·C 
therefore, ultra vires and illegal. 
Allowing the appeal, this Court 
HELD: 1.1. Section 3(2) of the City of Nagpur Corporation Act, 1948 
D shows that so long as the appellant-Corporation in exercise of its inde-
pendent statutory powers under Section 114(1)(e) of the 1948 Act had not 
imposed fresh rates of octroi duty on various articles brought within its 
municipal limits for consumption, sale or use, the maximum rates as 
imposed under Section··66(2) of the C.P. & Berar Municipalities Act, 1922 
E 
F 
could continue to operate. But once the field was occupied by the appel-
lant-Corporation's exercise of statutory powers under Section 114(1)(e) 
read with Section 115 of the 1948 Act and their sanction by the State 
Government, the earlier maximum rates fixed by the then local Govern-
ment under Section 66(2) of 1922 Act would obviously become inconsistent 
with the rates that would be fixed by the Corporation under the 1948 Act 
in exercise of its independent powers under Section 114(1)(e) and also by 
the rates as amended from time to time by the appellant-Corporation in 
exercise of the very same power. Hence the old maximum rates would go 
out of the protective coverage of Section 3(2) of the 1948 Act. That actually 
happened in 1966 when for the first time the appellant-Corporation im-
posed new octroi rates on various articles under Section 114(1)(e) and 
G Section 115 with its sub-sections leave no room for doubt that the appel-
lant-Corporation had full statutory authority empowering it to impose 
octroi duty at appropriate rates .after following the procedure laid down · 
by Section 115 and that could be done af

Excerpt shown. Read the full judgment & AI analysis in Lexace.