MUNICIPALCOUNCIL, KOTA, RAJASTHAN versus THE DELHI CLOTH AND GENERAL MILLS CO. LTD.

Citation: [2001] 2 S.C.R. 287 · Decided: 02-03-2001 · Supreme Court of India · Bench: V.N. KHARE · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

MUNICJPALCOUNCIL, KOTA, RAJASTHAN 
v. 
THE DELHJ CLOTH AND GENERAL MILLS CO. LTD. 
MARCH2, 2001 
[V.N. KHARE AND DORAISWAMY RAJU, JJ.] 
Rajasthan Municipalities Act, 1959: Section 104(2). 
Octroi-Dharmada Tax-Notification authorised levy of 'dharmada' tax 
on entry of goods into municipal limit-Suit restraining municipality from 
collecting 'dharrnada' tax dismissed-But High Court held that S. 104(2) only 
dealt with obligatory taxes like octroi which did not include 'dharmada' tax-
Validity of-Hfld: the levy imposed and collected under the name of'dharrnada' 
is by way of octroi which the municipality is entitled to collect-Further, such 
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imposition of'dhannada' tax does not amount lo double taxation-Hence, levy 
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of 'dharmada' tax is legal-Constitution of India, 1950, Entry 52 List II 
D 
Seventh Sch. 
Wora'.< and Phrases : 
"Double Taxation" -Meaning of 
The appellant-Municipality sought to levy "dharmada" tax, as a 
form of octroi on the goods imported by the respondent-company into the 
municipal limits pursuant to a notification issued by the State Government 
under Section 104(2) of the Rajasthan Municipalities Act, 1959. 
The respondents filed a suit restraining the appellant from collecting 
'dharmada' tax. The trial court dismissed the suit, which was confirmed 
by the appellate court. The High Court held that Section 104(2) of the Act 
only dealt with the obligatory taxes like octroi and did not include 
'dharmada' tax and, therefore, the State Government could not have 
authorised the appellant-Municipality to collect 'dharmada' tax. Hence 
this appeal. 
Allowing the appeal, the Court 
· ~ 
HELD : 1.1. The scheme underlying the notification issued in exer-
cise of the powers under Section 104(2) of the Rajasthan Municipalities 
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288 
SUPREME COURT REPORTS 
(2001] 2 S.C.R. 
A 
Act, 1959 seems to be to provide for an additional levy and collection of 
octroi on certain class or category of goods, under the nomenclature of 
Dharmada or Nirkhi, indicative more of the specific purpose or object of 
the demand so made but again only on goods brought within the limits of 
the Municipality for consumption, use or sale demonstrating thereby that 
B 
the collection under the name ofDharmada as well as Nirkhi is also by way 
of an octroi, the levy being on the very and only incidence of the entry of 
the goods and animals within the municipal limits for consumption, use or 
sale therein. (302-G-H; 303-A] 
1.2. Whenever a challenge is made to the levy of tax, its validity may 
C 
have to be mainly determined with reference to the legislative competence 
or power to levy the same and in adjudging this issue the nature and 
'~haracter of the tax has to be inevitably determined at the threshold. It is 
equally axiomatic that once the legislature concerned has been held to 
possess power to levy the tax, the motive with which the tax is imposed 
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becomes immaterial and irrelevant and the fact that a wrong reason for 
exercising the power has been given also would not in any manner dero-
gate from the validity of the tax. (303-B·CJ 
1.3. It is not the nomenclature 11'ed or chosen to christen the levy 
that is really relevant or determinative of the real character or the nature 
of the levy, for the purpose of adjudging a challenge to the competency or 
the power and authority to legislate or impose a levy. What really has to be 
seen is the pith and substance or the real nature and character of the levy 
which has to be adjudged, with reference to the charge viz., the taxable 
event and the incidence of the levy. The levy sought to be imposed and 
recovered as 'Dharmada' being only on the goods brought within the 
municipal limits for consumption, use or sale therein the same in truth, 
reality and substance is only an 'octroi' for the purpose of carrying out the 
several public charitable objects statutorily enjoined upon the Municipal 
Board and enumerated in SectiOns 98 and 99 and those undertaken pursu-
ant to the stipulations contained in Sections 101 and 102 of the Act. The 
mere fact that it is called by a different name (all the more so when the 
word 'octroi'itself is not found used in Entry 52 of List II of the seventh 
Schedule) for historical reason and administrative needs or exigencies hy 
the draftsmen of the notification does not in any manner either undermine 
the nature and character of the levy or render, if any, the less a levy 
envisaged under Entry 52 of Lis

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