CITY OF NAGPUR CORPORATIONversusM/S. KHEMCHAND KHUSHALDAS AND SONS AND ORS.

                CITY OF NAGPUR CORPORATION                                  A
                                   v.
    MIS. KHEMCHAND KHUSHALDAS AND SONS AND ORS.

                           AUGUST 12, 1996

           (S.P. BHARUCHA AND S.B. MAJMUDAR, JJ.]                           B

     City of Nagpur Corporation Ac~ 1948: Sections 3(2), 114(1)(e) & (3)
and 115.

      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.
                                                                            G
     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.

      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
     statutory powers of the Corporation and the State Government under
B    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
  could continue to operate. But once the field was occupied by the appel-
E 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
F 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 after considering the objections to
   be invited against the proposed imposition of rates of octroi. It is not in
H dispute that the said procedure was followed by the appellant-Corporation
            CITY OF NAGPUR CORPN. v. KHEMCHAND KHUSHALDAS                      549

     before the 1966 notification imposin~ new octroi rates was issued and            A
     which rates were later amended in the years 1974 and 1979. [557-B-F]

           1.2. The octroi rules, sanctioned by the State under Section 115 of
     the 1948 Act show that all earlier rules regarding octroi as sanctioned by
     the then local Government along with the ceiling as imposed by the said
     Government under Section 66(2) of the 1922 Act got eclipsed and ceased B
     to operate as they obviously became inconsistent with the new octroi rules
     framed by the appellant-Corporation and sanctioned by the State under
     the 1948 Act. The field of octroi imposition got completely occupied by the
     statutory exercise availed of under the new Act by the appellant-Corpora-
     tion as well as the State. [558-D]                                          C
           2.1. The imposition of maximum rates of tax by the State Govern-
_,
     ment is an enabling provision and it is not a condition precedent to the
     exercise of taxing power by the Corporation under Section 114(1) read with
     Section 115. Both these powers and functions are independent of each
     other and operate in their own fields subject to the rider that if the State D
     Government chooses to impose maximum amounts of rates of any tax
     imposed by Corporation, in exercise of State's powers under Section
     114(3), that ceiling would get engrarted rm the rates of tax as imposed by
     the Corporation, under Section 114 read with Section 115 of the 1948 Act.
     But so long as that ceiling is not imposed by the State Government the E
     rates of taxes imposed by the Corporation would operate unrestricted and
     uninhibited by any such ceiling. [558-G-H; 559-A]

           2.2. The appellant-Corporation was fully justified in imposing octroi
     on articles at the rates specified in the notification of 1966 as subsequently
     amended in 1974 and 1979 and the impugned notification issued by the             F
     State under Section 115 of the 1948 Act operated on its own without having
     any ceiling imposed about the maximum rates under Section 114(3). The
     said provisions about the imposition of maximum rates by the State being
     directory in nature and not mandatory or compulsory for the State, so long
     as the State did not choose to exercise its powers under Section 114(3),         G
     there was no whittling down or cutting across of the rates of octroi as
     imposed by the very same State by the impugned notification and the rates
     of octroi as mentioned therein could be legally and validly enforced by the
     appellant-Corporation. [561-G-H]

           Municipal Corporation, Jabalpur and Anr. v. Shri Somji Bhanji Keniya, H
I
    550                  SUPREME COURT REPORTS (1996) SUPP. 4 S.C.R.

A   [19731 3 sec 519, held inapplicable.

          "Parekh Brothers'~ Nagpur v. Corporation of the City of Nagpur and
    others, (1975) Mb. LJ. 86, approved.

          CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3463 of
B 1990.

         From the .Judgment and Order dated 1.3.90 of the Bombay High
    Court in W.P. No. 1224 of 1980.

          V.A. Mohta, AK. Sanghi, Shyam Mudliar and Diwakar Chaturvedi
C   for the Appellant.

          E.C. Agrawala for the Respondents.

          The Judgment of the Court was delivered by

D          S.B. MAJMUDAR, J. City of Nagpur Corporation has brought in
    challenge the order passed by the High Court of Bombay, Nagpur Bench
    in Writ Petition No. 1224 of 1980 by obtaining special leave to appeal
    against the said judgment. Respondents herein had moved the said writ
    petition challenging the impugned notification dated 10th December 1979
E   issued by the Stale of Maharashtra sanctioning the octroi rates proposed
    by the appellant-Corporation under Section 115 read with Section
    114(1)(e) of the city of Nagpur Corporation Act, 1948 (hereinafter referred
    to as 'the said Act') on the ground that as the State of Maharashtra had
    not framed any rules flXing the maximum rates of octroi tax under Section
    114 sub-section (3) of the said Act, the impugned notification was of no
F   legal effect. The aforesaid challenge to the impugned notification was
    upheld by the High Court and that is how the appellant-Corporation is in
    appeal before us.

    Background facts
G         A few relevant background facts leading to these pi'oceedings
    deserve to be noted at the outset. The respondents, original writ petitioners
    before the High Court, are manufacturers of incense sticks (agarbatties).
    They carry on their manufacturing activities within the limits of the appel-
    lant-Municipal Corporation. Through a notification dated 10th December
H   1979 issued by the State of Maharashtra the appellant-Corporation sought
     CITY OF NAGPUR CORPN. v. KHBMCHAND KHUSHALDAS (&R MAJMUDAR, J.J    551

to revise the rates of octroi duties on various items including aromatic A
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. According to the respondents the
impugned notification sought to revise upwards the rates of octroi duty on B
these articles which went beyond the maximum rates of octroi fixed by the
State of Madhya Pradesh under C.P. & Berar Municipalities Act, 1922
(hereinafter referred to as the '1922 Act') and was, therefore, ultra vires
and illegal. This contention of the respondents was accepted by the High
Court. We may now have a look at the relevant events preceding the
issuance of the impugned notification.                                      C

      The C.P. & Berar Municipalities Act came into force in 1922. On
5th September 1923 a notification was issued by the then local Government
under Section 66 sub-Section (2) of the 1922 Act regulating the imposition
of octroi and also imposing maximum amounts of rates for the said tax.         D
The said notification applied to the local area which now is comprised in
the appellant-Corporation. On 3rd February 1926 a further notification was
issued framing Imposition Rules for Terminal Tax under Section 66(1)(0)
of the 1922 Act. The said terminal tax was imposable on the goods
imported within the limits of the local municipality which was the predeces-
sor of the appellant-Corporation. One further notification under Section       E
66(2)(e) of the 1922 Act was issued by the then local Government on 29th
April 1950 laying down the maximum rates of octroi tax. On 21st February
1951 rules were promulgated under Section 66(1)(c) of 1922 Act for levy
of octroi as per Section 66(1)(e) of the 1922 Act. These octroi rules came
into force from 1st March 1951 in the local area then comprising the           F
Nagpur city. On 2nd March 1951 the City of Nagpur Corporation Act, 1948
came into force. It is not in dispute between the parties that the said Act
governs the controversy raised in this litigation. In. supersession of the
octroi rules framed on 21st February 1951 a fresh notification was issued
by the appellant-Corporation framing Octroi Imposition Rules under Sec-        G
tion 114{1)(e) of the said Act and the said rules having obtained the
requisite sanction from the State of Maharashtra came into force from 1st
June 1966. Octroi duty was thereafter being levied by the appellant-Cor-
poration as per the rates imposed on the notified goods covered by the
said rules of 1.6.1966. These rules were further amended by notification
dated 20th April 1974. These amended rules came into force from 15th           H·
    552                   SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.

A   May 1974. Upto that stage the respondents-writ petitioners had no
    grievance. However the said rules came to be further amended by notifica-
    tion dated 10th December 1979 by which the original octroi ·rules framed
    under Section 114(1)(e) in the year 1966 came to be further amended.
    These amended rules came into force from lst January 1980. The respon-
    dent-writ petitioners felt aggrieved by this latter amendment to the octroi
B   rules brought in force pursuant to the said notification dated 10th Decem-
    ber 1979.

          The High Court took the view that the impugned notification of 10th
    December 1979 issued under Section 114(1)(e) read with Section 115 of
C   the said Act was inoperative as it sought to impose octroi on the raw
    material imported by the respondents at rates which went beyond the
    ceiling imposed on these rates by the then local Government under 1922
    Act and which ceiling had remained operative even after the repeal of the
    1922 Act.

D Rival Contentions

         Mr. Mohta, learned senior counsel appearing for the appellant sub-
  mitted that the High Court had erred in holding that the imposition of
  maximum rates of oclroi by the then local Government being the Madhya
E Pradesh Government under Section 66(2) of the 1922 Act enured beyond
  its repeal by virtue of Section 3 sub-Section (2) of the said Act at least from
  1966 when the appellant-Corporation in exercise of its statutory powers
  had imposed new rates of octroi as per Section 114(1)(e) read with Section
  115 of the Act after getting them sanctioned by the State Government. That
  as the said imposition was under the said Act unless any ceiling was
F imposed qua such imposition by the. State in exercise of its powers under
  Section 114 sub-Section (3), the rates as imposed by the appellant-Cor-
  poration from time to time from 1966 onwards held the field without being
  subjected to any ceiling. Thal the High Court had wrongly assumed that
  imposition of ceiling of such rates by the State Government under Section
G 114 sub-Section (3) was a condition precedent to the exercise of statutory
  powers of the Corporation and the State Government under Section
  114(1)(e) read with Section 115. It was also contended that the Division
  Bench of the High Court in "Parekh Brothers'~ Nagpur v. Corporation of the
  City of Nagpur and Others, (1975) Mh. L.J. 86 had taken the view which
H supported the appellant's contention and the said decision was wrongly not



                                                                                    (
     Cl1Y OF NAGPUR CORPN. '· KHEMCHAND KHUSHALDAS (S.B. MATM!JDAR, J. J   553

followed by the High Court on the supposition that it no longer remained         A
good law in view of the decision of this Court in Mu11icipal Corporation,
Jabalpur and Another v. Shri Somji Bhanji Keniya, [1973] 3 SCC 519. Mr.
Mohta submitted that in the case before this Court the imposition of octroi
tax rates was under 1922 Act and, therefore, the ceiling imposed under
Section 66(2) of the 1922 Act remained inoperative qua those rates. That         B
such a situation did nol obtain in the present case as the Corporation did
exercise its statutory powers under the said Act by getting issued the
notification of 1966 which later got amended in 1974 and then in 1979. Mr.
Mcihta, therefore, submitted that the decision of this Court in Municipal
Corporatio11, Jabalpur (supra) did not in any way adversely affect the ratio
of the decision of the Division Bench of the High Court in "Parekh Brothers"
                                                                                 c
(supra). Even otherwise the latter decision laid down correct law and ought
to have been followed by the High Court in the present ease.

       Mr. Agarwal, learned counsel appearing for the respondent-writ            D
petitioners on the other hand submitted that this Court in the decision in
Mu11icipal Co1poration, Jabalpur (supra) had clearly ruled that the ceiling
imposed on the octroi rates by the then local Government being the
Madhya Pradesh Government under Section 66 sub-Section (2) of the 1922
Act remained operative, by virtue of Section 3 sub-section (2) of the City
of J abalpur Corporation Act which was in pari mate1ia with Section 3            E
sub-Section (2) of the said Act and consequently the High Court was
justified in following the ratio of the said decision and that the decision of
the Division Bench of the High Court in ''Parekh Brothers" (supra) which
took a contrary view was rightly not followed by the High Court.
                                                                                 F
      Having given our anxious consideration to these rival contentions we
find that the High Court with respect was not justified in taking the view
that the impugned notification in any way conflicted with the maximum
octroi rates as prescribed by the rules promulgated by the then local
Government being the Madhya Pradesh Government or that the said                  G
maximum rates still held the field after the advent of the said Act and the
exercise of the statutory powers by the Corporation and the State Govern-
ment under the said Act. In order to appreciate the correct contours of
the controversy raised for our decision, it will be necessary to have a look
at the statutory background governing the said controversy.                      H
    554                          SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.

A Statutory background

         The pre-cursor of the City of Nagpur Corporation Act, 1948 which
  governs the rights and obligations of the parties in the present case was the
  C.P. & Berar Municipalities Act, 1922. The local area within the Jurisdic-
  tion of the appellant -Corporation was then governed by \he said Act,
B Chapter IX of the 1922 Act dealt with 'Imposition, Assessment and Col-
  lection of Taxes'. Section 66(1) of the 1922 Act, amongst others, authorised
  and empowered the Municipal Committee from time to time and subject
  to the provisions of the said Chapter to impose in the whole or in any part
  of the municipality, amongst others, the tax of octroi on animals or goods
C brought within the limits of the municipality for sale, consumption or use
  as laid down by Section 66(1)(e) of the said 1922 Act. The said Section
  also provided in sub-Section (2) that the local Government may by rules
  made under this Act, regulate the imposition of taxes under this section,
  and impose maximum amounts or rates for any tax. It is not in dispute
D between the parties that the then local Government being the Madhya
  Pradesh Government in exercise of its statutory powers under Section
  66(2) of the 1922 Act had imposed such maximum rates of octroi duty
  which could be levied by the Municipal Committee which was then running
   the municipal administration in the area which is now within the jurisdic-
  tion of the appellant-Corporation. These maximum rates as imposed by the
E then local Government being the Madhya Pradesh Government under
  Section 66(2) of 1922 Act did hold that field till the advent of the present
   City of Nagpur Corporation Act, 1948, that is, the said Aci. As noted
   earlier the said Act came into force on 2nd March 1951. By that time the
   notification issued under Section 66(2) dated 29th April 1950 by the then
   local Government was holding the field. After coming into force of the said
F
   Act, the aforesaid notification imposing maximum rates of octroi leviable
   on various goods brought within the local limits of the appellant-Corpora-
   tion continued to operate by virtue of Section 3 sub-Section (2) of the said
   Act which reads as under :

G            "3. (1) ............................... .

             (2) Every appointment, rule, bylaw, form, notification, notice, tax,
             scheme, order, licence or permission made, issued, imposed, sanc-
             tioned or given under the Central Provinces and Berar
H            Municipalities Act, 1922, shall, so far as it relates to the




                                                                                    I
     CITY OF NAGPUR CORPN. v. KHEMCHAND KHUSHALDAS [S.B. MAIMUDAR.J.J   555

        Municipality of N"gpur and so far as it is in force at the commen- A
        cement of and is not inconsistent with, this Act, be deemed to have
        been n1ade, issued, imposed, sanctioned or given under the
        provisions of this Act, and shall unless previously altered, modified,
        cancelled, suspended, surrendered or withdrawn, as the case may
        be, under this Act remain in force for the period, if any, for which
                                                                               B
        it was so made, issued, imposed, sanctioned or given."

Statutory power to impose octroi tax is conferred on the appellant-Cor-
poration by Section 114 of the Said Act. That Section is found in Part IV
Chapter XI dealing with 'Taxation'. Section 114(1)(e) of the said Act reads
as under:                                                                      c
      "114. (1) For the purposes of this Act, the Corporation shall impose-

        (a) .................................................. .

        (b) .................................................. .               D
        (c) ···················································

        (d) ···················································

        (e) a cess on animals or goods brought within the City for sale,       E
        consumption or use therein. 11

This imposition is compulsory imposition by the Corporation. Sub-section
(3) of Section 114 is also relevant. It reads under :

        "114. (1) .............................................                F
        (2) .................................................. .

        (3) 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      G
        for preventing evasion of assessment and payment of taxes."

The procedure for imposing the taxes as envisaged by Section 114 is laid
down by Section 115 which With its sub-sections reads as under :

        '115. (1) The Corporation may, at a special meeting, bring forward a   H
    556                 SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.

A          resolution to propose the imposition of any tax under Section 114.

           (2) When such a resolution has been passed the Corporation shall
           publish in accordance with the rules made under this Act, a notice,
           defining the Class of persons or description of property proposed
           to be taxed, the amount or rate of the tax to be imposed, and the
B          system of assessment to be adopted.

           (3) Any person resident within the City and objecting to the
           proposed tax may, within thirty days from the publication of the
           said notice, submit his objection in writing to the Corporation and
c          the Corporation shall at a special meeting take his CJbjection into
           consideration.

           (4) If the Corporation decides, to amend its proposals or any of
           them, it shall publish amended proposals, along with a notice·
D          indicating that they .are in modification of those previously pub-
           lished for objection.

           (5) Any objections which may be received to the amended
           proposals within thirty days shall be dealt with in the marmer
           prescribed in sub-section (3).
E
           (6) The Corporation shall forward its final proposals to the State
           Government, which shall either refuse to sanction them or return
           them for further consideration, or sanction them without modifica-
           tion or with such modification not involving an increase of the rate
F          to be proposed as it thinks fit.

           (7) Such sanction, if any, shall be published in the Gazette and the
           tax shall then come into force on such date as may be specified in
           that notification.

G           (8) A notification of the imposition of a tax under this section shall
            be conclusive evidence that the tax has been imposed in accord-
            ance with the provisions of this Act."

    In the background of the aforesaid relevant statutory provisions we may
H   now proceed to consider the question posed for our decision.
     C!TI OF NAGPUR CORPN. '· KHEMCllAND KHUSHALDAS (S.B. MAIMUDAR, J.(   557

Coiisideration of the question                                                  A

        A mere look at the provision of Section 3(2) of the said Act shows
 that so long as the appellant-Corporation in exercise of its independent
statutory powers under Section 114(1)(e) of the said Act had not imposed
fresh rates of octroi duty on various articles brought within its municipal B
_limits for consumption, sale or use, the maximum rates as imposed under
Section 66(2) of the 1922 Act could continue to operate. But once the field
was occupied by the appellant-Corporation's exercise of statutory powers
under ·section 114(1)(e) read with Section 115 of the said Act and their
 sanction by the State Government, the earlier maximum rates fixed by the
then local Government being Madhya Prade,;h Government under Section C
66(2) of 1922 Act would obviously become inconsistent with the rates that
would be fixed by the Corporation under the said 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 D
 protective coverage of Section 3(2) of the said Act. That actually happened
in 1966 when for the first time the appellant-Corporation imposed new
 octroi rates on various articles under Section 114(1)(e) of the said act. A
conjoint reading of Section 114(1)(e) and Section 115 with its sub-sections
leaves no room for doubt that the appellant-Corporation had full statutory
authority empowering it to impose octroi duty at appropriate rates after E
 following the procedure laid down by Section 115 and that couid be done
 after considering the objections to be invited against the proposed imposi-
tion of rates of octroi. It is not in dispute that the said procedure was
followed by the appellant-Corporation before the 1966 notification impos-
ing new octroi rates was issued and which rates were later amended in the F
years 1974 and 1979. In this connection it is profitable to have a look at
the notification issued by the State of Maharashtra in exercise of its powers
conferred by sub- Section (6) of Section 115 of the said Act sanctioning
the proposal framed by the appellant-Corporation as detailed in the
notification for imposition of a cess on animals or goods brought within the G
City of Nagpur for sale, consumption or use therein, under Clause (e) of
sub-section (1) of Section 114 read with Section 115 of the City of Nagpur
Corporation Act and in supersession of those sanctioned under the Mad-
hya Pradesh Government Notification No. 886-871 - MXIII, dated the 21st
February 1951. The said notification recites that in exercise of the powers
conferred by sub-section (7) of Section 115 of the City of Nagpur Corpora- H
    558                   SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.               •

A   tion Act, 1948, Government also directs that the said tax shall come "into
    force with effect from 1st day of June 1966. Clause (2) of the said notifica-
    tion lays down that a cess !hereinafter called as "Octroi Duty'' shall be
    levied on animals and goods, specified in the Schedule thereto annexed,
    brought within the octroi limits of the City of Nagpur for sale, consumption
    or use at the rates mentioned against each in the Schedule annexed subject
B   to conditions specified !hereinafter. Clause (5) thereof lays down that when
    an article is mentioned in the Schedule specifically and is also included in
    a general category, the duty shall be levied at the rate mentioned for the
    specific item. When any article is not specifically mentioned and may come
    under two or more headings in the schedule, the duty shall be levied at the
C   highest rate fixed for such heading.

        In view of the aforesaid octroi rules sanctioned by the State of
  Maharashtra under Section 115 of the said Act it becomes obvious that all
  earlier rules regarding octroi as sanctioned by the erstwhile State of
D Madhya Pradesh along with the ceiling as imposed by the said State under
  Section 66(2) of the 1922 Act got eclipsed and ceased to operate as they
  obviously became inconsistent with the new octroi rules framed by the
  appellant-corporation and sanctioned by the State of Maharashtra under
  the said Act. In other words the field of octroi imposition got completely
  occupied by the statutory exercise availed of under the new Act by the
E appellant-Corporation as well as the State of Maharashtra. So far as this
  aspect is concerned there is not much controversy between the parties.
  However it is vehemently contended by the learned counsel for the respon-
  dents that under sub-Section (3) of Section 114 of the said Act the State
  is enjoined to impose maximum rates of tax which could be levied by the
p Corporation and as that has not been done by the State, the earlier
  imposition of maximum amounts of rates of tax as done by the then local
  Government being the Madhya Pradesh Government under the cor-
  responding provisions of Section 66(2) of the predecessor Act of 1922
  continued to operate. It is not possible to agree. A mere glance at Section
  114(3) shows that imposition of maximum rates of tax by the State Govern-
G ment is an enabling provision and it is not a condition precedent to the
  exercise of taxing power by the Corporation under Section 114(1) read with
  Section 115. Both these powers and functions are independent of each
  other and operate in their own fields subject to the rider that if the State
  Government chooses to ·impose maximum amounts of rates of any tax
H imposed by Corporation, in exercise of State's powers under Section
     Cl1Y OF NAGPUR CORPN. v. KHEMCHAND KHUSHALDAS (S.B. MAJMUDAR, l. J   559

 114(3)', that ceiling would get engrafted on the rates of tax as imposed hy    A
 the Corporation under Section 114 read with Section 115 of the Act. But
 so long as that ceiling is not imposed by the State Government the rates
 of taxes imposed by the Corporation would operate unrestricted and
 uninhibited by any such ceiling. The High Court with respect was in error
when it took the view that imposition of such ceiling of rates of taxes under
                                                                                B
Section 114(3) by the State was a condition precedent to the exercise of
 powers of imposition of taxes by the Corporation under Section 114(1)(e)
 read with section 115. For coming to the said conclusion the High Court
 had equally erred in reading too much in the judgment of this Court in
Mu11icipal Corporatio1~ Jabalpur (supra) as we will presently point out. It
 is difficult for us to read the provisions of Section 114(3) as mandatory      C
requiring the State Government to necessarily regulate imposition, assess-
ment and collection of all the taxes imposable by the Corporation under
Section 114(1) of the said Act. The several clauses in sub-Section (3) must
be read distinctively and the powers which are given to the State Govern-
 ment under sub-Section (3) must be read as independent powers for              D
 making rules with regard to the assessment and collection of the taxes. A
power to make rules prescribing maximum rates of taxes could be inde-
pendently exercised by the State Government but there is nothing in the
Section which would make it obligatory for it to first specify the maximum
amounts of rates of tax before it exercises its another independent power
                                                                                E
of making rules for imposition of a tax under Section 115 of the said Act
read with Section 114 thereof. We cannot agree with the contention of
learned counsel for respondents that the power to make rules for imposi-
tion of tax conferred on the Corporation and the State Government under
Section 114(1) and Section 115 must be read Act as being subject to the
imposition of maximum rates of any tax under Section 114(3) or that the         F
two powers are interlinked, intertwined or interdependent. If Mr.
Agarwal's contention was right Section 114(1) would have been made
expressly subject to Section 114 sub-Section (3). But the legislature in its
wisdom has not done so. If the contention of Mr. Agarwal, learned counsel
for the respondents is accepted it would amount to rewriting Section 114( 1)    G
and Section 115 and making them subject to sub-Section (3) of Section 114.
Such an exercise is clearly contra-indicated by the aforesaid statutory
settings and is impermissible. We may in this connection mention that a
Division Bench of the Bombay High Court in the case of "Parekh Brothers"
(supra) had taken the same view which we are inclined to take on the            H
    560                   SUPREME COURT REPORTS {1996] SUPP. 4 S.C.R.

A construction of the aforesaid relevant provisions of the said Act. We wholly
    concur with the said view.

           Now remains the question whether this Court in Municipal Corpora-
    tion, Jabalpur (supra) had taken any contrary view on this aspect. In the
    case of Municipal C01poration, Jabalpur (supra) this Court was concerned
B with the question whether "the rates of octroi as fixed by the municipality
    under the Central Provinces.and Berar Municipalities Act. 1922 could go
    beyond the maximum rates as prescribed under the very same Act by the
    State under Section 66(2). The answer of the High Court in that case was
    that the ceiling of maximum rates as prescribed by the State under the very
c   same Act would govern the rates of octroi fixed by the Municipal Corpora-
    tion under the same Act. The said decision of the High Court was con-
    firmed by this Court. It is obvious that if the Municipal Corporation
    functioning under that Act imposed rates of octroi which went beyond the
    prescribed maximum rates imposed by the State under the very same Act,
D   the ceiling of maximum rates as fixed by the State had to operate and would
    restrict within that limit the rates of octroi fixed by the Corporation. If in
    the present case the State of Maharashtra had f1Xed maximum rates of
    octroi under Section 114(3) then obviously the rates of octroi as f1Xed by
    the Corporation under Section 114(1)(e) read with Section 115 had to be
    restricted to the said maximum ceiling but in the present case admittedly
E
    rio such ceiling was imposed by the State of Maharashtra prescribing
    maximum octroi rates for the appellant -Corporation in exercise of the
    State's powers under Section 114(3). We fail to appreciate how the
    aforesaid decision of this Court in Municipal Corporation, Jabalpur (supra)
    can be of any assistance to the respondents in the present case. In this
F   connection it is pertinent to note that this Court had noted that in the case
    before it the Corporation had not imposed directly any tax under Section
     120(1) of the 1948 Act, but had purported to impose the tax as authorised
    by the rules made by the Municipality on May 14, 1943, under the 1922
    Act. These rules prescribed the ad valorem rate of Rs. 2/5/6 per cent and
G    continued to remain in force by virtue of Section 3(2) of the 1948 Act. But
     even as the taxes imposed under 1922 Act would continue to be in force,
     the notification issued by the State Government under Section 66(2) of
     1922 Act would also continue to be in force under Section 3(2), read with
     Section 120(3) of the 1948 Act. It was also noted that the said notification
H    had clearly prescribed the maximum octroi for these goods at two annas
         CITY OFNAGPURCORPN. "· KHEMCHAND KHUSHALDAS (S.B. MAJMUDAR, J.j    561

     per maund. Hence side by side there were two orders with regard to the A
     imposition and levy of octroi on the same goods. In the case of conflict
     between the two, it is obvious that the maximum rates prescribed by the
     State Government would hold the field. As noted earlier on the facts of
     the present case there are no two orders simultaneously operating in the
    same field in connection with levy of octroi. The notification of 1966 under B
    Section 115 read with Section 114(1)(e) as amended from time to time has
     operated on its own without being in any way cut across or superimposed
    by any maximum rates of octroi as fixed by the State of Maharashtra in
     exercise of its statutory powers under Section 114(3). Consequently in the
     absence of such a statutory ceiling operating in the field, the rates as fixed C
    by the Corporation and as sanctioned by the State under Section 115
    remained fully operative without having any ceiling overhead. Such was not
    the case in Municipal Co1poration, Jabalpur's case (supra) as noted earlier.
    In fact in the very same judgment in para 15 of the Report it has been
    clarified by this Court that if after 1965 oclroi was levied at a higher rate,
    merchants would be liable to pay octroi at that rate, meaning thereby if D
     after coming into operation of the Madhya Pradesh Municipal Corporation
    Act, 1956 the City of Jabalpur Corporation had exercised its powers of levy
,   of octroi under the said latter Act of 1956 that would have operated on its
    own subject to imposition of any ceiling of maximum rate if at all fixed by
    the State under the 1956 Act. Consequently it must be held that the ratio E
    of this Court's decision in the case of Municipal Co1poration Jabalpur
    (supra) is not at all attracted on the facts of the present case. On the other
    hand the decision of the Division Bench of the Bombay High Court in the
    case of "Parekh Brothers" (supra) which meets our approval squarely got
    attracted for resolving the controversy in the present case. The High Court
                                                                                    F
    was, therefore, with respect wrong when it took the view that the aforesaid
    decision of the Division Bench in "Parekh Brothers" (supra) was no longer
    good law in view of this Court's decision in the case of Municipal Corpora-
    tion, Jabalpur (supra). In view of the aforesaid discussion the conclusion is
    inevitable that the appellant-Corporation was fully justified in imposing
    octroi on articles at the rates specified in the notification of 1966 as G
    subsequently amendment in 1974 and 1979 and the impugned notification
    of 10th December 1979 issued by the State of Maharashtra under Section
    115 of the said Act operated on its own without having any ceiling imposed
    about the maximum rates under Section 114(3). The said provision about
    the imposition of maximum rates by the State being directory in nature and H
                                                                                   I



    562                  SUPREME COURT REPORTS [19%] SUPP. 4 S.C.R.

A   not mandatory or compulsory for the State, so long as the State did not
    choose to exercise its powers under Section 114(3), there was no whittling
    down or cutting across of the rates of octroi as imposed by the very same
    State by the impugned notification of 1979 and the rates of octroi as
    mentioned therein could be legally and validly enforced by the appellant-
B   Corporation.

          In the result this appeal is allowed: The impugned judgment of the
    Division Bench of the High Court is set aside and the writ petition filed
    by the respondents is dismissed. In the facts and circumstances of the case,
    however, there will be no order as to costs all throughout.
c v.s.s.                                                       Appeal allowed.




                                                                                       .i.