FERTILIZER CORPORATION OF INDIA LTD., GORAKHPURversusNAGAR MAHAPALIKA, GORAKHPUR

  FERTILIZER CORPORATION OF INDIA LTD., GORAKHPUR                               A
                                     v.
               NAGAR MAHAPALIKA, GORAKHPUR

                             APRIL 24, 1996

        [M.M. PUNCHHI AND SUJATA V. MANOHAR, JJ.]                               B

      U.P. Town Areas Act, 1914: Section 14

      Municipalities-Octroi-Power to levy-Held : town areas not em-
powered to lery octroi after amendment of S.I4 of Act-Tax collected by          C
Notified Area Committee after amendment could not be sustained--U.P.
Municipalities Act, 1916-U.P. Urban Local Self-Government Laws (Amend-
ments) Act, 1987, S.18.

      U.P. Nagar Mahapalika Adhiniyam, 1959: Sections 3 and 4.
                                                                                D
       Municipalities-O_ctroi-Automatic levy of-/n newly included
area-New area included in city by notification--Levy of octroi in city-Held
:automatically leviable in such area:--Following of procedure under ss.l99 to
219 not necessary--Lery of octroi prior to insertion of S. 3(4) valid as such
insertion was retrospective.
                                                                                E
      Municipalities-Octroi-Continuance of-Octroi levied by municipality
under U.P. Municipality Ac~ 1916--Municipality succeeded by Mahapalika
under Adhiniyam-Held: Octroi levied by municipality remained in force even
without following procedure for its levy under Adhiniyam.

       The appellant-Corporation carried on the business of manufactur-         F
ing fertilizers. It had a factory situated in an area which was outside the
city limits. This area was governed by U.P. Town Areas Act, 1914 and it
had a Notified Area Committee constituted under the Act. At that time the
city had a Municipality constituted under the U.P. Municipality Act, 1916.
By reason of a notification issued under Section 3(1) of the U.P. Nagar         G
Mahapalika Adhiniyam. 1959, the city ceased to be governed by the U.P.
Municipalities Act, 1916 and became a Nagar Mahapalika governed by the
Adhiniyam of 1959.

     Thew<tfter the area in which the appellant's factory was situated was
brought within the limits of the city by a notification issued under Section H
                                     707
    708                  SUPREME COURT REPORTS [1996) SUPP. 1 S.C.R.

A 3(2) of the Adhiniyam of 1959. ConseQuently, the area in which the
    appellant's factory was situated came under the jurisdiction of the Nagar
    Mahapalika of the city. Octrni was recovered from the appellant by the
    Notified Area Committee and Nagar Mahapalika of the city. Unable to
    succeed before the High Court, the appellant had filed the present appeal
B   challenging the said recovery of octroi.

          Allowing the appeal in part, this Court

          HELD : 1.1. Prior to the Uttar Pradesh Urban Local Self-Govern-
    ment Laws (Amendment) Ordinance, 1979, the Notified Town Area Com-
    mittee, under Section 14(1) (g) of the U.P. Town Areas Act, 1914 had the
c   power to impose any tax mentioned in Section 128(1) of the U.P.
    Municipalities Act, 1916. This included the power to levy octroi which was
    provided for under Section 128t1)(viii) of the U.P. Municipalities Act,
    1916. By reason of the amendment made by Section 3 of the said Or-
    dinance, the power to levy a tax mentioned in Section 128(1)(viii) of the
D   U.P. Municipalities Act, 1916 was taken away from the Notified Area
    Committees under the U.P. Town Areas Act, 1914. Therefore, after the
    commencement of the said Ordinance, the Notified Area Committee had
    no power to levy and collect octroi from the appellant. This position
    continued up to the date when the area which was under the jurisdiction of
E   the Notified Area Committee became a part of the Nagar Mahapalika.
    Clearly, therefore, the sum which had been collected by the Notified Area
    Committee from the appellant for the period prior to the commencement
    of the said Ordinance was without the authority of law. [712-B-E]

          1.2. Once the area in which the appellant's factory was situated was
F   included in the city, by a notification under Section 3(2) of the U.P. Nagar
    Mahapalika Adhiniyam, 1959, by reason of Section 3(4) of the said Ad-
    hiniyam of 1959, all notifications, rules, bye-laws etc of the city in force,
    automatically apply to the freshly included area; and all taxes, fees· and
    charges imposed under the Adhiniyam can be levied and collected from
G   the newly included area. [713-D]

          13. Section 18 of the Uttar Pradesh Urban Local Self-Government
    Laws (Amendment) Act, 1987, being U.P. Act 3 of 1987, validated only a
    purported levy and collection of octroi under the provisions of the prin-
    cipal Acts referred to in Chapters IV or V of the Amending Act 3 of 1987.
H   These two chapters of the said U.P. Act 3 of 1987 deal with the said
                   F. C.I. LTD. v. NAGAR MAHA.P ALIKA                      709

Adhiniyam of 1959 and the U.P. Municipalities Act, 1916 respectively. Section     A
18, therefore, will not validate a purported levy of octroi under the U.P. Town
Areas Act, 19141evied by the Notified Area Committee. [717-G-H]

      2. Section 3(4) of the Adhiniyam of 1959, however, was not in exist-
ence at the time when the appellant's factory area was included in the city. B
Section 3(4) has been inserted in the said Adhiniyam of 1959 by reason of
U.P. Act 3 of 1987. Section 6 of the Amending Act which adds Section 3(4)
to the U.P. Adhiniyam of 1959 provides that Section 3(4) shall be and shall
always be deemed to have been inserted in the said Adhiniyam. Therefore,
Sectiou 3(4) has been inserted with retrospective effect and will apply to
the levy and collection of octroi in the newly included area. Moreover, by C
virtue of Section 18 of the said Amending Act 3 of 1987, any tax, fee or
charge levied, charged or collected before the Amending Act 3 1987 shall
be deemed to be as valid and effective as if such assessment, re-assessment,
levy or collection had been done under the said Adhiniyam of 1959 as
amended by the Amending Act 3 of 1987. By reason of these retrospective D
amendments, it is not open to the appellant to challenge the imposition of
octroi in the extended area of the city. Therefore, the argument of the
appellant that procedure under Sections 199 to 219 of the Adhiniyam of
1959 must be followed for imposing octroi in the extended area, must be
rejected. Hence, by reason of the Amending and Validating Act 3 of 1987
the levy and collection of octroi in the extended area of the city must be E
upheld. [713-E-G; 714-F-G; 715-F-G]

      Hindustan Gum and Chemicals Ltd. v. State ofHaryana & Ors., [1985]
4 SCC 124 and Bhaskar Textile Mills Ltd. v. Jharsuguda Municipality & Ors.,
[19841 2 sec 25, relied on.                                                       F

      3. Even in respect of the original city it was not necessary to follow
the procedure under Sections 199 to 219 of the said Adhiniyam of 1959 for
the levy of octroi. Section 577 of the said Adhiniyam of 1959, inter alia,
provides that any tax, bye-law, regulation etc. imposed under the U.P.
Municipalities Act, 1916, shall, in so far as it is not inconsistent with the G
provisions of the Adhiniyam, continue in force until it is superseded by
any tax etc. imposed under the Adhiniyam of 1959. Therefore, the respon-
dent was not required to follow the procedure under Sections 199 to 219
of the said ~ <lhiniyam of 1959, as octroi was not levied under the Ad·
hiniyam of 1959. It was levied earlier and continued under Section 577 H
    710                    SUPREME COURT REPORTS [1996] SUPP.l S.C.R.

A when the city came under the Adhiniyam of 1959. Octroi which was
    imposed under the U.P. Municipalities Act, 1916 remained in force. This
    octroi was levied and collected from the extended area when the extended
    area became a part of the city. [715-H; 716-A-D]

            J.K. Cotton Spinning and Weaving Mills Ltd. & AM. v. Union of India
B & Ors., [1988] 1 SCR 700, held inapplicable.

            CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 61-62 of
    1989.


c Court From the Judgment and Order dated 7.12.87 of the Allahabad High
        in C.W.P. Nos. 19337 and 19389 of 1986.

            D.A. Dave, P.O. Tyagi for J.B.D. & Co. for the Appellant.

            K. Madhava Reddy, V.J. Francis, Venkata Reddy and P.I. Jose for
D the Respondent.
            The Judgment of the Court was delivered by

          MRS. SUJATA V. MANOHAR, J. Delay in filing supplementary
    affidavit is condoned.
E       The appellant, Fertilizer Corporation of India, carries on the busi-
  ness of manufacturing fertilizers. It has a factory situated at Gorakhpur.
  Prior to 1982, the area in which the factory of the appellant is situated, was
  outside the city limits of Gorakhpur. This area was governed by the U.P.
  Town Areas Act, 1914 and it had a Notified Area Committee constituted
F under this Act to discharge the functions specified under this Act. The city
  of Gorakhpur, prior to 16.11.1981, had a municipality constituted under the
  U.P. Municipalities Act, 1916. With effect from 16.11.1981, by reason of a
  notification issued under Section 3(1) of the U.P. Nagar Mahapalika
  Adhiniyam, 1959, the city of Gorakhpur ceased to be governed by the U.P.
G Municipalities Act of 1916 and became a Nagar Mahapalika governed by
  the Uttar Pradesh Nagar Mahapalika Adhiniyam, 1959.

          Thereafter the area in which the appellant's factory is situated was
    brought within the limits of Gorakhpur city with effect from 15th of June,
    1982, by a notification issued under Section 3(2) of the U.P. Nagar
H   Mahapalika Adhiniyam, 1959, (hereinafter referred to as the 'Adhiniyam
     F. C.!. LTD. 1'. 1\iAGAR MAHAPALIKA !ivfRS. SU.lATA V. MANOHAR. J.j   711

of 1959'). As a nsult, the area in which the factory of the appellant is         A
situated, which wa~ previously under the jurisdiction of the Notified Area
Commitlce, came under the jurisdiction of the Nagar Mahapalika of
Gorakhpur city.

      The dispute in these appeals relates to the levy and recovery of
octroi from the appdlant for the period 7.4.1 979 to 22.12.1982. A sum           B
of Rs. 2.19 lakhs was recovered from the appellant by the Notified
Area Committee by way of octroi for the period 7.4.1979 to 14.6.1982,
and an amouat of Rs. 4.78 lakhs was recovered by the Nagar
Mahapalika of Gorakhpur ·city by way of octroi from 14.6.1982 to
22.12.1982. It is the contention of the appellant- Corporation that it is        c
not liable to pay octroi for the period 7.4.1979 to 15.6.1982 or for any
period thereafter. The appellant made a representation to the P d-
ministrator of the Mahapalika claiming refund of the octroi paid for
the said periods but the Administrator rejected the representation.
The appellant thereafter filed petitions in the Court of Small Causes
under Section 472 of the said Adhiniyam of 1959. These petitions were            D
allowed on 30.8.1 982 and the appellant was granted refund of the
octroi paid as also a permanent injunction restraining the Nagar
Mahapalika from recovering octroi. The Nagar Mahapalika of
Gorakhpur preferred two appeals against these orders. The District
Judge, however, dismissed these appeals by his order dated 4.10.1986.            E
The order of the District Judge was challenged by the Nagar
Mahapalika of Gorakhpur city by filing two writ petitions before the
Allahabad High Court. The High Court by its judgment and. order
dated 7.12.1987 allowed these writ petitions. Hence the present ap-
peals have been filed by the appellant before us.
                                                                                 F
      We have to examine whether octroi was validly collected from the
appellant for the aforesaid periods.

     I. 7.4.1979 to 14.6.1982

      Prior to 7.4.1979 the Notified Area Committee ·had the power to levy
                                                                                 G
octroi under the U.P. Town Areas Act, 1914.

     On 7th of April, 1979, the Ut!ar Pradesh Urban Local Self-Govern-
ment Laws (Amendment) Ordinance, 1979 was promulgated which has
been subsequently replaced by an Act. This Ordinance 6 of 1979 made              H
    712                   Slli'REMF COURT REPORTS [1()961 SUPP. 1 S.C.R.

A   amendments to the U.P. \1unicipalitic~ Act, IYl(i, as also the U.P. Town
    Area~ Act, l'Jl4. By reason of Section 3 of the ~aid Ordinance, the C.P.
    Town Areas Act, llJ14 was amended. As a re~ult, the power of a Notified
    Area Committee under the L:.P. Tmvn Area~ Act, ll)14, to levy, inter alia,
    octroi was taken away.

B         Pril)r to the said Ordinance. the Notified Town Area CommiLtcc,
    under Section l4(1)(g) of the L.P. Town Areaf. Act, 1914 had the power
    to impose any tax mentioned in Section 128(1) of the U.P. Municipalities
    Act, 1916. This included the power to levy octroi which was provided for
    under Section l28(l)(viii) of the U.P. Municipalities Act, 1916. By reason
C   of the amendment made by the said Ordinance, the power to levy a tax
    mentioned in Section 128(1)(viii) of the U.P. Municipalities Act, 1916 was
    taken away from the Notified Area Committee~ under the U.P. Town
    Areas Act, l914.

          Therefore, with affect from 7.4.1979 the Notified Area Committee
D   had no power to levy and collect octroi from the appellant. This position
    continued uplo 14.6.1982 when the area which was under the jurisdiction
    of the Notilied Area Committee became a part of the Gorakhpur Nagar
    Mahapalika. Clearly, therefore, the sum of Rs.2.19 lakhs which has been
    collected by the Notified Area Committee from the appellant for the
    period 7.4.1979 to 14.6.1982 is without the authority of law.
E
          II. 15.6.1982 to 22.12.1982

           From 15.6.1982, the area in which tht- factory of the appellant is
    situated became a part of Gorakhpur Nagar Mahapalika. It is the conten-
    tion of the respondent that even when Gorakhpur city had a municipality
F   under the U.P. Municipalities Act, 1916, octroi was being validly levied in
    Gorakhpur city. After the Gorakhpur City Municipality became Gorakhpur
    Nagar Mahapalika under the Adhiniyam of 1959, octroi was continued in
    the city of Gorakhpur. Therefore, when the Nagar !'Vtahapalika of
    Gorakhpur was extended to the area in which the factory of the appellant
G   is situated, this area also became subject to octroi. Therefore, the appellant
    is bound and liable to pay octroi from 15.6.1982. This submission has been
    challenged by the appellant.

           Now, under sub-section (2) Section 3 of the Adhiniyam of 1959 (as
    it stood at the relevant time), the State Government may from time to time,
H   after consultation with the Mahapalika, by a notification in the Official
     F.CJ. LTD. 1'. NAGAR MAHAPALIKA[MRS.SU.TATA V. MANOHAR,J.]            713

Ga;r.ette, alter the limits specified for any city under sub-section (1) so as A
to include or to exclude therefrom such area as may be specified. Accord-
ingly a notification was issued under Section 3(2). As a result, as from 15th
of June, 1982 the area in which the appellant's factory is situated came to
be included in the limits of Gorakhpur city. Section 3(4) .of the said
Adhiniyam of 1959 provides as follows :
                                                                                  B
         "3( 4) : Where by reason of a notification under sub-section (2),
         any area is included in a city declared under sub- section· (1), such
         area shall thereby become subject to all notifications, rules, regula-
         tions, bye-laws, orders directions issued or made under this or any
        ·other enactment and in force in the city at the time immediately         C
         preceding the inclusion of such area, and all taxes, fees and charges
         imposed under this Act, shall be and continue to be levied and
         collected in the aforesaid area."

       Therefore, by reason of sub-section (4) of Section 3, once the area
in which the appellant's factory is situated is included in Gorakhpur city,       D
all notifications, rules, bye-laws etc. of Gorakhpur city in force, automat-
ically apply to the freshly included area; and all taxes, fees and charges
imposed under the Adhiniyam can be levied and collected from the newly
included area.

       Section 3(4), however, was not in existence at the time when the
                                                                                  E
appellant's factory area was included in Gorakhpur city. Section 3(4) has
been inserted in the said Adhiniyam of 1959 by reason of the Uttar Pradesh
Local Urban Self-Government Laws (Amendment) Act, 1987, being U.P.
Act 3 of 1987. Section 6 of the Amending Act which adds Section 3(4) to
the U.P. Adhiniyam of 1959 provides that Section 3(4) shall be and shall          F
always be deemed to have been inserted in the said Adhiniyam. Therefore,
Section 3(4) has been inserted with retrospective effect and will apply to
the levy and collection of octroi in the newly included area with effect from
15th of June. 1982. Section 18 of the said Amending Act 3 of 1987 f11rther
provides as follows :
                                                                                  .G
        "18(1) Notwithstanding any judgment, decree or order of any court
        or other authority to the contrary, any tax, fee or charge, levied,
        charged or collected or purporting to have been levied, charged
        or collected before the commencement of the Uttar Pradesh
        Urban Local Self-Government Laws(Amendment) Act, 1987 and H
    714                  SUPREME COURT REl'ORTS [1996] SUPP. 1 S.C.R.

A           any action taken or thing clone before such commencement in
            relation to the assessment, re-assessment, levy or collection of such
            tax, fee or charge umkr the provisions of the principal Act referred
            to in Chapter l V or Chapter Y, as the case may be, and the rules
            made thereunder shall be deemed to be valid and effective as if
            such a._<;scssment, reassessment, levy of collection or action or thing
B           had been made, taken or done under the principal Act referred
            to in Chapter IV or Chapter Y, as the case may be, as amended
            by the Uttar Pradesh Urban Local Self-Government Laws
            (Amendment) Act, 1987 and the rules and bye-laws made there-
            under.
c
            (2) From the removal of doubts, it is hereby declared that nothing
            in sub-section (1) shall be construed as preventing any person -

            (a) from questioning in accordance with the provisions of the
            principal Act referred to in Chapter IV or chapter V, as the case
D           may be, as amended by the Uttar Pradesh Urban Local Self-
            Government Laws (Amendment) Act, 1987, any assessment, re-
            assessment, levy or collection of any tax, fee or charge referred to
            in sub-section (1); or

            (b) from claiming refund of any amount paid by him in excess of
E
            the amount due from him by way of any tax, fee or charge under
            the principal Act referred to in Chapter IV or chapter V, as the
            case may be, as amended by the Uttar Pradesh Urban Local Self
            Government Laws (Amendment) Act. 1987."

F         Therefore, any tax, fee or charge levied, charged or collected before
    the Amending Act 3 of 1987 shall be deemed to be as valid and effective
    as if such assessment, re-assessment, levy or collection had been done
    under the said Adhiniyam of 1959 as amended by the Amending Act 3 of
    1987. By reason of these retrospective amendments, it is not open to the
G   appellant to challenge the imposition of octroi in the extended area of
    Gorakhpur city with effect from 15th of June, 1982.

          ln the case of Hindustan Gum and Chemicals Ltd. v. State of Haryana
    & Ory., [1985] 4 SCC 124 the factory premises of the appellant were
    included within the municipal limits of Bhiwani by a notification dated lOth
H   of August, 1965, issued under Section 5(3) of the Punjab Municipal Act,
     F.C.I. LTD. v. NAGARMAHAPALIKA [MRS. SUJATA V. MANOHAR J.J         715

1911. Sub-section ( 4) of Section 5 was amended retrospectively by the A
Punjab Municipal (Haryana Amendment and Validation) Act, 1971,
whereby the levy and collection of octroi in the extended area were
validated. In sub-section ( 4), the expression "notification" was retrospec-
tively added thereby including within its scope a notification imposing
octroi which would now automatically apply with retrospective effect to the
                                                                                B
extended· area. This Court Held that by reason of the restropective amend-
ment of Section 5(4), imposition of octroi in the extended area was valid
from the date when the new area became included within the municipal
limits. The facts of the present case are very similar to this case. Therefore,
by reason of the Amending and Validating Act 3 of 1987 the levy and
collection of octroi in the extended area of Gorakhpur city must be upheld     c
with effect from 15.6.1982.

       In the case of Bhaskar Textile Mills Ltd. v. Jharsuguda Municipality &
Ors., [1984] 2 SCC 25, para 20, a similar provision in Section 5 of the Orissa
Municipal Act, 1950 was considered by this Court. Section 5 which is D
worded in a manner similar to Section 3( 4) which is before us, inter alia,
provided that any bye-law immediately in force before the inclusion of new
area shall be deemed to apply to such new area. The Court said that when
the area of a municipality is extended to cover a new area, the existing
municipal bye-laws automatically apply to the extended area and no
separate steps as prescribed under the Municipal Act are necessary to be E
taken before applying such bye-laws to the extended area. It was contended
before this Court in the above case when the Municipal Act requires
specific steps to be taken before bye-laws can be enacted and enforced in
the municipal area, such steps must be taken afresh when the municipal
area is extended to cover new areas. It was contended that the bye-laws F
will not be enforceable in the new area without such steps being taken. This
argument was negatived by this Court in view of the provisions of Section
5 of the Orissa Municipal Act of 1950. Following this decision, the argu-
ment of the appellant that. procedure under Sections 199 to 219 of the
Adhiniyam of 1959 must be followed for imposing octroi in extended area,
must be rejected.                                                            G

      The appellant next contended that even prior to 15.6.1982 octroi was
not validly levied and collected in the original Gorakhpur city. The appel-
lant contended that procedure under Sections 199 to 219 of the said
Adhiniyam of 1959 was at no time followed for the levy of octroi in th.e H
    716                   SUPREME COURT REPORTS [1996J SUPP. 1 S.CR.

A original Gorakhpur city. Hence octroi could not be extcn&d to the newly
    included area of the appellant's factory after 15.6.1982. According to the
    respondent, however, even prior to 16.4.1981, (when the Adhiniy<1m of 1959
    became applicable), under the U.P. Municipalities Act, 19lfi, Section
    128(1 )(viii) authorised the municipality of Gorakhpur to levy octroi. The
    municipality of Gorakhpur had levied octroi. When the municipality of
B
    Gorakhpur city was succeeded by the Mahapalika of Gorakhpur city under
    the said Adhiniyam of 195<J with effect from 16.4.1981, the existing octroi
    was continued. Section 577 of the said Adhiniyam of 1959, inter alia,
    provides that any tax, bye-law. regulation etc. imposed under the U.P.
    Municipalities Act, 19Jfi, shalL in so far as it is not inconsistent with the
C   provisions of the Adhiniyam, continue in force unl i! it is superseded by any
    tax etc. imposed under the Adhiniyam of Jl)59. The rt:spondent, therefore,
    rightly submits that it was not required to follow the procedure under
    Sections 199 to 219 of the ~aid Adhiniy<tm of 14)59, as octroi was not levied
    under the Adhiniyam of 1959. It was le' ied earlier and continued under
D   Section 577 when Gorakhpur city came under the Adhiniyam of 1959.
    Octroi which was imposed under the U.P. Municipalities Act, 1916
    remained in force. This octroi was levied and collected from the extended
    area when the C.\'tendcd area became a part of Gorakhpur city.

           It was also contended by the appellant that by reason of the Uttar
E   Pradesh Urban Local Self-Government laws (Amendment) Ordinance.
    1979 referred to earlier, the power to levy octroi under the U .P.
    Municipalities Act, 1916 was also taken away, just as it was taken away in
    the case of a Notified Area Committee under the U.P. Town Areas Act,
    1914. This contention, however, has no merit. Section 2 of the said Or-
    dinance deals with amendment to the U.P. Municipalities Act, 1916. It
F   substitutes for clause (vii) of sub-section (1) of Section 128, a new clause
    (vii) which is set out there. This clause deals with imposition of a toll.
    Clau~e (vii) of sub-section (1) of Section 128, which deals with the imposi-
    tion uf octroi, is not in any manner a!fect.;d by tht: said Ordinance of 1979.

G         The Ordinance, however, also amends Section 33S of the U.P.
    Municipalities Act, 1916. It is this amendment which is relied upon by the
    appellant. Section 338 of the U.P. Municipalities Act, 1916 deals with the
    extension of certain enactments to and imposition of taxes in and constitu-
    tion of committees for notified areas. It provides that the State Government
H   may by notification apply or adopt to a notified area the provisions of any
     F.C.I.LTD. v. NAGARMAHAPALIKA !MRS.SUJATA V. MANOHARJ.]              717

section of this Act or impose in the whole or a part of such notified area A
any tax which might be imposed under the provisions of the U.P.
Municipalities Act, 1916 as if the notifled area were a municipality. To this
the Ordinance has made an amendment by carving out an exception. It ha~
provided that the taxes which can be so imposed on a notified area shall
be taxes other than those taxes referred to in clauses (vii) and (viii) of B
sub-section (1) of Section 128. These two clauses deal with toll and octroi.
The amendment thus, takes away the right to impose octroi in any notified
area. Notified area is described in Section 337 as an area other than a
municipality, town area or agricultural village which may be so notified by
the State Government by a notification as set out therein. In such a notified C
area octroi cannot be imposed under Section 338 as amended by the
Ordinance. Section 338 has no application to a municipality under the U.P.
Municipalities Act, 1916. Such a municipality has and continues to have
the power to impose octroi under Section 128(1)(viii) of the said Act. The
contention, therefore, that the Gorakhpur municipality prior to 16.4.1981
had no power to levy octroi must be rejected. Octroi Waii validly levied and D
imposed in Gorakhpur city under the U.P. Municipalities Act, 1.916 and it
continued to be validly levied when Gorakhpur city came to be governed
by the U.P. Adhiniyam of 1959. Hence octroi was leviable in the extended
area which became a part of Gorakhpur city with effect fro~ 15.6.1982.
                                                                                 ·E
      To sum up, the Notified Area Committee had no power to levy and
collect octroi from the appellant from 7.4.1979 to 14.6.1982 by virtue of tht'
said Ordinance 6 of 1979. But with effect from 15.6.1982, the Gorakhpur
Mahapalika has validly levied octroi on the appellant.

      The respondent has tried to justify the collection of octroi by the
                                                                                  F
Notified Area Committee for the period 7.4.1979 to 14.6.1982 on the basis
of Section 18 of the Amending Act 3 of 1987. The respondent contends
that by reason of Section 18 of the Amending Act 3 of 1987 which has been
set out earlier, any purported levy and collection of tax has been validated.
A perusal of Section 18, however, makes it clear that what is validated is G
a purported levy and collection of octroi under the provisions of the
principal Acts :eferred to in Chapters IV or V of the Amending Act 3 of
1987. These two chapters of the said U.P. Act 3 of 1987 deal with the said
Adhiniyam of 1959 and the U.P. Municipalities Act, 1916 respectively.
Section 18, therefore, will not validate a purported levy of octroi under the H
    718                   SUPREME COURT REPORTS [1996) SUPP. 1 S.C.R.

A U.P. Town Areas Act, 1914 levied by the Notified Area Committee.
           It is lastly submitted by the appellant that it is by virtue of the
    retrospective introduction of sub-section (4) of Section 3 in the said
    Adhiniyam of 1959 that the levy and collection of octroi from 15.6.1982 is
    validated. This retrospective imposition puts an unreasonable burden on
B   the appellant. The appellant has relied upon a decision of this Court in J.K.
    Cotton Spinning and Weaving Mills Ltd. & Am: v. Union of India & Ors.,
    [1988)1 SCR 700 at 713 where this Court has said in connection with the
    restrospective levy of excise duty, that the period of limitation prescribed
    under Section llA of the Central Excises and Salt Act, 1944 would apply
C   even to the levy and collection retrospectively of excise duty. The ratio of
    this judgment cannot apply to the present case since we have not been
    shown any provision similar to Section llA in the said adhiniyam of 1959.
    What is more, in the present case, from January 1983 to 7.12.1987, which
    is the date of the High Court judgment, the collection of octroi by the
    respondent was stayed by reason of court orders. Therefore, all that we
D   can observe is, that the respondent shall collect octroi for any period
    subsequent to 22.12.1982 in accordance with the provisions of law. But the
    respondent, who is the successor of the Notified Area Committee, is also
    liable to refund to the appellant octroi collected for the period 7.4.1979 to
    14.6.1982. Looking to the fact that the appellant has closed its unit, it will
E            to
    be open the respondent to adjust the amount of octroi refundable to the
    appellant against the ~ability of the appellant to pay octroi for a period
    subsequent to 22.12.1982 if the respondent is entitled, in accordance with
    law, to collect such octroi for periods subsequent to 22.12.1982.

         The appeals are accordingly partly allowed. There will, however, be
F   no order as to costs.

    v.s.s.                                                     Appeals allowed.