Jothi Timber Mart & Others v. Corporation of Calicut & Another

Shah, J. In a group of petitions presented before the High Court of Kerala the appi:llants challenged the validity of the levy of "timber-tax" by the Corporation o{ Calicut on the grounds, inter alia, that the State Legislature is incompetent to impose that tax und•:r the Kerala Act 30 of 1961. Govindan Nair, J., declared that the Legislature was incompetent to enact s. 126 of the Cali-cut City 'vlunicipal Act, 1961 (30 of 1961 ). The decision of Govindan Nair, J., was reversed in appeal by a Division Benr.h of the High Court and the petitions were dismissed.

By virtue of Art. 246 read with Sch. VII, Item 52, List II of the Constitution, the State may legislate in the matter of "tax on the entry of gocds into a local area for consumption, use or sale therein." The appellants contend that s. 126 conferring authority to impose timber tax violates the restrictions upon the legislative power imposed by the Constitution and on that account is void.

Section 98 of the Act enumerates the taxes and duties which the Municipality may levy and one of the taxes described in cl. (e) is "tax on timber brought into the city". Section 126 declares a charge of tax on timber broµght into the city : it provides, (inso-far as it is material) :

"(1) If the Council by a resolution determine that a

tax shall be levied on timber brought into the city, such tax shall be levied at such rates, not exceeding five rupees per ton, and in such man-ner as may be detennined by the Council;

Provided that no tax shall be levied on any timber brought into the city in the course of transit to any place outside the city and directly removed out of the city hy rail. road or water.

(2) No timber shall, except in the case referred to in

the proviso to sub-section (1 ) be brought into the city unless the tax due thereon has been paid. (3) The tax shall be levied on timber kept within the

city for sale if the Commissioner has reason 'to

believe that the tax, if any, due thereon has not been paid:

"

Power to make bye-laws for sale and sei~ure of timber in respect of which tax is not paid and for carrymg out the pro-visions relating; to the levy of tax is conferred by s. 126 ( 6) and s. (369 ( 1) of the Act The Corporation of Calicut has frame? bye-laws relating to the levy and collection of umb~r . tax. I.t is pro-vided by cl. 3 that the tax on timber shall be paid ~mediately on timber being brought into the city. Bye-law 7 provides :

"(1) If timber i~ brought into the city and it is claimed that it is in the course of transit to a place out-side the city and not for consumption, use or sale within the city and if in the opinion of the authority or officer authorised to collect the tax on timber, such timber brought into the city is not for 'the purpose of transit but for the purpose of consumption, use or sale therein, such authority or officer may demand from the person claiming; exemption an amount equal to the tax leviable for such timber as security.

(2) If the person, who has paid the security satisfies the Commissioner within 14 days from the date of pay-ment that the timber in respect of which the amount was paid was brought into the city in the course of transit and not for consumption, use or sale therein the Commissioner shall refund the amount to such person. Otherwise the saine shall be appropriated to-wards tax due on such timber.

(3) (4) "

The High Court he!\[ ' that timber ' may be imported within tbe limits of the Corporation for four purposes-( 1) for consumption in the city: '.") for use in the city; (3) for sale in the city; and ( 4) for transit through the city, and since all the four purposes were within the enacting; part of the section and the proviso to 1. 126(1) having eliminated the right of the Municipality to levy tax for transit throug)l the city, "the taxing power conferred by entry 52, List II of the Seventh Schedule was ensured and its constitutional strength and validity upheld" thereby.

Counsel for the appellants contends that the High Court was ,;n error in holding that entry of timber into the Municipal area may be only for consµm\ltion, use, or s~le_within the Municipality or m the course of transit through the limits of the municipality. He says tha~ tJ:te ento/ n:iay for instan~e. be _merely for storage of the goods wtthm the limits. of the n:iu~1c1pa1tty and a provision levymg tax on goods entenng the hnuts of the municipality with-L14 Sup. CI/69-11 out specification of the purpose is beyond the legislative power of the State.

Entry of goods within the local area for consumption, use or sale therein is made taxable by the State Legislature : authority to impose a general levy of tax on entry of goods into a local area is not conferred on the State Legislature by item 52 of List 11 of &h. VII of the Constitution. The Municipality derives its power to tax from the State Legislature and can obviously not have authority more extensive than the authority of the State Legis-lature. If the State Legislature is competent to levy a tax only on the entry of goods for consumption, use or sale into a local area, the Municipality cannot under a legislation enacted in exercise of the power conferred by item 52, List ll have power to levy tax in respect of goods brought into the local area for purposes other than consumption, use or sale. The authority of the State Legis-lature itself being subject to a restriction in that behalf, s. 126 may reasonably be read as subject to the same limitations. When the power of the Legislature with limited authority is exercised in respect of a subject-matter, but words of wide and general import arc used, it may reasonably be presumed that the Legis-lature was usin,g the words in regard to that activity in respect of which it is competent to legislate and to no other; and that the Legislature did not intend to transgress the limits imposed by the Constitution : see In re Hindu Women's Rights to Property Act, 1937 ( 1 ). To interpret the expression "brought into the city" used in s. 126 (I) as meaning brought into the city for any pur-pose and without any limitations would, in our judgment, amount to attributing to the Legislature an intention to ignore the consti-tutional limitations. The expression "brought into the city' 'in s. 126 was therefore rightly interpreted by the High Court as mean-ing brought into the municipal limits for purposes of consump-tion, use or sale and not for any other purpose.

While we agree with the ultimate conclusion of the High Court we may observe that we do not agree with the assumption made by the High Court that the entry of goods into the city may be only for the four purposes mentioned by the High Court; nor do we hold that the proviso exempts from taxation timber brought into the city in the course of transit even when it is not directly removed out of the city by rail, road or water. The proviso, in our judgment, has a limited operation. It merely provides that the municipality shall not be entitled to levy a tax on timber brought into the city in the course of transit to any place outside the city and directly removed out of the citv by rail, road or water. Rut on tha! account we are unable ---- to hold that the proviso is enacted with the object of bring- --- (t) [t941] F.C.R. 12.

ing to tax all entry of timber which is not brought into the city in the course of transit to any place outside the city and directly removed out of the city by rail; road or water.

The appeals fail and are dismissed. There will be no order as to costs in these appeals.

. CIVIL APPEL1'ATE JURISDICTION: Civil Appeals Nos. 1079 to 1086 a;nd 1088 to 1099 of 1966.

Appeals from the judgment and orders dated August 31, 1965 of the Kerala High Court in Writ Appeals Nos. 134 of 1964 etc.

H. R. Gokhale, B. Datta, J. B. Dadachanji and 0. C. Mathur, for the appellants (in all the appeals).

C. K. Daphtary, A. S. Nambiar and Lily Thomas, for respon-dent No. 1 (in all the appeals).

D. P. Singh and M. R. K. Pillai. for respondent No. 2 (in all the appeals).