Dixit, C.J.
1. By this application under Articles 226 and 227 of the Constitution the petitioner, who holds kerosene and diesel oil agency from the Indian Oil Corporation Ltd., and does business in Narsimhapur, seeks a writ of certiorari for quashing a notification issued by the Government on 14th July 1966 under Section 130(1) of the Madhya Pradesh Municipalities Act, 1961 (hereinafter referred to as the Act) sanctioning the abolition of the terminal tax and toll tax which had been imposed by the Municipal Council, Narsimhapur, on 12th April 1916 under the Central Provinces Municipal Act, 1903. He also prays that the 'Narsimhapur Municipality Octroi (Assessment, Collection and Refund) Rules, 1966' framed by the State Government in exercise of its powers conferred by Clauses (a) and (b) of Section 127(2), Section 133, Sections 355 (1) and 356 of the Act be declared to be invalid and the respondents be restrained from giving effect to those Rules, and further that the respondent Municipal Council be prohibited also from recovering any octroi duty on kerosene and diesel oil from 1st November 1966.
2. The material facts are that on 12th April 1916 the Municipal Council, Narsimhapur, in the exercise of its powers under the Central Provinces Municipal Act, 1903, imposed a terminal tax on goods brought within the municipal limits by rail. The abolition of this terminal tax was sanctioned by the Government by a notification issued on 14th July 1966 in exercise of its powers under Section 130(1) of the Act of 1961. On the same date, the Government issued the 'Narsimhapur Municipality Octroi (Assessment, Collection and Refund) Rules, 1966'. These Rules were made by the Government in the exercise of its powers under the provisions of the Act of 1961 to which a reference has already been made earlier. The preamble to the Rules says that they have been made 'for the assessment, collection and refund of Octroi tax within the limits of Narsimhapur Municipality'. Rule 2 (e) of the said Rules defines 'Octroi limits' as meaning 'the Octroi limits of the Municipality as fixed by the byelaw made under Sub-clause (f), and Clause (2) of Section 358 of the Act'. Rule 3 then says :
'Goods subject to tax are, wherever produced, liable to pay the tax as soon as they enter the Octroi limits of the Municipality.'
The Municipal Council imposed an Octroi tax on kerosene and diesel oil and other goods with effect from 1st November 1966.
3. It was argued by Shri Dharmadhikaree, learned counsel for the petitioner,that under Section 127 (1) (v) the Municipal Council could impose an octroi on animals or goods brought within the limits of the Municipality for sale, consumption or use within such limits: that the Council could also under Clause (xvi) of Section 127 (1) impose a terminal tax on goods or animals imported into or exported from the limits of the Municipality. But by the proviso to Clause (xvi) it was expressly provided that a terminal tax and an octroi duty shall not be in force in any Municipality at the same time. Learned counsel said that the terminal tax imposed by the Municipal Council on 12th April 1916 could not be abolished by the Council with the previous sanction of the Government in the exercise of its powers under Section 130 (1) of the Act of 1961 because Section 130 (1) enabled the abolition of a tax imposed under the Act of 1961 and not of taxes imposed under the Act of 1903; and that as the terminal tax imposed on 12th April 1916 was continued by Article 277 of the Constitution and also Section 127 (4) of the Act of 1961, it could only be abolished by Act of the Legislature.
It was, therefore, contended that the abolition of the terminal tax by the notification issued on 14th July 1966 was illegal and invalid and in no way affected the continuance of the terminal tax and that as the terminal tax continued to be in force the Council could not impose octroi tax under Section 127 (1) (v) and thus the imposition of the tax with effect from 1st November 1966 and the 'Narsimhapur Municipality Octroi (Assessment, Collection and Refund) Rules, 1966, were invalid. Learned counsel also submitted that in any case under the aforesaid Rules no octroi tax could be recovered from the petitioner so long as the octroi limits of the Municipality were not defined and that the Municipal Council had not till now defined these limits.
4. Leaving aside the question whether in view of Entry No. 89 of List I of the Seventh Schedule to the Constitution and the fact that under the Constitution the State Legislature has no power to impose a terminal tax, the validity of Clause (xvi) of Section 127 (1) of the Act of 1961 can be supported, and taking Clauses (v) and (xvi) of Section 127 (1) as they are, it is plain that a Municipal Council can impose either an octroi tax or a terminal tax, but cannot impose under those provisions both the taxes simultaneously. The octroi tax that was imposed by the Municipal Council here with effect from 1st November 1966 was after the abolition of the terminal tax imposed on 12th April 1916. The contention of learned counsel for the petitioner that the Council could not abolish the tax under Section 130 (1) of the Act is altogether unsubstantial, Section 130(1) lays down that 'a Council may abolish any tax already imposed under this Act.....' If this provision is read with Section 2 (2) of the Act repealing, inter alia,the Central Provinces and Berar Municipalities Act, 1922, it is plain that the terminal tax imposed by the Narsimhapur Municipality under the Act of 1903, which Act was repealed by the Act of 1922 and which in its turn was repealed by the Act of 1961, is a tax deemed to have been imposed under the Act of 1961.
Section 2 (2) of the Act, inter alia, provides that notwithstanding the repeal of that Central Provinces and Berar Municipalities Act, 1922, all taxes imposed under the repealed Act or any enactment thereby repealed shall be deemed to have been imposed under the Act of 1961. The expressions 'imposed under the said Acts', that is the repealed Acts, 'or any enactment thereby repealed' are wide enough to save taxes imposed not only under the Act of 1922 but also under the Act of 1903 which was repealed by the Act of 1922 and make the saved taxes as one deemed to have been imposed under the Act of 1961. The words 'any tax already imposed under this Act' as used in Section 130 (1) read with Section 2(2), therefore, mean not only taxes imposed under the Act of 1961 but also taxes deemed to have been imposed under that Act. If then, as we think, this is the true construction of Section 130 (1), the Council had the power to abolish with the previous sanction of the State Government, the terminal tax imposed on 12th April 1916 and the notification issued by the State Government on 14th July 1966 sanctioning the abolition cannot be assailed on the ground that under Section 130 (1) the Council had no power to abolish that tax.
5. There is no dispute that the terminal tax imposed by the Narsimhapur Municipality in 1916 was continued first by Section 143(2) of the Government of India Act, 1935, and then under Article 277 of the Constitution. But the contention advanced on behalf of the petitioner that the terminal tax having been thus continued could be abolished only by an Act of the Legislature is not sound. The decision of the Supreme Court in Ram Krishna Ram Nath v. Janpad Sabha, AIR 1962 SC 1073, on which learned counsel relied, does not furnish any basis for supporting the contention.
In the case of Ram Krishna Ram Nath, AIR 1962 SC 1073 (supra) the Supreme Court dealing with Section 143(2) of the Government of India Act, 1935, said.
'In the context the relevant words of the sub-section could only mean 'may continue to be levied if so desired by the Provincial Legislature' which is indicated by or is implicit in the use of the expression 'may' in the clause 'may be continued until provision to the contrary is made by the Federal Legislature'. This would therefore posit a limited legislative power in the province to indicate or express a desire to continue or not to continue the levy. If int-he exercise of this limited power the province desires to discontinue the tax and effects a repeal of the relevant statute the repeal would be effective. Of course, in the absence of legislation indicating a desire to continue the tax, the effect of the provision of the Constitution would be to enable the continuance of the power to levy the tax but this does not alter the fact that the provision by its implication confers a limited legislative power to desire or not to desire the continuance of the levy subject to the overriding power of the Central Legislature to put an end to its continuance and it is on the basis of the existence of this limited legislative power that the right of the Provincial Legislature to repeal the taxation provision under the Act of 1920 could be rested'.
These observations only mean that the continuance of a tax under Section 143(2) of the Government of India Act, 1935, or Article 277 of the Constitution does not in any way stand in the way of the authority by which the tax was imposed to discontinue the imposition. It is true that in the aforesaid observations reference has been made to 'legislation' and to the power of the State Legislature to discontinue the imposition continued by Section 143(2). But if it is remembered that the observations reproduced above were made by the Supreme Court while dealing with the validity of an amendment made in Section 192 of the Central Provinces and Berar Local Government Act, 1948, by the Central Provinces and Berar Local Government (Amendment) Act, 1949, it is clear that the references to 'limited legislative power' in the Province to enact a law to discontinue the tax continued by Section 143(2) cannot be read as meaning that it is only by an Act of Legislature that a tax continued under Section 143(2) of the Government of India Act, 1935, or Article 277 can be discontinued. The effect of those observations is only this, that the authority which validly imposed the tax continued under the aforesaid provisions has the limited power of discontinuing the imposition even if it was continued by Section 143(2) of the Government of India, Act, 1935, or Article 277. Here, as pointed out earlier, the terminal tax was imposed in 1916 by the Narsimhapur Municipality under the Central Provinces Municipal Act, 1903, and the Municipal Council was competent to abolish that tax under Section 130 (1) of the Act of 1961.
6. The further contention that as the terminal tax was continued by Sub-section (4) of Section 127 of the Act of 1961, therefore, an Act of the Legislature was necessary for its abolition is fallacious. Sub-section (4) of Section 127 is as follows:
'Subject to the provisions of Article 277 of the Constitution of India, any tax which immediately before the commencement of this Act was being lawfully levied by the
Municipal Committee, Municipal Council or Municipal Board, as the case may be. notwithstanding that such tax is not specified in Sub-section (1), shall continue to be levied by the Council',
This provision no doubt purports to provide for the continuance of 'any tax which immediately before the commencement of this Act (that is, the Act of 1961) was being lawfully levied by the Municipal Committee, Municipal Council or Municipal Board', notwithstanding the fact that the tax is not specified in Section 127 (1). But it is easy to see that the continuance of a tax not enumerated in Section 127 (1) and which is also not covered by any entry in List II of the Seventh Schedule to the Constitution is really by virtue of the provisions of Article 277 of the Constitution. If Article 277 had not provided for the continuance of such taxes, then Sub-section (4) of Section 127 would have been utterly ineffective. In fact, Section 127 (4) does nothing but repeats what has been provided by Article 277. Thus, the continuance of the terminal tax imposed in 1916 was by virtue, of Article 277 and not by virtue of Section 127 (4) of the Act.
7. Learned counsel is on a strong ground in his submission that the Municipal Council cannot recover the octroi tax imposed by it on kerosene and diesel oil with effect from 1st November 1966 inasmuch as the octroi limits contemplated by the Narsimhapur Municipality Octroi (Assessment, Collection and Refund) Rules, 1968 had not been defined. On reading Section 127 (1) (v) and the aforesaid Rules together, it is clear that though goods become liable to payment of octroi duty when they are brought within the municipal limits for sale, consumption or use within those limits, the liability to actual payment of the tax does not arise until the goods are brought within the octroi limits. Rule 3 specifically prescribes that goods subject to tax 'are, wherever produced, liable to pay the tax as soon as they enter the Octroi limits of the Municipality'. 'Octroi limits' have been defined by Rule 2 (e) as the limits fixed by a bye-law made under Section 358 (2) (f) which gives to the Council the power to frame byelaw fixing octroi limits.
8. Shri Dabir, learned counsel for tht Municipal Council, suggested that the expression 'within the limits of Narsimhapur Municipality' used in the preamble in connection with the words 'for the assessment, collection and refund of Octroi tax' itself Indicated that the octroi limits were no other than the limits of the Municipality. We are unable to assent to this contention which totally ignores the definition of 'Octroi limits' given in Rule 2 (e) as the limits fixed by a byelaw framed under Section 358(2) (f). As stated earlier and as held by this Court in Municipal Committee, Bhatapara v.Board of Revenue, M.P. 1962 MP LJ 310 If the rules framed for the assessment and Collection of tax make the liability for payment of tax on goods after they enter the octroi limits of the Municipality then though the goods may be brought within the Municipal limits for consumption or use or sale within those limits, the liability for actual payment of the tax cannot arise until the goods are brought within the octroi limits. That there is a distinction between octroi limits and municipal limits, and octroi limits may be different from Municipal limits is plain enough from the decision of the Supreme Court in Bagalkot City Municipality v. Basalkot Cement Co. AIR 1963 SC 771. As, in the present case, the octroi limits have not been fixed by a byelaw made under Section 358 (2) (f) of the Act, the Municipal Council cannot make any person liable for payment of tax for goods entering the municipal limits for sale, use or consumption within those limits.
9. For the foregoing reasons, this petition is allowed in part and the respondent-Municipal Council is restrained from imposing any liability on the petitioner for payment of octroi tax so long as octroi limitsare not defined by a byelaw made underSection 358 (2) (f) of the Act. The Municipal Council shall refund to the petitionerthe amount of octroi tax so far collectedfrom him in terms of the undertakinggiven by it to this Court on 18th November1966. The petitioner shall have costs of thisapplication. Counsel's fee is fixed at Rupees150/-. The outstanding amount of the security deposit shall be refunded to the petitioner.