I96I

J< ebruary 3.

SUPREME COURT REPORTS [1961]

BANGALORE WOOLLEN, COTTON AND

SILK MILLS CO. LTD., BANGALORE v.

THE CORPORATION OF THE CITY OF BANGALORE BY ITS COMMlSSIONER,

BANGALORE CITY. (with connected appeal) (J. L. KAPUR, M. HIDAYATULLAH and J.C. SHAH, JJ.)

Municipality-Octroi-Resolution intending to levy and final levy, if separate publication necessary-Notice technically defective, if can be validated-Power to specify goods not mentioned in the Schedule-Excessive delegation-Raw Cotton or Wool, nature of- City of Bangalore Municipal Corporation Act, I949 (Act LXIX of I949), SS, 38(I), 9J(e), 98(I), 98(2).

The City of Bangalore Municipal Corporation resolved to levy octroi on cotton and wool and the resolµtion was notified in the Official Gazette as required bys. 98(1) of the City of Bangalore Municipal Corporation Act. Objections were invited and the appellants filed their objections to the tax. Final resolution in regard to the tax was passed under s. 98(2) of the Act which was published in local newspapers but not in the Official Gazette.

Notices were also sent to the appellants to the effect that after considering their objections the Municipality had decided to levy octroi on the goods at the rate already notified. The appellants then filed applications in the High Court under Art. 226 of the Constitution challenging the legality of the levy of octroi but the High Court dismissed the applications. On appeal with a certificate of the High Court:

Held, that publication of the resolution in the Official Gazette and invitation of objections under s. 98(1) whjch were filed, were sufficient compliance with the provisions of the Act.

The notice stating that the tax had been resolved to be levied instead of stating that it was intended to be levied was at the most only technically defective but all such defects were validated bys. 38 of the Act. It was not necessary first to pass a resolution specifying the goods and then another resolution showing the intention of the Municipality to tax those goods.

The goods and the rate of tax were specified and the resolution was passed after following the procedure laid down in s. 98(1).

This amounted to substanti~I compliance with the provisions of the Act.

The legislature has laid down the powers of the Municipality to tax various goods and enumerated certain goods; Class VIII in Part V of Schedule III read withs. 97(e) of the Act authorised the Municipality to impose tax on other articles and goods. In

the present case there was a resolution which sought to include 1961 the goods in dispute in the Schedule for the purpose of imposing -- the tax. Bangalore Woollen, Bijay Cotton Mills Ltd. v. Their Workmen [1960] 2 S.C.R.

Cotton and Silk 982, distinguished.

Mills Co. Ltd.

The conferment of power upon the Municipality to specify c • ;0 • th goods under Class VIH is in te nature of conditional delegation c:/;•ang%0,: and does not amount to excessive delegat10n.

Y Baxter v. Ah Way (1909) 8 C.L.R. 626, followed.

The High Court was right in holding that Cotton and Wool do not cease to be raw materials for the purposes of the Act, merely because they are ginned and pressed in bales. The resolution in the present case' covered the articles imported by the appellants into the limits of the Corporation of Bangalore.

CIVIL APPELLATE

JURISDICTION: Civil Appeals Nos. 448 and 449 of 1957.

Appeals from the judgment and order dated September 27, 1956, of the Mysore High Court in Writ Petitions Nos. 44 and 45 of 1955.

N. O. Chatterjee, D. N. Jl!ukherjee and B. N. Ghose, 'for the appellant in C. A. No. 448of1957.

V. L. Narasimhamoorthy, S. N. Andley, J.B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the

appellant in C. A. No. 449 of 1957.

G. R. Ethirajulu Naidu, Advocate-General, Mysore,·• B. R. G. K. Achar and K. R. Ohoy, dhuri, for the respondent.

1961. February 3. The Judgment of the Court was delivered by KAPUR, J.-These are two appeals brought against two judgments and orders of the High Court of Mysore which arise out of two petitions filed by the appellants under Art. 226 challenging the legality of the imposition of octroi on wool and cotton under s. 98 of the City of Bangalore Municipal Corporation Act (Act LXIX of 1949), which for the sake of convenience, will be termed the "Act ".

On March 31, 1954, a resolution was passed purporting to be under s. 98(1) of the Act by which it was

Kapur].

700 SUPREME COURT REPC''.'T'f: [1961]

z96r resolved to levy an octroi on cotton 1, nd wool as - follows:- Bangalore WooUen, Name oif the Articles Rate of duty Cotton and Silk

Mills co, Ltd,

l. Raw cotton and wool Rs. 1/9/- per cent. ad valorem v, (this includes both loose Corpora1ion of the and compressed, made in City of Bangalore India or foreign)

Kapur J. 2. " This was notified in the Mysore Gazette on April 3, 1954, and was' also published as required by s. 98(1) of the Act. Objections were invited and it is admitted that both the appellants filed their objections. Final resolution under s. 98(2) was passed on December 21, 1954, and the resolution in regard' to octroi came into force as from January 1, 1955. It may be mentioned that the final resolution passed under s. 98 (2) of the Act was not published in the Official Gazette but was published in the local newspapers and a notice dat.ed December 23, 1954, was also sent to the appellants to the effect that after considering their objections the Municipality had decided to levy an octroi on the goods at the rate already notified.

The appellant in C.A. 448/57, filed a petition in the High Court on March 15, 1955, under Art. 226 cha:- lenging the validity of the imposition of the octroi on the grounds :-

(1) that the tax was in contravention of s. 98(2) of the Act in so far as a notice was not published in the Official Gazette ;

(2) that the tax was in contravention of s. 130 of the Act and

(3) that there was excessive delegation.

The appellant in C. A. 449/57, filed its petition on March 17, 1955, in which besides challenging the validity of the imposition of t!ie_ tax on grounds above set out, it also challenged the vires of the imposition on the grounds :-

1. that the levy of the octroi was in contravention of Art. 276(2) of the Constitution by which a tax on trade exceeding Rs. 250/- per annum could not be imposed;

2. that it was a contravention of Art. 301 which , 1961 guaranteed freedom of inter-State trade and com- Bangal,;;;-Wool1'•, merce, and Cotton and Sillc

3. that it was in contravention of Art. 19(1)(g) of Mills co. Lid. the Constitutiou. v.

The High Court rejected all these objections and c ... poralion oflh• the appellant has come to this court on a certificate C•ty of Bangalore of the High Court under Art. 133(1) of the Consti- Kapur J. tution.

In order to decide the question of the legality of the tax it is necessary to refer to the relevaut provisions of the Act. Section 97 enumerates the taxes and duties which the Corporation is empoweredto levy under the Act. Section 97(e) provides:

"97. The Corporation may levy- .......................................

(e) an octroi on animals or goods or both brought within the octroi limits for consumption or use therein." Section 98 which deals with the powers of control of 1

Government and the procedure for the levying of the Municipal taxes provides :

Section 98 (1). "Before the Corporation passes any resolution imposing a tax or duty for the first time it shall direct the Commissioner to publish a notice in the Official Gazette and in the local newspapers of its intention and fix a reasonable period not being less than one month from the date of publication of such notice in the Official Gazette for submission of objections. The Corporation, may, after considering the objections, if any, received within the period specified, determine by resolution to levy the tax or duty. Such resolution shall specify the rate at which, the date from which and the period of levy, if any, for which such tax or duty shall be levied.

(2) When the Corporation shall have determined to levy any tax or duty for the first time or at a new rate, the Commissioner shall forthwith publish a notice in the manner laid down in sub-section {l) specifying the date from which, the rate at which and the period of levy, if any, for which such tax or dut, r shall be levied.''

1961 It was argued that instead of passing a resolution

Bangal,;;;-Woollen imposing the octroi dut, y, the Corporation should have

Cotton and Silk 'first published its " resolution " to impose the tax and Mills Co. Lid. that the Corporation could not at once pass " a resolu- ".· tion " by which it imposed the tax. It published that Curpora1•0• of th• resolution in the Official Gazette and also in accordance City of Bangalore 'th th · • f 98(1) d · d b" t" _ w1 o er prov1s10ns o s. an mv1te o iec ions Kapur J. which were filed.

The only defect, if defect it can be called at all, was that instead of saying that it " intended " to impose a tax, the notice which was published said the tax " had been resolved to be levied." This is a technicality and is of

II") substance.

The next objection raised was that after the Corporation adopted the resolution imposing the tax which was after considering all the objections the publication was only in local newspapers and there was no publication in the Government Gazette and this, it was submitted, was such a serious defect as to make the imposition illegal and ultra vires. In support counsel for the appellants relied on certain judgments w_here

publication in the Official Gazette was held to be a condition precedent to the legality of the imposition of the tax. These cases are Krishna Jute & Cotton Mills

v. The Municipal Council, V izianagram (1) ; M unicipaJ, Council, Rajamundry v. Nidamarti Jaladurga Prasadarayudu (•).

Reference was made also to The Municipal Council, Anantapur v. Sangali Vasudeva Rao (3); Manak Chand v. Municipal Council(') and State of Kerala v. P. J. Joseph('). This question we are not considering as we are referring this c'ase to a larger Bench on certain constitutional points and shall refer this question also in the sequel.

The second objection raised was that there was no compliance with s. 130 of the Act. That section is as follows:-

Section 130. " If the corporation by a resolution determines that an octroi should be levied on animals or goods brought within the octroi limits of

(1) A.LR. 1926 Mad. 152.

(3) (1931) l.L.R. 55 Mad, 207.

(2) A.LR. 1926 Mad. 800.

(4) A.LR. 1951 Raj. 139.

I,;) A.LR. 1958 S.C. 296, 299.

the city, such octroi shall be levied on such articles 1961

or goods specified. in Part V _Schedule ~II at suh Bangalcw• w,, oll••· rates not exceedmg those laid down m the said cotton and Silk.

Part in such manner as may be determined by the Mills Co. Lid. ' corporation." ~· That is not a charging section but it imposes a limita- Co'.P°"""'" of the tion on the power of the Municipality as to the rate C"y of Bangalore at which a tax can be imposed. It was further argued Kapur J. that before a resolution under s. 98(1) could be passed the goods sought to be taxed had to be specified under s. 130 read with Schedule III, Part V of the Act.

Clause 18 of that Schedule p, rovides that octroi on animals and goods shall be levied at the rates not exceeding the following.

Classes I to VII specify articles on which octroi can be levied at the maximum rate. Class VIII was as follows :

Octroi Maximum rate "Other articles which are not specified above and which may be Rs. 2·0-0 per cent. approved by the Corporation ad valorem" by an order in this behalf That class empowers the Municipal Council to impose octroi duty on other articles which are not specified but which may be approved by the Corporation. In other words the Corporation can choose other p.rticles upon which tax can be imposed and the respondent Corporation in the present case did resolve to impose tax on raw cotton and wool and also fixed the rate at Rs. 1·9-0 per cent. ad valorem. The submission that as a result of the operation of s. 130 first a resolution had to be passed specifying raw cotton and wool as goods on which octroi duty would be levied and then the procedure under s. 98(1) and (2) had to -Oe gone through is without substance. What the Corporation did was that it passed a resolution choosing these goods to be goods on which octroi duty was to be levied and by the same resolution it resolved that the goods therein specified be taxed at .the rate therein specified. There is no contravention of s. 130 even if the contention of the appellants was to be taken most strictly. The goods were specified ; the

'96' rate of tax to be levied on the goods was also speci- . BM1C•lo:-woo11 fied ; the resolution was passed to that effect and the c.11 ... ••d su';'' other procedure laid down ins. 98(1) was then followed .

.lllf-ill• Co. Lid • . In our opinion it is not necessary that first a resolu . .. : tion should be passed specifying the goods and then <;.r1:i''on •1111• another resolution should be passed showing the

"" _!!':._"lfalore intention of the Municipality to tax those goods.

Kafrwr J.

WhR.t has been done substantially complies with the provisions of the Act.

.1

It was next argued that the words of Class VI II in Part V of Schedule III where the words used are " other articles which are not specified above " and which may be approved by the Corporation by order in this behalf meant that the goods must be precisely defined and included by name in the Schedule and that the use of the word " in this behalf" meant adding to the list of articles in Schedule III. Reliance was placed on the interpretation of the word " in t.his behalf" as given by this Court in Bijay Cotton Mills Ltd. v. Their Workmen('). But that case has no application to the facts of the present case because the resolution was, as a matter of fact, passed for the purpose of imposing an octroi duty on the goods in dispute. The words used in Bijay Cotton Mills Ud. v.

Their Workmen(') were in another context and even there a.II that was said was that a notification had to issue making the Central Government the appropriate Government. As we have said above in the present ca.ee there was a resolution which sought to include these goods in the Schedule for the purpose of imposing the tax.

The excessive nature of delegation under Class VIII in Part V of Schedule III was also urged but this was not a. question which was raised in the High Court nor is there any substance in the matter. The argument raised was that the power of the Municipa.l Corporation to specify goods under Class VIII Wll8 excessive delegation which wa~ both uncanalised and uncontrolled and reliance was placed on a judgment of this Court in Hamdard Dawakoona v. Union of India('); but that case has no application to the facts

(r) (196oj 2 S.C.R. 980.

(•) [1960] 2 S C.R. 671,

of the present case. In the present case the Legisla- '96~ tll'l'e has laid down the powers of the Municipality BfMfOlor• w..u..;

to tax various goods. It has enumerated certain Co#o• _, s.a articles and animals and Class VIII read with s. 97(e) MiUs Co. LI& of the Act has authorised the Municipality to impose ": tax on other articles and goods. This power is more po';':.":, t.:::. in the nature of conditional delegation as was held in •Y• __ Baxter v. Ah Way(1) where it was held thatunders. 52(g) K•Jnu J. of the (Australian) Customs Act, 1901, a power given to prohibit by proclamation the importation of certain articles was not a delegation of legislative power but conditional legislation because thP prohibition of importation was a legislative a.ct of l' trliament itself and the effect of sub-s. (g) of s. 52 was only to confer upon the Governor-General in Council the discretion to determine to which class of goods other than those specified in the section and under what conditions the prohibition shall apply. All that the Legislature has done in the present case is that it has specified certain articles on which octroi duty can be imposed and it has also given to the Municipal Corporation the discretion to determine on what other goods and under what conditions the tax should be levied. That, in our opinion, is not a case which falls under the rule laid down by this Court in Hamdard Dawakhana v.

Union of India(').

It was contended in C. A. 449/57 that the imposition of duty on raw cotton could not cover processed cotton that is cotton which had been ginned, combed and pressed. The High Court held that the cotton by being ginned or pressed in bales does not cease to be raw cotton and was to be regarded as raw for the purpose of the Act. The same would apply to wool.

The notification levying the tax specifically stated that raw cotton and wool included both loose and compressed, i.e., compressed cotton and wool whether it was Indian cotton or foreign cotton. It will not, in our opinion, be a correct meaning to give to the notification if it were "interpreted to apply only to cotton which had been gathered from the fields and had neither been ginned nor pressed." We agree with

(1) (1909) 8 C.L.R. 6>6.

(>) [1960] • S.C.R. 671.

'96' the High Court that this resolution covers the articles

Bangalor1 Wooll•• which the appollants in the two cases were impurt-

Cotto• and 5;1~ 'ing into the limits of the Corporation of Bangalore.

Mills Co. Ltd.

The learned Advocate-General appearing for the v: respondent also relied on s. 38 of the Act which Corporation of the provides :

City of Bangalore Section 38 (1). "No act done, or proceeding taken

Kapur J. under this Act shall be questioned merely on the ground-

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

(b) of any defect or irregularity in such act or proceeding, not affecting the merits of the case." This section validates all defects and irregularities in in any act or proceedings which do not affect the merits of the case. It was submitted that this section is in another chapter, i.e., chapter 2 dealing with provisions common to the Corporation and the Standing Committees. It may be that it is in another chapter but the language of the section is wide and applies to all defects or irregularities in any act or proceeding done not affecting the merits of the case.

In our opinion the following points should be heard by the Constitution Bench•:-

(1) Whether the imposition in the present case offends Art. 276 or 301 of the Constitution ?

(2) Whether the failure to notify the final resolution of the imposition of the tax in the Government Gazette is fatal to the tax ? .

If the answer to these questions or any of them is in the affirmative the appeal will have to be allowed.

But if the two questions are answered against the appellants the appeals will fail as all other points have been decided by us against the appellants. The costs will follow the event unless the Bench hearing the reference makes other order.

Referred to Constitution Bench for final disposal.

"'The decision of the Constitution Bench is reported infra.

L. KAPUR

M. HIDAYATULLAH

C. SHAH, JJ.

Bangalore Municipal Corporation

s. 98(2)

Art. 226

s. 98(1)

s. 98(1)

Schedule III

Mysore High Court

N. O. Chatterjee

D. N. Jl!ukherjee

B. N. Ghose

V. L. Narasimhamoorthy

S. N. Andley

J.B. Dadachanji

Rameshwar Nath

P. L. Vohra

G. R. Ethirajulu Naidu

B. R. G. K. Achar

K. R. Ohoy

KAPUR

High Court of Mysore

Art. 226

s. 98

March 31, 1954

s. 98(1)

Kapur

April 3, 1954

s. 98(1)

s. 98(2)

December 21, 1954

January 1, 1955

s. 98

December 23, 1954

March 15, 1955

Art. 226

s. 98(2)

s. 130

March 17, 1955

Art. 276(2)

Art. 301

Art. 19(1)(g)

Bangalore

Art. 133(1)

Section 97

Section 97(e)

Section 98

Section 98

s. 130

Section 130

articles 1961

s. 98(1)

s. 130

Schedule III

Part V of the Act

Clause 18

s. 130

s. 98(1)

s. 130

Kafrwr

Schedule III

Schedule III

Central Government

Schedule III

Municipa.l Corporation

[1960] 2 S C.R. 671

s. 97(e)

Customs Act, 1901

s. 52

s. 38

Section 38

Constitution Bench•:-

Art. 276

Constitution Bench


a S.C.R.

SUPREME COURT REPORTS 707

BANGALORE WOOLLEN, COTTON AND

SILK MILLS CO. LTD., BANGALORE v.

CORPORATION OF THE CITY OE' BANGALORE,

BY ITS COMMISSIONER, BANGA~ORE CITY.

(with connected appeal and petitions) (S. K. Das, J. L. KAPUR, M. HrnAYATULLAH, J.C. SHAH

and T. L. VENKATARAMA AYYAB, JJ.)

M unicipality-Octroi-Constitutionality of-Final resolution for levying not published in Official Gazette-Defect, if can be validated-City of Bangalore Municipal Corporation Act, r949 (69 of r949), ss. 38(I)(b), 98, IOJ, Sch. Ill, Part V, Classes I to Vlll- Constitution of India, Arts. 276, 3or-Goverilment of India Act, r935 (26 Geo. V, Ch. 2), s. r42-A.

The appellants in the two appeals and petitioners under Art. 32 of the Constitution challenged the constitutionality of the imposition of octroi duty on cotton and wool on the grounds that

(1) the failure to notify the final resolution of the imposition of the tax in the Government Gazette as required by s. 98(2) of the City of Bangalore Municipal Corporation Act was fatal to the tax, and that (2) the imposition of the tax offended Art. 276 or 301 of the Constitution.

Held, that the impugned octroi duty did not contravene the provisions of Arts. 276 and 301 of the Constitution.

Hamdard Dawakhana (Wakf) v. The Union of India [1960] 2 S.C.R. 671, held inapplicahle.

Atiabari Tea Co. Ltd. v. The State of Assam [1961] l S.G.R. 809, referred to.

Section 38(1)(b) of the Act validated any defect or irregularity in proceedings taken under the Act which did not afiect the merits of the case. The failure to publish the final resolution did not affect 'the merits of the imposition of the tax and was therefore not fatal to it.

i• The mere fact that s. 38(1)(b) occurred in a chapter dealing with Municipal Authorities or the other parts of the Section dealt with another subject was no reason for confining its operation to those subjects only.

Harla v. State of Rajasthan [1952] S.C.R. no and State of Kera/av. P. ]. Joseph A.I.R. 1958 S.C. 296, referred to.

'fhe contention that the impugned tax contravened the provisions of Art. 276 of the Constitution was not sustainable. Entry 52 in List II of the Constitution and entry 49 in the Government of India Act, 1935, which relate to taxes on entry of goods into a local area are not afiected by Art. 272 of the Constitution and

.I96I

April 5.

z96z s. r42-A of the Government of India Act, which are similar to - each other and relate only to a distinct head of taxation i.e.,

angalore Woollen, taxes on professions, trades and callings etc.

Cotton and Sllh The Municipality of Chopda v. M otilal M anekchand I.L.R.

Mills Co. Ltd. [r958] Born. 483, Gajadhar Hiralal Ginning and Pressing Factory v. v.

The Municipal Committee, Washim I.L.R. [r958] Born. 628 and COYptwation of the Secretary, Municipal Committee, Karanja v. The New East India

City 01 Bangalore Press Co. Ltd., Bombay A.LR. r949 Nag. 2r5, distinguished.

Kapur].

Classes I to VII in Schedule III of Part V make certain specified articles taxable and Class VIII makes "other articles which

re not specified" taxable if approved by the Corporation. The qombined effect of ss. 97 and r30 and Part V of Schedule III including Class VIII is that the words used are of very general nature and would have the same effect as if all articles were intended to be and were included.

Anwarkhan Mahboob Co. v. The State of Bombay [r96r] I S.C.R. 709, followed. . /

CIVIL

APPELLATE

JURISDICTION: Civil Appeals Nos. 448 and 449of1957 with Writ Petitions Nos. 97 and 107 of 1961.

Appeals from the judgment and order dated September 27, 1956, of the Mysore High Court in Writ Petitions Nos. 44 and 45 of 1955.

M. C. Setal, vad, Attorney-General for India, N. C.

Chatterjee, D. N. Mukherjee and B. N. Ghose, for the appellant in C. A. No. 448/57 and Petitioner in Writ Petition No. 97/1961.

M. C. Setalvad, Attorney-General for India, V. L.

Narasimhamoorty, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for appellant in C. A. No. 449/57 and Petitioners in W. P. No. 107 of 1961.

A. V. Viswanatha Sastri and K. R. Choudhri, for respondents in C. As. Nos. 448 and 449 of 57 and W. Ps. Nos. !'7 and 107/1961.

1961. April 5. The Judgment of the Court was delivered by

KAPUR, J.-A Divisional Bench of this Court made a reference* under the proviso to cl. (3) of Art. 145 on. the following two points :- .

(1) Whether the imposition in the present C8IMl offends Art. 276 or 301 of the Constitution?

•See p. 698 ""''.

(2) Whether t.he failure to notify the final resolution of the imposition of the tax in the Government Bangaz,,., Wooll.,., Gazet.te is fatal to the tax ?

Cotton and Silh The facts of the case are set out in the order of the Mills Co. Ltd.

Divisional Bench and it is unnecessary to restate them. v: 1

h Th II . h l d. h , Corporat1ono le e appe ants mt e two appea s an mt e two peti- City of Bangalore tions under Art. 32 are challenging the constitutionality of. the octroi duty on cotton and wool imposed by the respondent Corporation within its octroi limits. The procedure for levying municipal taxes

and the power of control of Government in regard to

, those taxes is laid down in s. 98 of the City of Bangalore Municipal Corporation Act (Act 69 of 1949) hereinafter tl'rmed the Act. The.procedure is that a resolution intending to impose a tax has to be passed by the Corporation and that resolution is required to be published in the Official Gazette and in the local newspapers. The rate payers can then submit objections and after considering such objections received during the specified time the Corporation may by resolution determine to levy the tax or duty. When such a resolution has been passed the Commissioner is required to publish forthwith a notification in the Official Gazette and in the newspapers as set out in Auh-s. (1) of s. 98 of the Act. This notification is to specify the date from which, the rate at which and the period of levy, if any, for which such tax is levied.

As has been stated in the order of the Divisional Bench all other requirements of s. 98 were complied with except that the notification in the Government Gazette as required by sub-s. (2) was not published.

This, it was submitted, was a defect which was fatal to the legality of the imposition of the tax. To support this submission reliance was placed on two judgments of this Court in Harla v. State of Rajasthan (1) and State of Kerala v. P. J. Joseph(•). In the former case the Jaipur Opium Act was enacted by a resolution of the Council of Ministers appointed by the then Crown Representative but this law was neither promulgated nor published in the Gazette nor made known to the public. The mere passing of the resolution by the

(•) [to, i] s.c.R. 110. (•) A.I.R. 1958 s.c. •96

Kapur ].

' 96' Council of Ministers without publication was held not Bangalore woollen, to be sufficient. to make the law operative. At p. 114,

Collon and Silk it was observed that reasonable publication of some Mills Co. Ltd. sort was necessary and that natural justice required

C ".· ,, h that before a law could operate it had to be promu!- orpo1at•on o, I e d bl' h d d . b b d .

City of Bangalore gate or pu IS e an it must e roa cast m some recognisable way. Similarly in the latter case there Kapu1 J. was no publication in the Gazette of the Order of the Government made in the exercise of the power con ferred by an Act nor was there any communication of the order to the person affected thereby and it was held that not having been published in the Gazette it was not valid and could not have the force of law.

But the respondent relied upon s. 38(l)(b) of the Act which cures defects or irregularities not affecting the merits of the case. That section provides :-

S. 38(1). "No act done, or proceeding taken under this Aet shall be questioned merely on the ground- ( a.) 0 O IO O 0 O IO IO O O O O O O O • O O • O O O •' O I• O • O • O O O O • O IO I I I Io 0 0 O I I IO O 0 O O 0 O

(b) of any defect or irregularity in such act or proceeding, not affecting the merits of the case. " Thus under that provision any defect or irregularity not affecting the merits of the case saves any act done or proceeding taken under the Act on the ground of such irregularity or defect. The appellants contended that the section has no application to defects in regard to procedure under s. 98 of the Act for the imposition of taxes because s, 38 read as a whole refers to a different situation and that there was internal evidence in the section itself to show that it has no relevance to the objection taken by the appellants.

The section, it was argued, is in Chapter II dealing with Municipal Authorities and this particular provision is in that Part of the Chapter which d1:1als with provisions common to the Corporation and its Standing Committees and the marginal note shows that the object of enacting it was the validation of proceedings of the Corporation and its Standing Committees and that the whole section should be read in that context.

So read, it was submitted, the section must be taken to be a saving provision for the validity of proceedings

of the Municipal Authorities which was clear from z96z

cl. (a) of sub-s. (1) which deals with defects on the Bangalo~-Woollen, ground of vacancy or defect in the constitution of the cotton and Silk Corporation or of any Standing Committee and sub- Mills co. Ltd. s. (2) of that section also has reference to the meetings v: of the Corporation and therefore, it was contended, Corporation of the th d c .

I . . d . l (b) f b City of Bangalore e eiect or irregu anty ment10ne m c . o su - _ section (I) in any act done or proceeding taken also Kapur J. must have reference to that kind of defect which is referred to in other parts of the section. It was further submitted that the words "not affecting the merits of the case" showed that the reference was not to any defect in regard to the procedure for imposition of taxes but defects etc. which might arise in the proceedings of the Corporation and which have reference to a defect in the constitution of the Corporation or its Standing Committees. Reference was also made to the marginal note in the section.

I, t is unnecAssary in this case to discuss the relevance of marginal notes in the construction of s. 38(l)(b) because in our opinion the language is unambiguous and clear and it validates any defect in any act done or proceedings taken under the Act and makes it immune fron1 being questioned on the ground of any defect or irregularity in suoh act or proceedings not affecting the nwrit s of the case and merely because it is in a chapter dr>aling with Municipal Authorities or other parts of the section dealing with another subject is no re11son for confining its operation to the defects conten<kd for by the appellants, The resolution was published in newspapers and was also communicated to those affected by it and thus it was well known. The failure to publish it in the Government Gazette did not affect the merits of its imposition. The answer to question No. 2 referred therefon' iH that the mere failure to notify the final resolution of the imposition of the tax in the Government Gazette is not fa.ta.I to the legality of the imposition.

The other question referred is whether the imposition offends Art. 276 or 301 of the Constitution.

I96I Article 276 as far as it is relevant for the purposes of this case provides :- Bangalore Woollen, A t 276(1)" N t h d' h' t• 1 Cotton and Silk r • 0 Wit Stan mg anyt mg lil ar IC e MillS co. Ltd. 246, no law of the Legislature of a State relating to v. taxes for the benefit of the State or of a munici- Corporation of the pality, district board, local board or other local City of Bangalore authority therein in respect of professions, trades,

Kapur J. callings or employments shall be invalid on the ground that it relates to a tax on income.

(2) The total amount payable in respect of any one person to the State or to any one municipality, district board, local board or other local authority in the State by way of taxes on professions, trades, callings and employment shall not exceed two hundred and fifty rupees per annum." It was contended that the imposition of the impugned tax contravenes the provision of Art. 276(2) as it is of a sum more than Rs. 250 and is therefore unconstitutional. This contention is not well founded. There was a similar provision in the Government of India Act, 1935, i.e., s. 142-A but there the amount mentioned in . sub-s. (2) was Rs. 50 per annum and this limitation was placed as from after the 31st. day of March, 1939. A reference to the legislative lists will show that neither the Article 276 nor s. 142-A of the Government of India Act, 1935, has any reference to the tax now impugned. In the Devolution .Rules under the Government of India Act, 1915, taxes which could be levied for the purpose of local bodies were the following :-

"Item No. 7. An octroi. -· Item No. 8. A terminal tax on goods imported into or exported from, a local area save where such tax is first imposed in a local area in which-an octroi was not levied on or before the 6th July 1917. Item No. 9. A tax on trades, professions and callings. " In the Government of India Act, 1935, the relevant entries in the Legislative List-List II-'were 46 and 49 which were as follows:

46. "Taxes on profesions, trades, callings and employments, subject, however, to the pr!W'isions

of section one hundred and forty-two A of this z96z Act."

" C f d . t I J Bangalore Woollen, . esses on entry o goo s n a. oca area Catton and Silk for consumption, use or sale therem.

Mills ca. Ltd.

Terminal tax was taken to List I, i.e., Central List and v. is now entry 89 in the Union List (List I). Corresc,, paratfon •/the ponding entries to 46 and 49 of the Government of Ctty •!Bangalore India. Act, 1935, in the Constitution in List II are 52 - Kapur J. and 60 which are as follows :-

52. " Taxes on the entry of goods into a local area for consumption, use or sale therein."

60. " Taxes on professions, trades, callings and employments. " The history of these tax:es therefore shows that in the Devolution Rules. under the Government of India Act, 1915,· octroi, terminal tax: and tax:es on professions and callings were tli:ree distinct heads of taxation.

Similarly in the Government of India Act, 1935, and in the Constitution the two entries are separate.

Therefore when s. 142-A was added in the Government of Indil/' Act, 1935, its operation was limited to entry 46 of List II and had no reference to entry 49 w bicb deals with cesses on entrJ<; of goods. The position under the Constitution is exactly the same and therefore neither s. 142-A of the Government of India Act, 1935 nor Art. 276 bas any effect on entry 49 in the Government of India Act, 1935 or entry 52 in the Constitution. The learned Attorney-General in support of his argument that the impugned tax is .a tax on trade, relied upon three judgments : The Municipality 'of Ohopda v. Motilal Manekchand ('); Gajadhar Hiralal Ginning &: Pressing Factory v. The Municipal Committee, Washim ('); and Secretary, .ll:luni cipal Committee, Karanja v. The New Ea.st India Press Co. Ltd., Bombay('). None of these cases bas any applicability to the tax now impugned because the facts were different and the imposition was of a different character. The attack on the constitutionality of the impugned tax on the ground of contravention of Art. 276 is therefore not sustainable and must be rejected.

(I) I.L.R. [1958] Bom. 483.

(2) I.L.R. [1958] Bom. 625.

(3) A.I.R. 1949 Nag. ZI5.

1961 The second ground of assault on the constitution-

I - ality of the tax imposed is based on contravention of anga o" Woollen, A 30 h' h 'd Cotton and Silk rt. 1 W IC prov1 es :- Mills co. Ltd.

Art. 301. "Subject to the other provisions of this v.

Part, trade, commerce and intercourse throughout Corporation of the the territory of India shall be free." City 0f Bangalore It was contended that the tax imposed directly

Kapur}. affected the movement of goods and therefore violates Art. 301 which guarantees the freedom of trade throughout the territory of India. In Atiabari Tea Co. Ltd. v. State of Assa.m ('), Gajendragadkar, J., giving the opinion of the majority said :-

"that the content of freedom provided for by Art. 301 was larger than the freedom contemplated bys. 297 of the Constitution Act of 1935, and whatever else it may or may not include, it certainly includes movement of trade which is of the very essence of all trade and is its integral part. If. the transport or the movement of goods is taxed solely on the basis that the goods are th us carried or transported that, in our opinion, directly affects the freedom of trade as contemplated by Art. 301. If the movement, transport or the carrying of goods is allowed to be impeded, obstructed or hampered by taxation without satisfying the requirements of Part XIII the freedom of trade on which so much emphasis is laid by Art. 301 would turn to be illusory." According to Shah, J., the content is wider. At page 241 the learned Chief Justice gave it a more restricted meaning. Relying on these observ.ations it was contended that the tax which is affected by Art. 301 is one which is directly on movement .of trade, i.e., from one point to another. As against this reliance was placed by the respondent on Art. 305 which at the relevant time was as follows:- Art. 305. "Nothing in articles 301 and 303 shall affect the provisions of any existing law except in so far as the President may by order otherwise direct; ... " According to this article the provisions of Art. 301 do not affect the provisions of any existing ll).w except in so far as the President may otherwise direct and there

(1) [1961] I S.C.R. 809.

is no such direction by the President. "Existing law" r96r has been defined in Art. 366, clause (10), to mean: '" ' t' 1 ' 1 0 d' d Bangalore Woollen. ex1s mg aw means any aw, r mance, or er, Collon and s; ik bye-law, rule or regulation passed or made before Mills co. Ltd. the commencement of this Constitution by any Legisv. lature, authority or person having power to make Crporation oftke such a law, Ordinance, order, bye-law, rule or re- City 01 Bangalore gulation;" - and by Art. 372 all laws in force in the territory of Kaf•ur f.

India immediately before the commencement of the Constitution shall continue to be in force until altered or repealed or amended by a competent legislature.

It was 'these provisions which were relied upon as an answer to the question of the applicability of Art. 301.

But the learned Attorney-General argued that the action taken by the Municipal Corporation was after the coming into force of the Constitution, being a levy imposed as from January, 1955, that the imposition of the tax was subordinate legislation which could not be saved undey Art. 305 cind that the tax could only be imposed by resorting to the provisions of Art. 304(b) which provides: Art. 304. "Notwithstanding anything in article 301 or article 303, the Legislature of a State may by law-

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

(b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest:

Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President." The argument therefore was this that the Act being an "existing law" might be saved under Art. 305 but that would operate on and save the taxes on articles specified in Schedule III of Part V, itAm 18, i.e., octroi on animals and goods set out in Classes I to VII of that Part but would not save the octroi on other articles under Class VIII imposed after the Constitution because that would be an addition of a bye-law, rule or order and would not fall within the term " existing

r961 law". The impugned tax was levied under class VIII

B I ·--1v 11 set out in part V which is as follows:- anga ore oo en, O ,

M .

Colton and Silk ctori aximum rate Mills co. Lid.

Class VIII-Other articles v. which are not specified above Corporation of the and which may be approved

C•ty of Bangalore by the Corporation by an Rs. 2-0-0 per cent.

Kapur._!. order in this behalf............ ad valorem.

Octroi is to be levied by reference to s. 130 of the Act which provides:- S. 130. "If the oorporat.ion by a resolution determines that an octroi should be levied on animals or goods brought within the octroi limits of the city, such octroi shall be levied on such articles or goods specified in Part V of Schedule III at such rates not exceeding those laid down in the said Part in such manner as may be determined by the corporation." Therefore under this section if the corporation resolved to levy octroi on animals or goods brought within the octroi limits of the city then this octroi was to be levied at rates not exceeding those laid down in that section.

This, it was submitted, was subordinate legislation and therefore was not saved by Article 305 . because "existing law" as defined means any law, ordinance, order, by-law, rule or regulation passed . ... before theConstitution and as the impugned tax was a new regulation passed after the Constitution it was not saved by Art. 305. In support of this reliance was placed on the observations of this Court in Hamrlard Dawakhana (Wakf) v. The Union of India('); but as was observed by the Divisional Bench that case does not apply to the facts of the present case.

For the respondef!t it was argued that (1) goods and animals were specified in the Act and therefore there was no making or passing of new regulations and (2) it is not a case of delegated legislation but is a case of conditional legislaion. It was firstly submitted that there is sufficient' specification in the Act itself of the articles on which the octroi duty could be levied.

Section 97 of the Act gives the power to levy octroi duty on animals or goods without any exception which are brought within the octroi limits. Sections 98

(•l (1960] 2 s.c.R, 67"

.~-

and 130 lay down the procedure for the levying of ' 96' taxes and impose a limitation on the extent of the Bangalore woollaK, tax to be levied and Classes I to VII make certain Cotton and Sil~ articles taxable and Class VIII makes other articles Mills Co. Ltd. and goods taxable if they are approved by the Corpov: ,, •• t • Th' h h b' h h Corporation o, m• ra 10n. 1s approac to t e su Ject as t e support Cit of Bangalore of a decision of this Court in Anwarkhan Mahboob Co.

Y _

v. The St, ate of Bombay ('), where the facts were that Kapur J. the assessee was subjected to a purchase tax under s. 14(6) of the Bombay Sales Tax Act, 1953 (Act III of 1953). The contention of the assessee was that the goods had not been specified in the Sales Tax Act. In that Act in the schedule were mentioned the goods the sale or purchase of which was subject to tax and the last entry wa.s of" a.II goods other than those specified from time to time in Schedule A (and section 7 A) and in the preceding entries . " The question for decision was whether that entry amounted to specification of goods for the purposes of Sales Tax and it was held that it was.

This case was sought to be distinguished on the ground that the words there were " a.II goods other than ......... " and those words would comprise every article which was not specifically mentioned in the Schedule. We are unable to accept this distinct.ion because even though the words used in the present statute a.re different the combined effect of ss. 97 and 130 and Pa.rt V of Schedule III including Class VIII which have been set out above is that the words are of very general nature and would have the same effect as if all articles were intended to be and were included. In view of this it is unnecessary to discuss the second contention.

Therefore the answer to the first question referred is thatthe impugned octroi duty does not contravene the provisions of Arts. 276 and 301. In view of our decision on the two questions referred these appeals fail and are dismissed with costs. One hearing fee.

Consequently Writ Petition Nos. 97 and 107 are dismissed. There will be no order as to costs in those petitions.

(1) (1961) 1 S.C.R. 709.

Appeals dismissed.

Petitions dismis&ed.

CORPORATION OF THE CITY OE BANGALORE, BY ITS COMMISSIONER, BANGALORE CITY

petitions) (S. K. Das, J.

L. KAPUR

C. SHAH

ss. 38(I)(b), 98

Constitution of India

Arts. 276, 3

Goverilment of India Act

Art. 32

s. 98(2)

Art. 276

Arts. 276 and 301

[1960] 2 S.C.R. 671

Section 38(1)(b)

s. 38(1)(b)

Art. 276

Government of India Act, 1935

Art. 272

Schedule III

ss. 97

Schedule III

Mysore High Court

M. C. Setal

N. C.

Chatterjee

D. N. Mukherjee

B. N. Ghose

M. C. Setalvad

V. L.

Narasimhamoorty

S. N. Andley

J. B. Dadachanji

Rameshwar Nath

P. L. Vohra

A. V. Viswanatha Sastri

K. R. Choudhri

KAPUR

Art. 145

Art. 276

Mills Co. Ltd.

Bangalore

Art. 32

s. 98

s. 98

s. 98

s. 38(l)(b)

S. 38(1)

s. 98

Kapur

s. 38(l)(b)

Art. 276

Article 276

Art. 276(2)

s. 142

31st. day of March, 1939

Article 276

s. 142

Government of India Act, 1935

6th July 1917

Government of India Act, 1935

Government of India Act, 1915

s. 142

s. 142

Government of India Act, 1935

Art. 276

Government of India Act, 1935

Art. 276

Art. 301

Art. 301

India

Gajendragadkar

Art. 301

Art. 301

Art. 301

Shah

Art. 301

Art. 305

Art. 305

articles 301 and 303

Art. 301

Art. 366

Mills co. Ltd.

Art. 372

Art. 301

Art. 305

Art. 304(b)

Art. 304

article 301

article 303

Art. 305

Schedule III

s. 130

S. 130

Schedule III

Article 305

Art. 305

Section 97

Sections 98

Corpov

Anwarkhan Mahboob Co.

s. 14(6)

Bombay Sales Tax Act, 1953

section 7

ss. 97 and 130

Schedule III

Arts. 276 and 301

(1961) 1 S.C.R. 709


r96r

February 3.

SUPREME COURT REPORTS

RANCHHODDAS ATMARAM v.

THE UNION OF INDIA.

(1961]

(B. P. SINHA, C.J., s. K. DAS, A. K. SARKAR,

N. RAJAGOPALA AYYANGAR and

J. R. MUDHOLKAR, JJ.)

Sea Customs-Import of prohibited goods-Maximum Penalty- Whether can be levied in excess of Rs. r, ooo/--Sea Customs Act, r878 (VIII of r878), ss. r9, 167, item No. 8.

Item 8 of the schedule to s. 167, Sea Customs Act, 1878, . provides that any person concerned in the importation or exportation of prohibited goods shall be liable to a penalty "not exceeding three times the value of the goods. or not exceeding one thousand rupees."' The petitioner was found to have imported gold of the value of Rs. 25,000/- and the Customs authorities imposed a penalty of Rs. 5.000/-. The petitioner challenged the validity of the order imposing the penalty on the ground that the maximum penalty that could be imposed under item 8 of s. 167 was Rs. l, ooo/-.

Held, that the orders imposing the penalty was valid. It is open to the Customs authorities to impose any of the alternative penalties provided though the amount of it exceeds the amount of the maximum in the other alternative. None of the previous decisions of the Supreme Court were authority for the proposition that the maximum penalty which can be imposed under item 8 of s. 167 is Rs. l, ooo/- as this question did not arise in those cases. On the plain language of the provision which was in the affirmative form it gave an option to the Customs authorities to impose any one of the two penalties provided. The relevant words could not be read as "shall not be liable to a penalty exceeding three times the value of the goods, or exceeding one thousand rupees."' Maqbool Hussain v. State of Bombay [1953] S.C.R. 730, Babula I Amthalat Mehta v. The Collector of Customs [1957] S.C.R. rrro and F.N. Roy v. The Collector of Customs, Calcutta [1957] S.C.R. rr51, explained and distinguished.

The Metropolitan Board of Works v. Steed (1881) L.R. 8 Q.B.D. 445, referred to.

ORIGINAL JURISDICTION: Petition No. 300 of 1960.

Petition under Art. 32 of the Constitution of India. for enforcement of Fundamental Rights and Criminal Appeal No. 107of1958.

Appeal by special leave from the judgment and order dated April 5, 1957, of the Bombay High Court in Criminal Revision Application No. 1100 of 1956.

Por'Us A. Mehta, S. J. Sorabjee, S. N. Andley, J.B.

Dada, chanji, Rameshwar Nath and P. L. Vohra, for the petitioners.

C. K. Daphtary, Solicitor-Genera! of India, H. R.

Khanna, Y. S. Parmar and G. Gupta, for respondents (In Petn. No. 300of1960).

N. C. Chatterjee and R. L. Aggarwal, for the appeJ. !ant.

H. R. Khanna and R.H. Dhebar, for respondents (In Cr. A. No. 107 of 1958.)

1961. February 3. The Judgment of the Court was delivered by

Ran&Uodda.r

Almaram

Union of Indi•

SARKAR, J.-These two matters have been heard S•rA., J. together as they raise a common question. One of these matters is a petition under Art. 32 of the Constitution and the other, an appeal from a judgment of the High Court at Bombay.

The petitioner and the appellant were found by the Customs authorities in proceedings under the Sea Custcms Act, 1878, to have imported goods in breach of s. 19 of that Act. The petitioner had without authority imported gold of the value of Rs. 25,000/- and the appellant, steel pipes of the value of Rs. 1,28,182/-. The Customs authorities by independent orders, imposed a penalty of Rs. 5,000/- on the petitioner and of Rs. 25,630/- on the appellant for these offences, under item 8 of the schedule to s. 167 of the Act. The Customs authorities further confiscated the petitioner's gold under the same provision. There was no order of confiscation of the steel pipes for reasons to which it is unnecessary to refer.

The appeal is against an order the result of which was to direct realisation of the penalty imposed on the appellant, by execution of a distress warrant. The petition challenges the validity of the order imposing the pecuniary penalty. Neither the petitioner nor the appellant, however, questions the decisions of the Customs authorities that they had been guilty of

Ranehhotlda.s

Almaram

Union of India

breach of s. 19 or that penalties could be imposed on them under item 8 in s. 167. The petitioner does not, further, challenge the order confiscating the gold.

The only contention of the petitioner and the appellant is that the orders of the Customs authorities are invalid as they impose penalties in excess of Rs. 1,000/-. They contend that the maximum penalty that can be imposed under item 8 in s. 167 is Rs. 1,000/-. This contention is based on two grounds.

First it is said that, it has been so held by this Court.

Then it jfi said that, in any case, on a proper construction, item 8 in s. 167 does not premit the imposition of a penalty in excessof Rs. 1,000/-.

First, as to the decisions of this Court, we were referred to three. The earliest is Maqbool Hussain v.

The State of Bombay ('). That was a case in which the question was whether a person on whom a penalty of confiscation of goods had been imposed under item 8 in s. 167, could later be prosecuted on the sa.me facts for an offence under s. 23 of the Foreign Exchange Regulation Act, 1947, in view of the provisions of Art. 20(2) of the Constitution aga.inst, what has been called, double jeopardy. It was held that Art. 20(2) was no bar to the prosecution under the Foreign Exchange Regulation Act for, the authority under the Sea Customs Act imposing the penalty . under item 8 in s. 167 was not a judicial tribuna.l and the proceeding resulting in the imposition of the penalty of confisca.tion was, therefore, not a prosecution. No question arose in that case as to the maximum penalty that could be imposed under item 8 in s. 167. While discussing whether a Customs authority exercising the power to order confiscation and levy a penalty under s. 167 formed a judicial tribunal, this Court observed at p. 742 :

"Even though the customs officers are invested with the power of adjudging confiscation, increased rates of duty or penalty the highest penalty which can be inflicted is Rs. 1,000/-." It is quite obvious that this observation was made in a different context and was not intended to decide

(1) [1953] S.C.R. ?; JO,

that' the provision did not permit the imposition of a.

higher penalty, a.s to which no question ha.d then a.risen. It is clear that if the highest penalty which the Customs officers had the power to impose was in excess of Rs. 1,000/- but subject to another limit, it would hot have followed that they were judicial tribunals. The judgment of this Court was not based on the amount of the maximum penalty which the Customs authorities could impose. It seems ra.ther to have been assumed that the maximum penalty was Rs. 1,000/., for the question about maximum penalty was neither argued, nor discussed in the judgment at all.

The second case is Bahulal Amthalal Mehta v. The Collector of Customs (1). The only question that arose there was whether s. 178A of the Sea Customs Act, which placed on the person from whose possession any goods mentioned in the section and rea.sona.bly believed to have been smuggled were seized, the burden of proving that they were not so, was void as offending Art. 14 of the Constitution. In discussing the scheme of the Act, it was observed in connection with item 8 in s. 167 that "This Court ha.s held that the minimum is the alternative: see Ma11bool Hussain v. The State of Bomhay "('). Here a.gain, it is clear that the Court wa.s not deciding the question that ha.a now a.risen before us. It only ma.de a. pa.a. sing reference to the observation in Maqbool Hussain's

case('). It wa.s not necessary for the decision of Babulal' a case (1) to have pronounced on the correctness of the observation in Ma11bool Hussain's case(•) a.nd no such pronouncement was clearly intended. Nor wa.s it necessary in Babulal' a case (1) to express a.ny view a.a to the maximum penalty that could be imposed under item 8 in s. 167.

The la.st case referred to is F. N. R()]J v. The Colledor of Customs, Calcutta(')· That wa.s a. case where a.n order ha.d been ma.de under item 8 in s. 167 co®sca.ting certain goods imported without authority a.nd imposing a. penalty of Rs. 1,000/- in respect of that import.

The importer filed a. petition in this Court under Art. 32

(r) (19,7] 5.C.R. IIIO, II16.

(a) (19'3] S.C.R. 730.

(l) [19'7] S.C.R. 1151.

Ranchhoddas

AtHIOJ'Otn

Uniox of India

Sarhar J.

Ranchhoddas

Atmaraw

v, Union of India

Sarkar].

722 SUPREME COtJRT REPORTS [1961]

of the Constitution challenging the validity of the penalties levied. The main part of the argument of the learned counsel for the petitioner was based on the Imports and Exports (Control) Act, 1947, and raised questions which do not concern us in the present cases.

It appears however that it was also contended that item 8 in s. 167 offended Art. 14 of the Constitution, a point which again does not arise in the cases in hand.

That contention was dealt with in the following words

at p. 1158:

 ·~Another similar argument was that s. 167, item 8 of the Sea Customs Act itself offended Art. 14 in that it left to the uncontrolled discretion of the Customs authorities to decide the amount of the penalty to be imposed. The section makes it clear that the maximum penalty that might be imposed under it is Rs. 1,000/-. The discretion that the section gives must be exercised within the limit so fixed. This is not an uncontrolled or unreasonable discretion.

Furthermore, the discretion is vested in high Customs officers and there are appeals from their orders. The imposition of the fine is really a quasijudicial act and the test of the quantum of it is in the gravity of the offence. The object of the Act is to prevent unauthorised importation of goods and the discretion has to be exercised with that object in view." It will be observed that the fine imposed was Rs. 1,000/-. It was not therefore a case in which any question eould arise as to whether a penalty in excess of Rs. 1,000/- could be imposed and in fact no such question arose. The question that arose was, whether the section offended Art. 14, so that, no penalty could be imposed under it at all. It was in this connection that it was observed that item 8 in s. 167 did not leave it to the uncontrolled discretion of the Customs authorities to decide the amount of the penalty because it had imposed a limit on that amount. It is _true that the limit was there mentioned as Rs. 1,000/-. But it is clear that the reasoning would have held equally if it had been said that the limit imposed was either three times the value of the goods or Rs. 1,000/-. The point

3 S.C.R.

SUPREME COUitT REPORTS 723

that was sought to be made in the judgment was that there was a limit and that that was a reason for saying that the discretion given was not uncontrolled and, therefore, there was no violation of Art. 14. For this purpose, it made no difference what the limit was.

Some of the High Courts have thought that this Court had decided in these cases that the maximum penalty permissible under the provision is Rs. 1,000/ ..

The fact is that the question was never required to be decided in any of these cases and could not, therefore, have been, or be treated as, decided by this Court. In Leo Roy Frey v. The Superintendent, District Jail, Amritsar('), this Court observed that " No question has been raised as to the maximum amount of penalty that can be imposed under s. 167(8) and 1w are not called upon to express any opinion on that point." This would show that this Court had taken notice of the fact that the High Courts were interpreting the judgment in F. N. Roy's case(') and the other cases in a manner which was not intended and desired to strike a note of warning against the misconception.

None of these cases is authority for the proposition that the maximum penalty which can be imposed under item 8 ins. 167, is Rs. 1,000/-. The argument that this Court

has already held that the maximum penalty that can be awarded under it is Rs. 1,000/- must therefore fail.

We now come to the construction of the provision, the relevant portion of whicli is in these terms:

S. 167. The offences mentioned in the first column of the following schedule shall be punishable to the extent mentioned in the third column of the same with reference to such offences respectively:

Sections of Offences this Act to which offence has reference

Penalties

. . . . . . . 8, If any goods, the impor tation or exportation of which is for the time being prohibited or restricted by or under Chapter IV of this Act, be imported into or exported from India contrary to such prohibition or restriction.

(I) [1958] S.C.R. 822, 827.

Such goods shall be liable to confiscation ; and any person concerned in any such r8 & 19 offence shall be liable to a penalty not exceeding three times the value of the goods, or not exceeding one thousand rupees.

12) [1957).S.C.R. rt5r.

Ranchhoddas

.4 lmarani

Union of India

Sarka"].

Ranchhoddas

Atmara1n

Union of India

Sarkar].

The words whic? are material to this case are, "Any person concerned rn any such offence slrnll be liabie to a penalty not exceeding three times the value of the goods. or !lot exceeding one thousand rupees. " The quest10i:i 1s whetier, in imposing a penalty, the conditions laid down m both the alternative cla11ses joineu by the word "or" have to be fulfilled or the condition m any one of them only Y

It is clear that if the words form an affirmative sentence, then the condition of one of the clauses only need be fulfilled.

In such a ease "or " really means " either" " or ". In the Shorter Oxford Dictionary one of the m0anings of the word "or" is given as "A participle co-ordin; itiBg two (or more) words, phrases or clauses between which there is an alternative. " It is aho there sh; ted, "The alternntive expressed by "or" is emphasised by prefixing to the first member or adding after the last, the associated adv. EITHER." So, even without "either", "or" alone creates an alternative. If, therefore, the sentence before us is an affirmative one, then we get two alternatives, any one of which may be ch,.i:, cn without tho other being considered at all. In such a cn.se it must be held that a penalty exceeding Rs. 1,000/- c; rn be imposed.

If, however, the st, ntence is a nagative one, then the position becomes diffc.rent.

The word "or" between the two clauses would then spread the negative influence over the clause following it. This rule of grammar is not in dispute. In such a case the comlitions of both the clauses must be fulfilled and the result would be that the penalty that can be imposed can never exceed Rs. 1,000/-.

The question then really comes to this: Is the sentence before us a negntivc or an affirmative one?

It seems to us that the sentence is an affirmative sentence. The substance of the sentence is that a certain person shall be liable to a penalty. That is a positive concept.

The sentence is therefore not negative in its import.

The learned counsel for the petitioner and the appellant said that the sentence began with a negative, namely, the words "not exceeding., and therefore it

is a negative sentence and the word "or" occurring later in the sentence must spread the negative influence over that part of the sentence which follows it. This contention is clea .. rly fallacious. The word " not." refers only to the word " exceeding " following it and th" two together constitute a qualifying clause limiting tlie amount of the penalty that can be imposed. There is no negative sense to spread over and influence the rest of the sentence. If the learned counsel were right, the words "not exceeding '' would not have been repeated after the word " or" for the word" or" would have carried the negative influence forward and rtnother negative would not have been necessary. The acceptance of lertrned counsel's argument that "or" cal'ried any negali1e influenct; forward, would make nonsense of the sentence.

It seems to us that the learned counsel really wants us to read the section as if the words were, "shall not be liable to a penalty exceeding three times the value of the goods, or ex0eeding one thousand rupees. " So

read the sentence would be a negative one and the word" or" would c:i, r-ry the negative influence forward.

To do that would, however, here-enacting and not interpreting. It is cleM. that each time the expression "not exceeding" is used, it qualifies the <>xtent of the punishment that is stated after it. That expression is really equivalent to the words "up to" and can be easily. substituted by them without affecting the Hentence in any way.

There is really no negative in the sentence anrl what we have, is a purely affirmative provision laying down two alternative penalties to choose from, with a maximum for each.

The distinction between affirmative and negative sentences may be illustrated by the case of The Metropolitan Board of Works v. Steed (1). The provision there considered was, "No existing road, being of less width than forty feet, 'hall be ... formed ...... as a street for the purposes" of carriage traffic, unless such road be widened to the full width of forty feet ...... or for the purposes of foot traffic only, unless such road ...... be widened to the foll width of twenty feet or unless such

(1) (1881) L.R. 8 Q.B.D. 44.1-

Ranchhoddas

A.tmaram

Union of India

Sarilar ].

Ranchhoddas

Atmaram

Union of India

Sarkar J.

streets respectively shall be open at both ends." It was held that both the conditions had to be fulfilled and the street had to be of the prescribed width and also open at both ends.

One of the reasons given for this view was that the sentence was a negatiYe one and the word "or" (being the one underlined by us*) in it carried forward the negative influence and made it necessary to fulfil both the conditions. It was said

at pp. 447.48:

"We might have referred to authorities by good writers, shewing that where the word 'or' is preceded by a negative or prohibitory provision, it frequently has a different sense from that which it has when it is preceded by an affirmative provision.

For instance, suppose an order that 'you must have your house either drained or ventilated. ' The word '.or' would be clearly used in the alternative.

Suppose again, the order was that ' you must have your house drained or ventilated,' that conveys the idea to my mind that you must have your house either drained or ventilated. But supposing the order were that 'you must not have your house undrained or unventilated.' The second negative words are coupled by the word 'or', and the negative in the preceding sentence governs both. In s. 98 there is a negative preceding a sentence ; 'no existing road ' shall be formed." It is obvious that the sentence before us contains no negative or prohibitory provision. It only contains a positive provision empowering one of the two alternative penalties laid down to be imposed. The fact that the penalties are dirl)cted not to exceed a certain limit does not change the sentence from affirmative to negative; the sentence remains permissive and does not become prohibitory. It follows that any of the alternative penalties provided may be imposed though the amount of it exceeds the amount of the maximum in the other alternative.

A cousideration of the object of the Act also supports that view. The Act is vital for the country's economic stability.

It is intended to prevent smuggling in goods and such goods may be of large value, A Rmall fine of Bs. 1,000/- would

• Here printed in italics.

often be quite inadequate to serve these objects. It would be in consonance with such objects if power is given to the authorities concerned to impose a higher penalty when the occasion requires it.

Th~ learned counsel for the petitioner and the appellant then referred us to Webster's New International Dictionary (2nd ed.) where one of the meanings of the word " nor " has been given as "or not ". The )earned counsel sav that the word "or" and the word " not" following it have to be read together and on the authority of Webster, ask us to substitute for them the word " nor " in order to get at the inteution of the Legislature.

But we do not have here the word "nor". Nor are we able to find anything in Webster's Dictionary authorising the substitution of "nor" in all places for the words" or not". We are clear that here no "or not~· occurs which can be substituted by "nor" without doing violence to the sentence. The word "not ", following the word " or", is really joined to and qualifies the word "exceeding" which comes after it and cannot be joined to the preceding word "or"

at all. To read the words "or not " as joined to each other, and to substitute them by "'nor" would be to change the structure of the whole sentence and, therefore, its meaning. An interpretation which so radically alters the meaning of the clause, cannot be accepted.

These were the main arguments advanced by the learned counsel. for the petitioner and the appellant.

There remain, however, certain other points raised by them to deal with. It was said that the fact that two alternative penalties had been provided would indicate that one of them was the maximum. It is somewhat difficult to comprehend this argument.

By itself it does not show that the maximum penalty would be Rs. 1,000/- and that is what the learned counsel want us to hold. We have earlier held that either of the two penalties provided may be chosen by the authorities concerned as they consider fit.

Suppose three times the value of the goods with which the offence is concerned, exceeds Rs. 1,0(10/-.

Then that would be larger of the two penalties that can be awarded in that case and the present argument does

Ranchhoddas

Atmaram

Union of India

Sarkar].

rj16Z

Ranc; hlsoddtis

AtmMam

Union of Jnditi

Sarkar].

SUPREME COURT REPORT.3 [1961]

not establish that this larger penalty cannot be imposed. Which is the maximum in a particular case, would depend on the value of the goods. Further, there seems to us to be gQod reason why two alterna. tive penalties were provided. Where the value of the goods is very large, it may be that a penalty of Rs. 1,000/- would be too inadequate a punishment.

Again, it may be that three times the value of the goods may be much smaller than Rs. 1,000/-. It may conceivably be necessaiy in such a case by reason, for example, of the person concerned having on earlier occasions committed the same offence or having shown a determined state of mind to commit the offence, to inflict a penalty higher than three times that value. Then it. may also happen that the value of the thing concerned may, in conceivable circum. stances, not be properly ascertainable. In such a case the alternative penalty up to Rs. 1,000/· has to be adopted if any penalty at all is to be awarded.

The learned counsel then said that if both the alternatives were available to the authorities concerned to choose from, hen the provision would give them

a very arbitrary discretion which, whether it offended Art. 14 or not, there is no reason to think was intend~ ed by the Legislature. We do not think that this argument is of force.

Each of the alternative penalties provided, has a limit attached to it. Therefore the discretion is neither unlimited nor arbitrary. It may be that three times the value may amount to an enormous sum but that will be so only when the value of the goods with which the offence is concerned, is high. If goods of high value are the subject matter of the offence, then there is no reason for. saying that the provision for imposing a penalty of three times

that value, is not intended by the Legislature •

. Another argument advanced on behalf of the petitioner and the appellant was that no other item in s. 167 provided for a penalty in money, as distinguished from confiscation, in excess of Rs. 1,000/· and this indicated the intention of the Legislature not to impose a higher penalty. It was therefore said that item S should be co11strued in accordance with this

intention as not enabling the imposition of a pecuni- 1961 ary penalty higher than Rs. 1,000/-. The first answer Ranchhoddas to this contention is that the intention in item 8 has Atmaram to be gathered from the language used in it. If that v. language is clear, that must be given effect to what- unionof India ever may have been the intention in other provisions.

In our view, the language in item 8 is clear and it Sarkar J. permits the imposition of a penalty in excess of Rs. 1,000/-. No question of gathering the intention of the Legislature from the other items arises. The second answer is that the learned counsel are not right when they say that the other items do not provide for a pecuniary penalty in excess of Rs. 1,000/-. Thus under item 29 when goods are found in a boat without a boat-note as required by s. 76 of the Act, the person in charge of the boat hall be liable to a penalty not exceeding twice the amount of the duty leviable on "" the goods.

Now it is conceivable that such duty may be in excess of Rs. 1,000/-. Provisions for similar penalty will be found in items 17, 29, 31, 38, 48 and others. There are also several items which permit the imposition of a penalty calculated at large sums like Rs. 500/- and Rs. 1,000/- per package. In these the amount of the penalty might easily exceed Rs. 1,000/-: see items 17, 36, 49, 56. There is another group of items which permits the imposition of penalty calculated on the value of the goods, and such penalty may, of course, be far in excess of Rs. 1,000/-: ee items 58, 59 and 73. It would indeed be strange if a statute like the Sea Customs Act, on the proper working of whioh the finances and commerce of the country largely depend, considered!!- pecuniary penalty of Rs. 1,000/- enough for a breach of any of its provisions. We feel no doubt that the Act did not intend this.

It was also argued that a penal statute like the one before us, must be construed in favour of a citizen and therefor" item 8 should be construed as permitting the imposition of a penalty up to Rs. 1,000/- and no more. This rule of construction of a penal statute is applicable only where the meaning of the statute is ·

not clear. This is not the case with the present statute. The appellant and the petitioner can therefore derive no assistance from this rule.

Ranchhoddas At1naram v.

Union of India

Sarkar].

The learned counsel for the petitioner and the appellant also said that the Sea Customs Act was modelled on 39 and 40 Viet., Ch. 36, an English statute to consolidate the Customs laws, s. 186of which corresponds to s. 167 of our Act. They said that the English section expressly provided that the authority concerned would have the option to choose any of the punishments specified, but our statute deliberately departed from this and did not use the words "at the election of" which occur in the English statute. In our view, even without these words the meaning in our provision is plain. It also seems to us that the English statute used the words "at the election of" by way of abundant caution. The effect of that statute wrrnld have been the same even without those words. It may be that in our statute similar words were not used because it is somewhat differently framed; the nse of them may have been considered inappropriate. The English statute gives a choice between two fixed penalties of "treble the value of the goods " and " one hundred pounds." In our statute, each of the two alternative penalties is flexible ; each penalty is not to exceed a certain limit.

The last argument was based on the word "extent" appeariug in the main part of s. 167 which, it is said, indicated that the third column laid down the extent of the punishment that could be awarded. This argument does not carry the matter further at all for, whichever of the two competing interpretations is accepted, in each case there w.ould be the extent of the punishment specified and that word cannot" help in deciding what the correct interpretation is.

For these reasons it seems to us that under item 8 ins. 167 a penalty in excess of Rs. 1,000/- can be imposed and so the orders that the Customs authorities had made in these cases are not open to any challenge. It is not in dispute that the penalties imposed did not excePd three times the ralue of the goods concerned.

The petit.ion nncl the a p1wal are accordingly dismissed. There will be no order for costs.

Petition and appeal dismissed.

RANCHHODDAS ATMARAM

THE UNION OF INDIA

B. P. SINHA, C.J.

s. K. DAS

A. K. SARKAR

N. RAJAGOPALA AYYANGAR

R. MUDHOLKAR, JJ.

Sea Customs Act

s. 167

Sea Customs Act, 1878

s. 167

Supreme Court

s. 167

Art. 32

Constitution of India

A. Mehta

S. J. Sorabjee

S. N. Andley

J.B.

Dada

Rameshwar Nath

P. L. Vohra

C. K. Daphtary

H. R.

Khanna

Y. S. Parmar

G. Gupta

N. C. Chatterjee

R. L. Aggarwal

H. R. Khanna

R.H. Dhebar

SARKAR

Art. 32

High Court at Bombay

s. 19

s. 167

s. 19

s. 167

s. 167

s. 167

s. 167

s. 23

Foreign Exchange Regulation Act, 1947

Art. 20(2)

Art. 20(2)

Customs Act

s. 167

s. 167

s. 167

s. 178A

Customs Act

Art. 14

s. 167

Maqbool Hussain

Babulal

Ma11bool Hussain

s. 167

s. 167

Art. 32

Ranchhoddas

Sarhar

s. 167

Art. 14

s. 167

Customs Act

Art. 14

Art. 14

s. 167

Art. 14

s. 167(8) and 1

F. N. Roy

S. 167

Sections of Offences this Act

Chapter IV of this Act

India

Ranchhoddas

lmarani

Union of India

Sarkar

s. 98

Ranchhoddas

Art. 14

s. 167

Ranchhoddas

s. 76

Customs Act

Customs Act

s. 186

s. 167

s. 167