judgement:
Nos. 2333 or 2336 of 1983.
(Under Article 32 of the Constitution of India).
Advocates for the Petitioners.
L.M. Singhvi, A.M. Singhvi, Vimal Dave and Krishan Kumar.
T.S. Krishnamurthy Iyer, Naresh Kumar Sharma and Vineet Kumar.
Dr. Y.S. Chitale, (Not present) Mrs. Sadhana Ramchandran and Raju Ramchandran and Harjinder Singh (Not present) Advocates for the Respondents: A.V. Rangam and Mrs. Sarla Chandra for the State of Tamilnadu.
N.H. Gurusahani, Ashwani Kumar, N.N. Keshwani and M.N. Shroff and A.S. Nambiar Not Present.
The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
The several petitioners in these writ petitions are agents for the sale of tickets for the lotteries conducted by the Governments of various States other than Maharashtra.
They question the ban sought to be imposed by the Government of Maharashtra on the sale within the State of Maharashtra of tickets of lotteries conducted by the Government of other States.
They, generally, seek a writ in the nature of a Mandamus directing the State of Maharashtra to forbear from interfering with the sale or distribution of lottery tickets in respect of the lotteries organised ' by the Governments of States other than Maharashtra.
There is no express notification or order of the Government of Maharashtra imposing a ban on the sale of lottery tickets of other.
States in the State of Maharashtra.
The ban is sought to be spelt out from a Press release of the Director of Publicity, Sachivalaya, Bombay dated September 24, 1969 and a communication ' dated August 24, 1981 addressed by the Government of Maharashtra, 443 Finance Department, to some of the petitioners individually.
The Press release is as follows: SALE OF LOTTERY TICKETS OF OTHER STATES UNLAWFUL Warning to Public On September 16, the Minister for Finance in a Press conference, followed by a press note, made it clear to agents who are selling lottery tickets that the sale of lottery tickets of other States in this State is unlawful.
The Government of India, in giving permission for conducting State lotteries had made a condition that the lottery tickets should not be sold in another State, without the express consent of that State, No such permission has been given in Maharashtra for the sale of outside State lottery tickets.
Despite the warning given by the Minister, unauthorised sales of lottery tickets, of outside States continues, and the Government is therefore taking steps to stop these obviously unlawful practices by seizing all stocks of tickets of other States ' lotteries, The public are warned that no tickets other that the Maharashtra State Lottery tickets can be sold within the Maharashtra State".
The communications addressed to the petitioners are in the following terms: Sir, I am directed to refer to your letter No. DA/PL/81/622, dated 22.6.1981 on the above mentioned subject and to state that there is ban on the sale of other State Lottery tickets in State of Maharashtra.
It is, therefore, regretted that your request to permit you to sell your State Lottery tickets in this State cannot ' be accepted.
Yours faithfully, Sd/ State Lottery Officer, Finance Department The basic submission on behalf of the petitioners is that there 444 is no legal authority for the imposition of the ban.
It is argued that ' under the Constitution, 'Lotteries organised by the Government of India or the Government of a State ' is a subject which is within ' the exclusive legislative competence of Parliament and that it is not open to the Government of any State purporting to act in exercise of its executive power to impose such a ban as that sought to be imposed by the Government of Maharashtra.
On the other hand, it is sought to be argued on behalf of the Government of Maharashtra that the Union Government 's executive power is co extensive with the power of Parliament to make laws, that the President in exercise of his power under article 258(i) has entrusted to the Government of Maharashtra the executive power of the Union in respect of lotteries run by the State and therefore, it was competent for the Government of Maharashtra to impose the ban.
Entry 40 of List I of the VIIth Schedule to the Constitution is "Lotteries organised by the Government of India or the Government of a State".
Entry 34 of List IT of VIIth Schedule is, "Betting and gambling".
There is no dispute before us that the expression "Betting and gambling" includes and has always been understood to have included the conduct of lotteries.
Quite obviously, the subject 'Lotteries organised by the Government of India or the Government of a State ' has been taken out from the legislative field comprised by the expression "Betting and gambling" and is reserved to be dealt with by Parliament.
Since the subject 'Lotteries organised by the Government of India or the Government of a State ' has been made a subject within the exclusive legislative competence of Parliament, it must follow, in view of Act.
246(1) and (3), that no legislature of a State can make a law touching lotteries organised by the Government of India of the Government of a State.
This much is beyond controversy and the Maharashtra legislature has acknowledged the position, as indeed it must, in Sec.
32 of the Bombay Lotteries (Control and Tax) and Prize Competitions (Tax) Act, 1958.
It is an Act to control and tax lotteries and to tax prize competitions in the State of Maharashtra.
Section 32(b) expressly provides that nothing in the Act shall apply to "a lottery organised by the Central Government or a State Government".
This, as we said, is but a recognition of the prevailing situation under the Constitution.
The Constitutional position cannot be altered by an act of the State legislature.
It appears that the Government of Maharashtra and various other State Governments requested the Union Government to authorise them to conduct lotteries for the purpose of 'finding funds 445 for financing their development plants '.
Such authorisation was, of course, strictly, not necessary in the absence of a law made by Parliament pursuant to Entry 40 of List I of the VIIth Schedule to the Constitution.
Article 298 of the Constitution extends the executive power of the Union and each State to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose, with the stipulation that if the trade, business or purpose is not one with respect to which Parliament may make laws, the said executive power of Parliament shall be subject in each State to legislation by the State and if the trade, business or purpose is not one with respect to which the State legislature may make laws, the said executive power of the State shall be subject to legislation by Parliament.
Thus, while the Government of a State is free to carry on any trade or business in respect of which it may not have the power to make laws the power to carry on such trade or business shall be subject to legislation by Parliament.
Therefore, the Government of a State has the right to conduct lotteries subject to legislation by Parliament.
Since there is at present no legislation by Parliament on the subject of lotteries organised by the Government of India or the Government of a State, the Government of every State has the unrestricted right to organise lotteries of its own.
We will consider the effect of the impact of article 73, article 258(1) and Entry 40 of List I read with article 246 on this right a little later.
To continue the expose of facts, in response to the request of the several State Governments, the Ministry of Home Affairs, Government of India, addressed a communication dated July 1,1968 to the Chief Secretaries to the Government of all States.
It was stated in the letter that though the Central Government was opposed to the idea of lotteries being conducted by Governments, they had decided to authorise the State Governments to conduct lotteries in view of the representations of some of the State Governments that it would help them 'to mobilise savings and to find funds far financing their development plans '.
However, it was added : "At the same time, it is also felt that suitable steps should be taken to safeguard the interests of such State Governments, who, as a matter of policy, do not desire to start State Lotteries or permit sale of tickets of lotteries organised in other States, within their jurisdiction.
In order to avoid objections from such States, it has been decided that the Central Governments permission for conducting State Lotteries is available on the condition that tickets to such a lottery will 446 not be sold in another State without the express consent of the State Government concerned.
I am to add that in order to achieve this object an amendment of Section 294 A IPC is being undertaken to make sale of tickets, without the consent of the State Government concerned, a penal offence".
We may mention here that the proposal to amend Section 294 A IPC to achieve the object of preventing the sale of lottery tickets of one State being sold in States which are opposed to the conduct of lotteries as a matter of policy has remained a static proposal and no such amendment has so far been attempted to be made.
The communication dated July 1, 1968 from the Government of India was followed by Presidential order under article 258(1) of the Constitution.
The Presidential order relating to the State of Maharashtra with which we are concerned.
is as follows: No. 29/29/63 P.IV Government of India Ministry of Home Affairs New Delhi, the 2nd April, 1969.
ORDER Whereas the Government of Maharashtra propose to organise a State lottery; And whereas the Central Government has no objection to it: Now, therefore, the President is pleased to permit the Government of Maharashtra to conduct a State lottery, subject to the condition that the tickets of the lottery shall not be sold in another State without the permission of the Government of that State.
The President is further pleased to entrust to the Government of Maharashtra under clause (1) of Article 258 of the Constitution the executive power of the Union in respect of lotteries organised by that Government.
Sd/ (D.D. JOSHI) Deputy Secretary to the Government of India 447 It was after this entrustment of executive power of the Union to the Government of Maharashtra 'in respect of lotteries organised by that Government ' that the Government of Maharashtra proceeded to issue the Press release and thereafter the individual communications, earlier referred to, making it known that the sale of lottery tickets of other States was banned in the State of Maharashtra.
The source of power for the ban is claimed to be the entrustment of power by the President under article 258(1) of the Constitution.
But the terms of the entrustment do not justify the claim.
The entrustment of power, as is seen, is only 'in respect of lotteries organised by that Government '.
The expression 'that Government ' in the context of the entrustment of power to the Government of Maharashtra can only mean the Government of Maharashtra and no other.
Nor can it ever be that such executive power as the Union Government may possess in respect of the trading, business or, for that matter, any other activity of the Government of one State may be entrusted to the Government of another State.
That would be destructive of the very scheme and structure of our Constitution.
The Government of Maharashtra cannot therefore purport to ban the sale of lottery tickets of Other States by virtue of the entrustment of power under Article 258(1) of the Constitution.
It is then said that the permission granted to each State to conduct its lotteries is expressly subject to the condition that the tickets of the lottery shall not be sold in another State without the permission of the Government of that State.
We have already pointed out that Article 298 of the Constitution extends the executive power of every State to the carrying on of any trade or business even if such trade or business is one with respect of which Parliament alone has the exclusive power to make laws, subject to the stipulation that such executive power of the State shall be subject to Parliamentary legislation.
It is true that in view of Entry 40 of List I of the VIIth Schedule to the Constitution Parliament has exclusive power to make laws with respect to "Lotteries organised by the Government of India or the Government of a State", that Article 73 of the Constitution extends the executive power of the union to the matters with respect to which Parliament bas power to make laws and, therefore; the executive power of the Union must extends to the subject "Lotteries organised by the Government of India or the Government of a State".
But the executive power of the union, by the very opening words of Article 73, is "subject to the provisions of this Constitution".
It follows that the executive power of the Union with respect to lotteries 448 organised by the Government of a State has necessarily to be exercised subject to the provisions of the Constitution, including Article 298, which expressly extends the executive power of the State to the carrying on of any trade or.
business subject only to legislation by Parliament if the trade or business is not one with respect to which the State legislature may make laws.
It is to be noted that Article 298 does not open with the words 'subject to the provisions of the Constitution ', as does Article 73.
Reading and considering Articles 73 and 298 together, as they should indeed be read and considered, it is clear that the executive power of a State in the matter of carrying on an; trade or business with respect to which the State legislature may not make laws is subject to legislation by Parliament but is not subject to the executive power of the union, That is why we mentioned earlier that the Government of a State is not required to obtain the permission of the Union Government in order to organise its lotteries, in the absence of Parliamentary legislation.
Even assuming that such permission is necessary, we do not see how a condition imposed by such permission that lottery tickets of one State may not be sold in another State may be enforced by the other State.
The other State has no power to make laws in regard to the lotteries by the first State.
Its executive power, by virtue of Article 298, extends to lotteries organised by itself but not to lotteries organised by the other State.
If a State acts in breach of the condition imposed by the President while entrusting power under Article 258, it is open to the President to revoke the permission or to take such further or other action as may be constitutionally permissible but it cannot possibly enable the Government of the other State to do a thing about it except to complain, perhaps, to the Union Government.
The Government of India is quite obviously alive to the position that there is no way of enforcing the stipulation that lottery tickets of one State shall not be sold in another except by Parliament making a law in that behalf.
The awareness is revealed by the last sentence in the letter dated July 1, 1968 which says, "I am to add that in order to achieve this object an amendment of Section 294 A IPC is being undertaken to make sale of tickets, without the consent of the State Government concerned, a penal offence".
The proposed amendment is yet to see the light of day.
A submission which appears to have found favour with the 449 High Court of Bombay in Kamal Agency vs State and the High Court of Madras in H.G. Jain vs State of Tamil Nadu was that in Entry 40 of List I and the respective local Acts, a lottery organised by a State must be construed to refer to a lottery lawfully organised by a State and that if a lottery is not lawfully organised by a State it would not fall within Entry 40 of List I but would fall under the head 'gambling ' under Entry 34 of List II and the State legislature would then be empowered to legislate in respect of the same.
Where the State Legislature could thus legislate, it was said, the State Government could take executive action in respect of lotteries organised by another State if they were unlawful.
The Gujarat and Andhra Pradesh High Courts have dissented from this view.
In Special Civil Application No. 1309 of 1970 Bhagwati, C.J. presiding over a Division Bench of the Gujarat High Court and in L.B. Paradise Lottery Centre vs State one of us sitting singly in the Andhra Pradesh High Court have explained that there is no justification for first reading the word 'lawfully ' into Entry 40 of List I and then proceeding to interpret the expression 'Lottery lawfully organised ' as meaning a lottery organised persuant to the entrustment of executive power of the Union under Article 258 of the Constitution.
It was observed "legislative power cannot be fed into Entry 34, by feeding the word 'lawful ' into Entry 40 or List I and thus artificially restricting the cope of Entry 40".
It was pointed out that if the Government of a State organised a lottery without the entrustment of executive power as contemplated by Article 258 or in disregard or defiance of any condition that may have been imposed while entrusting executive power under Article 258 it would never be a matter for the legislature of one State to take upon itself the power to declare unlawful the lottery run by the Government of another State; and even less so could the Government of a State declare unlawful a lottery run by the Government of another State and thereafter ban the sale of the tickets of the lotteries organised by that State.
In the Madras case it was also observed that the entrustment order carried with it all powers which the State Government might take to realise the maximum collection.
We cannot subscribe to this view.
That would really amount to the entrustment of vital legislative powers to the State Government which would be constitutionally, impermissible.
We do not think it necessary to refer in any further detail to the decisions of the Gujarat, Andhra Pradesh Bombay and Madras decisions 450 except to say that we generally agree with the reasoning in the Gujarat and Andhra Pradesh decisions and disagree with the reasoning in the Bombay and Madras decisions.
In the result we allow the Write petitions and direct the State of Maharashtra to forbear from giving effect to the ban on the sale or distribution of tickets of lotteries organised by other States.
There is no order regarding to costs.
N.V.K. Appeal allowed.

dataset_name: IN-Abs

summary:
By a press release, the Government of Maharashtra declared that the sale of lottery tickets of States other than the State of Maharashtra was unlawful and warned the public that no lottery ticket of other States should be sold within the State.
The petitioners who were agents for the sale of tickets for lotteries conducted by various State Governments other than the State of Maharashtra contended in their writ petitions, that the aforesaid ban that was sought to be imposed had no legal authority.
Under the Constitution lotteries organised by the Government of India or the Government of a State was a subject which was within the exclusive legislative competence of Parliament and that it was not open to the Government of any State purporting to Act in exercise of its executive power to impose such a ban.
On behalf of the State Government respondent it was contended that the Union Government 's executive power was co extensive with the power to make laws, that the President in exercise of his power under Article 258(1) had entrusted to the State Government the executive power of the Union through a Presidential order dated April 2, 1969 in respect of lotteries run by the State, and therefore it was competent for the State Government to impose the ban.
Allowing the writ petitions, ^ HELD: 1.
The Government of Maharashtra cannot purport to ban the 441 sale of lottery tickets of other State by virtue of the entrustment of power under Article 258(1) of the Constitution.
[447 D] 2.
Entry 40 of List I of the VIIIth Schedule to the Constitution is "Lotteries organised by the Government of India or the Government of a State".
Entry 34 of List II of VIIIth Schedule is, "Betting and gambling".
Since the subject 'Lotteries organised by the Government of India or the Government of a State ' has been taken out from the legislative field comprised by the expression "Betting and gambling" and reserved to be dealt with by Parliament, within its exclusive legislative competence it must follow, in view of Article 246(1) and (3) that no legislature of a State. can make a law touching lotteries organised by the Government of India or the Government of a State.
[444 D E] 3.
Article 73 extends the executive power of the Union to the matters with respect to which Parliament has power to make laws.
But the executive power of the Union, by the very opening words of article 73 is "subject to the provisions of the Constitution".
It therefore follows that the executive power of the Union with respect to lotteries organised by the Government of a State has necessarily to be exercised subject to the provisions of the Constitution, including article 298, which expressly extends the executive power of the State to the carrying on of any trade or business subject only to legislation by Parliament if the trade or business is not one with respect to which the State Legislature may make laws.
[447G H; 440A B] 4.
Reading and considering Articles 73 and 298 together, it is clear that the executive power of a State in the matter of carrying on any trade on business with respect to which the State legislature may not make laws is subject to legislation by Parliament but is not subject to the executive power of the Union.
The Government of a State is not required to obtain the permission of the Union Government in order to organise its lotteries, in the absence of Parliamentary legislation.
Even assuming that such permission is necessary, a condition imposed by such permission that lottery tickets of one State may not be sold in another State cannot be enforced by the other State.
The other State has no power to make any laws in regard to lotteries organised by the first State.
Its executive power, by virtue of Article 298, extends to lotteries organised by itself but not to lotteries organised by the other State.
[448C E] 5.
If a State acts in breach of the condition imposed by the President while entrusting power under Article 258 it is open to the President to revoke the permission or to take such further or other action as may be constitutionally permissible but it cannot possibly enable the Government of the other State to do anything about it except to complain perhaps to the Union Government.
[448 E F] In the instant case the source of power for the ban is claimed to be the entrustment of power by the President under Act 258(1) through the Residential order Dated April 2, 1969.
But the terms of the entrustment do not justify the claim The entrustment of power is only 'in respect of lotteries organised by that Government '.
The expression 'that Government ' in the context of the entrustment of power to the Government of Maharashtra can only mean the Government of Maharashtra and no other.
[447 B C] L.B. Paradise Lottery Centre vs State, AIR 1975 AP 50 Shri Indravadan Chaman Lal Thacker vs State of Gujarat, S.C.A. 1309/70 approved.
442 Komal Agency vs State, AIR 1971 Bombay 332 and H.G. Jain vs State of Tamilnadu, AIR 1973 Madras 402; over ruled.


judgement:
Civil Appeal No. 487 of 1977.
Appeal by Special leave from the Judgment and order dated the 5th January, 1977 of the orissa High Court in O.J.C. No. 810 of 1976.
V S Desai, Parveen Kumar and Ashok Mathur for the Appellant.
C.V. Murty, K. PrabhaKar Rao and C.M. Murty for the Respondents.
R.K. Mehta for Respondent No. 3.
B.D. Sharma for Respondent No. 2.
The Judgment of the Court was delivered by MISRA J.
: The present appeal by special leave is directed against the judgment of the High Court of Orissa dated 5th January ]977 dismissing a petition under 'articles 226 and 227 of the Constitution ' for quashing imposition of octroi under section 131(1)(kk) of the Orissa Municipal Act, 1950 (hereinafter referred to as the 'Act ') and for . '.
a declaration.
that the notifications dated 31st July 1973 and 12th August, 1975 issued by the State Government in exercise of powers .
vested under s.4 of the Act are illegal and unenforceable and for a further declaration that the octroi Bye laws of the Jharsuguda Municipal Council are also void and inoperative.
Jharsuguda Municipality, respondent No. 1, is a municipality incorporated under the Act.
In March 1962 the State Government 'accorded sanction for the imposition of octroi in terms of s.]3](]) of the Act. ' A set of octroi bye laws were framed by the Municipal Council in terms of s.388 of the Act and the same were also approved by the State Government in exercise of powers under s.390 of the Act on 19th March, 1968.
octroi was levied for the first time after 31st March 1962 when the State Government accorded sanction under s.131 (i)(kk) of the Act.
The appellant is a company duly incorporated under the Indian having its mills located at village Ektali under the Jharsuguda police station in District Sambalpur, Orissa.
The said area of the village was included within the Ektali Panchayat.
The company mainly carries on spinning of cotton which in the manu . 404 facturing ' process is transformed from loose fibres into finished yarn.
The area under the Ektali village in which the appellants ' factory was located was constituted, along with other villages as a Gram by a declaration made under s.3 of the, Orissa ' Grama Panchayat Act, 1964.
On or about 25th March, 1970 Jharsuguda Municipality passed a resolution for the inclusion of Ektali and other villages in the Jharsuguda Municipality and thus extending the area of the said Municipality.
Against the proposed extension the appellant made a representation to the State Government inter alia on the ground that he said, village Ektali could not under the relevant rules be included in the Municipality under s.4(1)(c) of the Orissa Municipal Act, 1950 in view of the proviso to s.4(1) which contemplates that a declaration shall not be made under this sub section unless the State Government are satisfied that two thirds of the adult male population of the town to which it refers are chiefly employed in pursuits other than agriculture and that such a town contains not less than 10,000 inhabitants and an average number of not less than 1000 inhabitants to a square mile of the area of such a town.
The appellant alleged that the male population of the said village Ektali was 2640 as per 1971 census report, out of which only 1586 were chiefly employed in pursuits other than agriculture and thus two thirds of such male population were not employed in non agricultural pursuits.
The State Government, however, by a notification dated 31st July 1973 declared their intention under s.4(1)(c) of the Municipal Act, 1950 to include within the Jharsuguda Municipality the local area of a number of villages including the village Ektali.
By the said notification published in Orissa Gazette Extraordinary dated 22nd August, 1973 the Government invited objections within six weeks from the date of publication.
The appellant did file objection to the said notification.
Objection was also filed by Grama Panchayat of Ektali to the effect that the Ektali Grama was duly constituted , by the State Government in Community Development and Panchayat Raj Department in exercise of powers under s.3(1) of the Orissa Grama Panchayat Act and in the absence or any notification under s.3(1) and s.149 of the Grama Panchayat Act, village Ektali still continues to be a Grama.
The objections were examined by the District Magistrate, Sambalpur and the Revenue Division Commissioner Northern Division, .
Sambalpur and the same were rejected.
On 12th August, 1975, notification under s.4(33(b) declaring the inclusion of the said villagsa 405 including the village Ektali, into Jharsuguda Municipality was issued.
Soon thereafter on Ist September, 1975 the said Jharsuguda Municipality sent a letter to the appellant directing it to pay octroi as per provisions of s.5 of the Orissa Municipal Act.
The said octroi was payable at the rate of 1 per cent ad valorem on cotton as soon as it entered the municipal check post for the purpose of its being spun into yarn.
The levy or octroi duty was challenged by filing a petition under articles 226 and 227 of the Constitution on various grounds viz.
,(a) the inclusion of village Ektali in the area of Jharsuguda Municipality was illegal and ultra vires the provisions of the Orissa Municipal Act, and (b) the levy of octroi duty at the rate of I percent ad valorem was arbitrary, coercive and violative of article 301 of the Constitution and, therefore, the appellant prayed for quashing the notifications referred to above.
The writ petition was, however, dismissed by a Division Bench of the Orissa High Court by its order dated 5th January.
1977 The appellant filed an application under article 133(1) of the Constitution for the grant of a certificate for leave to appeal to 'this Court, which was dismissed by the High Court by its order dated 19th January, 1977.
The appellant has now filed the present appeal after obtaining special leave from this Court.
The learned counsel for the appellant raised the following contentions: .
In the absence of a notification cancelling the declaration constituting Ektali village as part of Grama, it was not legally permissible for the State Government acting ' under the Orissa Municipal Act 1 950 to include within the area of the municipality the area of the said Grama. 2.
The mandatory requirements of proviso to sub s.(l) of s.4 of the Orissa Municipal Act, 1950 have not beer satisfied.
The objection filed by the appellant under sub s.(2) of s.4 has not been considered by the State Government.
(a) The liability to octroi arises when any of the three alternatives mentioned in s.]31(1)(kk) of the Municipal Act is satisfied viz., when the goods are brought 406 within the municipal limits for (i) consumption, (ii) use or (iii) sale.
(b) The tax already imposed within the limits of the Municipality of Jharsuguda could not be automatically made applicable to the extended limits of the municipality without obtaining the sanction of the State Government under s.131(1) (kh) of the Act.
(c) The rate levied is per se unreasonable and arbitrary.
We take up these grounds seriatim.
Admittedly village Ektali where the factory of the appellant is located was a part of the duly constituted Ektali Grama Panchayat prior to 1973, within the meaning of s.3 of the Orissa Grama Panchayat Act.
Sub section (1) of s.3 authorises the State Government to constitute any village or group of contiguous villages as a Grama by a declaration notified in the Gazette and assign to such Grama a name which shall be of one of the villages comprised within the Grama.
Subsection (2) of 5.3 provided that whenever the State Government deems it fit so to do, they may cancel any notification in respect of a Grama under sub s (1) on may alter the area comprised in a Grama by reducing or adding to the number of villages comprised within such Grama by a declaration 'notified in the Gazette constituting such altered area or areas as a Grama or Gramas, as the case may be.
The precise contention raised on behalf of the appellant is that there was a declaration by notification for the.
constitution of the Grama within the meaning of sub s.(l), but there has been no notification as required by sub s,(2) of s.3 for taking village Ektali out of Grama Panchayat and, therefore, village Ektali continues to be a Grama and the inclusion of village Ektali in Jharsuguda Municipality by notifications dated 31st July, 1973 and 12th August, 1975 will have no effect.
This contention has considerable force: When a duly constituted Grama is to go out of existence an order of the Magistrate cancelling the notification in terms of sub s.(2) of s.3 of the Grama Panchayat Act is necessary.
But there are circumstances which take away the force of the argument.
The Grama Panchayat never ' challenged the notification of inclusion of the village Ektali in Jhar 407 suguda Municipality.
From un controverted averment made in para 6 of the counter affidavit of the State filed before the High Court it appears that the Grama Panchayat was consulted before the impugned notification.
Therefore, we do not feel persuaded to accept the contention at the instance of the appellant.
This leads us to the second ground.
In order to.
appreciate the second ground it is appropriate at this stage to refer to the provisions of s.1 in so far as it is relevant for the purposes of the case: "4.(1) The State Government may, by notification declare their intention (a) to constitute any town, together with, or exclusive of, any railway station, village, land or building in the vicinity of any such town, a municipality under this Act: or (b) . . . . . . . (c) to include within a municipality any local area contiguous to the same and defined in the notification; or (d) . . . (e) . . .
(f) . . . (g) . . . (h) . . .
Provided that a declaration shall not be made under this sub section unless the State Government are satisfied that two thirds of the adult male population of the town to which it refers, are chiefly employed in pursuits other than agricultural, and that such town contains not less than ten thousand inhabitants and an average number of not less than one thousand inhabitants to the square mile of the area of such town, 408 (2) Any inhabitant of the town or local area, or any, rate payer of the municipality, in respect of, which any .
such notification has been published under sub section (l) may, if he objects to anything contained in the notification, submit his objection in writing to the State Government.
through the Magistrate of the district within six weeks from the date of the publication of the notification and the ' State .
Government shall take his objections into consideration.
(3) . ." The emphasis of the appellant is that two third of the adult male population of the Grama should be chiefly employed in pursuits other than agricultural.
The appellant has referred to 1971 census figures.
On the basis of these census figures it is argued that out of the total male population of 2640 of Grama Ektali only 1586 adults were engaged in non agricultural pursuits hut the requirement of law was that two third of the male population should have been employed in the non agricultural pursuits which comes to 1760.
The argument proceeds on the assumption that the proviso to s.4(1) applies.
But a bare persual of the proviso clearly indicates that the requirement is that two thirds of the adult male population of the town to which it refers should be engaged in non agricultural ' pursuits.
The provision, to our mind, applies not to all the classes of sub s.(l) of s.4 but it applies only to cl.(a) of sub s.(l) of s.4, because it is cl.(a) of s.4(1) which talks of town.
Therefore, the proviso, in .
Our opinion, has no application to the present case and that cannot be taken to be a ground for challenging the notification for inclusion of village Ektali in the Jharsuguda Municipality.
This takes us to the third ground.
The appellant had filed an objection under sub s.(2) of s.4.
The said objection was examined by the District Magistrate, Sambalpur and the Revenue Divisional Commissioner (Northern Division), Sambalpur: They overruled the objection treating it to be of general nature.
Thereafter, the Community Development and the Panchati Raj (Grama Panchayat) Department were consulted to agree with this proposal, to which they agreed, and it was thereafter.
that the Urban Development Department issued a final notification dated 12th August, 1975 to include the above village into the municipal limits of Jharsuguda Municipality.
The contention of the appellant that the objection had not been considered by the State Government 409 cannot be accepted in as much as the objection is required to be made through the Magistrate of the district.
Naturally, the District Magistrate while forwarding the objection to the State Government made his comment.
The Revenue Divisional Commissioner intervenes in the channel of communication between the District Magistrate and the State Government and he, therefore, had an occasion to.
process the matter.
The State Government while dealing with the matter consulted the.
Panchayati Raj Department and ultimately notified in terms of notification dated 12th August, 1975.
In the circumstances it cannot be accepted that the objection filed by the appellant had not been considered by the State Government.
It was next contended that the liability for octroi arises when ally of the three alternatives mentioned in s.131(1)(kk) of the Municipal Act are satisfied, namely, when the goods are brought within the municipal limits fol (i) consumption, (ii) use, or (iii) sale.
Section 131(1) of the Municipal Act empowers the Municipal Council to impose various kids of taxes within the limits of the Municipality with the sanction of the State Government.
One of the taxes contemplated by s.313 (l) is octroi, as provided in cl.
According to the appellant the goods are brought into the municipal area not for the purpose of sale or for consumption but for the purpose of manufacture of yarn.
The appellant took support from Burmah Shell Oil Storage & Distribution Co. India Ltd. vs The Belgam Borough Municipality in which this Court had an occasion to consider the word 'Consumption '.
This Court took the view that the word 'consumption ' in is primary sense means the act of con summing and in ordinary parlance means the use of an article in a way which destroys, wastes or uses up that article, but in some legal contexts, the word 'Consumption has a wider meaning and that it is .
not necessary that by the act of consumption the commodity must be ' destroyed or used up.
On the strength of this authority it is con tended that the goods were brought into the municipal limits neither .
For consumption, nor for sale.
Assuming the contention to be correct there is no escape from the conclusion that the goods are brought into the municipal limits at.
least for the purpose of use.
In this view of the legal position the imposition of octroi by the Municipality cannot be challenged on this ground.
The next ground of attack is based on s.372 of the Orissa Municipal Act.
Section 392 pertinently reads: H 410 "392.
The State Government before making any rules under sub section (2) of section 81 and section 387, and a municipal council, before making any regulation or by laws under section 388, shall publish, in such manner as the State Government deem sufficient for giving information to persons interested, the proposed rules or regulations or by laws together with a notice specifying a date on or after which the same will be taken into consideration; and shall before making such rules or regulations or by laws, receive and consider any objection or suggestion which may be made by any person with respect to the same before the date so specified.
Every such rule or regulation or by law shall be published in the Gazette in English and in Oriya and such publication shall be evidence that the rule or regulation or by law has been made as required by this section.
" It is contended that the mandatory requirements having not been complied with the imposition of octroi is vitiated on this account.
The appellant in para 3 of the Writ petition had alleged that the bye laws 'were not published in the State Gazette either in Oriya or in English.
This allegation has, however, been controverted by the State Government in para ]8 of the counter affidavit.
It was specifically averred that the bye laws were approved and confirmed by the Government in Urban Development Department vide.
Order No. 1903/Legis 43 67/UD dated nil published in Orissa Gazette for information of the general public on 23rd May, 1969 at pages 691 to 697.
There is a statutory presumption under s.3 of the Act that the publication of the rules or regulations or by laws in the Gazette shall be evidence that the rule or regulation or bye law has been made as required by this section.
In view of this statutory presumption the Court will assume that the bye law has been made in accordance with law in the absence of anything more from the side of the appellant.
As a second limb to this argument it was contended by the appellant that even assuming that the bye laws when initially enforced might be presumed to be in accordance with law, in the absence of similar steps being taken at the time of extension of bye Jaws to the newly added area, the bye laws are not enforceable in the new area.
411 This argument has proceeded in utter oblivion of the provisions of s.5 of the Municipal Act.
It reads: "5.
When any local area is included in a municipality, by a notification under clause (b) or (c) of sub section (3) of section 4, all the provisions of this Act and of any rules, by laws, notifications, or orders made thereunder, which immediately before such inclusion were in force throughout such municipality, shall be deemed to apply to such area, unless the State Government, in and by the notification, otherwise direct." The learned counsel for the appellant, however, has placed strong reliance upon Visakhapatnam Municipality vs Kandrequla Nukaraju & Ors.
In that case the question that fell for consideration was whether the property tax which could lawfully be levied under the District Municipalities Act 1929 can be levied after the repeal of that Act, on property situated in the areas included within the municipal limits after the constitution of the municipality.
Section 391(1) of the Andhra Pradesh Municipalities Act 1965 expressly repealed the.
District Municipalities Act, 1920 from which it must follow that ordinarily no action can be taken under the Act of 1920 after April 1, 1966 when the repeal became effective on the coming into force of the Act.
It was, however, contended in that case that cl.
la of Schedule 9 of the Act keeps the repealed enactment alive for tax purposes and, therefore, the municipality had the authority to impose the property tax under the Act of 1920 notwithstanding its repeal by the new Act.
This Court, however, took the view that the provisions contained in the Schedule are of a transitional nature.
They were intended to apply during the period of transition following upon the repeal of old municipal laws and the introduction of the li new law.
The object of clause 12 of Schedule 9 was to authorise the levy of taxes which, on the commencement of the Act, Were levied under the repealed laws.
This Court further added that the municipality might have been levying property tax since long on properties situated within its limits, but until April 1, 1966 the villages of Ramakrishnapuram and Sriharipuram were outside those limits.
Qua the areas newly included within the municipal limits, the tax was being imposed for the first time and therefore it was incumbent on the municipality to follow the procedure prescribed by the first proviso to section 81(2).
Residents and tax payers of those areas never had 412 an opportunity to object to the imposition of the tax and that valuable opportunity cannot be denied to them.
It is obligatory upon the municipality not only to invite objections to the proposed tax but also to consider the objections received by it within the specified period.
For the State, however, reliance was placed in that case on s.3(4) of the Act to contend that the inclusion of the two villages within the municipal area attracts of its own force every provision of the Act with effect from the dale on which the final notification is published.
by the Government under s.3(3).
In support of this contention it cited the decision of this Court in Atlas Cycle Industrial Ltd. vs State of Haryana & Anr.
This argument on behalf of the State was, however, repelled and the Court observed :.
"Far from supporting the argument, we consider that the decision shows how a provision like the one contained in Section 3(4) cannot have the effect contended for by the appellant.
In the Atlas Cycle case, section 5(4) of the Punjab Municipality Act, 1911 provided that when any local area was included in the municipality, "this Act and. all .
rules, bye laws, orders, directions and powers made, issued or conferred under this Act and in force throughout the whole municipality at the time, shall apply to such areas.".
" But this Court took the view that since section 5(4) of the Punjab Act did not, significantly, refer to notifications and since section 62(1) of the Punjab Act spoke of "notification" for the imposition of taxes, it was not competent to the municipality to levy and collect octroi from the company on the strength merely of the provision contained in section 5(4) of the Punjab Act.
That case, however, is distinguishable and cannot be of much assistance for solving the problem before us.
Section 5 of the orissa Municipal Act makes all the provisions of the Act and of any rules, by laws, notifications, or orders made thereunder, which immediately before such inclusion were in force throughout such municipality, applicable to such area, unless the State Government, in and by the notification, otherwise direct.
This section, therefore, includes not only the provisions of the Act, rules and bye laws but also includes notifications.
This distinguishes the.
present case from the Visakhapatnam Municipality 's case (supra).
413 For the appellant, next reliance was placed upon Bagalkot City Municipality vs Bagalkot Cement.(1) In that case also at the time of the imposition of the octroi duty the respondent 's factory was situated outside the municipal district and was not subject to the octroi duty.
Subsequently, the Government extended the municipal district so that the factory came to be included within that district.
The appellant in that case contended that upon such extension its octroi limits also stood extended to include the factory and the respondent became liable to pay octroi duty in respect of goods brought into the factory.
The majority view was that the expression "municipal district" in the bye law referred to the municipal district as existing when the bye law was framed.
The context prevented the definition of "municipal .
district" in the Act, namely, the municipal district as from time to time existing from being applied under s.20 of the Bombay General Clauses Act to interpret the bye law The bye law had been made without being published to the respondent, and if it was so read referring to the municipal district from time to time existing it would be invalid for non compliance with the provisions of s.48 of the Act.
This case again is distinguishable in view of the wording of s.5 of the orissa Municipal Act: .
Lastly it is urged that the octroi duty levied in this case by the Municipality is unreasonable and excessive.
The Municipality is required to provide certain amenities not only for the permanent residents within the municipality, but also even for casual visitors who may on occasions enter the limits of the municipality.
The entry of large quantities of goods within the municipality almost daily from outside necessarily creates innumerable problems such as provisions of water supply, lighting facilities, facilities for conservancy, sanitation, maintenance of good roads and markets etc.
which the Jharsuguda Municipality has done and there is no allegation to the contrary by the appellant.
From the material placed before us we are of the view that the levy is not an unreasonable one.
It is not also excessive.
The imposition of octroi cannot, therefore, be challenged on the ground that there is violation of article 19(1)(g) of the Constitution.
Considering the case from any aspect the imposition of octroi duty, in our opinion, does not suffer from any infirmity.
414 For the foregoing discussion the appeal cannot succeed.
It is accordingly dismissed.
In the circumstances of the case, however, we allow the parties to bear their own costs.
S.R. Appeal dismissed.

summary:
The appellant Textile Mills is a company duly incorporated under the Indian having its mills located at Village Ektaji under the Jharsuguda police station in district Sambalpur, Orissa.
The company mainly carries on spinning of Cotton which in the manufacturing process is transformed from loose fibres into finished yarn The area under the Ektaji village in which the appellant 's factory was located was earlier constituted as a Grama by a declaration made under Section 3 of the Orissa Grama Panchayat Act 1964.
On or about March 25, 1970 Jharsuguda Municipality passed a resolution for the inclusion of the Ektaji and other villages within its jurisdiction.
After considering the objections and representations against the inclusion of Ektaji village in the Municipal Limit and after following once again the other statutory requirement of further notice etc.
, the State Government published in the Orissa Gazette dated 12.8.1975 a notification approving the inclusion.
Soon thereafter on September 1, 1975 the said Jharsuguda Municipality sent a letter to the appellant directing it to pay octroi duty at the rate of I percent ad valorem on cotton as soon as it entered the Municipal check post for the purpose of its being spun into yarn.
The levy of octroi was challenged by filing a petition under articles 226 and 227 of the Constitution on various grounds, but the writ Petition was dismissed.
Petition seeking permission for issuance of a certificate under Article 133(1) of the Constitution was also dismissed.
Hence the appeal after obtaining Special Leave of the Court.
Dismissing the appeal the Court.
^ HELD: 1.
Considering the case from any aspect the imposition of Octroi duty under section 5 of the Orissa Municipal Act, 1950 does not suffer from any infirmity [413 H] 2.
The levy, being neither an unreasonable one nor also excessive, cannot .
be challenged on the ground that there is violation of Article 19(1)(e) of the Constitution.
[413 a] 402 3.
It is true that when a duly constituted Grama under sub section (I) of section 3 of the Grama.
Panchayat Act is to go out of existence an order of the Magistrate cancelling the Notification in terms of sub section (2) of Section 3 of the said Act is a pre requisite.
But in the instant case the Gram Panchayat never challenged the Notification of inclusion of the Village Ektaji in Jharsuguda ' Municipality.
Rather on the other hand the Gram panchayat was consulted before the impugned notification dated 12th August 1975 was issued.
[406 H; 407 A] 4.
The proviso to sub section 1 of Section 4 of the Orissa Municipal.
Act, 1950 has no application to the present case and that cannot be taken to be a ground for challenging the Notification for inclusion of Village Ektaji hl the Jharsuguda Municipality.
A bare perusal of the proviso clearly indicates that the requirement is that two thirds of the adult, male population of the town to which it refers should be engaged in non agricultural pursuits The proviso applies not to all the clauses of sub section (I) of section 4 but it.
applies only to clause (a) of sub section (1) of Section 4, because it is clause (a) of section 4 (1) which talks of town.
[408 E F] 5.
The contention that the objection raised by the appellant against the inclusion of the village in question into Municipality has not been considered by the State has no force.
The objection is required to be made through the Magistrate of the District.
Naturally the District Magistrate.
while forwarding the objection to the State Government made his comment.
The Revenue Divisional officer who intervenes in the channel of communication between the District Magistrate and the State Government had an occasion to process the matter.
The State Government while dealing with the matter consulted the Panchayat Raj Department and ultimately notified in terms of the notification dated August 12, 1975.
[408H; 409A B] 6.
Section 131(1) of the Municipal Act empower the Municipal Council to impose various kinds of taxes which includes octroi as provided in Clause (kk) with the sanction of the Government since the goods are brought into the municipal limits at least for the purpose of use" one of the three conditions laid down in clause (kk the imposition of Octroi is valid.
Burmah Shell Oil Storage & Distribution Co. vs The Belgam Borough Municipality ' [1963] Supp 2 SCR 216 referred to and held inapplicable.
[409 D E] 7:1.
There is a statutory presumption under section 392 of the Orissa Municipal Act, 1950 that the publication of the rules or regulations or bye laws in the Gazette shall be evidence that the rule pr regulation or bye law has, been mad as required by the section Therefore the court will assume that the bye law has been made in accordance with law in the absence of anything more from the site of the appellant.
1410 F G] 7 :2; The argument that even assuming that the bye laws when initially enforced might be presumed to be in accordance with law in the absence of similar steps being taken at the time of extension of bye laws to the newly added area, the bye laws are not enforceable in the new areas is not correct as it has, proceed in utter oblivion of the provisions of section 5 of the Municipal Act.
[410H; 411 A] Vishakhapatanam Municipality vs Kandregula Nukarajau & Ors. ; ; Atlas Cycle Industries Ltd. vs State of Haryana and Anr. ; ; Bagalkot City Municipality v Bagalkot Cement [1963] 2 Supp S.C.R. 710; distinguished 403