Mandatory tax procedure and delegated authority limits invalidated a municipal octroi enhancement, despite objections based on estoppel and prior payment.

A municipal octroi enhancement was invalid because the Ordinance vested the power to impose and rate octroi in the Government, and the municipality had no independent authority to raise it. The levy also failed because mandatory statutory steps under the Municipalities Act were not followed, including proper framing and publication of rules, invitation of objections, sanction, and lawful commencement; such procedural safeguards were held essential, not directory. The challenge was not defeated by estoppel, waiver, delay, or alleged suppression, as prior payment did not validate an unlawful levy and no sufficient basis for estoppel was shown. Relief was granted by striking down the levy to the extent of the unauthorized 50 per cent increase.

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Issues: (i) whether the municipality had authority under the Ordinance and the Rules to enhance the octroi rate; (ii) whether the levy of octroi was invalid for non-compliance with the mandatory procedure under the Municipalities Act; and (iii) whether the assessee was precluded by estoppel, waiver, delay, or suppression of material facts from challenging the demand.

Issue (i): whether the municipality had authority under the Ordinance and the Rules to enhance the octroi rate.

Analysis: The Ordinance vested the power to impose octroi and prescribe its rate in the Government. The municipality's resolution merely purported to increase the existing levy by 50 per cent and did not disclose any independent power under the Rules to alter the rate. The scheme of the Ordinance did not authorise the municipality to enhance octroi on its own.

Conclusion: The enhancement was not validly made under the Ordinance and the Rules.

Issue (ii): whether the levy of octroi was invalid for non-compliance with the mandatory procedure under the Municipalities Act.

Analysis: Imposition of octroi under the Municipalities Act required compliance with the prescribed steps, including passing proper rules by resolution, publication inviting objections, sanction by the Collector, publication of the sanctioned rules, and observance of the statutory commencement requirements. The record showed that these mandatory steps were not followed: no proper municipal rules were framed, the required publication and objection procedure was not observed, the sanction order referred to bye-laws rather than rules, and the tax was given retrospective effect contrary to the statutory scheme. Mandatory procedural safeguards for imposing a tax cannot be treated as directory.

Conclusion: The tax was illegally imposed for failure to comply with the mandatory procedure.

Issue (iii): whether the assessee was precluded by estoppel, waiver, delay, or suppression of material facts from challenging the demand.

Analysis: The challenge was to the demand notice issued in 1962, and the earlier payment of octroi did not bar a challenge to the validity of the levy when the demand was made. There was no proved waiver of the illegality, no valid agreement surrendering the objection, and no sufficient detriment to support estoppel against the municipality. The omission to refer to the earlier agreement in the writ petition was not treated as suppression of a material fact sufficient to defeat relief.

Conclusion: The assessee was not barred from challenging the demand on these grounds.

Final Conclusion: The demand was sustained only to the extent not covered by the unlawful enhancement, and relief was granted by striking down the levy to the extent of the 50 per cent increase.

Ratio Decidendi: A tax levy is vitiated where the statute prescribes mandatory procedural steps for its imposition and those steps are not strictly complied with.

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