1957 (12) TMI 23 - SC - Indian Laws

Municipalities cannot impose terminal tax under section 66(1)(o) on goods merely transiting through municipal limits without unloading

Central Indian Spinning and Weaving and Manufacturing Company, Limited, The Empress Mills, Nagpur Versus Municipal Committee, Wardha

The SC held that municipalities cannot impose terminal tax under s. 66(1)(o) of the C.P. Berar Municipalities Act on goods merely in transit through ... Goods neither unloaded nor reloaded at Wardha but are merely carried across through the municipal area - Liability of goods in transit for export terminal tax u/s 66(1)(o) of the C.P. & Berar Municipalities Act - Powers of the Municipality to impose, assess and collect taxes - refund the export terminal tax collected on such goods in transit - HELD THAT:- There is no evidence that the actual object of the Act in the present case was to extend the powers of the Municipalities to imposing the tax on articles which were in the course of transit. The vires of the tax has not been assailed but the difference in the language of the two items in List I and II has been pressed before us for the purpose of showing that the word ' terminal ' implies the terminus of a journey and not the end of the jurisdictional limits of a Municipality. Terminal in item No. 58 of List I of the 1935 Constitution Act has reference to the terminus of carriage of goods. There is no reason to give to this word a different meaning in item No. 8 of Scheduled Tax Rules under the Government of India Act of 1915 or in clause (o) of s. 66(1) of the Act. The two sets of taxes in Lists I and 11 have different qualities. The 'terminal tax' under item No. 58 of List I arises at the end of journey by railway wherever the end may be in relation to particular goods' and under item No. 49 of List 11 the tax or cess on entry of goods whatever the nomenclature is imposable when the goods enter a local area for consumption, use or sale therein. The two sets of taxes are so distinct that they may be imposed simultaneously, one when they reach their destination at the end of a railway journey and the other when they enter the limits of a local area for the object above mentioned. But in both cases the activity in regard to the motion of the goods ends, in the one case as the goods are carried no further by railway and in the other as their entry is for consumption, use or sale. Keeping in view the terms and language and the legislative history of the section 66(1) we are unable to enlarge the terms of the section by mere construction so as to include within its operation goods which are in transit and are being transported across the jurisdictional limits of the Municipality. It is a noticeable feature of s. 66(1) that apart from the terminal tax there are 14 other heads of taxation imposable by the Municipality and in the case of each one of these 14 heads the tax is on some activity which takes place within the jurisdictional limits of the Municipality. This supports the contention of the appellant that the terminal tax leviable under cl. (o) properly construed must have reference to some activity within the municipal area i.e., the entry for the purpose of remaining within that area or commencement of journey from that area. We are, therefore, of the opinion that the terminal tax under s. 66(1)(o) is not leviable on goods which are in transit and are only carried across the limits of the Municipality, and would therefore allow this appeal, reverse the decision of the Nagpur High Court. Appeal allowed. Issues Involved:1. Liability of goods in transit for export terminal tax under s. 66(1)(o) of the C.P. & Berar Municipalities Act.2. Refund of export terminal tax collected on goods in transit.Issue-wise Detailed Analysis:1. Liability of Goods in Transit for Export Terminal Tax:The primary issue was whether goods passing through the limits of Wardha Municipality without being unloaded or reloaded are liable for an export terminal tax under s. 66(1)(o) of the C.P. & Berar Municipalities Act. The appellant argued that the terms 'imported into or exported from' should imply the termination or commencement of the journey of the goods, excluding goods merely in transit. The respondent contended that the tax is applicable upon entry or exit of goods within municipal limits, and the term 'terminal' refers to the jurisdictional limits of the municipality.The court examined the dictionary meanings of 'import,' 'export,' and 'transit,' and concluded that goods in transit, which are merely carried across a particular area, cannot be considered as imported into or exported from that area. The court further analyzed various precedents and statutory interpretations, emphasizing that 'terminal tax' should be construed in favor of the taxpayer. The legislative history indicated that terminal tax was intended for goods whose journey ended within or commenced from the municipal limits, not for goods merely passing through.The court held that the terminal tax under s. 66(1)(o) is not applicable to goods in transit, as such goods are neither imported into nor exported from the municipality's limits. This interpretation aligns with the principle that taxing statutes must be strictly construed, and any ambiguity should be resolved in favor of the taxpayer.2. Refund of Export Terminal Tax Collected on Goods in Transit:Given the court's decision that goods in transit are not liable for terminal tax, the appellant was entitled to a refund of the Rs. 240 collected by the Wardha Municipal Committee. The court reversed the decision of the Nagpur High Court, which had previously upheld the imposition of the tax.The court's ruling emphasized that the tax was wrongfully collected, as the goods were merely in transit and did not meet the criteria for being taxed under the relevant statutory provisions. Consequently, the appellant was entitled to recover the amount paid.Conclusion:The court allowed the appeal, determining that the terminal tax under s. 66(1)(o) of the C.P. & Berar Municipalities Act is not applicable to goods merely in transit through municipal limits. The decision of the Nagpur High Court was reversed, and the appellant was awarded costs in both the Supreme Court and the High Court.