Tax on trade by true character, not form, limits municipal levy; refund suit also barred by notice and limitation.

A municipal levy imposed on the manager of a cotton pressing factory was treated as a tax on trade because its true character, not its calculation by bales pressed, determined its constitutional validity; the levy could not be imposed above the prescribed ceiling. The claim for refund of tax paid under protest was barred because the suit was brought long after the cause of action arose, and the levy was made under colour of authority in execution or intended execution of the municipal Act, so the statutory notice and limitation bar applied. The declaration on the ceiling was retained, but refund and injunction relief were set aside.

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Issues: (i) Whether the cotton manufacturing tax levied by the municipality was a tax on trade subject to the constitutional ceiling and therefore not leviable beyond the prescribed maximum; (ii) whether the suit for refund of tax paid under protest was barred by the statutory notice and limitation provision.

Issue (i): Whether the cotton manufacturing tax levied by the municipality was a tax on trade subject to the constitutional ceiling and therefore not leviable beyond the prescribed maximum.

Analysis: The levy was imposed on the manager of the pressing factory in relation to a skilled commercial activity carried on for profit. Its incidence was not altered by the fact that the amount was computed by reference to the number of bales pressed. In determining the nature of the impost, the true character of the tax had to be examined, and not merely its form. On that approach, the levy was in substance a tax on trade and therefore attracted the constitutional ceiling on taxes of that description.

Conclusion: The municipality was not entitled to levy the cotton manufacturing tax above Rs. 250 per annum.

Issue (ii): Whether the suit for refund of tax paid under protest was barred by the statutory notice and limitation provision.

Analysis: The suit for refund was instituted long after the cause of action accrued. The levy had been made under colour of authority and in execution or intended execution of the municipal Act, so the statutory bar applied notwithstanding the contention that the levy was ultra vires. The absence of a timely suit and notice defeated the claim for refund.

Conclusion: The claim for refund was barred.

Final Conclusion: The decree was modified so that the declaration against levy beyond the constitutional ceiling was retained, but the monetary refund relief and the related injunction were set aside.

Ratio Decidendi: A tax imposed on a skilled profit-oriented manufacturing activity is, in substance, a tax on trade, and the legality of the levy must be tested by its true nature rather than its form; a refund suit against a municipality is barred where the impugned levy was made under colour of authority in execution or intended execution of the Act and the statutory limitation period has expired.

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