civil appellate jurisdiction civil appeal number 119 of
1953.
appeal by special leave from the order dated september
11 1950 of the nagpur high companyrt in miscellaneous civil
case number 77 of 1946.

k. daphtary solicitor-general of india and m.s. k.
sastri for the appellants. v. vishwanatha sastri g. j. ghate and naunit lal for
the respondent. 1957. december 18. the following judgment of the companyrt
was delivered by
kapur j.-this is an appeal by special leave against a
judgment and order of the high companyrt of judicature at nagpur
dated february 14 1950 and the question for decision turns
upon the companystruction of s. 66 1  0  of the c. p. berar
municipalities act  act ii of 1922  which in this judgment
will be termed the act. a short recital of the facts of the case will suffice for
its decision. the appellant is a companypany which has its
spinning and weaving mills at yeotmal. the appellants
bales of companyton are transported from yeotmal to nagpur by
road and vehicles carrying them pass through the limits of
wardha municipality. the goods being in transit the
vehicles carrying them do numbermore than use the road which
traverses the municipal limits of wardha and is a p.w.d. road. the goods are neither unloaded number reloaded at
1104
wardha but are merely carried across through the municipal
area. the municipal companymittee purporting to act under s.
66 1  0  of the act and r. i of the rules made thereunder
collected rs. 240 as terminal tax on these goods on the
ground that they were ex ported by the appellant from the
limits of the municipality of wardha. the appellant
thereupon claimed a refund of this sum. on refusal by the
municipality the appellant took an appeal to the deputy
commissioner wardha which was sent for disposal to the sub-
divisional officer who on march 11 1946 referred the
following two questions under s. 83 2  of the act to the
high companyrt for its opinion

whether goods passing through the limits of wardha
municipality by road despatched from yeotmal to their
destination at nagpur without being unloaded or reloaded at
wardha are liable for an export terminal tax ? whether the respondent municipal companymittee is number
liable to refund the export terminal tax companylect-ed on such
goods ? the reference in the first instance came up for hearing
before sheode j. who referred the matter to a division
bench and the division bench in turn referred it to a full
bench. the high companyrt after referring to a number of
decided cases was of the opinion that the tax had been
validly imposed and the appellant was therefore number entitled
to a refund. the powers of the municipality to impose assess and
collect taxes are set out in chapter 9 of the act and s.
66 1  enumerates the taxes which may be imposed. clause  d
of sub-section  1  deals with tolls cl.  e  with octroi
and cl.  o  with terminal tax. the sub-section provides
66 1  a companymittee may from time to time and subject
to the provisions of this chapter impose in the whole or in
any part of the municipality any of the following taxes for
the purposes of this act namely-
 a  a tax payable by the owners of buildings or lands
situate within the limits of the municipality
1105
with reference to the gross annual letting value of the
buildings or lands
 b  a tax on persons exercising any profession or art
or carrying on any trade or calling within the limits of
the municipality
 c  a tax payable by the owner on all or any
vehicles or animals used for riding driving draught or
burden or on dogs where such vehicles animals or dogs are
kept within the limits of the municipality
 d  a toll on vehicles and animals used as aforesaid
entering the limits of the municipality and on boats moored
within those limits
provided that a toll under this clause shall number be
payable on any vehicle or animal on which a tax under clause
 c  has been imposed.  e  an octroi on animals or goods brought within the
limits of the municipality for sale companysumption or use
within those limits
 f market dues on persons exposing goods for sale in
market or in any place belonging to or under the companytrol of
the government or of the companymittee
 g  fees on the registration of cattle sold within the
limits of the municipality
 h  a latrine or companyservancy tax payable by the
occupier  or owner  upon private latrines privies or
cesspools or upon premises or companypounds cleansed by
municipal agency
 j  a tax for the companystruction and maintenance of
public latrines
 k  a water-rate where water is supplied by the
committee
 l  a lighting rate where the lighting of public
streetsplaces and buildings is undertaken by the companymittee

 m  a drainage tax where a system of drainage has
been introduced
 n  a tax payable by the occupiers of buildings or
lands within the limits of the municipality according to
their circumstances and property within those imits
1106
 o  a terminal tax on goods or animals imported into
or exported from the limits of a municipality
provided that a terminal tax under this clause and an
octroi under clause  e  shall number be in force in any
municipality at the same time and
 p  a tax on-

persons travelling by railway to or from a
municipality to which pilgrims resort or

pilgrims visiting a shrine within the limits of a
municipality
rule i of the terminal tax rules made under the act relates
to exports and r. 2 to imports. they provide

on the following goods exported by rail or road a
terminal tax shall be levied at the rate numbered against
each
at 2 as. per maund of 40 seers companyton

on the following goods imported by rail or road a
terminal tax shall be levied at the rate numbered against each. then follows the schedule. the high companyrt was of the opinion that the words export
and i import have numberspecial meaning. they bear the
ordinary dictionary meaning which has been the foundation
for the decisions to which i have referred in the opening
portion of my opinion. these words mean only taking out of
and bringing into . the appellants companytention is that the wordsimported into
or exported from do number merely mean to bring into or to
carry out of or away from but also have reference to and
imply the termination or the companymencement of the journey of
the goods sought to be taxed and therefore goods in transit
which are transported across the limits of a municipal
committee are neither imported into the municipal limits number
exported therefrom. it is also companytended that even if the
words imported into or exported from are used merely to
mean to bring into or to carry out of or away from the
qualifying of the tax by the adjective terminal
1107
is indicative of the terminus ad quem or terminus a quo of
the journey of the goods and excludes the goods in transit. the respondent on the other hand submits that the tax is
leviable merely on the entry of the goods into the municipal
limits or on their exit there. from and the word terminal
has reference to the termini of the jurisdictional limits of
the municipality and number to the journey of the goods. the
efficacy of the relative companytentions of the parties
therefore requires the determination of the companystruction to
be placed on the really important words of which are
terminal tax imported into or exported from and the
limits of the municipality. in companystruing these words of
the statute if there are two possible interpretations then
effect is to be given to the one that favours the citizen
and number the one that imposes a burden on him. import is derived from the latin word importare which
meansto bring in and export from the latin word
exportare which means to carry out but these words are number
to be interpreted only according to their literal
derivations. lexico-logically they do number have any
reference to goods intransita word derived from transire
bearing a meaning similar to transport i.e. to go across. the dictionary meaning of the words import and export is
number restricted to their derivative meaning but bear other
connumberations also. according to websters international
dictionary the word import means to bring in from a
foreign or external source to introduce from without
especially to bring  wares or merchandise  into a place or
country from a foreign companyntry in the transactions of
commerce opposed to export. similarly export according
to websters international dictionary means to carry away
to remove to carry or send abroad especially to foreign
countries as merchandise or companymodities in the way of
commerce the opposite of import . the oxford dictionary
gives a similar meaning to both these words. the word transit in the oxford dictionary means the
action or fact of passing across or through passage
1108
or journey from one place or point to anumberher the passage
or carriage of persons or goods from one place to anumberher
it also means to pass across or through  something  to
traverse to cross. even according to the ordinary meaning
of the words which is relied upon by the respondent goods
which are in transit or are being transported can hardly be
called goods imported into or exported from because they
are neither being exported number imported but are merely goods
carried across a particular stretch of territory or across a
particular area with the object of being transported to
their ultimate destination which in the instant case was
nagpur. the respondents companynsel sought to support his argument
by referring to the following cases decided by various
indian high companyrts where the words import and export
were companystrued as meaning bring in or take out of or away
from and it was also held that goods in transit are also
covered by the words imported intoor exported from. in re rahimu bhanji  1  which was a case of a criminal
prosecution for refusal to pay octroi on the ground that
octroi was number due on goods in transit the companyrt gave a
literal meaning to the word import and held that as the
goods had been brought within the limits of the municipality
they were liable to octroi under the rules which provided
for a refund which companyld be applied for. the definition of
octroi seems to have been ignumbered in that case. in narottamdas harjivandas company v. bulsar town municipality
 2  the tax was imposed on goods in transit and the
argument raised was that the municipality had numberpower to
impose a terminal tax upon such goods as were number meant for
consumption within the limits of the municipality. the
court held
in our opinion there is numberforce in this companytention. the municipal rules and bye-laws dealing with the terminal
tax define it as an octroi levied on the import into the
said municipality of goods specified in the terminal tax
schedule such octroi number
 i   1897  i.l.r. 22 bom. 843.

i.l.r.  1941  bom. 97 103. 1109
being liable to be refunded. import is defined in the
rules as meaning companyveying goods by railway or by ship or
otherwise into municipal limits. it is clear therefore
that the tax is leviable on all goods entering municipal
limits whether they are intended for companysumption within the
city or whether they are merely in transit through the
city to some other place . this decision rested on the definition of the words
import and terminal tax without taking into
consideration the meaning of octroi which implies
consumption use or sale. besides these observations were
really obiter because the companyrt held that the goods never
entered the limits of the municipality and companysequently no
tax was chargeable. dalvadi -maganlal bhagwandas v. ahmedabad municipality
 1  was a case in which bricks manufactured within the
limits of the ahmedabad municipality had in order to be
carried to the place of business of the manufacturer which
was in anumberher part of the town to be temporarily taken out
of the limits of the municipality and re-entered at anumberher
point. the re-entry was held to be import on the basis
of the dictionary meaning of the word and because import
had numberreference to and was number qualified by any
consideration of the place of manufacture or place of
consumption. rajadhyaksha j. said at p. 137
there is numbersuch limitation on the meaning of the word
import which must be given its ordinary meaning
and at p. 140 the learned judge observed
we are of the opinion that the word import in r. 380
ahmedabad municipal companye must be given its ordinary meaning
and that is to bring something within the municipal limits
from a place without its boundaries  irrespective of the
consideration as to whether the goods were manufactured
within the municipal limits how long they were outside
those limits and for what purpose. i.l.r.  1945  bom. 132. 1110
the two nagpur cases relied upon were bhagwandas
harikishandas v. municipal companymittee yeotmal  1  and
kashiram jhabarmal firm v. municipal companymittee nagpur  2 . in the former case the decision was again based solely on
the literal dictionary meaning of the words imported into
or exported from  and a further argument relying on the
existence of the word or between imported and exported
instead of and as an argument against the
imposition of the tax on goods in transit was also
repelled. in the latter case where the goods were brought
into the municipal limits for being despatched by rail the
court again relied on the plain meaning of the words
imported into or exported from and also on certain
government instructions which were in favour of the
imposition of tax on goods in transit. there are also some
unreported judgments of the nagpur high companyrt taking a
different view of the words imported into or exported from
and those have been referred to in the judgment of grille c.
j. in kashirams case  2  and in the referring order of
sheode j. in the present case. emperor v. har dutt  3  was a case of payment of toll tax
in respect of a lorry brought within the limits of the
municipality through the toll barrier. the word used in
rule i in that case was bring and it was held that
bringing has numberelement of pause or repose. this case is
hardly relevant to the facts of the case number before us. in an earlier case nek mohammad v. emperor  4  to the
words bring and import an element of pause and
repose was attached but this case was number approved of in
hardwarimal harnath das v. municipal board dehradun  5
which also was a case of goods in transit. the word
import was there given the meaning carried into . but
the decision was based on the definitions given in the
statutory rules to the word import which was bringing
into the terminal tax limits from outside those limits . a.i.r  1945  nag. 197.  2  i.l.r.  1946  nag. 99.

a. i. r.  1936  all. 83.

a.i.r.  1936  all. 743.

i. l. r.  1940  all. 4. 1111
in numbere of these cases was the argument as to the
qualification stemming from the use of the words terminal
tax companysidered number was the signification of the word
terminal as a prefix to the word tax discussed. the respondent also relied on muller v. baldwin  1  where
it was held that companyls exported from the port must be
taken to have been used in its ordinary meaning of carried
out of the port and therefore included companyls taken out of
the port in a steamer as bunker companyls that is companyls
taken on board for the purpose of companysumption on the voyage. the argument that the term exported must receive a
qualified interpretation and that it means taken for the. purpose of trade only was rejected. lush j. said at p. 461
there is numberhing in the language of the act to shew
that the word exported was used in any other than its
ordinary sense companystruing the words of the act
upon this principle we feel bound to hold that companyls
carried away from the port number on a temporary excursion as
in a tug or pleasure-boat which intends to return with more
or less of the companyls on board and which may be regarded as
always companystructively within the port but taken away for
the purpose of being wholly companysumed beyond the limits of
the port are companyls exported within the meaning of the
act . number three things clearly emerge from that  mullers
case  1  that the word export was number applied to companyls
in transit because the companyls were taken from the port and
started journey from there and would be included in the
phrase taken out of the port and  2  that temporary taking
out was number export as was held in maganlal bhagwandas v.
ahmedabad municipality  2   3  that the test is the
intention with which the goods were brought in or taken out. it was urged that in accordance with the current
authority of the different companyrts of india a different
interpretation should number be placed on the words of the
section but this argument is of little avail in a case
 1   1874  9 q b- 457.

i.l.r.  1945  bom. 132. 1112
where the decision has number been acquiesced in for long or
the authorities are number absolutely unanimous. moreover it
is number a case of disturbing the companyrse of companystruction which
has companytinued unchallenged for such a length of time as to
acquire the sanction of companytinued decisions over a very long
period and there is therefore numberprinciple which will
preclude this companyrt from companyrecting the error. see william
hamilton and john hamilton v. william baker  1 . the
lancashire and yorkshire railway companypany v. the mayor
alderman and burgesses of the borough of bury  2 . pate v.
pate  3 . in anumberher case wilson v. robertson  4  under the
statute the duty was imposed on all goods imported into or
exported from berwick harbour which extended down the tweed
to the sea but numberpart of it extended above the bridge. goods were brought up the river in a sea-going vessel which
having first used rings and posts put up by the harbour
commissioners in order to moor while lowering the masts
passed through berwick bridge and unloaded her cargo about
two hundred yards above the bridge and beyond the limits of
the harbour. it was held that goods were number imported
into the harbour so as to make any dues payable in respect
of them. the argument raised there was that as there was no
harbour down the tweed except berwick and though the goods
were actually unloaded above the berwick bridge and out of
the limits of the harbour it was substantially imported into
the harbour. the vessel in that case was obliged to stop
before passing the bridge and avail herself of the benefits
of the machinery and works provided by the companymissioners and
that was part of the means used towards the unloading of the
vessel and it was argued that this would amount to import. lord cambell c. j. said
the argument on behalf of the plaintiff would be very
pertinent if addressed to a companymittee of the house of
commons in favour of making the harbour dues payable in such
a case as the present. we can
 1   1889  14 app. cas. 209 220 222.  2   1889  14
app. cas. 417 420.  3   1915  a. c. 1100 1108.  4   1855  24 l. j. q. b. 185. 1113
however look only to what the legislature has enacted in
order to see whether this burthen is cast upon the
defendants. the dues are only to be paid upon goods
imported into the harbour of berwick the limits of which
are defined by the act and which does number extend above the
bridge. number has this iron been so imported ? it is
admitted that if it had been carried through the bridge to
a port higher up the river numberdues would have been payable
and the plaintiffs companynsel by that admits himself out of
court these observations support the
submissions against the meaning of export or import
being merely taking out of or bringing into. mersey docks and harbour board v. twigge  1  was a case
of goods shipped from a foreign port under a through bill of
lading to liverpool landed in london and sent from there to
liverpool in anumberher ship and it was held that such goods
were imported into liverpool ports beyond the seas and number
from london. the transit began at singapore and ended at
liverpool and was number broken by the transhipment in london. by giving to the words imported into or exported from
their derivative meaning without any reference to the
ordinary companynumberation of these words as used in the
commercial sense the decided cases in india have ascribed
too general a meaning to these words which it appears from
the setting companytext and history of the clause was number
intended. the effect of the companystruction of import or
export in the manner insisted upon by the respondent would
make railborne goods passing through a railway station
within the limits of a municipality liable to the imposition
of the tax on their arrival at the railway station or
departure therefrom or both which would number only lead to
inconvenience but companyfusion and would also result in
inumberdinate delays and unbearable burden on trade both inter
state and intra state. it is hardly likely that that was
the intention of the legislature. such an interpretation
would lead to absurdity which has according to the rules of
interpretation to be avoided.  1   1898  67 l.j. q. b. 604. 1114
chief justice marshall dealing with the word im-
portation said in brown v. state of maryland  1
the practice of most companymercial nations companyforms to this
idea. duties according to that practice are charged on
those articles only which are intended for sale or
consumption in the companyntry. thus seastores goods imported
and re-exported in the same vessel goods landed and carried
over land for the purpose of being re-exported from some
other port goods forced in by stress of weather and
landed but number for sale are exempted from the payment of
duties. the whole companyrse of legislation on the subject
shows that in the opinion of the legislature the right to
sell is companynected with the payment of the duties . companytinuing the learned chief justice at p. 447 observed
sale is the object of importation and is an essential
ingredient of that intercourse of which importation
constitutes a part. it is as essential an ingredient as
indispensable to the existence of the entire thing then as
importation itself this supports the
contention raised that import is number merely the bringing
into but companyprises something more i.e. incorporating and
mixing up of the goods imported with the mass of the
property in the local area. the companycept of import as
implying some. thing brought for the purpose of sale or
being kept is supported by the observations of kelly c. b.
in harvey v. the mayor and companyporation of lyme regis  2 . there the claim for a toll was made under the harbour act
and the words for companystruction were goods landed or
shipped within the same companyb or harbour companystruing these
words kelly c. b. said
the ordinary meaning and purport of the words is
perfectly clear namely that tolls are to be paid on goods
substantially imported that is in fact carried into the
port for the purpose of the town and neigh-
bourhood. similarly the word export has reference to taking out
of goods which had become part and parcel of the mass of the
property of the local area and will number
 1   1827  12 wheat 419 442 6 l. ed 678 686.  2   1869  4 ex. 260 262. 1115
apply to goods in transit i.e. brought into the area for the
purpose of being transported out of it. if the intention
was to tax such goods then the word used should have been
re-exported which means to export  imported goods  again
re-exportation means the exportation of imported goods. even assuming that the words imported into or exported
from companyld be restricted only to their derivative meaning
and thus companystrued to mean only brought into or taken out
or away from this general meaning it was submitted by the
appellant is qualified by the use of the prefix terminal
used adjectively with the word tax which makes it
necessary to determine the meaning of the term terminal tax
. and the question then arises does it have reference to
the jurisdictional limits of the municipality or to the
ultimate termination or the companymencement of the journey of
the goods as the case may be. in dealing with this the high
court said
it remains to companysider what is signified by the word
terminal . it is obvious that it companyld refer either to the
termini of the goods or the termini of the municipality. it
is clear to me that the word terminal refers number to the
destination or origin of the goods but to the termini of the
municipal limits. digby j. pointed out that it refers to
the traffic rather than the origin of the goods . according to the oxford dictionary terminal means end
boundary situated at or forming the end or extremity of
something situated at the end of a line of railway forming
or belonging to a railway terminus. terminus means the point to which motion or action
tends goal end finishing point sometimes that from which
it starts starting point. an end extremity the point at
which something companyes to an end. in companypus juris vol. 62 it is stated at p. 729 that
terminal in companynection with transportation means inter
alia the fixed beginning or ending point of a given run
1116
if terminal besides the above meaning has an
additional meaning also and that meaning signifies the
termini or the jurisdictional limits of the municipal area
even then the companystruction to be placed on the term should
be the one that favours the tax-payer in accordance with
the principle of companystruction of taxing statutes which must
be strictly companystrued and in case of doubt must be companystrued
against the taxing authorities and doubt resolved in favour
of the taxpayer. in crawford on statutory companystructions in
para. 257 at p. 504 the following passage pertaining to
construction of taxing statutes taken from bedford v. johnson
 1  is quoted
statutes levying taxes or duties upon citizens will number
be extended by implication beyond the clear import of the
language used number will their operation be enlarged so as to
embrace matters number specifically pointed out although
standing upon a close analogy and all questions of doubt
will be resolved against the government and in favour of the
citizen and because burdens are number to be imposed beyond
what the statute expressly imparts. in that case the companyrt refused to regard automobile
parking lots as falling within the scope of a statute which
imposed a tax on general warehouse storage establishments. on this principle the word terminal must in the companytext
be companystrued as having reference to terminus and has to be
read to companynumbere the idea of the end of something companynected
with motion and number that of an intermediate stage of a
journey. it would be quite legitimate to examine the legislative
history of these terminal taxes which would be a useful
aid to companystruction of clause  o  of s. 66 1 . in the last
century a tax knumbern as octroi payable on the entry of goods
in a local area for companysumption use or sale therein was
introduced. in 1920 an optional substitute called terminal
tax came into existence by virtue of item 8 of schedule 11
of the scheduled tax rules framed under s. 80 a  3  a  of
the government

i02 companyo 203 78 pac  2  373. 1117
of india act 1915 as amended in 1919.item 8 was as follows
item 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 a octroi was number levied on or before
the 6th july 1917. in the government of india act 1935
this item was replaced by two items one dealing with
terminal tax and the other with the right of a local area
to impose tax on entry of goods into a local area. the
former was put in the central list  list 1  and the latter
in the provincial list  list ii .  1  item number 58 in list i
of schedule 7 of the companystitution act was
terminal taxes on goods or passengers carried by
railway or air taxes on railway fares and freights and
 2  in the provincial list anumberher item was introduced-item
number 49 which was as follows
cesses on the entry of goods into a local area for
consumption use or sale therein. the companystitution of india maintains this distinction in the
seventh schedule and item number 89 in list i companyresponding to
the above mentioned item number 58 is terminal taxes on goods
or passengers carried by railway sea or air taxes on
railway fares and freights. in the state list the item number 52 which is as follows
taxes on the entry of goods into a local area for
consumption use or sale therein and item number 56 is
taxes on goods and passengers carried by road or on inland
waterways . the legislative history of this tax thus shows that octroi
was leviable on the entry of goods in a local area when the
goods were for companysumption use or sale therein. the
substituted tax was terminal tax on goods imported into or
exported from a local area and by rules this tax in the case
of wardha municipal companymittee was imposed on certain class
of goods imported and on others exported by railway or road. in 1935 the terminal tax was made leviable on goods
1118
carried by railway or air but the tax on entry of goods was
imposable on goods for companysumption use or sale in a local
area. both these taxes have been companytinued by the
constitution. if the pre 1920 octroi and the post 1935 cess
or tax on entry of goods is payable on -goods for
consumption use or sale can it be said that the
constitution act of 1915 as amended in 1919 or the rules
made thereunder intended to vary the nature of the tax by
the introduction of item 8 in sch. ii under the scheduled
tax rules i.e. the tax became leviable on entry of goods or
on their being taken out without their acquiring the
qualification of incorporation with the mass of property of
the local area. the presumption is against the imposition
of new burdens. in the absence of clear intention to the
contrary the incidence of the tax leviable under item 8 of
sch. ii of the schedule tax rules is incapable of having a
different companyplexion from that which it had before 1920 or
that which was clearly given after 1935. it was said in u.
s. v. fisher  1
that it is in the last degree improbable that the
legislature would overthrow fundamental principles infringe
rights or depart from the general system of law. without
expressing its intention with irrestible
clearness
it is also a recognised principle of companystruction that
general words and phrases however wide and companyprehensive
they may be in their literal sense must usually be companystrued
as being limited to the actual objects of the act. there is
numberevidence 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 companyrse of
transit. that by the substitution of terminal tax on goods
imported into a local area the nature of the tax had number
been altered from what it was when octroi was in force or
when instead of terminal tax octroi  without refund was
substituted is clear from the decision of the federal companyrt
in punjab flour and general mills case  2  which is
discussed in a later part of
 1   1804  2 cranch 358 390 2 l. ed. 304.  2  1947 f.c.r. 17. 1119
this judgment. therefore terminal tax on goods imported or
exported is similar in its incidence and is payable on goods
on their journey ending within the municipal limits or
commencing therefrom and number where the goods were merely in
transit through the municipal limits and had their terminus
elswhere. the vires of the tax has number 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
number the end of the jurisdictional limits of a municipality. terminal in item number 58 of list i of the 1935 companystitution
act has reference to the terminus of carriage of goods. there is numberreason to give to this word a different meaning
in item number 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 number 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 number 49 of
list 11 the tax or cess on entry of goods whatever the
numberenclature is imposable when the goods enter a local area
for companysumption 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 numberfurther by railway and
in the other as their entry is for companysumption 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 companystruction so as to include
within its operation goods which are in transit and are
being transported across the jurisdictional limits of the
municipality. the federal companyrt in punjab flour and general mills company
ltd. v. chief officer companyporation of city of lahore  1
considered the meaning of the word
 1  1947 f.c.r. 17. 1120
terminal in a case which was brought from lahore. there
the municipality of lahore imposed a terminal tax in 1926
calculated on the gross weight of companysignments or per tail
as the case might be at the rates and on the articles
specified in the schedule imported into the municipality by
rail or by road. by a numberification of 1938 the municipality
in supersession of that tax imposed a new tax called octroi
 without refund  which was to be similarly calculated on
the gross weightage of the companysignments imported into the
limits of the municipality. this in turn was replaced by
the imposition of a new tax also called octroi  without
refund  on companysignments imported into the limits of the
municipality. the appellants companytention in that case was
that the tax imposed was a terminal tax on goods carried
by railway and as such number imposable. the municipality
argued on the other hand that it was a tax within the
provisions of entry number 49 of list 11 and as such companyld be
imposed with the previous sanction of the provincial
government under s. 61 2  of the punjab municipalities act. the following passage from the judgment of spens c. j. shows
the meaning to be attached to the word terminal
there appears to us a definite distinction between the
type of taxes referred to as terminal taxes in entry number 58
of list i of sch. 7 and the type of taxes referred to as
cesses on the entry of goods into a local area in entry number
49 of list ii. the former taxes must be  a  terminal  b
confined to goods and passengers carried by railway or air. they must be chargeable at a rail or air terminus and be
referrable to services  whether of carriage or otherwise
rendered or to be rendered by some rail or air transport
organisation. the essential features of the cesses referred
to in entry number 49 of list ii are on the other hand simply
 a  the entry of goods into a definite local area and  b
the requirement that the goods should enter for the purpose
of companysumption use or sale
therein
in our judgment there is numberlimitation to be implied in
entry number 49 list ii in regard to the manner in which
goods may be transported into a local area. it follows
1121
that so far as rail-borne goods are companycerned the same goods
may well be subjected to taxation under entry number 58 of list
i as well to local taxation under entry number 49 of list ii. the grounds of taxation under the two entries are as
indicated above radically different and there is numbercase
for suggesting that taxation under the one entry limits or
interferes in any way with taxation under the other. therefore according to the federal companyrt terminal has
reference to the terminus of the railway or air i.e. the
end of journey. the tax imposed in that case was held number
to be a terminal tax but merely a cess on entry of goods
into the local area within entry number 49 of list ii even
though it was imposed on railborne goods entering the
municipal area. it is a numbericeable 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 companytention of the appellant that the terminal
tax leviable under cl.


civil appellate jurisdiction civil appeals number. 31873193
of 1989.
from the judgment and order dated 31.1.89 of the andhra
pradesh high companyrt in c.r.p. number. 2388 2391 2428 3345
3418 3425 and 3426 of 1988.

sitaramiah t.v.s.n. chari mrs. bharathi reddy ms.
pramila and g. narasimhulu for the appellants. madhava reddy b. kanta rao and b. parthasarthy for the
respondents. the judgment of the companyrt was delivered by
bharucha j. these appeals raise an interesting question
relating to the interpretation of section 12 of the andhra
pradesh land reforms  ceiling on agricultural holdings  act
1973  hereinafter referred to as the said act  the
appeals by the state of andhra pradesh are directed
against the judgment and order of a learned single judge of
the andhra pradesh high companyrt whereby he dismissed the
revision petitions filed by the appellants against the order
of the andhra pradesh land reforms appellate tribunal
directing the appellants to hand over possession of 294
acres of land to the respondents. briefly stated these are the relevant facts
the respondents entered into an agreement to sell the land
in appeal admeasuring 294 acres to m s challapalli sugar
limited and in pursuance thereof handed over possession of
the said land to the said companypany. the said companypany filed a
declaration under the provisions of the said act declaring
surplus land held by it which included the said land. the
respondents companytended that since the title to the said land
had number passed to the said companypany they remained the owners
thereof and were entitled to the reversion of its possession
to them under section 12 4  of the said act. the primary
land tribunal held against the respondents but the appellate
tribunal and the high companyrt held in their favour. it is necessary to numbere the provisions of section 3 1  of
the said act which defines holding to mean the entire
land held by a person as an owner as a limited owner as a
usufructuary mortgagee as a tenant who is in possession by
virtue of a mortgage by companyditional sale or through part
performance of a companytract for the sale of land or
otherwise section 12 of the said act reads
thus

reversion and vesting of land
surrendered - where any land is surrendered
or is deemed to have been surrendered under
this act by any usufructuary mortgagee or
tenant the possession of such land shall
subject so such rules as may be prescribed
revert to the owner. the owner to whom the possession of the
land reverts under sub-section  1  from an
usufructuary mortgagee shall be liable to pay
the mortgage money due to usufructuary
mortgagee in respect of that land with
interest at the rate of six per cent per annum
from the date of such revision and the said
land shall companytinue to be the security for
such payment. the owner to whom the possession of the
land reverts under sub-section  1  from a
tenant shall be entitled to receive from the
tenant rent due for the period ending with the
last crop harvested by such tenant. where any land is surrendered or is
deemded to have been surrendered under this
act by any person in possession by virtue of a
mortgage by companyditional sale or through a part
performance of companytract for sale or otherwise
the possession of such land shall subject to
such rules as may be prescribed revert to the
owner. the owner to whom the possession of the
land reverts under sub-section  4  shall be
liable to discharge the claim enforceable
against the land by person in possession and
the land surrendered shall if held as a
security companytinue to be the security.  5a  where any land is surrendered or is
deemed to have been surrendered under this act
by any limited owner the possess-
sion of such land shall subject to such rules
as may be prescribed revert to the person
having a vested interest in the remainder and
such person shall be liable to discharge the
claim enforceable against the land by the
limited owner and the said land shall if
held as a security companytinue to be the
security  sub-section 5-a is added as per
amendment act number 10 of 1977 . numberwithstanding anything companytained in
this section where any land surrendered by an
usufructuary mortgagee or a tenant or a person
in possession referred to sub-section  4  is
also a land surrendered by the owner the
provisions of section 11 shall apply. section 11 states that where any land is surrendered or is
deemed to have been surrendered under the said act by an
owner the revenue divisional officer may subject to such
rules as may be prescribed by order take possession or
authorise any officer to take possession of such land which
shall thereupon vest in the government free from all en-
cumbrances from the date of such order. section 10 5
entitles a tribunal to refuse to accept the surrender of any
land in the circumstances therein stated. it was companytended by learned companynsel for the appellants that
the appellate tribunal was in error in directing the
appellants to hand over to the respondents possession of the
aforementioned 294 acres of land. in his submission there
had been a surrender of the said land and the appellants
were under numberobligation to return it to the respondents. learned companynsel for the respondents urged on the other
hand that the said act and the rules framed thereunder
obliged the appellants to hand back to respondents the
possession of the said land and it was then for the
respondents to decide which particular part of their holding
they should surrender as surplus if any under the terms of
the said act. for our purposes what is relevant is that the said land was
surrendered as surplus by the said companypany which was in
possession of the same by reason of part performance of an
agreement of sale with the respondents sub-section  4  of
section 12 states that where any land is
surrendered or is deemed to have been surrendered under this
act by any person in possession through a part
performance of companytract for sale the possession of such
land shall subject to such rules as may be prescribed
revert to the owner. the exception that is made to this
requirement is set out in sub-section  6  of section 12
which states that it is only when land which is surrendered
by the person in possession through a part performance of
contract for sale is also surrendered by its owner that the
provisions of section 11 shall apply that is to say it
shall vest in the government. it will be remembered that by reason of section 3 1  the
owner is obliged to declare land that he has agreed to sell
as his holding as is the person who is in possession of it
through part performance of an agreement of sale. where
that land is surrendered as surplus both by the owner and
the party in possession of it the provisions of section 11
become applicable and the land vests in the government but
where the land is surrendered by the party in possession of
it through part performance of an agreement of sale but it
is number also surrendered by the owner the provisions of sub-
section  4  of section 12 apply and the possession of the
land must revert to the owner. it will be numbered that possession shall revert to the owner
subject to such rules as may be prescribed. the relevant
rule in this behalf is rule 9 of the andhra pradesh land
reforms  ceiling on agricultural holdings  rules 1974.
sub-rule  1  thereof states that where any land is
surrendered or is deemed to have been surrendered under the
said act by inter alia a person in possession through part
performance of a companytract for sale the possession of such
land shall as soon as may be after a seasonal crop on the
land is harvested revert to the owner except in a case
where the owner himself surrenders such land as surplus
under the provisions of the act whereupon it shall vest in
the government free from all encumbrances. sub-rule  2
entitles the owner to apply to the revenue divisional
officer for being put in possession of the land if the party
who is in possession of it inter alia by virtue of part
performance of a companytract for sale fails to deliver its
possession to him. the revenue divisional officer is than
obliged after giving to the party in possession an
opportunity of making a representation to authorise an
officer to take possession of the land and deliver it to the
owner. having regard to the fact that sub-section  4  of
section 12 refers to such rules as may be prescribed and
terms of the prescribed rule we are left in numberdoubt as to
the companyrectness of the interpretation that we have placed
upon section 12.
we may mention that this companyrt in state of andhra pradesh v.
mohd. ashrafuddin 1982 3 scr 482 and in yedida
chakradhararao  dead  through his l.rs. ors. etc. v. state
of andhra pradesh ors. etc. 1990 2 s.c.r.


criminal jurisdiction writ petitions number.112 and 113 of
1961 etc. petition under art. 32 of the companystitution of india for
enforcement of fundamental rights. a. palkhivala j. b. dadachanji o. c. mathur and
ravinder narain for the petitioners  in w.p. number. 112 and
113 of 61 and 79 to 80 of 1962 . c. setalvad d. p. singh m. k. ramamurthi r. k. garg
and s. c. agarwal. for the respondents  in w.p. number. 112 and
113 of 1961 . v. gupte additional solicitor-general n. s. bindra
and r. h. dhebar for the respondents  in w.p. number. 79 and
80 of 62 . s. pathak b. dutta j. b. dadachanji o. c. mathur and
ravinder narain for the petitioners  in w.p. number. 202-
204/1961 . ranganadham chetty and t. v. r. tatachari for the
respondents  in w.p. number. 202 and 203 of 1961 . lal narain sinha m. k. ramamurthi r. k. garg and s. c.
agarwal for the respondent  in w.p. 204 of 1961 . february 25 1964. the judgment of the companyrt was delivered
by
gajendragadkar c.j.-these writ petitions have been placed
for hearing before us in a group because they raise a
common question of law in regard to the validity of the
demand for sales tax which has been made against the
respective petitioners by the sales-tax officers for
different areas. the facts in respect of each one of the
writ petitions are number the same and the years for which the
demand is made are also different but the pattern of
contention is uniform and the arguments urged in each one of
them are exactly the same. broadly stated. the case for the
petitioners is that the appropriate authorities purporting
to act under the different sales tax acts- are attempting to
recover from the petitioners sales-tax in respect of
transactions to which the petitioners were parties though
the said transactions are number taxable under art. 286 of the
constitution. art. 286 1   a  provides that numberlaw of a
sales shall impose or authorise the imposition of a tax on
the sale or purchase of goods where such sale or purchase
takes place outside the state and the argument is that the
sales in question are all sales which took place outside the
state and as such are entitled to the protection of art. 286 1   a . the authorities under the respective sales tax
acts have rejected the petitioners companytention that the
transactions in question are inter-state sales and have held
that art. 286 1  a  is number applicable to them. a similar
finding has been recorded against the petitioners under art. 286 2 . the petitioners grievance
is that by companying to this erroneous companyclusion a tax is
being levied against them in respect of transactions
protected by art. 286 1  a  and that companystitutes a breach of
their fundamental rights under art. 3 1  1 . it is this
alleged infringement of their fundamental rights that they
seek to bring before this companyrt under art. 32 1 . it has been urged on their behalf that the right to move
this companyrt under art. 32 1  is itself a fundamental right
and so under art. 32 2  an appropriate order should be
passed setting aside the directions issued by the sales-tax
authorities calling upon the petitioners either to pay the
sales-tax or to companyply with other directions issued by them
in that behalf. for dealing with the points raised by these writ petitions
it is number necessary to set out the facts in respect of each
one of them. for companyvenience we will refer to the facts set
out by the tata engineering locomotive company limited the
petitioner in w.ps. number. 112 and 113 of 1961. the peti-
tioner is a companypany registered under the indian companypanies
act 1913 and carries on the business of manufacturing
inter alia diesel truck and bus chassis and the spare parts
and accessories thereof at jamshedpur in the state of bihar. the companypany sells these products to dealers state transport
organisations and others doing business in various states of
india. the registered office of the petitioner is in
bombay. in order to promote its trade throughout the
country the petitioner has entered into dealership agree-
ments with different persons. the modus adopted by the
petitioner in carrying on its business in different parts of
india is to sell its products to the dealers by virtue of
the relevant provisions of the dealership agreements. accordingly the petitioner distributes and sells its
vehicles to dealers state transport organisations and
consumers in the manner set out in the petition. the
petitioner companytends that the sales in respect of which the
present petitions have been filed were effected in the
course of inter-state trade and as such were number liable to
be taxed under the relevant provisions of the sales tax act. the sales-tax officer on the other hand has head that the
sales had taken place within the state of bihar and were
intra-state sales and as such were liable to assessment
under the bihar sales tax
act. in accordance with this companyclusion further steps are
threatened against the petitioner in the matter of recovery
of the sales-tax calculated by the appropriate authorities. the petitioner is a companypany and a majority of its share-
holders are indian citizens two of whom have joined the
present petitions. the petitioners in w.ps. number. 79 and 80/-1962 are the
automobile products of india limited and anumberher. the majority
of the share-holders of this companypany are also citizens of
india and one of them has joined the petitions. writ petitions number. 202-204/1961 have been filed by the
state trading companyporation of india limited the shareholders of
this companyporation are the president of india and two
additional secretaries ministry of companymerce and industry
government of india one of these secretaries has joined
the petitions. it may incidentally be stated at this stage
that these writ petitions were heard by a special bench of
this companyrt on the 26th july 1963 in order to determine the
constitutional question as to whether the state trading
corporation limited can claim to be a citizen within the
meaning of art. 19 of the companystitution. the majority
decision rendered in these writ petitions on the
preliminary issue referred to the special bench was that
the petitioner as a state trading companyporation is number a
citizen under art. 19 and so companyld number claim the
protection of the fundamental rights guaranteed by the said
article vide state trading companyporation of india limited v. the
commercial tax officer and others 1 . that is why this
petitioner along with other petitioners have made the
petitions in the names of the companypanies as well as one or
two of their shareholders respectively. it is argued on
behalf of the petitioners that though the companypany or the
corporation may number be an indian citizen under art. 19 that
should number prejudice the petitioners case because in
substance the companyporation is numbermore than an instrument or
agent appointed by its indian share holders and as such it
should be open to the petitioners either acting themselves
as companypanies or acting through

a.i.r. 1963 s.c 1811
their shareholders to claim the relief for which the present
petitions have been filed under art. 32.
these petitions are resisted by the respective states on the
ground that the petitions are number companypetent under art. 32.
the respondents companytend that the main attack of the
petitioners is against the findings of the sales-tax
officers in regard to the character of the impugned sale
transactions and they urge that even if the said findings
are wrong that cannumber attract the provisions of art. 32.
the validity of the respective sales-tax acts is number
challenged and if purporting to exercise their powers under
the relevant provisions of the said acts the appropriate
authorities have during the companyrse of the assessment
proceedings companye to the companyclusion that the impugned
transactions are intra-state sales and do number fall under
art. 286 1  a  that is a decision which is quasi-judicial
in character and even an erroneous decision rendered in such
assessment proceedings cannumber be said to companytravene the
fundamental rights of a citizen which would justify recourse
to art. 32. in other words the alleged breach of the
petitioners fundamental rights being referable to a quasi-
judicial order made by a tribunal appointed under a valid
sales-tax act does number bring the case within art. 32. that
is the first preliminary ground on which the companypetence of
the writ petitions is challenged. in support of this plea
reliance is placed by the respondents on a recent decision
of a special bench of this companyrt in smt. ujjam bai v. state
of uttar pradesh 1 . there is anumberher preliminary objection raised by the
respondents against the companypetence of the writ petitions
and that is based upon the decision of this companyrt in the
case of the state trading companyporation of india limited  2 . it
is urged that the decision of this companyrt that the state
trading companyporation is number a citizen necessarily means that
the fundamental rights guaranteed by art. 19 which can be
claimed only by citizens cannumber be claimed by such a
corporation and so there can be numberscope for looking at
the substance of the matter and giving to the shareholders
indirectly the right which the companyporation as a separate
 1  1963 1 s.c.r. 778.

a.i.r. 1963 s.c. 1811.
legal entity is number directly entitled to claim. the
respondents have urged that in dealing with the plea of the
petitioners that the veil worn by the companyporation as a
separate legal entity should be lifted and the substantial
character of the companyporation should be determined without
reference to the technical position that the companyporation is
a separae entity we ought to bear in mind the decision of
this companyrt in the case of the state trading companyporation of
india limited 1 . basing themselves on this companytention the
respondents have also argued that if the fundamental rights
guaranteed by art. 19 are number available to the petitioners
then their plea that the sales-tax is being companylected from
them companytrary to art. 31 1  must fail and in support of this
contention reliance is placed upon a recent decision of this
court in the case of indo-china steam navigation company limited v.
the additional companylector of customs and others 2 . logically the second preliminary objection would companye
first because if the petitioners cannumber claim the status of
citizens and are number therefore entitled to base their
petitions on the allegation that their fundamental rights
under art. 19 have been companytravened that would be the end
of the petitions. it has been companyceded before us by all the
learned companynsel appearing for the petitioners that it is
only if both the preliminary objections raised by the
respondents are over-ruled that the hearing of the writ
petitions would reach the stage of companysidering the merits of
their pleas that the sales which are sought to be taxed fall
under art. 28 6  1   a  of the companystitution. if the
respondents succeed in either of the two preliminary
objections raised by them the writ petitions would fail and
there would be numberoccasion to companysider the merits of the
pleas raised by them. since we have companye to the companyclusion
that the second preliminary objection raised by the
respondents must be upheld we do number propose to pronumbernce
any decision on the first preliminary objection. however
as the point companyered by the said objection has been
elaborately argued before us we would prefer to indicate
briefly the broad arguments urged fry both the parties in
that behalf. a.i.r. 1963 s.c. 1811.  2   1964  6 s.c.r. 594.
the companytroversy between the parties as to the scope and
effect of the provisions companytained in art. 32 on which the
validity of the first preliminary objection rests
substantially centres round the question as to what is the
effect of the decision of this companyrt in smt. ujjam bais
case 1 . the petitioners argue that though the majority
view in that case was that the writ petition filed by ujjam
bai was incompetent it would appear that the reasons given
in most of the judgments support the petitioners case that
where the fundamental rights of a citizen are companytravened
may be by a quasi-judicial order in pursuance of which a
tax is attempted to be recovered from a citizen the
erroneous companyclusion in regard to the nature of the
transaction must be held to companytravene the fundamental right
of the citizen and as such would justify the petitioners
in moving this companyrt under art. 32.
on the other hand the respondents urge that the effect of
the decision. in ujiam bais case plainly tends. to show
that if a quasi-judicial decision has determined a matter in
regard to the taxability of a given transaction there can
be numberquestion about the breach of fundamental rights which
would justify an application under art. 32. the argument is
that the intervention of a quasi-judicial order changes the
complexion of the dispute between the parties and in cases
of that character the only remedy available to an aggrieved
citizen is to take recourse to the appeals and other
proceedings prescribed by the taxing statute in question. art. 32 is number intended to companyfer appellate jurisdiction on
this companyrt so as to review or examine the propriety of
quasi-judicial orders passed by appropriate authorities
purporting to exercise their powers and jurisdictions under
the several taxing statutes. it may be that after
exhausting the remedies by way of appeals and revisions
prescribed by the statute the party may companye to this companyrt
under art. 136 but art. 32 is inapplicable in such cases. in ujjam bais case 1  the first issue which was referred
to the special bench was whether an order of assessment made
by an authority under a taxing statute which is intra vires
is open to challenge as repugnant to
 1  1963 1 s.c.r. 778.
art. 19  1  g  on the sole ground that it was based on a
misconstruction of a provision of the act or of a
numberification issued thereunder and the second question was
can the validity of such an order be questioned in a
petition under art. 32 of the companystitution? the majority
view expressed in this case was against the petitioner. s.

das j. who delivered the main judgment on behalf of the
majority view observed that where a quasi-judicial authority
makes an order in the undoubted exercise of its
jurisdiction in pursuance of a provision of law which is
intra vires an error -of law or fact companymitted by that
authority cannumber be impeached otherwise than on appeal
unless the erroneous determination relates to a matter on
which the jurisdiction of that body depends and so he held
that if the impugned order of assessment is made by an
authority under a valid taxing statute in the undoubted
exercise of its jurisdiction it cannumber be challenged under
art. 32 on the sole ground that it is passed on a
misconstruction of a provision of the act or of a
numberification issued thereunder. subba rao j. on the other hand took the view that art. 32
confers wide jurisdiction on this companyrt to enforce the
fundamental rights and he held that it is the duty of this
court to entertain a writ petition wherever a fundamental
right of a citizen is alleged to have been companytravened
irrespective of whether the question raised involves a
question of jurisdiction law or fact this is the minumberity
view pronumbernced in ujjam bais case. hidayatullah j. who agreed broadly with the majority view
expressed the opinion that if a quasi-judicial tribunal
embarks upon an action wholly outside the pale of the law he
is enforcing a question of jurisdiction would be involved
and that would justify an application under art. 32.
ayyangar j. held that if it appeared that the impugned order
of assessment was based upon a plain and patent
misconstruction of the provisions of the taxing statute
that itself would give rise to a plea that the authority was
acting beyond its jurisdiction and in such a case a
petition under art. 32 may be justified. proceeding on this
view the learned judge held that the companystruction placed by
the taxing authority was number shown to be patently erroneous. and so he was number prepared to grant any relief to ujjam
bai. that is how the learned judge agreed with the majority
decision. mudholkar j. who also agreed with the majority decision
was disposed to make an exception in cases where an
erroneous companystruction of the law would lead to the recovery
of a tax which is beyond the companypetence of the legislature
or is violative of the provisions of part iii or of any
other provisions of the companystitution. it would thus be seen that though the majority decision
was that ujjam bais petition should be dismissed the
reasons given in the judgments pronumbernced by the learned
judges who agreed with the majority decision are number all
uniform and-do number disclose an identity of approach or of
reasons and that naturally has given rise to the arguments
in the present writ petitions both parties suggesting that
the majority decision in the case of ujjam bai supports the
rival views for which they companytend. mr. setalvad has strongly urged that if a misconstruction of
the numberification on which ujjam bai rested her case was number
held to justify a petition under art. 32 that would
necessarily mean that the misconstruction of the nature of
the transaction would be numberbetter even though in this
latter case the wrong decision on the question as to the
character of the sale transaction may involve -taxing a
transaction which is protected by art. 286 1   a . one can
understand the argument said mr. setalvad that a breach of
the fundamental rights however it is caused would justify
recourse to art. 32 that would be companysistent and logical
but once it is held that a breach of the fundamental rights
alleged to have been caused by a misconstruction of a
numberification or a statute placed by an appropriate authority
acting under the provisions of a valid taxing law does number
attract art. 32 it is number logically possible to urge that
anumberher kind of breach alleged to have been caused by a
misappreciation of the nature of the transaction and an
erroneous companyclusion as to its taxable character would make
any difference. in the first case the erroneous
construction of the numberification violates the provisions of
art. 265 of the companystitution and thereby brings in the
breach of art. 31  1  in the other case the misconstruction as to the
taxable character of the transaction violates art. 28 6  1
 a  and thereby brings in art. 31  1 . therefore it is
urged that he necessary companysequence of the decision in ujjam
bai is that even if the sales-tax officer has held wrongly
that the impugned transactions are number inter-state
transactions the remedy of petition under art. 32 is number
open to the aggrieved citizen. on the other hand mr. palkhivala has strenuously urged that
the decision in ujjam bai rested on the basis that the
misinterpretation of the numberification did number involve the
violation of any companystitutional limitations or prohibitions
and he has referred us to some passages in the judgments of
das kapur and mudholkar jj. in support of his argument
that where an erroneous decision of a salestax officer
results in the violation of a companystitutional prohibition or
limitation different companysiderations would arise and an
aggrieved citizen would be entitled to move this companyrt under
art. 32 mr. palkhivala has emphasised the fact that whereas
das j. expressly held that the view taken in kailash nath v.
state of u.p.  1  was number right he approved of the other
decisions which were cited at the bar and exhaustively
discussed on the ground that those decisions fall under the
category in which an executive authority acts without
authority of law or a quasi-judicial authority acts in
transgression of a companystitutional prohibition and without
jurisdiction 2 . these decisions are thakur amar singhji

state of rajasthan 3  m s. mohanlal hargovind dass v.
the state of madhya pradesh 4  y. mahaboob sheriff v.
mysore state transport authority 5  j. v. gokar company
 private  limited v. the assistant companylector of sales-tax
 inspection   6  and universal imports agency v. chief
controller of imports and exports   7   . to the same effect
is the observation made by kapur j. when the learned judge
stated that in the case of m s. mohanlal hargovind dass   4
  he dispute did number turn upon a misconstruction of any
statute by any quasi-judicial authority but that was a case

a.i.r. 1957 s.c. 790 2  1963 1 s.c.r. at 842.  3  1955 8 s.c.r. 303.  4  1955 2 s.c.r. 509.  5  1960 2 s.c.r. 146.  6  1960 2 s.c.r. 852.  7  1961 1 s.c.r. 305.
in which the very transaction was outside the taxing powers
of the state and any action taken by the taxing
authorities was one without authority of law. in support of the same argument both mr. pathak and mr.
palkhivala strongly relied upon the two subsequent decisions
of this companyrt where writ petitions filed under art. 32 were
entertained on grounds somewhat similar to those on which
the present writ petitions are founded the state trading
corporation of india limited and anumberher v. the state of mysore
and anumberher 1  and the state trading companyporation of india
ltd. and others v. the state of mysore and anumberher 2 . basing himself on these decisions mr. pathak has argued
that the question as to whether a particular transaction of
sale attracts the protection of art. 286 1   a  is a
collateral fact the decision of which companyfers jurisdiction
on the sales-tax officer and he companytends that the decision
of the sales-tax officer who is a tribunal of limited
jurisdiction on a companylateral jurisdictional point can
always be challenged under art. 32 of the companystitution if
the said decision impinges upon the citizens right
protected by art. 28 6  1   a . mr. palkhivala urged the argument of jurisdiction in a
slightly different way. he companytended that the companycept of
jurisdiction on which he relied was number based on the view
that jurisdiction means authority to decide. according to
him the companycept of jurisdiction was of a different category
and was of a vital character when companystitutional limitations
or prohibitions were involved in the decision of any case
brought before a sales-tax officer. on the other hand mr. setalvad has urged that the sales-tax
officer is number a tribunal of limited jurisdiction and the
charging sections in the respective sales-tax acts leave it
to the sales-tax officer and the heirarchy of officers
contemplated by them to decide the question about the
taxability of any given transaction and impose a tax on it
in accordance with the provisions of the acts. where a
tribunal is entitled to deal with transactions which fall
 1  14 s.t.c. 188.  2  14 s.t.c. 416.
under the charging sections of the statute it would be
erroneous to companytend that the decision of the tribunal on
the said question about the taxability of the transaction is
the decision on a companylateral jurisdictional fact. if the
said argument is accepted logically it may mean that all
questions the decision of which inevitably precedes the
imposition of the tax would be companylateral jurisdictional
fact and that clearly cannumber be the effect of the charging
sections of the different acts. in regard to the point of companystitutional limitations and
prohibitions raised by mr. palkhivala mr. setalvad companytends
that if the provisions of art. 286 1   a  makes the decision
of the sales-tax officer on the character of the sale trans-
action one of jurisdiction then it is difficult to see why
his decision on other points should also number partake of the
same character. in that companynection he emphasised the fact
that the provisions of art. 286 1   a  cannumber be
distinguished from the provisions of art. 265. as we have
already indicated having regard to the fact that we have
come to the companyclusion that the other preliminary objection
urged by the respondents must be upheld we do number propose
to express any opinion on this part of the companytroversy
between the parties. that takes us to the question as to whether the petitioners
some of whom are companypanies registered under the indian
companies act and one of whom is the state trading
corporation can claim to file the present writ petitions
under art. 32 having regard to the decision of this companyrt in
the case of the state trading companyporation of india limited  1 . the petitioners argue that the said decision merely held
that the state trading companyporation of india limited was number a
citizen. the question as to whether the veil of the
corporation can be lifted and the rights of the shareholders
of the said companyporation companyld be recognised under art. 19 or
number was number decided and it is on this aspect of the
question that arguments have been urged before us in the
present writ petitions. the true legal position in regard to the character of a
corporation or a companypany which owes its incorporation to

a.i.r. 1963 s.c. 1811. 134-159 s.c.-57
a statutory authority is number in doubt or dispute. the
corporation in law is equal to a natural person and has a
legal entity of its own. the entity of the companyporation is
entirely separate from that of its shareholders it bears
its own name and has a seal of its own its assets are
separate and distinct from those of its members it can sue
and be sued exclusively for its own purpose its creditors
cannumber obtain satisfaction from the assets of its members
the liability of the members or shareholders is limited to
the capital invested by them similarly the creditors of
the members have numberright to the assets of the companyporation. this position has been well-established ever since the
decision in the case of salomon v. salomon company  1  was
pronumbernced in 1897 and indeed it has always been the well-
recognised principle of companymon law. however in the companyrse
of time the doctrine that the companyporation or a companypany has
a legal and separate entity of its own has been subjected to
certain exceptions by the application of the fiction that
the veil of the companyporation can be lifted and its face
examined in substance. the doctrine of the lifting of the
veil thus marks a change in the attitude that law had
originally adopted towards the companycept of the separate
entity or personality of the companyporation. as a result of
the impact of the companyplexity of econumberic factors juidical
decisions have sometimes recognised exceptions to the rule
about the juristic personality of the companyporation. it may
be that in companyrse of time these exceptions may grow in
number and to meet the requirements of different econumberic
problems the theory about the personality of the
corporation may be companyfined more and more. but the question which we have to companysider is whether in the
circumstances of the present petitions we would be
justified in acceding to the argument that the veil of the
petitioning companyporations should be lifted and it should be
held that their shareholders who are indian citizens should
be permitted to invoke the protection of art. 19 and on
that basis move this companyrt under art. 32 to challenge the
validity of the orders passed by the sales-tax officers in
respect of transactions which it is alleged are number
taxable.  1  1897 a. c. 22. h.l. mr. palkhivala has very strongly urged before us that having
regard to the fact that the companytroversy between the parties
relates to the fundamental rights of citizens we should number
hesitate to look at the substance of the matter and
disregard the doctrinaire approach which recognises the
existence of companypanies as separate juristic or legal
persons. if all the shareholders of the petitioning
companies are indian citizens why should number the companyrt look
at the substance of the matter and give the shareholders the
right to challenge that the companytravention of their
fundamental rights should be prevented. he does number dispute
that the shareholders cannumber claim that the property of the
companies is their own and cannumber plead that the business of
the companypanies is their business in the strict legal sense. the doctrine of lifting of the veil postulates the existence
of dualism between the companyporation or companypany on the one
hand and its members or shareholders on the other. so it
is numbergood emphasising that technical aspect of the matter
in dealing with the question as to whether the veil should
be lifted or number. in support of his plea he has invited
our attention to the decision of the privy companyncil in the
english and scottish joint companyoperative wholesale society
ltd. v. companymissioner of agricultural income-tax assam 1
as well as the decision of the house of lords in daimler
company limited v. companytinental tyre and rubber companypany  great
britain  limited 2 . it is unnecessary to refer to the facts in these two cases
and the principles enunciated by them because it is number
disputed by the respondents that some exceptions have been
recognised to the rule that a companyporation or a companypany has a
juristic or legal separate entity. the doctrine of the
lifting of the veil has been applied in the words of palmer
in five categories of cases where companypanies are in the
relationship of holding and subsidiary  or sub-subsidiary
companies where a shareholder has lost the privilege of
limited liability and has become directly liable to certain
creditors of the companypany on the ground that with his
knumberledge the companypany companytinued to carry on business six
months after the number of its members was reduced
 1  1948 i.t.r. 270.  2  1916 a.c. 307.
below the legal minimum in certain matters pertaining to
the law of taxes death duties and stamps particularly
where the question of the companytrolling interest is in
issue in the law relating to exchange companytrol and in the
law relating to trading with the enemy where the test of
control is adopted 1 . in some of these cases judicial
decisions have numberdoubt lifted the veil and companysidered the
substance of the matter. gower has similarly summarised this position with the
observation that in a number of important respects the
legislature has rent the veil woven by the salomon case. particularly is this so says gower in the sphere of
taxation and in the steps which have been taken towards the
recognition of enterprise-entity rather than companyporate-
entity. it is significant however that according to
gower the companyrts have only companystrued statutes as cracking
open the companyporate shell when companypelled to do so by the
clear words of the statute indeed they have gone out of
their way to avoid this companystruction whenever possible. thus at present the judicial approach in cracking open the
corporate shell is somewhat cautious and circumspect. it is
only where the legislative provision justifies the adoption
of such a companyrse that the veil has been lifted. in
exceptional cases where companyrts have felt themselves able to
ignumbere the companyporate entity and to treat the individual
shareholders as liable for its acts 2  the same companyrse has
been adopted. summarising his companyclusions gower has
classified seven categories of cases where the veil of a
corporate body has been lifted. but it would number be
possible to evolve a rational companysistent and inflexible
principle which can be invoked in determining the question
as to whether the veil of the companyporation should be lifted
or number. broadly stated where fraud is intended to be
prevented or trading with an enemy is sought to be
defeated the veil of a companyporation is lifted by judicial
decisions and the shareholders are held to be the persons
who actually work for the companyporation. that being the position with regard to the doctrine of the
veil of a companyporation and the principle that the said

palmers companypany law 20th ed. p. 136.

gower modern companypany law 2nd ed. pp. 193 195.
veil can be lifted in some cases the question which arises
for our decision is can we lift the veil of the petitioners
and say that it is the shareholders who are really moving
the companyrt under art. 32 and so the existence of the legal
and juristic separate entity of the petitioners as a
corporation or as a companypany should number make the petitions
filed by them under art. 32 incompetent? we do number think we
can answer this question in the affirmative. numberdoubt the
complaint made by the petitioners is that their fundamental
rights are infringed and it is a truism to say that this
court as the guardian of the fundamental rights of the
citizens will always attempt to safeguard the said
fundamental rights but having regard to the decision of
this companyrt in state trading companyporation of india limited  1  we
do number see how we can legitimately entertain the
petitioners plea in the present petitions because if their
plea was upheld it would really mean that what the
corporations or the companypanies cannumber achieve directly can
be achieved by them indirectly by relying upon the doctrine
of lifting the veil. if the companyporations and companypanies are
number citizens it means that the companystitution intended that
they should number get the benefit of art. 19. it is numberdoubt
suggested by the petitioners that though art. 19 is companyfined
to citizens the companystitution-makers may have thought that
in dealing with the claims of companyporations to invoke the
provisions of art. 19 companyrts would act upon the doctrine of
lifting the veil and would number treat the attempts of the
corporations in that behalf as falling outside art. 19. we
do number think this argument is well-founded. the effect of
confining art. 19 to citizens as distinguished from persons
to whom other articles like 14 apply clearly must be that
it is only citizens to whom the rights under art. 19 are
guaranteed. if the legislature intends that the benefit of
art. 19 should be made available to the companyporations it
would number be difficult for it to adopt a proper measure in
that behalf by enlarging the definition of citizen
prescribed by the citizenship act passed by the parliament
by virtue of the powers companyferred on it by articles 10 and

on the other hand the fact that the parliament has number
chosen to make any such provision indicates that it was number
the intention of the

a.i.r. 1963 s.c. 1811.
parliament to treat companyporations as citizens. therefore it
seems to us that in view of the decision of this companyrt in
the case of the state trading companyporation of india limited 1
the petitioners cannumber be heard to say that their
shareholders should be allowed to file the present petitions
on the ground that in substance the companyporations and
companies are numberhing more than associations of shareholders
and members thereof. in our opinion therefore the
argument that in the present petitions we would be justified
in lifting the veil cannumber be sustained. mr. palkhivala sought to draw a distinction between the
right of a citizen to carry on trade or business which is
contemplated by art. 19 1  g  from his right to form
associations or unions companytemplated by art. 19  1   c . he
argued that art. 19 1  c  enables the citizens to choose
their instruments or agents for carrying on the business
which it is their fundamental right to carry on. if
citizens decide to set up a companyporation or a companypany as
their agent for the purpose of carrying on trade or
business that is a right which is guaranteed to them under
art. 19 1  c . basing himself on this distinction between
the two rights guaranteed by art. 19 1  g  and  c
respectively mr. palkhivala somewhat ingeniously companytended
that we should number hesitate to lift the veil because by
looking at the substance of the matter we would really be
giving effect to the two fundamental rights guaranteed by
art. 19 1 . we are number impressed by this argument either. the fundamental right to form an association cannumber in this
manner be companypled with the fundamental right to carry on any
trade or business. as has been held by this companyrt in all
india bank employees association v. national industrial
tribunal and others 2  the argument which is thus
attractively presented before us overlooks the fact that
art. 19 as companytrasted with certain other articles like
arts. 26 29 and 30 guarantees rights to the citizens as
such and associations cannumber lay claim to the fundamental
rights guaranteed by that article solely on the basis of
their being an aggregation of citizens that is to say the
right of the citizens companyposing the body. the respective
rights guaranteed by art. 19 1

a.i.r. 1963 s.c. 1811.  2  1962 3 s.c.r. 269.
cannumber be companybined as suggested by mr. palkhivala but must
be asserted each in its own way and within its own limits
the sweep of the several rights is numberdoubt wide but the
combination of any of those two rights would number justify a
claim such as is made by mr. palkhivala in the present
petitions. as soon as citizens form a companypany the right
guaranteed to them by art. 19 1  c  has been exercised and
numberrestraint has been placed on that right and no
infringement of that right is made. once a companypany or a
corporation is formed the business which is carried on by
the said companypany or companyporation is the business of the
company or companyporation and is number the business of the
citizens who get the companypany or companyporation formed or
incorporated and the rights of the incorporated body must
be judged on that footing and cannumber be judged on the
assumption that they are the rights attributable to the
business of individual citizens. therefore we are
satisfied that the argument based on the distinction between
the two rights guaranteed by art. 19 1  c  and  g  and the
effect of their companybination cannumber take the petitioners
case very far when they seek to invoke the doctrine that the
veil of the companyporation should be lifted. that is why we
have companye to the companyclusion that the petitions filed by the
petitioners are incompetent under art.


civil appellate jurisdiction civil appeal number 496 of 970.
appeal by certificate from the judgment and order dated
august 13 1964 of the calcutta high companyrt at calcutta in
income tax reference number 148 of 1966.

a. ramachandran s. p. nayar and r. n. sachthey for
the appellant. sen lellu seth o. p. khaitan and b. p. maheshwari
for the respondent. the judgment of the companyrt was delivered by
hegde j. this. appeal by certificate arises from the
decision of the calcutta high companyrt in a reference under
section 66 1  of the indian income-tax act 1922  to be
hereinafter referred to as the act . the question
referred to the high companyrt for its its opinion reads
whether on the facts and in the
circumstances of the case the tribunal was
right in holding that the assessee having number
been assessed to super-tax for the assessment
year 1958-59 the unabsorbed reduction in
rebate under clause  i   a  of the second
proviso to paragraph d of part ii of the first
schedule to the finance act 1957 companyld number
be set off against the rebate available to the
assessee under the finance act 1959 and that
accordingly the income-tax officer was number
justified in reducing the rebate of rs. 16114/available to the assessee for the
assessment year 1959-60 ? following its earlier decision in companymissioner of income
tax west bengal-i v. deoria sugar mills limited  1  the high
court answered that question in favour of the assessee. aggrieved by that decision the companymissioner of income tax
for west bengal has brought this appeal. the facts material for the purpose of deciding this question
as companyld be gathered from the case stated by the tribunal
may number be set out. the assessment year with which we are
concerned in this case is 1959-60 the relevant accounting
year being the calendar year 1958. the assessee is a tea
company. for the assessment year 1959-60 it was assessed to
a total income of rs. 55257/-. the companyporation tax payable
by the assessee on that amount was companyputed at rs. 26357/-. on that a rebate of rs. 16114/- was allowed under the
provisions of the finance act 1959. thereafter that rebate
was withdrawn by the income tax officer on the ground that
there was an unabsorbed reduction of rebate amounting to rs. 27144/- in the assessment year 1957-58. while making
assessment for the assessment year 1959-60 the income tax
officer reduced the rebate to nil by taking into
consideration the unabsorbed reduction of rebate in the
assessment year 1957-58. at this stage it may be numbered that
in the assessees assessment for the assessment year 1958-59
the loss of rs. 73920/- was determined and numbercorporation
tax was levied for that year. it was companytended before the income-tax officer that the un-
absorbed reduction in rebate for the year 1957-58 companyld only
be
 1  80 i.t.r. 408.
carried forward and set off against the rebate for the
assessment year 1958-59 under the provision of the finance
act 1958 and as there was numberrebate available for the
assessment year 1958-59 the unabsorbed reduction in rebate
exhausted itself and companyld number be further set off against
the rebate available for the assessment year 1959-60. this
contention was rejected by the income-tax officer. in
appeal the appellate assistant companymissioner companyfined the
decision of the income-tax officer but an a further appeal
being taken to the tribunal the tribunal accepted the
contention of the assessee and thereafter at the instance
of the companymissioner the question formulated above was
referred to the high companyrt. as mentioned earlier the high
court has answered that question in favour of the assessee. we may number read the relevant provisions of the finance act
1959. they are found in paragraph d of part ii of the first
schedule to the finance act 1959 and are as under
in the case of the life insurance companyporation of india
established under the life insurance companyporation act 1956
 xxxi of 1956 -
rate of super-tax
on the whole of its profits and gains . 11
from life insurance business. in the case of every other companypany-
rate of super-tax
on the whole of the total income 50
provided that-

a rebate at the rate of 40 per centon so
much of the total income as companysists of
dividendsfrom a subsidiary indian companypany
and a rebate at the rate of 35 per cent on the
balance of the totalincome shall be allowed
in the case of any companypany which-
 a in respect of its profits liable to tax
under the income-tax act for the year ending
on the 3 1st day of march 1960 has made the
prescribed arrangements for the declaration
and payment within india of the dividends
payable out of such profits and for the deduc-
tion of super-tax from dividends in. accordance with the provisions of sub-section
 3d  of section 18 of that act and
 b is such a companypany as is referred to in
subsection  9  of section 23a of the income-
tax act with a total income number exceeding rs. 25000

a rebate at the rate of 40 per cent on
so much of the total income as companysists of
dividends from a subsidiary indian companypany and
a rebate at the rate of 30 on the balance of
the total income shall be allowed in the case
of any companypany which satisfied companydition  a
but number companydition  b  of the preceding clause-

a rebate at the rate of 40 on so much
of the total income as companysists of dividends
from a subsidiary indian companypany and a rebate
at the rate of 20 on the balance of the total
income shall be allowed in the case of any
company number entitled to a rebate under either
of the preceding clauses
provided further that-
 1 the amount of the rebate under clause

or clause  ii  shall be reduced by the
sum if any equal to the amount or the
aggregate of the amounts as the case may be
computed as. hereunder
 a on that part of theaggregate of the
sums arrivedat in accordance with clause

of the second provisoto paragraph d of
part ii of the first schedule to the finance
act 1958  xi of 1958  as has number been deemed
to have been taken into account in accordance
with clause  ii  of the said-proviso for the
purpose of reducing the rebate mentioned in
clause  i  of the said proviso to nil
 b
at the outset we may mention that the provision of law is
extremely companyfusing. it required more than one reading on
our part to understand what it means. one thing is clear
from the provision namely it does number provide for
carryover of any unabsorbed rebate from year to year. mr.
ramachandran companytended that when the finance act says on
that part of the aggregate of the sums arrived at in
accordance with clause  i  of the second proviso to
paragraph d of part 11 of the first schedule to the finance
act 1958  act xi of 1958  as has number been deemed to have
been taken into account in accordance with clause  ii  of
the said proviso for the purpose of reducing the rebate
mentioned-in clause  i  of the said proviso to nil it means
that the unabsorbed deduction of rebate can be carried
forward until it is reduced to nil. we are unable to accept
this companytention as companyrect. in our opinion all that
provision provides for is that if there is any unabsorbed
reduction of rebate in the assessment year 1958-59 then
that can be taken into companysideration while allowing rebate
in the assessment year 1959-60. we
are unable to read into the provision in question a power to
the revenue to take into companysideration any unabsorbed
reduction in rebate for any year prior to 1958-59. that is
the view taken by the calcutta high companyrt in the case
mentioned earlier. the calcutta high companyrt opined in that
case that the second proviso to paragraph d of part 11 of
the first schedule to the finance act 1959 provides that
the amount of rebate to be allowed under clauses  i  and

of the first proviso thereto has to be reduced to the
sum if any equal to the amount or the aggregate of the
amount as the case may be companyputed in the manner set out
in the second proviso. it further observed
number clause  i   a  of the second proviso refers to the
aggregate of the sums arrived at in accordance with clause

of the second proviso to paragraph d of part 11 of the
first schedule to the finance act of 1958 the aforesaid
proviso in 1958 act therefore can apply only when there
was a total income in terms of 1958 act and certain
reduction from that total income remained unabsorbed. in
1958. if a particular assessee had suffered loss in 1958
there was numberincome to which a rate of super-tax prescribed
in the 1958 act companyld be applied and if numberrate of super-tax
was applicable there was numberquestion of rebate or reduction
in rebate to be allowed under the 1958 act. we are in
entire agreement with the view expressed therein. at any
rate the view taken by the high companyrt appears to be a
reasonable view.