ASSOCIATED CEMENT COMPANIES LTD. DWARKA v. STATE — 1985 DIGILAW 71 (GUJ)

N. H. BHATT, J. ( 1 ) THESE three petitions between common parties by and large raise common or similar questions of law and facts and they can be conveniently dealt with together and disposed of by this common judgment obviously with the concurrence or the learned common counsels appearing in these matters. ( 2 ) IN order to understand what the controversies are some facts are required to be closely noted. The common petitioner is the Associated Cement Companies Limited having its cement works at various places in India. One of such factories is known as Dwarka Cement Works and it is situated within the limits of the respondent No. 2 Dwarka Nagar Panchayat which is a body corporate constituted under the provisions of the Gujarat Panchayats Act 1951 (hereinafter referred to as the Act for brevitys sake ). Under the Act the Respondent-Panchayat is entitled to levy various taxes by virtue of the power conferred on this Panchayat under sec. 178 of the Act. The taxes are house tax octroi entertainment tax etc. The State Government has made Gujarat Gram and Nagar Panchayats Taxes and Fees Rules 1964 but in order to facilitate the working of recovery of these taxes some other rules are also made and they are styled as Gujarat Panchayats (Payment of Lump-sum Contribution by Factories in lieu of Taxes) Rules 1964 As the name itself suggests the provision is made to enable the Panchayats to recovery and the factories to pay a lump-sum in lieu of various taxes. Sec. 179 of the Act is a substantive provision which deals with this lump-sum contribution. Said sec. 179 reads as follows:"179 Subject to any rules that may be made under this Act and regard being had to the fact that a factory itself provides in the factory area all or any of the amenities which such panchayat provides a gram panchayat or as the case may be nagar panchayat may arrive at an agreement with any factory with the sanction of the State Government to receive a lump-sum contribution in lieu of all or any of the taxes levied by the panchayat. (2) Where no such agreement as is referred to in sub-sec. (2) Where no such agreement as is referred to in sub-sec. (1) can be reached the matter may be referred to the State Government in the manner prescribed and the State Government may after giving to the panchayat and the factory concerned an opportunity of being heard decide the amount of such contribution. The decision of the State Government shall be binding the panchayat and the factory concerned. (3) In the case of and matter referred to the State Government under sub- sec. (2) the State Government may subject to such conditions as it may think fit to impose having regard to the circumstances on the case by order in writing direct the panchayat to stay the collection or recovery from the factory of all or any of the taxes until the State Government decides the matter under sub sec. (2 ). This means that under sec. 179 (1) a factory and the gram panchayat are free to arrive at an agreement to pay and receive lump-sum contribution in lieu of all or any of the taxes levied or leviable by the panchayat. This sort of arrangement ex facie is to suit the needs and requirements of both the parties to the agreement. The panchayat will be spared of the trouble of making arrangements for collection of various taxes and this would obviously save some expenditure and botheration on that count. Similarly the factory also will be saved of the day to day trouble attendant upon the payment of duties particularly octroi. So more often than not it will be in the interest on both the parties to reach sort of a settlement or agreement but the legislature was not oblivious of one time office bearers of a panchayat or the persons in management of a factory to act to the detriment of the public body and that is why such an agreement is required to be sanctioned by the State government in order to be operative. However at times the factory on the one hand and the panchayat on the other hand have cross-roads. for reasons of its own may be personal or political the panchayat may not be willing to have this sort of working arrangement. But the legislative wanted that this unilateral denial of this facility should not be encouraged. Sec. 179 (2) therefore provides this sort of arrangement to be imposed on an unwilling panchayat. Sub-sec. for reasons of its own may be personal or political the panchayat may not be willing to have this sort of working arrangement. But the legislative wanted that this unilateral denial of this facility should not be encouraged. Sec. 179 (2) therefore provides this sort of arrangement to be imposed on an unwilling panchayat. Sub-sec. (2) therefore provides that where any such agreement cannot be reached between the factory on the one hand and the panchayat on the other the matter can be referred to the State Government in the manner prescribed and the State Government would be competent to give its decision obviously after hearing both the sides; and sub-sec. (2) ends with the provision that the decision of the State Government shall be binding the panchayat and the factory concerned. ( 3 ) THE legislature has left the procedural aspect of this substantive provisions to the rule-making authority namely the Government Rules 3 and 4 of the above named Rules are reproduced hereinbelow:3 Application by occupier:- (1) Where the occupier of a factory situate within the limits of a gram or nagar desires to arrive at an agreement he shall make an application in writing to the panchayat not later than sixty days from the commencement or the financial year; Provided that where the factory is newly established during the financial year the occupier may make such application not later than sixty days front the date on which the factory started functioning. (2) Where any local area in which a factory is situated- (a) is declared to be a gram or nagar under sub-sec. (1) of sec. 9 of the Act; or (b) is included in a gram or nagar under sub-sec. (2) of the said sec. 9 the occupier may make all application under sub-sec (1) within sixty days from the date of such declaration or inclusion all where such declaration or inclusion has been made before the con commencement of these rules from the dale of such commencement. (2) of the said sec. 9 the occupier may make all application under sub-sec (1) within sixty days from the date of such declaration or inclusion all where such declaration or inclusion has been made before the con commencement of these rules from the dale of such commencement. (3) An application under sub-sec (1) shall state - (a) (i) the amounts paid the panchayat in respect of each of the taxes period by the panchayat during the three financial years immediately preceding the financial year or as the case may be during the period of less than three years the factory has been functioning immediately preceding the financial year in which the application is made; (ii) the amount payable by the occupier to the panchayat in respect of all or any of the taxes levied by the panchayat during the financial year in which the application is made (the amount payable in respect of each tax being indicated separately); (b) the details of the amenities provided by the occupier in the factory and of those which the panchayat provides within the limits of its jurisdiction; (c) the expenditure incurred by the factory on each of the amenities provided by it during the period referred to in sub-clause (i) of clause (a) upto the date of the application; (d) whether the occupier desires that the panchayat shall not recover any tax from him pending decision on the application. (4) Consideration of the application by panchayat. (1) On receipt of the application under rule 3 the panchayat shall stay recovery of its taxes from the occupier if the occupier has so desired and then consider the application and subject to the provisions of Rule 8 pass not later than sixty days from the date of receipt there of a resolution fixing the lump sum in lieu of all or any of the taxes. (2) The amount of lump sum contribution may not be disproportionately less than the amount receivable by the panchayat in respect of taxes levied by it at the normal rates during any financial year after deduring cost of amenities if any provided by the occupier. (3) Where the occupier agreed to accept the lump sum fixed by the panchayat the panchayat shall submit through the District Development Officer and the Development Commissioner to the State Government proposal for sanction. (3) Where the occupier agreed to accept the lump sum fixed by the panchayat the panchayat shall submit through the District Development Officer and the Development Commissioner to the State Government proposal for sanction. Such proposal shall be accompanied by:- (a) the application made by the occupier under rule 3 (b) the resolution passed by the panchayat; and (c) a draft of the agreement Form A; (d) details of amenities- (i) provided by the panchayat within the limits of its jurisdiction as a whole; (ii) provided by the panchayat within the limits of the factory; and (iii) likely to be further provided within the limits of the factory on the agreement being effective indicating the approximate cost thereof in the year immediately preceding the financial year or likely to be involved in the financial year in which the application is made. The initiative for this agreement or settlement ordinarily also would emanate from a factory and that is why Rule 3 (1) provides that the occupier of a factory situate within the limits of a gram or nagar and desirous of arriving at an agreement has to make an application in writing to the panchayat not later than sixty days from the commencement of the financial year. Rule 3 (3) sets out various information to be furnished by the applicant factory in order to enable the Government either to sanction the agreement if sec. 179 (1) applies or to give its decision if the matter comes to be referred to it under sec. 179 (2) in the event of there being no agreement. The idea of the rule making authorities is also to see that such agreements are encouraged and that is why Rule 4 (1) provides that on receipt of the application under Rule 3 the panchayat shall stay recovery of its taxes from the occupier if the occupier so desires and then consider the application and pass a resolution not later than sixty days from the date of the receipt of the application fixing the lump such contribution in lieu of all or any of the taxes Rule 4 (2) provide that while entering into this agreement the panchayat is not to act arbitrarily to the detriment of the interests of the panchayat which are common interests of all inhabitants of that locality. It is therefore reasonably provided that the amount of lump sum contribution though obviously would not be on par with the expected amount of taxes cannot be disproportionately less than the said expected realisation. More often than not such factories provide amenities to the people in the area of the factory the amenities being similar to those amenities provided by the panchayat to the remaining area means the area other than the area of the factory under the panchayats final control. Provisions of sec. 179 specifically make this amply clear. They say that while fixing the lump sum contribution regard shall be had to the fact that a factory itself provides in the factory area all or any of the amenities which the panchayat provides in the remainder of the area or to the local area of that Panchayat. Obviously this will be the relevant factor. If the agreement is reached the matter has to go to the State Government for its sanction and obviously various factors will be required to be taken into account by the Government strike a golden balance between two at times rival interests of the panchayat and the factory. If there is no agreement there will be recourse to sec. 179 (2) where also the Government has to decide the amount of contribution obviously on the principles laid down in sec. 179 (1) namely the amount to be decided by the Government is not to be disproportionately less than the amount expected to be received by the panchayat in respect of taxes levied by it at the normal rate during any financial year after making adequate deductions for the costs of amenities provided by the factory in its area which amenities would be similar to the amenities provided by the panchayat in the remaining area. Obviously Rule 4 (2) will govern such a situation as per Rule 8 (4) of these rules and even in the absence of an agreement between the parties the Government while deciding the amount on lump sum contribution shall see that the amount fixed by it is not disproportionately less than the amount receivable by the Panchayat in respect of taxes levied by it at the normal rate during any financial year and before reaching that amount of lump sum contribution deduction of the cost of amenities if any provided try the occupier shall be made. ( 4 ) IN these three petitions three different periods had arisen for consideration. The Special Civil Application No. 647 of 1979 deals with the three years period from the year 1972-73 to 1974-75. Initially the occupier of the factory and the panchayat had agreed at Rs. 95 0 and the matter hand gone to the Government for its sanction. The Government curiously enough such that Rs. 1 50 0 should be the amount of lump sum contribution and; not Rs. 95 0 which was the amount agreed to between the occupier and the panchayat. This decision was taken in the year 1975. So a writ petition had come to be filed in this High Court registered as the Special Civil Application No. 1624 of 1975. It came to he dealt with by P. D. Desai J. (as he then was) by his judgment dated 10-9-1976 and he very clearly ruled that the Government had of jurisdiction to arrive at in own amount when there was agreement between the parties. In other words the learned Judge held that the only authority which time Government had under sec. 179 (1) was either to accord sanction or not to accord sanction but it had no jurisdiction to arrive at its own assessment on the lump sum contribute. the result was that the petition called to be allowed by the learned Judge on 10-9-1976 and the proceeding regarding the sanction of the argument stood remanded to the Government. This time the Government heard the parties. By that title the panchayat also was not willing to stand by the original agreement and tried to give evidence of far more amount expected by way of octroi. The result was that the State Government passed the order annexure-8 dated 15-7-1978 refusing to grant approval. That is why the Company has filed this petition for a writ quashing and setting aside the impugned order of the first respondent and directing it to accord its sanction to the agreement arrived at between the petitioner and the respondent panchayat at Rs. 95 0 per annum for the triennial period 1972-73 to 1974-75. To us it appears that the Government should have treated the proceedings before it in those circumstances as the proceedings under sec. 95 0 per annum for the triennial period 1972-73 to 1974-75. To us it appears that the Government should have treated the proceedings before it in those circumstances as the proceedings under sec. 179 (2) of the Act and should have proceeded to decide the matter and that having been not done the proceedings are required to be remanded to the Government for dealing with the question of fixation of lump sum contribution under sec. 179 (2) of the Act. This is the normal and ordinary inference that should be drawn from the insistence of the occupier of the factory that the Government must decide the question of lump sum contribution. It is in this sense that we said that after we remand these proceedings the Government shall consider the proceedings as the proceedings before it under sec. 179 (2) and the Government shall by following the proper procedure arrive at a figure of lump sum contribution. How even certain grounds given by the Government for not accepting the amount of Rs. 95 0 and for reaching the figures of Rs. 4 79 0 as the amount of lump sum contribution for refusing to sanction the agreement will be required to be examined by us because after the proceedings are remanded the conclusion will be required to be reached on the basis of those various principles. These very questions also arise in the other two petitions the facts of which we are instantly giving. The Special Civil Application No. 3144 of 1981 deals with the petitioners application to the respondent-panchayat for arriving at an agreement in respect of lump sum contribution in lieu of taxes and the period sought to be covered is the period of three years from 1978-79 to 1980-81. The panchayat did not agree to reaching a settlement and there is no controversy about it. So the matter had gone to the Government obviously under sec. 179 (9) of the Act. The order of the Government dated 27/07/1981 is to be found at annexure-D in that petition and by that the Government fixed the amount of Rs. 5 70 0 as the amount of lump sum contribution to be paid by the petitoner to the respondent-panchayat. This decision of the Government under sec. 179 (9) of the Act. The order of the Government dated 27/07/1981 is to be found at annexure-D in that petition and by that the Government fixed the amount of Rs. 5 70 0 as the amount of lump sum contribution to be paid by the petitoner to the respondent-panchayat. This decision of the Government under sec. 179 of the Gujarat Panchayats Act is assailed in this petition and the rounds are more or less common to the grounds that had weighed with the Government in tentatively reaching decision of Rs. 4 79 0 in respect of the period from 1972-73 to 1974-75. The Specie Civil Application No. 6281 of 1984 arises out of the Governments decision under sec. 179 (2) of the Act because the Government after the panchayat did not reach an agreement with the petitioner-occupier of the factory was required to fix the amount of lump sum contribution in lieu of taxes and the Government did it at Rs. 4 52 627 The period is covering 1981-89 to 1983-84. This petition No. 6281 of 1984 is directed against that decision of the Government. ( 5 ) MANY of the grounds that we now deal with are common to all the petitions and that is why we have taken up these three matters together. The petitioner. is that whatever expenses are incurred by the occupier in respect of various amenities which are providable by the panchayat are to be deducted from the expected amount of taxes. This argument proceeds against the very text of sec. 179 (1) of the Act. It is to be noted with pertinence that the panchayat is under no obligation to enter into an agreement with the occupier. Sec. 179 (1) of the Act is an enabling provision and in the panchayat for good had or no reasons does not agree with the occupier the function of sec. 179 (1) rests there. But under sec. 179 (2) the occupier certainly can sec an adjudication at the hands of the State Government. So Mr. Nanavati was not right in his submission that the occupier has a right to enter into an agreement and the panchayat is under an obligation to enter into an agreement. The very term agreement itself militates against this argument. Mr. 179 (2) the occupier certainly can sec an adjudication at the hands of the State Government. So Mr. Nanavati was not right in his submission that the occupier has a right to enter into an agreement and the panchayat is under an obligation to enter into an agreement. The very term agreement itself militates against this argument. Mr. Nanavatis argument is that whatever duties are imposed on the panchayat in respect of carrying on certain duties qua the local area under the jurisdiction of the panchayat can be attended to by the occupier in respect of the area of the factory and all those deductions must be made from the expected amount of taxes in a financial year. The relevant words of sec. 197 (1) are the amenities which such panchayat provides and the words are not that the amenities which such panchayat is expected to provide. It is truism to state that various duties are cast on panchayats but the panchayat is not expected to take all those duties on hand to the fullest extent because more often than not there may be financial restraints on the power of the panchayat in that regard. That is why the legislature has made it amply clear that if the factory provides the amenities which are in act provided by the panchayat in the area other than the factory area reached shall he had to than fact of the provision made by the factory itself in the factory area. In other words the regard spoken of in sec. 179 (1) is confined to those all of any of the amenities which the panchayat actually provides in the non factory area. If Mr. S. I. Nanavatis argument is to be accepted in would mean that the text of sec. 179 (1) is to be written. as the amenities such panchayat is under all obligation to provide or is capable of providing. Such a thing cannot has been contemplated by the legislature looking to the comparatively meager sources at the command of the panchayats. ( 6 ) HOWEVER it is ar be pertinently noted that while sanctioning agreement under sec. 179 (1) or deciding the question of lump sum contribution the State Government has to give due of the amounts spent by the factory after providing all or any of the amenities which are taken on land by the panchayat. ( 6 ) HOWEVER it is ar be pertinently noted that while sanctioning agreement under sec. 179 (1) or deciding the question of lump sum contribution the State Government has to give due of the amounts spent by the factory after providing all or any of the amenities which are taken on land by the panchayat. This alternative argument of Ms. S. I. Nanavati therefore deserves to he accepted and the Government and the Panchayat do not seem to have any quarrel over the principle. The question however is how are these expenses to he worked out. The Government in these three decisions in these petitions have taken per capita expenditure. Say for example there are five thousand souls in the area other than the factory area and say there are three thousand souls in the factory area who are occupying the premises or the place. If the panchayat say for example spends Rs. 19. 50 per head after electricity water-supply and sanitary facilities in its area as contradicted wit the area within the factory premises the Government would say and as a matter of fact has now said that the expenses made by the panchayat qua those five thousand people are to be examined then per hand amount is to be worked out and then for the three thousand persons within the factory area that amount alone will be given adjustment from the amount of the expected realisasions by way of taxes. The Government seems to be thinking that the of the learned single Judge of this High Court in the case of Saurashtra Cement and Chemicals Industries Ltd. v. State of Gujarat and others. XVII G. L. R. 645 supports this arithmetical formula. We have gone through that judgment very carefully. We do not find that any such rigid formula has been laid down by the learned single Judge. We shall quote the words of the learned Judge to clear what we mean to say:"the employees of a factory residing within the territory of a panchayat cannot claim from the panchayat more amenities than the panchayat provides to its other residents in the village. We shall quote the words of the learned Judge to clear what we mean to say:"the employees of a factory residing within the territory of a panchayat cannot claim from the panchayat more amenities than the panchayat provides to its other residents in the village. Therefore while computing the cost of amenities which should be deducted from the amount of taxes payable by a factory to a panchayat it is necessary to find out what amenities a panchayat provides to its other residents in the village and what would be the cost of those amenities if provided by the panchayat to the employees of the factory residing within its limits. Now if a factory does not provide to its employees within the area of a gram panchayat all or any of the amenities which the panchayat provides to its other residents the factory is not entitled to any deduction from the amount of taxes payable by it to the panchayat. The next factor which a panchayat or the State Government has to find out is the cost of amenities provided by a panchayat to the employees of the factory within the limits of the village. If a panchayat provides to the employees of a factory in the an entice which it provides to the other residents of its village there also the factory is not entitled to any deduction on that account from the amount of taxes payable by it to the gram panchayat. If a panchayat does not provide any of the amenities to the employees of a factory within its limits and in the factory at its own cost provides them to its employees the factory is entitled to deduction of the cost of the amenities provided by it subject to the fact that the amount of such cost would be the amount which the panchayat would have other wise spent if it had provided the amenities to the employees of the factory within its limits. If the factory provides them the amounts which a panchayat provides to the other residents of the village there the factory is entitled to deduction from the amount of lump sum contribution of such amount as it spend on providing some of the amenities In other words. If the factory provides them the amounts which a panchayat provides to the other residents of the village there the factory is entitled to deduction from the amount of lump sum contribution of such amount as it spend on providing some of the amenities In other words. the scheme of clause (d) of sub-rule 4 appears to be that if a factory provided all amenities to its employees residing within the limits of a panchayat which the panchayat should have otherwise provided the it would be entitled to the deduction of such cost from the amount of lump sum contribution. If the factory provides not all but some of the amenities to its employees it is entitled to deduction of such amount as it spends on them". Above quoted words in our views do not permit any such per head amount of expenses. We find that it is neither feasible nor advisable to have recourse to such a rigid formula for certain obvious reasons. As for example the area of the factory may be comparatively larger though the population be less. may be comparatively less. The lighting facilities and the sanitation facilities would be required to be more in the factory area though the population be less. So about making of the roads. Regarding water supply also the same conditions would arise. It is therefore. inevitable to take all such factors into account cumulatively and there should be a reasonable prognosis as to what would be the costs required to be incurred by the panchayat to extend those very facilities and amenities to that area in the factory. After having reason able prognosis in that regard it will be considered that. that is the amount which should be regarded as deducible from the expected earnings by way of imposition of taxes. It is a matter of common knowledge that as occupiers of factories. the occupiers are under some special obligations under the factor) laws or labour laws. Whatever is expended by the occupiers to meet those specially-provided for obligations can never be expected to be deduced from the expected amount of realisation by way of taxes. Therefore we hold that only those expenses which the panchayat would have been required to meet had the panchayat extended those similar facilities in the factory area also which are to be given adjustment also and no other. Therefore we hold that only those expenses which the panchayat would have been required to meet had the panchayat extended those similar facilities in the factory area also which are to be given adjustment also and no other. ( 7 ) THE second and important bone of contention between the parties also centers round the method of working out the probable income under various heads. Here the petitioner has much to say against the method adopted by the Government. The Government can be said to be quasi-judicial authority while dealing with the question under sec. 179 (1) or sec. 179 (2 ). Even if it be not having quasi-judicial authority at least it is cast with administrative authority which has civil repercussions on the rights of the factory owner and that is why the balance is to be held evenly by the State Government while dealing with situation. In other words the Government cannot act a protagonist of the panchayat and try to see that the panchayats coffers are made as rich as possible. It cannot be lost sight of that whatever be the Governments decision under sec. 179 (2) of the Act it has got binding effect not only on the panchayat but on the occupier of the factory also and that is why there are all the greater reasons for the State Government like a quasi-judicial authority to act fairly and dispassionately. This is required to be emphasised because we find that the Governments approach in these three cases is nor what it should be. We shall illustrate this observation of ours by certain instances some of which are common to all the three petitions. ( 8 ) THE first instance is about one item called calcareous shell sand which is imported by the factory for the purposes of its manufacturing activities. Paragraph 13 of the Special Civil Application No. 647 of 1979 deals with the petitioners stand on this question. This peculiar type of sand known to the mercantile or business world as calcareous shell sand is exigible to octroi. There is entry 70 in the Octroi Rules which is reproduced below: @@@schedule 1 (Rule 24) - Rate of Octroi goods Rate of Tax Minimum Maximum (70) Silica Quartz Zircon sand Felspar 0. 15 per 0. 30 per Gypsum Grog Minerals and Oxides used metric ton metric ton as raw materials. (71) residuary Rs. 2. There is entry 70 in the Octroi Rules which is reproduced below: @@@schedule 1 (Rule 24) - Rate of Octroi goods Rate of Tax Minimum Maximum (70) Silica Quartz Zircon sand Felspar 0. 15 per 0. 30 per Gypsum Grog Minerals and Oxides used metric ton metric ton as raw materials. (71) residuary Rs. 2. 00 or 100 ad valorem @@@ below it is mentioned the residuary entry (71 ). Though entry 70 deals with specified types of materials as exigible to specified late of octroi and though this calcareous shell sand is not one of those items set out there the Government unreasonably treated this as falling under that item. The result is that according to the petitioner the octroi of the imported material namely calcareous shell sand would be Rs. 1 15. 908 whereas the Government has put it at almost three times that amount. The Government says that from this item itself the panchayat would be able to derive the octroi of Rs. 3 47 7231 by recourse to entry 70. This is obviously erroneous. All that Mr. J. R. Nanavati states is that they will be in a position to show that this being one kind of sand would be covered by entry 70. This is ex facie untenable. Event if it be the residuary type of sand then also this calcareous shell sand would fall under entry VI and not 70. 1 ( 9 ) SECONDLY the question is of furnace oil. The petitioners say in this regard is to be found in paragraph 14 of the Special Civil Application No. 647 of 1979. According to the petitioner octroi from that source would be only Rs. 48 455 whereas the Government works it out at Rs. 5 21 304 about ten times. During the period from 1-4-1969 to 31-12-1969 furnace oil was not liable to octroi under any of the specified entries but was liable under the residuary entry No. 65 (then existing) at the rate of 1% ad valorem. From 1 to 14-6-1971 it was liable to octroi under the residuary item No. 71 i. e. 2% ad valorem and from 15-6-1971 onwards it was liable to octroi under the specified item 70 (A) at 40 paise per metric ton. Still the Government did not respond to the argument of the petitioner Company. From 1 to 14-6-1971 it was liable to octroi under the residuary item No. 71 i. e. 2% ad valorem and from 15-6-1971 onwards it was liable to octroi under the specified item 70 (A) at 40 paise per metric ton. Still the Government did not respond to the argument of the petitioner Company. All that has been stated by the Government as well as the panchayat was denial about the lobbylimy of this item to duty under specified item No. 70 (A) as 40 paise per metric ton from 15/06/1971 The reason given is that the said entry 70 (A) was introduced by the State Government in its Rules with effect from 15/06/1971 but the panchayat had adopted the same on and from 1/04/1975 Under section 178 of the Gujarat Panchayat Act there cannot be levy of octroi at a rate less than the rate prescribed by the State Government nor at a rate higher than the one prescribed by the State Government. If the Government amends its schedule of the rules on and from 15/06/1971 the panchayat has to adopt it from that date and if it does not adopt it is deemed to have adopted that rate under statutory obligation. This also shows the very unreasonable attitude adopted by the State Government which is expected to know the provisions of law and the Gujarat Gram and Nagger Panchayat Taxes and Fees Rules 1964 framed by it. ( 10 ) THE third item of controversy is general stores. There the Governments stand is sustainable for the obvious reason that the occupier did not furnish any break up and therefore the Government as a reasonable decide in. body applied the correct standard. However when the matters go back on remand and if the wisdom dawns on this occupier-company and it gives a satisfactory break up. and if the Government is satisfied about it the Government may revise its decision on this score. ( 11 ) THE fourth question that crept up in the Special Civil Applications No. 3144 of 1981 and 6281 of 1984 pertains to certain materials imported by the contractor for the purposes of this petitioner-Company. Here there is a storm in a teacup as we shall instantly point out. The petitioner had engaged services of contractors who were to supply the petitioner lime stone or some materials to be used as one of the raw materials. Here there is a storm in a teacup as we shall instantly point out. The petitioner had engaged services of contractors who were to supply the petitioner lime stone or some materials to be used as one of the raw materials. The panchayat insisted that these being the materials brought by independent contractors for the purposes of sale to the occupier i. e. the petitioner-Company who were free to accept or reject them on being offered at the factory premises were liable to octroi duty. The company on the other hand contended that this octroi amount could not are realized from the contractor who was only an agent of the company and therefore this amount of octroi also should be calculated for the purpose of reaching the lump sum contribution. The panchayat cannot have this amount calculated doubly. It cannot recover best of both the worlds. The panchayat cannot have the octroi recovered from the contractor and at the same time have the octroi amount calculated as the possible income of octroi realizable even on the count of this item from the occupier. Because of this controversy there was a litigation between these parties which was the subject matter of the Special Civil Suit No. 163 of 1978 in the Court of Joint Civil Judge (SD) at Jamnagar. The Company there urged that the contractor was their employee or agent and. therefore the panchayat should not collect octroi from the contractor. And the consequence for the purpose of the Special Civil Application No. 3144 of 1981 would be that in the total figure on expected realizations by way of octroi this amount would not be required to be included. The learned Civil Judge there held that the contractor was importing things on his own and not as the agent or employee of the Company. Against that decision the Company has preferred First Appeal No. 700 of 1980 in this High Court which was pending. With the concurrence of the learned advocats we directed to hear that First Appeal No. 700 of 1980 along with the Special Civil Application No. 3144 of 1981. We have heard that first appeal also and by a separate judgment we have dismissed that appeal. With the concurrence of the learned advocats we directed to hear that First Appeal No. 700 of 1980 along with the Special Civil Application No. 3144 of 1981. We have heard that first appeal also and by a separate judgment we have dismissed that appeal. The net outcome therefore on this score would be that the panchayat will be entitled to recover octroi on this item from the contractor and consequently the octroi on this item will not be taken into account while considering the possible in come of octroi from the company on this item for the purpose of ultimate decision regarding lump sum contribution. Mr. J. R. Nanavati the learned counsel for the panchayat very categorically states that the panchayat did not want this octroi to be taken up in the total calculation of the amount of octroi realisable from the occupier-factory. So the Government shall have to exclude this item for the purposes of working out the possible octroi and then proceed to give its decision under section 179 (1) of the Act. ( 12 ) THIS brings us to the facts of the Special Civil Application No. 6281 of 1984. The period sought to be covered by this lump sum contribution scheme is the period from 1981-82 to 1983-84. There also the panchayat catsgawkily declined to have any agreement with the petitioner with the result that the matter was sent to the Government under sec. 179 (2) of the Act. The Government adopted various untenable stands and more or less similar to those which were adopted while dealing with the similar cases of the earlier periods which are subject matter of the two petitions being the Special Civil Applications No. 647 of 1979 and 3144 of 1981. For the same reasons the proceedings under sec. 179 (2) which are at the root of the Special Civil Applecation No. 6281 of 1984 also shall stand remanded to the Government. ( 13 ) ONE more argument was advanced by Mr. S. I. Nanavati which deserves to be noted for being rejected. The Company imports special kind of paper bags for the purpose of packing their final product namely cement. This item is liable to custom duty because they are imported bags made out of imported paper. ( 13 ) ONE more argument was advanced by Mr. S. I. Nanavati which deserves to be noted for being rejected. The Company imports special kind of paper bags for the purpose of packing their final product namely cement. This item is liable to custom duty because they are imported bags made out of imported paper. As these bags again go out of India the Central Government gives a duty draw-back which in common commercial parlance would come to refund of the custom duty. Seeking analogical assistance the Potitanner-Company urges than when these paper bags go out the panchayat will be under an obligation to refund the octroi amount and therefore while working out the expected amounts of octroi the octroi paid or payable on these paper bags must be left out. This argument is not acceptable for the simple reason that the bags once they are imported for the purposes of use in the octroi limits are in fact used no question of refund arises. What weighs with the Central Government in refunding the custom duty cannot neckswarily be a reason for the panchayat which levies octroi on the import of the goods within the octroi limits for the purposes of consumption use or sale. Once the packets are put to use namely for the purpose of storing cement the purses of import is served and subsequent sending of the bags along with the things contained in it cannot give rise to any case for refund of octroi. In this connection it was alternatively urged that once the refund of custom duty is there there will be corresponding decrease in the price of the bags and therefore also the price for the purpose of working out the possible octroi also will stand comparatively reduced. This cannot also be in any way countsnanced because the occasion for charging octroi arises on the entry of goods for the purpose of use and if for same other reasons there is refund there cannot be retroactive reduction of price. In this connection it was also urged that these bags should be treated as gunny bags. The word gunny bag having common parlance meaning means a bag made out of fiber namely (mostly) jute. These paper bags can be by no stretch of imagination termed as gunny bags. Se the entry applied to these paper-bags is rightly applied by-the Government. In this connection it was also urged that these bags should be treated as gunny bags. The word gunny bag having common parlance meaning means a bag made out of fiber namely (mostly) jute. These paper bags can be by no stretch of imagination termed as gunny bags. Se the entry applied to these paper-bags is rightly applied by-the Government. ( 14 ) THE result is that all the three petitions to the aforesaid extent are allowed by setting aside the impugned orders of the Government. The procedings under sec. 179 (1) of the Gujarat Panchayat Act stand remanded to the Government for fresh decision under sec. 179 (2) of the Act in accordance with law. As the matters are sufficiently old particularly in the two earlier petitions out of these petitions we direct the Government that the Government shall take up this question at once on hand and dispose them of in accordance with law latest by 30/06/1985 Rule is accordingly made absolute in each of these petitions with no order as to costs. ( 15 ) IT is directed that the interim relief granted by this Court during the tendency of these petitions shall continue to operate till the expire of the period of fifteen days after the Governments fresh decision as per our above directions is reached. Potashes allowed. .