1. Spens, C.J.:—The appellant in this case is the Punjab Flour and General Mills Company. That Company has large mills at Shahdara, Lahore, where, before the recent war, it carried on the business (inter alia) of milling wheat which it imported by rail to its mills. The wagons containing the wheat were drawn by engines to a point known as “the point of intersection” immediately outside the premises of the appellant. There delivery of the wheat was taken by the appellant. From the point of intersection the wagons were hand-hauled into a private siding on the premises of the appellant and there unloaded. In the mills of the appellant the wheat was, by grinding, converted into flour and other consumable products, and the bulk of the wheat was in due course in such converted form again re-exported by rail from the mills. Contracts for sale of flour and other products re-exported by rail were effected through a selling agent in Lahore, or, if effected by agents elsewhere, were confirmed by the appellant at the mills. Prior to 1938 the mills of the appellant were not within the municipal limits of Lahore, but in that year the municipal limits were extended to include Shahdara and the appellant's mills.

2. The first respondent is the Chief Officer of the Corporation of the City of Lahore. The orporation was constituted by the City of Lahore Corporation Act, 1941, and the Chief Officer was appointed under the provisions of that Act. That Act came into force on the 1st July, 1942. The predecessors of the Corporation and its Chief Officer were the Lahore Municipality and later an Administrator, constituted under the provisions of and exercising the powers conferred by the Punjab Municipal Act, 1911, as amended from time to time.

3. By Notification No. 38833 in the Punjab Government Gazette of 19th November, 1926, the Municipality of Lahore duly gave notice of the imposition, under its then existing powers of local taxation, of a tax called a terminal tax calculated on the gross weight of consignments 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. In the taxable articles in the schedule was included grain. By a Notification No. 1380 of 28th April, 1938, the Administrator of the Municipality duly gave notice of the imposition with effect from 1st August, 1938, of a tax in supersession of the tax, the imposition of which was notified in the above-mentioned Notification of November, 1926. The new tax was called “Octroi (without refunds)” and was to be calculated on the gross weight of consignments and on animals per tail at the rates and on the articles specified in the schedule, imported into the limits of the Municipality. Again in the schedule was included grain. In its turn the tax referred to in Notification No. 1380 of 28th April, 1938, was superseded by a tax the imposition of which was notified by Notification No. 422-C of the 6th February, 1940, to take effect from 11th May, 1940. This tax was also called” Octroi (without refunds)” and was to be charged on consignments, including grain, imported into the limits of the Municipality.

4.  Consequent upon the inclusion in 1938 of the appellant s mills within the municipal boundaries and the imposition of the tax called “Octroi (without refunds)” notified by the Notification of April, 1938, above referred to, claims were made by the Administrator for the payment of the said octroi (without refunds) by the appellant in respect of all wheat, including wheat carried by rail, imported by the appellant to his said mills at Shahdara. It was claimed by the appellant that the tax the imposition of which was notified by the Notification of April, 1938, and the tax which superseded it and the imposition of which was notified by the Notification of February, 1940, were, whatever they might be called, terminal taxes on goods carried by railway and as such were not imposable, after the coming into force of the Government of India Act, 1935, by any Province or local authority by reason of entry No. 58 in List I of the Seventh Schedule to the said Act. On behalf of the Municipality it was argued that the taxes in question were clearly within the provisions of entry No. 49 of List II in the said Seventh Schedule and as such were taxes which the Municipality could with the previous sanction of the Provincial Government impose under the provisions of s. 61 (2) of the Punjab Municipal Act, 1911, as modified by the Government of India (Adaptation of Indian Laws) Order, 1937.

5. Section 61 of the Punjab Municipal Act, 1911, gives powers by sub-s. (1) to a Municipal Committee to impose, certain specified taxes subject to certain limitations and then authorises such further taxes as come within sub-s. (2) which as modified as aforesaid, runs as follows:—

“Save as provided in the foregoing clause, with the previous sanction of the Provincial Government any other tax which the Provincial Legislature has power to impose in the Province under the Government of India Act, 1935.”

6. Entry No. 58 in List I of the Seventh Schedule to the Government of India Act, 1935, is as follows:—

“Terminal taxes on goods or passengers carried by-railway or air; taxes on railway fares and freights.”

7. Entry No. 49 in List II in the said Schedule is as follows:—

“Cesses on the entry of goods into a local area for consumption, use or sale therein.”

8. As there was no regular municipal barrier at “the point of intersection” to collect the octroi taxes, the Administrator eventually authorised somewhat violent means to bring the dispute to a head, namely an attempt to seize by a raiding party stocks of wheat and wheat products from the appellant's mills. This raid took place in January, 1941, and resulted in the commencement by the appellant of this suit against the Administrator on the 3rd February, 1941. After the coming into operation of the City of Lahore Corporation Act, 1941, the present first respondent was substituted for the Administrator. Eventually on the 11th June, 1945, a Divisional Bench of the High Court at Lahore (Sir Trevor Harries C. J. and Abdul Rahman J.) dismissed the appellant's action but granted a certificate under s. 205 of the Government of India Act, 1935, whereupon the appellant brought this appeal to this Court.

9. The main point to be decided is whether or not the particular taxes in this case called “Octroi (without refunds)” the impositions of which were notified by the above-mentioned Notifications of April, 1938, and February, 1940, were “cesses on the entry of goods into a local area for consumption, use or sale therein” [entry No. 49 of List II] or whether, as claimed by the appellant, they really amounted to “terminal taxes on goods carried by railway” [entry No. 58 of List I]. A subsidiary point has also to be decided, namely whether, even if these taxes are held to be “cesses on the entry of goods into a local area,” the appellant's wheat in fact entered the area for consumption, use or sale therein.

10. On the main point, the appellant's counsel stressed that the original tax which was imposed in 1926 was imposed as a terminal tax, and was chargeable on grain imported by rail, and that therefore the taxes of 1938 and 1940, if chargeable on grain imported by rail, were only a continuation of the old tax under a new name and were really terminal taxes, and that after the coming into operation of the Government of India Act, 1935, the Provincial or local authority could not impose such terminal taxes. In our judgment no conclusions can possibly be based on the forms of taxes or the nomenclature applied to the taxes imposed prior to 1st April, 1937. The Government of India Act, 1935, made a great alteration in the powers of Provinces and local authorities to impose local taxation, and our enquiry must be limited to an examination of the taxes imposed in 1938 and 1940 to ascertain whether or not the taxes claimed on the grain imported by the appellant did or did not come within the powers of the Province and the Municipality as conferred by the Government of India Act, 1935. Further, our examination must be Directed to ascertain the real nature and incidence of these taxes in fact and for this purpose no great help can be obtained from the use of the names employed or definitions applied by the Municipality to these taxes. So far however as such points can help us, it is to be noted in favour of the Corporation's claim that from 1938 onwards the description terminal tax was in fact not used in regard to the taxes in dispute in this action and that in an extensive revision in 1938, following the coming into effect of the Government of India Act, 1935, of the Lahore Municipal Account Code, [a body of rules dealing (inter alia) with many details of local taxes] a definition of “octroi” was inserted in s. 1 of Chapter V, the Chapter headed “Octroi” defining “octroi” in terms adapted directly from those used in entry No. 49 in List II of the Seventh Schedule to the Act as meaning “a cess on the entry into a municipality of goods for consumption, use or sale therein.” But of course, if, in fact the taxes on examination are really, having regard to their nature and incidence,not cesses on the entry of goods into the Lahore Municipality at all but terminal taxes on the carriage of goods by rail, the names and definitions given and applied by the Municipality to the taxes could not bring them within the taxing powers conferred on Provinces by the Government of India Act, 1935.

11. There appears to us a definite distinction between the type of taxes referred to as terminal taxes in entry No. 58 of List I of the Seventh Schedule and the type of taxes referred to as cesses on the entry of goods into a local area in entry No. 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 referable 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 No. 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 consumption, use or sale therein. It is to be noted that there is no limitation on the manner by which the goods to be subjected to such cesses may enter. There is no ground for suggesting that entry of goods by rail or air is any less contemplated than entry by waterway or road. It was argued by the appellant's counsel that because by entry No. 20 of List I Federal railways and the regulation of railways and so forth is included in the Central Government Legislative List and by List II the Provincial Government is mainly given the powers of legislation over roads and internal waterways and transport thereon [entry No. 18], it should therefore be deduced that all taxation on rail and air borne goods must be imposed, if at all, under the powers conferred by entry No. 58 of List I and that powers of taxation conferred by entry No. 49 of List II must be confined to goods that enter by road or internal waterway only. We cannot accept this argument. It is not in our judgment justified by the wording of the various entries in the two Lists and would impose a limitation on local taxation under entry No. 49, List II, which would often work most inequitably in practice between those importing goods by road or waterway and those who, could import by rail or air. In our judgment there is no limitation to be implied in entry No. 49, List II, in regard to the manner in which goods may be transported into a local area. It follows that so far as rail borne goods are concerned, the same goods may well be subjected to taxation under entry No. 58 of List I as well as to local taxation under entry No. 49 of List II. The grounds of taxation under the two entries are, as indicated above, radically different, and there is no case for suggesting that taxation under the one entry limits or interferes in any way with taxation under the other.

12. It now remains to determine, having decided that taxation of rail borne goods may be authorised by entry No. 49 of List II, whether in this-case the disputed taxes were cesses on the entry of goods into Lahore municipal limits. In both the Notifications of 1938 and 1940 the tax is notified as imposed on consignments of goods and animals “imported into the Limits of the Municipality as notified from time to time in the Punjab Government Gazette” with provisions exempting certain articles. On the face of the Notification the tax is leviable solely in respect of the importation. There is no reference to method of transport or carriage. There is also no express reference on the face of the Notification to the limitation imposed by entry No. 49 itself, namely, that the taxation must be limited to goods entering for consumption, use or sale in the area. That limitation appears to have been expressly brought into effect by the insertion of the definition of octroi in the amendments of 1938 to the Municipal Account Code referred to earlier. But the absence in the Notifications themselves or elsewhere of any express reference to the limitation would not make the taxes cease to be taxes on the entry of goods into an area if that were the basis of imposition and claim. In the Notification there is no sort of suggestion that the taxes are terminal taxes. It was argued that as the taxes were expressly imposed “without refunds”, that indicated that they were really terminal taxes and in this connection we were referred to the judgment of Becket J. in an unreported case in the High Court at Lahore of Dwarka Tea Das v. The Administrator, City of Lahore Corporation, Regular Second Appeal No. 430 of 1942. We were wholly unable to appreciate either the reasoning or conclusions of the learned Judge. We can see no cause whatsoever for holding that if cesses are imposed in pursuance of the powers conferred by entry No. 49 in List II, any provision need be made for refands. Whether or not there should be any refunds in respect of such cesses appears to us to be a matter open for determination by Provincial or local taxing authority, and the existence or non-existence of a provision or system of refunds cannot affect the tax being or not being a cess within entry No. 49.

13. In our judgment the impositions disputed in this case are not terminal taxes within entry No. 58 of List I but are cesses on the entry of goods into a local area within entry No. 49 of List II and were, therefore, properly imposed by the Lahore Municipality in 1938 and 1940 even on rail borne goods entering the municipal area and were payable by the appellant Company provided that the wheat, the taxes on which are disputed, in fact entered the municipal area for consumption, use or sale therein.

14. On this last point, it should be stated that the appellant never disputed paying the taxes in question on such flour or other products of the wheat as were in fact consumed by or delivered to persons inside the municipal limits. The dispute was confined to the claims for taxes on wheat which was imported by rail by the appellant to its mills for grinding into flour or other products, such or a similar amount of flour or other products being then re-exported by rail to places outside the municipal limits to purchasers or agents for sale. In some cases the flour or other products of the wheat were used to fulfil contracts for sale of flour and such other products entered into before the wheat arrived at the mills. Sometimes the flour and other p roducts were used to fulfil contracts entered into whilst the wheat was at the mill. In other cases the flour and other products were re-exported to be sold by agents outside the municipal limits. In all cases the wheat was converted by grinding into flour and other products and it was the flour and other products that were re-exported. The learned Judges of the High Court were agreed that the conversion of the wheat by grinding into flour or other products involved an user by the appellant of the wheat. We agree. We do not think it possible for the appellant to deny that it used the wheat in its mills to convert it into the flour and other products, in which it did business. It also seems clear that in many cases contracts for sale were entered into or confirmed within the municipal limits in respect of the wheat products. In our judgment all the wheat imported by the appellant by rail, the taxes on which are in dispute in this case, entered the municipal limits of Lahore for consumption, use or sale therein. The claim for the disputed taxes was well founded and this appeal is therefore dismissed with costs.

15.  Having regard to our conclusion it is unnecessary to consider whether the octroi taxes in question are continuing taxes within the meaning of s. 143 (2) of the Government of India Act, 1935.