Full Judgment Text
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PETITIONER:
TATA ENGINEERING AND LOCOMOTIVECOMPANY LTD. AND ANR.
Vs.
RESPONDENT:
MUNICIPAL CORPORATION OF THE CITY OF THANE AND ORS.
DATE OF JUDGMENT22/11/1991
BENCH:
RAMASWAMI, V. (J) II
BENCH:
RAMASWAMI, V. (J) II
AHMADI, A.M. (J)
RAMASWAMY, K.
CITATION:
1992 AIR 645 1991 SCR Supl. (2) 445
1993 SCC Supl. (1) 361 JT 1991 (6) 322
1991 SCALE (2)1111
ACT:
Maharashtra Municipalities (Octroi) Rule, 1968:
Rule 25 (3) (d)--Octroi--Levy of-Goods imported within
municipal limits and stored in Warehouse for temporary
detention and eventual exports--Goods sold within municipal
limits for export and consumption outside municipal
limits---Held octroi not leviable--Taxable event of
octroi--What is.
Rules 28,29 and 30--Octroi---Refund of-Non-compliance
with procedure-Effect of--Compliance with procedure not a
condition precedent for eligibility of refund----Compliance
with procedure shall be tested having regard to the nature
of transaction and the object of procedure.
Doctrine of unjust enrichment--No evidence to suggest
that octroi levied was recovered from customers-Refund of
octroi would not lead unjust enrichment.
Rule 24--Octroi--"Breaking the bulk"--Procedure to be fol-
lowed-Rule 24 held not inconsistent with Rule 62 of Chapter
VIII of the schedule to the Bombay Provincial Municipal
Corporation Act, 1949 Object of Rule 24(2) explained.
Rule 28(2) (b)---Refund of octroi-Requirements of-Re-
quirement of exporting goods out of municipal limits within
six months of import-Proof of--Equitable principle "first
export was of goods first imported"---Applicability of.
HEADNOTE:
The appellant-company was carrying on business of manu-
facture and sale of motor vehicles, spare parts of motor
vehicles and excavators. Their manufacturing units were
located outside the municipal limits of the respondent
corporation. Pursuant to the permission granted by the
Respondent Corporation under Rule 10(2) of
446
the Maharashtra Municipalities (Octroi) Rules, 1968 the
appellant company was maintaining a bonded warehouse within
the municipal limits of the Respondent-Corporation. The
motor vehicles parts and excavators parts brought from the
Company’s own factories as well parts imported from abroad
were stored in this warehouse. These products were brought
in bulk and thereafter taken or sent out from the Municipal
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limits in smaller packings depending on the requirements of
the customers in various parts of the country.
The appellants were also granted current account
facilities without the requirement of immediate payment of
octroi at the Octroi Naka. Accordingly, the appellants were
carrying out their activities of imports and exports under
the current account procedure with facility of unpacking the
bulk, repacking and exporting.
Under the Octroi Rules the octroi becomes refundable
when the goods in respect of which octroi was paid are
exported out of octroi limits within 6 months of their im-
port. During the period 1st January, 1983 to 31st March,
1984 the appellant-Company made 1182 claims for refund of
octroi which were rejected by the Corporation on the
grounds: (1) the Company had "sold" the spare parts within
the octroi limits of the Corporation in contravention of
Rule 25(3) (d) of the Maharashtra Municipalities (Octroi)
Rules, 1968; (2) the procedure prescribed for export and the
claim of refund had not been strictly followed.
The appellants filed a writ petition under Article 226
in the High Court of Bombay contending that the action of
the Municipal Corporation in refusing refund was unconstitu-
tional and illegal. The Division Bench of the High Court
dismissed the writ petition. The Company filed an appeal in
this Court against the decision of the High Court.
In appeal to this Court it was contended on behalf of
the appellant (i) since the sales were not for consumption
or use within the octroi limits and that the parts were sold
to parties outside the octroi limits and also for consump-
tion or use outside such limits the rejection of the claims
by the Respondent-Corporation on the ground that the sales
were within the municipal limits in contravention of rule
25(3) (d) of the Rules is illegal; (ii) Under Rule 62 of
Chapter VIII of the Schedule to Bombay Provincial Municipal
Corporation Act, 1949, prior intimation of the intention to
’break the bulk’ is enough and there is no necessity for the
company to get the sanction
447
of Superintendent of Octroi or break the bulk in the
presence of an officer deputed for the purpose as required
under sub-rule (2) of Rule 24 of the Maharashtra Municipali-
ties (Octroi) Rules, 1968; Rule 24(2) of the Octroi Rules is
inconsistent with Rule 62 and to the extent of inconsistency
it shall be deemed to be not applicable.
On behalf of the respondent Corporation it was contended
(i) that the meaning of words "sales therein" in the defini-
tion of octroi in the Acts and in Entry 52 of List II of VII
Schedule to the Constitution could not be limited to sales
of the goods for purposes of consumption or use within the
municipal limits; (ii) there was a change in the ownership
of the goods since a sale in law had taken inside the octroi
limits though the purchaser was residing and carrying on
business outside the octroi limits and under the sale the
goods were intended to be and in fact exported for the
purpose of consumption and use outside the octroi limits;
(iii) that while Rule 62 (c) deals with prior intimation
Rule 24(2) deals with the sanction and breaking of the bulk
in the presence of an officer deputed for that purpose and
both the rules can stay together and operate and there is no
inconsistency; (iv) since the appellants have recovered the
amounts paid by them by way of octroi duty from their deal-
ers or customers they are not entitled to refund; ordering
of refund would amount to allowing the appellants to unjust-
ly enrich themselves at the cost of the public to whom the
burden had already been passed.
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Allowing the appeal, this Court,
HELD: 1. In the case of impost of octroi the taxable
event is the entry of goods which are meant to reach an
ultimate user or consumer in the area. Mere physical entry
into the octroi limits would not attract levy of octroi.
When the goods are brought in not for consumption within the
area but for temporary detention and eventual export, octroi
is not leviable. The octroiable event in such a case shall
be deemed not to have happened. This is particularly so
because in the case of goods not consumed or used within the
octroi area but exported there is a constitutional bar for
the levy of octroi. In view of the constitutional bar,
octroi is not leviable if the goods are not brought into the
octroi area for purposes of consumption or use in the area
but for export and in fact exported by the importer himself
or the sale by him occasions the export. [458-B-C, 472 H,
473-A, 475-E]
1.1 Having regard to the nature and incidence of octroi
unless the octroiable goods are consumed or used or are
meant to reach an
448
ultimate user or consumer in the octroi area no octroi is
leviable. The words ’sale therein’ in the words ’consump-
tion, use or sale therein’ in the definition octroi means
sale of octroiable goods to a person for the purpose of
consumption or use by such person in the octroi area. If
sale was intended for consumption or use in the octroi area
whether the purchaser actually consumed inside or outside
octroi area is irrelevant. Therefore octroi rules cannot be
read as enabling the municipality to levy and collect octroi
even in cases where the goods have not been imported for
consumption or use. [475-C, 474-B]
Burmah Shell Co. v. Belgaum Municipal, ll963I Suppl. 2
S.C.R. 216; Hira Lal Thakur Lal Dalai v. Brash Broach Munic-
ipality, [1976] Suppl. SCR 82; Municipal Council of Jodhpur
v. Parekh Automobiles Ltd. & Ors., [1990] 1 S.C.C. 367 and
H.M.M. Ltd. v. Administrator, [1989] 4 S.C.C. 640, relied
on.
Khandelwal Traders Akola v. The Akola Municipal Council,
AIR 1985 Born. 218, approved.
1.2 Since the goods were sold by the Company to outside
purchasers and the goods under the transactions of sale were
intended to be exported and were in fact exported, for
consumption or use outside the municipal limits no octroi
duty was leviable and the octroi duty paid on entry into the
municipal limits was, therefore, liable to be refunded.
Accordingly the rejection of the refund claims on the ground
that Rule 25(3) (d) had not been strictly complied with is
illegal and could not be sustained. [457 G-H]
2. Once octroi is not leviable the deposit made by the
importer pending export is in the nature of a trust and
refundable in the event of the export of the goods. [473-G-
H]
2.1 Under the octroi scheme, when the goods in respect
of which octroi is paid are exported, the octroi becomes
refundable. Right to refund arises because the goods are not
consumed inside the area but exported and the tax becomes
not leviable. [458-C]
2.2 If there is no consumption or use, octroi is not
attracted and if any levy has been made and the amount
collected, the same becomes legally refundable even when the
goods are exported in parts and in smaller packages. [472-H]
3. The rules merely regulate the system on which refund
shall
449
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be allowed. In a given set of facts, whether the rules have
been complied with will have to be tested having regard to
the nature of the particular transaction and whether the
object of the procedure provided is otherwise fully satis-
fied. [458-D, 473 H, 474-A]
3.1 The object of requiring intimation or sanction and
presence of an officer when breaking the bulk in the scheme
of octroi levy and refund is to ensure that dutiable goods
do not escape the assessment and refunds are made only in
respect of goods exported. In other words the whole require-
ment relates to the identification of the goods. In that
sense if the same is otherwise complied with the right to
refund cannot be denied. [474 A-B]
3.2 Rules 24 to 30 of the Maharashtra Municipalities
(Octroi) Rules, 1968 and the forms in the system of levy of
Octroi are intended to regulate the procedure for collection
identification of dutiable goods and correlation of goods
exported with the goods imported for the purpose of refunds
of octroi collected. [475-D]
The rules do not contain any specific provision that an
applicant for refund who has failed to follow the procedure
would be disentitled to claim the refund. [473-G]
3.3 Compliance with the procedure prescribed in the
Rules for filing claims of refunds are not conditions prece-
dent for the right or eligibility for refund or the liabili-
ty to refund but are provisions regarding proof of export of
the goods imported and are not meant to be exhaustive ei-
ther. They are to be interpreted and understood in that
sense. [475 E-F]
Municipal Committee Khurari v. Dhannalal Nethi & Ors.,
[1969] 1 S.C.R. 166; Kirpal Singh Duggal v. Municipal Board,
Ghaziabad, [1968I 3 S.C.R. 551, applied.
3.4 Since the rejection of the claims for refund was
merely on the ground that either form 4 and original in-
voices were not produced or columns 5 and 6 of Form 11 or
the corresponding columns in Form 12 had not been filled
with reference to an original invoice or Form 4 or deposit
receipt and the refusal to issue export pass certificates on
those very grounds are untenable the orders of rejection are
invalid. 1475 G-H]
4. The object of the Rules fixing a period of limitation
for
450
export however is different. The export cannot be put in
perpetual doubt and the goods may be considered to have come
to a repose if they were not exported within a particular
period provided in the rules. [475-F]
4.1 However an equitable principle could be followed in
this regard and it may be presumed that the goods which came
in first have gone out first. If the goods are mixed up and
unidentifiable due to breaking bulk and repacking in smaller
and assorted packages before export the principle that the
first export was of the goods first imported, subject to any
evidence available to the contrary, may be applied and the
six months period prescribed under Rule 28(2) (b) for export
may be determined accordingly. [475 A-B, H, 476-A]
Clayton’s case, 1814-23 All. E.R. 1, applied.
5. There is no inconsistency between Rule 62 and Rule
24(2). The intimation contemplated in Rule 62 imply that the
breaking the bulk shall be done with the knowledge of the
octroi authorities. But it cannot be said that the rules
further provide that after intimation the breaking of the
bulk shall be done in the presence of the officers and after
sanction that would in any case be inconsistent. Therefore,
both the rules can stand together. [471 F-G]
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6. There in no evidence that any of the articles sold
by the Company is subject to any price control by the Gov-
ernment or that the Company had charged any octroi separate-
ly in the bills. Documentary evidence do not also show that
any octroi was separately charged and collected by the
Company. Therefore the question of unjust enrichment does
not arise. [476 F-H]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4702 of
1991.
From the Judgment and Order dated 26.8.88 of the Bombay
High Court in W.P. No. 2264 of 1984.
T. Andharujina, F.H. Talyarkha, R.F. Nariman, R. Narain,
Ashok Sagar and Ms Amrita Mitra for the Appellants.
K.K. Singhvi, B.N. Singhvi and Anil K. Gupta for the Re-
spondents.
The Judgment of the Court was delivered by
451
V. RAMASWAMI, J. Leave granted.
The First appellant--Tara Engineering and Locomotive
Company Limited (hereinafter called the ’Company’) is a.
company registered under the Indian Companies Act, 1913 and
the second appellant is one of its Directors. The Company is
carrying on business of manufacture and sale of motor vehi-
cles and spare parts of motor vehicles and excavators. Their
manufacturing units are at Pune and Jamshedpur outside the
Thane Municipal Corporation limits. They have a bonded
warehouse within the municipal limits in which they bring
and stock motor vehicles parts’and excavators parts from
their own factories at Pune and Jamshedpur. They also bring
in parts manufactured by their ancillaries within India and
also parts imported from aboard. These products or parts are
brought in bulk and thereafter taken or sent out from the
Municipal limits in smaller packings depending on the re-
quirements of the customers in various parts of the country.
It is stated that the parts imported or purchased from
others and brought in are relatively very small in quantity
and the major portion of the activity related to their own
factory produced parts.
On and from 1 st October, 1982 with the notification
under Section 3 of the Bombay Provincial Municipal Corpora-
tion Act, 1949, the Thane Municipal Council became a Munici-
pal Corporation (hereinafter called the Corporation). Prior
to the constitution of the Corporation it was a municipality
and were governed by the Thane Municipal Council constituted
under the Maharashtra Municipality Act, 1965. Prior to 1 st
October, 1982 the Thane Municipal Council had granted to the
Company current account facilities in respect of payment of
octroi under the Maharashtra Municipalities Act, 1965 and
the Maharashtra Municipalities (Octroi) Rules, 1968 made
thereunder. The Municipal Council had also granted permis-
sion under Rule 10 (2) to the Company for maintaining a
godown or warehouse of their own. Their is no dispute that
even after the coming into existence of the Thane Municipal
Corporation the appellants were permitted to have a ware-
house of their own and keep a current account facility
without the requirement of immediate payment of octroi at
the Octroi Naka. In terms of granting those facilities the
Company had made as security a cash deposit of Rs. 7 lakhs
with the Corporation and had also given a Bank Guarantee for
an equivalent amount as agreed to between the Company and
the Corporation. However, there is some dispute as to what
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were the formalities that were dispensed with in the matter
of claiming refund of the octroi when the goods were export-
ed. But suffice it to say at this stage that the appellants
were permitted to carry out their activities of imports and
exports under the current account procedure with a facility
of unpacking the bulk, repacking and exporting.
452
During the period 1st January, 1983 to 31st March, 1964
it is stated that the appellants had made 1182 claims for
refund. All these claims were rejected by the letters of the
Corporation dated 31.8.1983, 12.1. 1984, 5.4.1984 and
6.4.1984. They were rejected on the following two grounds:
(1) the Company had "sold" the spare parts within the octroi
limit (which is co-terminus with the Corporation limit) in
contravention of Rule 25 (3) (d) of the Maharashtra Munici-
palities (Octroi) Rules, 1968 (hereinafter called the
"Rules"), (2) the procedure prescribed for export and the
claim of refund had not been strictly followed. The non-
compliance with)the procedure prescribed referred to in the
second ground according the Corporation were: (i) Form 4 of
the Octroi Rules and the original invoices were not submit-
ted, or (ii) Forms 11 and 12 filed were incomplete and all
the required information were not given or (iii) certificate
of the Octroi exit Naka Officer had not been obtained. The
rejection of the claim was either on one or more than one or
all the grounds mentioned above. The appellants filed a writ
petition under Article 226 in the High Court of Judicature
at Bombay contending that the action of the Municipal Corpo-
ration in refusing refund is unconstitutional and illegal
and for certain other reliefs. The Division Bench of the
High Court which heard the same dismissed the writ petition
on the 26th August, 1988. It is against this judgment that
the present appeal has been filed.
It appears that during the hearing of the writ petition
the learned counsel appearing for the Corporation did not
counter the contention of the Company that the rejection
under Rule 25 (3) (d) was not correct and the learned Judges
have also recorded the same in the judgment. But the learned
counsel for the respondent before us stated that it is not
correct to say that he had conceded any point and that since
he could not argue that point in view of the decision of
another Division Bench of the same High Court in Khandelwal
Trader Akola v. The Akola Municipal Council, AIR 1985 Bombay
218 which was binding on the Bench which heard the writ
petition and also in view of certain observations of this
Court in Burmah Shell Company v. Belgaum Municipal, [1963]
Suppl. 2 SCR 216 and Hiralal Thakorlal Dalai v. Brash Broch
Municipality, [1976] Suppl. SCR 82 he did not press the
point. We have therefore, permitted the point to be argued
in this appeal.
Before we discuss the points in controversy we may state
that in the counter-affidavit filed in the writ petition the
respondents have admitted that the Company was enjoying the
current account facility prior to 1.10. 1982 and the re-
spondent-Corporation had also given the said facility to the
Company even after 1st October, 1982 on their making a cash
deposit of Rs. 7 Lakhs and furnishing a Bank Guarantee for a
like sum as security
453
for grant of that facility. The respondent had also admitted
that the Company had been given permission under Rule 10 (2)
to maintain their own godown from 12th December, 1982.
Broadly stated under the current account facility granted,
no octroi duty is recoverable in cash from the appellants at
the entry octroi naka point. However, the Company was re-
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quired to submit a statement of goods imported in Form 5
before the 10th of the following month. The officers of the
respondent after scrutiny of the statement so filed deter-
mine the octroi duty payable thereon and debit the amount in
the current account kept and send a demand notice to the
company. The Company is required to pay the amount to the
Corporation within 15 days of the determination of duty.
The first submission of Mr. Andharujina, learned counsel
for the appellants was that the sales were not for consump-
tion or use within the octroi limits and that the parts were
sold to parties outside the octroi limits and also for
consumption or use outside such limits and therefore the
rejection of the claims on the ground that the spare parts
were sold within the municipal limits and that it amounted
to a contravention of Rule 25 (3) (d) of the Rules is ille-
gal. Mr. K.K. Singhvi, the learned counsel for the Corpora-
tion on the other hand contended that the meaning of words
"sales therein" in the definition of octroi in the Acts and
in Entry 52 of List II could not be limited to sales of the
goods for purposes of consumption or use within the munici-
pal limits.
When an importer wants to export dutiable goods tempo-
rarily detained by him in his own godown he shall present an
intimation-cumapplication for written permission in Form 11
to the Superintendent of Octroi to export such goods. Rule
25 (3) (d) states that no such intimation shall be accepted
unless:
.LM15
"the exporter and the importer of these goods
are one and the same person and such articles
have not undergone change of ownership"
.LM0
The case of the Corporation was that there was a change
in the ownership of the goods since a sale in law had taken
place inside the octroi limits though the purchaser was
residing and carrying on business outside the octroi limits
and under the sale the goods were intended to be and in fact
exported for the purpose of consumption and use outside the
octroi limits.
Section 127 of the Bombay Provincial Municipal Corporation
Act,1949 and the corresponding S. 105 of the Maharashtra
Municipalities Act,1965 authorises the Muncipality to levy
"Octroi". Both these Acts define
454
octroi as meaning a tax on the entry of goods into the
municipal area "for consumption, use or sale therein". The
Maharashtra Municipalities (Octroi) Rules 1968 made under
the Maharashtra Municipalities Act, 1965, provides for the
levy, collection and refunds of octroi duty on the goods
specified in the schedule thereunder and the procedure for
the same. These Rules were in force in Thane Municipality
before Thane was declared as "City" under the Bombay Munici-
pal Corporations Act LIX of 1949. However these Rules are
continued in the Thane Municipal Corporation by virtue of
paragraph 5 of Appendix IV to the Act LIX of 1949.
The legislative entry relating to the constitutional
power to levy this tax is found in List II Entry 52 of the
7th Schedule to the Constitution which reads:
"52. Taxes on the entry of goods into a local
area for consumption, use or sale therein".
The Bombay Municipal Boroughs Act, 1925 which was in
force prior to the enactment of the Maharashtra Municipali-
ties Act, 1965 also contained a similar provision in section
73 enabling the Municipalities covered by that Act to levy
"Octroi on animals or goods or both brought within the
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octroi limits for consumption or use therein". This provi-
sion was amended by Amending Act 35 of 1954 by substituting
the words "use or sale" for the words "or use" with effect
from May 5, 1954. In other words before 1954 the word "sale"
was not included in the provision of octroi on goods which
the Municipality was authorised to impose. After the amend-
ment the Municipality could levy octroi on goods brought
within the octroi limits "for consumption, use or sale
therein". This provision came up for consideration in Burmah
Shell case (supra). Two of the categories of transactions
which were considered in this case related to transactions
under which (1) goods were sold by the Company through its
dealers or by itself and consumed within the octroi limits
by persons other than the Company and (2) goods sold by the
Company through its dealers or by itself inside the octroi
limits to other persons but consumed by them outside the
octroi limits. The Company contended that the tax could not
be collected on goods which were merely sold but not con-
sumed inside the octroi limits. In connection with this con-
tention this Court considered the meaning of words "consump-
tion, use or sale therein" and observed:
"It is not the immediate person who brings the
goods into a local area who must consume them
him-self, the act of consumption may be post-
poned or may be performed by someone else but
so long as the goods have been brought into
the local
455
area for consumption in that sense, no matter
by whom, they satisfy the requirements of the
Boroughs Act and octroi is payable".
" ..... The goods must be regarded as having
been brought in for purposes of consumption
when a person brings them either for his own
use or consumption, or to put them in the way
of others in the area, who are to use and
consume".
And concluded holding:
"In our opinion, the Company was liable to pay
octroi tax on goods brought into local area
(a) to be consumed by itself or sold by it to
consumers direct and (b) for sale to dealers
who in their turn sold the goods to consumers
within the municipal area irrespective of
whether such consumers bought them for use in
the area or outside it. The Company was,
however, not liable to Octroi in respect of
goods which it brought into the local area and
which was re-exported".
The ratio is thus not a mere sale inside that attracts
octroi but a sale intended for consumption of the goods
inside the octroi area though ultimately the person to whom
it was sold for consumption does not consume the goods
inside but does the same outside the limit.
After consideration of the judgment in Burmah Shell
Company’s case (supra) the Gujarat High Court in one of the
cases arising for refund of octroi duty paid, took the view
that octroi leviable on goods brought within the octroi
limits ’for consumption, use or sale therein’ and that the
word ’sale’ could not be given the narrow meaning of a sale
for consumption to the ultimate consumer within the octroi
limits. Accordingly if the goods were sold within the octroi
limits by the importer even if it resulted in export and
consumption was also outside the octroi limit, octroi duty
paid is not refundable. This decision came up in appeal
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before this Court and the decision of this Court is reported
in Hiralal Thakorlal Dalai v. Brash Broach Municipality,
[1976] Suppl. SCR 82. On facts that case related to a con-
signment sale and the goods were despatched to destination
outside octroi limits for consumption there. A plea for
review of the decision in Burmah Shell Company s case
(supra) was also made in this case. However a Constitution
Bench rejected the request for reconsideration and held that
the word "sale" in the colloquium of the words "consumption,
use or sale therein" means sale for consumption within the
octroi limits. The ratio of these two decisions was consid-
ered by the Bombay High Court in Khandelwal Traders Akola’s
case (supra), which was referred to in the Judgment under
appeal. It was held in this case also
456
that where a dealer imports goods within the octroi limits
not for ultimate consumption or sale for consumption within
the limits but for the purpose of export and obtain permis-
sion for export he is not liable to pay octroi on such goods
notwithstanding that in the larger sense for purposes of
export he sells the goods within the octroi limits, that is
to say even where the situs of the sale could be fixed
within the octroi limit. The matter is now put beyond any
pale of doubt by the latest decision of this Court in Munic-
ipal Council, Jodhpur v. M/s. Parekh Automobiles Ltd. &
Ors., [1990] 1 SCC 367. Rule 13 (4) of the Rajasthan Munici-
pal Octroi Rules, 1962 which was one of the provisions
considered in this case provided that
"In cases provided for in sub-rule (3) (that
is who is given the account current
facility)amount of octroi duty payable shall
be based on the total amount of the octroi as
shown by the entry passes less the total
amount of goods transported outside the munic-
ipal limits as shown by the transport passes:
Provided that in computing the octroi duty
payable under subsection (4), the goods trans-
ported outside the municipal limits shall be
lessened only if such goods have not been sold
within the municipal limits and if they have
been exported out of such limits within a
period of six months from the date of their
import in such limits".
Relying on this provision the municipality in that case
contended that if the sale had taken place within the octroi
limits though the sale was not for consumption or use within
the octroi limits, duty was payable and no refund could be
claimed. The learned Single Judge who heard the matter in
the High Court did not permit the importer to raise the
question that the sale took place only outside the octroi
limits of Jodhpur and proceeded on the footing that the sale
of product in question took place within the octroi limits
of Jodhpur. He however accepted the contention of the Indian
Oil Corporation (importer) that the sale to the dealer was
for the purpose of export and the dealer did export the
goods outside the octroi limits and that, therefore, even if
the sale was said to have been effected within the octroi
limits no octroi was leviable. Since admittedly the goods
had been sold in Jodhpur octroi limits only for their on-
wards transmission for use and consumption in Dangia was
outside the octroi limits he held that no octroi duty was
payable. This view of the learned Single Judge was confirmed
on appeal by the Division Bench of the High Court. On appeal
this Court confirmed this view and held that the Indian Oil
Corporation (importer) who had the current account facility
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and gov-
457
erned by the terms of rule 13 was entitled to go on paying
octroi duty "on to basis of the goods brought by it within
the municipality less the goods transported outside the
municipality even where the transport outside the municipal-
ity may be in pursuance of a sale within the municipality so
long as such sale is in pursuance of an intention that the
goods should be consumed or used outside the municipal
limits".
In the present case the sales were to person who were
carrying on business outside the limits of the Corporation
and the goods were also intended to be consumed or used
outside such limits and in fact the goods were also export-
ed. The ratio of the decisions above referred clearly,
therefore, governs this case, even if it were to be assumed
that the sale in the general sense took place inside the
municipal limits.
However we may state that it was the contention of the
learned counsel for the appellant that the sale in fact took
place outside the municipal limits and in support of this
contention he relied on the following facts among others.
The spare parts were consigned by the Company to out station
purchasers. The goods were transported by the Company them-
selves across the octroi limits. The consignment or lorry
receipt mentioned the consignee as self. The bills for
collection were sent through Bank and the goods were not to
be delivered to the consignee until the payment was made by
the consignee through the Bunk. Right of disposal expressly
reserved with the vendor. On the other hand on behalf of the
Corporation it was contended that orders were both received
and accepted in Thane, goods were despatched from Thane and
challans were also made in the name of the buyers and the
property in the goods passed within Thane. The sale had in
fact taken place within municipal area. In fact he further
contended that being a question of fact we are not entitled
to go into the same in view of the finding of the High
Court. It is not necessary for us, however, to consider this
aspect and we would for the purpose of this case proceed on
the assumption that technically the sale in law had taken
place inside the municipal limits.
Since the goods were sold by the Company to outside
purchasers and the goods under the transactions of sale,
were intended to be exported and were in fact exported, for
consumption or use outside the municipal limits no octroi
duty was leviable and the octroi duty paid on entry into the
municipal limits was, therefore, liable to be refunded.
Accordingly the rejection of the refund claims on the ground
that Rule 25 (3) (d) had not been strictly complied with is
illegal and could not be sustained. Such of those claims
which were rejected only on the grounds of contravetion of
458
Rule 25 (3) (d) shall now be taken up by the respondent and
passed for payment.
In the case of impost of octroi the taxable event is the
entry of goods which are meant to reach an ultimate user or
consumer in the area. Mere physical entry into the octroi
limits would not attract levy of octroi. When the goods are
brought in not for consumption within the area but for
temporary detention and eventual export, octroi is not
leviable. But in order to ensure, in such circumstances,
that the goods are exported and to prevent evasion of octroi
on goods consumed inside the octroi limit, Rules provide for
deposit of a certain sum of money or the actual octroi duty
payable subject to a right to get a refund of the same when
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the goods are exported. When the goods in respect of which
octroi was paid are exported, the octroi became refundable
and that is the very scheme of the ’ levy of octroi. The
octroiable event in such a case shall be deemed not have
happened. Right to refund arises because the goods are not
consumed inside the area but exported and the tax becomes
not leviable. The rules merely regulate the system on which
refunds shall be allowed. The procedure prescribed and the
need to adhere to the procedure shall have to be considered
in the light of these legal incidence and nature of octroi
duty.
Before we deal with the question whether the Company had
not followed any of the procedure prescribed and the right
of the Corporation to deny refund of octroi on non-compli-
ance with any of those provisions in the Rules, it is neces-
sary to broadly set out the different types of procedures
prescribed, depending on different purposes of imports and
exports, contemplated under the Rules. This may be broadly
classified into five categories, (i) goods imported for
Consumption, use or sale in the municipal area, (ii) goods
imported not for consumption, use or sale within the munici-
pality but for immediate export, (iii) goods intended to be
temporarily detained within the municipality in the bonded
warehouse maintained by the Corporation and eventual export;
(iv) goods intended for temporary detention in the private
licensed bonded wharehouse of the importer and eventual
export; and (v) goods imported by any person, mercantile
firm or body which has been permitted by the municipal
Corporation to keep an current account. In the first case,
since octroi is attracted on arrival of the dutiable goods
at the Octroi Naka the importer pays the amount of octroi
assessed by the octroi officer and takes the goods inside
the municipal limits. In the second case, the importer gives
a declaration-cum application that the goods are not being
imported in the municipal limits for consumption, use or
sale but are intended for immediate export outside the
octroi limits. He is required to deposit an amount in
459
accordance with the scale fixed under clause (b) of sub-rule
(1) of Rule (5). On such deposit being made a receipt is
given in the form prescribed by the Entrance Naka Inspector
and a written permission-cum-transit pass issued by the
Octroi Officer. On arrival of the goods at the exit Naka and
on surrender of the written permission-cum-transit pass the
deposit amount is refunded. In the third category of cases,
the importer makes an application to the Octroi officer at
the Entrance Naka for a written permission to deposit such
goods at the bonded warehouse maintained by the Corporation.
The Octroi Officer then makes an entry on the application
that the importer is allowed to proceed with the goods to
the bonded warehouse. The Officer in-charge of the bonded
warehouse will receive the goods and keep them in the bonded
warehouse until exported. When the importer wants to export
the goods he is required to apply for a written permission-
cum-export pass in the prescribed form and also deposit an
amount equal to the octroi leviable therein. On such deposit
made a written permissioncum-export pass is issued. When the
goods are taken out of the municipal limits the Officer
Incharge of the Exit Naka endorses the export pass certify-
ing the export and the refund of the deposit is claimed
thereafter producing the certificate issued by the Exit Naka
Officer. In the fourth category, the importer gives a decla-
ration in Form 4 that the goods are meant for temporary
detention with him at his own warehouse for eventual export.
After verification of the particulars furnished in that form
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with the invoices and other documents produced he is re-
quired to deposit at the Entry Octroi Naka point itself an
amount equal to the amount of full octroi duty thereon as
deposit. A receipt is given by the Octroi Inspector stating
that the said amount "on account of deposit" has been recov-
ered. When he wants to export the dutiable goods detained
with him he presents an intimation-cum-application in Form
11 for written permission to export the goods. He is also
required to produce the goods at the Central Octroi officer
along with the application. On satisfaction that all the
conditions prescribed have been fulfilled and after verifi-
cation of the goods a written permission-cum-refund export
pass in Form No. 12 is given to the importer. On presenta-
tion of these documents the Octroi officer at the Exit Naka
gives a certificate that the goods mentioned therein have
passed octroi limits and with that the refund application is
made and refund obtained.
The instant case falls under the fifth category. The
Company has been permitted by the Municipal Corporation to
keep the dutiable goods in a bonded warehouse of their own
with a current account facility. The rules which were relied
on by the Respondent and some of which are said to have not
been complied with by the Company may be set out:
"10. Maintenance of Bonded Warehouses. -
460
(1) x x x
(2) A Council may permit any importer to
maintain a private Bonded Warehouse for keep-
ing goods which are imported by such importer
for temporary detention and eventual export
and grant a licence to such importer for that
purpose subject to the conditions and restric-
tions laid down in such licence. A fee shall
be charged for such licence at the rates
specified in the bye-laws relating to the
grant of such licence."
"14. Declarations to be made by importer,
etc.- (1) On arrival of any dutiable goods at
the Octroi Naka, the Octroi Officer shall call
upon the importer or the driver of the Vehicle
or conveyance or the person incharge of the
pack-animal or other persons bringing the
goods-
(a) X X X X
(b) X X X X
(C) X X X X
(d) to make a declaration in Form 4, in
respect of the goods intended for temporary
detention with himself and eventual export;
(e) to make a declaration in Form 5, in
respect of the goods imported by, or on behalf
of, any person, mercantile firm or body which
has been permitted by the Council to keep an
account current under Section 142;
"15. Procedure for assessment and recovery of
octroi. -
(4) On receipt of a declaration in Form 5
under the last preceding rule, the Octroi
Officer shall ascertain whether the name of
the person, mercantile firm or body on whose
behalf the goods are being imported is on the
list of persons, firms or bodies allowed to
keep an account current, and if so, check the
goods with the details entered in the declara-
tion and fill up the certificate below the
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declaration and issue a pass in Form 6. The
Octroi Officer shall forward all such declara-
tions together with a list in duplicate there-
of to the Central Octroi Officer for further
action in accordance with the provisions of
Section 142.
"24.Procedure for temporary detention of
dutiable goods meant for eventual export, with
importer himself. - (1) Where dutiable goods
intended for temporary detention within the
octroi
461
limits and eventual export are to be detained
by the importer at his residence or a Bonded
Warehouse licensed under sub-role (2) of rule
10 within the octroi limits, he may do so on
giving a declaration to the Octroi officer in
Form 4, and on payment of an amount equal to
the amount of full octroi due thereon as
deposit either in cash or in the form of Bank
Guarantee at the Entrance Naka.
(2) In case the importer cannot export the
goods without breaking bulk or without assem-
ble and testing in the case of machinery, he
shall do the same only with the sanction of
the Superintendent of Octroi in the presence
of an officer deputed for this purpose by the
said Superintendent. Such goods, if necessary
shall be formed into packages, which may be
sealed and marked by the Officer so deputed.
"25.Procedure for export of dutiable goods
temporarily detained with importer. - (1) When
the importer wants to export dutiable goods
detained with him, he shall present an intima-
tion-cum-application for written permission in
Form 11 to the Superintendent of Octroi to
export such goods, giving necessary details;
and produce such goods for verification on any
working day during the hours fixed by the
Chief Officer at the Central Octroi Office or
at any other Branch Office, as may be estab-
lished by the Council for the purpose.
(2) A separate intimation-cum-application
shall be given by each importer or his own
goods. One such intimation-cumapplication
shall be sufficient for a single consignment.
When such consignment contains goods of dif-
ferent descriptions, full details shall be
given separately in the intimation-cum-appli-
cation. Not more than one intimation-cum-
application for export can be given by an
importer for goods passing through an Exit
Naka in a day.
(3) No such intimation-cum-application shall
be accepted unless-
(a) it is complete in all respects and
signed by the importer himself or by a person
authorised by him in writing in this behalf;
(b) it is supported by the receipt for the
deposit paid at the time of import and is
accompanied by the original invoice, if any,
filed at the time of import;
462
(c) the goods produced for inspection and
intended to be exported are, subject to the
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provisions of sub-rule (2) of the last preced-
ing rule, identical with what they were at the
time of import.
(d) the exporter and the importer of
these goods are one and the same person and
such articles have not undergone change of
ownership.
Note. - The requirement of clause (c) shall
not be applicable in the case of dutiable
goods to which sub-rule (3) or (4) of the last
preceding rule applies.
(4) On receipt of such intimation-cum-applica-
tion and on arrival of the goods intended for
export, at the Central Octroi Office or Branch
Office, the Superintendent of Octroi or any
officer authorised by him shall-
(a) satisfy himself that all the condi-
tions prescribed above are fulfilled;
(b) verify that the goods actually pro-
duced for inspection are as described in the
intimation-cum-application and in the relevant
import invoice, if any, or in the import
declaration in Form 4, and seal and mark such
goods whenever deemed necessary; and
(c) issue a written permission-cum-refund
export pass in Form 12 after obtaining a
specimen signature of the importer or his
authorised agent on such pass.
(5) The importer accompanied by an escort, if
provided by the Council, shall then take the
goods beyond the octroi limits through the
Exit Naka within the time limit and by the
route specified in the pass. Before crossing
the Exit Naka, the impoter shall present the
goods to the Octroi Officer at the Exit Naka
for inspection, with the pass. The time limit
shall be fixed with due regard to the distance
of the Exit Naka from the Central Octroi
Office or the Branch office, but in no case it
shall exceed 12 hours from the time of issue
of the permission-cumrefund export pass.
(6) The Octroi Officer at the Exit Naka, on
presentation of such goods as well as the
pass, shall satisfy himself that-
(a) the pass as well as the goods are
presented within the specified time limit;
463
(b)the seals or marks, if any, are inact; and
(c) the goods actually tally with those men-
tioned in the pass.
On being so satisfied, he shall make relevant
entries in the register maintained for the
purpose, obtain signature of the importer
thereon, sign a certificate as given on the
pass, deliver the same to the importer and
allow the goods to pass beyond the octroi
limits.
28. Provision for refund of deposit.- (1)
When any goods for which a deposit has been
paid under rule 24 at the time of their import
are exported, the amount of deposit recovered
shall, subject to the provision of sub-rule
(2), be refunded.
(2) The refund shall be admissible, if all the
conditions below are satisfied.-
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(a) The refund is applied for within one
month from the date of e x port.
(b) The goods are exported out of the
octroi limits within a period of six months of
their import.
(c) The application for refund is supported
by a duly certified written permission-cum-
refund export pass.
(d) All the conditions in sub-rule (3) of
rule 25 are fulfilled.
(e) The amount claimed as refund is with-
drawn within three months from the date of
intimation to the importer to receive the
amount.
(f) The goods exported were declared to be
intended for temporary detention with the
importer and eventual export at the time of
import:
Provided that the said period of six months
shall not apply to goods imported by the Food
Corporation of India established under section
3 of the Food Corporation Act, 1964.
29. Procedure for refund. - (1) The Applica-
tion for refund of deposit shall be made in
Form 13 by the importer himself or by his duly
authorised agent in this behalf in writing on
any working day during the hours fixed for
money transactions by the Council at the
Central Octroi Office within one month from
the date of the actual export. If the last day
for claiming refund falls on a public holiday
such application shall be accepted on the next
working day.
464
(2) Such application shall be accompanied by
the duly certified relevant written permis-
sion-cure-refund export pass and shall contain
reference to the connected export intimation-
cum-application already given by the importer.
There shall be a separate application for each
written permission-cure-refund export pass.
(3) If the refund application is in order and
satisfies all the conditions specified in the
last preceding rule, the amount of the refund
shall be correctly determined subject to the
limitation prescribed in the next succeeding
rule".
30. Value, weight, etc. of goods for purposes
of refund.- When the refund is claimed in
respect of goods on which duty is leviable
ad-valorem, the value for the purposes of
refund shall be the value as per invoice on
the strength of which the duty was originally
paid together with such cost of carriage and
other incidental charges that were then deter-
mined. Where the value was determined in the
absence of invoice on the basis of market rate
prevalent on the day of import, that value
only should be considered and not the market
price prevalent in the local market on the day
of export".
FORM 4
(Rules 14, 24 and 25)
Declaration in respect of the dutiable goods imported
into the Municipal octroi limits, which are intended for
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temporary detention with the importer and eventual export.
To
The Octroi Officer,
Octroi Naka No. ..............
............ Municipal Council.
I, ....................(insert full name and address of
the importer) hereby declare that the below mentioned goods
are meant for temporary detention with me at ........
(specify address at which to be kept) for eventual export
outside the octroi limits. I am willing to pay an amount
equal to the amount of full octroi due thereon as deposit
either in cash or in the form of Bank Guarantee and may
claim refund according to the rules if these goods are
exported outside limits within six months from the date of
their import. The below mentioned details are true and
according to the original invoice, true copy of which is
filed herewith. The said invoice covers all the goods im-
ported by me as per Bill of Entry/Railway Receipt/Goods
Transport Memo/Air consignment Note
No. ..........dated ........
465
Sr. No No.and Description Weight Value Senders Rem-
No &date descri- of the or plus all name& arks
of ption of goods goods incidental address
import packages charges in full
document which are to
given seper-
ately
1 2 3 4 5 6 7 8
Full residential/business address of the importer.
Date .......... Signature of the Importer
I have checked the above particulars with the invoice
and verified the goods, which are found to be correct. True
copy of the invoice appended is verified and found to be
correct. The weight or quantity or value, together with the
incidental charges declared, is correct. The taxable
weight/quantity/value of the goods is ....... and the rate
of octroi ........
Date....... Inspector/Clerk.
The amount of Rs. ........on account of deposit has been
recovered under receipt No. .......... dated ...........
Date ......... Inspector/Clerk.
FORM5
(Rules 14 and 15)
Declaration in respect of the dutiable goods imported on
behalf of person, firm, or body allowed to keep an account
current.
To,
The Cetroi Officer,
Octroi Naka No. .........
Municipal Council.
I,................. (insert the full name and address of
the importer) hereby declare that the below mentioned goods
are being imported into the Municipal Octroi limits on
behalf of .............. (insert the name of persons, firm
or body allowed to keep an account current) and that the
below mentioned value and weight/quantity of the goods is
true and correct and is according to the original invoice,
true copy of which is filed herewith. The said invoice fully
covers all the goods imported by me today as per Bill of
Entry/Railway Receipt/Goods Transport Memo/Air Consignment
Note No. ......... dated .........., I further undertake
to produce the said invoice for your inspection whenever
demanded by you within one year from today.
466
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To be filled in by the importer To be filled in
at the Central
Octroi Office
1.Sr.No.
2. Bill of Entry ’Railway Receipt’ Goods Transport Memo/ Air
Consignment Note.
3. Number description of packages.
4. Goods.
6. Value plus incidental charges which are to be given
seperately.
7.Rate of Ovctroi.
8. Amount of Octroi recoverable.
Date.......Signature of the importer Dues entered in
I have checked the above particulars Account Current
with the invoice and verified the goods, Date ..........
which are found to be correct. True Octroi
copy of the invoice appended is Superintendent
verified and found to be correct.
The weight or quantity or value, together
with the incidental charges declared,
is correct. Issued pass No ...dated ...
Date ............... Inspector/Clerk
FORM6 (Rule 15)
Pass for goods imported on behalf of person, firm or body
allowed to keep an account current
....Municipal Council:.......Municipal Council Book
No. ..... Entrance Naka No. .....: Book No. ..... En-
trance Naka No. .....
Counterfoil of pass Pass for goods
imported by in account current ....
(Name of Person, firm or body)
Description No. and Description Weight,
Description of the quantity
of packages goods or value
1 2 3
Dated .......... Dated ..........
Entrance Naka Inspector/Clerk Entrance Naka Inspector/Clerk
467
Form 11
(Rules 25 and 26)
Intimation-cum-application for written permission for Export
of Goods Temporarily detained with the Importer
To
The Superintendent of Octroi,
.......... Municipal Council.
Sir,
I....................... (insert the full name and address
of the importer) hereby declare my intention to export the
goods to.............through Naka No. ........ as detailed
below. The certified copy of original invoice/invoices under
which these goods were imported are appended herewith. I
have produced the goods for actual verification. Kindly
grant me the permission to carry the goods to the said Naka.
SI. Description Quantity Date of Import Deposit Gross
No. of the (Number of Import invoice receipt weight
goods bags or & No. of No. and number &
cases) entrance date date
Naka
1 2 3 4 5 6 7
Value Amount to be Number of Name and How Remarks
refunded Refund Export address of exported
pass granted the consignee
8 9 10 11 12 13
Date ........... Signature of Importer
Verified the contents and the weight as above and found
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correct.
Countersigned.
Octroi Officer. Signature of the Refund Inspector/Clerk.
Receipt No.......
468
FORM
Rule 25)
Written Permission-cum-Refund Export Pass
Receipt No.............. Date ............... 19
Sl. Month Name and Name and Description Quantity Gross
no. and address of address of of the (number of weight
date the impoter the consignee goods bags or cases)
1 2 3 4 5 6 7
Value Deposit How Exist Date & time by Whether Remarks
to be exported Naka which the goods goods
refunded No. should reach the sealed or
Export Naka escort given
8 9 10 11 12 13 14
*Fee for Written Permission-Cum-Refund Pass Rs .........
Miscellaneous Receipt No.........., dated..........,
Signature of the importer Signature of Octroi Officer
I hereby certify that the goods mentioned above have passed
outside the octroi limits this day the.......... of the
month.......... 19 Time........... a.m./p.m. in my
presence Railway receipt......../Vehicle No. .........
The seals, if any, thereon were intact when the goods were
presented to me for verification.
Date ........... Signature of the Exist Naka Officer
Naka No. ...........
*This fee should be levied in accordance with the bye-laws
framed under section 338 for granting permission to take the
goods from the Central Octroi Office or Branch Office to the
Exist Naka.
FORM13
(Rule 29)
Application for Refund of Deposit
To
The Superintendent of Octroi,
.......... Municipal Council.
469
Sir,
I, ................the resident of..........hereby apply
for refund of deposit as per enclosed Written Permis-
sion-cum-Refund Export Pass No. ..........dated..........,
as the goods mentioned in the pass were exported
on.....under my intimation-cum-application, dated..........,
I therefore, request you to grant the refund of
Rs. .........and oblige.
Enclosure:
Date.......... Signature of Importer
On a reading of these rules it appears to be that Rules
24, 25 and 28 in terms would apply only to cases failing
under category four, stated above. The declaration in Form 4
referred to in Rule 24 and deposit of the amount equivalent
to octroi duty payable at the entry point, production of the
goods for verification at the Central Octroi Office are all
consistent with its being applicable to a case where dutia-
ble goods are imported for temporary detention and eventual
export by a person having a bonded warehouse of his own
contemplated in Rule 14 (1) (d) and not Rule 14 (1) (e).
However, Rules 29 and 30 are general in terms and may be
invoked in both the cases falling under Rule 14 (1) (d) and
(e). Sub-rule (3) of Rule 29 refers to the compliance of the
conditions in Rule 28 and that is how it may be said that
the provisions of Rule 28 are attracted to the cases of a
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person having a bonded warehouse and the facility of account
current. However, the Rules have to be read and applied in
such way that they do not conflict with but are consistent
with the facility of current account given to the Company.
Form 5 which is applicable to a case falling under Rule 14
(1) (e) does not require the Company (importer) to give a
declaration at the time of arrival of the goods at the entry
Naka point that the "goods are meant for temporary detention
with" the Company at its warehouse "for eventual export
outside the octroi limits". The Company need not also make
any deposit with the Naka Inspector at the point of entry.
An amount equivalent to the octroi duty payable in respect
of the goods is only entered in the account current after
the goods have reached the warehouse and verified by the
Octroi Officer. Form 4is not applicable to the case of the
Company which has got a current account facility. The Compa-
ny, is, therefore, bound to give a declaration only in Form
5, and need not give a declaration as in Form 4 nor is there
any obligation to deposit an amount equivalent to the full
octroi duty with the Octroi Inspector at the Entry Naka
Point. Further reference to original invoices/in Forms 4 and
5 is only for the purpose of checking the particulars en-
tered into in the forms. The production of an invoice is
not, having regard to the
470
purpose of such production, to be insisted blindly. If the
particulars furnished in the form including weight/quantity
or value could be established satisfactorily by other docu-
ments, we have no doubt that will be sufficient compliance
with the Rules. Column 5 of Form 11 also refers to invoice
and the date of invoice. This is again to correlate the
goods exported with the goods imported. If the identity of
the goods could be established by evidence other than the
production of invoices that should satisfy the Rules. The
invoice as such has no bearing on the liability of the goods
for octroi or the right of the Company for refund.
So far as the production of the original invoices are
concerned, the learned counsel for the Company pointed out
that the goods are brought from their own manufacturing
units at Pune and Jamshedpur and it will only be a stock
transfer and this requirement of producing original invoice
could not be complied with and is not applicable. Under the
current account procedure the invoices, if any and all the
other documents are verified when the goods reach the ware-
house with reference to the description of the goods,
weight/quantity, value and other particulars and it is only
after verification the octroi duty leviable is determined
and amount is debited in the account current and the demand
also is issued.
The learned counsel for the appellant also referred to
certain documents to show that for every category of arti-
cle, the Company has given a distinctive number and the
goods are easily identifiable and the number of items or
quantity imported are all record in the register and com-
puterised for easy verification. It is these identifying
numbers of the articles that are mentioned in the intima-
tion-cure-application for written permission for export. He
also relied on the fact that the Company has no manufactur-
ing unit within the Thane Municipality. Similarly, Column 6
of Form II also could not be complied with as it is not
applicable to a person who is having current account facili-
ty. So far as the value is concerned the learned counsel for
the appellants have fairly stated that the respondent was
taking 72% of the list price of the articles for determining
octroi payable, for which he has no objection. In fact, he
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has suggested that since the Company publishes the price
list periodically and that which shows the current price at
any point of time may be taken as the basis for such valua-
tion.
The Octroi Exit Naka Officer had refused to give the
certificate of export pass on the ground that the particu-
lars in Columns 5 and 6 of Form 11 could not be verified as
the original invoices and the deposit receipts were not
produced. Since these columns could be filled only to the
extent possible by a person having an account current facil-
ity and there is no dispute about the export of the goods
mentioned therein the refusal to give the export pass cer-
tificate. by the Exit Naka Officer could not be sustained.
471
The next point to be considered is the procedure to be
followed when the importer wants to "breaking the hulk" and
repack the goods in smaller quantities and also the proce-
dure relating to filling up Forms 11 and 12 and the refund
applications in such circumstances. Rules 24 (2.) states
that for breaking the bulk and repacking in smaller pack-
ages, sanction of the Superintendent of Octroi is necessary
and the "breaking bulk" shall also be done in the presence
of an officer deputed for this purpose. Rule 62 of Chapter
VIII of the Schedule to the Bombay Provincial Municipal
Corporation Act, 1949 provides that subject to the standing
orders not less than 90% of the octroi paid on any goods
shall be refunded if such goods are exported beyond the
limits of the city within six months of payment:
"provided that...... (C) in the case of
goods which have been broken bulk prior
intimation has been given to the officers
specified in this behalf in the standing
orders and the place or places of storage have
been reported to him from time to time".
Paragraph 5 of Appendix IV to this Act which we have
noticed earlier states that the rules flamed under the
Municipal Act shall "in so far as it is not inconsistent
with the provisions of this Act, continue in force". Rule 62
of Chapter VIII forms part of the Act. The learned counsel
for the appellant, therefore, contended that Rule 62 shall
prevail and prior intimation of the intention to ’breaking
bulk’ shall be enough and there was no necessity for the
Company to get the sanction of the Superintendent of Octroi
or break the bulk in the presence of an officer deputed for
the purpose as required under sub-rule (2) of Rule 24. In
other words according to the learned counsel Rule 24 (2) of
the Octroi Rules is inconsistent with Rule 62 of Chapter
VIII of the Schedule to the Act and to the extent.._ of
inconsistency it shall be deemed to be not applicable. On
the other hand the learned counsel for the respondent con-
tended that Rule 62 (c) deals with prior intimation and Rule
24 (2) deals with the sanction and breaking of the bulk in
the presence of an officer deputed for that purpose and both
the rules can stay together and operate and there is no
inconsistency. We are not impressed with the argument that
there is an inconsistency between Rule 62 and Rule 24 (2).
The intimation contemplated in Rule 62 imply that the break-
ing the bulk shall be done with the knowledge of the octroi
authorities. But it Cannot be said that the rules further
provide that after intimation the breaking of the bulk shall
be done in the presence of the officers and after sanction
that would in any case be inconsistent. Both the rules thus
can stand together.
In H.M.M. Limited v. Administrator, [1989] 4 SCC 640
this Court had occasion to consider the effect of non-com-
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 25
pliance with this require-
472
ment of a similar provision, on the right to get refund.
Shortly stated the facts in that case were these: The appel-
lant brought into the municipal limits Horlicks in bulk
containers (large steel drums) for being packed in unit
containers (glass bottles) at the packing station in Banga-
lore and thereafter exported outside the municipal limits.
In respect of the milkfood so exported in glass bottles the
appellants sought refund of octroi on the ground that there
was no consumption, use or sale within the municipal limits
and the goods were exported. Rule 24 of the Octroi Rules
that were in force in Bangalore city provided:
"24...0n all articles on which octroi duty has
been paid and which are subsequently exported
beyond the octroi limits without breaking
bulk, refunds shall, subject to the following
rules, be granted at the rate originally
charged at the time of import; provided that
no such refunds shall, except in the ease of
timber imported and re-exported in log be
granted unless such goods are exported within
three months from the date on which octroi was
levied".
Relying on this provision it was contended by the Munic-
ipality that breaking the bulk amounted to "use" within the
municipal limits attracting levy of octroi and no refund was
permissible. The refund application had also not been made
within three months from the date on which octroi was
levied. It was admitted that the appellants had not followed
that procedure prescribed in Rule 24. This Court held that
mere transferring of a bulk product in small containers like
packets or bottles for the purpose of sale does not amount
to use of the goods in the sense the word is used in rela-
tion to levy of octroi. It was further held that the words
"without breaking bulk" is not an expression of art and that
meant only transferring the product from the drums by break-
ing the seal of the drums, to the bottles for the purpose of
exporting or for taking them out of the municipal limits,
and that would not amount to either use or consumption of
the Horlicks powder within the municipal limits attracting
the levy of octroi.
The ratio of the judgment clearly is that merely on the
ground that the goods are not exported in bulk as originally
imported, the levy does not become valid or that the import-
er who exported the goods loses his right to a refund of the
octroi paid. The goods neither loose their identity nor
cease to be identifiable. Once we reach the conclusion that
there is no consumption or use, octroi is not attracted and
if any levy has been made and the amount collected, the same
becomes legally refundable even when the goods are exported
in parts and in smaller packages. This is particu-
473
larly so because in the case of goods not consumed or used
within the octroi area but exported there is a constitution-
al bar for the levy of octroi.
In this connection we may also refer to another decision
reported in Municipal Committee, Khurari v. Dhannalal Sethi
& Ors., [1969] I SCR 166. The rules considered in that case
also provided that an application for refund was to be made
in the prescribed form and that the exporter after filling
in the particulars had to present his application at the
office appointed for that purpose. There were other rules
which provided an elaborate procedure to be followed at the
time of export of the goods. These rules related to the
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octroi officers satisfying himself that the goods brought
for export agree with those mentioned in the application,
presentation of the claim within the prescribed time, iden-
tifying of the goods exported with those imported and other
matters. This Court held that:
"these rules do provide a procedure which an
exporter wishing to claim refund has to fol-
low. But the question is whether in a case
where an exporter has not done so, is he
disentitled from claiming the refund. The real
difficulty in the way of the appellant Commit-
tee is that though the rules lay down a proce-
dure which such an applicant has to follow,
they do not provide at the same time that an
applicant for refund who has failed to follow
the procedure laid down in r.r. 35 to 39 would
be disentitled to claim the refund. In the
absence of such a provision coupled with the
categorical language of r. 27 giving a right
to an exporter of dutiable goods to claim
7/8th of the duty paid on such goods on their
import, it becomes difficult to uphold the
denial by the appellant Committee of the right
of respondents 1 and 2 such a refund. We are,
therefore, of the opinion that in the present
state of the rules, the appeal must fail
though for reasons different from those given
by the Board of Revenue and the High Court".
It may be pertinent to mention that the Maharashtra
Municipalities (Octroi) Rules, 1968 also do not contain any
specific provision that an applicant for refund who has
failed to follow the procedure would be disentitIed to claim
the refund. It may be noted that the amount collected which
is equivalent to the octroi duty payable on the goods, on
entry into the octroi limits while in detention in the
warehouse is only as a deposit pending export of the goods.
The other aspect is that once octroi is not leviable the
deposit made by the importer pending export is in the nature
of a trust and refundable in the event of the export of the
goods. Further in a given set of facts, whether the rules
have been complied with will have
474
to be tested having regard to the nature of the particular
transaction and whether the object of the procedure provided
is otherwise fully satisfied. ‘ Rule 28 also merely
states that the refund shall be admissible if all the
conditions in sub-rule 2 of that Rule are satisfied. The
object of requiring intimation or sanction and presence of
an officer when breaking the bulk in the scheme of octroi
levy and refund is to ensure that dutiable goods do not
escape the assessment and refunds are made only in respect
of goods exported. In other words the whole requirement
relates to the identification of the goods. In that sense if
the same is otherwise complied with the right to refund
cannot be denied. These rules cannot be read as enabling the
municipality to levy and collect octroi even in cases where
the goods have not been imported for consumption or use. As
held by this Court in Kirpal Singh Duggal v. Municipal
Board, Ghaziabad, [1968] 3 SCR 551 the octroi rules are
intended to regulate the system on which the refunds shall
be allowed and paid. What are merely matters of procedure
which the municipality was entitled to require compliance
with in granting refund cannot be treated as condition
precedent for the entitlement of the refund itself. The
Constitution prohibits levy of tax except in accordance with
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law. When the goods are not imported for consumption or use
within the octroi area the municipality ceases to have any
constitutional right to levy octroi. If the goods therefore
have merely entered into the octroi limits and passed out of
the same no octroi duty is attracted.
The concept of octroi as held by this Court in Burma
Shell s case (supra) may include "the bringing in of goods
in a local area so that the goods come to a repose there".
It is this concept that is reflected in Rule 28 (2) Co) when
it requires evidence that the goods were exported out of the
octroi limits within a period of six months of their im-
ports. The learned counsel for the appellants Mr. Andharuji-
na had expressed certain difficulties in satisfying the
Corporation that the goods imported were exported within the
period of six months as provided in the rules in view of
certain peculiar circumstances in this case. He pointed out
the goods received in bulk are small small items and there
are about 16000 distinctive types of articles and when the
bulks are broken and each of the categories items are mixed
up together it becomes difficult for him to individually
identify when the goods were received and when they were
exported. However, he was sure that the goods were exported
before six months. When this difficulty was pointed out
during the pendency of the appeal, as an interim direction
this Court by Order dated 1.5. 1989 directed the parties to
proceed on the basis that the goods which came in first had
gone out first unless some factors or features indicate
otherwise. This is not equitable principle unknown to law.
Even as early as in 1816 with reference to money paid on
account to a creditor, in Clayton’s case (1814)
475
23 All. E.R. Rep. P. 1, it was held that in the absence of
an agreement to the contrary, in the case of current account
containing debit and credit entries there is a presumption
that the first item on the credit side of the account is
intended to be applied in the payment of the first item on
the debit side of the account. This is an equitable princi-
ple which could be followed in the instant case and it may
be presumed that the goods which came in first have gone out
first and the six months period could be determined on that
basis. In any case in view of the interim direction given by
this Court on May 1,1989 that may be usefully be followed
for the future also in this case.
To sum up: Having regard to the nature and incidence of
octroi unless the octroiable goods are consumed or used or
are meant to reach an ultimate user or consumer in the
octroi area no octroi is leviable. The words ’sale therein
in the words "consumption, use or sale therein in the defi-
nition octroi means sale of octroiable goods to a person for
the purpose of consumption or use by such person in the
octroi area. If sale was intended for consumption or use in
the octroi area whether the purchaser actually consumed
inside or outside octroi area is irrelevant. Rules 24 to 30
and the forms in the system of levy of octroi are intended
to regulate the procedure for collection, identification of
dutiable goods and correlation of goods exported with the
goods imported for the purpose of refunds of octroi collect-
ed. In view of constitutional bar octroi is not leviable if
the goods are not brought into the octroi area for purposes
of consumption or use in the area but for export and in fact
exported by the importer himself or the sale by him occa-
sions the export. Compliance with the procedure prescribed
in the Rules for filing claims of refunds are not condition
precedent for the right or eligibility for refund or the
liability to refund but are provisions regarding proof of
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export of the goods imported and are not meant to be exhaus-
tive either. They are to be interpreted and understood in
that sense. The object of the Rules fixing a period of
limitation for export however is different. The export
cannot be put in perpetual doubt and the goods may be con-
sidered to have come to a repose if they were not exported
within a particular period provided in the rules. Applying
these principles to the instant case, on facts the rejection
of refund applications on the ground that Rule 25 (3) (d)
had not been complied with was illegal. Since the rejection
of the claims for refund was merely on the ground that
either Form 4 and original invoices were not produced or
columns 5 and 6 of Form 11 or the corresponding columns in
Form 12 had not been filled with reference to an original
invoice or Form 4 or deposit receipt and the refusal to
issue export pass certificates on those very grounds which
we have stated are untenable the other orders of rejections
are also invalid. If the goods are mixed up and unidentifia-
ble
476
due to breaking bulk and repacking in smaller and assorted
packages before export the principle that the first export
was of the goods first imported, subject to any evidence
available to the contrary, may be applied and the six months
period prescribed for export may be determined accordingly.
When these appeals were pending by way of interim ar-
rangement this Court by order dated 25.4.1990 directed that
in order to obviate the difficulty of identifying the goods
at the time of export by reason of the breaking of the)bulk
and in order avoid doubts, the respondent Corporation may
depute their officer or officers on all working days at the
warehouse of the Company to supervise the breaking of the
bulk subject to the Company reimbursing the entire monthly
payments and other allowances to be paid to the said officer
or officers as per bill or pay slips sent by the Corporation
to the Company. We think that this procedure could be con-
tinued and followed in future also so that while the pur-
poses of the rules are served the free trade and commerce of
the Company which is stated to have a large turnover is also
not affected.
The learned counsel for the respondent then contended
that the appellants have recovered the amounts paid by them
by way of octroi duty from the dealers or the customers to
whom they had sold the goods and therefore they are in any
case not entitled to get a refund. The argument was that if
refund is ordered it would amount to allowing the appellants
to unjustly enrich themselves at the cost of the public to
whom the burden had already been passed. This argument is
based on the ground that in the selling price the company
had merged the octroi duty originally paid as deposit and if
a refund is made the company would be getting an additional
amount over and above normal price which they would have
charged but for the fact that they were initially asked to
deposit octroi. There is no evidence that any of the arti-
cles sold by the Company is subject to any price control by
the Government or that the Company had charged any octroi
separately in the bills, Invoices and the other documents of
sale to the outside purchasers produced before us do not
also show that any octroi was separately charged and col-
lected by the Company. It may be mentioned that in the
rejoinder filed by the appellant in the writ petition they
have specifically denied that they "have recovered the
amount paid by them by way of octroi duty from the dealers
to whom they had sold the goods or that the dealers in turn
have recovered the octroi duty from the customers". In view
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of this the question of unjust enrichment does not arise.
477
This appeal is accordingly allowed on the above terms.
There will ’however be no order as to costs.
T.N.A. Appeal
allowed.
478