Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 13
PETITIONER:
MAN MOHAN TULI
Vs.
RESPONDENT:
MUNICIPAL CORPORATION OF DELHI & ORS.
DATE OF JUDGMENT18/02/1981
BENCH:
FAZALALI, SYED MURTAZA
BENCH:
FAZALALI, SYED MURTAZA
KOSHAL, A.D.
VARADARAJAN, A. (J)
CITATION:
1981 AIR 991 1981 SCR (2) 894
1981 SCC (2) 467 1981 SCALE (1)352
ACT:
Delhi Municipal Corporation Act, 1957, section 158 and
rule 26 of the Terminal Tax Rule framed under the Act,
interpretation of-Exigibility of Terminal Tax, explained.
HEADNOTE:
Man Mohan Tuli, appellant in C.A. 2004/80, is the owner
of a piece of land situate on the Grand Trunk Road near the
sixth milestone as one goes from Delhi to Ghaziabad.
Appellant Tuli has constructed various buildings on his land
for use as godowns and has rented them out to various
transport companies engaged in bringing goods from other
States and storing them before their transhipment to Delhi
and other States beyond Delhi. The trucks carrying the goods
for various destinations pass along the G.T. Road and move
into Tuli’s land. After the trucks enter the land, the goods
are unloaded into the godowns, sorted out and reloaded into
the respective trucks meant for various destinations.
Thereafter, the trucks move out of the land and, passing
through the Union Territory of Delhi after crossing the
border line, proceed to their destinations. The Municipal
Corporation of Delhi by its Orders dated May 23, 1975 and
July 7, 1975 directed that a Terminal Tax post be set up at
the entrance to Tuli’s land in order to collect terminal tax
on goods carried into that land. A writ was filed before the
High Court by the owners of transport companies as also by
Tuli for quashing the orders of the Corporation seeking to
levy Terminal Tax on the goods which were not meant for
Delhi but for places beyond Delhi. The High Court held that
the Corporation was legally entitled to levy Terminal Tax at
the point of territory of the Union Territory of Delhi even
though the goods were sorted out in the godown of Tuli,
resorted out and re-loaded since as they while passing
through the territory of Delhi undoubtedly entered the said
territory. Hence the appeals by special leave by appellant
Tuli and others.
Allowing the appeal in part, the Court
^
HELD: 1. It is well settled that taxing statutes must
be strictly interpreted giving every benefit of doubt to the
tax-payer. A Terminal Tax could be levied only by the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 13
Corporation or the State which is the final destination of
the goods sent from any other area. A Terminal Tax signifies
that there must be a terminus for the journey of the goods.
Terminus means the point to which main action tends, goal,
end, finishing point, the point at which something comes to
an end. [899 D, 901 B-D]
2.1 From a consideration of the decided cases of the
Supreme Court, the following propositions emerge:-
(i) Terminal tax and octroi are similar kinds of levies
which are closely interlinked with (a) destination of the
goods (b) the user in the local area
895
on arrival of the goods. Where the goods merely pass through
a local area without being consumed therein the mere fact
that the transport carrying the goods halt within the local
area for transhipment or allied purposes would not justify
the levy of either the terminal tax or octroi duty. This is
because the halting of the goods is only for an incidental
purpose to effectuate the journey of the goods to the final
destination by unloading, sorting and reloading them at a
particular place. [803 A-C]
(ii) There is a very thin margin of difference between
a terminal tax and octroi. In the case of the former
(terminal tax) the goods reach their final destination and
their entry into the area of destination immediately,
attracts, payment of terminal tax irrespective of their
user. In the case of octroi, however, the tax is levied on
goods for their use and consumption. [903 D-E]
(iii) But at the same time, the goods while halting at
a local area should leave for their destination within a
reasonable time which may depend on circumstances of each
case and if the goods are kept within the area for such a
long and indefinite period that the purpose of reaching the
final destination lying in a dicerent area is frustrated or
defeated, they may be exigible to terminal tax. [903 E-F]
(iv) Where the goods enter into a local area which is
also the destination of the goods either temporarily or
otherwise, the terminal tax would be leviable. For instance,
if A consigns goods from Patna in Bihar to Delhi in the name
of X and X after having received the goods at Delhi rebooks
or reloads the same on a transport for Chandigarh in the
name of Y, terminal tax would be leviable by the Corporation
at Delhi because the destination of the goods in the first
instance was Delhi and that by itself would attract the
imposition of terminal tax. The fact that X rebooks them to
Chandigarh would not make any difference because the act of
rebooking by X at Delhi would constitute a fresh transaction
by which the goods after having been carried into Delhi are
further exported to Chandigarh. On the other hand, when
there is one continuous journey of the goods from Patna to
Chandigarh without any break, the final destination would be
Chandigarh even though the goods may have to be halted in
Delhi for the purpose of unloading, sorting and reloading
and may have to be kept in Delhi for a reosonable time. In
such a case terminal tax would not be exigible. [903 G-H,
904 A-C]
Punjab Flour & General Mills v. Lahore Corporation,
A.I.R. 1947 F.C. 14; The Central India Spinning & Weaving &
Manufacturing Co. Ltd., The Empress Mills, Nagpur v. The
Municipal Committee, Wardha, [1958] SCR 1102; Bangalore
Woollen, Cotton & Silk Mills Co. Ltd. Bangalore v.
Corporation of the City of Bangalore, [1961] 3 SCR 707;
Diamond Sugar Mills Ltd. & Anr. v. The State of Uttar
Pradesh, [1961] 3 S.C.R. 242; Burmah Shell Oil Storage &
Distributing Co. India Ltd. v. The Belgaum Borough
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 13
Municipality, [1963] Supp. 2 SCR 216; Khyerbari Tea Co. Ltd.
JUDGMENT:
Champlain Realty Co. v. Town of Brattleboro, 67 L. Ed.
U.S. 309, quoted with approval.
896
2.2. What would be a reasonable time for interpretation
of the goods or halting, in the instant case, at the godown
of Tuli, will naturally depend upon the special features or
circumstances of each case, namely, the nature of the goods,
the time taken in loading, sorting and unloading, the
obstacles or difficulties which may be faced by the
transporters and similar other factors. Normally, a time of
two to three days or even a week should be sufficient to
clear the goods for its journey to the ultimate destination.
It may sometimes happen that goods may have to be kept in
the godowns in the territory of Delhi for circumstances,
beyond the control of the consignee or the consignor, for
example, a garnishee order. In considering what is
reasonable time these circumstances would have to be taken
into consideration. [906 H, 907 A-C]
2.3. Rule 26 of the Terminal Tax Rules will have to be
interpreted on the footing that section 178 of the Delhi
Municipal Corporation Act, 1957 does not contemplate levy of
terminal tax for goods meant for destinations other than
Delhi. The word "immediately" appearing in Rule 26 has to be
liberally construed so as to imply a reasonable period and
if the export is delayed the rules may apply if a reasonable
explanation has been given. So far as rules regarding taking
of passes, etc., at the barrier are concerned they would, of
course, apply but subject to the conditions under which
terminal tax can be imposed under section 178 of the Act
which is the main charging section. [907 C-E]
Amti Banaspati Co. Ltd v. The Union of India I.L.R.
1973 Delhi 237, distinguished.
3.1. Section 178 of the Delhi Municipal Corporation
Act, cannot be interpreted so as to justify imposition of
terminal tax even on goods which merely passed through the
territory of Delhi, although their destination is not Delhi
but places beyond Delhi. [908 F-G]
3.2. Merely because the goods after having been
unloaded in the godown of appellant Tuli are sorted,
reloaded in different trucks and thereafter pass through the
territory of Delhi, they do not become exigible to terminal
tax. [908 G-H]
3.3. Rule 26 of the Terminal Tax cannot be interpreted
so that exemption could be granted only if the goods are
exported immediately which means within a very short time
irrespective of any other consideration. Terminal tax can be
leviable only if it is proved that the goods remained at the
godown for an indefinite and unexplained period which could
not be said to be reasonable in the circumstances. [908 H,
909 A-B]
3.4. Where the goods are carried by trucks into the
territory of Delhi and unloaded there and are also meant for
Delhi and soon thereafter may be re booked by the receiver
of the goods to some other place, terminal tax would be
leviable because in this case there are two separate
transactions-(i) by which the goods are meant for Delhi and
(ii) by which after having reached and having been unloaded
at Delhi they are rebooked and reloaded for some other place
and which therefore is a fresh and different transaction. In
such a case, terminal tax would be leviable at the entry
point in the territory of Delhi. [909 B-C]
3.5. The direction given by the High Court to the
Terminal Tax Officer to fix a reasonable time for unloading,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 13
sorting and reloading the goods which are
897
meant for different destinations taking into consideration
the quantity of the goods. the time for unloading, sorting
etc. and for further reloading and transhipment should be
done within a time to be fixed by a Terminal Tax Officer is
correct. [909 E-F]
&
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2004-
2005 Of 1980.
Appeals by Special Leave from the Judgment and Order
dated 13-10-1978 of the Delhi High Court in LPA Nos. 73/77
and 103/77.
Madan Bhatia and Sushil Kumar for the Appellant in both
the appeals.
R.B. Datar, Lalit Bhardwaj and Miss Madhu Mulchandani
for Respondent Nos. 1-3.
P.R. Rao, S.R. Venkataraman, P.C. Kapur, R.C. Bhatia
and S.L. Sharma for Respondent No. 5 in Civil Appeal No.
2004/80.
N.B. Sinha and S.K. Sinha for Respondent No. 4.
The Judgment of the Court was delivered by
FAZAL ALI, J. These appeals by special leave are
directed against a Division Bench common judgment dated
October 13, 1978 of the High Court of Delhi by which the
Letters Patent Appeals were allowed and the impugned Orders
dated May 23, 1975 and July 7, 1975 passed by the Terminal
Tax Officer, Municipal Corporation of Delhi were quashed.
The facts of the case lie within a very narrow compass
and may be summarized as follows. Manmohan Tuli, appellant
in C.A. No. 2004/80, is the owner of a piece of land situate
on the Grand Trunk Road near the sixth milestone as one goes
from Delhi to Ghaziabad. Appellant Tuli has constructed
various buildings on his land for use as godowns and has
rented them out to various transport companies engaged in
bringing good from other States and storing them before
their transhipment to Delhi and other States beyond Delhi.
The trucks carrying the goods for various destinations pass
along the G.T. Road and move into Tuli’s land. It is not
disputed that after the trucks enter the land, the goods are
unloaded into the godowns, sorted out and reloaded into the
respective trucks meant for various destinations. Thereafter
the trucks move out of the land and passing through the
Union Territory of Delhi after crossing the border line,
proceed to their destinations. The Municipal Corporation of
Delhi (hereinafter referred to as the Corporation,) by its
Orders dated May 23, 1975 and July 7, 1975 (hereinafter
referred to as the "inpugned orders’) directed that a
Terminal Tax post be sets up at the entrance to Tuli’s land
in order to collect
898
terminal tax on goods carried into that land. The Ghaziabad
Nagar Palika also purported to levy terminal tax on such
goods but this levy was neither assailed before the High
Court nor has been challenged before us and is therefore
left out of consideration. A writ was filed before the High
Court by the owners of transport companies as also by Tull
for quashing the orders of the Corporation seeking to levy
terminal tax on the goods which were not meant for Delhi but
for places beyond Delhi. Further details are not necessary
for the decision of these appeals and both the appeals (C.A.
Nos. 2004 and 2005 of 1980) will be disposed of by a common
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 13
judgment.
The High Court vide the impugned judgment was of the
opinion that even though the goods were stored in the godown
of Tull, sorted out and reloaded but as they while passing
through the territory of Delhi undoubtedly entered the said
territory, the Corporation was legally entitled to levy
terminal tax at the point of entry into the Union Territory
of Delhi. The case of the appellant was that the goods were
not meant either to be used or consumed in Delhi nor was
Delhi the final destination of the goods. It was a different
matter that as the goods were to be sent to destination
beyond Delhi the transport carrying the goods had perforce
to pass through the territory of Delhi. It was thus
contended that the goods were not carried into the territory
of Delhi but were merely carried through the territory of
Delhi to other destinations which were beyond Delhi. It was
argued that s. 178 of the Delhi Municipal Corporation Act,
1957 (hereinafter referred to as the ’Act’) had in terms no
application to the case and that therefore the terminal tax
imposed by the impugned orders was legally invalid.
The counsel for the respondent, however, submitted that
even though the goods may have been meant for other
destinations but as they were unloaded in the godown and
reloaded in various trucks and actually entered into the
territory of Delhi, they were factually carried into the
Delhi territory and that was sufficient to empower the
Corporation to levy the terminal tax. According to the
argument of the counsel for the Corporation, the question of
destination was not at all germane for the purpose of
adjudicating the competency of the Corporation to levy
terminal tax at the point of entry into Delhi.
Thus, the entire question turns upon the interpretation
of s.178 of the Act and some Rules framed under the Act.
Relevant portion of section 178 runs thus:
"178(1). On and from the date of the establishment
of the Corporation under section 3, there shall be
levied on all goods carried by railway or road into the
Union Territory of Delhi
899
from any place outside thereof, a terminal tax at the
rates specified in the Tenth Schedule."
(Emphasis supplied)
The crucial words which have to be interpreted are:
’goods carried by railway or road into the Union Territory
of Delhi from any place outside Delhi’. The contention of
the appellant is that the words ’goods carried into the
Union Territory’ clearly indicate that the final destination
of the goods must be Delhi and by virtue of this fact, the
natural consequence would be that the goods should be
carried from other places either by rail or by road into the
territory of Delhi. This argument was reinforced by the
words ’terminal tax’ used in s. 178 which imply that the
terminus of the journey of the goods must be Delhi and only
in that event the Corporation would be competent to levy a
terminal tax. This argument was sought to be rebutted by the
respondents on the ground that the words ’carried into the
Union Territory of Delhi’ should be interpreted
independently and literally so as to indicate that even if
the goods passed through Delhi, the moment they entered into
the territory of Delhi terminal tax became exigible. So far
as this aspect of the argument is concerned, we are unable
to accept the same because it is well settled that taxing
statutes must be strictly interpreted giving every benefit
of doubt to the tax payer.
Before, however, examining the respective contentions
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 13
of the parties it may be necessary to refer to the
authorities dealing with the history of terminal tax or
octroi duty. To begin with, it is not disputed that the
power to subject the goods either to octroi or to terminal
tax squarely falls within entries numbers 52 and 56 of List
II to the Seventh Schedule of the Constitution. In Punjab
Flour & General Mills v. Lahore Corporation the Court while
drawing a distinction between the type of taxes referred to
as terminal taxes in Entry No. 58 of List I of Schedule 7 to
the Government of India Act, and those described as cesses
in Entry No. 49 of List II thereof observed as follows:
"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 Sch. 7 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
900
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.... 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."
In The Central India Spinning & Weaving & Manufacturing
Co. Ltd., The Empress Mills, Nagpur v. The Municipal
Committee, Wardha this Court examined the entire matter
exhaustively and after giving the history of terminal tax or
octroi observed as follows:
"If ‘terminal’ besides the above meaning has an
additional meaning also and that meaning signifies the
termini or the jurisdictional limits of the municipal
area even then the construction to be placed on the
term should be the one that favours the tax-payer, in
accordance with the principle of construction of taxing
statutes, which must be strictly construed and in case
of doubt must be construed against the taxing
authorities and doubt resolved in favour of the tax-
payer."
... ... ...
"The legislative history of this tax thus shows that
octroi was leviable on the entry of goods in a local
area when the goods were for consumption, use or sale
therein. The substituted tax was terminal tax on goods
imported into or exported from a local area and by
rules this tax in the case of Wardha Municipal
Committee was imposed on certain class of goods
imported and on others exported by railway or road."
... ... ... ...
"That by the substitution of terminal tax on goods
imported into a local area the nature of the tax had
not been altered from what it was when octroi was in
force or when instead of "terminal tax" octroi (without
refund) was substituted ..... Therefore terminal tax on
goods imported or exported is similar in its incidence
and is payable on
901
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 13
goods on their journey ending within the municipal
limits or commencing therefrom and not where the goods
were merely in transit through the municipal limits and
had their terminus elsewhere."
... ... ...
"Therefore, according to the Federal Court "terminal"
has reference to the terminus of the railway or air,
i.e., the end of journey."
A close analysis of this decision, therefore clearly
discloses that a terminal tax signified that there must be a
terminus for the journey of the goods. The word ’terminus’
according to Oxford Dictionary means-a point situated at or
forming the end or extremity of something, situated at the
end of a line of railway. In other words, terminus means the
point to which main action tends, goal, end, finishing
point, the point at which something comes to an end. In
Corpus Juris Vol. 62 at p. 729 the word ’terminal’ in
connection with transportation means the fixed beginning or
ending point of a given run. It would thus appear that a
terminal tax could be levied only by the Corporation or the
State which is the final destination of the goods sent from
any other area.
A similar view was taken by a later decision of this
Court in Bangalore Woollen, Cotton & Silk Mills Co. Ltd.
Bangalore v. Corporation of the City of Bangalore where
Kapur, J., speaking for the Court observed as follows:
"The history of these taxes therefore shows that
in the Devolution Rules under the Government of India
Act, 1915 octroi, terminal tax and taxes on professions
and callings were three distinct heads of taxation..
Therefore, when s. 142-A was added in the Government of
India Act, 1935, its operation was limited to entry 46
of List II and had no reference to entry 49 which deals
with cesses on entry of goods. The position under the
Constitution is exactly the same and therefore neither
s. 142-A of the Government of India Act, 1935 nor Art.
276 has any effect on entry 49 in the Government of
India Act, 1935 or entry 52 in the Constitution."
In this case also a distinction between a terminal tax
and octroi was clearly brought out. In Diamond Sugar Mills
Ltd. & Anr. v. The State of Uttar Pradesh & Anr. while
defining a local area within
902
the meaning of Entry 52 of List II of Seventh Schedule to
the Constitution, the Court observed as follows:
"We are of opinion that the proper meaning to be
attached to the words ’local area’ in Entry 52 of the
Constitution, (when the area is a part of the State
imposing the law) is an area administered by a local
body like a municipality, a district board, a local
board, a union board, a Panchayat or the like."
In Burmah Shell Oil Storage & Distributing Co. India
Ltd. v. The Belgaum Borough Municipality this Court again
fully discussed the matter and Hidayatullah, J., speaking
for the Court stressed the essential distinction between
octroi and terminal tax in the following words:
"Octrois and terminal taxes were different taxes though
they resembled in one respect, namely, that they were
leviable in respect of goods brought into a local area.
While terminal taxes were leviable on goods ’imported
or exported’ from the Municipal limits denoting thereby
that they were connected with the traffic of goods,
octrois, according to the legislative practice then
obtaining were, leviable in respect of goods brought
into a Municipal area for consumption or use or sale.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 13
.. .. ..
The history of these two taxes clearly shows that
while terminal taxes were a kind of octroi which were
concerned only with the entry of goods in a local area
irrespective of whether they would be used there or
not; octrois were taxes on goods brought into the area
for consumption, use or sale. They were leviable in
respect of goods put to some use or other in the area
but only if they were meant for such user."
In Khyerbari Tea Co. Ltd. & Anr. v. The State of Assam
Gajendragadkar, J. speaking for the Court drew a very apt
distinction regarding the concept of import and observed as
follows:-
"In that connection, the legislative history of the
octroi duty was examined and it was held that the
concept of import requires that the goods which are
brought into must mix up with the mass of the property
in the local area where the goods are alleged to have
been imported. If the goods are just carried and not
mixed with the mass of the property in the area through
which they are carried, they cannot be said
903
to have been imported into that area........ The word
"carried" is of much wider denotation, and it would be
unreasonable to limit its scope by introducing
considerations which are relevant in dealing with the
question of import."
Thus, from a consideration of the cases cited above,
the following propositions emerge:-
(1) Terminal tax and octroi are similar kinds of
levies which are closely interlinked with (1)
destination of the goods, (2) the user in the
local area on arrival of the goods. Where the
goods merely pass through a local area
without being consumed therein the mere fact
that the transport carrying the goods halt
within the local area for transhipment or
allied purposes would not justify the levy of
either the terminal tax or octroi duty. This
is because the halting of the goods is only
for an incidental purpose to effectuate the
journey of the goods to the final destination
by unloading, sorting and reloading them at a
particular place.
(2) There is a very thin margin of difference
between a terminal tax and octroi. In the
case of the former (terminal tax) the goods
reach their final destination and their entry
into the area of destination immediately
attracts payment of terminal tax irrespective
of their user. In the case of octroi, however
the tax is levied on goods for their use and
consumption.
(3) But at the same time, the goods while halting
at a local area should leave for their
destination within a reasonable time which
may depend on circumstances of each case and
if the goods are kept within the area for
such a long and indefinite period that the
purpose of reaching the final destination
lying in a different area is frustrated or
defeated, they may be exigible to terminal
tax.
(4) Where the goods enter into a local area which
is also the destination of the goods either
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 13
temporarily or otherwise, the terminal tax
would be leviable. For instance, if A
consigns goods from Patna in Bihar to Delhi
in the name of X and X after having received
the goods at Delhi re-books or reloads the
same on a transport for Chandigarh in the
name of Y, terminal tax would be leviable by
the Corporation at Delhi because the goods in
the first instance was Delhi and that by
itself would attract the imposition of
terminal tax. The fact that X
904
rebooks them to Chandigarh would not make any
difference because the act of rebooking by X
at Delhi would constitute a fresh transaction
by which the goods after having been carried
into Delhi are further exported to
Chandigarh. On the other hand, when there is
one continuous journey of the goods from
Patna to Chandigarh without any break, the
final destination would be halted in Delhi
for the purpose of unloading, sorting and
reloading and may have to be kept in Delhi
for a reasonable time. In such a case
terminal tax would not be exigible.
These principles are also spelt out by the American law
on the subject which deals with inter-state transport of
goods. In American Jurisprudence (2d, Vol. 15, p.689, para
49) the following statement is made, which is spelt out from
various American decisions including those of the U.S.
Supreme Court:
"In the determination of whether a transportation
of persons or property constitutes interstate or
intrastate commerce, the essential character or
unity of the movement is the decisive factor,
While the intention of the shipper or passenger is
probably the most important single factor in
determining whether transportation is interstate
or intra-state intention alone has been said not
to be a controlling factor in making such
determination. Inter-state journeys are to be
measured by the commonly accepted sense of the
transportation concept........The parties cannot,
by descriptive terms of contract, convert a local
business, serving as an agency of a transportation
company, into an interstate commerce business,
nor, conversely, may a through shipment be
transformed into intrastate commerce by separating
the rate into its component parts, charging local
rates, and issuing local waybills"
Similar observations are to be found in the same volume
of American Jurisprudence (p. 697, para 56) which relate to
the continuity of transit of goods, and may be extracted
thus:
"The crucial question to be settled in determining
whether Personal property moving in interstate
commerce is subject to local taxation is that of
its continuity of transit and this question is to
be determined by various factors, among which are
the intention of the owner, the control he retains
to change destination. the agency by
905
which the transit is effected, and the occasion or
purpose of the interruption during which the tax
is sought to be levied, Intent, while not alone
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 13
conclusive, is probably the most important single
determinant of continuous carriage.
If a break in the interstate journey is
caused by the exigencies or conveniences of the
safety of the goods during transit, or natural
causes over which the taxpayer has no control, the
continuity of the transit remains unimpaired".
The following statement of law occurs in the same
volume(para 57, p. 698):-
"If during transit, property is stored for an
indefinite time for other than natural causes or
for lack of facilities for immediate
transportation, it is subject to state or local
laws, including inspection laws......On the other
hand, if the entry of goods into a warehouse is a
convenient in termediate step in the process of
getting them to their final destination, they
remain in interstate or foreign commerce until
they reach those points".
In the case of Champlain Realty Co. v. Town of
Brattleboro one important aspect of the matter has been
dealt with, viz., the fact that if the goods halt in an
intermediate State whilst on their journey to their
destination for a long period due to circumstances beyond
the control of the owner, whether or not the goods lose the
nature of the interstate transaction and could be free from
the state taxation, was clearly highlighted by he following
observations:-
"Longs of pulp wood which have been placed in a
river to be floated into another state are in
interstate commerce, so as to be free from state
taxation, although, because of the high water in a
connecting river into which they will ultimately pass,
it is unsafe to permit them to enter that river, and
they are temporarily held in a boom near the mouth of
its tributary".
In the same case, C.J. Taft indicated the various
aspects of interruptions in the journey and the incidence
thereof and observed as follows:-
"The doubt arises when there are interruptions in
the journey, and when the property, its transportation,
is
906
under the complete control of the owner during the
passage If the interruptions are only to promote the
safe or convenient transit, then the continuity of the
interstate trip is not broken.
...... ...... .....
Chief among these are the intention of the owner,
the control he retains to change destination, the
agency by which the transit is effected, the actual
continuity of the transportation, and the occasion or
purpose of the interruption during which the tax is
sought to be levied".
In Volume 78 L Ed at p. 138 the test laid down was that
if the shipment was made in good faith to a destination and
the interruption was not indefinite but reasonable the
continuity of the journey cannot be said to be broken. It
was also pointed out that where the interruption of the
movement of commodities at an intermediate point is not
incidental to the transportation, the shipment loses the
character of interstate commerce so as to be exigible to
local taxation. In this connection, the following
observations were made:
"If the shipment has been made in good faith to a
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 13
destination the interruption is not indefinite, but is
reason-able and solely in furtherance of the intended
transportation of the shipment to its ultimate
destination, then the continuity of the journey is not
broken by the delay nor by the mere power of the owner
there to destroy its character as interstate
commerce.....any interruption of the movement of
commodities at an intermediate point between origin and
final destination that is not incidental to the
transportation or the means of transportation or, being
so incidental, is used or extended for purposes of the
owner not incidental to the transportation or the means
used therefor, breaks the continuity in transit and
subjects the shipment to local taxation at the point of
interruption".
We have laid special stress on the circumstances under
which the terminal tax becomes leviable if the halt or
interruption of the goods at an intermediate point is for an
indefinite and unexplained period. The answer to the
question as to what would be a reasonable time for
interruption of the goods or halting in the instant case at
the godown of Tuli, will naturally depend on the special
features or circumstances of each case, viz., the nature of
the goods,
907
the time taken in loading, sorting and unloading, the
obstacles or difficulties which may be faced by the
transporters and similar other factors. Normally, a time of
two to three days or even a week should be sufficient to
clear the goods for its journey to the ultimate destination.
It may sometimes happen that goods may have to be kept in
the godowns in the territory of Delhi for circumstances
beyond the control of the consignee or the consignor, e.g.,
while the goods are lying in a godown at Delhi a dispute
occurs between the concerned parties as a result of which an
injunction is issued by a court restraining the transporters
from moving the goods. In considering what is reasonable
time these circumstances would have to be taken into
consideration.
It, was however, argued before us that according to the
Terminal tax Rules framed under the Act, Rule 26 exempts
goods from terminal tax if the same are exported immediately
and are declared to be intended for immediate export. In
view of the interpretation we have placed on s. 178 it is
obvious that the word "immediately "appearing in Rule 26 has
to be liberally construed so as to imply a reasonable period
and if the export is delayed the rules may apply if a
reasonable explanation has been given. So far as rules
regarding taking of passes, etc, at the barrier are
concerned they would, of course, apply but subject to the
conditions under which terminal tax can be imposed under
s.178 of the Act which is the main charging section.
The High Court appears to have placed some reliance on
Amrit Banspati Co. Ltd. v. The Union of India in coming to
the conclusion that in the instant case the Corporation was
legally entitled to levy terminal tax. With due respect to
the Judges of the High Court who decided the Appeals, we
would like to point out that the case just above referred to
is clearly distinguishable from the present appeals. The
most crucial fact in the Delhi decision was that the goods
were being carried into the Union Territory of Delhi for the
purpose of sale at Delhi. Thus, the case proceeded on the
admitted position that the goods were carried from Ghaziabad
into the Delhi territory for sale at Delhi. The final
destination of the goods being Delhi, there can be no doubt
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 13
that the Corporation was fully entitled to levy terminal tax
on such goods. In this connection, the High Court observed
as follows:-
"The Petitioner-company was incorporated under the
companies Act, 1956, and it had its registered office
at G.T.Road, Ghaziabad, in the State of Uttar
Pradesh....
908
It has a factory, inter alia, at Ghaziabad for
manufacturing the said Vanaspati products. In the
course of its business, the company carried and still
carries its products by railway and/or road into the
Union Territory of Delhi from Ghaziabad for the purpose
of sale at Delhi.
....... ........ ......
The words "shall be levied on all goods carried by
rail-way or road" in sub-section (1) show clearly that
the section imposes terminal tax on the carriage or
movement of goods from outside the Union Territory of
Delhi into the said Territory. In other word, the
taxable event is the carriage or movement of goods into
the Union Territory of Delhi".
The observations last extracted must be understood in
the light of the admitted facts in Amrit Banaspati Company"s
case (supra). We are unable to accept that case as an
authority for the proposition that even if the final
destination of the goods was not Delhi but as the goods were
carried through the territory of Delhi, they would still be
exigible to terminal tax. In the impugned Judgment the High
Court, however, seems to have laid undue emphasis and
special stress on the fact that the goods were carried into
the Union territory of Delhi, the moment they passed through
it even though the destination of the goods may be some
other area. This appeared, according to the High Court. the
real purport and intention of s. 178. We are, however,
unable to agree with this view which is patently wrong and
does not at all flow from the plain and unambiguous language
of s. 178 of the Act nor does s.178 warrant such an
interpretation. Thus, our conclusions are follows:-
(1) The High Court was wrong in interpreting s. 178 of
the Act so as to justify imposition of terminal
tax even on goods which merely passed through the
territory of Delhi, although their destination is
not Delhi but places beyond Delhi.
(2) The High Court was wrong in holding that merely
because the goods after having been unloaded in
the godown of appellant Tuli are sorted, reloaded
in different trucks and thereafter pass through
the territory of Delhi, they become exigible to
terminal tax.
(3) The High Court was wrong in interpreting Rule 26
literally and holding that exemption could be
grant
909
ed only if the goods are exported immediately
which means within a very short time irrespective
of any other consideration. In view of our
interpretation of s. 178, Rule 26 must be
interpreted in the light of the object of s. 178
and terminal tax can be leviable only if it is
proved that the goods remained at the godown for
an indefinite and unexplained period which could
not be said to be reasonable as discussed by us in
the circumstances.
(4) Where the goods are carried by trucks into the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 13
territory of Delhi and unloaded there and are also
meant for Delhi and soon thereafter may be
rebooked by the receiver of the goods to some
other place, terminal tax would be leviable
because in this case there are two separate
transactions-(1) by which the goods are meant for
Delhi, and (2) by which after having reached and
having been unloaded at Delhi they are rebooked
and reloaded for some other place and which
therefore is a fresh and different transaction. In
such a case, terminal tax would be leviable at the
entry in the territory of Delhi.
We might mention that the High Court while holding that
terminal tax is exigible has construed the word
’immediately’ in Rule 26 literally and directed the Terminal
Tax Officer to fix a reasonable time for unloading, sorting
and reloading the goods which are meant for different
destinations taking into consideration the quantity of the
goods, the time for unloading, sorting, etc., and has
further directed that reloading or transhipment should be
done within a time to be fixed by the Terminal Tax Officer.
Though the directions given are correct but they will have
to be construed in the light of the various factors which we
have referred to. Rule 26 will have to be interpreted on the
footing that s. 178 of the fact does not contemplate levy of
terminal tax for goods meant for destinations other than
Delhi.
For the reasons given above, we allow these appeals,
set aside the impugned judgment except the portion quashing
the impugned orders. That portion we uphold (though on
grounds different from the ones given by the High Court) in
the light of the decision given and the observations made by
us regarding the interpretation of s. 178 of the Act. In the
special circumstances of the case there will be no order as
to costs.
V.D.K. Appeal allowed
910