TATA ENGINEERING AND LOCOMOTIVE COMPANY LTD. AND ANR. versus MUNICIPAL CORPORATION OF THE CITY OF THANE AND ORS.

TAT A ENGINEERING AND LOCOMOTIVE COMPANY LTD. AND ANR.

v. MUNICIPAL CORPORATION OF THE CITY OF THANE AND ORS.

NOVEMBER 22, 1991

[A.M. AHMADI, V. RAMASWAMI AND K. RAMASWAMY, JJ.J

Maharashtra Municipalities (Octroi) Rule, 1968:

Rule 25 (3) (d)-Octroi--Levy of-Goods imported within munici pal limits and stored in Warehouse for temporary detention and even tual exports-Goods sold within municipal limits for export and consump tion outside municipal limits--Held octroi not leviable-Taxable event of octroi-What is.

Rules 28,29 and 3~ctroi~efund of-Non-compliance with procedure-Effect of-Compliance with procedure not a condition prece dent for eligibility of refund-Compliance with procedure shall be tested having regard to the nature of transaction and the object of procedure.

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Doctrine of unjust enrichment-No evidence to suggest that octroi E

levied was recovered from customers-Refund of octroi would not lead-to.. unjust enrichment.

Rule 24-0ctroi-"Breaking the bulk"-Procedure to be followed-Rule 24 held not inconsistent with Rule 62 of Chapter VIII of the schedule to the Bombay Provincial Municipal Corporation Act, F 1949-0bject of Rule 24(2) explained.

Rule 28(2) (b)-Refund of octroi-Requirements of-Requirement 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

G

The appellant-company was carrying on business of manufac ture and sale d motor vehicles, spare parts of motor vehicles and excavators. Their manufacturing units we.re located outside the mu nicipal limits of the respondent corporation. P~rsuant to the per mission granted by the Respondent Corporation under Rule 10(2) of H

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[1991] SUPP. 2 S.C.R.

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the Maharashtra Municipalities (Octroi) Rules, 19.68 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 limits in smaller packings depending on the requireinents 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 appeliants were carrying out their activities of im C ports 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 import. 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 Corpo ration on the grounds: (1) the Co~pany 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 unc,mstitutional 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.

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In appeal to this Court it was contended on behalf of the ap pellant (i) since the sales were not for consumption or use within the octroi limits and that the parts were sold to parties outside the G octroi limits and also for consumption or use o_utside such limits the rejection of the claims by the Respondent-COiporation 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 H enough and there is no necessity for the company to get the sanction

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TATA ENGINEERING CO. v. MUNICIPAL CORPN.

447

of Superintendent ofOctroi or break the bulk in the presence of an · A officer deputed for the purpose as required under sub-rule (2) of· Rule 24 of the Maharashtra Municipalities (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) . B

that the meaning of words "sales therein" in the definition of octroi in the Acts and in Entry 52 of List II of VII Schedule to the Consti tution could not be limited to sales of the goods tor 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 car- C rying 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 D there is no inconsistency; (iv) since the appellants have recovered the amounts paid by them by way of octroi duty from their dealers or customers they are not entitled to refund; ordering of refund would amount to allowing the appellants to unjustly enrich them selves at the cost of the public to whom the burden had already been passed.

E

Allowing the appeal, this Court,

l:IELD: 1. In the case of impost of oct~oi 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 ocfroi. When the goods are brought in not F for consumption within the area but for temporary detention and eventual export, octroi is n·ot 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 actroi 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 G 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-EJ

1.1 Having regard to the nature and incidence of octroi unless H

the octroiable goods are consumed or used or are meant to reach an

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SUPREME COURT REPORTS

[1991) SUPP. 2 S.C.R.

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ultimate user o·r consumer in the octroi area no octroi. is leviable. The words 'sale therein' in the words 'consumption, 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 out side 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, (1963] Suppl. 2 S.C.R. C 216; Hira Lal Thakur Lal Dalal v. Brash Broach Municipality, (1976) Suppl. SCR 82; Municipal Council of Jodhpur v. Parekh Automobiles Ltd. & Ors., {1999) l S.C.C. 367 and H.M.M. Ltd. v. Administrator, (1989] 4 S.C.C. 640, relied on.

Khandelwal Traders Ako/a v. The Ako/a Municipal Council, AIR

D 1985 Bom. 218, approved.

1.2 Since the goods were sold by the Company to outside pur chasers 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 iilegal and could not be sustained. [457 G-H]

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2. Once octroi is not leviable the deposit made by the im porter pending export is in the nature of a trust and refund!lble in the event of the export of the goods. [473-G-H]

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· 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 bas 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 mereiy regulate the system on which refund shall

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TATA ENGINEERING CO. v. MUNICIPAL CORPN.

449 ·

be allowed. In a given set of facts, whether the rules have been A compl'ied 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 satisfied. (458-D, 473 H, 474-A]

3.1 The object of requiring intimation or sanction and pres ence of an officer when breaking the bulk in the scheme of octroi B levy and refund is to ensure that dutiable goods do not escape the assessment and refunds are made only in respect of go-0ds 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. [474 A-BJ

c:

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3.2 Rules 24 to 30 of the Maharashtra Municipalities (Octroi) Rules, 1968 and the forms in the system of levy of Octroi are in tended to regulate the procedure for collection identification of du tiable goods and correlation of goods exported with the goods im ported for the purpose of refunds of octroi collected. [475-DJ

The rules do not contain any specific provision that an appli cant for refund who has failed to follow the procedure would be disentitled to claim the refund. (473-G]

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3.3 Compliance with the procedure prescribed in the Rules for filing claims of refunds are not conditions precedent for the right or E eligibility for refund or the liability to refund but are provisions regarding proof of export of the goods imported and are not meant to be exhaustive either. They are to be interpreted and understood· in that sense. (475 E-F)

Municipal Committee Khurari v. Dhannala/ Sethi & Ors., [1969] F

1 S.C.R. 166; Kirpal Singh Duggal v. Municipal Board, Ghaziabad, (1968) 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 invoices were not pro duced or columns 5 and 6 of Form 11 or the corresponding columns G 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 rejec- tion are invalid. (475 G-H]

4. The object of the Rules fixing a period of limitation for H

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[1991) SUPP. 2 S.C.R.

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exl>ort however is different. The export cannot be put in perpetual doubt and the goods may be considered to have come to a 1·epose if ·they were not exported within a pa~ticular period provided in the rules. [475-F)

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4.1 However an equitable principle could be followed in this regard and it may be presumed that the goods which came in first hav~. gone out first. If the goods are mixed up and unidentifiable due to breaking bulk and ·repacking in smaller and assorted pack ages before export the principle that the first export was of the goods first imported, subject to any evidence available to the con trary, may be applied and the six months period prescribed under C 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). D 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. There fore, both the rules can stand together. [471 F-G)

'E

6. There in no evidence that any of the articles 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. Docu mentary evidence do not also show that any octroi was separately charged and collected by the Company. Therefore the question of

F unjust enrichment does not arise. (476 F-H]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4702 of

1991.

From the Judgment and Order dated 26.8.88 of the Bomaby High

G 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 Respondents.

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The Judgment of the Court was delivered by

TATA ENGINEERING CO. v. MUNICIPAL CORPN. [V. RAMASWAMI, J.] 451

V. RAMASW AMI, J. Leave granted.

A

· tje First appellant-Tata 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 vehicles and spare parts of motor vehicles and excavators. Their B manufacturing units are at Pune and Jamshedpur outside the Thane Mu nicipal 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 C and thereafter taken or sent ·out from the. Municipal limits in smaller packings depending on the requirements 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.

D

On and from lst October, 1982 with the notification under Section 3 of the Bombay Provincial Municipal Corporation Act, 1949, the Thane Municipal Council became a Municipal Corporation (hereinafter called the Corporation). Prior to the constitution of the Corporation it was a municipality and were governed by the Thane Municipal Council consti tuted under the Maharashtra Municipality Act, 1965. Prior to 1st October, E 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 F into existence of the Thane Municipal Corporation the appellants were permitted to have a war~bouse of their own and keep a current account facility without the req\iifement of immediate payment of octroi at the Octroi Naka. In tenns 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 Guara.tiiee for an equiv.a'.tent amount as agreed to between G the Company and the. Corporatiori. However, there is some dispute as to what were the fonnalt~ies that were dispensed with in the matter of claim- ing refund of the octroi when the goods were exported. 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 .~f unpacking the bulk, repacking and exporting.

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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 : (I) 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 Municipalities (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 Cor poration were: (i) Form 4 of the Octroi Rules and the original invoices were not submitted, 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 D 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.

C

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 befor~ us stated that it i~ 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 Khande/wa/ Trader Ako/av. The Ako/a 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, [I963f Suppl. 2 SCR 216 and Hiralal Thakorlal Dalal v. Bra. sh Broch Municipality, [1976] Suppl. SO~ 82 he did not press the point. We have therefore, permitted the point to b~ 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 respondent-Corporation had also given the said facility to the Company even after lst October, 1982 on their making a cash deposit of Rs. 7 Lakhs and furnishing a Bank Guarantee for a like sum as s~curity

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TATAENGINEERINGCO. v. MUN!CIPALCORPN. [V. RAMASWAMl,J.] 453

~ for grant of that facility. The respondent had also admitted that the Com- A pany had been given permission under Rule I 0 (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 required to submit a statement of goods imported in Form 5 before the I 0th of the following month. The officers of the respondent after scrutiny B of the s.tatement so filed determine 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 Corpora- tion within 15 days of the determination of duty.

The first submission of Mr. Andharujina, learned counsel for the c

appellants was that 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 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 illegal. Mr. K.K. Singhvi, the learned counsel for D the Corporation 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 consump- tion or use within the municipal limits.

When an importer wants to export dutiable goods temporarily de- E

tained by him in his own godown he shall present an intimation-cum- application 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 :

"the exporter and the importer of these goods are one and the F same person and such articles have not undergone change of ownership"

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 G 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. I 05 of the Maharashtra Municipalities Act, 1965 authorises the Muncipality to levy "Octroi". Both these Acts define

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SUPREME COURT REPORTS

(1991) SUPP.2 S.C.R.

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, pro vides 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 Municipal Corporations Act LDC of 1949. How ever these Rules are continued in the Thane Municipal Corporation by virtue of paragraph 5 of Appendix IV to the Act LDC of 1949.

The legislative entry relating to the constitutional power to levy this tax is found in List II Entry 52 of the 7ih Schedule to the Constitution which reads :

"52. Taxes on the entry of goods into a local area for con sumption, use or sale therein".

The Bomaby Municipal Boroughs Act, 1925 which was in force prior to the enactment of the Maharashtra Municipalities 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 octroi limits for consumption or use therein". This provision 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 amendment the Municipality could levy octroi on goods brought within the octroi limits "for consumption, use or sale therein". This provision came up for consideration ih Bunnah Shell case (supra). Two of the categories of transactions which were considered in this case related to transactions under which (l) 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 consumed inside the octroi limits. In connection with this contention this Court considered the meaning of words "consumption, 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 con sumption may be postponed or may be perfonned by someone else but so long as the goods have been brought into t11e local

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TATA ENGINEERING CO. v. MUNICIPAL CORPN. [V. RAMASWAMI, J.] 455

area for consumtion in that sense, no matter by whom, they A 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".

B

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 c 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 resp~ct 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 D intended for consumption of the goods inside the octroi area though ulti- mately 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 E 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 consump- tion 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 coQ.sumption ·was also outside the octroi limit, octroi duty F paid is not refundable. This decision came up in appeal before this Court and the decision of this Court is reported in Hiralal Thakorlal Dalal v. Brash Broach Municipality, [1976] Suppl. SCR 82. On facts that case related to a consignment sale and the goods were despatched to destina- tion outside octroi limits for consumption there. A plea for review of the decision in Bunnah Shell Company's case (supra) was also made in this G case. However a Constitution Bench rejected the request for reconsidera- tion and held that the word "sale" in the colloquium of the words "con- sumption, use or sale therein" means sale for consumption within the octroi limits. The ratio of these two decisions was considered by the Bombay High Court in Khandelwal Traders Ako/a 's case (supra), which was referred to in the Judgment under appeal. It was held in this case also H

456

SUPREME COURT REPORTS

(1991) SUPP. 2 S.C.R.

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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 permission 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 B put beyond any pale of doubt by the latest decision of this Court in Municipal Council, Jodhpur v. Mis. Parekh Automobiles Ltd. & Ors., [1990] l SCC 367. Rule 13 (4) of the Rajasthan Municipal Octroi Rules, 1962 which was one of the provisions considered in this case provided that

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"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 or'goods transported outside the municipal limits as shown by the transport passes:

Provided that in computing the octr.oi duty payable under sub section (4), the goods transported 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 onwards transmission for use and consumption in Oangia 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 and gov-

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TATA ENGINEERING CO. v. MtJNICIPALCORPN. [V. RAMASWAMI,J.] 457

emed by the tenns.ofiule 13 was entitled to go on paying octroi duty "on A to basis of the goods brought by it within the municipality less the goods tr&isported outside the municipality even where the transport .outside the municipality may be in pursuance of a sale within the municipality so long as 5uch sale is in pursuance of an intention that the goods should be conswn~d 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 al~o intended to be consumed or used outside such limits and in fact the goods were also exported. The ratio of the decisions above(eferred 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 mu- nicipal 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· men- tioned 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 Bank. Right of disposal expressly reserved with _the· vendor. On the other hand on behalf of the Corporation it was contended that orders were Df>th 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 ~or the purpose of this case proceed on the assumption that technically the sale in law bad taken place inside the municipal limits.

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Since the goods were sold by the Company to outside purchasers and the goods under the transactions of sale, were intended to be exported G 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 H

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458

SUPREME COURT REPORTS

[1991] SUPP. 2 S.C.R.

A Rule 25 (3) (d) shall now be taken up by the respondent and passed for

payment.

B

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 the goods are C exported. When the goods in respect of which octroi was_ paid are ex ported, 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 h"appened. Right to refuiid arises because the goods are not con sumed inside the area but exported and the tax becomes not leviable. The rules merely regulate the system on which refunds shall be allowed. The D 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.

·

F

E

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-compliance with any of those provisions in the Rules, it is necessary to broadly set out the different types of procedures prescribed, depending on different purposes of in\ports 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 municipality 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 Cor- G poration to keep an current account. In the first case, since octroi is attracted on arrival of the d_utiable 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 fu the municipal limits for consumption, use or sale but are intended for immedi ate export outside the octroi limits. He is required to deposit an amount in

H

j

~

TATA ENGINEERING CO. v. MUNICIPALCORPN. [V. RAMASWAMI, J.) 459

accordance with the scale fixed under clause (b) of sul>-i"ule (1) of Rule A (5). On such deposit being made a receipt is given in the form prescribed by the Entrance Naka Inspector and a written permission-c~-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 applica- tion to the Octroi officer at the Entrance Naka for a written permission to B deposit such goods at the bonded warehouse maintained by the Corpora- tion. 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- c cum-export pass in the prescribed form and also deposit an amount equal to the octroi leviable therein. On such deposit made a written permission- cum-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 certifying the export and the refund of the deposit is claimed thereafter producing the certificate issued by the Exit Naka Officer. In the fourth D category, the importer gives a declaration in Form 4 that the goods are meant for temporary detention with him at his own warehouse for even- tual export. After verification of the particulars furnished in that form with the invoices and other documents produced he is required 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 E stating that the said amount "on account of deposit" has been recovered. 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 verification of the goods a written F permission-cum-refund export pass in Form No. 12 is given to the im- porter. On presentation 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.

G

.... _

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 fac~lity. 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. -

H

A

B

c

D

E

F

G

H

SUPREME COURT REPORTS

(1991] SUPP. 2 S.C.R.

(I)

x

x

x

(2) A Council may permit any importer to maintain a private Bonded Warehouse for keeping 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 restrictions 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)

(e)

to make a declaration in Form 4, in respect of the goods intended for temporary detention with himself and even tual export;

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;

"IS.Procedure for assessment and recovery of octroi. -

(4) On receipt of a declaration in Fotm 5 under the last pre ceding 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 declaration and fill up the certificate below the declaration and issue a pass in Form 6. The Octroi Officer shall forward all such declarations together with a list in duplicate thereof 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 dy:ti able goods intended for temporary detention within the oc~oi

·,

TATA ENGINEERING CO. v. MUNICIPAL CORPN. [V. RAMASW AMI, J.) 461

limits and eventual export are to be detained by the importer at A his residence or a Bonded Warehouse licensed under sul>-rule (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 paymen~ of an amoµnt 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.

B

(2) In case the importer cannot export the goods without breaking bulk or without assemble and testing in the case of machinery, he shall do the same only with the sanction of the Superintend- ent of Octroi in the presence· of an officer deputed for this purpose by the said Superintendent. Such goods, if necessary C shall be formed into packages, which may be sealed and marked by the Officer so deputed.

"25.Procedure for export of dutiable goods temporarily de tained with importer. - (I) When the importer wants to export dutiable goods detained with him, he shall present an intim~­ tion-cum-application for written permission in Form 11 to the Superintendent of Octroi to export such goods, giving neces~ sary details; and produce such goods for verifica!ion 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 established by the Council for the purpose.

(2) A separate intimation-cum-application shall be given by each· importer or hts own goods. One such intimation-cum application shall be sufficient for a single consignment. When such consignment contains goods of different descriptions, full · details shall be given separately in the intimation-cum-applic~­ tion. Not more than one fntimation-cum-application for export can be giv~n by an importer for goods passing through an Exit Nakain'aday.

(3) No such intimation-cum-application shall be accepted un less-

·

(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;

D

E

F

G

(b)

it is supported by the receipt for the deposit paid at the . time of import and is accompanied by the original in- -voice, if any, filed at the time of import;

H

462

SUPREME COURT REPORTS

[1991) SUPP. 2 S.C.R.

A

(c)

the goods produced for inspection and intended to be ex- ported are, subject to the provisions of sub-rule (2) of the last preceding rule, identical with what they were at the time of import.

B

c

D

E

F

G

H

(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-application and on ar- rival 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 conditions prescribed above

are fulfilled;

(b) verify that the goods actually produced for inspection are as described in the intimation-cum-application and in the relevant import invoice, if any, or in the import declara- tion 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 pennission-cum- refund 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; ,

\-

-..

I-·

t:"'

TATA ENGINEERING CO. v. MUNICIPAL CORPN. [V. RAMASW AMI, J.) 463 •

(b)

the seals or marks, if any, are inact; and

A

( c)

the goods actually tally with those mentioned 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, de liver the same to the importer and allow the goods to pass B beyond the octroi limits.

28. Provision for refund of deposit.- (l) 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.-

c

(a) The refund is applied for within one month from the date. ·

of export.

(b) The goods are exported out of the octroi limits within a D

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 withdrawn within three months from . the date of intimation to the importer to receive the amount.

(t) The goods exported were declared to be intended for tern~ . . _porary de_ten~ion with the importer and eventual export at

th-e time of ill)port:

·

E

F

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.

2,. Procedure for refund. - (1) The Application for refund of

deposit shall be made in Form 13 by the importer himself or G by his duly authorised agel\t in this behalf in writing on any working day duritig th~ .~ptirs fixed for money transactions by the Cowwil at the ·ro~tral Octroi Office within one month from the ~te of the.actual export. If the last day for claiming refund falls on a public holiday such application shall be ac- cepted on the next working day.

H

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464

A.

B

c

D

SUPREME COURT REPORTS

(1991) SUPP. 2 S.C.R.

(2) Such application shall be accompanied by the duly certi fied relevant written permission~cum-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-cum-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 detennined subject to the limita tion 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 le viable 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 determined. 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".

FORM4 (Rules 14, 24 and 25)

E

Declaration in respect of the dutiable goods imported into the Mu nicipal octroi limits, which are intended for temporary detention with the importer and eventi.Jal export.

To

· F

The Octroi Officer, Octroi Naka No ............ .. .. .. . .. .. .. .. .. Municipal Council. !, .................... (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 G a.mount 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 origi nal invoice, true copy of which is filed herewith. The said invoice covers all the goods imported by me as per Bill of Entry/Railway Receipt/ Goods

H Transport Memo/ Air consignment Note No .......... dated ....... .

II(

.~

._.I.

TATA ENGINEERING CO. v. MUNICIPALCORPN. [V. RAMASWAMl,J.] 465

Sr. Noi & date No.and Des.:ription Weight Value plus all of the No. of import goods

incidental charges

des.:ri-

or

goods which are to be given separately

document ption of packages

Sender's

'·Re- A

name& m3rks address in full

1

2

3

4

5

6

7

8

B

Full residentiaVbusiness 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. Ture copy of the invoice ap- C pended is verified and found to be correct. The weight or quantity or · value, together with the incidental charges declared, is correct. The tax- able weight/quantity/value of the goods is ...... and the rate ofoctroi... .... ,

Date...........

Inspector/Clerk. The amount of Rs .......... on account of deposit has been recovered

D

under receipt No .......... dated .......... .

Date ......... .

Inspector/Clerk. ·

FORMS (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 Cctrrii Officer, OctroCNaka No ....... .. Municipal Council..

1, ........................ (insert the full name and address of the importer) hereby declare that the below mentioned goods are being imported into the Mu- nicipal 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 at).d 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.

E

F

H

466

SUPREME COURT REPORTS

[1991] SUPP. 2 S.C.R.

To be filled in by the importer

Sr. Bill of Entry' No. Railway Receipt'

Number Weight descri- Goods Transport ption of Goods quantity Gross packages Memo/Air Consignment Note

1&&£1i1!1i2D Value plus incidental charges which are to be given separately 6

5

2

3

4

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. Issued pass No ........ :.dated ......... .

Date...............

Inspector/Clerk

FORM6 (Rule 15)

To be filled in at the Central Octroi Office

Rate of Amount of Octroi 'Octroi recoverable

7

8

Dues entered in Account Current Date ......... . Octroi Su:j>erintendent

Pass for goods imported on behalf of person, finn or body allowed to keep an account current

.......... Municipal Council : .......... Municipal Council Book No ..... Entrance Naka No ..... : Book No ..... Entrance Naka No .....

Counterfoil of pass

Pass for goods imported by in account current ....... . (Name of Person, finn or body)

Desc_r.iption

No. and Description of packages 1

Description of the goods 2

Weight, quantity or value 3

. •"

Dated.......... Entnµ1ee ,Naka Insp~ptor/(;lerk

, , , .

.

>. ~-

.

.

' ·-

.

, ' '

Dated ....... : .. Entrance Naka In~pector/Clerk

A

B

c

D

E

F

G

·H

TATA ENGINEERING CO. v. MUNICIPAL CORPN. [V. RAMASWAMI, J.] 467

Form 11 (Rules 25 and 26)

Intimation-cum-application for written permission for Export of Goods Temporarily detained with the Importer

To

Sir,

The Superintendent of Octroi, .................... Municipal Council.

A

B

I ....... , ..... , ......... (insert the full name and address of the im- C

porter) 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. No.

Description of the goods

2

Quantity

Date of

(Number of Import & No.

bags or cases) 3

of entrance Naka 4

Import invoice No.and date 5

Depo~it receipt number& date 6

Gross weight

7

Value Amount to be Number of Name and refunded Refund Export address of

How exported

Remarks

8

9

10

11

12

13

pass granted the consignee

D

E

F

' T

Date ......... ..

Si~e of Importer G

Veri-fied the contents and the weight as above and found correct.

Countersigned. Octroi Officer. Receipt No ....... .

Signature ofthe Re~d lnspector/CJerk.

.H

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468

SUPREME COURT REPORTS

(1991] SUPP. 2 S.C.R.

FORM12 (Rule 25)

Written Permission-cum-Refund Export Pass

Receipt No .............................. -

Date ............................. 19

A

B

SI. . no.

Month · and date 2

Name and Description Name and address of address of the importer the consignee

of the goods s

Quantity (number of bags or cases) 6

Gross weight

7

3

4

c

Value.

Deposit to be refunded

How exported

Date & time· by Whether

Exist Naka which the goods No.

should reach the sealed or ExportNaka escort given

goods

Remarks

I

..,. \

8

9

10

11

12

13

14

*Fee for Written Pennission-Cum-Refund Pass Rs ... ,. ..... Miscellaneous Receipt

D No .......... , dated ......... .

Signature''or the importer

Signature of Octroi Officer

I hereby certify that the goods mentioned above have passed outside . Time ........... am./ E p.m. in my presence Railway receipt... ....... /Vehicle No ......... The seals, if

the octroi limits this day the .......... of the month ....... : .. 19

any, thereon were intact when the goods were presented to me for verifi cation.

Date .......... .

Signature of the Exist Naka Of(icer NakaNo .......... .

*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)

F

G

To

Application for Refund of Deposit

H

The Superintendent of Octroi, .......... Municipal Council.

..

TATA ENGINEERING CO. v. MUNICIPALCORPN. [V. RAMASWAMI, J.] 4(9

Sir,

I, ................ the resident of .......... hereby apply for refund of deposit as per enclosed Written Permission-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 2t'3nt the refund of Rs ......... and oblige.

A

B

Enclosure:

Date ......... .

Signature of Importer

)

On a reading of these rules it appears to be that Rules 24, 25 and 28 C

in terms would apply only to cases falling under category four, stated above. The· declaration in Form 4 referred to in R;ule 24 and deposit of the amount equivalent to octroi duty payable at the eµ.try point, production of the goods for verification at the Central Octroi Office are all consistent wjth its being applicable to a case where dutiable goods are imported for .. temporary detention and eventual export by a person having a bonded D · warehvuse of his own contemplated in Rule 14 (I) {d) and not Rule 14 (I) . (e). However, Rules 29 and 30 are genefal in tenns and may be invoked in both the cases falling under Rule 14 (I) (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 person having a bonded warehouse and the facility of account current. E 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 declara~ tion 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 ware- F house "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 4 is not applicable to the case of the Company which has got a current account facility. The G Company, 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 In spector at the Entry Naka Point. Further reference to original invoice~in Forms 4 and 5 is only for the purpose of che~king the particulars ente ed into in the forms. The production of an invoice is not, having regard to he H 1

470

SUPREME COURT REPORTS

(1991] SUPP. 2 s.c.R:

purpose of such production, to be insisted blindly. If the particulars fur nished in the fonn including weight/quantity or value could be established satisfactorily by other documents, we have no doubt that will be sufficient compliance vdtb the Rules. Column 5 of Fonn I I 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 orig!nal invoice could not be complied with and is not applicable. Under the current ac count procedure the invoices, if any and all the other documents are verified when the goods reach the \Yarehouse with reference to the de scriptiOn of the goods, weight/quantity, value and other particulars and it is only after verification the octroi duty leviable is detennined and amount is debited in the account current ~d the demand also is issued.

The learned counsel for the appellant also ·referred to certain docu ments to show that for every category of article, 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 computerised for easy verification. It is these identifying numbers of the articles that are mentioned in the intimation-cum-application for written pennission for export. He also relied on the fact that the Company has no manufacturing unit within the Thane Municipality. Similarly, Column 6 of Fonn 11 al~o could not be complied with as it is not applicable to a person who is having current account facility. 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 has suggested that since the Com pany 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 valuation.

The Octroi Exit Naka Officer had refused to give the certificate of export pass on the ground that the particulars in CQlumns 5 and 6 of Fonn 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 facility and there is no dispute about the export of the goods mentioned therein the refusal to give the export pass certificate by the Exit Naka Officer could not be sustained.

A

B

c

D

E

F

G

H

,.._ .... l '

. ~ •• \

_.

..

...

TATA ENGINEERING CO. v. MUNICIPALCORPN. [V. RAMASWAMl,J.) 471

The next point to be considered is the procedure to be followed A

when the importer wants to "breaking the bulk" and repack the goods in smaller quantities and also the procedure 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 packages, sane- tion 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. B Rule 62 of Chapter VIII of the Schedule to the Bombay Provincial Mu- ;nicipal 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:

c

"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 D

earlier states that the rules framed 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 intima- tion 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 E 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 accord- ing 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 responde11t contended that Rule 62 ( c) F deals with prior intimation ;irid 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 inconsist- ency. We are not impressed with the argument that there is an inconsist- ency between Rule 62 and Rule 24 (2). The intimation contemplated in Rule 62 imply .that the breaking the bulk shall be done with the knowl- G edge of the octroi authorities. But it 'eattrtot be said that the rules further provide that after i~tinlation the breakiilg 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 HMM Limited v. Administrator, [1989) 4 SCC 640 this Court had occasion to consider the effect of non-compliance with this require-

H

472

SUPREME COURT REPORTS

(1991] SUPP. 2 S.C.R.

A ment of a similar provision, on the right to get refund. Shortly stated the facts in that case were these : The appellant 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 Bangalore and thereafter exported outside the municipal limits. In respect of the milk food . so exported in glass bottles the appellants sought refund of octroi on the B 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 with- out 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 case of tim- ber 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 Municipality 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 relation 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 breaking the seal of the drums, to the , bottles for the purpose of exporting or for taking them oui of the munici- . pal 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 importer 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 ruis bee'n 1iiade and the amount collected, the _same becomes legally refundable even when the goods are exported in parts and it! smaller packages. This is particu-

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TATA ENGINEERING CO. v. MUNICIPAL CORPN. [V. RAMASWAMI, J.) 473

larl}' 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.

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In this connection we may also refer to another decision reported in Municipal Committee, Khurari v. Dhannalal Sethi & Ors., [1969] l 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 ap- . jX\inted for that purpose. There were other rules which provided an elabo rate, procedure to be followed at the time of export of the goods. These rules related to the 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, identifying 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 follow. But the question is whe'lher 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 ap pellant Committee is that though the rules lay down a proce dure which such an applicant has to follow, they do not pro vide at the same time that an applicant for refund who has failed to follow the procedure laid down in r.r. 35 to 319 would ·be disentitled to claim the refund. In the absence of such a provision coupled with the categorical language ofr. 27 giving a right to an exporter of dutiable goods to claim 7 /8tb of the duty paid on such goods on their import, it becomes Uifficult to uphold the denial by the appellant Committee ofthe1right of respondents l and 2 such a refund. We are, therefore, of the opinion that in the present state of the rules, the appdal must fail though for reasons different from those given by th~ Board of Revenue and the High Court".

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It may be pertinent to mention that the Maharashtra Munici!palities ·(Octroi) Rules, 1968 also do not contain any specific provision :that an ~plicant for refund who has failed to follow the procedure w~uld be disentitled 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 I 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

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474

SUPREME COURT REPORTS

(1991) SUPP. 2 S.C.R.

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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 otlier words the whole requirement relates to the identifica tion 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 C 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 re fund cannot be treated as condition precedent for the entitlement of the refund itself. The Constitution prohibits levy of tax except in accordance D with 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 Shel/ '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) (b) when it requires evidence that the goods were exported out of the octroi limits within a period of six months of their imports. The learned counsel for the appellants Mr. Andharujina 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 distinc tive 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 directeu the parties to proc~ed on the basis that the goods which came in first pad 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)

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TATA ENGINEERING CO. v. MUNICIPAL CORPN. [V~ RAMASWA.MI; J.) 475

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?3 All. E.R. Rep. P. 1, it was held that in the absence of an aJeemem. 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 ~ide 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 principle 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 si({ months perio4 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 folllowed for the future also in this case.

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To sum up: Having regard to the nature and incidenc~ of octroi unless the octroiable goods are consumed or used or are meant to reach an C ultimate user or consumer in the octroi area no octroi is levtia,ble. The words 'sale therein' in the words "consumption, use or sal,:l ther~ln" in the definition octroi means sale of octroiable goods to a persoh>'f¥'' the pur pose 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. Rlules 24 to D 30 and the forms in the system of levy of octroi are intended ~o regulate the procedure for collection, identification of dutiable goods ~d correla- tion of goods exported with the goods imported for the purpose pf refunds of octroi collected. In view of constitutional bar octroi is not ieviable if the goods are not brought into the octroi area for purposes of co~sumption or use in the area but for export and in fact exported by the importer E himself or the sale by him occasions the export. Compliance with the procedure prescribed in the Rules for filing claims of refun4s are not condition precedent for the right or eligibility for refund or the liability to refund but are provisions regarding proof of export of the goods imported and are not meant to be exhaustive either. They are to be inte1Rreted and understood in that sense. The object of the Rules fixing a period1of limita- F tion for export however is different. The export cannot be put in, perpetual doubt and the goods may be considered to have come to a rep9se if they were not exported within a particular period provided in the rules. Apply- ing 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 G 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 iq Form 12 had not been filled with reference to an original invoice or Form 4 or deposit receipt ~d the refusal to issue export pass· ce_!fificates[ 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 unic\entifiabte H

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476

SUPREME COURT REPORTS

[1991] SUPP. 2 S.C.R.

A . 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 ap plied and the six months period prescribed for export may be determined accordingly.

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When these appeals were pending by way of interim arrangement 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 Corpora tion may depute their officer or officers on all working days at the ware house of the Company to supervise the breaking of the bulk subject to the C 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 purposes of the rules are served the free trade and commerce of the Company which is stat~d to have a large turnover is also not affected.

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pellants 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 wouJd 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 addi tional 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 articles sold by the Company is subject to any price control by the Government or that t~e 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 collected by the Company. It may be men tioried 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 tum have recovered the octroi duty from the customers". In view of this the question of unjust enrichment does not arise.

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TATA ENGINEERING CO. v. MUNICIPAL CORPN. [V. RAMi\SWAMI, J.) 477

This appeal is accordingly allowed on the above tenns. There will A

however be no order as to costs.

T.N.A.

Appeal allowed.