1962 (11) TMI 61 - SC - Indian Laws

Concept of octroi - Liability to pay octroi on goods brought within municipal limits for different purposes - Interpretation of consumption use or sale within the context of octroi - HELD THAT - A sale of the goods brought inside even though not expressly mentioned in the description of octroi as it stood formerly was implicit provided the goods were not re-exported out of the area but were bought inside for use or consumption by buyers inside the area. In this sense the amplification of the description both in the Government of India Act 1935 and the Constitution did not make any addition to the true concept of octroi as explained above. That concept included the bringing in of goods in a local area so that the goods come to a repose there. When the Government of India Act 1935 was enacted the word octroi was deliberately avoided and a description added to forestall any dispute of the nature which has been raised in this case. In other words even without the description the tax was on goods brought for consumption use or sale . The word octroi was also avoided because terminal taxes are also a kind of octroi and the two were to be allocated to different legislatures. In our opinion even without the word sale in the Boroughs Act the position was the same provided the goods were sold in the local area to a consumer who bought them for the purpose of use or consumption or even for resale to others for the purpose of use or consumption by them in the area. It was only when the goods were re-exported out of the area that the tax could not legitimately be levied and in this case the municipality has agreed to refund the amount of tax on goods re-exported without being used or consumed in the municipal area. In this view of the matter it was not necessary for the Municipality to follow the procedure for imposing taxes when the section was amended. The tax still remained the same. Its nature incidence or rate were not altered. In our opinion the company was liable to pay octroi tax on goods brought into local area (a) to be consumed by itself or sold by it to consumers direct and (b) for sale to dealers who in their turn sold the goods to consumers within the municipal area irrespective of whether such consumers bought them for use in the area or outside it. The company was however not liable to octroi in respect of goods which it brought into the local area and which were re-exported. But to enable the company to save itself from tax in that case it had to follow the procedure laid down by rules for refund of taxes. Appeal dismissed.

Summary

Issues Involved:
1. Liability to pay octroi on goods brought within municipal limits for different purposes.
2. Interpretation of "consumption, use, or sale" within the context of octroi.
3. Compliance with procedural requirements for imposing octroi after legislative amendments.
4. Refund of octroi on goods re-exported outside municipal limits.

Issue-wise Detailed Analysis:

1. Liability to pay octroi on goods brought within municipal limits for different purposes:
The appellant, Burmah Shell Oil Storage & Distributing Company of India Ltd., challenged the imposition of octroi by the Belgaum Borough Municipality on goods brought within the octroi limits for sale. The company categorized the goods into four types: goods consumed by the company, goods sold and consumed within the octroi limits, goods sold inside but consumed outside the octroi limits, and goods sent to extra-municipal points. The Municipality had levied octroi on all goods brought inside the limits, amounting to Rs. 1,40,544.51 nP over three years. The company contested the liability to pay octroi on the second and third categories, arguing that octroi should not apply to goods sold within the limits but consumed outside.

2. Interpretation of "consumption, use, or sale" within the context of octroi:
The court examined the interpretation of "consumption or use" as contrasted with "sale." The appellant argued that these terms should denote consumption or use by the person who brings the goods into the municipal limits. The court referred to constitutional entries and historical context to explain that octroi applies to goods brought into a local area for consumption, use, or sale, irrespective of the immediate consumer. The court clarified that the taxable event is the entry of goods meant to reach an ultimate user or consumer in the area, and the act of sale is merely a means to that end.

3. Compliance with procedural requirements for imposing octroi after legislative amendments:
The Municipality's power to levy taxes, including octroi, is derived from section 73 of the Bombay Municipal Boroughs Act, 1925. The appellant contended that the inclusion of "sale" in the octroi description after the 1954 amendment required the Municipality to reframe rules and follow the procedure under sections 75, 76, and 77. The court held that the amendment did not alter the nature, incidence, or rate of the tax but merely clarified its scope. Therefore, the existing rules and by-laws continued to apply, and the Municipality was not required to follow the procedural steps for imposing a new tax.

4. Refund of octroi on goods re-exported outside municipal limits:
The Municipality agreed to refund octroi on goods re-exported outside the octroi limits, subject to the rules. The court upheld this position, stating that the company was entitled to a refund for goods not consumed or used within the municipal area. However, the company had to follow the prescribed procedure for claiming refunds. The court emphasized that the tax was payable on goods brought into the area for consumption or use, and the act of sale within the area did not exempt the goods from octroi.

Conclusion:
The court dismissed the appeal, holding that the company was liable to pay octroi on goods brought into the local area for consumption or use, including those sold within the area to consumers who might use them outside the area. The company was entitled to refunds for goods re-exported, provided it adhered to the procedural requirements. The judgment clarified the interpretation of "consumption, use, or sale" and upheld the Municipality's authority to levy octroi under the existing rules and by-laws.