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PETITIONER:

TATA ENGINEERING AND LOCOMOTIVECOMPANY LTD. AND ANR.

Vs.

RESPONDENT:

MUNICIPAL CORPORATION OF THE CITY OF THANE AND ORS.

DATE OF JUDGMENT22/11/1991

BENCH:

RAMASWAMI, V. (J) II

BENCH:

RAMASWAMI, V. (J) II

AHMADI, A.M. (J)

RAMASWAMY, K.

CITATION:

1992 AIR 645 1991 SCR Supl. (2) 445

1993 SCC Supl. (1) 361 JT 1991 (6) 322

1991 SCALE (2)1111

ACT:

Maharashtra Municipalities (Octroi) Rule, 1968:

Rule 25 (3) (d)--Octroi--Levy of-Goods imported within

municipal limits and stored in Warehouse for temporary

detention and eventual exports--Goods sold within municipal

limits for export and consumption outside municipal

limits---Held octroi not leviable--Taxable event of

octroi--What is.

Rules 28,29 and 30--Octroi---Refund of-Non-compliance

with procedure-Effect of--Compliance with procedure not a

condition precedent for eligibility of refund----Compliance

with procedure shall be tested having regard to the nature

of transaction and the object of procedure.

Doctrine of unjust enrichment--No evidence to suggest

that octroi levied was recovered from customers-Refund of

octroi would not lead unjust enrichment.

Rule 24--Octroi--"Breaking the bulk"--Procedure to be fol-

lowed-Rule 24 held not inconsistent with Rule 62 of Chapter

VIII of the schedule to the Bombay Provincial Municipal

Corporation Act, 1949 Object of Rule 24(2) explained.

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

quirement of exporting goods out of municipal limits within

six months of import-Proof of--Equitable principle "first

export was of goods first imported"---Applicability of.

HEADNOTE:

The appellant-company was carrying on business of manu-

facture and sale of motor vehicles, spare parts of motor

vehicles and excavators. Their manufacturing units were

located outside the municipal limits of the respondent

corporation. Pursuant to the permission granted by the

Respondent Corporation under Rule 10(2) of

446

the Maharashtra Municipalities (Octroi) Rules, 1968 the

appellant company was maintaining a bonded warehouse within

the municipal limits of the Respondent-Corporation. The

motor vehicles parts and excavators parts brought from the

Company's own factories as well parts imported from abroad

were stored in this warehouse. These products were brought

in bulk and thereafter taken or sent out from the Municipal

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limits in smaller packings depending on the requirements of

the customers in various parts of the country.

The appellants were also granted current account

facilities without the requirement of immediate payment of

octroi at the Octroi Naka. Accordingly, the appellants were

carrying out their activities of imports and exports under

the current account procedure with facility of unpacking the

bulk, repacking and exporting.

Under the Octroi Rules the octroi becomes refundable

when the goods in respect of which octroi was paid are

exported out of octroi limits within 6 months of their im-

port. During the period 1st January, 1983 to 31st March,

1984 the appellant-Company made 1182 claims for refund of

octroi which were rejected by the Corporation on the

grounds: (1) the Company had "sold" the spare parts within

the octroi limits of the Corporation in contravention of

Rule 25(3) (d) of the Maharashtra Municipalities (Octroi)

Rules, 1968; (2) the procedure prescribed for export and the

claim of refund had not been strictly followed.

The appellants filed a writ petition under Article 226

in the High Court of Bombay contending that the action of

the Municipal Corporation in refusing refund was unconstitu-

tional and illegal. The Division Bench of the High Court

dismissed the writ petition. The Company filed an appeal in

this Court against the decision of the High Court.

In appeal to this Court it was contended on behalf of

the appellant (i) since the sales were not for consumption

or use within the octroi limits and that the parts were sold

to parties outside the octroi limits and also for consump-

tion or use outside such limits the rejection of the claims

by the Respondent-Corporation on the ground that the sales

were within the municipal limits in contravention of rule

25(3) (d) of the Rules is illegal; (ii) Under Rule 62 of

Chapter VIII of the Schedule to Bombay Provincial Municipal

Corporation Act, 1949, prior intimation of the intention to

'break the bulk' is enough and there is no necessity for the

company to get the sanction

447

of Superintendent of Octroi or break the bulk in the

presence of an officer deputed for the purpose as required

under sub-rule (2) of Rule 24 of the Maharashtra Municipali-

ties (Octroi) Rules, 1968; Rule 24(2) of the Octroi Rules is

inconsistent with Rule 62 and to the extent of inconsistency

it shall be deemed to be not applicable.

On behalf of the respondent Corporation it was contended

(i) that the meaning of words "sales therein" in the defini-

tion of octroi in the Acts and in Entry 52 of List II of VII

Schedule to the Constitution could not be limited to sales

of the goods for purposes of consumption or use within the

municipal limits; (ii) there was a change in the ownership

of the goods since a sale in law had taken inside the octroi

limits though the purchaser was residing and carrying on

business outside the octroi limits and under the sale the

goods were intended to be and in fact exported for the

purpose of consumption and use outside the octroi limits;

(iii) that while Rule 62 (c) deals with prior intimation

Rule 24(2) deals with the sanction and breaking of the bulk

in the presence of an officer deputed for that purpose and

both the rules can stay together and operate and there is no

inconsistency; (iv) since the appellants have recovered the

amounts paid by them by way of octroi duty from their deal-

ers or customers they are not entitled to refund; ordering

of refund would amount to allowing the appellants to unjust-

ly enrich themselves at the cost of the public to whom the

burden had already been passed.

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Allowing the appeal, this Court,

HELD: 1. In the case of impost of octroi the taxable

event is the entry of goods which are meant to reach an

ultimate user or consumer in the area. Mere physical entry

into the octroi limits would not attract levy of octroi.

When the goods are brought in not for consumption within the

area but for temporary detention and eventual export, octroi

is not leviable. The octroiable event in such a case shall

be deemed not to have happened. This is particularly so

because in the case of goods not consumed or used within the

octroi area but exported there is a constitutional bar for

the levy of octroi. In view of the constitutional bar,

octroi is not leviable if the goods are not brought into the

octroi area for purposes of consumption or use in the area

but for export and in fact exported by the importer himself

or the sale by him occasions the export. [458-B-C, 472 H,

473-A, 475-E]

1.1 Having regard to the nature and incidence of octroi

unless the octroiable goods are consumed or used or are

meant to reach an

448

ultimate user or consumer in the octroi area no octroi is

leviable. The words 'sale therein' in the words 'consump-

tion, use or sale therein' in the definition octroi means

sale of octroiable goods to a person for the purpose of

consumption or use by such person in the octroi area. If

sale was intended for consumption or use in the octroi area

whether the purchaser actually consumed inside or outside

octroi area is irrelevant. Therefore octroi rules cannot be

read as enabling the municipality to levy and collect octroi

even in cases where the goods have not been imported for

consumption or use. [475-C, 474-B]

Burmah Shell Co. v. Belgaum Municipal, ll963I Suppl. 2

S.C.R. 216; Hira Lal Thakur Lal Dalai v. Brash Broach Munic-

ipality, [1976] Suppl. SCR 82; Municipal Council of Jodhpur

v. Parekh Automobiles Ltd. & Ors., [1990] 1 S.C.C. 367 and

H.M.M. Ltd. v. Administrator, [1989] 4 S.C.C. 640, relied

on.

Khandelwal Traders Akola v. The Akola Municipal Council,

AIR 1985 Born. 218, approved.

1.2 Since the goods were sold by the Company to outside

purchasers and the goods under the transactions of sale were

intended to be exported and were in fact exported, for

consumption or use outside the municipal limits no octroi

duty was leviable and the octroi duty paid on entry into the

municipal limits was, therefore, liable to be refunded.

Accordingly the rejection of the refund claims on the ground

that Rule 25(3) (d) had not been strictly complied with is

illegal and could not be sustained. [457 G-H]

2. Once octroi is not leviable the deposit made by the

importer pending export is in the nature of a trust and

refundable in the event of the export of the goods. [473-G-

H]

2.1 Under the octroi scheme, when the goods in respect

of which octroi is paid are exported, the octroi becomes

refundable. Right to refund arises because the goods are not

consumed inside the area but exported and the tax becomes

not leviable. [458-C]

2.2 If there is no consumption or use, octroi is not

attracted and if any levy has been made and the amount

collected, the same becomes legally refundable even when the

goods are exported in parts and in smaller packages. [472-H]

3. The rules merely regulate the system on which refund

shall

449

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be allowed. In a given set of facts, whether the rules have

been complied with will have to be tested having regard to

the nature of the particular transaction and whether the

object of the procedure provided is otherwise fully satis-

fied. [458-D, 473 H, 474-A]

3.1 The object of requiring intimation or sanction and

presence of an officer when breaking the bulk in the scheme

of octroi levy and refund is to ensure that dutiable goods

do not escape the assessment and refunds are made only in

respect of goods exported. In other words the whole require-

ment relates to the identification of the goods. In that

sense if the same is otherwise complied with the right to

refund cannot be denied. [474 A-B]

3.2 Rules 24 to 30 of the Maharashtra Municipalities

(Octroi) Rules, 1968 and the forms in the system of levy of

Octroi are intended to regulate the procedure for collection

identification of dutiable goods and correlation of goods

exported with the goods imported for the purpose of refunds

of octroi collected. [475-D]

The rules do not contain any specific provision that an

applicant for refund who has failed to follow the procedure

would be disentitled to claim the refund. [473-G]

3.3 Compliance with the procedure prescribed in the

Rules for filing claims of refunds are not conditions prece-

dent for the right or eligibility for refund or the liabili-

ty to refund but are provisions regarding proof of export of

the goods imported and are not meant to be exhaustive ei-

ther. They are to be interpreted and understood in that

sense. [475 E-F]

Municipal Committee Khurari v. Dhannalal Nethi & Ors.,

[1969] 1 S.C.R. 166; Kirpal Singh Duggal v. Municipal Board,

Ghaziabad, [1968I 3 S.C.R. 551, applied.

3.4 Since the rejection of the claims for refund was

merely on the ground that either form 4 and original in-

voices were not produced or columns 5 and 6 of Form 11 or

the corresponding columns in Form 12 had not been filled

with reference to an original invoice or Form 4 or deposit

receipt and the refusal to issue export pass certificates on

those very grounds are untenable the orders of rejection are

invalid. 1475 G-H]

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

for

450

export however is different. The export cannot be put in

perpetual doubt and the goods may be considered to have come

to a repose if they were not exported within a particular

period provided in the rules. [475-F]

4.1 However an equitable principle could be followed in

this regard and it may be presumed that the goods which came

in first have gone out first. If the goods are mixed up and

unidentifiable due to breaking bulk and repacking in smaller

and assorted packages before export the principle that the

first export was of the goods first imported, subject to any

evidence available to the contrary, may be applied and the

six months period prescribed under Rule 28(2) (b) for export

may be determined accordingly. [475 A-B, H, 476-A]

Clayton's case, 1814-23 All. E.R. 1, applied.

5. There is no inconsistency between Rule 62 and Rule

24(2). The intimation contemplated in Rule 62 imply that the

breaking the bulk shall be done with the knowledge of the

octroi authorities. But it cannot be said that the rules

further provide that after intimation the breaking of the

bulk shall be done in the presence of the officers and after

sanction that would in any case be inconsistent. Therefore,

both the rules can stand together. [471 F-G]

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6. There in no evidence that any of the articles sold

by the Company is subject to any price control by the Gov-

ernment or that the Company had charged any octroi separate-

ly in the bills. Documentary evidence do not also show that

any octroi was separately charged and collected by the

Company. Therefore the question of unjust enrichment does

not arise. [476 F-H]

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4702 of

1991.

From the Judgment and Order dated 26.8.88 of the Bombay

High Court in W.P. No. 2264 of 1984.

T. Andharujina, F.H. Talyarkha, R.F. Nariman, R. Narain,

Ashok Sagar and Ms Amrita Mitra for the Appellants.

K.K. Singhvi, B.N. Singhvi and Anil K. Gupta for the Re-

spondents.

The Judgment of the Court was delivered by

451

V. RAMASWAMI, J. Leave granted.

The First appellant--Tara Engineering and Locomotive

Company Limited (hereinafter called the 'Company') is a.

company registered under the Indian Companies Act, 1913 and

the second appellant is one of its Directors. The Company is

carrying on business of manufacture and sale of motor vehi-

cles and spare parts of motor vehicles and excavators. Their

manufacturing units are at Pune and Jamshedpur outside the

Thane Municipal Corporation limits. They have a bonded

warehouse within the municipal limits in which they bring

and stock motor vehicles parts'and excavators parts from

their own factories at Pune and Jamshedpur. They also bring

in parts manufactured by their ancillaries within India and

also parts imported from aboard. These products or parts are

brought in bulk and thereafter taken or sent out from the

Municipal limits in smaller packings depending on the re-

quirements of the customers in various parts of the country.

It is stated that the parts imported or purchased from

others and brought in are relatively very small in quantity

and the major portion of the activity related to their own

factory produced parts.

On and from 1 st October, 1982 with the notification

under Section 3 of the Bombay Provincial Municipal Corpora-

tion Act, 1949, the Thane Municipal Council became a Munici-

pal Corporation (hereinafter called the Corporation). Prior

to the constitution of the Corporation it was a municipality

and were governed by the Thane Municipal Council constituted

under the Maharashtra Municipality Act, 1965. Prior to 1 st

October, 1982 the Thane Municipal Council had granted to the

Company current account facilities in respect of payment of

octroi under the Maharashtra Municipalities Act, 1965 and

the Maharashtra Municipalities (Octroi) Rules, 1968 made

thereunder. The Municipal Council had also granted permis-

sion under Rule 10 (2) to the Company for maintaining a

godown or warehouse of their own. Their is no dispute that

even after the coming into existence of the Thane Municipal

Corporation the appellants were permitted to have a ware-

house of their own and keep a current account facility

without the requirement of immediate payment of octroi at

the Octroi Naka. In terms of granting those facilities the

Company had made as security a cash deposit of Rs. 7 lakhs

with the Corporation and had also given a Bank Guarantee for

an equivalent amount as agreed to between the Company and

the Corporation. However, there is some dispute as to what

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were the formalities that were dispensed with in the matter

of claiming refund of the octroi when the goods were export-

ed. But suffice it to say at this stage that the appellants

were permitted to carry out their activities of imports and

exports under the current account procedure with a facility

of unpacking the bulk, repacking and exporting.

452

During the period 1st January, 1983 to 31st March, 1964

it is stated that the appellants had made 1182 claims for

refund. All these claims were rejected by the letters of the

Corporation dated 31.8.1983, 12.1. 1984, 5.4.1984 and

6.4.1984. They were rejected on the following two grounds:

(1) the Company had "sold" the spare parts within the octroi

limit (which is co-terminus with the Corporation limit) in

contravention of Rule 25 (3) (d) of the Maharashtra Munici-

palities (Octroi) Rules, 1968 (hereinafter called the

"Rules"), (2) the procedure prescribed for export and the

claim of refund had not been strictly followed. The non-

compliance with)the procedure prescribed referred to in the

second ground according the Corporation were: (i) Form 4 of

the Octroi Rules and the original invoices were not submit-

ted, or (ii) Forms 11 and 12 filed were incomplete and all

the required information were not given or (iii) certificate

of the Octroi exit Naka Officer had not been obtained. The

rejection of the claim was either on one or more than one or

all the grounds mentioned above. The appellants filed a writ

petition under Article 226 in the High Court of Judicature

at Bombay contending that the action of the Municipal Corpo-

ration in refusing refund is unconstitutional and illegal

and for certain other reliefs. The Division Bench of the

High Court which heard the same dismissed the writ petition

on the 26th August, 1988. It is against this judgment that

the present appeal has been filed.

It appears that during the hearing of the writ petition

the learned counsel appearing for the Corporation did not

counter the contention of the Company that the rejection

under Rule 25 (3) (d) was not correct and the learned Judges

have also recorded the same in the judgment. But the learned

counsel for the respondent before us stated that it is not

correct to say that he had conceded any point and that since

he could not argue that point in view of the decision of

another Division Bench of the same High Court in Khandelwal

Trader Akola v. The Akola Municipal Council, AIR 1985 Bombay

218 which was binding on the Bench which heard the writ

petition and also in view of certain observations of this

Court in Burmah Shell Company v. Belgaum Municipal, [1963]

Suppl. 2 SCR 216 and Hiralal Thakorlal Dalai v. Brash Broch

Municipality, [1976] Suppl. SCR 82 he did not press the

point. We have therefore, permitted the point to be argued

in this appeal.

Before we discuss the points in controversy we may state

that in the counter-affidavit filed in the writ petition the

respondents have admitted that the Company was enjoying the

current account facility prior to 1.10. 1982 and the re-

spondent-Corporation had also given the said facility to the

Company even after 1st October, 1982 on their making a cash

deposit of Rs. 7 Lakhs and furnishing a Bank Guarantee for a

like sum as security

453

for grant of that facility. The respondent had also admitted

that the Company had been given permission under Rule 10 (2)

to maintain their own godown from 12th December, 1982.

Broadly stated under the current account facility granted,

no octroi duty is recoverable in cash from the appellants at

the entry octroi naka point. However, the Company was re-

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quired to submit a statement of goods imported in Form 5

before the 10th of the following month. The officers of the

respondent after scrutiny of the statement so filed deter-

mine the octroi duty payable thereon and debit the amount in

the current account kept and send a demand notice to the

company. The Company is required to pay the amount to the

Corporation within 15 days of the determination of duty.

The first submission of Mr. Andharujina, learned counsel

for the appellants was that the sales were not for consump-

tion or use within the octroi limits and that the parts were

sold to parties outside the octroi limits and also for

consumption or use outside such limits and therefore the

rejection of the claims on the ground that the spare parts

were sold within the municipal limits and that it amounted

to a contravention of Rule 25 (3) (d) of the Rules is ille-

gal. Mr. K.K. Singhvi, the learned counsel for the Corpora-

tion on the other hand contended that the meaning of words

"sales therein" in the definition of octroi in the Acts and

in Entry 52 of List II could not be limited to sales of the

goods for purposes of consumption or use within the munici-

pal limits.

When an importer wants to export dutiable goods tempo-

rarily detained by him in his own godown he shall present an

intimation-cumapplication for written permission in Form 11

to the Superintendent of Octroi to export such goods. Rule

25 (3) (d) states that no such intimation shall be accepted

unless:

.LM15

"the exporter and the importer of these goods

are one and the same person and such articles

have not undergone change of ownership"

.LM0

The case of the Corporation was that there was a change

in the ownership of the goods since a sale in law had taken

place inside the octroi limits though the purchaser was

residing and carrying on business outside the octroi limits

and under the sale the goods were intended to be and in fact

exported for the purpose of consumption and use outside the

octroi limits.

Section 127 of the Bombay Provincial Municipal Corporation

Act,1949 and the corresponding S. 105 of the Maharashtra

Municipalities Act,1965 authorises the Muncipality to levy

"Octroi". Both these Acts define

454

octroi as meaning a tax on the entry of goods into the

municipal area "for consumption, use or sale therein". The

Maharashtra Municipalities (Octroi) Rules 1968 made under

the Maharashtra Municipalities Act, 1965, provides for the

levy, collection and refunds of octroi duty on the goods

specified in the schedule thereunder and the procedure for

the same. These Rules were in force in Thane Municipality

before Thane was declared as "City" under the Bombay Munici-

pal Corporations Act LIX of 1949. However these Rules are

continued in the Thane Municipal Corporation by virtue of

paragraph 5 of Appendix IV to the Act LIX of 1949.

The legislative entry relating to the constitutional

power to levy this tax is found in List II Entry 52 of the

7th Schedule to the Constitution which reads:

"52. Taxes on the entry of goods into a local

area for consumption, use or sale therein".

The Bombay Municipal Boroughs Act, 1925 which was in

force prior to the enactment of the Maharashtra Municipali-

ties Act, 1965 also contained a similar provision in section

73 enabling the Municipalities covered by that Act to levy

"Octroi on animals or goods or both brought within the

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octroi limits for consumption or use therein". This provi-

sion was amended by Amending Act 35 of 1954 by substituting

the words "use or sale" for the words "or use" with effect

from May 5, 1954. In other words before 1954 the word "sale"

was not included in the provision of octroi on goods which

the Municipality was authorised to impose. After the amend-

ment the Municipality could levy octroi on goods brought

within the octroi limits "for consumption, use or sale

therein". This provision came up for consideration in Burmah

Shell case (supra). Two of the categories of transactions

which were considered in this case related to transactions

under which (1) goods were sold by the Company through its

dealers or by itself and consumed within the octroi limits

by persons other than the Company and (2) goods sold by the

Company through its dealers or by itself inside the octroi

limits to other persons but consumed by them outside the

octroi limits. The Company contended that the tax could not

be collected on goods which were merely sold but not con-

sumed inside the octroi limits. In connection with this con-

tention this Court considered the meaning of words "consump-

tion, use or sale therein" and observed:

"It is not the immediate person who brings the

goods into a local area who must consume them

him-self, the act of consumption may be post-

poned or may be performed by someone else but

so long as the goods have been brought into

the local

455

area for consumption in that sense, no matter

by whom, they satisfy the requirements of the

Boroughs Act and octroi is payable".

" ..... The goods must be regarded as having

been brought in for purposes of consumption

when a person brings them either for his own

use or consumption, or to put them in the way

of others in the area, who are to use and

consume".

And concluded holding:

"In our opinion, the Company was liable to pay

octroi tax on goods brought into local area

(a) to be consumed by itself or sold by it to

consumers direct and (b) for sale to dealers

who in their turn sold the goods to consumers

within the municipal area irrespective of

whether such consumers bought them for use in

the area or outside it. The Company was,

however, not liable to Octroi in respect of

goods which it brought into the local area and

which was re-exported".

The ratio is thus not a mere sale inside that attracts

octroi but a sale intended for consumption of the goods

inside the octroi area though ultimately the person to whom

it was sold for consumption does not consume the goods

inside but does the same outside the limit.

After consideration of the judgment in Burmah Shell

Company's case (supra) the Gujarat High Court in one of the

cases arising for refund of octroi duty paid, took the view

that octroi leviable on goods brought within the octroi

limits 'for consumption, use or sale therein' and that the

word 'sale' could not be given the narrow meaning of a sale

for consumption to the ultimate consumer within the octroi

limits. Accordingly if the goods were sold within the octroi

limits by the importer even if it resulted in export and

consumption was also outside the octroi limit, octroi duty

paid is not refundable. This decision came up in appeal

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before this Court and the decision of this Court is reported

in Hiralal Thakorlal Dalai v. Brash Broach Municipality,

[1976] Suppl. SCR 82. On facts that case related to a con-

signment sale and the goods were despatched to destination

outside octroi limits for consumption there. A plea for

review of the decision in Burmah Shell Company s case

(supra) was also made in this case. However a Constitution

Bench rejected the request for reconsideration and held that

the word "sale" in the colloquium of the words "consumption,

use or sale therein" means sale for consumption within the

octroi limits. The ratio of these two decisions was consid-

ered by the Bombay High Court in Khandelwal Traders Akola's

case (supra), which was referred to in the Judgment under

appeal. It was held in this case also

456

that where a dealer imports goods within the octroi limits

not for ultimate consumption or sale for consumption within

the limits but for the purpose of export and obtain permis-

sion for export he is not liable to pay octroi on such goods

notwithstanding that in the larger sense for purposes of

export he sells the goods within the octroi limits, that is

to say even where the situs of the sale could be fixed

within the octroi limit. The matter is now put beyond any

pale of doubt by the latest decision of this Court in Munic-

ipal Council, Jodhpur v. M/s. Parekh Automobiles Ltd. &

Ors., [1990] 1 SCC 367. Rule 13 (4) of the Rajasthan Munici-

pal Octroi Rules, 1962 which was one of the provisions

considered in this case provided that

"In cases provided for in sub-rule (3) (that

is who is given the account current

facility)amount of octroi duty payable shall

be based on the total amount of the octroi as

shown by the entry passes less the total

amount of goods transported outside the munic-

ipal limits as shown by the transport passes:

Provided that in computing the octroi duty

payable under subsection (4), the goods trans-

ported outside the municipal limits shall be

lessened only if such goods have not been sold

within the municipal limits and if they have

been exported out of such limits within a

period of six months from the date of their

import in such limits".

Relying on this provision the municipality in that case

contended that if the sale had taken place within the octroi

limits though the sale was not for consumption or use within

the octroi limits, duty was payable and no refund could be

claimed. The learned Single Judge who heard the matter in

the High Court did not permit the importer to raise the

question that the sale took place only outside the octroi

limits of Jodhpur and proceeded on the footing that the sale

of product in question took place within the octroi limits

of Jodhpur. He however accepted the contention of the Indian

Oil Corporation (importer) that the sale to the dealer was

for the purpose of export and the dealer did export the

goods outside the octroi limits and that, therefore, even if

the sale was said to have been effected within the octroi

limits no octroi was leviable. Since admittedly the goods

had been sold in Jodhpur octroi limits only for their on-

wards transmission for use and consumption in Dangia was

outside the octroi limits he held that no octroi duty was

payable. This view of the learned Single Judge was confirmed

on appeal by the Division Bench of the High Court. On appeal

this Court confirmed this view and held that the Indian Oil

Corporation (importer) who had the current account facility

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and gov-

457

erned by the terms of rule 13 was entitled to go on paying

octroi duty "on to basis of the goods brought by it within

the municipality less the goods transported outside the

municipality even where the transport outside the municipal-

ity may be in pursuance of a sale within the municipality so

long as such sale is in pursuance of an intention that the

goods should be consumed or used outside the municipal

limits".

In the present case the sales were to person who were

carrying on business outside the limits of the Corporation

and the goods were also intended to be consumed or used

outside such limits and in fact the goods were also export-

ed. The ratio of the decisions above referred clearly,

therefore, governs this case, even if it were to be assumed

that the sale in the general sense took place inside the

municipal limits.

However we may state that it was the contention of the

learned counsel for the appellant that the sale in fact took

place outside the municipal limits and in support of this

contention he relied on the following facts among others.

The spare parts were consigned by the Company to out station

purchasers. The goods were transported by the Company them-

selves across the octroi limits. The consignment or lorry

receipt mentioned the consignee as self. The bills for

collection were sent through Bank and the goods were not to

be delivered to the consignee until the payment was made by

the consignee through the Bunk. Right of disposal expressly

reserved with the vendor. On the other hand on behalf of the

Corporation it was contended that orders were both received

and accepted in Thane, goods were despatched from Thane and

challans were also made in the name of the buyers and the

property in the goods passed within Thane. The sale had in

fact taken place within municipal area. In fact he further

contended that being a question of fact we are not entitled

to go into the same in view of the finding of the High

Court. It is not necessary for us, however, to consider this

aspect and we would for the purpose of this case proceed on

the assumption that technically the sale in law had taken

place inside the municipal limits.

Since the goods were sold by the Company to outside

purchasers and the goods under the transactions of sale,

were intended to be exported and were in fact exported, for

consumption or use outside the municipal limits no octroi

duty was leviable and the octroi duty paid on entry into the

municipal limits was, therefore, liable to be refunded.

Accordingly the rejection of the refund claims on the ground

that Rule 25 (3) (d) had not been strictly complied with is

illegal and could not be sustained. Such of those claims

which were rejected only on the grounds of contravetion of

458

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

passed for payment.

In the case of impost of octroi the taxable event is the

entry of goods which are meant to reach an ultimate user or

consumer in the area. Mere physical entry into the octroi

limits would not attract levy of octroi. When the goods are

brought in not for consumption within the area but for

temporary detention and eventual export, octroi is not

leviable. But in order to ensure, in such circumstances,

that the goods are exported and to prevent evasion of octroi

on goods consumed inside the octroi limit, Rules provide for

deposit of a certain sum of money or the actual octroi duty

payable subject to a right to get a refund of the same when

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the goods are exported. When the goods in respect of which

octroi was paid are exported, the octroi became refundable

and that is the very scheme of the ' levy of octroi. The

octroiable event in such a case shall be deemed not have

happened. Right to refund arises because the goods are not

consumed inside the area but exported and the tax becomes

not leviable. The rules merely regulate the system on which

refunds shall be allowed. The procedure prescribed and the

need to adhere to the procedure shall have to be considered

in the light of these legal incidence and nature of octroi

duty.

Before we deal with the question whether the Company had

not followed any of the procedure prescribed and the right

of the Corporation to deny refund of octroi on non-compli-

ance with any of those provisions in the Rules, it is neces-

sary to broadly set out the different types of procedures

prescribed, depending on different purposes of imports and

exports, contemplated under the Rules. This may be broadly

classified into five categories, (i) goods imported for

Consumption, use or sale in the municipal area, (ii) goods

imported not for consumption, use or sale within the munici-

pality but for immediate export, (iii) goods intended to be

temporarily detained within the municipality in the bonded

warehouse maintained by the Corporation and eventual export;

(iv) goods intended for temporary detention in the private

licensed bonded wharehouse of the importer and eventual

export; and (v) goods imported by any person, mercantile

firm or body which has been permitted by the municipal

Corporation to keep an current account. In the first case,

since octroi is attracted on arrival of the dutiable goods

at the Octroi Naka the importer pays the amount of octroi

assessed by the octroi officer and takes the goods inside

the municipal limits. In the second case, the importer gives

a declaration-cum application that the goods are not being

imported in the municipal limits for consumption, use or

sale but are intended for immediate export outside the

octroi limits. He is required to deposit an amount in

459

accordance with the scale fixed under clause (b) of sub-rule

(1) of Rule (5). On such deposit being made a receipt is

given in the form prescribed by the Entrance Naka Inspector

and a written permission-cum-transit pass issued by the

Octroi Officer. On arrival of the goods at the exit Naka and

on surrender of the written permission-cum-transit pass the

deposit amount is refunded. In the third category of cases,

the importer makes an application to the Octroi officer at

the Entrance Naka for a written permission to deposit such

goods at the bonded warehouse maintained by the Corporation.

The Octroi Officer then makes an entry on the application

that the importer is allowed to proceed with the goods to

the bonded warehouse. The Officer in-charge of the bonded

warehouse will receive the goods and keep them in the bonded

warehouse until exported. When the importer wants to export

the goods he is required to apply for a written permission-

cum-export pass in the prescribed form and also deposit an

amount equal to the octroi leviable therein. On such deposit

made a written permissioncum-export pass is issued. When the

goods are taken out of the municipal limits the Officer

Incharge of the Exit Naka endorses the export pass certify-

ing the export and the refund of the deposit is claimed

thereafter producing the certificate issued by the Exit Naka

Officer. In the fourth category, the importer gives a decla-

ration in Form 4 that the goods are meant for temporary

detention with him at his own warehouse for eventual export.

After verification of the particulars furnished in that form

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with the invoices and other documents produced he is re-

quired to deposit at the Entry Octroi Naka point itself an

amount equal to the amount of full octroi duty thereon as

deposit. A receipt is given by the Octroi Inspector stating

that the said amount "on account of deposit" has been recov-

ered. When he wants to export the dutiable goods detained

with him he presents an intimation-cum-application in Form

11 for written permission to export the goods. He is also

required to produce the goods at the Central Octroi officer

along with the application. On satisfaction that all the

conditions prescribed have been fulfilled and after verifi-

cation of the goods a written permission-cum-refund export

pass in Form No. 12 is given to the importer. On presenta-

tion of these documents the Octroi officer at the Exit Naka

gives a certificate that the goods mentioned therein have

passed octroi limits and with that the refund application is

made and refund obtained.

The instant case falls under the fifth category. The

Company has been permitted by the Municipal Corporation to

keep the dutiable goods in a bonded warehouse of their own

with a current account facility. The rules which were relied

on by the Respondent and some of which are said to have not

been complied with by the Company may be set out:

"10. Maintenance of Bonded Warehouses. -

460

(1) x x x

(2) A Council may permit any importer to

maintain a private Bonded Warehouse for keep-

ing goods which are imported by such importer

for temporary detention and eventual export

and grant a licence to such importer for that

purpose subject to the conditions and restric-

tions laid down in such licence. A fee shall

be charged for such licence at the rates

specified in the bye-laws relating to the

grant of such licence."

"14. Declarations to be made by importer,

etc.- (1) On arrival of any dutiable goods at

the Octroi Naka, the Octroi Officer shall call

upon the importer or the driver of the Vehicle

or conveyance or the person incharge of the

pack-animal or other persons bringing the

goods-

(a) X X X X

(b) X X X X

(C) X X X X

(d) to make a declaration in Form 4, in

respect of the goods intended for temporary

detention with himself and eventual export;

(e) to make a declaration in Form 5, in

respect of the goods imported by, or on behalf

of, any person, mercantile firm or body which

has been permitted by the Council to keep an

account current under Section 142;

"15. Procedure for assessment and recovery of

octroi. -

(4) On receipt of a declaration in Form 5

under the last preceding rule, the Octroi

Officer shall ascertain whether the name of

the person, mercantile firm or body on whose

behalf the goods are being imported is on the

list of persons, firms or bodies allowed to

keep an account current, and if so, check the

goods with the details entered in the declara-

tion and fill up the certificate below the

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declaration and issue a pass in Form 6. The

Octroi Officer shall forward all such declara-

tions together with a list in duplicate there-

of to the Central Octroi Officer for further

action in accordance with the provisions of

Section 142.

"24.Procedure for temporary detention of

dutiable goods meant for eventual export, with

importer himself. - (1) Where dutiable goods

intended for temporary detention within the

octroi

461

limits and eventual export are to be detained

by the importer at his residence or a Bonded

Warehouse licensed under sub-role (2) of rule

10 within the octroi limits, he may do so on

giving a declaration to the Octroi officer in

Form 4, and on payment of an amount equal to

the amount of full octroi due thereon as

deposit either in cash or in the form of Bank

Guarantee at the Entrance Naka.

(2) In case the importer cannot export the

goods without breaking bulk or without assem-

ble and testing in the case of machinery, he

shall do the same only with the sanction of

the Superintendent of Octroi in the presence

of an officer deputed for this purpose by the

said Superintendent. Such goods, if necessary

shall be formed into packages, which may be

sealed and marked by the Officer so deputed.

"25.Procedure for export of dutiable goods

temporarily detained with importer. - (1) When

the importer wants to export dutiable goods

detained with him, he shall present an intima-

tion-cum-application for written permission in

Form 11 to the Superintendent of Octroi to

export such goods, giving necessary details;

and produce such goods for verification on any

working day during the hours fixed by the

Chief Officer at the Central Octroi Office or

at any other Branch Office, as may be estab-

lished by the Council for the purpose.

(2) A separate intimation-cum-application

shall be given by each importer or his own

goods. One such intimation-cumapplication

shall be sufficient for a single consignment.

When such consignment contains goods of dif-

ferent descriptions, full details shall be

given separately in the intimation-cum-appli-

cation. Not more than one intimation-cum-

application for export can be given by an

importer for goods passing through an Exit

Naka in a day.

(3) No such intimation-cum-application shall

be accepted unless-

(a) it is complete in all respects and

signed by the importer himself or by a person

authorised by him in writing in this behalf;

(b) it is supported by the receipt for the

deposit paid at the time of import and is

accompanied by the original invoice, if any,

filed at the time of import;

462

(c) the goods produced for inspection and

intended to be exported are, subject to the

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provisions of sub-rule (2) of the last preced-

ing rule, identical with what they were at the

time of import.

(d) the exporter and the importer of

these goods are one and the same person and

such articles have not undergone change of

ownership.

Note. - The requirement of clause (c) shall

not be applicable in the case of dutiable

goods to which sub-rule (3) or (4) of the last

preceding rule applies.

(4) On receipt of such intimation-cum-applica-

tion and on arrival of the goods intended for

export, at the Central Octroi Office or Branch

Office, the Superintendent of Octroi or any

officer authorised by him shall-

(a) satisfy himself that all the condi-

tions prescribed above are fulfilled;

(b) verify that the goods actually pro-

duced for inspection are as described in the

intimation-cum-application and in the relevant

import invoice, if any, or in the import

declaration in Form 4, and seal and mark such

goods whenever deemed necessary; and

(c) issue a written permission-cum-refund

export pass in Form 12 after obtaining a

specimen signature of the importer or his

authorised agent on such pass.

(5) The importer accompanied by an escort, if

provided by the Council, shall then take the

goods beyond the octroi limits through the

Exit Naka within the time limit and by the

route specified in the pass. Before crossing

the Exit Naka, the impoter shall present the

goods to the Octroi Officer at the Exit Naka

for inspection, with the pass. The time limit

shall be fixed with due regard to the distance

of the Exit Naka from the Central Octroi

Office or the Branch office, but in no case it

shall exceed 12 hours from the time of issue

of the permission-cumrefund export pass.

(6) The Octroi Officer at the Exit Naka, on

presentation of such goods as well as the

pass, shall satisfy himself that-

(a) the pass as well as the goods are

presented within the specified time limit;

463

(b)the seals or marks, if any, are inact; and

(c) the goods actually tally with those men-

tioned in the pass.

On being so satisfied, he shall make relevant

entries in the register maintained for the

purpose, obtain signature of the importer

thereon, sign a certificate as given on the

pass, deliver the same to the importer and

allow the goods to pass beyond the octroi

limits.

28. Provision for refund of deposit.- (1)

When any goods for which a deposit has been

paid under rule 24 at the time of their import

are exported, the amount of deposit recovered

shall, subject to the provision of sub-rule

(2), be refunded.

(2) The refund shall be admissible, if all the

conditions below are satisfied.-

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(a) The refund is applied for within one

month from the date of e x port.

(b) The goods are exported out of the

octroi limits within a period of six months of

their import.

(c) The application for refund is supported

by a duly certified written permission-cum-

refund export pass.

(d) All the conditions in sub-rule (3) of

rule 25 are fulfilled.

(e) The amount claimed as refund is with-

drawn within three months from the date of

intimation to the importer to receive the

amount.

(f) The goods exported were declared to be

intended for temporary detention with the

importer and eventual export at the time of

import:

Provided that the said period of six months

shall not apply to goods imported by the Food

Corporation of India established under section

3 of the Food Corporation Act, 1964.

29. Procedure for refund. - (1) The Applica-

tion for refund of deposit shall be made in

Form 13 by the importer himself or by his duly

authorised agent in this behalf in writing on

any working day during the hours fixed for

money transactions by the Council at the

Central Octroi Office within one month from

the date of the actual export. If the last day

for claiming refund falls on a public holiday

such application shall be accepted on the next

working day.

464

(2) Such application shall be accompanied by

the duly certified relevant written permis-

sion-cure-refund export pass and shall contain

reference to the connected export intimation-

cum-application already given by the importer.

There shall be a separate application for each

written permission-cure-refund export pass.

(3) If the refund application is in order and

satisfies all the conditions specified in the

last preceding rule, the amount of the refund

shall be correctly determined subject to the

limitation prescribed in the next succeeding

rule".

30. Value, weight, etc. of goods for purposes

of refund.- When the refund is claimed in

respect of goods on which duty is leviable

ad-valorem, the value for the purposes of

refund shall be the value as per invoice on

the strength of which the duty was originally

paid together with such cost of carriage and

other incidental charges that were then deter-

mined. Where the value was determined in the

absence of invoice on the basis of market rate

prevalent on the day of import, that value

only should be considered and not the market

price prevalent in the local market on the day

of export".

FORM 4

(Rules 14, 24 and 25)

Declaration in respect of the dutiable goods imported

into the Municipal octroi limits, which are intended for

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temporary detention with the importer and eventual export.

To

The Octroi Officer,

Octroi Naka No. ..............

............ Municipal Council.

I, ....................(insert full name and address of

the importer) hereby declare that the below mentioned goods

are meant for temporary detention with me at ........

(specify address at which to be kept) for eventual export

outside the octroi limits. I am willing to pay an amount

equal to the amount of full octroi due thereon as deposit

either in cash or in the form of Bank Guarantee and may

claim refund according to the rules if these goods are

exported outside limits within six months from the date of

their import. The below mentioned details are true and

according to the original invoice, true copy of which is

filed herewith. The said invoice covers all the goods im-

ported by me as per Bill of Entry/Railway Receipt/Goods

Transport Memo/Air consignment Note

No. ..........dated ........

465

Sr. No No.and Description Weight Value Senders Rem-

No &date descri- of the or plus all name& arks

of ption of goods goods incidental address

import packages charges in full

document which are to

given seper-

ately

1 2 3 4 5 6 7 8

Full residential/business address of the importer.

Date .......... Signature of the Importer

I have checked the above particulars with the invoice

and verified the goods, which are found to be correct. True

copy of the invoice appended is verified and found to be

correct. The weight or quantity or value, together with the

incidental charges declared, is correct. The taxable

weight/quantity/value of the goods is ....... and the rate

of octroi ........

Date....... Inspector/Clerk.

The amount of Rs. ........on account of deposit has been

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

Date ......... Inspector/Clerk.

FORM5

(Rules 14 and 15)

Declaration in respect of the dutiable goods imported on

behalf of person, firm, or body allowed to keep an account

current.

To,

The Cetroi Officer,

Octroi Naka No. .........

Municipal Council.

I,................. (insert the full name and address of

the importer) hereby declare that the below mentioned goods

are being imported into the Municipal Octroi limits on

behalf of .............. (insert the name of persons, firm

or body allowed to keep an account current) and that the

below mentioned value and weight/quantity of the goods is

true and correct and is according to the original invoice,

true copy of which is filed herewith. The said invoice fully

covers all the goods imported by me today as per Bill of

Entry/Railway Receipt/Goods Transport Memo/Air Consignment

Note No. ......... dated .........., I further undertake

to produce the said invoice for your inspection whenever

demanded by you within one year from today.

466

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To be filled in by the importer To be filled in

at the Central

Octroi Office

1.Sr.No.

2. Bill of Entry 'Railway Receipt' Goods Transport Memo/ Air

Consignment Note.

3. Number description of packages.

4. Goods.

6. Value plus incidental charges which are to be given

seperately.

7.Rate of Ovctroi.

8. Amount of Octroi recoverable.

Date.......Signature of the importer Dues entered in

I have checked the above particulars Account Current

with the invoice and verified the goods, Date ..........

which are found to be correct. True Octroi

copy of the invoice appended is Superintendent

verified and found to be correct.

The weight or quantity or value, together

with the incidental charges declared,

is correct. Issued pass No ...dated ...

Date ............... Inspector/Clerk

FORM6 (Rule 15)

Pass for goods imported on behalf of person, firm or body

allowed to keep an account current

....Municipal Council:.......Municipal Council Book

No. ..... Entrance Naka No. .....: Book No. ..... En-

trance Naka No. .....

Counterfoil of pass Pass for goods

imported by in account current ....

(Name of Person, firm or body)

Description No. and Description Weight,

Description of the quantity

of packages goods or value

1 2 3

Dated .......... Dated ..........

Entrance Naka Inspector/Clerk Entrance Naka Inspector/Clerk

467

Form 11

(Rules 25 and 26)

Intimation-cum-application for written permission for Export

of Goods Temporarily detained with the Importer

To

The Superintendent of Octroi,

.......... Municipal Council.

Sir,

I....................... (insert the full name and address

of the importer) hereby declare my intention to export the

goods to.............through Naka No. ........ as detailed

below. The certified copy of original invoice/invoices under

which these goods were imported are appended herewith. I

have produced the goods for actual verification. Kindly

grant me the permission to carry the goods to the said Naka.

SI. Description Quantity Date of Import Deposit Gross

No. of the (Number of Import invoice receipt weight

goods bags or & No. of No. and number &

cases) entrance date date

Naka

1 2 3 4 5 6 7

Value Amount to be Number of Name and How Remarks

refunded Refund Export address of exported

pass granted the consignee

8 9 10 11 12 13

Date ........... Signature of Importer

Verified the contents and the weight as above and found

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correct.

Countersigned.

Octroi Officer. Signature of the Refund Inspector/Clerk.

Receipt No.......

468

FORM

Rule 25)

Written Permission-cum-Refund Export Pass

Receipt No.............. Date ............... 19

Sl. Month Name and Name and Description Quantity Gross

no. and address of address of of the (number of weight

date the impoter the consignee goods bags or cases)

1 2 3 4 5 6 7

Value Deposit How Exist Date & time by Whether Remarks

to be exported Naka which the goods goods

refunded No. should reach the sealed or

Export Naka escort given

8 9 10 11 12 13 14

*Fee for Written Permission-Cum-Refund Pass Rs .........

Miscellaneous Receipt No.........., dated..........,

Signature of the importer Signature of Octroi Officer

I hereby certify that the goods mentioned above have passed

outside the octroi limits this day the.......... of the

month.......... 19 Time........... a.m./p.m. in my

presence Railway receipt......../Vehicle No. .........

The seals, if any, thereon were intact when the goods were

presented to me for verification.

Date ........... Signature of the Exist Naka Officer

Naka No. ...........

*This fee should be levied in accordance with the bye-laws

framed under section 338 for granting permission to take the

goods from the Central Octroi Office or Branch Office to the

Exist Naka.

FORM13

(Rule 29)

Application for Refund of Deposit

To

The Superintendent of Octroi,

.......... Municipal Council.

469

Sir,

I, ................the resident of..........hereby apply

for refund of deposit as per enclosed Written Permis-

sion-cum-Refund Export Pass No. ..........dated..........,

as the goods mentioned in the pass were exported

on.....under my intimation-cum-application, dated..........,

I therefore, request you to grant the refund of

Rs. .........and oblige.

Enclosure:

Date.......... Signature of Importer

On a reading of these rules it appears to be that Rules

24, 25 and 28 in terms would apply only to cases failing

under category four, stated above. The declaration in Form 4

referred to in Rule 24 and deposit of the amount equivalent

to octroi duty payable at the entry point, production of the

goods for verification at the Central Octroi Office are all

consistent with its being applicable to a case where dutia-

ble goods are imported for temporary detention and eventual

export by a person having a bonded warehouse of his own

contemplated in Rule 14 (1) (d) and not Rule 14 (1) (e).

However, Rules 29 and 30 are general in terms and may be

invoked in both the cases falling under Rule 14 (1) (d) and

(e). Sub-rule (3) of Rule 29 refers to the compliance of the

conditions in Rule 28 and that is how it may be said that

the provisions of Rule 28 are attracted to the cases of a

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person having a bonded warehouse and the facility of account

current. However, the Rules have to be read and applied in

such way that they do not conflict with but are consistent

with the facility of current account given to the Company.

Form 5 which is applicable to a case falling under Rule 14

(1) (e) does not require the Company (importer) to give a

declaration at the time of arrival of the goods at the entry

Naka point that the "goods are meant for temporary detention

with" the Company at its warehouse "for eventual export

outside the octroi limits". The Company need not also make

any deposit with the Naka Inspector at the point of entry.

An amount equivalent to the octroi duty payable in respect

of the goods is only entered in the account current after

the goods have reached the warehouse and verified by the

Octroi Officer. Form 4is not applicable to the case of the

Company which has got a current account facility. The Compa-

ny, is, therefore, bound to give a declaration only in Form

5, and need not give a declaration as in Form 4 nor is there

any obligation to deposit an amount equivalent to the full

octroi duty with the Octroi Inspector at the Entry Naka

Point. Further reference to original invoices/in Forms 4 and

5 is only for the purpose of checking the particulars en-

tered into in the forms. The production of an invoice is

not, having regard to the

470

purpose of such production, to be insisted blindly. If the

particulars furnished in the form including weight/quantity

or value could be established satisfactorily by other docu-

ments, we have no doubt that will be sufficient compliance

with the Rules. Column 5 of Form 11 also refers to invoice

and the date of invoice. This is again to correlate the

goods exported with the goods imported. If the identity of

the goods could be established by evidence other than the

production of invoices that should satisfy the Rules. The

invoice as such has no bearing on the liability of the goods

for octroi or the right of the Company for refund.

So far as the production of the original invoices are

concerned, the learned counsel for the Company pointed out

that the goods are brought from their own manufacturing

units at Pune and Jamshedpur and it will only be a stock

transfer and this requirement of producing original invoice

could not be complied with and is not applicable. Under the

current account procedure the invoices, if any and all the

other documents are verified when the goods reach the ware-

house with reference to the description of the goods,

weight/quantity, value and other particulars and it is only

after verification the octroi duty leviable is determined

and amount is debited in the account current and the demand

also is issued.

The learned counsel for the appellant also referred to

certain documents to show that for every category of arti-

cle, the Company has given a distinctive number and the

goods are easily identifiable and the number of items or

quantity imported are all record in the register and com-

puterised for easy verification. It is these identifying

numbers of the articles that are mentioned in the intima-

tion-cure-application for written permission for export. He

also relied on the fact that the Company has no manufactur-

ing unit within the Thane Municipality. Similarly, Column 6

of Form II also could not be complied with as it is not

applicable to a person who is having current account facili-

ty. So far as the value is concerned the learned counsel for

the appellants have fairly stated that the respondent was

taking 72% of the list price of the articles for determining

octroi payable, for which he has no objection. In fact, he

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has suggested that since the Company publishes the price

list periodically and that which shows the current price at

any point of time may be taken as the basis for such valua-

tion.

The Octroi Exit Naka Officer had refused to give the

certificate of export pass on the ground that the particu-

lars in Columns 5 and 6 of Form 11 could not be verified as

the original invoices and the deposit receipts were not

produced. Since these columns could be filled only to the

extent possible by a person having an account current facil-

ity and there is no dispute about the export of the goods

mentioned therein the refusal to give the export pass cer-

tificate. by the Exit Naka Officer could not be sustained.

471

The next point to be considered is the procedure to be

followed when the importer wants to "breaking the hulk" and

repack the goods in smaller quantities and also the proce-

dure relating to filling up Forms 11 and 12 and the refund

applications in such circumstances. Rules 24 (2.) states

that for breaking the bulk and repacking in smaller pack-

ages, sanction of the Superintendent of Octroi is necessary

and the "breaking bulk" shall also be done in the presence

of an officer deputed for this purpose. Rule 62 of Chapter

VIII of the Schedule to the Bombay Provincial Municipal

Corporation Act, 1949 provides that subject to the standing

orders not less than 90% of the octroi paid on any goods

shall be refunded if such goods are exported beyond the

limits of the city within six months of payment:

"provided that...... (C) in the case of

goods which have been broken bulk prior

intimation has been given to the officers

specified in this behalf in the standing

orders and the place or places of storage have

been reported to him from time to time".

Paragraph 5 of Appendix IV to this Act which we have

noticed earlier states that the rules flamed under the

Municipal Act shall "in so far as it is not inconsistent

with the provisions of this Act, continue in force". Rule 62

of Chapter VIII forms part of the Act. The learned counsel

for the appellant, therefore, contended that Rule 62 shall

prevail and prior intimation of the intention to 'breaking

bulk' shall be enough and there was no necessity for the

Company to get the sanction of the Superintendent of Octroi

or break the bulk in the presence of an officer deputed for

the purpose as required under sub-rule (2) of Rule 24. In

other words according to the learned counsel Rule 24 (2) of

the Octroi Rules is inconsistent with Rule 62 of Chapter

VIII of the Schedule to the Act and to the extent.._ of

inconsistency it shall be deemed to be not applicable. On

the other hand the learned counsel for the respondent con-

tended that Rule 62 (c) deals with prior intimation and Rule

24 (2) deals with the sanction and breaking of the bulk in

the presence of an officer deputed for that purpose and both

the rules can stay together and operate and there is no

inconsistency. We are not impressed with the argument that

there is an inconsistency between Rule 62 and Rule 24 (2).

The intimation contemplated in Rule 62 imply that the break-

ing the bulk shall be done with the knowledge of the octroi

authorities. But it Cannot be said that the rules further

provide that after intimation the breaking of the bulk shall

be done in the presence of the officers and after sanction

that would in any case be inconsistent. Both the rules thus

can stand together.

In H.M.M. Limited v. Administrator, [1989] 4 SCC 640

this Court had occasion to consider the effect of non-com-

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pliance with this require-

472

ment of a similar provision, on the right to get refund.

Shortly stated the facts in that case were these: The appel-

lant brought into the municipal limits Horlicks in bulk

containers (large steel drums) for being packed in unit

containers (glass bottles) at the packing station in Banga-

lore and thereafter exported outside the municipal limits.

In respect of the milkfood so exported in glass bottles the

appellants sought refund of octroi on the ground that there

was no consumption, use or sale within the municipal limits

and the goods were exported. Rule 24 of the Octroi Rules

that were in force in Bangalore city provided:

"24...0n all articles on which octroi duty has

been paid and which are subsequently exported

beyond the octroi limits without breaking

bulk, refunds shall, subject to the following

rules, be granted at the rate originally

charged at the time of import; provided that

no such refunds shall, except in the ease of

timber imported and re-exported in log be

granted unless such goods are exported within

three months from the date on which octroi was

levied".

Relying on this provision it was contended by the Munic-

ipality that breaking the bulk amounted to "use" within the

municipal limits attracting levy of octroi and no refund was

permissible. The refund application had also not been made

within three months from the date on which octroi was

levied. It was admitted that the appellants had not followed

that procedure prescribed in Rule 24. This Court held that

mere transferring of a bulk product in small containers like

packets or bottles for the purpose of sale does not amount

to use of the goods in the sense the word is used in rela-

tion to levy of octroi. It was further held that the words

"without breaking bulk" is not an expression of art and that

meant only transferring the product from the drums by break-

ing the seal of the drums, to the bottles for the purpose of

exporting or for taking them out of the municipal limits,

and that would not amount to either use or consumption of

the Horlicks powder within the municipal limits attracting

the levy of octroi.

The ratio of the judgment clearly is that merely on the

ground that the goods are not exported in bulk as originally

imported, the levy does not become valid or that the import-

er who exported the goods loses his right to a refund of the

octroi paid. The goods neither loose their identity nor

cease to be identifiable. Once we reach the conclusion that

there is no consumption or use, octroi is not attracted and

if any levy has been made and the amount collected, the same

becomes legally refundable even when the goods are exported

in parts and in smaller packages. This is particu-

473

larly so because in the case of goods not consumed or used

within the octroi area but exported there is a constitution-

al bar for the levy of octroi.

In this connection we may also refer to another decision

reported in Municipal Committee, Khurari v. Dhannalal Sethi

& Ors., [1969] I SCR 166. The rules considered in that case

also provided that an application for refund was to be made

in the prescribed form and that the exporter after filling

in the particulars had to present his application at the

office appointed for that purpose. There were other rules

which provided an elaborate procedure to be followed at the

time of export of the goods. These rules related to the

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octroi officers satisfying himself that the goods brought

for export agree with those mentioned in the application,

presentation of the claim within the prescribed time, iden-

tifying of the goods exported with those imported and other

matters. This Court held that:

"these rules do provide a procedure which an

exporter wishing to claim refund has to fol-

low. But the question is whether in a case

where an exporter has not done so, is he

disentitled from claiming the refund. The real

difficulty in the way of the appellant Commit-

tee is that though the rules lay down a proce-

dure which such an applicant has to follow,

they do not provide at the same time that an

applicant for refund who has failed to follow

the procedure laid down in r.r. 35 to 39 would

be disentitled to claim the refund. In the

absence of such a provision coupled with the

categorical language of r. 27 giving a right

to an exporter of dutiable goods to claim

7/8th of the duty paid on such goods on their

import, it becomes difficult to uphold the

denial by the appellant Committee of the right

of respondents 1 and 2 such a refund. We are,

therefore, of the opinion that in the present

state of the rules, the appeal must fail

though for reasons different from those given

by the Board of Revenue and the High Court".

It may be pertinent to mention that the Maharashtra

Municipalities (Octroi) Rules, 1968 also do not contain any

specific provision that an applicant for refund who has

failed to follow the procedure would be disentitIed to claim

the refund. It may be noted that the amount collected which

is equivalent to the octroi duty payable on the goods, on

entry into the octroi limits while in detention in the

warehouse is only as a deposit pending export of the goods.

The other aspect is that once octroi is not leviable the

deposit made by the importer pending export is in the nature

of a trust and refundable in the event of the export of the

goods. Further in a given set of facts, whether the rules

have been complied with will have

474

to be tested having regard to the nature of the particular

transaction and whether the object of the procedure provided

is otherwise fully satisfied. ` Rule 28 also merely

states that the refund shall be admissible if all the

conditions in sub-rule 2 of that Rule are satisfied. The

object of requiring intimation or sanction and presence of

an officer when breaking the bulk in the scheme of octroi

levy and refund is to ensure that dutiable goods do not

escape the assessment and refunds are made only in respect

of goods exported. In other words the whole requirement

relates to the identification of the goods. In that sense if

the same is otherwise complied with the right to refund

cannot be denied. These rules cannot be read as enabling the

municipality to levy and collect octroi even in cases where

the goods have not been imported for consumption or use. As

held by this Court in Kirpal Singh Duggal v. Municipal

Board, Ghaziabad, [1968] 3 SCR 551 the octroi rules are

intended to regulate the system on which the refunds shall

be allowed and paid. What are merely matters of procedure

which the municipality was entitled to require compliance

with in granting refund cannot be treated as condition

precedent for the entitlement of the refund itself. The

Constitution prohibits levy of tax except in accordance with

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law. When the goods are not imported for consumption or use

within the octroi area the municipality ceases to have any

constitutional right to levy octroi. If the goods therefore

have merely entered into the octroi limits and passed out of

the same no octroi duty is attracted.

The concept of octroi as held by this Court in Burma

Shell s case (supra) may include "the bringing in of goods

in a local area so that the goods come to a repose there".

It is this concept that is reflected in Rule 28 (2) Co) when

it requires evidence that the goods were exported out of the

octroi limits within a period of six months of their im-

ports. The learned counsel for the appellants Mr. Andharuji-

na had expressed certain difficulties in satisfying the

Corporation that the goods imported were exported within the

period of six months as provided in the rules in view of

certain peculiar circumstances in this case. He pointed out

the goods received in bulk are small small items and there

are about 16000 distinctive types of articles and when the

bulks are broken and each of the categories items are mixed

up together it becomes difficult for him to individually

identify when the goods were received and when they were

exported. However, he was sure that the goods were exported

before six months. When this difficulty was pointed out

during the pendency of the appeal, as an interim direction

this Court by Order dated 1.5. 1989 directed the parties to

proceed on the basis that the goods which came in first had

gone out first unless some factors or features indicate

otherwise. This is not equitable principle unknown to law.

Even as early as in 1816 with reference to money paid on

account to a creditor, in Clayton's case (1814)

475

23 All. E.R. Rep. P. 1, it was held that in the absence of

an agreement to the contrary, in the case of current account

containing debit and credit entries there is a presumption

that the first item on the credit side of the account is

intended to be applied in the payment of the first item on

the debit side of the account. This is an equitable princi-

ple which could be followed in the instant case and it may

be presumed that the goods which came in first have gone out

first and the six months period could be determined on that

basis. In any case in view of the interim direction given by

this Court on May 1,1989 that may be usefully be followed

for the future also in this case.

To sum up: Having regard to the nature and incidence of

octroi unless the octroiable goods are consumed or used or

are meant to reach an ultimate user or consumer in the

octroi area no octroi is leviable. The words 'sale therein

in the words "consumption, use or sale therein in the defi-

nition octroi means sale of octroiable goods to a person for

the purpose of consumption or use by such person in the

octroi area. If sale was intended for consumption or use in

the octroi area whether the purchaser actually consumed

inside or outside octroi area is irrelevant. Rules 24 to 30

and the forms in the system of levy of octroi are intended

to regulate the procedure for collection, identification of

dutiable goods and correlation of goods exported with the

goods imported for the purpose of refunds of octroi collect-

ed. In view of constitutional bar octroi is not leviable if

the goods are not brought into the octroi area for purposes

of consumption or use in the area but for export and in fact

exported by the importer himself or the sale by him occa-

sions the export. Compliance with the procedure prescribed

in the Rules for filing claims of refunds are not condition

precedent for the right or eligibility for refund or the

liability to refund but are provisions regarding proof of

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export of the goods imported and are not meant to be exhaus-

tive either. They are to be interpreted and understood in

that sense. The object of the Rules fixing a period of

limitation for export however is different. The export

cannot be put in perpetual doubt and the goods may be con-

sidered to have come to a repose if they were not exported

within a particular period provided in the rules. Applying

these principles to the instant case, on facts the rejection

of refund applications on the ground that Rule 25 (3) (d)

had not been complied with was illegal. Since the rejection

of the claims for refund was merely on the ground that

either Form 4 and original invoices were not produced or

columns 5 and 6 of Form 11 or the corresponding columns in

Form 12 had not been filled with reference to an original

invoice or Form 4 or deposit receipt and the refusal to

issue export pass certificates on those very grounds which

we have stated are untenable the other orders of rejections

are also invalid. If the goods are mixed up and unidentifia-

ble

476

due to breaking bulk and repacking in smaller and assorted

packages before export the principle that the first export

was of the goods first imported, subject to any evidence

available to the contrary, may be applied and the six months

period prescribed for export may be determined accordingly.

When these appeals were pending by way of interim ar-

rangement this Court by order dated 25.4.1990 directed that

in order to obviate the difficulty of identifying the goods

at the time of export by reason of the breaking of the)bulk

and in order avoid doubts, the respondent Corporation may

depute their officer or officers on all working days at the

warehouse of the Company to supervise the breaking of the

bulk subject to the Company reimbursing the entire monthly

payments and other allowances to be paid to the said officer

or officers as per bill or pay slips sent by the Corporation

to the Company. We think that this procedure could be con-

tinued and followed in future also so that while the pur-

poses of the rules are served the free trade and commerce of

the Company which is stated to have a large turnover is also

not affected.

The learned counsel for the respondent then contended

that the appellants have recovered the amounts paid by them

by way of octroi duty from the dealers or the customers to

whom they had sold the goods and therefore they are in any

case not entitled to get a refund. The argument was that if

refund is ordered it would amount to allowing the appellants

to unjustly enrich themselves at the cost of the public to

whom the burden had already been passed. This argument is

based on the ground that in the selling price the company

had merged the octroi duty originally paid as deposit and if

a refund is made the company would be getting an additional

amount over and above normal price which they would have

charged but for the fact that they were initially asked to

deposit octroi. There is no evidence that any of the arti-

cles sold by the Company is subject to any price control by

the Government or that the Company had charged any octroi

separately in the bills, Invoices and the other documents of

sale to the outside purchasers produced before us do not

also show that any octroi was separately charged and col-

lected by the Company. It may be mentioned that in the

rejoinder filed by the appellant in the writ petition they

have specifically denied that they "have recovered the

amount paid by them by way of octroi duty from the dealers

to whom they had sold the goods or that the dealers in turn

have recovered the octroi duty from the customers". In view

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of this the question of unjust enrichment does not arise.

477

This appeal is accordingly allowed on the above terms.

There will 'however be no order as to costs.

T.N.A. Appeal

allowed.

478