Burmah Shell Oil Storage & Distributing
Co. India Ltd. Vs. The Belgaum Borough Municipality [1962] INSC 319 (16
November 1962)
HIDAYATULLAH, M.
DAS, S.K.
KAPUR, J.L.
SARKAR, A.K.
DAYAL, RAGHUBAR
CITATION: 1963 AIR 906 1963 SCR Supl. (2) 216
CITATOR INFO :
F 1976 SC1446 (1,2,3,5) RF 1979 SC1721 (6,7)
RF 1981 SC 991 (12) R 1984 SC 583 (17) F 1990 SC 47 (10) RF 1992 SC 645
(4,10,11,28)
ACT:
Octroi-Levy of Octroi on goods by Belgaum
MunicipalityConsumption, use or sale-Meaning of-Difference between Terminal tax
and Octroi-Bombay Municipal Boroughs Act, 1925, (Bom. 18 of 1925), s. 73.
HEADNOTE:
The appellant company deals in petrol and
other petroleum products which it manufactures in its refineries situated
outside the octroi limits of Belgaum Municipality. It brings those products
inside the said area either for use or consumption by itself or for sale
generally to its dealers and licensees who in their turn sell them to others.
The Company also directly sells its products to Government, both civil and
military, and to local bodies and big private concerns. The goods brought by
the company within the octroi limits fall into four categories, viz. (i) goods
consumed by the Company, (ii) goods sold by the Company through its dealers or
by itself and 217 consumed within the octroi limits by persons other than the
Company, (iii) 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 and (iv) goods sent by the Company from its Depot inside the
octroi limits to extra municipal points where they are bought and consumed by
persons other than the Company.
The Company filed a writ petition in the High
Court against the respondents for a writ or writs to prohibit them from
charging octroi from the Company on its products brought inside the octroi
limits for sale. The writ petition was dismissed by the High Court. The
appellant came to this Court by certificate under Art. 133(i)(b) of the Constitution.
During the course of arguments, the respondents agreed to grant a refund on
those goods belonging to the appellant company which were actually sent outside
octroi limits. The appellant also admitted its liability to pay octroi on goods
consumed by itself This Court was required to give its decision only on the
rest of the two categories of goods.
Held, that 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
held not liable to octroi in respect of goods which it brought into the local
area and which were re-exported.
The word consumption in its primary sense
means the act of consuming and in ordinary parlance means the use of an article
in a way which destroys, wastes or uses up that article. But in some legal
contexts, the word 'consumption' has a wider meaning. It is not necessary that
by the act of consumption the commodity must be destroyed or used up.
Octroi and terminal tax resemble in the sense
that they are both leviable in respect of goods brought into a local area.
Otherwise, they are quite, different from
each other. While terminal taxes are leviable on goods "imported or
exported" from municipal limits denoting thereby that they are connected
with the traffic of goods, octrois are leviable in respect of the goods brought
into a municipal area for consumption or use or sale. The history of these two
taxes shows that while terminal taxes were a kind of octroi which were
concerned only with the entry of goods in a local area irrespective of whether
they would be: used there or not, octrois were taxes on goods brought into 218
the area for consumption, use or sale. They were leviable in respect of the
goods put to some use or the other in the area but only if they were meant for
such user. Another difference between the two is that there is no system of
refund under terminal tax but that is so for octroi.
Burmah Shell Oil and Dist. Co. v. Manmad
Municipality, A.I.R. 1958 Bom. 43, The State of Bombay v. The United Motors
(India) Ltd., [1953] S.C.R. 1069 and Anwar Khan Mahboob Co. v. The State of
Bombay, [1961] 1 S.C.R. 709, relied upon.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No 431/1961.
Appeal from the judgment and order dated May
31, 1960, of the Mysore High Court in Writ Petition No. 94 of 1959.
M. C. Setalvad, Attorney-General of India,
D.N. Mukherjee and B. N. Ghosh, for the appellant.
A.V.Viswanatha Sastri and R.
Gopalakrishnan,-for the respondent.
1962. November 16. The judgment of the Court
was delivered by HIDAYATULLAH, J. In this appeal by certificate ,under Article
133 (1) (b) of the Constitution granted by the High Court of Mysore against its
judgment and order dated May 31, 1960, the Burmah Shell Oil Storage &
Distributing Company of India Ltd. is the appellant and the Belgaum Borough
Municipality, Belguam, the respondent. The appeal arises out of proceedings
commenced by the Company against the Municipality under Article 226 of
the-constitution for a writ or, writs to prohibit the Municipality from
arguing' octroi from the Company on its products brought inside the octroi
limits for sale. The petition of the company was dismissed by the High Court.
The Company deals in petrol and other petroleum' products which it manufactures
in its refineries situated outside the octroi limits of Belgaum 219 Municipality
It brings these products inside the said area either for use or consumption by
itself or for sale generally to its dealers and licensees who in their turn
sell them to others. The Company also directly sells its products to Government
both Civil & Military, and to local bodies and big private concerns. The
Company has a Divisional Office and Depot in Belgaum and the petition in the
High Court was filed ,by the Divisional Manager incharge of that area. The
Company in the normal course of its business operations appoints dealers and
licensees and typical forms of agreement between the Company and such dealers
and licensees have been exhibited in the case.
According to the Company, the goods, brought
by it within the octroi limits can be divided into four separate categories as
follows 1 . Goods consumed by the Company
2. Goods sold by the Company through its
dealers or by itself and consumed within the octroi limits by persons, other
than the Company;
3. Goods sold by the Company through its dealers
or by itself insidethe octroi limits to other persons but consumed by them
outside the octroi limits ; and (4) Goods sent by the company from its Depot
inside the octroi limits to extra-municipal points where they are bought and
consumed by persons other than the company.
We are concerned in this appeal with a period
of three years commencing on October 22, 1955, and ending on a like date in
1958. During this time, octroi duty levied on all goods brought inside the
octroi limits of the Municipality, irrespective of' their destination according
to 'the four;
categories above enumerated, 220 amounted to
Rs. 1,40,544.51 nP. The Company claimed in the High Court that it was not
liable to pay octroi on categories other than the first. This claim was rejected
but the Municipality agreed to give a refund according to rulesin respect of
the fourth category.
Before dealing with the contentions in the
case it is necessary to refer briefly to the scheme of taxation under the
Bombay Municipal Boroughs Act, 1925, by which the Belgaum Municipality is
governed and the by-laws and rules made by the Municipality for the levy of
octroi within the octroi limits of the Municipality. The Municipality draws its
power to levy taxes from section 73. That section provides inter alia as
follows :"(1) Subject to any general or special orders which the State
Government may make in this behalf and to the provisions of section 75 and 76 a
Municipality may impose for the purposes of this Act any of the following
taxes, namely x x x x (iv an octroi on animals or goods or both, brought within
the octroi limits for consumption, use or sale therein;" The words '-use
or sale" were substituted for the words "'or use" from May 5,
1954, by an Amending Act of 1954 (Bombay Act 35 of 1954). In other words,
before 1954 the word "sale" did not figure in the description of
"octroi on animals or goods or both" which the Municipality was
authorised to impose.
Sections, 75 and 76 lay down the procedure
which the Municipality must follow before imposing a tax. It is not necessary
to quote the sections-. It 221 is sufficient to say that the Municipality
passes a resolution at a general meeting, selects one of the taxes mentioned in
section 73 and approves rules prepared for the purpose of clause (j) of section
58 specifying the classes of persons or property or both which would be made
liable, any exemptions to be granted, the amount or rate at which the tax is to
be levied and any remission or refund to be allowed together with the
conditions under which such exemption, remission or refund would be granted.
There are other matters which the rules cover but it is not necessary to
mention them here.
After the resolution is passed the
Municipality publishes the rules together with a notice informing all persons
concerned. Any inhabitant of the Municipal Borough objecting to the imposition
of the tax, or its amount or the rate proposed or the classes of persons or
property to be made in able or to any exemption proposed may object within one
month. The Municipality then considers the objection, records its opinion upon
them and forwards the notice, the objections, its opinion upon them and the
rules with modifications, if, any, in view of the objections, to the State
Government. Section 76 then lays down that the State Government may refuse to
sanction the rules submitted or to sanction them with or without modification
and under section 77 the rules are once again published along with the sanction
and from the date prescribed by the rules so published the tax is imposed.
Section 58 to which reference was made above confers power on the Municipality
to make rules not inconsistent with the Act and clause (j) in so far as
relevant to our purpose reads as follows :"(j) prescribing the taxes to be
levied in the municipal borough for municipal purposes, the circumstances in
which exemption will be allowed, the conditions on which and the 222 extent to
which remission will be granted, and the system on which refunds willbe allowed
and paid, in respect of such taxes ; the limits of the charges or payments to
be fixed......... ...............
Section 61 (1) confers on the Municipality
the power to make by-laws for many purposes. Clause (n) thereof authorises"fixing
of octroi limits and stations;
providing for the exhibition of tables of
octroi ; regulating, subject to any general or special orders which the State
Government may make in this' behalf, the system under which refunds are to be
made on account thereof when the animals or goods on which octroi has been
paid, or .articles manufactured wholly or in part from such animals or, goods,
are agai n exported, and the custody or storage of animals or goods declared
not to be intended for consumption, use or sale within the municipal borough
and prescribing a period of limitation after which no claim for refund of
octroi shall be entertained and the. minimum amount for which any claim to
refund may be made." Under section 60 the Municipality has to follow as
far as may be the same procedure for the suspension, modification or abolition
of any tax and the suspension, alteration or recession of any rule prescribing
a tax. In 1925 the Municipality had framed rules and by-laws before it became a
Borough Municipality. These rules are called the "The Belgaum Municipality
Octroi Rules and By laws" and are continued by virtue of section 5 (b) of
the Borough Act.
Before the amendment of the: Boroughs Act in
1954, rule 4(1) of the Octroi Rules and By-laws ran as follows:-"Subject
to the exemptions and the provisions hereinafter' expressly specified, a tax on
all 223 goods of the description mentioned in Schedule "A" hereto
annexed, shall, on the import there. of, be payable to the Municipality at the
rates specified for such goods respectively in the said schedule." When
the Act was amended in 1954 by including the word "'sale" in the
description of octroi the rules and by-laws were not reframed nor was the
procedure under section 76 read with section 58 followed to impose octroi on
animals and goods sold within the octroi limits. Rule 4 (1) also continued as
before.
The Company which had paid octroi on all its
products brought within the octroi limits of the Belgaum Municipality. before
the amendment including , the goods not consumed by itself but sold to others
started a correspondence saying that in 'as much as the law was newly amended
to include "sale" in the description of "octroi", the Rules
and By-laws ought to have been framed again and the procedure under section 76
read, with section 58 (j) followed. As this was not done, the Company
contended, the tax could not be collected on goods which were merely sold but
not consumed inside-the octroi limits. In the course of this correspondence,
the Company did not object generally to the levy of octroi on goods brought
inside the octroi limits for consumption, use or sale but asserted that octroi
on goods which were sent out of the said limits was liable to be refunded. This
the Municipality was prepared to grant subject to the rules. Even before the
High Court the learned Advocate appearing for the Municipality stated that if
any goods belonging to the company were actually sent outside the octroi limits
the Municipality was prepared to grant refund on proof thereof, That is the
stand of the Municipality even to-day. The Company also stated before us that
it was liable to pay octroi on goods consumed by itself.' The dis224 pute has
thus narrowed down to the second and third categories.
The learned Attorney General appearing for
the Company contends that the words "consumption or use" must be
contrasted with the word "sale". Sale, he argues, introduces a person
other than the one who brings the goods or animals within the Municipal limit
and as the words "consumption or use" are not qualified to say that
the consumption or use may be by any one, those words must necessarily denote
consumption or use by the, very person who brings the goods or animals. In
support of this argument he refers to entry No. 49 of the second list of the
Government of India Act, 1935, Sch. VII which reads:"49. Cesses on the
entry of goods into a local area for consumption, use or sale," and entry
No. 52 of the State List in the Constitution which reads:"52. Taxes on the
entry of goods into a local area for consumption use or sale therein." It
is pointed out that these Constitutional documents themselves indicate that
octroi may be on goods (or animals) brought into a local area (a) for
consumption (b) for use or (c) for sale, and the Boroughs Act, before the
amendment, had selected only two, namely, consumption and use and left out the
third that is, sale". The tax was thus payable only when the goods or
animals were brought for consumption or use, by the person who brought them in,
but not when the goods or animals were brought in and sold and were consumed or
used by the purchaser or someone else. It is conceded that after the amendment
the tax was intended to be collected even in respect of goods brought for sale
but here it is pointed out that the procedure under sections 75, 76 and 77 has
not been followed as required by section 60 of the Boroughs Act and the
imposition of 225 octroi on goods and animals brought in, for sale fails to be
effective. It is said that this amounts to a new tax and it needed to be
imposed according to the provisions abovementioned and reliance is placed ,upon
Burmah Shell Oil Storage and Dist. Co. v. Manmad Municipality (1).
"The Boroughs Act defines octroi in
section 2 (12)-"octroi" shall include a terminal tax." In clause
(v) of section 73 (1) terminal tax is mentioned separately and section 61 (1)
(0) gives the power to fix terminal tax limits And stations and other ancillary
matters. The proviso to section 73 (1) is material and it reads:
" provided that, save as provided in
clause (xiv) no such tax shall be leviable in boroughs in which an octroi was
not levied on or before the 6th July, 1917." Clause (xiv) says that the
Municipality may impose any other tax "which under the Constitution the
State Legislature has power to impose in the State." The entries in the
Legislative Lists which have been cited from the Government of India Act 1935
and the present Constitution and the definition of octroi as including terminal
tax need some explanation. The definition of octroi is subject to the context
and may not apply to enlarge the ambit of octroi. But the reason underlying the
extended definition gives us the true meaning of octroi as described in section
73 (1) (iv). The Boroughs Act was passed in 1925 and replaced art earlier Act
of 1901. The Boroughs Act, therefore, was prior to the Government of India Act,
1935. Under section 80A (3) (a) of the Government of India Act, the Governor
General-in-Council had framed rules; on December 16, 1920, which were known as
the Scheduled-tax Rules. Schedule II of these Rules (1) A. I.R. 1958 Bom, 43.
226 dealt with taxes for the benefit of Local
Authorities and included :
7. Octroi
8. A terminal tax on goods imported into, or
exported from a local area, save where such tax is first imposed in a local
area in which octroi was not levied on or before July 6,1917.
[Entry No. 8 quoted above was substituted by
the Government of India Notification No. 7 dated January 24, 1924, for an entry
which read formerly "'A terminal tax on goods imported into a local area
in which an octroi was levied on or before July 6, 1917"] The particular
tax was 'octroi' and there was no description of the tax. The word 'octroi'
comes from the word 'octroyer' which means "to grant' and in its original
use meant 'an import' or 'a toll' or (a town duty' on goods brought into a
town. At first octrois were collected at ports but being highly productive,
towns began to collect them by creating octroi limits. They came to be known as
'town duties'., These were collected not only on 'imports' but also on 'exports'
see Beuhler: Public Finance (3rd Edn.) p. 426. Grice in his National and Local
Finance p. 303 says that they were known as 'ingate tolls' because they were
collected at toll gates or barriers. Normally, they were levied on goods meant
for consumption but in Seligman's Encyclopaedia of Social Sciences Volume IX
page 570, 'octrois' are described without any reference to consumption or use.
This is how the editors describe octrois :or " As compared with the
facilities of the National Government the possibilities of raising revenue by
local bodies arc quite limited. All forms of indirect taxation are practically
closed to local authorities. They are unable to levy 227 customs duties,
although they may collect the so-called octrois that is, duties levied on goods
entering town." It will be noticed that in the Government of India Act
"octroi' was named but not described and now the Constitution avoids the
word 'octroi , as did the Government of India Act 1935 before, and gives a
description. In the Boroughs Act the definition of octroi' includes Terminal
Tax. Terminal Tax, as the Indian Statutory Commission points out, formerly
meant in Indian fiscal, terminology a tax which was levied at Railway Stations
and collected by the Railway Administration on all goods imported or exported
from the Station. It was also collected from passengers in some Municipalities.
We also learn from the Report that on the recommendation of a Committee
appointed in 1908 terminal tax took the place of octroi in a large number of Municipalities
at first in the United Provinces and then in others. At first the Government of
India were not in favour of such a change. Octrois were levied on goods brought
into, a local area for consumption, use or sale and were indirect taxes but.
terminal taxes were regarded as direct.
On July 6, 1917, the Government of India by a
Resolution reversed their former policy and agreed that the conversion was not
a change from indirect to direct taxation. Terminal taxes were of the nature of
octrois, but were not quite the same. The main differences were : that there
was no system of refunds under the Terminal Tax Rules (Terminal taxes as
Findlay Shiffas tells us were sometimes known as 'octrois without refunds'.)
and for octroi to be levied the goods must be brought in for sale, use or
consumption.
After the Scheduled-tax Rules the collection
of terminal tax was restricted to those areas in which octroi was levied on or
before July 6, 1917. Most of the Municipal laws allowed collection of terminal
taxes only if octrois were not levied. As the Taxation 228 Enquiry Commission
observes (Vol. III Ch. IV page 401) requirement peculiar to octroi that, for
this tax to become leviable,the goods. must not only enter the area, but, must
be, "for the purpose of consumption, use or sale therein." Usually,,
this requirement is sought to be satisfied by (a) the ab initio exemption of
the goods which merely pass , through the area, whether the exit is immediate
or after an interval, or (b) by the subsequent refund of the tax collected on
such goods., Exemptions and refunds, therefore, are the distinguishing features
of the octroi system." Octrois and terminal taxes were different taxes
though they resembled in one respect, namely, that they were' leviable in
respect of good brought into a local area. While terminal taxes were leviable
on goods imported or exported' from the Municipal limits denoting thereby that
they were connected with the traffic of goods, octrois, according to the
legislative practice then obtaining 'were, leviable in respect of goods brought
into a Municipal area for consumption or use or sale. It is "not necessary
to cite the Municipal Acts prior to' 1935 but a reference to them will amply
prove that such was the' tax which was contemplated as octroi.
When the Government of India. Act 1935 was
enacted terminal taxes became a central subject vide entry No. 58 of List I,
which.:reals as; follows:"58. Terminal taxes on 'goods or passengers
carried by railway or air." At that time, it was suggested by sir Walter
Leyton that both octrois and terminal taxes should be provincial subjects and
that it would perhaps be possible to fuse the two The Joint Committee however,
229 recommended otherwise and terminal taxes were separated from octrois and
included in the central list. The proceeds of the terminal taxes, however, were
to be distributed among the provinces. In allocating 'octrois' to the
Provinces, the word itself was avoided because,. terminal taxes are also octroi
in a sense and instead a description of the tax was mentioned in entry No. 49,
which has been quoted already, and which read "Cesses on the. entry of
goods into a local area for consumption, use or sal This scheme has been
repeated in the Constitution with the difference that the entry relative to terminal
'tax now reads "terminal taxes on goods and passengers carried by railway,
sea or air", and the word "taxes" replaced the word
"cesses" in the entry, relative to octrois.
The history of these two taxes clearly shows
that while terminal taxes were kind of octroi which were concerned only with
the entry of goods in a local area irrespective of whether they would be used
there or not octrois were taxes on goods brought into the area for consumption,
use or sale.
They were leviable in respect of goods put to
some use or other in. the area but only if they were meant for such user. When
the Government of India Act, in its Scheduled Tax Rules, mentioned
"octrois", it intended to give the power to levy taxes in this
well-understood sense, namely, on the entry of goods in a local area, for
consumption, use or sale. The Boroughs Act, which was enacted in 1925 mentioned
only "consumption and use.",, Ever since its enactment, no dispute
seems to have been raised by any person that goods brought in for sale were
exempt from octrois. All persons who brought the goods apparently paid this tax
without objection. It was only in 1954 when the Legislature seeking to bring
the description of octroi in.the Municipal Act in line,. with the Constitution
included the word "sale" also, that the dispute was raised by persons
who were affected, and they were 230 some of the persons who had paid the tax
before, even though the word "sale" was not there. Of course, the
conduct of the tax-payer is not determinative of the meaning of the words
",,consumption or use." But it shows how the term was always
understood. The word consumption in its Primary sense means the act of
consuming and in ordinary parlance means the use of an article in a way which
destroys, wastes or uses up that article. But in some legal contexts, the word
"consumption" has a wider meaning. It is not necessary that by the
act of consumption the commodity must be destroyed or used up. The word
'-consumption" occurs in explanation to sub-Article 1 of Article 286 of
the Constitution. In explaining the ambit of that word, this Court observed in
The State of Bombay v. The United Motors (India) Ltd. (1) as follows:"The
expression "for the purpose of consumption in that State" must, in
our opinion, be understood as having reference not merely to the individual
importer or purchaser but as contemplating distribution eventually to consumers
in general within the State." It is not the immediate person who brings
the goods into a local area who must consume them himself, the act of
consumption may be postponed or may be performed by someone else but so long as
the goods have been brought into the local area for consumption in that sense,,
no matter, by whom, they satisfy the requirements of the Boroughs Act and octroi
is payable. Added to the word "consumption" is the word
"use" also. There may be certain commodities which though put to use
are not "used-, up in the process. A motor-car brought into an, area for
use is not used up in the same sense as food-stuffs. The two expressions use
and consumption together therefore, connote the bringing in of goods and
animals not with a view to taking them out again but with a view to their
retention either for use without using (1) [1953] S. C. R. 1069, 1084.
231 them up or for consumption in a manner
which destroys, wastes or uses them up. In this context, the word
"'consumption", as has been shown above, must receive. a larger
meaning than merely the act of consuming in the generally understood sense.
Recently, in M/s . Anwarkhan Mahboob Co. v. The State of Bombay(1) while
dealing with the Explanation to Article 286(1), this Court observed as follows
"In answering that question it is unnecessary and indeed inexpedient to
attempt an exhaustive definition of the word "consumption" as used in
the explanation to Art. 286 of the Constitution. The act of consumption with
which people are most familiar occurs when they eat, or drink or smoke. Thus,
we speak o f people consuming bread, or fish or meat or vegetables, when they eat
these articles of food ; we speak of people consuming tea or coffee or water or
wine, when they drink these articles ; we speak of people consuming cigars or
cigarettes or bidis, when they smoke these.
The production of wealth, as economists put
it, consists in the creation of "utilities." Consumption consists in
the act of taking such advantage of the commodities and services produced as
constitutes the 'utilization' thereof. For each commodity, there is ordinarily
what is generally considered to be the final act of consumption. For some
commodities, there may be even more than one kind of final consumption. Thus
grapes may be "finally consumed" by eating them as fruits ;
they may also be consumed by drinking the
wine prepared from "grapes." Again, the final act of consumption may
in some cases be spread over a considerable period of time. Books, articles of
furniture, paintings may be mentioned as examples. It may even happen in such
caes, (1) [1961] 1 S. C. R. 709, 715.
232 that after one consumer has performed
part of the final act of consumption, another portion of the final act of
consumption may be performed by his heir or successor-in-interest, a
transferee, or even one who has obtained possession by wrongful means. But the
fact that there is for each commodity what may be considered ordinarily to be
the final act of consumption, should not make us forget that in reaching the
stage at which this final act of consumption takes place the commodity may pass
through different stages of production and for such different stages, there
would exist one or more intermediate acts of consumption........ In the absence
of any words to limit the connotation of the word "consumption, to the
final act of consumption, it will be proper to think that the constitution-makers
used the word to connote any kind of user which is ordinarily spoken of as
consumption of the particular commodity." Looking to the trade of the
company, it is quite obvious that it brings in the goods (a) for consumption by
itself which of course is within the term 'octroi' as described;
(b) for re-export either by itself or through
dealers outside the area which as is admitted by the municipality, entitles the
company to a refund of tax and (c) for sale by it directly to consumers or to
dealers who distribute the goods within the area to ultimate consumers. So long
as the goods are brought inside the area for sale within the area to an
ultimate consumer, it makes no difference that the consumer does not consume
them in the area but takes them out for consumption elsewhere. A motorist who
buys petrol within the municipal area and goes outside it for a drive buys the
petrol in the area for purposes of consumption and the person who keeps and
stores the petrol for sale in such circumstances keeps it for consumption 233
therein. The word '-therein" does not mean that all the act of consumption
must take place in the area of the municipality. It is sufficient if the goods
are brought inside the area to be delivered to the ultimate consumer in that area
because the taxable event is the entry of goods which are meant to reach an
ultimate user or consumer in the area. Indeed, the consumer may never consume
them as, for example, a motorist buys a tin of oil and finds that it does not
suit his vehicle and leaves it lying on his shelf. 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. In this process the act of sale is merely
the means for putting the goods in the way of use or consumption. It is an
earlier stage, the ultimate destination of the goods being 'use or
consumption'. The earlier stage, namely, the sale by him, does not save the person
who brought the goods into the local area from liability to the tax if the
goods were brought inside for consumption or use. In other words, 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
234 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.
For the reasons above stated this appeal must
fail. It will be dismissed with costs.
Appeal dismissed.
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