Man Mohan Tuli Vs. Municipal
Corporation of Delhi & Ors [1981] INSC 40 (18 February 1981)
FAZALALI, SYED MURTAZA FAZALALI, SYED MURTAZA
KOSHAL, A.D.
VARADARAJAN, A. (J)
CITATION: 1981 AIR 991 1981 SCR (2) 894 1981
SCC (2) 467 1981 SCALE (1)352
ACT:
Delhi Municipal Corporation Act, 1957,
section 158 and rule 26 of the Terminal Tax Rule framed under the Act,
interpretation of-Exigibility of Terminal Tax, explained.
HEADNOTE:
Man Mohan Tuli, appellant in C.A. 2004/80, is
the owner of a piece of land situate on the Grand Trunk Road near the sixth
milestone as one goes from Delhi to Ghaziabad.
Appellant Tuli has constructed various
buildings on his land for use as godowns and has rented them out to various
transport companies engaged in bringing goods from other States and storing
them before their transhipment to Delhi and other States beyond Delhi. The
trucks carrying the goods for various destinations pass along the G.T. Road and
move into Tuli's land. After the trucks enter the land, the goods are unloaded
into the godowns, sorted out and reloaded into the respective trucks meant for
various destinations.
Thereafter, the trucks move out of the land
and, passing through the Union Territory of Delhi after crossing the border
line, proceed to their destinations. The Municipal Corporation of Delhi by its
Orders dated May 23, 1975 and July 7, 1975 directed that a Terminal Tax post be
set up at the entrance to Tuli's land in order to collect terminal tax on goods
carried into that land. A writ was filed before the High Court by the owners of
transport companies as also by Tuli for quashing the orders of the Corporation
seeking to levy Terminal Tax on the goods which were not meant for Delhi but
for places beyond Delhi. The High Court held that the Corporation was legally
entitled to levy Terminal Tax at the point of territory of the Union Territory
of Delhi even though the goods were sorted out in the godown of Tuli, resorted
out and re-loaded since as they while passing through the territory of Delhi
undoubtedly entered the said territory. Hence the appeals by special leave by
appellant Tuli and others.
Allowing the appeal in part, the Court ^
HELD: 1. It is well settled that taxing
statutes must be strictly interpreted giving every benefit of doubt to the tax-payer.
A Terminal Tax could be levied only by the Corporation or the State which is
the final destination of the goods sent from any other area. A Terminal Tax
signifies that there must be a terminus for the journey of the goods.
Terminus means the point to which main action
tends, goal, end, finishing point, the point at which something comes to an
end. [899 D, 901 B-D]
2.1 From a consideration of the decided cases
of the Supreme Court, the following propositions emerge:- (i) Terminal tax and
octroi are similar kinds of levies which are closely interlinked with (a)
destination of the goods (b) the user in the local area 895 on arrival of the
goods. Where the goods merely pass through a local area without being consumed
therein the mere fact that the transport carrying the goods halt within the
local area for transhipment or allied purposes would not justify the levy of
either the terminal tax or octroi duty. This is because the halting of the
goods is only for an incidental purpose to effectuate the journey of the goods
to the final destination by unloading, sorting and reloading them at a
particular place. [803 A-C] (ii) There is a very thin margin of difference
between a terminal tax and octroi. In the case of the former (terminal tax) the
goods reach their final destination and their entry into the area of
destination immediately, attracts, payment of terminal tax irrespective of
their user. In the case of octroi, however, the tax is levied on goods for
their use and consumption. [903 D-E] (iii) But at the same time, the goods
while halting at a local area should leave for their destination within a
reasonable time which may depend on circumstances of each case and if the goods
are kept within the area for such a long and indefinite period that the purpose
of reaching the final destination lying in a dicerent area is frustrated or
defeated, they may be exigible to terminal tax. [903 E-F] (iv) Where the goods
enter into a local area which is also the destination of the goods either
temporarily or otherwise, the terminal tax would be leviable. For instance, if
A consigns goods from Patna in Bihar to Delhi in the name of X and X after
having received the goods at Delhi rebooks or reloads the same on a transport
for Chandigarh in the name of Y, terminal tax would be leviable by the
Corporation at Delhi because the destination of the goods in the first instance
was Delhi and that by itself would attract the imposition of terminal tax. The
fact that X rebooks them to Chandigarh would not make any difference because
the act of rebooking by X at Delhi would constitute a fresh transaction by
which the goods after having been carried into Delhi are further exported to
Chandigarh. On the other hand, when there is one continuous journey of the
goods from Patna to Chandigarh without any break, the final destination would
be Chandigarh even though the goods may have to be halted in Delhi for the
purpose of unloading, sorting and reloading and may have to be kept in Delhi
for a reosonable time. In such a case terminal tax would not be exigible. [903
G-H, 904 A-C] Punjab Flour & General Mills v. Lahore Corporation, A.I.R.
1947 F.C. 14; The Central India Spinning & Weaving & Manufacturing Co.
Ltd., The Empress Mills, Nagpur v. The Municipal Committee, Wardha, [1958] SCR
1102; Bangalore Woollen, Cotton & Silk Mills Co. Ltd. Bangalore v.
Corporation of the City of Bangalore, [1961]
3 SCR 707;
Diamond Sugar Mills Ltd. & Anr. v. The
State of Uttar Pradesh, [1961] 3 S.C.R. 242; Burmah Shell Oil Storage &
Distributing Co. India Ltd. v. The Belgaum Borough Municipality, [1963] Supp. 2
SCR 216; Khyerbari Tea Co. Ltd.
Champlain Realty Co. v. Town of Brattleboro,
67 L. Ed.
U.S. 309, quoted with approval.
896 2.2. What would be a reasonable time for
interpretation of the goods or halting, in the instant case, at the godown of
Tuli, will naturally depend upon the special features or circumstances of each
case, namely, the nature of the goods, the time taken in loading, sorting and
unloading, the obstacles or difficulties which may be faced by the transporters
and similar other factors. Normally, a time of two to three days or even a week
should be sufficient to clear the goods for its journey to the ultimate
destination.
It may sometimes happen that goods may have
to be kept in the godowns in the territory of Delhi for circumstances, beyond
the control of the consignee or the consignor, for example, a garnishee order.
In considering what is reasonable time these circumstances would have to be
taken into consideration. [906 H, 907 A-C] 2.3. Rule 26 of the Terminal Tax
Rules will have to be interpreted on the footing that section 178 of the Delhi
Municipal Corporation Act, 1957 does not contemplate levy of terminal tax for
goods meant for destinations other than Delhi. The word "immediately"
appearing in Rule 26 has to be liberally construed so as to imply a reasonable
period and if the export is delayed the rules may apply if a reasonable
explanation has been given. So far as rules regarding taking of passes, etc.,
at the barrier are concerned they would, of course, apply but subject to the
conditions under which terminal tax can be imposed under section 178 of the Act
which is the main charging section. [907 C-E] Amti Banaspati Co. Ltd v. The
Union of India I.L.R.
1973 Delhi 237, distinguished.
3.1. Section 178 of the Delhi Municipal
Corporation Act, cannot be interpreted so as to justify imposition of terminal
tax even on goods which merely passed through the territory of Delhi, although
their destination is not Delhi but places beyond Delhi. [908 F-G] 3.2. Merely
because the goods after having been unloaded in the godown of appellant Tuli
are sorted, reloaded in different trucks and thereafter pass through the
territory of Delhi, they do not become exigible to terminal tax. [908 G-H] 3.3.
Rule 26 of the Terminal Tax cannot be interpreted so that exemption could be
granted only if the goods are exported immediately which means within a very
short time irrespective of any other consideration. Terminal tax can be
leviable only if it is proved that the goods remained at the godown for an
indefinite and unexplained period which could not be said to be reasonable in
the circumstances. [908 H, 909 A-B] 3.4. Where the goods are carried by trucks
into the territory of Delhi and unloaded there and are also meant for Delhi and
soon thereafter may be re booked by the receiver of the goods to some other
place, terminal tax would be leviable because in this case there are two
separate transactions-(i) by which the goods are meant for Delhi and (ii) by which
after having reached and having been unloaded at Delhi they are rebooked and
reloaded for some other place and which therefore is a fresh and different
transaction. In such a case, terminal tax would be leviable at the entry point
in the territory of Delhi. [909 B-C] 3.5. The direction given by the High Court
to the Terminal Tax Officer to fix a reasonable time for unloading, sorting and
reloading the goods which are 897 meant for different destinations taking into
consideration the quantity of the goods. the time for unloading, sorting etc.
and for further reloading and transhipment should be done within a time to be
fixed by a Terminal Tax Officer is correct. [909 E-F] & CIVIL APPELLATE
JURISDICTION: Civil Appeal Nos. 2004- 2005 Of 1980.
Appeals by Special Leave from the Judgment
and Order dated 13-10-1978 of the Delhi High Court in LPA Nos. 73/77 and
103/77.
Madan Bhatia and Sushil Kumar for the
Appellant in both the appeals.
R.B. Datar, Lalit Bhardwaj and Miss Madhu
Mulchandani for Respondent Nos. 1-3.
P.R. Rao, S.R. Venkataraman, P.C. Kapur, R.C.
Bhatia and S.L. Sharma for Respondent No. 5 in Civil Appeal No. 2004/80.
N.B. Sinha and S.K. Sinha for Respondent No.
4.
The Judgment of the Court was delivered by
FAZAL ALI, J. These appeals by special leave are directed against a Division
Bench common judgment dated October 13, 1978 of the High Court of Delhi by
which the Letters Patent Appeals were allowed and the impugned Orders dated May
23, 1975 and July 7, 1975 passed by the Terminal Tax Officer, Municipal
Corporation of Delhi were quashed.
The facts of the case lie within a very
narrow compass and may be summarized as follows. Manmohan Tuli, appellant in
C.A. No. 2004/80, is the owner of a piece of land situate on the Grand Trunk
Road near the sixth milestone as one goes from Delhi to Ghaziabad. Appellant
Tuli has constructed various buildings on his land for use as godowns and has
rented them out to various transport companies engaged in bringing good from
other States and storing them before their transhipment to Delhi and other
States beyond Delhi.
The trucks carrying the goods for various
destinations pass along the G.T. Road and move into Tuli's land. It is not
disputed that after the trucks enter the land, the goods are unloaded into the
godowns, sorted out and reloaded into the respective trucks meant for various
destinations. Thereafter the trucks move out of the land and passing through
the Union Territory of Delhi after crossing the border line, proceed to their
destinations. The Municipal Corporation of Delhi (hereinafter referred to as
the Corporation,) by its Orders dated May 23, 1975 and July 7, 1975
(hereinafter referred to as the "inpugned orders') directed that a
Terminal Tax post be sets up at the entrance to Tuli's land in order to collect
898 terminal tax on goods carried into that land. The Ghaziabad Nagar Palika
also purported to levy terminal tax on such goods but this levy was neither
assailed before the High Court nor has been challenged before us and is
therefore left out of consideration. A writ was filed before the High Court by
the owners of transport companies as also by Tull for quashing the orders of
the Corporation seeking to levy terminal tax on the goods which were not meant
for Delhi but for places beyond Delhi. Further details are not necessary for
the decision of these appeals and both the appeals (C.A. Nos. 2004 and 2005 of
1980) will be disposed of by a common judgment.
The High Court vide the impugned judgment was
of the opinion that even though the goods were stored in the godown of Tull,
sorted out and reloaded but as they while passing through the territory of
Delhi undoubtedly entered the said territory, the Corporation was legally
entitled to levy terminal tax at the point of entry into the Union Territory of
Delhi. The case of the appellant was that the goods were not meant either to be
used or consumed in Delhi nor was Delhi the final destination of the goods. It
was a different matter that as the goods were to be sent to destination beyond
Delhi the transport carrying the goods had perforce to pass through the
territory of Delhi. It was thus contended that the goods were not carried into
the territory of Delhi but were merely carried through the territory of Delhi
to other destinations which were beyond Delhi. It was argued that s. 178 of the
Delhi Municipal Corporation Act, 1957 (hereinafter referred to as the 'Act')
had in terms no application to the case and that therefore the terminal tax
imposed by the impugned orders was legally invalid.
The counsel for the respondent, however,
submitted that even though the goods may have been meant for other destinations
but as they were unloaded in the godown and reloaded in various trucks and
actually entered into the territory of Delhi, they were factually carried into
the Delhi territory and that was sufficient to empower the Corporation to levy
the terminal tax. According to the argument of the counsel for the Corporation,
the question of destination was not at all germane for the purpose of
adjudicating the competency of the Corporation to levy terminal tax at the
point of entry into Delhi.
Thus, the entire question turns upon the
interpretation of s.178 of the Act and some Rules framed under the Act.
Relevant portion of section 178 runs thus:
"178(1). On and from the date of the
establishment of the Corporation under section 3, there shall be levied on all
goods carried by railway or road into the Union Territory of Delhi 899 from any
place outside thereof, a terminal tax at the rates specified in the Tenth Schedule."
(Emphasis supplied) The crucial words which have to be interpreted are:
'goods carried by railway or road into the
Union Territory of Delhi from any place outside Delhi'. The contention of the
appellant is that the words 'goods carried into the Union Territory' clearly
indicate that the final destination of the goods must be Delhi and by virtue of
this fact, the natural consequence would be that the goods should be carried
from other places either by rail or by road into the territory of Delhi. This
argument was reinforced by the words 'terminal tax' used in s. 178 which imply
that the terminus of the journey of the goods must be Delhi and only in that
event the Corporation would be competent to levy a terminal tax. This argument
was sought to be rebutted by the respondents on the ground that the words
'carried into the Union Territory of Delhi' should be interpreted independently
and literally so as to indicate that even if the goods passed through Delhi,
the moment they entered into the territory of Delhi terminal tax became
exigible. So far as this aspect of the argument is concerned, we are unable to
accept the same because it is well settled that taxing statutes must be
strictly interpreted giving every benefit of doubt to the tax payer.
Before, however, examining the respective
contentions of the parties it may be necessary to refer to the authorities
dealing with the history of terminal tax or octroi duty. To begin with, it is
not disputed that the power to subject the goods either to octroi or to
terminal tax squarely falls within entries numbers 52 and 56 of List II to the
Seventh Schedule of the Constitution. In Punjab Flour & General Mills v.
Lahore Corporation the Court while drawing a distinction between the type of
taxes referred to as terminal taxes in Entry No. 58 of List I of Schedule 7 to
the Government of India Act, and those described as cesses in Entry No. 49 of
List II thereof observed as follows:
"There appears to us a definite
distinction between the type of taxes referred to as terminal taxes in Entry
No. 58 of List I of Sch. 7 and the type of taxes referred to as cesses on the
entry of goods into a local area in Entry No. 49 of List II. The former taxes
must be (a) terminal (b) confined to goods and passengers carried by railway or
air. They must be chargeable at a rail or air terminus and be 900 referable to
services (whether of carriage or otherwise) rendered or to be rendered by some
rail or air transport organisation. The essential features of the cesses
referred to in Entry No. 49 of List II are on the other hand simply (a) the
entry of goods into a definite local area and (b) the requirement that the
goods should enter for the purpose of consumption, use or sale therein.... The
grounds of taxation under the two entries are, as indicated above, radically
different, and there is no case for suggesting that taxation under the one
entry limits or interferes in any way with taxation under the other." In
The Central India Spinning & Weaving & Manufacturing Co. Ltd., The
Empress Mills, Nagpur v. The Municipal Committee, Wardha this Court examined
the entire matter exhaustively and after giving the history of terminal tax or
octroi observed as follows:
"If `terminal' besides the above meaning
has an additional meaning also and that meaning signifies the termini or the
jurisdictional limits of the municipal area even then the construction to be
placed on the term should be the one that favours the tax-payer, in accordance
with the principle of construction of taxing statutes, which must be strictly
construed and in case of doubt must be construed against the taxing authorities
and doubt resolved in favour of the tax- payer." ... ... ...
"The legislative history of this tax
thus shows that octroi was leviable on the entry of goods in a local area when
the goods were for consumption, use or sale therein. The substituted tax was
terminal tax on goods imported into or exported from a local area and by rules
this tax in the case of Wardha Municipal Committee was imposed on certain class
of goods imported and on others exported by railway or road." ... ... ...
...
"That by the substitution of terminal
tax on goods imported into a local area the nature of the tax had not been
altered from what it was when octroi was in force or when instead of
"terminal tax" octroi (without refund) was substituted .....
Therefore terminal tax on goods imported or exported is similar in its
incidence and is payable on 901 goods on their journey ending within the
municipal limits or commencing there from and not where the goods were merely
in transit through the municipal limits and had their terminus elsewhere."
... ... ...
"Therefore, according to the Federal
Court "terminal" has reference to the terminus of the railway or air,
i.e., the end of journey." A close analysis of this decision, therefore
clearly discloses that a terminal tax signified that there must be a terminus
for the journey of the goods. The word 'terminus' according to Oxford
Dictionary means-a point situated at or forming the end or extremity of
something, situated at the end of a line of railway. In other words, terminus
means the point to which main action tends, goal, end, finishing point, the
point at which something comes to an end. In Corpus Juris Vol. 62 at p. 729 the
word 'terminal' in connection with transportation means the fixed beginning or
ending point of a given run. It would thus appear that a terminal tax could be
levied only by the Corporation or the State which is the final destination of
the goods sent from any other area.
A similar view was taken by a later decision
of this Court in Bangalore Woollen, Cotton & Silk Mills Co. Ltd.
Bangalore v. Corporation of the City of
Bangalore where Kapur, J., speaking for the Court observed as follows:
"The history of these taxes therefore
shows that in the Devolution Rules under the Government of India Act, 1915
octroi, terminal tax and taxes on professions and callings were three distinct
heads of taxation..
Therefore, when s. 142-A was added in the
Government of India Act, 1935, its operation was limited to entry 46 of List II
and had no reference to entry 49 which deals with cesses on entry of goods. The
position under the Constitution is exactly the same and therefore neither s.
142-A of the Government of India Act, 1935 nor Art.
276 has any effect on entry 49 in the
Government of India Act, 1935 or entry 52 in the Constitution." In this
case also a distinction between a terminal tax and octroi was clearly brought
out. In Diamond Sugar Mills Ltd. & Anr. v. The State of Uttar Pradesh &
Anr. while defining a local area within 902 the meaning of Entry 52 of List II
of Seventh Schedule to the Constitution, the Court observed as follows:
"We are of opinion that the proper
meaning to be attached to the words 'local area' in Entry 52 of the
Constitution, (when the area is a part of the State imposing the law) is an
area administered by a local body like a municipality, a district board, a
local board, a union board, a Panchayat or the like." In Burmah Shell Oil
Storage & Distributing Co. India Ltd. v. The Belgaum Borough Municipality
this Court again fully discussed the matter and Hidayatullah, J., speaking for
the Court stressed the essential distinction between octroi and terminal tax in
the following words:
"Octrois and terminal taxes were
different taxes though they resembled in one respect, namely, that they were
leviable in respect of goods brought into a local area.
While terminal taxes were leviable on goods
'imported or exported' from the Municipal limits denoting thereby that they
were connected with the traffic of goods, octrois, according to the legislative
practice then obtaining were, leviable in respect of goods brought into a
Municipal area for consumption or use or sale.
.. .. ..
The history of these two taxes clearly shows
that while terminal taxes were a kind of octroi which were concerned only with
the entry of goods in a local area irrespective of whether they would be used
there or not; octrois were taxes on goods brought into the area for
consumption, use or sale. They were leviable in respect of goods put to some
use or other in the area but only if they were meant for such user." In
Khyerbari Tea Co. Ltd. & Anr. v. The State of Assam Gajendragadkar, J.
speaking for the Court drew a very apt distinction regarding the concept of
import and observed as follows:- "In that connection, the legislative
history of the octroi duty was examined and it was held that the concept of
import requires that the goods which are brought into must mix up with the mass
of the property in the local area where the goods are alleged to have been
imported. If the goods are just carried and not mixed with the mass of the
property in the area through which they are carried, they cannot be said 903 to
have been imported into that area........ The word "carried" is of
much wider denotation, and it would be unreasonable to limit its scope by
introducing considerations which are relevant in dealing with the question of
import." Thus, from a consideration of the cases cited above, the
following propositions emerge:- (1) Terminal tax and octroi are similar kinds
of levies which are closely interlinked with (1) destination of the goods, (2)
the user in the local area on arrival of the goods. Where the goods merely pass
through a local area without being consumed therein the mere fact that the
transport carrying the goods halt within the local area for transshipment or
allied purposes would not justify the levy of either the terminal tax or octroi
duty. This is because the halting of the goods is only for an incidental
purpose to effectuate the journey of the goods to the final destination by
unloading, sorting and reloading them at a particular place.
(2) There is a very thin margin of difference
between a terminal tax and octroi. In the case of the former (terminal tax) the
goods reach their final destination and their entry into the area of
destination immediately attracts payment of terminal tax irrespective of their
user. In the case of octroi, however the tax is levied on goods for their use
and consumption.
(3) But at the same time, the goods while
halting at a local area should leave for their destination within a reasonable
time which may depend on circumstances of each case and if the goods are kept
within the area for such a long and indefinite period that the purpose of
reaching the final destination lying in a different area is frustrated or
defeated, they may be exigible to terminal tax.
(4) Where the goods enter into a local area
which is also the destination of the goods either temporarily or otherwise, the
terminal tax would be leviable. For instance, if A consigns goods from Patna in
Bihar to Delhi in the name of X and X after having received the goods at Delhi
re-books or reloads the same on a transport for Chandigarh in the name of Y, terminal
tax would be leviable by the Corporation at Delhi because the goods in the
first instance was Delhi and that by itself would attract the imposition of
terminal tax. The fact that X 904 rebooks them to Chandigarh would not make any
difference because the act of rebooking by X at Delhi would constitute a fresh
transaction by which the goods after having been carried into Delhi are further
exported to Chandigarh. On the other hand, when there is one continuous journey
of the goods from Patna to Chandigarh without any break, the final destination
would be halted in Delhi for the purpose of unloading, sorting and reloading
and may have to be kept in Delhi for a reasonable time. In such a case terminal
tax would not be exigible.
These principles are also spelt out by the
American law on the subject which deals with inter-state transport of goods. In
American Jurisprudence (2d, Vol. 15, p.689, para 49) the following statement is
made, which is spelt out from various American decisions including those of the
U.S.
Supreme Court:
"In the determination of whether a
transportation of persons or property constitutes interstate or intrastate
commerce, the essential character or unity of the movement is the decisive
factor, While the intention of the shipper or passenger is probably the most
important single factor in determining whether transportation is interstate or
intra-state intention alone has been said not to be a controlling factor in
making such determination. Inter-state journeys are to be measured by the commonly
accepted sense of the transportation concept........The parties cannot, by
descriptive terms of contract, convert a local business, serving as an agency
of a transportation company, into an interstate commerce business, nor,
conversely, may a through shipment be transformed into intrastate commerce by
separating the rate into its component parts, charging local rates, and issuing
local waybills" Similar observations are to be found in the same volume of
American Jurisprudence (p. 697, para 56) which relate to the continuity of
transit of goods, and may be extracted thus:
"The crucial question to be settled in
determining whether Personal property moving in interstate commerce is subject
to local taxation is that of its continuity of transit and this question is to
be determined by various factors, among which are the intention of the owner,
the control he retains to change destination. the agency by 905 which the
transit is effected, and the occasion or purpose of the interruption during
which the tax is sought to be levied, Intent, while not alone conclusive, is
probably the most important single determinant of continuous carriage.
If a break in the interstate journey is
caused by the exigencies or conveniences of the safety of the goods during transit,
or natural causes over which the taxpayer has no control, the continuity of the
transit remains unimpaired".
The following statement of law occurs in the
same volume(para 57, p. 698):- "If during transit, property is stored for
an indefinite time for other than natural causes or for lack of facilities for
immediate transportation, it is subject to state or local laws, including
inspection laws......On the other hand, if the entry of goods into a warehouse
is a convenient in termediate step in the process of getting them to their
final destination, they remain in interstate or foreign commerce until they
reach those points".
In the case of Champlain Realty Co. v. Town
of Brattleboro one important aspect of the matter has been dealt with, viz.,
the fact that if the goods halt in an intermediate State whilst on their
journey to their destination for a long period due to circumstances beyond the
control of the owner, whether or not the goods lose the nature of the
interstate transaction and could be free from the state taxation, was clearly
highlighted by he following observations:- "Longs of pulp wood which have
been placed in a river to be floated into another state are in interstate
commerce, so as to be free from state taxation, although, because of the high
water in a connecting river into which they will ultimately pass, it is unsafe
to permit them to enter that river, and they are temporarily held in a boom
near the mouth of its tributary".
In the same case, C.J. Taft indicated the
various aspects of interruptions in the journey and the incidence thereof and
observed as follows:- "The doubt arises when there are interruptions in
the journey, and when the property, its transportation, is 906 under the
complete control of the owner during the passage If the interruptions are only
to promote the safe or convenient transit, then the continuity of the
interstate trip is not broken.
...... ...... .....
Chief among these are the intention of the
owner, the control he retains to change destination, the agency by which the
transit is effected, the actual continuity of the transportation, and the
occasion or purpose of the interruption during which the tax is sought to be
levied".
In Volume 78 L Ed at p. 138 the test laid
down was that if the shipment was made in good faith to a destination and the
interruption was not indefinite but reasonable the continuity of the journey
cannot be said to be broken. It was also pointed out that where the
interruption of the movement of commodities at an intermediate point is not
incidental to the transportation, the shipment loses the character of
interstate commerce so as to be exigible to local taxation. In this connection,
the following observations were made:
"If the shipment has been made in good
faith to a destination the interruption is not indefinite, but is reason-able
and solely in furtherance of the intended transportation of the shipment to its
ultimate destination, then the continuity of the journey is not broken by the
delay nor by the mere power of the owner there to destroy its character as
interstate commerce.....any interruption of the movement of commodities at an
intermediate point between origin and final destination that is not incidental
to the transportation or the means of transportation or, being so incidental,
is used or extended for purposes of the owner not incidental to the
transportation or the means used therefor, breaks the continuity in transit and
subjects the shipment to local taxation at the point of interruption".
We have laid special stress on the
circumstances under which the terminal tax becomes leviable if the halt or
interruption of the goods at an intermediate point is for an indefinite and
unexplained period. The answer to the question as to what would be a reasonable
time for interruption of the goods or halting in the instant case at the godown
of Tuli, will naturally depend on the special features or circumstances of each
case, viz., the nature of the goods, 907 the time taken in loading, sorting and
unloading, the obstacles or difficulties which may be faced by the transporters
and similar other factors. Normally, a time of two to three days or even a week
should be sufficient to clear the goods for its journey to the ultimate
destination.
It may sometimes happen that goods may have
to be kept in the godowns in the territory of Delhi for circumstances beyond
the control of the consignee or the consignor, e.g., while the goods are lying
in a godown at Delhi a dispute occurs between the concerned parties as a result
of which an injunction is issued by a court restraining the transporters from
moving the goods. In considering what is reasonable time these circumstances
would have to be taken into consideration.
It, was however, argued before us that
according to the Terminal tax Rules framed under the Act, Rule 26 exempts goods
from terminal tax if the same are exported immediately and are declared to be
intended for immediate export. In view of the interpretation we have placed on
s. 178 it is obvious that the word "immediately "appearing in Rule 26
has to be liberally construed so as to imply a reasonable period and if the
export is delayed the rules may apply if a reasonable explanation has been
given. So far as rules regarding taking of passes, etc, at the barrier are
concerned they would, of course, apply but subject to the conditions under
which terminal tax can be imposed under s.178 of the Act which is the main
charging section.
The High Court appears to have placed some
reliance on Amrit Banspati Co. Ltd. v. The Union of India in coming to the
conclusion that in the instant case the Corporation was legally entitled to
levy terminal tax. With due respect to the Judges of the High Court who decided
the Appeals, we would like to point out that the case just above referred to is
clearly distinguishable from the present appeals. The most crucial fact in the
Delhi decision was that the goods were being carried into the Union Territory
of Delhi for the purpose of sale at Delhi. Thus, the case proceeded on the
admitted position that the goods were carried from Ghaziabad into the Delhi
territory for sale at Delhi. The final destination of the goods being Delhi,
there can be no doubt that the Corporation was fully entitled to levy terminal
tax on such goods. In this connection, the High Court observed as follows:-
"The Petitioner-company was incorporated under the companies Act, 1956,
and it had its registered office at G.T.Road, Ghaziabad, in the State of Uttar
Pradesh....
908 It has a factory, inter alia, at
Ghaziabad for manufacturing the said Vanaspati products. In the course of its
business, the company carried and still carries its products by railway and/or
road into the Union Territory of Delhi from Ghaziabad for the purpose of sale
at Delhi.
....... ........ ......
The words "shall be levied on all goods
carried by rail-way or road" in sub-section (1) show clearly that the
section imposes terminal tax on the carriage or movement of goods from outside
the Union Territory of Delhi into the said Territory. In other word, the taxable
event is the carriage or movement of goods into the Union Territory of
Delhi".
The observations last extracted must be
understood in the light of the admitted facts in Amrit Banaspati Company"s
case (supra). We are unable to accept that case as an authority for the
proposition that even if the final destination of the goods was not Delhi but
as the goods were carried through the territory of Delhi, they would still be
exigible to terminal tax. In the impugned Judgment the High Court, however,
seems to have laid undue emphasis and special stress on the fact that the goods
were carried into the Union territory of Delhi, the moment they passed through
it even though the destination of the goods may be some other area. This
appeared, according to the High Court. the real purport and intention of s.
178. We are, however, unable to agree with this view which is patently wrong
and does not at all flow from the plain and unambiguous language of s. 178 of
the Act nor does s.178 warrant such an interpretation. Thus, our conclusions
are follows:- (1) The High Court was wrong in interpreting s. 178 of the Act so
as to justify imposition of terminal tax even on goods which merely passed
through the territory of Delhi, although their destination is not Delhi but
places beyond Delhi.
(2) The High Court was wrong in holding that
merely because the goods after having been unloaded in the godown of appellant
Tuli are sorted, reloaded in different trucks and thereafter pass through the
territory of Delhi, they become exigible to terminal tax.
(3) The High Court was wrong in interpreting
Rule 26 literally and holding that exemption could be granted only if the goods
are exported immediately which means within a very short time irrespective of
any other consideration. In view of our interpretation of s. 178, Rule 26 must
be interpreted in the light of the object of s. 178 and terminal tax can be
leviable only if it is proved that the goods remained at the godown for an
indefinite and unexplained period which could not be said to be reasonable as
discussed by us in the circumstances.
(4) Where the goods are carried by trucks
into the territory of Delhi and unloaded there and are also meant for Delhi and
soon thereafter may be rebooked by the receiver of the goods to some other
place, terminal tax would be leviable because in this case there are two
separate transactions-(1) by which the goods are meant for Delhi, and (2) by
which after having reached and having been unloaded at Delhi they are rebooked
and reloaded for some other place and which therefore is a fresh and different
transaction. In such a case, terminal tax would be leviable at the entry in the
territory of Delhi.
We might mention that the High Court while
holding that terminal tax is exigible has construed the word 'immediately' in
Rule 26 literally and directed the Terminal Tax Officer to fix a reasonable
time for unloading, sorting and reloading the goods which are meant for
different destinations taking into consideration the quantity of the goods, the
time for unloading, sorting, etc., and has further directed that reloading or transshipment
should be done within a time to be fixed by the Terminal Tax Officer.
Though the directions given are correct but
they will have to be construed in the light of the various factors which we
have referred to. Rule 26 will have to be interpreted on the footing that s.
178 of the fact does not contemplate levy of terminal tax for goods meant for
destinations other than Delhi.
For the reasons given above, we allow these
appeals, set aside the impugned judgment except the portion quashing the
impugned orders. That portion we uphold (though on grounds different from the
ones given by the High Court) in the light of the decision given and the
observations made by us regarding the interpretation of s. 178 of the Act. In
the special circumstances of the case there will be no order as to costs.
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