Engineering and Locomotive Company Ltd. & Anr Vs. Municipal Corporation of the
City of Thane & Ors  INSC 306 (22 November 1991)
V. (J) Ii Ramaswami, V. (J) Ii Ahmadi, A.M. (J) Ramaswamy, K.
1992 AIR 645 1991 SCR Supl. (2) 445 1993 SCC Supl. (1) 361 JT 1991 (6) 322 1991
Municipalities (Octroi) Rule, 1968:
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.
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.
of unjust enrichment--No evidence to suggest that octroi levied was recovered
from customers-Refund of octroi would not lead unjust enrichment.
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)
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
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 limits in smaller packings depending on the
requirements of the customers in various parts of the country.
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.
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
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
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
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;
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.
the appeal, this Court,
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.
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]
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,
 Suppl. SCR 82; Municipal Council of Jodhpur v. Parekh Automobiles Ltd.
& Ors.,  1 S.C.C. 367 and H.M.M. Ltd. v. Administrator,  4
S.C.C. 640, relied on.
Traders Akola v. The Akola Municipal Council, AIR 1985 Born.
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.
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]
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]
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.
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]
rules merely regulate the system on which refund shall 449 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]
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]
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
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.,  1 S.C.R. 166; Kirpal Singh Duggal v.
Municipal Board, Ghaziabad, [1968I 3 S.C.R. 551, applied.
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]
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]
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.
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]
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]
APPELLATE JURISDICTION: Civil Appeal No. 4702 of 1991.
the Judgment and Order dated 26.8.88 of the Bombay High Court in W.P. No. 2264
F.H. Talyarkha, R.F. Nariman, R. Narain, Ashok Sagar and Ms Amrita Mitra for
B.N. Singhvi and Anil K. Gupta for the Re- spondents.
Judgment of the Court was delivered by 451 V. RAMASWAMI, J. Leave granted.
First appellant--Tara Engineering and Locomotive Company Limited (hereinafter
called the 'Company') is a.
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.
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.
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 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.
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:
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.
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,  Suppl. 2 SCR 216 and
Hiralal Thakorlal Dalai v. Brash Broch Municipality,  Suppl. SCR 82 he did
not press the point. We have therefore, permitted the point to be argued in
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.
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- 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.
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.
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:
"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.
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.
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:
Taxes on the entry of goods into a local area for consumption, use or sale
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 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:
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".
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
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.
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 before this Court and the decision of this Court is reported in Hiralal Thakorlal
Dalai v. Brash Broach Municipality,  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.,  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
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".
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 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
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
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.
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.
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.
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.
case of impost of octroi the taxable event is the entry of goods which are
meant to reach an ultimate user or consumer in the area. Mere physical entry
into the octroi limits would not attract levy of octroi. When the goods are
brought in not for consumption within the area but for temporary detention and
eventual export, octroi is not leviable. But in order to ensure, in such
circumstances, that the goods are exported and to prevent evasion of octroi on
goods consumed inside the octroi limit, Rules provide for deposit of a certain
sum of money or the actual octroi duty payable subject to a right to get a
refund of the same when the goods are 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.
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,
imported for Consumption, use or sale in the municipal area,
imported not for consumption, use or sale within the munici- pality but for
intended to be temporarily detained within the municipality in the bonded
warehouse maintained by the Corporation and eventual export;
intended for temporary detention in the private licensed bonded wharehouse of
the importer and eventual export; and
imported by any person, mercantile firm or body which has been permitted by the
municipal Corporation to keep an current account.
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.
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 permission cum-export pass is issued. When the goods are taken out of
the municipal limits the Officer In charge 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
verification of the particulars furnished in that form 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.
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:
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;
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;
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 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.
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
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.
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;
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.
separate intimation-cum-application shall be given by each importer or his own
goods. One such intimation-cumapplication shall be sufficient for a single
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.
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;
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;
(c) the goods produced for inspection and intended to be exported are, subject
to the provisions of sub-rule (2) of the last preced- ing rule, identical with
what they were at the time of import.
exporter and the importer of these goods are one and the same person and such
articles have not undergone change of ownership.
- 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.
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;
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.
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.
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;
seals or marks, if any, are inact; and (c) the goods actually tally with those
men- tioned in the pass.
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.
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.
The refund shall be admissible, if all the conditions below are satisfied.- (a)
The refund is applied for within one month from the date of e x port.
The goods are exported out of the octroi limits within a period of six months
of their import.
The application for refund is supported by a duly certified written
permission-cum- refund export pass.
All the conditions in sub-rule (3) of rule 25 are fulfilled.
The amount claimed as refund is with- drawn within three months from the date
of intimation to the importer to receive the amount.
The goods exported were declared to be intended for temporary detention with
the importer and eventual export at the time of import:
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
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.
(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.
shall be a separate application for each written permission-cure-refund export
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
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".
(Rules 14, 24 and 25) Declaration in respect of the dutiable goods imported
into the Municipal octroi limits, which are intended for temporary detention
with the importer and eventual export.
Octroi Officer, Octroi Naka No. ..............
full name and address of the importer) hereby declare that the below mentioned
goods are meant for temporary detention with me at ........
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 ........
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.
.......... 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
amount of Rs. ........on account of deposit has been recovered under receipt
No. .......... dated ...........
(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.
The Cetroi Officer, Octroi Naka No. .........
(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
be filled in by the importer To be filled in at the Central Octroi Office
Bill of Entry 'Railway Receipt' Goods Transport Memo/ Air Consignment Note.
Number description of packages.
Value plus incidental charges which are to be given seperately.
Amount of Octroi recoverable.
of the importer Dues entered in I have checked the above particulars Account
Current with the invoice and verified the goods, Date ..........
are found to be correct. True Octroi copy of the invoice appended is
Superintendent verified and found to be correct.
weight or quantity or value, together with the incidental charges declared, is
correct. Issued pass No ...dated ...
............... 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. .....
of pass Pass for goods imported by in account current ....
of Person, firm or body) Description No. and Description Weight, Description of
the quantity of packages goods or value 1 2 3 Dated .......... Dated ..........
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.
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.
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 correct.
Officer. Signature of the Refund Inspector/Clerk.
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
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. .........
seals, if any, thereon were intact when the goods were presented to me for
........... Signature of the Exist Naka Officer Naka No. ...........
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.
(Rule 29) Application for Refund of Deposit To The Superintendent of Octroi,
.......... Municipal Council.
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.
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).
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 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.
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.
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.
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
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 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.
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.
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:
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".
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).
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.
H.M.M. Limited v. Administrator,  4 SCC 640 this Court had occasion to consider
the effect of non-com- pliance with this require- 472 ment of a similar
provision, on the right to get refund.
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.
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:
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".
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.
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.
this connection we may also refer to another decision reported in Municipal
Committee, Khurari v. Dhannalal Sethi & Ors.,  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 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:
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
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.
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,  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 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.
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".
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
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.
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 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.
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.
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 of this the question of unjust enrichment does not arise.
This appeal is accordingly allowed on the above terms.
will 'however be no order as to costs.