Hindustan Coca-Cola
Beverage Pvt. Ltd. Vs. Sangli Miraj & Kupwad Municipal Corporation &
Ors.
JUDGMENT
Dr. MUKUNDAKAM
SHARMA, J.
1.
Delay
condoned.
2.
Leave
granted.
3.
As
both the appeals involve identical question of law the same were heard together
and are disposed of by this common judgment. Both the present Civil Appeals are
filed against the judgment dated 08.10.2010 in the Writ Petition No. 5510 of 2010
and against the judgment dated 08.10.2010 in the Writ Petition No. 5867 of 2010,
passed by the Division Bench of the High Court of Judicature at Bombay whereby
the Division Bench has dismissed the writ petitions filed by the appellants herein
challenging the validity of the bill issued by the Respondent Corporation, levying
and demanding octroi from the appellants on glass bottles and crates.
4.
In
the Civil Appeal filed against the judgment dated 08.10.2010 in the Writ Petition
No. 5510 of 2010 the appellant company is, inter alia, engaged in the
manufacture of aerated beverages marketed under different brands. The products of
the company are distributed from its plant located at Pirangut Taluka, Mulshi,
District Pune to amongst other places like Sangli Miraj and Kupwad.
5.
According
to the appellant, their products are distributed and sold in returnable and reusable
glass bottles. Glass bottles are stored in plastic crates. Glass bottles and crates
are owned by the appellant. They are never sold to any distributor or retailer.
Once the product in the glass bottles kept in crates is consumed, glass bottles
along with crates are Page 2 of 20 returned to the appellant for filling after cleaning
and washing them. The appellant pays octroi levied on the aerated beverages when
they enter octroi limits of Municipal Corporations. The impugned bill has the effect
of levying octroi separately on the glass bottles and plastic crates utilized by
the appellant to pack and transport the aerated beverages manufactured by them.
The aerated beverages cannot be separated from bottles and crates. The bottles
and crates are neither consumed nor sold but are returned. The glass bottles
and plastic crates are both reusable and durable and are repeatedly used by the
appellant. Moreover, it is alleged that the cost of the glass bottles and crates
is amortized and included in the retail sale price of the aerated beverages. Hence,
it was suggested that Octroi cannot be levied on the value of the glass bottles
and crates and the impugned bills are, therefore, illegal and arbitrary.
6.
The
said challenge did not find favour with the High Court and the High Court after
placing reliance on the judgment of this Court in the case of Acqueous Victuals
Private Limited v. State of Uttar Pradesh & Ors. reported at dismissed the
Writ Petition. However, liberty was granted to the appellant company to claim refund
by filling appropriate application, in case, the bottles and crates are not sold,
used, or consumed in the Municipal limits of the respondent-corporation, that
is to say, if they have not finally rested in the Municipal limits of the
respondent-corporation; and a further direction was issued that if such an
application is filed, the same will be considered in its proper perspective by the
concerned authority and if a case is made out the refund shall be granted.
7.
We
heard the learned senior counsel appearing for the parties at length. Similar
submissions, as were made before the High Court, were also made before this
Court. It was submitted by the learned senior counsel appearing for the appellant
that plastic crates and glass bottles are durable and reusable. They are used a
number of times by the appellant. The bottles and crates are not sold. They are
not consumed. The bottles are used but again sent out and refilled. The crates
are also similarly sent back.
8.
It
was further submitted that as per the definition of the term octroi as found in
Section 2(42) of the Bombay Provisional Municipal Corporation Act, 1949 (for short
"BPMC Act"), "octroi" means a cess on the entry of goods
into the limits of a city for consumption, use or sale therein and as in the present
case there is no consumption, use or sale, the levy of octroi is unjustified.
9.
Strong
emphasis was placed on the submission that, the cost of the bottles and crates is
amortized and included in the retail sale price of the aerated beverage. Since the
cost of glass bottles and crates is already included in the price of the beverage
on which the octroi is levied and collected, no further octroi can be levied on
the glass bottles and crates.
10.
All
the above said submissions and contentions were refuted by the learned senior
counsel appearing for the respondents. It was submitted that the issue in the present
case stands settled by this Court, long back, in the case of Acqueous Victuals (supra)
and the High Court has rightly dismissed the Writ Petition by following the
ratio laid down in the said judgment of this Court. Further, it was submitted that
the appellant cannot be aggrieved by the said levy of the octroi on glass
bottles and crates, as in case the appellant can satisfy the authorities that
they were not used, consumed or sold in the Municipal limits but were taken out
for recycling, in the said case they can claim refund and as such are not burdened
with the liability of octroi on such bottles and crates.
11.
Before
we proceed further it would be relevant to refer to the judgment of this Court in
the case of Acqueous Victuals (supra). In Acqueous Victuals (supra), the petitioner-
Company was engaged in the business of bottling soft drinks. After bottling these
beverages at its plants at Bareilly, the petitioner-Company distributed the same
to wholesalers in Districts of Uttar Pradesh. Section 128 of the Uttar Pradesh Municipalities
Act, 1916 conferred powers on the Municipal Boards to impose octroi on goods or
animals brought within the Municipality for consumption, use or sale therein. Byelaws
of the Municipalities provide for levying octroi on soft drinks. As the Municipalities
were seeking to levy Octroi on the basis of gross weight not only of the
beverages but also of the bottles containing the beverages which were brought within
the Municipal limits, the petitioner-Company filed writ petition in the Allahabad
High Court challenging the said levy. According to the petitioner-Company, the bye-laws
provided for levying octroi on soft drinks but not on the weight of bottles
which contained those soft drinks. The High Court dismissed the petition. The High
Court held that the bottles in which the soft drinks were carried could be said
to have been used within the Municipal limits for the purpose of storing them till
they were ultimately utilized by the consumers concerned. Therefore, even the weight
of bottles containing these liquids could legitimately be taken into consideration
by the Municipalities for imposing the octroi duty thereon.
12.
Dealing
with the petition challenging the High Court's decision, this Court referred to
Section 128 (1) (viii) of the Uttar Pradesh Municipalities Act, 1916 which states
that subject to any general rules or special orders of the State Government in this
behalf, the taxes which a Board may impose can consist of Octroi on goods or animals
brought within the Municipality for consumption, use or sale therein. The rates
of levy were given in Schedule I. Schedule I referred to aerated water but not
to aerated water bottles.
This Court considered
the main charging provision i.e. Section 128(1)(viii) which stated that Octroi
can be charged on goods which were brought within the Municipality for
consumption, use or sale and held that packing which contains the consignment
of octroiable beverages would remain liable to be included in the taxable gross
weight of consignment provided such packing is shown to be brought within the Municipal
limits for the purpose of its sale, consumption, or use within the Municipal
limits. But, if the packing is found to have been taken out of the Municipal limits
after its contents were discharged within the Municipal limits, then the weight
of such packing cannot be brought to octroi tax or if such tax is levied at the
entry point, it would become liable to be refunded.
This Court further observed
that the claim of refund would involve disputed questions such as whether such
consignments with the packing were actually sold with their contents to the local
consumers, or wholesalers, whether they were consumed or used up within the local
limits or whether they were used for an indefinite period and ultimately rested
within the Municipal limits and had not been taken out. These disputed questions
of fact are required to be examined and adjudicated upon when claims for refund
are considered by the appropriate authorities.
13.
While
arriving at the above conclusion, this Court referred to the Constitution Bench
judgment in Burmah Shell Oil Storage & Distributing Company of India Limited
v. Belgaum Borough Municipality reported at AIR 1963 SC 906 where it was dealing
with the question whether octroi was leviable on the goods brought within the limits
of Belgaum for consumption by Burmah Shell, for re-export and for sale. While
interpreting the words found in Entry No.52 of the State list in the Constitution
dealing with taxes on the entry of goods into a local area for consumption, use
or sale therein, this Court observed that the two expressions, "use" and
"consumption" together connote the bringing in of goods and animals with
a view to their retention either for use without using them up or for
consumption in a manner which destroys, wastes or uses them up. This Court observed
that this authoritative pronouncement of the Court makes it clear that before a
Municipality can impose octroi duty on any commodity, it has to be shown that
the commodity concerned was brought within the Municipal limits for consumption,
that is, for being totally used up so that it ceases to exist within the Municipal
limits or it was to be used for an indefinite period within the Municipal limits
so that it ultimately rests within the Municipal limits and does not go out subsequently,
or the commodity concerned must be shown to have been brought within the Municipal
limits for the purpose of sale within the said limits.
14.
This
Court also referred to its judgment in S.M. Ram Lal & Co. v. Secretary to Government
of Punjab reported at 1969 UJ 373 (SC), where this Court was dealing with the question,
whether the wool imported within the Municipal limits of Faridabad in raw form for
dyeing within the Municipal limits could be said to have been used in the Municipal
limits or consumed therein so as to attract Octroi duty thereon. This Court
observed that the word 'use' occurs in Entry No.52 of List II of Seventh Schedule
sandwiched between 'consumption' and 'sale', and it must take colour from the context
in which it occurs. This Court further observed that the coupling of three words
'consumption', 'use' and 'sale' connotes that the underlying common idea was
that either the title of the owner is transferred to another or the thing or
commodity ceases to exist in its original form.
15.
However,
this Court did not approve of the High Court's reasoning that the bottles and
shells were used as containers till final consumption of contents and, therefore,
the bottles which contained the beverage were used till the final consumption
stage and were, therefore, liable to levy of Octroi leaving aside the question
whether they were brought within the Municipal limits for consumption thereof. Referring
to Burmah Shell's case, this Court held that though the use of the bottles may not
amount to its destruction or total using up, but to attract octroi, the bottles
must have finally rested within the Municipal limits and not taken out. This Court
concluded that to attract the levy of octroi on the goods brought within the Municipal
limits, there must be proof of the fact that the goods got consumed completely within
the Municipal limits or were used for an indefinite period in such a way that
they come to rest finally and permanently within the Municipal limits or sold
within the said limits.
16.
With
reference to the facts of the case before it, this Court observed that the moot
question was whether the bottles which were filled in with beverages imported for
sale within the Municipal limits could be said to have been consumed or used within
the Municipal limits. The question whether the bottles were really sold by the
petitioner-Company within the Municipal limits requires resolution on consideration
of relevant facts. If empty bottles are taken out of Municipal limits, they cannot
be said to have been consumed or destroyed within the Municipal limits. The question
which needs investigation is whether out of the total consignment of bottled beverages
imported within the Municipal limits, the entire consignments of the very bottles
after getting emptied got re-exported or whether some of the said bottles forming
part of the original consignments got destroyed by way of breakage, etc. or were
never returned by the consumers concerned and only rest of the imported bottles
were re-exported by enabling the consumers and retailers or wholesalers to get refund
of the price of the bottles paid by way of advance security from the petitioner-Company
on return of these empty bottles for recycling. It is axiomatic that if the bottles
in which beverages were brought within the Municipal limits for sale to consumers
had themselves got destroyed by breakage, etc. or were not returned by
consumers, they could be said to be consumed within the Municipal limits and, hence,
there would be no occasion for their export at any time thereafter. In the said
circumstance the intention with respect to the fact that whether or not, the said
goods were brought for consumption and usage will become clear only at the subsequent
stage i.e. when the bottles are re-exported. In the view that it had taken, this
Court held that if the petitioner-Company satisfied the authorities concerned
that the bottles containing the original consignments after getting emptied within
the Municipal limits were actually taken out of the Municipal limits for recycling,
then it would be entitled to claim proportionate refund of the octroi duty assessed
on the weight of such empty bottles only subject to the burden of such amount of
duty not being shown to have been passed on to consumers of beverages or to anyone
else, i.e. there is no unjust enrichment.
17.
Setting
aside the High Court's order to the above extent, this Court permitted the
petitioner-Company to lodge its claim for refund by producing evidence on the
following points:
a. "Nature of the consignments
concerned with their dates and the number of bottles packed with beverages brought
within the municipal limits with their weight;
b. Proof regarding the
fact that these bottles were not sold within the municipal limits to wholesalers,
retailers or to any other person;
c. Number of bottles covered
by the consignments concerned which were subsequently taken out as empty bottles
beyond the municipal limits for recycling and weight of such empty bottles;
d. Whether the bottles which
are actually found to have been taken out of the municipal limits were the very
same bottles containing beverages brought within the municipal limits by way of
relevant consignments;
e. Whether the value of such
bottles and amount of octroi duty on their weight was passed on to the
consumers or not?"
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18.
In
our considered opinion the present case is squarely covered by the above said
decision of this Court in the case of Acqueous Victuals (supra), and the said decision
was passed on the similar facts as of the present case, the only difference being
that in the case of Acqueous Victuals (supra) octroi was computed and levied on
the basis of the weight of the bottles and crates, whereas in the present case,
the impugned bill seeks to levy octroi on the basis of value of the bottles and
value of the crates. It was suggested by the learned senior counsel appearing
for the appellant that due to the said difference the judgment in the case of Acqueous
Victuals (supra) will not be applicable to the present case. In our opinion the
said difference of the mode of computation of the octroi will not affect the applicability
of the ratio of the said decision to the present case and the same applies to
the present case on all fours.
19.
It
was also suggested by the learned senior counsel appearing for the appellant that
the decision in the case of Acqueous Victuals (supra) cannot be said to be the
correct law as the said decision did not correctly appreciate the law laid down
by the Constitution Bench of this Court in the case of Burmah Shell Oil (supra).
In order to appreciate the said submission it would be appropriate to extract the
relevant portion of the judgment in the case of Acqueous Victuals (supra)
wherein this Court has elaborately considered the law laid down by the
Constitution Bench in the case of Burmah Shell Oil (supra):-
"15. In view of
the aforesaid decision, it becomes obvious that the word "retention" is
held to be a synonym with the word "repose", meaning thereby the article
concerned must finally rest within the municipal limits. In the light of the aforesaid
judgment of the Constitution Bench of this Court, therefore, it is obvious that
before a municipality can impose octroi duty on any commodity, it has to be shown
that the commodity concerned was brought within the municipal limits for consumption,
that is, for being totally used up so that it ceases to exist within the
municipal limits themselves or it was to be used for an indefinite period within
the municipal limits so that it ultimately rests within the municipal limits and
does not go out subsequently, or the commodity concerned must be shown to have
been brought within the municipal limits for the purpose of sale within the said
limits.
Having thus laid down
the aforesaid legal position concerning the imposition of octroi in the penultimate
paragraph of the Report at p. 234, the Court observed that the Burmah Shell was
liable to pay octroi tax on goods brought into local area (a) to be consumed by
itself or sold by it to consumers direct and (b) for sale to dealers who in their
turn sold the goods to consumers within the municipal area irrespective of
whether such consumers bought them for use in the area or outside it. The Company
was, however, not liable to octroi in respect of goods which it brought into
the local area and which were re-exported. But to enable the Company to save itself
from tax in that case it had to follow the procedure laid down by rules for
refund of taxes.
The aforesaid authoritative
pronouncement of the Constitution Bench of this Court, therefore, sets at rest the
controversy in the present case. If it is the case of the writ petitioner that during
the relevant period from 1980 to 1987 it brought within the municipal limits of
the four respondent-Municipalities beverages packed in bottles and the bottles were
not sold within the municipal limits and after the beverages were taken out of
these bottles, these very bottles were returned to the petitioner and were taken
back to Bareilly, then for claiming the refund of the octroi paid on the weight
of these bottles during the relevant period when the consignments entered the municipal
limits from time to time, the writ petitioner had to follow the procedure laid down
by the Municipality concerned under its rules for refund of taxes and had to comply
with the statutory gamut of these rules. It had also to show that the burden of
disputed octroi duty was borne by it and was not passed on to consumers of beverages
contained in these bottles. In other words, it would not be guilty of unjust enrichment
if refund was granted. If the refund claim on furnishing the relevant proofs was
not ultimately granted, the remedy of appeal provided under the rules had to be
followed."
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20.
On
a minute and detailed perusal of the judgment of the Constitution Bench in the
case of Burmah Shell Oil (supra), and the above noted inference drawn in the
case of Acqueous Victuals (supra), we do not agree with the said submission of the
appellant. We respectfully agree with the above noted inference drawn and are of
the considered opinion that this Court in Acqueous Victuals (supra) has correctly
appreciated the law laid down by the Constitution Bench in Burmah Shell Oil
(supra).
21.
Though
it was vehemently argued that the cost of the bottles and crates is amortized
and included in the retail sale price of the aerated beverage but no facts were
placed before the High Court in that regard. Moreover, even in case the same were
placed, the same being disputed question of fact could not have been gone into by
the High Court exercising the jurisdiction under Article 226 of the
Constitution of India.
22.
In
the present case, the definition of "octroi" is contained in Section 2(42)
of the BPMC Act. Relevant entry in respect of aerated water in the octroi
schedule under the said Rules is at serial no.11 (D). Relevant entry as regards
bottles is at serial no.52. Relevant entry as regards barrel crate and individual
crate, is at serial No.53E. The said Rules contain detailed provisions under which
an importer can make an application for refund.
23.
Accordingly,
in our opinion, as also laid down by this Court in Acqueous Victuals (supra), in
case the appellant- company is sending out the same bottles for recycling and
if the bottles and crates are not sold, used, or consumed in the Municipal
limits of the respondent-Corporation, that is to say, if they have not finally rested
in the Municipal limits of the respondent-Corporation in which they are imported,
the appellant-company can always make an application for refund under the said Rules.
The appellant-company will have to produce evidence on the points detailed in the
Acqueous Victuals (supra) which we have quoted hereinabove. As submitted by the
appellant, in case, the cost of the bottles and crates is amortized and included
in the retail sale price of the aerated beverage, the evidence can also be
placed in that regard, in order to claim refund on any such amount. Besides, it
was also pointed out that bottles in which beverages are brought are recycled and
used bottles and therefore levy of octroi cannot be at the same rate as that of
the new bottles. These are also disputes on the facts, which would require production
of evidence. On the appellant- company making an application for refund, the concerned
authority will consider it in its proper perspective and if a case is made out
shall grant refund.
24.
Needless
to say, in case, the appellant is aggrieved by the valuation of the bottles and
crates on the basis of which the impugned bill is issued they are at the liberty
to file objections before the appropriate authority, and the appropriate
authority will adjudicate the same in accordance with the law, as against which
if still aggrieved, further remedy as available could be resorted to.
25.
At
this stage it is pertinent to mention that during the hearing, the appellant has
expressed its concern about the mechanism by which the said levy could be computed
and collected as according to them the present procedure is very cumbersome and
unworkable at both the ends, and moreover, the same would result into incurring
of huge managerial time and administrative cost. After the present judgment was
reserved for pronouncement, the appellant has also given proposals to the
respondent corporation for devising a suitable and convenient mechanism. The said
request on the part of the appellant requires consideration. Accordingly, the responded
corporation shall consider the said proposal in accordance with law and even
otherwise on their part devise a suitable, convenient and workable mechanism for
levy and collection of octroi.
26.
With
the above said directions both the appeals are dismissed with no order as to
costs.
.............................................J
[Dr. Mukundakam Sharma]
.............................................J
[Anil R. Dave]
New
Delhi,
July
4, 2011.
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