THE ENTRY TAX OFFICER, BANGALORE ETC. ETC. v. MIS CHANDANMAL CHAMPALAL AND CO.

H The Judgment of the Court was delivered by

E.T.O. v. CHANDANMAL CO .• [JEEVAN REDDY.].] 547

8.P. JEEVAN REDDY, J. Leave granted in the S.L.P. A

2Copy pinpoint2. Entry 52 in List-II of the Seventh Schedule to the Constitution, says Sri Narsimha Murthy, should not be confined to an impost , formerly known as 'octroi'. He submits that since it is a legislative entry, it must be liberally construed and full effect must be given to the words used therein. He says that when Entry 52 speaks of a taic on the entry of goods into a B

. 1 local area for consumption, use or sale therein, the words sale therein' , must be given their due and natural meaning and should not be restricted to a sale for the purpose of consumption or use of the goods sold within the limits of the concerned local area. The submission is urged with reference to the scope and ambit of the Karnataka Tax on Entry of Goods c into local areas for consumption, use or sale therein Act, 1979.

3Copy pinpoint3. The High Court of Karnataka has held following decisions of this Court in Burma Shell Oil Storage & Distributing Co. India Ltd. v. The Belgaum Borough Municipality, (1963] 2 S.C.R. 216, Hirata/ Thakorlal Dalal D v. Broach Municipality & Ors;, AIR (1963) S.C. 1446 and Municipal Council v. Parekh Automobiles Ltd., (1990] 1 S.C.C. 367 that the levy created by

- Section 3 of the Karnataka Act on the sales effected within a local area is confined only to those sales of goods which are meant for consumption or use within such local area. In other words, it held that where the goods sold are not intended for use of consumption within the local area but are meant to be and are taken out of the area for use or consumption elsewhere, no levy is permissible under the said Act. It is this view Sri Murthy disputes. He submits that Burma Shell, Hirata/ Thakorla/ and Parekh Automobiles dealt with case where the levy was by the municipality/local authority, no doubt under an enactment of the State F Legislature. In those cases, he says, there may be justification for taking a restrictive view and for construing the levy imposed by the municipality as one in the nature of octroi but where the levy is created by the State Legislature and the assessment and collection ·is also by the State Govern- ment, there is no reason to re:-;trict the word 'sale' occurring in Section 3 of the Karnataka Act to sale of goods intended for use or consumption G within the given local area. It is true, says the counsel, that the levy is at the stage of entry of goods into a local area but the levy is not by the local authority. The Karnataka Act, he says, bears no resemblance or similarity to a levy in the nature of octroi imposed by the local authorities and, therefore, it should not be subjected to the limitations applicable to a levy H

p. 548 Copy page pinpoint

A by the local authorities.

4Copy pinpoint4. On the other hand, it is contended by Sri Harish Salve, learned counsel for the respondents that all the submissions now raised by Sri Murthy are concluded against him by the several decisions of this Court. He points out that Hiralal Thakor/al first came up before a three-Judge B Bench comprising K.K. Mathew, Krishna Iyer and A.C. Gupta, JJ. and the matter was referred to a Constitution Bench precisely to resolve and decide the true meaning and scope of the words 'sale therein' occurring in Entry '>2. Para 3 of the order of reference reads thus: .' "3. The short point is whether a person who brings goods into a c taxable territory and sells it there for being taken outside the territory for consumption or use is liable to pay octroi. We have been taken, by council on both sides, through the judgment of this Court and while we are inclined to the view that the thrust of the judgment is in favour of limiting taxability to such sales within the D territory as are intended to be consumed or used in part or in whole within the territory there are observations which strike a

E different note. A plain reading of the words used impose no qualification of the expression "sale therein" but the judicial con- struction based on the history of octroi has also been an input in the interpretative exercise in Bunna Shell. Be that as it may, we - feel that there are blurred areas of sale within the territory which may attract a tax under Entry 52 left uncertain by the decision of this Court. We, therefore, regard this case as requiring further clarification particularly because the point is of some substance and affects muncipal finances and the business community in the F whole country."

5Copy pinpoint5. It is in pursuance of the said reference that the matter came up before the Constitution Bench which re-affirmed the law laid down in Burma Shell. The very same question has again been raised in Parekh G Automobiles, but once again the three-Judge Bench affirmed the principle of Bunna Shall and Hirala/ Thakor/a/. Sri Salve submits that at this distance 'r of time the matter should not be allowed to be re-agitated.

6Copy pinpoint6. While we cannot deny the force and substance in the submissions urged by Sri Narasimha Murthy. We do not find it possible to give effect H to it in the light of the decisions referred to by Sri Salve. It is true that

E.T.O. v. CHANDANMAL CO .. [JEEVAN REDDY. J.] 549

Bunna Shell, Hiralal 7hakorlal and Parekh Auton1obiles were concerned A. with State enactments which empowered the Municipalities to levy the impost, all the sale a close reading of the said decisions does indicate that they have read the words 'sale therein' occurring in Entry 52 of List-II as meaning 'a sale of goods within a local area for consumption or use therein' - though as a matter of fact, in a given case, the goods may be taken out and consumed there. The decisions clearly say that where the goods are sold within a local area for the purpose of being taken out of that local area and are actually taken out, no levy is permissible under entry 52. It is not possible to distinguish the said decisions on the grounds suggested by Sri Murhty. There is yet another reason. Octroi or any impost in the nature of that impost has always been looked upon with certain amount of disfavour. Acceptance of the State's contention in this case would ultimate- ly result in driving up the price of these goods to the consumer. It would become another sales tax in effect. In the circumstances, we are inclined to - indeed we have no option but to - affirm the decision of the Karnataka High Court on the meaning of the words 'sale therein' in Section 3 of the D Karnataka Act. At the same time, we find it not possible to agree with the Karnataka High Court insofar as it directed refund of the amount, which may be found to have been paid in excess of the legal liability, to the respondents. Any such direction would amount to unjust enrichment of the respondents who are merely dealers and have passed on the burden to the purchasers/consllmers. The dealers themselves have not suffered any loss. E They merely passed on the liability. In such cases, this Court has been refusing to refund the tax See State of Madhya Pradesh v. Vyankat Lal, A.I.R. (1985) S.C. 901 and Amamath Om Prakash v. State of Punjab, AlR (1985) s:c. 218. F + 7. An ·identical question was considered by a Division Bench of this • Court compromising J.S. Verma and AS. Anand, JJ. in Indian Oil Cor- poration v. Municipal Cotporation, Jullandhar, [1993] 1 S.C.C. 3J3 with respect to entry tax itself. After holding that the levy of duty was not justified in law, the Bench dealt with the question of refund in para 23 in the following words : G

"23. Before parting with the appeal, we would however, like to take

- note of the submission made on behalf of the Municipal Corpora- tion with regard to the question of refund of the octroi duty, already deposited by the appellant. The question of refund, in our H

550 SUPREME COURT REPORTS 1199413 S.C.R.

A opinion, does not arise. The JOC has collected the octroi duty from its dealers and agents, who have in turn passed on the burden to the consumer. Thus, having collected the octroi duty, there is no equity in favour of the IOC to claim a refund of the same. Learned counsel for the appellant also conceded that the question of refund, in the facts and circumstances of the case, does not arise and we, therefore, hold that the appellant shall not be entitled to any refund of the octroi duty already derosited by the appellant with the Municipal Corporation."

8Copy pinpoint8. We are in respectful agreement with the above principle. In this case also, it is not brought to our notice that the respondents have alleged and/or established that they have not passed on the duly to the pur- chasers/consumers. The normal presumption is that they have done so. If they say otherwise, it is for them to allege and establish the same. In the absence of any such allegation and proof, the direction of refund is not called for. D The ·appeals are accordingly allowed to the extent indicated above. The directions of the High Court "to re-do the orders in accordance with the law and in the light of this order" and the further direction to the authorities "to refund the amount to which each of the petitioners is entitled within three months" as well as the directions to the said effect in E the several orders under appeal are set aside. There shall be no order as to costs.

A.G. Appeal allowed.