MUNICIPAL COUNCIL, JODHPUR v. PAREKH AUTOMOBILES LTD. AND ORS.

But it may be noted, as mentioned hereinbefore, that an affidavit was filed by one Shri R.C. Parekh. It was stated that current account facility as mentioned ins. 133 of the Act was provided to the respondent No. 2, but the said facility was never discontinued even after 25th July, 1975 and is still being provided till the date of the hearing of the matter before this Court. The current account facility under section 133 of the Act is not to recover octroi tax on goods at the time of entry but to keep current account and recover it periodically. Reference was made to paragraph 6 of the writ petition and in reply, the Municipal Council admitted para No. 6 of the writ petition and stated that the facilities are still provided and has not been stopped. Therefore, it is clear, according to the deponent, and according to the respondent, that according to the Municipal Council, Jodhpur itself current facilities as provided under s. 133 of the Act were never withdrawn c and therefore, any submissions made by the Municipal Council to the contrary are totally unfounded. It could not have been withdrawn unila- terally without notice to the Indian Oil Corporation. According to the deponent, the petitioner ne.ver stated that the current account facility pro- vided to the Indian Oil Corporation had been withdrawn by the Municipal Council. It only stated in paragraph 9 of the writ petition that suddenly on D 25th July, 1975, the Municipal Council, Jodhpur mspended the export facilities provided to the respondent No. 2 and informed the respondent No. 2 that henceforth octroi tax would be charged from the respondent even on those goods which were exported outside the Municipal limits and which were not used or consumed within the municipal limits. The export facility, i.e., facility on the issue of transport passes under rule 13 of the said Rules E was only with the object to ascertain that quantity of petroleum products that have been exported out of Jodhpur Municipal limits and it did not amount to withdrawal of current account facilities. The object of current account facilities is not to realise octroi tax on each consignment of goods at the time of its entry in Municipal limits of Jodhpur, but to keep current account and realise octroi tax after specified time periodically. It is the case of the respondent No. l that the current account facility was never discon- F tinued and it is still continuing. In fact it is the duty of the Municipal Council to provide passes under rule 13 to person who have been provided current account facility. In reply to para 9 of the writ petition, it was stated by the Municipal Council that it never suspended the export facilities of Indian Oil Corporation. It was further stated that it was decided between the officers of the Indian Oil Corporation and Administrator that export facility shall remain in force only for goods exported to such distribution centres in respect of goods of which no sale is done atJodhpur. Therefore, the affidavit stated that there was no suspension. Reference was made to the order of the High Court dated 9th February, 1976 and other orders. Shri Soli Sorabjee referred to the scheme of the Act and submitted that the two decisions of this Court referred to by the High Court were not applicable. Neither of these cases, it was submitted, was concerned with the

MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES [MUKHARJI, J.l 73

situation where the goods were sold within the octroi limits and thereafter exported for consumption outside the said limits. In the Burmah Shell's case (supra), there was no sales by the company to its dealers. The company solci goods through its dealers to the customers both" within and outside the local area. He submitted that the observations of this Court to the effect that octroi is chargeable on goods brought into the area for sale to cosumers must be understood in that context. It was submitted that there was nothing in the said judgments of this Court to the effect that if goods are brought into a local area for sale to a dealer who then transports the goods outside the local area for sale to consumers, no octroi would be chargeable. It was submitted that as the goods were brought into the local area for sale within that area, octroi would be chargeable. It is significant to note, it was submitted, that the Burmah Shell's case (supra) makes it clear that to attract liability to pay octroi duty it is not necessary that the goods should be consumed within the c octroi limits. We are, however, unable to accept these cnntentions. If the goods were brought within the municipal limits for the purpose of sale (sale means passing of the title to the purchaser), then different considerations might have applied. But in view of the facts of this case, the title passed to the goods outside the municipal limits even in respect of the petroleum products which were sold within the municipal limits. It was contended by Shri Sorabjee that rule 13 had no application. Shri Sorabjee drew our attention to certain paragraphs of the writ petition, in particular to paragraph 18(b) where it was stated that it is obligatory for the respondent No. I to grant respondent No. 2 transport passes and it had no jurisdiction to withdraw that facility. It was submitted with reference to that and other paragraphs that it was the case of the respondent No. I that facility was withdrawn and suspended and prayer was made for restoration of that facility. It was, therefore, submitted on behalf of the appellant that in the absence of facilities being granted under rule 13, it was incumbent on the parties to make a declaration under rule 9 of F the said Rules. As no such declarations had admittedly been made, rule 9(2) of the said Rules was attracted. Accordingly, the goods in the present case were to be treated as having been brought within the municipal limits for consumption, use or sale therein and as such liable for octroi duty, according to the appellant. Therefore, Shri Sorabjee submitted that this appeal should only be confined to the applicability of rule 9(2) of the said Rules. On the other hand, it was disputed by Shri Dalveer Bhandari and others that it is incorrect to say that the facility was suspended or withdrawn. Reading of the pleadings, according to Shri Bhandari, would make it clear that these were not suspended or withdrawn. Reference was made to paragraphs 6 and 7 of the reply to the writ petition at p. 116of the paper book to the effect that it was the case of the appellant that facilities provided to the Indian Oil Corporation were never stopped and this submission. has been

74 SUPREME COURT REPORTS [1989} Supp. 2 S.C.R.

repeated several times. It was further submitted that when current account facility has been provided, there is no question of payment of octroi at the time of entry of petroleum products. On the other hand, the octroi tax is paid at the time of settlement of periodical account, say after every month. Thus, question of complying with rule 6 or rule 9 of the said Rules does not arise as they apply when octroi tax is paid at the time of entry of goods. In fact, the account of petroleum products imported and exported is kept by delivery -of entry passes and transport passes by Indian Oil Corporation at Octroi outpose, which passes are given by Municipal Council. In fact, it is obli- gatory duty, according to counsel, of Municipal Council to provide entry passes and transport passes to Indian Oil Corporation which have been provided current account facilities. The delivery of entry passes and trans- port passes is only to facilitate settlement of octroi account on goods which have been retained in Municipal area for use and consumption. If munici- pality does not provide transport passes, it cannot take advantage of its own default, according to Shri Bhandari. It is obligatory duty of Municipality, it was urged, to provide transport and entry passs to Companies and persons who have been provided current accout facilities. In any way, even it transport passes are not given by the Municipal Council, the quantity exported can be ascertain by other means also. In the present case, there is no dispute regarding diesel exported to Dangiawas from Jodhpur Municipality. The Municipal Council has not refuted in its reply in para I1 at p. 117 of the paper book, the quantity of petroleum products exported to Dangiawas as mentioned in Schedule 'A' (p. 104 of paper book) from 25th July, 1975 to date of writ petition. The E Municipal Council gave an undertaking to refund the octroi tax charged from the petitioner on the diesel exported to Dangiawas outside the limits of Municipal Council, Jodhpur as will be clear from the order of the learned Single Judge dated 7th February, 1976. It was also stated that the Division Bench vide its order dated !st April, 1977 has already ordered that respon- dent No. 2 would deposit the octroil tax on diesel exported to Dangiawas. F Thus, the octroi tax which became due on diesel exported to Dangiawas. from !st April, 1977 upto date is being deposited in the Bank accunt and there is no dispute regarding quantity of diesel exported to Dangiawas. Thus, it appears to us that the controversy raised by Municipal Council referring to cancellation of transport passes is unfounded. The object of the transport passes was to ascertain the quantity of diesel exported to G Dangiawas. There appears to be no dispute regarding quantity of diesel exported to Dangiawas from 25th July, 1975. The Depot Superintendent of Indian Oil Corporation, Jodhpur had deposed that current account facilities to Indian Oil Corporation is being continued till today. It was stated that the octroi is paid periodically on settlement of account between Municipal Council and Indian Oil Corporation and not at the time of entry of H petroleum products. It appears that the contention that cancellation of transport passes is equivalent to cancellation of current account facilities,

MUNICIPALCOUNC!Lv. PAREKHAUTOMOBILESlRANGANATiiAN,J.] 75

made on behalf of the appellant, is incorrect. A perusal of s. 133 would show that current account facility is provided by substantive section, whereas rule A 13 of the said Rules is procedure provided with the object of providing facility of settlement account of payment of octroi tax. In other words, according to rule 13(4), octroi tai< is charged on quantity mentioned in entry passes minus the quantity mentioned in transport passes, i.e., on quantity of petroleum products used or consumed within the Municipal limits of Jodh- 8 pur Municipality. It is also unsustainable, according to Shri Bhandari to contend that M/s Parekh Automobiles has recovered octroi tax from con- sumers. It has been asserted in the writ petition on oath as well as before this Court on filing affidavit that no octroi was recovered by Mis Parekh Auto- mobiles from consumers. On the other hand, it is the case of Mis Parekh \ Automobiles that it had to pay octroi tax out of commission which"it received from Indian Oil Corporation on sale of diesel. This fact, accOiding to Shri c Bhandari was never refuted by the Municipal Council or the Indian Oil Corporation. Thus there is no question of unjust enrichment, and as such Mis Parekh Automobiles is entitled to octroi tax which was recovered from it and which is lying deposited in separate Bank Account by the Indian Oil Corporation as perorderof Division Bench dated 1st April, 1977 upto date. For period before 1st April, 1977, the Municipal Council has already given an undertaking to refund octroi tax. Pleadings in this case and the averments are rather confusing. On the consideration ofall the facts and the circumstances of the case, we are of the opinion that the principles of the aforesaid two decisions of this Court have been correctly applied by the High Court in the facts and the circumstances of the case. The octroi duty is, therefore, not chargeable on the transactions mentioned herein. We are further of the opinion that in view ofthe confused state of the pleadings and averments, it is not possible to hold that current account facilities were withdrawn or cancelled. If that is the position, then there is no question that the High Court was right in the order it passed and the direction it gave. F In view of the aforesaid, appeals must fail and are accordingly dismis- sed. In the facts and the circumstances of the case, howeyer, we make no orders as to costs. RANGANATHAN. J. I have i:one through the judgment pro- posed to be delivered in the abO\ e cases by my learned brother Sabyasachi Mukharji, J. I agree but I would like to add a few words on G one of the questions raised. The controversy before us-I shall refer only to the facts in CA. 1552/1981 for purposes of the discussion-relates to the claim of the Municipal Council, Jodhpur (appellant) to octroi on the petroleum products sent from the depot of the Indian Oil Corporation (IOC) at H Jodhpur, to retail outlets at Dangiawas where they are sold by Parekh

76 SUPREME COURT REPORTS [1989] Supp. 2 S.C.R.

Automobiles Co. (hereinafter referred to as 'the dealer') for sale at A Dangiawas. Dangiawas is admittedly situated outside the limits of Jodhpur Municipal Council. The case of IOC and the dealer is that the goods in question are not sold at Jodhpur. According to them, the actual sale took place only at Dangiawas and, since neither the sale nor the consumption nor the use of the petroleum products in question B took place within the limits of the municipality of Jodhpur, the appel- lant council was not entitled to levy any octroi thereon. Alternatively, it was contended that, even if the sale is held to have taken place at Jodhpur, still, octroi cannot be levied as the goods so sold were meant for use or consumption outside the municipal limits, in view of the decision of this Court in Burmah Shell Oil Storage & Distributing Co. India Ltd. v. The Belgaum Borough Municipality, [1963] Supp. (2) c SCR 216 as followed in Hirata/ Thakor/al Dalal v. Broach Municipality & Ors., [1976] Supp. SCR 82. The learned Single-Jtrl!ge in the High Court did not permit the petitioners to raise the question that the sale took place only outside the municipal limits of Jodhpur since that involved an investigation into facts which could not be undertaken in a D writ petition and proceeded on the footing that the sale of the products in question took place within the limits of Jodhpur. He, however, accepted the contention of IOC and the dealer that even if the sale is taken to have been effected within Jothpur, no octroi was leviable as admittedly the goods had been sold in Jodhpur only for their onward transmission for use and consumption in Dangiawas outside the E Municipal limits. The Division Bench of the High Court has also approved of this conclusion and, in our opinion, rightly. As pointed out by my learned brothr in his detailed discussion on this aspect, this issue is covered by the two decisions of the Supreme Court which have already been referred to. I have nothing to add, so far as this part of the case is concerned. F It was urged before the High Court, on behalf of the Municipal Council, that the levy of octroi could be justified on the terms of rule 9 of the Rajasthan Municipalities (Octroi) Rules, 1962, (hereinafter referred to as 'the rules'). It is unnecessary to set out again the terms of this rule which have already been extracted in the judgment of my learned brother. Under sub-rule (1) of this rule, every person bringing his goods within the municipal limits should make a declaration in terms thereof. In the present case, it is common ground that no such declaration had been made. It is, therefore, urged that by virtue of the closing words of rule 9(2), the goods in question should be treated "as having been brought within the Municipal limits for consumption, use or sale therein" and thus attract the charge of tax under clause 2 of sub-section (1) of section 104 of the Rajasthan Municipalities Act, 1959 (hereinafter referred to as 'the Act'). The respondents have

MUNICIPALCOUNC!Lv.PAREKHAUTOMOBILES[RANGANA'IHAN,J.) 77

attempted to couuter this argument by urging that this provision regarding declaration does not apply in their case. Their argument is that their case is covered by section 133 of the Act read with rule 13 of the rules. The argument is that rule 13 is a special provision applicable to a class of persons which has been allowed current account facilities under section 133 of the Act and that the procedure under rule 13 overrides the requirements of rule 9. This argument has been accepted by the High Court. The question is whether the High Court's conclu- sion on this issue is correct. I think that the High Court rightly accepted this argument and I should like to elaborate a little my reasons for this conclusion. Chapter II of rules provide for the manner of assessment and collectioa vfoctroi duty. Rules 3 to 5 provide for the establishment of octroi c outposts with powers to the inspecting staff to stop the vehicles at the outposts. Rule 6 lays down that no goods liable to payment of octroi shall, except as otherwise provided in these rules, be brought within the Muni- cipal limits until the octroi duty leviable in respect of such goods has been paid at the octroi outposts. Where goods arrive at an octroi outpost they may be coming in either for consumption, use or sale within the Muni- D cipal Limits or for transportation outside those limits, whether immedia- tely or after a period of time. If they have come in merely for the purpose of transportation, they are not liable to pay octroi duty. It, therefore, became necessary to make a detailed provision as to the manner of assessment and collection of duty having regard to this consideration. That is why rule 9 requires every person bringing goods within the municipal limits to make a declaration as to what the goods are intended for. If any of the goods are intended for consumption, use or sale within the Munici- pality, a declaration could be made orally to this effect; thereupon the octroi would be collected then and there in respect of those goods. If, however, the goods are intended for immediate or eventual transpor- tation outside the Municipality, a written declaration should be filed by the importer. In respect of goods declared intended for immediate transportation, the officr-in-charge of the octroi outpost receives by way of deposit such amount as may be equivalent to.the duty payable thereon and issues a transit pass to the importer. The importer should transport the goods outside the Municipal limits within a period not exceeding eight hours (which can be extended to 24 hours at the most). G On such transportation being effected, the amount of octroi deposited in respect of the goods so transported is ret~rned to .the importer and the transit pass taken back. This is the procedure envisaged in rule 1I. (Certain refinements in procedure in the case of travelling agents is provided for in rules llA & llB, with which we are not coneerned}. Where, however, the goods are not immediately to be transported H outside the Municipal limits but are to be temporarily detained within

78 SUPREME COURT REPORTS [ 1989] Supp. 2 S.C.R.

the Municipal limits and eventually transported outside the Municipal " limits, rule 12 is attracted. In the case of such goods they have to be sen.t to a bonded warehouse. The goods may be withdrawn from time to time either on payment of octroi in the event of their being consumed, used or sold within the Municipal limits or without any payment of octroi duty in case of their being transported outside the B Municipal limits. This procedure is outlined in rules 12 and 16 to 22. But one important condition is that the maximum period for which the goods can be placed in the bonded warehouse is 6 months. lf the goods are not removed within the said time limit, they are liable to be sold by public auction and the warehouse charges and octroi recovered from the sale proceeds. This is the normal procedure for the assessment and collection of octroi duty. It is in respect of this procedure that the c declaration in rule 9 becomes important. The terms of the declaration determine the incidents of the duty. Regarding the first category of goods mentioned in rule 9(1), the collection of duty is immediate; regarding the second category, a deposit is demanded which can be refunded on transportation within a few hours; and in respect of the third, duty has to be paid unless the goods are transported outside the municipal limits within 6 months. Rule 13, however, contemplates a totally different scheme for the assessment and collection of octroi for the special type of cases envisaged therein. From the terms of S. 133, it would appear to be intended to cover mercantile firms or bodies which may be bringing goods into, or taking goods out of, the municipal limits frequently and, perhaps, also firms or bodies about whose capacity to pay the duty in due course the Municipal Board has confidence. These persons are given the facility of having a current account with the Municipality and the amount of duty payable by such a person is determined and col- lected from time to time. Such an account is opened on the firm or body making such deposit or furnishing such security as the Municipal- ity may require, for the due discharge of its liabilities under the Act and the Rules. When this facility is provided, the procedure to be followed is set out in rule 13. Here what is done is that the firm or body is given a book of entry passes and a book of transport passes from time to time. As and when the firm or body brings goods into the G Municipality, it is required to fill in one of the entry passes setting out the details of the goods which are being brought in under any particu- lar consignment and present the same at the octroi outpost of entry. After verifying that the details of the goods brought in tally with the details of the goods entered in the entry pass, the details are passed on to the octroi Superintendent who debits the account of the person concerned with. the amount of octr.oi payable in rspect of the goods

MUNJCIPALCOUNC!Lv. PAREKH AUTOMOBILES [RANGANATHAN,J.] 79

listed in the pass. As and when rn~ nrm or body wishes to transport the goods out of the Municipality, it fills up a transport pass containing the details of the goods proposed to be transported outside and pre- sents it to the octroi outpost of exit. The officer at the outpost verifies that the goods mentioned in the pass and the goods sought to be transported tally with each other. Then the· transport pass duly certified by him is passed on to the octroi Superintendent. The octroi B Superintendent, after verification, files the certificates of export sepa- rately in respect of each such body or firm. The amount of octroi payable in these cases is based on the total amount of octroi on the goods shown by the entry passes less the goods transported out under the transport passes. In other words, in the case of persons who have the current account facilities, the duty is calculated on the basis of the total amount of goods that have come in as reduced by the total c amount of the goods that have gone out, the balance being presumed to have been consumed, used or sold within the Municipal limits. In order to ensure that there is a correspondence between the goods that have come in and those that have gone out, me proviso to su.b-rule (4) of rule 13 provides that, in computing the octroi duty payable, the goods transported outside the Municipal limits shall be lessened only if (a) such goods have not been sold within the Municipal limits and (b) they have been transported out of such limits within a period of 6 months from the date of their import. A comparison of the above two sets of provisions will make it clear that they are two independent and mutually exclusive modes of assessment and collection of duty. Under the cash system of payment, a declaration under rule 9 is absolutely essential because the officials at the outpost will have to determine the mode of dealing with the goods on the basis of such declaration. The octroi duty has to be collected then and there in respect of the goods which are to be consumed, used or sold within the Municipal limits; a deposit has to be taken in respect of those goods which are intended to be immediately transported out- side; and the rest of the goods on which the transportation is to be effected on a future time, have to be directed to a bonded warehouse. The mode of collection of duty in respect of a person having current account facilities, however, does ·not depend upon any such declara- tion or upon the mode of utilisation of the goods as indicated in such declaration, because, in the case of the current account holders, the duty payable in respect of the entirety of the goods brought in is straightaway debited to his account on the basis of entry passes. The duty payable in respect of the goods transported outside is later on credited to his account on the basis of the transport passes. The diffe- rence is the amount of the duty payable by him and this is recovered H

80 SUPREME COURT REPORTS (1989] Supp. 2 S.C.R.

from the person concerned from time to time either by adjustment out of the deposits earlier obtained from him or by other processes of recovery. The procedure as to issue of transit passes or storage in a warehouse are also irrelevant for the purposes of dealing with the goods under rule 13.

B It, therefore, appears to me that High Court was fully justified in holding that the terms of rules 6 and 9 have no relevance to the pay- ment of duty in cases covered by the current account facility envisaged under rule 13. The High Court was, therefore, right in holding that the present case cannot be brought within the terms of proviso to rule 9(2) on the basis of a deemed consumption, use or sale within the Munici- pal limits. c It is true that the proviso to sub-rue 4 of rule 13 also envisaged the exclusion from levy of octroi duty only where the goods are not sold within the Municipal limits. It may be contended that, in the present case, as the IOC has sold the goods within the Municipal o limits, and the subsequent transport to Dangiawas, though effected by the roe, was really on behalf of the dealer the goods so transported and entered in the transport passes of the roe should be excluded from deduction under sub-rule (4) of rule 13. But this construction, in my view, cannot be accepted. The expressions used in the proviso to sub-rule (4) cannot be interpreted differently from the words used in section 104, on the basis of which chargeability to duty arises. If, as we have held, there can be no octroi duty at all levied .by the Jodhpur Municipality in respect of the goods sold by the IOC within, but clearly intended to be transported for use or consumption outside, the Munic- ipal limits, then this statutory limitation cannot be defeated by interpreting the proviso in such a way as to make all goods sold within the Municipality liable to duty even if the sale is in pursuance of a clear intention that the goods are to be despatched outside. The terms of the proviso and the main section have to be read harmoniously.

The result of the above discussion is that the present case is governed by the terms of rule 13 and the IOC is entitled to go on paying octroi duty on the basis of the goods brought by it within the Municipality less the goods transported outside the Municipality even where the transport outside the Municipality 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 Munici- pal limits. As we have already said, in cases where rule 13 applies, rule H 9 is excluded and, therefore, the High Court rightly held that the octroi charged on the IOC in respect of the impugned sales was not justified.

MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES [RANGANATiiAN, J.I 81

Before concluding I wish to refer to three aspects. The first is as to whether even assuming that rule 9 was applicable to a case where the current account facility has been provided, the terms of tliat rule can be read in such a manner as to militate against the very concept of octroi duty as explained in the Burmah Shell case. A questio11 may arisE whether the terms of rule 9(2) so interpreted would be intr4 vires the rule making power of the legislature. I express no opinion on this issue as I have already expressed my view that rule 9 has no applic~tion to the presel)t case. The second aspect, which I wish to touch upon, is a point sought to be raised on behalf of the appellant in the course oUhe present hearing that the current account facility granted to the IOC had been revoked. My learned brother has referred to the pleadings in this regard at great length and, as pointed out by him, the factual c position is by no means clear. I do not think that the appellant should be permitted to raise at this stage a new plea when all along, in the earlier proceedings in the High Court, the case has proceeded on the footing that the IOC had been having and continues to have current account facilities. The third aspect to which I would like to make a reference is that we have principally based out decision only on the facts in regard to the sales to Parekh Automobiles Ltd. We are told that there are a number of suits, other than those before us today, which are pending at various stages in which various pleas have been raised. I would only like to make it clear that we express no opinion regarding the factual position in those cases and those cases will have to be disposed off in the light of the legal position set out in our judgment. Except for the above clarifications I have nothing to add to what my learned brother Mukharji, J. has said and I respectfully agree with his conclusion that the appeals must fail and are dismissed.

R.S.S. Appeals dismissed.