Orissa High Court
Nabin Chandra Narayan Das vs Dhenkanal Municipality And Anr. on 9 August, 1988
Equivalent citations: AIR1989ORI76, [1989]74STC296(ORISSA), AIR 1989 ORISSA 76, (1988) 66 CUTLT 515 (1988) 2 ORISSA LR 332, (1988) 2 ORISSA LR 332
Bench: G.B. Patnaik, D.P. Mohapatra
JUDGMENT Agrawal, C.J.
1. This writ application has been referred to the Full Bench by a Division Bench of this Court which entertained doubt regarding the correctness of the decision of this court in the case of B alas ore Talkies v. Municipalities (1986) 61 Cut LT 254 : (AIR 1986 Orissa 230) where the question of levy of octroi duty on cinematograph films brought from outside for exhibition in the cinema halls in different towns in Orissa was decided.
2. The petitioner is the owner of a cinema hall in the town of Dhenkanal and brings cinematograph films from distributors for exhibition in his hall. The Dhenkanal Municipality having been authorised to levy octroi under Section 131 (1)(kk) of the Orissa Municipal Act, 1950 (for short, "the Act") issued a notice (Annexure 1) to the petitioner requiring him to pay octroi duty at the rate of 3 per cent for user of films by way of screening in his cinema hall.
The petitioner disputed the demand on the ground that bringing films on hire for exhibition only did not attract the mischief of the aforesaid provision of the Act, but having failed to convince the municipal authorities has filed the present writ application.
3. Section 131 authorises the Municipal Council to impose various taxes, and Clause (kk) of Sub-section (i) authorises the council to impose octroi and reads as follows: --
"(kk) an octroi on goods brought within the limits of a municipality for consumption, use or sale therein:"
This power is derived from Entry 52 of List II of the Schedule VII of the Constitution.
4. There is no difficulty in construing the expressions 'consumption' and 'sale' of any goods. But the expression 'use' which is sandwiched between the above two expressions, namely, 'consumption' and 'sale' is susceptible to a varied interpretation.
5. The Division Bench considered some decisions and came to the conclusion that "films are brought within the local limits for their use within such limits and thereafter taken out there from.". To put it in more explicitly, the Court took the view that the exhibition of films in the cinema halls was a mode of their user within the meaning of Clause (kk) and therefore the petitioners were liable to pay octroi duty on all those films brought within the municipal limits where the cinema halls were located The Division Bench had referred to the cases of Burmah Shell Oil Storage and Distributing Co. v. Belgaum Borough MunicipalityAIR 1963 SC 906 and Jafarabad Municipality v. Kathiawar Industries Ltd AIR 1969 Guj 344.
6. When this ease was being heard by the Division Bench, Mr. P. K. Misra, learned advocate for the petitioner had referred to the case of S. M. Ram Lal and Co. v. Secy. to Govt. of Punjab reported in (1969) 1 UJ (SC), 373 where the word 'use' occurring in an analogous provision of the Punjab Municipal Act, 1911 had fallen for interpretation. The Division Bench under an impression that in this case (which was not noticed) the Supreme Court had taken a different view and also otherwise expressing doubts regarding the correctness of the ratio derived from the principle enunciated by the Supreme Court in the Burmah Shell Company's case referred the matter to a larger Bench.
7. Before I proceed to consider the issue, let me first refer to the decisions cited by the parties.
Reference was again made to the Burmah Shell Company's case (supra). The question in that case was basically different. The Company had challenged the action of the Belgaum Municipality for levying octroi on its pertroleum products brought inside the octroi limits for sale, and one of the questions that fell for consideration was whether any octroi was payable on that part of the goods which were sold by the Oil Company through its dealers although within the octroi limits but ultimately consumed outside the municipal limits. The stand of the Company was repelled and it was held that : --
".....It is sufficient if the goods are brought inside the area to be delivered to the ultimate consumer in that area because the taxable event is the entry of goods which are meant to reach an ultimate user and consumer in the area."
But at the same time, the Court held that the company was not liable to pay duty in respect of such goods as were brought into the municipal limits and neither sold nor consumed but were re-exported The principle laid down in this case has been followed in almost all the subsequent decisions. Certain observations made in this decision, however, may be usefully noticed, it was observed in para 19 that : --
"....The word 'consumption' in its primary sense means the act of consuming and in ordinary parlance means the use of an article in a way which destroys, wastes or uses up that article. But in some legal contexts, the word 'consumption' has a wider meaning. It is not necessary that by the act of consumption the commodity must be destroyed or used up.".
The Supreme Court in para 20 also noticed the word 'use' and observed : --
"..... There may be certain commodities which though put to use are not 'used up' in the process. A motor car brought into an area for use is not used up in the same sense as food-stuffs. The two expressions 'use' and 'consumption' together therefore connote the bringing in of goods and animals not with a view to taking them out again but 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. In this context, the word 'consumption', as has been shown above, must receive a larger meaning than merely the act of consuming in the generally understood sense."
8. The other decision noticed by the Division Bench in the earlier case was also pressed into service before us by Mr. S. B. Nanda appearing for opposite party No. 1 Municipality. In this case, the Gujarat High Court was considering the question as to whether the salt manufactured by the plaintiff-company at its salt works and exported uncrushed or crushed was liable to octroi duty under the analogous provisions of Jafarabad Municipality and in that situation considered the expression 'use' and held that the word 'use' cannot have the meaning of using up' and ultimately held as follows : --
".... Therefore," considering the purpose for which the uncrushed salt is brought and the effect on that salt of the accomplishment of that purpose there is no doubt that uncrushed salt is brought in for use by the factory and octroi is leviable on the uncrushed salt so brought to the factory for crushing."
9. Let us now consider the sheetanchor of the petitioner's case, i.e., the unreported decision of the Supreme Court in S. M. Ram Lal and Co. The petitioner of that case carried on business in woollen goods, purchased wool at their head office in Delhi and sent it for dyeing to their factory in Faridabad township in the district of Gurugaon. The Notified Area Committee, Faridabad claimed to levy octroi on that wool This was challenged by the petitioner in the Punjab High Court. The High Court rejected the application on the view that the wool having been brought within the limits of the Faridabad township for 'use', octroi was leviable inasmuch as after undergoing the process of dyeing, the colour of the wool changed and it became a different commercial commodity from the commercial point of view and was capable of fetching more price in the market. The Supreme Court, however, observed : --
"..... unless it is shown that the wool was brought within the limits of the Notified Area Committee, Faridabad Township, with the object of converting it into a different commercial commodity, it is not liable to octroi."
and took the view that this question had to be decided on evidence "whether by the process of dyeing a new commodity was brought into existence" and accordingly remanded the matter to the High Court for that purpose. The facts of Ram Lal's case, in my opinion, are entirely different and would have no application to the case of exhibition of cinematograph films.
10. Mr. Misra had also referred to the case of Hiralal Thakorlal v. Broach Municipality AIR 1976 SC 1446. This decision is again of no assistance at all as it simply reiterated the principle enunciated in Burmah Shell Company's case.
I may also refer to a few other superfluous decisions cited by Mr. Misra, namely, Kirloskar Electric Co. Ltd. v. Corpn. of the City of Bangalore (1975) 1 Kant LJ 233 and Municipal Council, Pandhurna v. R. P. Dube (AIR 1969 Madh Pra 1) (FB).
In (1975) 1 Kant LJ 233, the learned Judge distinguished the decision in AIR 1969 Gujarat 344 (supra) and held, if I may say so, rightly that the machineries brought into the limits of the Corporation of Bangalore for the mere purpose of repair were not liable to octroi.
In AIR 1969 Madh Pra 1 (FB), the dispute was as to whether octroi duty was leviable by the Municipal Council on a bus passing through the octroi limits for the purpose of loading and unloading passengers in course of transit. It was held that under Section 66( 1)( e) of the relevant Act and the Rules, "the goods must come to rest within the municipal limits for the purposes of sale, consumption or use therein". The goods and animals on transit which merely pass through the limits of the Municipal Council, even if they are used within those municipal limits, could not be said to have been brought within the limits of such a municipality for the purpose of 'use' or 'consumption'. The facts of this case being entirely different is this decision of no assistance to Mr. Misra.
This brings us to the close of the consideration of the authorities which were cited at the bar.
11. The Division Bench after considering the two decisions recorded its view in paragraph 6 of the judgment in these words :
".... it is clear that the words 'use' and 'consumption' are neither synonymous nor are they to be understood to be carrying the same meaning. The term 'use' is of wider connotation than 'consumption'. Any article that is put to some application suffers waste or deterioration to some extent, though not totally destroyed or used up and can be said to come within the purview of the word 'use' in Section 131 (1)(kk) of the Municipal Act for imposition of octroi duty. ......"
12. The Supreme Court in Burmah Shell Company's case (AIR 1963 SC 906) has traced the history of the two taxes, namely,' terminal tax' and 'octroi tax' in great detail, and I may extract a part of para 19 of the judgment:
"The history of these two trades clearly shows that while terminal taxes were a kind of octroi which were concerned only with the entry of goods in a local area irrespective of whether they would be used there or not, octrois were taxes on goods brought into the area for consumption, use or sale. They were leviable in respect of goods put to some use or other in the area but only if they were meant for such user."
Again, to borrow from the said decision :
"..... The word 'octroi' comes from the word 'octroyer' which means 'to grant' and in its original use meant 'an import' or 'a toll' or 'a town duty' on goods brought into a town. At first octrois were collected at ports but being highly productive, towns began to, collect them by creating octroi limits. They came to be known as Town duties'. These were collected not only on 'imports' but also on 'exports'."
provided the possibilities of raising of revenue by local bodies.
13. The Gujarat decision AIR 1969 Guj 344 has delved deep to construe the expression 'use' and again I may usefully utilise the labour put in by the learned Judges in that case. According to the dictionary meanings, the word 'use' is generally meant to convey the meaning "to employ for, or to apply to a given purpose". In a taxing provision, the expression has to be noticed in the matter of its context. Although the expression 'consumption' in its wider sense would also be an 'user', but since the taxing provision has used the word 'use' along with the word 'consumption, it is reasonable to hold that the legislature contemplated in the word 'use,' 'the user' of any goods in a sense other than 'consumption'. In order to bring home this point, the decision has given the illustration of the user of steel furniture, precious stones and ornaments, a motor car and thereafter made a very apt observation with which I respectfully agree, that "although a change in the article would be indicative of 'use', there may be user also without any noticeable change as in the instances mentioned earlier. Whether or not, there would be a change in the article would depend upon the nature of the article and the purpose of its employment or use. It may well be that the article is such and the purpose for which it is brought in is such that a change in the article is to be expected if it is used The relevant factors to be considered whether or not there has been user of an article therefore are the nature of the article and the manner in which it is dealt with or the purpose for which it is employed."
I am of the confirmed view that this should be the correct approach to the problem. The definition of 'sale' under the taxing provisions has undergone tremendous changes in the last decade to cover within its fold various other subsidiary modes of sale, such as, the system of hire-purchase, supply of goods under an agreement of works-contract and the like, where the title in the goods passes into the purchaser in somewhat a different mode and manner. The delivery of any goods to a hirer, like giving possession of any tangible property to a lessee, confers upon him the right to hold it for a particular period as a matter of right. Its user also causes some wear and tear and depreciation in value, thus diminishing its life.
In essence, therefore, there is a grain of the ingredient of the 'right' which a purchaser acquires on a completed transaction of sale, present in these transactions also. The life of a cinematograph film which is brought for exhibition is also of a limited duration. An exhibitor may outright purchase a film, and, to use the expression, the film may be "used up" completely by its continuous and long exhibition, or it can be used only for a limited period, say even exhibiting for one show only. But it cannot be anything else than its use within the meaning of Clause (kk) making the film suffer by the gradual process of being used up. In my view, this would be the harmonious construction to further the intention of the legislature, and taking any other view would amount to frustrating its intention and be against the principles of a reasonable construction.
14. On the above discussions, I come to the conclusion that the Division Bench has taken the correct view of the matter in (1986) 61 Cut LT 254 : (AIR 1986 Orissa 230).
15. This writ application, therefore, must fail. It is accordingly dismissed with costs.
Hearing fee is assessed at Rs 250/- (two hundred fifty).
G.B. Patnaik, J.
16. I agree.
D.P. Mohapatra, J.
17. I agree.