Bombay High Court
Bagaria Vegetables Products Pvt. Ltd. ... vs Aurangabad Municipal Corporation, ... on 20 October, 2000
Equivalent citations: 2001(2)BOMCR746
Author: R.G. Deshpande
Bench: R.G. Deshpande
JUDGMENT R.G. Deshpande, J.
1. The petitioner No. 1 is a private limited company incorporated under the Companies Act. Its registered office is situated at Aurangabad. The petitioner No. 2 is the Managing Director of the petitioner No. 1 company.
2. The petitioner No. 1 carries on the business of Cotton Seed Oil. It has its own factory for refining Cotton Seed Oil, wherein, according to the petitioners, impurities of Cotton Seed Oil are being removed after refining. For doing the work of refining in its factory, the company is required to import Cotton Seed Oil, which after its due refining, is exported by the petitioners outside the limits of Municipal Corporation, Aurangabad.
3. The Municipal Corporation, Aurangabad, in accordance with the provisions of sub-section (1) of section 149 read with section 127 of the Bombay Provincial Municipal Corporation Act, 1949, framed Rules relating to Octroi. These Rules are known as "The Aurangabad City Municipal Corporation Octroi Rules" (for short, hereinafter referred to as "the Octroi Rules").
4. Sub-rule (4) of Rule 2 of the Octroi Rules defines "export" to mean "convening of goods out of Octroi limits of the Corporation to any other area". Sub-rule (10) of Rule 2 defines the word "import" as "convening goods into the Octroi limits of the Corporation from any other area". Rule 4 of the Octroi Rules deals with the imposition and nature of tax and class of property made liable thereto. Rule 4 reads as under :
"4. Imposition and Nature of Tax and Class of Property made liable thereto---Subject to the provisions of the Act and subject to the exemptions and provisions hereafter expressly specified an Octroi on all goods of the description given in Schedule "C" shall, on the import thereof for the purpose of consumption, use or sale within the Octroi limits of the Corporation, be payable to the corporation at the rates specified for such goods respectively in the said schedule."
As per the Octroi Rules, it is clear that "Octroi" is levied on the "import of the goods described in Schedule C for the purposes of consumption, use and sale within the octroi limits of the corporation". The rate of octroi is also to be in accordance the Rules as is given in Schedule "C". Rule 5 of the Octroi Rules deals with the items on which exemption is granted in respect of payment of Octroi duty. Rule 6 deals with other items concerning recovery of Octroi duty and also the powers of the persons vested with the duty to recovery the Octroi.
4. The important and most relevant rule for the purposes of present writ petition is Rule 16 of the Octroi Rules. Rule 16 deals with the refund of Octroi on goods imported for consumption, use an sale. As per this provision, refund of 90% of the Octroi on the goods imported for consumption, use and sale is admissible on export of such goods, subject to the conditions mentioned in Clauses (a) to (h). It would be appropriate at this stage itself to reproduce entire Rule 16 for being used as a ready reckoner while deciding the present writ petition.
"16. Refund of Octroi on export of goods for consumption, use or sales.---Refund of 90 percent of the Octroi paid on goods imported for consumption use or sale shall be admissible on their export subject to all the conditions mentioned in Clauses (a) to (h) :---
(a) Refund of Octroi shall be paid only to the person who is the importer or to such Agent of the importer as may be recognised by the Standing Orders and to no other person.
(b) The Export of the said goods has taken place within four months from the date of their Import.
(c) The said goods shall have been exported on the manner prescribed by the Standing Orders.
(d) The amount due for refund in respect of one Export Certificate shall not be less than five rupees.
(e) The goods have no since their import changed in any manner whatsoever their original form, conditions, state or appearance by any process of manufacture or otherwise :
Provided that goods shall not be deemed to have changed their form within the meaning of this rule merely by reason that they are wood, which since its import has been cut and made into beams planks and rafters or grain or tur, ground and converted into pulses or tobacco converted unto stuff or bidis or rice parched and made into murmuras; or wheat or other grain made into flour.
(f) The goods must not have been sold to a person, residing within the Octori Limits of the Corporation. However, if the goods are for the first time since their import sold to a person residing outside the octroi limits of the Corporation and are exported as a result of such sale, refund of 90 percent of octori will be admissible provided that the Importer continues to be in possession of the said goods till moment they are exported and provided further that the said importer and the exporter remain the same person.
(g) The goods that are exported must not be such that the refund of octori levied thereon at the time of import is not admissible according to the rules, when these goods are exported.
(h) The said importer shall claim the refund as follows :---
i) He shall make an application to the Commissioner.
ii) This application must reach the office of the Commissioner within seven days from the date of export.
iii) This application shall be duly signed by the said Importer.
iv) This application shall be accompanied by such documents as may be prescribed by the Standing Orders, and
v) The application shall comply with all the provisions prescribed by the Standing Orders for making a claim for refund."
5. It is the case of the petitioners that by the letter dated February 19, 1987, bills of each and every tanker of Cotton Seed Oil which the petitioners would be importing were furnished to the Octori Superintendent of the Aurangabad Municipal Corporation (for short, hereinafter referred to as "the Corporation"). The copy of the said letter is placed on record of the writ petition as Annexure A. On the above-said date the petitioner had imported one tanker of Cotton Seed Oil and in proof of which the corporation had issued Bill No. 12422 of even date. It is the say of the petitioners that the petitioner No. 1 company refined said Cotton Seed Oil in its factory, removed the impurities from the oil and exported the said purified refined Cotton Seed Oil by tanker No. MTB 5657. Since, according to the petitioners, by adopting the purification methods or operation said Cotton Seed Oil did not change its original form, conditions, state or appearance after refining, the petitioners, in accordance with the provisions of Rule 16 of the Octori Rules read with the Standing Orders, are entitled to refund of 90% octori paid by them while importing said Cotton Seed Oil. The petitioners were under bona fide strong belief that they are entitled for refund of such octori duty and therefore, the petitioners prepared export note and submitted the same along with the covering letter and original import bill to the Naka Officer while exporting the said oil, which is quite evident from the letter dated 20-2-1987 at Exhibit B. It is the grievance of the petitioners that inspite of having complied with all the relevant rules and inspite of having been entitled and eligible for refund, the Export Naka Officer of the corporation did not issue export certificate in favour of the petitioners and thereby refused to refund the amount to which, according to the petitioners, they are otherwise entitled to. The petitioners happen to be the regular importer of the Cotton Seed Oil and carries on the business of purifying oil at its factory situated at Aurangabad and export the same outside the Corporation limits. The petitioners, in view of the nature of their trade, also requested the Corporation authorities to have a current account in that respect so as to facilitate both the Corporation and the petitioners to carry on their work smoothly and without any hindrances. However, since no heed was paid to the request of the petitioners by the Corporation and since no decision as regards refund of 90% octori duty is taken by the Corporation, the petitioners have approached this Court through the present writ petition claiming the relief in the nature of issuance of writ of Mandamus or any other appropriate writ, order or direction to the Corporation to grant benefits of provisions of Rule 16 of Octori Rules read with the Standing Order No. 14 relating to the refund of octori in respect of Cotton Seed Oil to the petitioners. While claiming this relief, the petitioners have also sought for a declaration that this Court should declare that the Cotton Seed Oil does not change its original form, state, condition or appearance merely by removing impurities after refining and a further declaration that the petitioners are entitled to refund of 90% octori duty paid by them at the time of importing said Cotton Seed Oil. In pursuance of these main reliefs, certain ancillary reliefs are also asked for by the petitioners and can be granted to the petitioners if the first two reliefs which are asked for by the petitioners are granted to them.
6. While claiming refund, heavy reliance is placed by the petitioners on Rule 16 of the Octori Rules and precisely on Clause (e) of Rule 16 of the said Rules. As per Clause (a) of Rule 16, refund can be claimed or shall be paid to the person who is importer or to such other agent of the importer as may be recognised by the Standing Orders only. As per Clause (b) of Rule 16, for claiming refund it is very much necessary that the export is made within 4 months from the date of import of said goods. As per Clause (c) of Rule 16, the goods are supposed to be exported strictly in the manner in which it is prescribed for by the Standing Orders. Clause (d) provides that the amount of refund of octori should not be less than Rs. 5/-.
7. The relevant Clause (e) of Rule 16, as extracted above, specifically provides that the imported goods should not be changed in any manner whatsoever in their original form, conditions, state or appearance by any process of manufacture or otherwise. The proviso to Clause (e) of Rule 16 of the Octori Rules, on which reliance is placed by the petitioners for claiming refund in the instant matter, deals with certain specific items/goods as are mentioned therein which are wood, grain, tur, Tobbacco, Rice, Wheat or other grain. According to this proviso, any process in respect of the above-said articles/goods even if there is any change in its form, same is not to be treated as a change as is contemplated by Clause (e) of Rule 16 of the Octori Rules.
8. The petitioners, relying on these items by way of example contended that if such type of change is there it has been treated as a change as contemplated in Clause (e) of Rule 16 and claimed refund contending that merely by refining and purifying Cotton Seed Oil in the present case, it cannot be said to have changed its original form, as, according to the petitioners, Oil remains to be the same Oil. The petitioners, therefore, vehemently contended that in no case the petitioners can be denied refund claimed by them.
9. Shri P.M. Shah, learned Advocate for the petitioners, vehemently urged that the original form of the Cotton Seed Oil which they used in the factory for purifying and refining is not, in any way, changed. It is the case of the petitioners that the oil is to be simply purified by adopting various processes and immediately thereafter said oil is exported outside the Corporation limits. He argued that the petitioners import impure Cotton Seed Oil and exports purified and refined oil. Therefore, according to him, the original form of the goods is neither changed nor its state, conditions or appearance is changed by any process of manufacture or otherwise. Shri Shah further argued that the petitioners do not import Cotton Seed Oil for consumption, use or sale within the Corporation limits and therefore, according to the petitioners, they are entitled for refund of the octori duty asked for.
10. As against the aforesaid arguments of Shri P.M. Shah, Shri M.N. Navander, the learned Senior Advocate for the respondent, vehemently urged that taking into consideration the activity of processing Cotton Seed Oil for refining or being purified, there is definitely change in the condition, state and appearance of the original imported goods, though the form thereof i.e. liquid state is not changed.
11. Shri P.M. Shah, learned Advocate for the petitioner, in support of his contentions, relied on various decisions of the Supreme Court. He invited our attention to the judgment reported in Union of India and another v. Delhi Cloth and General Merchants Company Limited and others, . Relying on this decision, Shri Shah argued that the manufacture of Vanaspati i.e. raw oil purified in process but not deodorized was held not chargeable under the Central Excise and Salt Act, 1944. However, in the opinion of this Court, this is not a case wherefrom Shri Shah can derive any advantage in support of his contention. It is to be kept in mind that excise duty is on the manufacture of goods and not on the sale. Applying the principle that the substance produced by the manufacturer at an intermediate stage is not put in the market, which would not make any difference to the chargeability of the substance to the excise duty, which, in that case, was covered by an item in Schedule I of that Act. The basic difference which is to be kept in mind is that the purpose of the Central Excise and Salt Act is absolutely different than what is in the levy of octori on the goods which enter into the limits of Municipal Council or Corporation.
12. Shri Shah further relied on the decision of learned Single Judge of this Court in the matter of Navyug Steel Industries, Bombay and others v. Bombay Municipal Corporation and another, . In the above-cited case, Copper Bars and cooper-wire bars coming to the petitioners firm for being rolled into copper slab, rods, flats, etc.; were held to be entitled for exemption under the Bombay Municipal Corporation (Levy of) Octori Rules, 1965. In that case, the petitioner firm was engaged in rolling job work of cooper bars and nonferrous metals. The company used to receive copper bars and copper-wire for being rolled into copper slab, rods, flats, etc. These items were received from outside Greater Bombay. On doing certain job works in the nature of labour work, the copper bars or nonferrous metals used to be converted into copper slab, rods, flats, etc. However, except the change in the appearance, there was no other change in the character of that original item imported in the limits of Municipal Corporation. The character remained the same except change in the appearance which was inherent in the process or rolling. The learned Single Judge of this Court held that the petitioner was entitled to exemption under Rule 7 of the Octroi Rules in that case. However, after giving due thought to the matter we are of the firm opinion that the case cited above is of no help to the petitioners, as, the matter in hand is absolutely different and will have to be read in the background of the rules as applicable to the case in hand.
13. Shri Shah has also invited out attention to the decision reported in Deputy Commissioner, Sales Tax (Law), Board of Revenue (Taxes) Ernakulam v. Pio Food Packers, . This case relates to the consumption of commodity in the process of manufacture and precisely as regards processing of pineapple fruit into slices for selling in sealed cans. This case specifically relates to the provisions of the Kerala Sales Tax Act. The incidence of tax under the Sales Tax Act is also absolutely different than the incidence of octori under the Octori Rules. Section 5-A(1)(A) of the Kerala General Sales Tax Act, 1963, envisages consumption of commodity in the process of manufacture of another commodity. The goods purchased are supposed to be consumed and the consumption should be in the process of manufacture and the result must be the manufacture of other goods. While dealing with this matter, the aspects as regards, "consumption" has been dealt with by the Supreme Court and it is observed that there are several criteria for determining whether a commodity is consumed in the manufacture of another commodity. Generally prevalent test is whether the article produced is regarded in the trade as distinct in identity from the commodity involved in its manufacture. It is well known that commonly manufacture is the end result of one or more processess through which the original commodity is made to pass. In that case, the company used to cut pineapple into slices and by repacking it used to sell the same. Their Lordships of the Supreme Court, therefore, observed that when the pineapple is processed into pineapple slices for the purpose of sale in sealed cans, there is no consumption of pineapple fruit for the purpose of manufacture. Hence, their Lordships of the Supreme Court held that the said case did not fall within the above-mentioned provisions of the Kerala General Sales Tax Act. We have to reluctantly observe that the said case is also in no way helpful to the petitioner in the present case Their Lordships of the Supreme Court in that matter also dealt with the question as to what is "manufacture". However, the question of manufacture is of no relevance for the purpose of present case in the sense as it dealt with in the above-cited case, it was under the provisions of the Kerala General Sales Tax Act.
14. Shri Shah also invited our attention to another decision reported in Indian Oil Corporation v. Municipal Corporation, Jallundhar and others, . However, in the opinion of this Court, the said case is also of no avail to the petitioner. In that case, the entry of goods within the local area for consumption or use or sale was liable for octori in accordance with the Octori Rules of that Municipality. While dealing with the matter, it can be clearly seen that the transaction covered in that case was a transaction where petroleum products transported to the depot of the Indian Oil Corporation was meant for export from its depot inside the octori limits to its dealers outside the limits of Municipal Corporation for consumption, sale or use by the persons other than the Indian Oil Corporation, is a transaction of re-export and that the appropriation of the goods does not take place at the depot but at the outlets of the dealers or the agents outside the municipal limits. In that case, their Lordships of the Supreme Court, therefore, observed that octori duty was not chargeable on such a transaction and the Municipal Corporation was held not justified in imposing octori duty on those goods. It is to be seen that when the Indian Oil Corporation brought the petroleum products to its depot within the octori limits, there was no question of processing thereof nor was it being utilised nor sold within the limits of Municipal Corporation or otherwise. However, those petroleum products were only re-exported outside the limits of the Municipal Corporation to other various consumers or dealers, as the case may be. The question of consumption or sale of the petroleum products within the limits of the Corporation, in that case, therefore, did not arise. In our opinion, therefore, this case is also of no help to the petitioners in any manner.
15. Shri P.M. Shah, learned Advocate for the petitioners, invited our attention to the decision of this Court reported in Atul Products Limited and others v. Union of India and others, . However, this is also a case under the Central Excise and Salt Act, 1944. We, therefore, do not propose to deal with the same in details, as, in our opinion, the said case is also of no use to the learned Advocate for the petitioners on the point in question.
16. Shri P.M. Shah, learned Advocate for the petitioners, invited our attention to the decision of the Supreme Court in in the matter of M/s. Anwarkhan Mahboob Co. v. The State of Bombay (now Maharashtra) and others. Again this is also a case under the provisions of the Bombay Sales Tax Act, 1953. Relying on this judgment, Shri Shah tried to argue that the word "consumption" which was used in the aforesaid Act will have to be taken in the same sense for the word "consumption" used in the present Octroi Rules. We have already said above that the incidence of tax under the Sales Tax Act and the incidence of levy of octroi duty under the Octroi Rules is altogether different. The goods which are imported into the octroi limits and are either being used, or sold or consumed in the octroi limits by the importer, who is required to pay the octroi duty therein cannot said to be entitled to refund of octroi duty in accordance with Rule 16 of the Octroi Rules, as, in our opinion, consumption of an article for getting an ultimate product with a different character, state or condition which is ultimately again exported cannot be said to be entitled for refund of the octroi duty. There is, in our opinion, recognizable difference in the word "consumption" as is used under the provisions of the Sales Tax Act and in the Octroi Rules.
17. In the present case, the petitioners imported raw cotton seed oil within the limits of Municipal Corporation and naturally in accordance with the provisions of the Octroi Rules, the octroi duty is leviable as per the rates mentioned in the Rules. After importing the raw cotton seed oil the petitioners put the same into process thereby purifying raw cotton seed oil to make it worth of consumption or edible and again export the same outside the limits of Municipal Corporation. It is the case of the petitioners that in accordance with Rule 16 of the Octroi Rules, they are entitled for refund of 90% of the octroi duty paid by them on such goods when same were imported. According to the petitioners, they have neither used the said raw cotton seed oil nor consumed or used or sold within the limits of Municipal Corporation, Aurangabad. Simply the petitioners processed the purified oil and exported the same. However, it is not clear from the petition as to whether the goods are exported to the same party from whom such goods are imported. This Court has, therefore, to presume that the said export is not only to the original person from whom it is imported but may be to various other customers of the petitioners outside the limits of Corporation. This Court is, therefore, concerned only with the question as to whether could it be said that there was either sale or consumption or use within the limits of the Corporation after its import.
18. We, therefore, first deal with the question as to what is "consumption" as is used in the Octroi Rules. It is to be made clear that there does not appear to be any material on the record to show that the said raw cotton seed oil was either sold in the same form or used in the same form in the limits of Corporation except by the petitioners for converting it into purified oil as is contended by the petitioners. Therefore, the question of sale or use as is contemplated by the Octroi Rules within the limits of Corporation does not arise. However, the word "consumption" which is used in the Octroi Rules cannot be understood to have the same meaning as the layman, in the ordinary course, would give to it. "Consumption" can be in various ways. Even use of a chair by a person sitting over it or use in the like manner of other furniture by the user thereof can also be in the given set of circumstances termed as "consumption". In the present case, use of raw cotton seed oil for manufacture or converting it into purified cotton seed oil can also be said to be consumption of that raw cotton seed oil for manufacture of purified oil. Certain processes and labour work are required to be done over it. Raw cotton seed oil, therefore, takes a form of a raw material which is put into process of manufacture of purifying oil or converted into edible oil or palatable oil.
19. It would be interesting to ascertain the correct meaning of the expression "consumption" for the purpose of levying octroi duty. "Consumption" cannot be given a limited meaning nor can one be myopic while looking at the word "consumption" in connection with the levy of octroi and refund claimed by the petitioners. The word "consumption" cannot be understood as having reference not merely to the individual importer or purchaser who has contemplated distribution of goods eventually to the consumers in general. An article which has been brought into the Corporation limits being consumed by the person importing it but the act of consumption can be postponed or may be performed by some-one else but once the goods are brought into the local area for consumption they satisfy the requirements as regards levy of octroi and it matters little as to who has brought them into the local area. We derive the advantage from the observations of the Supreme Court in in the case reported in Burma Shell Storage and Distributing Co. of India Ltd., Belgaum v. Belgaum Borough Municipality, Belgaon.
20. The Octroi Rules, no doubt, along with the word "consumption" also employ the word "used". In such circumstances, it can very well be said that the raw cotton oil seed is used or consumed for getting the ultimate purified oil which becomes edible. Though liquid state is not changed, the processing definitely adds to the value of the product which is made edible and marketable for consumption. "Consumption" is otherwise used in a common parlance such as "consumption of tea, coffee". Even "smoking" is also termed as "consumption of cigarette". However, such a restricted meaning is not expected in the tax laws including the present Octroi Rules relating to levy of octroi duty. We are, therefore, of the opinion that raw cotton seed oil can definitely be said to have been consumed in the wider sense and in the absence of any specific meaning given to it in the Octroi Rules. We are, therefore, not in a position to give a limited meaning nor are we ready to limit the connotation of the word "consumption" only to the final act of "consumption".
21. We can also conveniently rely on the decision reported in Kathiawar Industries Ltd. v. Jaffrabad Municipality, wherein the Apex Court considered the question whether salt manufactured by the appellant outside the octroi limits and brought within the octroi limits for the purpose of being crushed into powder in the factory of the appellant situated within those limits and then exported was liable to levy of octroi. In that case, it was held that the salt was liable to octroi duty. While dealing with the above-said case Their Lordships of the Supreme Court had also taken into consideration the earlier judgment of the Supreme Court reported in Anwarkhan Mahboob Co. v. State of Bombay, wherein it was held that when uncrushed salt was crushed in the factory and commercially a different article was produced, the uncrushed salt must be held to have been consumed. Applying the same analogy in the present case we do not find it difficult to hold that the raw cotton seed oil which was processed in the factory of the petitioners and which ultimately produced "a different commercial article" and which is being exported, is consumed in the factory of the petitioners. In such a case we can conveniently hold that the raw cotton seed oil was consumed within the octroi limits and "a commercially different article" was exported outside the octroi limits. Hence, the petitioners cannot be said to be entitled for refund of the octroi paid while importing raw cotton seed oil.
22. Shri P.M. Shah, learned Advocate for the petitioners, tried to rely on the decision of the Supreme Court in in the matter of Mafatlal Industries Limited v. Nadiad Nagarpalika and others. In that case, the point was as regards bringing of long cloth by the petitioner industry within the octroi limits and cutting the said cloth into small pieces and then again exporting the same. The Supreme Court while dealing with the above matter held that cutting of long cloth into small pieces of different length and then exporting the same would not amount to use or consumption of cloth within the octroi limits. The Supreme Court, therefore, held in that case that the octroi duty was not leviable on the said article. We are, however, not in a position to agree with the contention of Shri P.M. Shah, learned Advocate for the petitioners, for the simple reason that in the above-cited case, no doubt but for cutting of the long cloth into small pieces no other process was adopted. Hence, the question of cloth having been consumed in that process did not arise. The case in hand is absolutely different wherein certain processes are exercised on the raw cotton seed oil imported into the factory of the petitioners and exported after its purification which definitely added to the utility thereof. Even the condition of the goods can be said to have been changed from the one which was existing at the time of its import. The above-cited decision of the Supreme Court is not of any help to Shri Shah, Advocate. In our opinion the present petitioners cannot be said to be entitled for refund of duty asked for.
23. In the circumstances, in our opinion, the petition deserves to be dismissed. It is dismissed accordingly. Rule is discharged. No order as to costs.