Bombay High Court
The Raymond Woollen Mills Ltd. And ... vs State Of Maharashtra And Another on 30 October, 1991
Equivalent citations: AIR1992BOM412, 1992(2)BOMCR248, AIR 1992 BOMBAY 412, (1992) 2 BOM CR 248
ORDER Pendse, J.
1. The Petitioner No. 1 is a Public Limited Company incorporated under the Companies Act and runs its factory at Jokegram, Thane. The Company claims to be one of the largest units manufacturing worsted woollen fabrics, polyester wool fabrics, other blended fabrics, woollen blankets, synthetic yarn and blended yarn. The Company imports greasy wool, polyester fibre, acrylic fibre, nylon fibre for the manufacture of its products in the Mills at Thane.
The goods are imported from abroad and are received at Bombay Docks. Some of the consignments which are required for immediate consumption are transported to Thane by filing bills of entry for Home Consumption. Some of the consignments are stored in the Customs Bonded Warehouse located within the Municipal limits of Bombay Municipal Corporation. Chapter VIII of Bombay Municipal Corporation Act, 1888 (hereinafter referred to as the 'Act') provides for municipal taxation and S. 192 onwards deals with levy of octroi tax. Sub-sec. (1) of S. 292 of the Act provides that the tax shall be levied in respect of articles mentioned in Schedule H on the entry of the said articles into Greater Bombay for consumption, use or sale therein. The tax shall be called an 'octroi'. Schedule H sets out the list of articles liable to payment of octroi and Class VII deals with piece goods cotton, yarn and threads of all sorts and starching and sizing materials, leather and articles of leather and rubber goods. Item 40 under Class VII provides for levy of 2 per cent ad valorem as octroi duty on import of raw or unspun wool, hemp, jute, coconut and other fibers and rope and articles made thereof. It is not in dispute that the articles imported by the Company squarely fell within Item 40 of Class VII of Schedule H. Section 194A of the Act, inter-alia, provides that any article imported into Greater Bombay for the purpose of immediate exportation shall be exempted from the levy of octroi if such article is conveyed direct from the place of import to the place of export under such supervision and on payment of such fees as shall be determined in the rules to be framed by the Commissioner with the approval of the Standing Committee. It is not in dispute that in respect of consignments imported by the Company and which are immediately removed to Thane factory, the Corporation does not levy any octroi duty but recovers only the fees as determined by the rules framed by the Commissioner and approved by the Standing Committee.
Section 195 of the Act deals with refund of octroi duty paid on export of the articles. Sub-sec. (1) prescribes that when any article upon which octroi has been paid shall be exported from Greater Bombay, then the amount of the tax levied shall be refunded. Sub-sec. (1A) reads as follows :
"The amount of (tax) to be refunded under sub-sec. (1) shall be 93% per cent of octroi levied upon the articles. The balance of 6 1/4 per cent shall be credited to the municipal fund as a fee for collection and refund."
Sub-sec. (2) provides that such refunds shall be paid in accordance with the rules as the Commissioner may frame from time to time with the approval of the Standing Committee. Sub-sec. (3) then provides that the rules shall require confirmation by the State Government. It also prescribes that any article imported into Greater Bombay and not exported within six months; of such entry of the articles shall be deemed to have been imported for consumption, use or sale in Greater Bombay.
2. In this petition filed under Art. 226 of the Constitution of India, the Company raises two contentions in regard to levy of octroi duty. The first contention is that it is not permissible for the Municipal Corporation to levy octroi duty when the consignments imported from abroad are merely stored in the Customs Bonded Warehouse. The second contention raised by the Company is that in any event, it is not permissible for the Corporation to recover octroi duty at the rate of 2 per cent ad valorem and then refund only 95 3/4% when the consignments are exported out of Greater Bombay to Thane Factory. The Corporation challenges both the claims made by the Company. Shri Parasurampuria, learned counsel appearing on behalf of the Company submitted that the levy of octroi duty is permissible in accordance with Entry 52 of List II of Schedule VII of the Constitution of India and for the purpose of valid levy of octroi, it is necessary that not only the goods enter the local area but such entry is for the purpose of consumption, use or sale in that local area. There cannot be nay debate about the accuracy of the proposition. Shri Parasurampuria then submits that when the imported consignments are stored in the Customs Bonded Warehouse as permissible under the provisions of the Customs Act, it cannot be held that the import is complete. The next submission was advanced was that the title in the imported consignment does not vest in the Company till the Customs duty is paid. It is impossible to find any merit in this submission. The title in the imported articles vests in the Company all along and merely because the goods were stored in the Customs Bonded Warehouse and payment of Customs duty is deferred till its removal, that would not vest the title of the goods in the Central Government. Shri Parashurampuria realising the folly in his submission, urged that the import is not complete because the Company had no right to use the imported articles till the goods are removed from the Customs Bonded Warehouse and the Customs duty is paid after filing bills of entries for home consumption. It was also contended by the learned counsel that the intention of the Company in importing the consignment is to make use of the same for their factory at Thane and which is situated outside the octroi limits of the Bombay Municipal Corporation. Shri Parsurampuria submits that as the intention of the Company is exportation outside the octroi limits of the Municipal Corporation, the Company is not liable to pay any octroi duty. It is impossible to find any merit in the submission urged on behalf of the Company. The liability to pay duty arises as soon as the goods are brought within the octroi limits of the corporation. Once the goods cross the octroi barrier, then the liability for payment of tax arises and the liability is not deferred till the company chooses to file bills of entry for home consumption and remove the goods from the Customs Bonded Warehouse. The contention that the company intends to use the imported articles only in their factory at Thane and which is outside the octroi limits of the corporation and, therefore, the company is not liable to pay octroi duty is without any merit. It is not possible for the corporation to imagine or to ascertain what is the intention of the importer. S. 194A of the Act specifically provides that when the goods are imported for the purpose of immediate exportation, then the importer will not be liable to pay octroi duty but only the fees as prescribed by the rules. In the case where the Company chooses to store the imported consignments in the Bonded Warehouse, then the purpose of import is not for immediate exportation and consequently the company is liable to pay the octroi duty at the rate of 2 per cent ad valorem. Section 195 clearly provides that in case the imported goods are subsequently exported by the importer, then the duty will be refunded. In our judgment, the challenge to the levy of octroi duty by the company is without any merit. Shri Bharucha, learned counsel appearing on behalf of the Corporation, invited our attention to the decision of the Supreme Court reported in 1989 (Suppl) (1) SCC 347, M/s.
Shroff and Co. v. Municipal Corporation of Greater Bombay and where it was observed that the charge or incidence corelated to the taxable event is on entry into the State by way of import. The purpose of import is decisive. In our judgment, as soon as the goods enter the octroi limits of the Municipal Corporation, then the liability to pay octroi duty in accordance with the rates set out in Schedule H arises unless the purpose of the import is immediate exportation outside the octroi limit as prescribed u/S. 194A of the Act and the rules framed by the Commissioner.
3. Shri Parsurampuria submitted that the claim of the Company that in cases where the imported articles are stored in Customs Bonded Warehouse, then the liability is not to pay the octroi duty at the rates prescribed in Schedule H but to pay the duty only at the rate of 6 1/4% is accepted by the Corporation and in support of the submission reliance is placed on two circulars dated May 13, 1989 and July 24, 1990. The second circular merely modifies the first circular on some minor details. The first circular dated May 13, 1989 deals with the subject of exemption from payment of octroi on consignments removed to Customs Bonded Warehouses. The circular recites that in Writ Petition No. 1337 of 1988 filed by M/s. Krislon Texturisers Private Limited in Bombay High Court, the Court has passed interim order directing the petitioners to pay to the Corporation 6 1/4% of the octroi amount due towards services charges, The Assistant Municipal Commissioner, therefore, decided to pass general orders to exempt goods imported into Greater Bombay and removed to Customs Bonded Warehouses from payment of octroi subject to payment of 6 1/4% of octroi amount due towards service charges and production of an undertaking specifying that the goods are not meant for consumption, use or sale in Greater Bombay, Shri Bharucha submits and, in our judgment, with considerable merit that the circular was issued by the Municipal Corporation with a view to prevent filing of large number of petitions in this Court by the importers who store the imported consignments in Customs Bonded Warehouses. Shri Bharucha submits that the Corporation thought it fit that instead of entering into multiplicity of litigation by large number of importers, it is desirable to respect the interim order of this Court and to furnish the same advantage to all the importers till disposal of the petition, Shri Bharucha also points out that it is not permissible for the Corporation by issuance of circulars to depart from the statutory provisions of S. 195 of the Act. Shri Bharucha, therefore, submits that issuance of the circulars cannot amount to acceding to the claim of the Company that it is not permissible to levy octroi duty in cases of import of articles and where the articles are stored in Customs Bonded Warehouses. In our judgment, the submission of Shri Bharucha is correct and deserves acceptance. The circular was obviously issued to respect the interim order of this Court and to avoid presentation of large number of petitions in this Court by importers whose imported articles are stored in Customs Bonded Warehouses. In our judgment, the circulars cannot confer any right upon the Company, the arrangement being only interim or temporary pending the disposal of the petition. In our judgment, the first contention urged on behalf of the Company that the Company is not liable to pay any duty as long as the imported articles are stored in Customs Bonded Warehouse is without any merit and is required to be turned down.
4. The second contention urged on behalf of the Company is that in any event, it is not permissible for the Corporation while refunding the octroi duty under sub-sec. (1) of S. 195 of the Act to retain 6 1/4% as a fee for collection and refund, Shri Parsurampuria submitted that the octroi duty at the rates prescribed under Schedule H is levied and recovered on the import of articles within octroi limits of the Corporation Sub-sec. (1) of S. 195 of the Act provides that when the articles on which duty has been paid are exported from Greater Bombay, then the duty shall be refunded but only to the extent of 93 3/4%. It was contended that the retention of the balance amount of 6 1/4% is contrary to law and cannot be permitted. There is no merit in this contention also. In the first instance, it must be noted that the retention of the balance of 6 1/4% is credited towards the Municipal fund as a fee for collection and refund as prescribed under sub-sec. (1A) of S. 195 of the Act. The distinction between the tax and the fee is well settled by catena of decisions and it is not necessary to refer to all these decisions save and except the decision of the Supreme Court P. M._ Ashwathanarayana Setty v. State of Karnataka. The Supreme Court observed (at page 110):
"If the essential character of the impost in that some special service is intended or envisaged as a quid pro quo to the class of citizens which is intended to be benefited by the service and there is a broad and general correlation between the amount so raised and the expenses involved in providing the services, the impost would partake the character of a "fee" notwithstanding the circumstance that the identity of the amount so raised is not always kept distinguished but is merged in the general revenues of the State and notwithstanding the fact that such special services, for which the amount is raised, are, as they very often do, incidentally or indirectly benefit the general public also. The test is the primary object of the levy and the essential purpose it is intended to achieve. The correlationship between the amount raised through the "fee" and the expenses involved in providing the services need not be examined with a view to ascertaining any accurate, arithmetical equivalence or precision in the correlation; but it would be sufficient that there is a broad and general correlation."
The statutory provision under sub-sec. (1A) of S. 195 of the Act clearly enables the Corporation to retain 6 1/4% of the duty recovered as a fee for collection and refund. Shri Parsurampuria very rightly did not dispute that the Corporation has to set up a machinery for collection of octroi duty as the import in Bombay Docks or in Bombay City is on a large scale. The rules provide for filing of several forms and applications at the time of payment of duty and at the time of seeking refund under sub-sec. (1) of S. 195 of the Act. As the Corporation has to maintain a large administrative set up, it is obvious that the Corporation is required to spend a substantial amount for rendering service. Shri Parsurampuria did not claim that retention of 6 1/4% of duty is excessive or disproportionate to the services rendered by the Corporation. The only contention urged by the learned counsel was that as the octroi was not leviable because at the time of import, the intention of the importer was to export the consignment to the factory at Thane, the octroi duty was not at all leviable and consequently the Corporation could not retain any part of the duty. The contention has already been examined and rejected.
5. Shri Parsurampuria relied upon the decision . The Poona City Municipal_ Corporation v. Dattatraya Nagesh Deodhar, in support of the submission that it is not permissible to retain any amount of the duty while making refund of octroi duty in respect of goods which are exported from the octroi limits of the Municipal Corporation. In the case before the Supreme Court, the Poona Municipality constituted under Bombay District Municipal Act, 1901 had framed Rule 18(3) which provided that before refunding the amount of octroi duty on exportation of goods, a deduction of 10 per cent shall be made. The provisions of the Bombay District Municipal Act, 1901 enable the Poona Municipality to levy tax on the refund sought. Subsequently, the Poona Municipality became a Corporation under the provisions of the Bombay Provincial Municipal Corporation Act, 1949. The provisions of the Bombay Provincial Municipal Corporation Act did not permit levy of tax on octroi refund. Indeed, the State Legislature had no power under the Constitution to impose such tax. The deduction of 10% after enactment of Bombay Provincial Corporation Act, 1949 which came into force from February 15, 1950 was challenged and the challenge was upheld by the Bombay High Court holding that it is not permissible for the Corporation to levy any tax on octroi refund. The decision of the Bombay High Court was challenged before the Supreme Court. The Supreme Court held that a tax on octroi refund is not one of the taxes which the Provincial Municipal Corporation could impose as it was not one of the specified taxes nor the tax which the State Legislature has power under the Constitution to impose. A contention was then raised before the Supreme Court that even if it is not permissible to levy a tax on octroi refund, it is permissible to retain a part of the tax as fees for rendering service to the importers. The Supreme Court turned down the contention because S. 147 of Bombay Provincial Corporation Act provided that it is permissible to levy fees for supervision as shall be deemed by the standing orders and as the Corporation had not framed any standing orders, it was not permissible to retain 10% of the collection under Rule 18(3) by asserting that deduction was towards fees for rendering service.
From the plain reading of the decision of the Supreme Court, it is obvious that the decision is of no assistance whatsoever to the contention urged by Shri Parsurampuria. The Supreme Court has nowhere laid down that it is not permissible to retain the part of the octroi duty as fees for rendering service. In the case before the Supreme Court, the claim for retention of the amount towards the fees was not accepted because the Corporation had not framed any rules or standing orders as required by the provisions of the Act. In the present case, the statutory provision of sub-sec. (1A) of S. 195 enables the Corporation to retain 6 1/4% of the octroi levied towards the fees for collection and refund. The subsection also provides that the amount shall be credited to the Municipal fund. It is, therefore, obvious that the Corporation in the present case had a statutory authority to retain the amount as fees. We have no hesitation in accepting the claim of the Corporation that the amount was retained as fees for rendering service. Once, the distinction between the tax and fees is understood, then even if the amount of fees is retained from the amount of tax initially collected, that would not cease the character of the retention amount as fees. The Supreme Court in the judgment of P. H. Ashwathanarayan Setty (supra) observed that impost would partake the character of a "fee" notwithstanding the circumstance that the identity of the amount so raised is not always kept distinguished but is merged in the general revenue of the State. In our judgment, the retention of the amount does not suffer from any infirmity and the contention of the Company in that respect must fail.
6. Finally, Shri Parsurampuria urged that the Corporation is guilty of discrimination while recovering the octroi duty from the importer who stores the imported articles in the Customs Bonded Warehouses. The complaint is that in respect of exporters, the Rules specifically provides that the goods imported within the octroi limits of the Corporation for the purpose of export are not liable to pay duty but only fees. Shri Parsurampuria wondered why distinction should be made between exporters who import the goods for ultimate export and importers who import the goods for ultimate export. The submission overlooks that the power to recover is prescribed by the statute and it is not permissible for the Courts to determine what should be the mode of taxation or whether the mode prescribed is fair or otherwise. In case, it is established that the Corporation had a power to recover fees, or levy tax, then the exercise cannot be struck down on the ground that in one case some advantage is conferred, while in the other, it is denied. The Rules of taxation are always harsh and are not open to challenge on the ground of unreasonableness. In our judgment, the grievance made by the Company is devoid of any merit. Though there are other prayers made in the petition about the validity of Ss. 192 and 195 of the Bombay Municipal Corporation Act, Shri Pursurampuria gave up the said contentions. In our judgment, the petitioners are not entitled to any relief and the petition must fail. Shri Bharucha made it clear that claim of the Company for refund, which are pending, would be decided in accordance with the rules.
6-A. Accordingly, rule is discharged with costs. 7. Rules discharged.