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CIVIL APPELLATE JURISDICTION : Civil Appeal No 431/1961. Appeal from the judgment and order dated May 31, 1960, of the Mysore High Court in Writ Petition No. 94 of 1959. M. C. Setalvad, Attorney-General of India, D.N. Mukherjee and B. N. Ghosh, for the appellant.

A.V.Viswanatha Sastri and R. Gopalakrishnan,-for the respondent.

1962. November 16. The judgment of the Court was delivered by HIDAYATULLAH, J. In this appeal by certificate ,under Article 133 (1) (b) of the Constitution granted by the High Court of Mysore against its judgment and order dated May 31, 1960, the Burmah Shell Oil Storage & Distributing Company of India Ltd. is the appellant and the Belgaum Borough Municipality, Belguam, the respondent. The appeal arises out of proceedings commenced by the Company against the Municipality under Article 226 of the-constitution for a writ or, writs to prohibit the Municipality from arguing' octroi from the Company on its products brought inside the octroi limits for sale. The petition of the company was dismissed by the High Court. The Company deals in petrol and other petroleum' products which it manufactures in its refineries situated outside the octroi limits of Belgaum Municipality It brings these products inside the said area either for use or consumption by itself or for sale generally to its dealers and licensees who in their turn sell them to others. The Company also directly sells its products to Government both Civil & Military, and to local bodies and big private concerns. The Company has a Divisional Office and Depot in Belgaum and the petition in the High Court was filed ,by the Divisional Manager in- charge of that area. The Company in the normal course of its business operations appoints dealers and licensees and typical forms of agreement between the Company and such dealers and licensees have been exhibited in the case. According to the Company, the goods, brought by it within the octroi limits can be divided into four separate categories as follows 1 . Goods consumed by the Company

We are concerned in this appeal with a period of three years commencing on October 22, 1955, and ending on a like date in 1958. During this time, octroi duty levied on all goods brought inside the octroi limits of the Municipality, irrespective of' their destination according to 'the four; categories above enumerated, amounted to Rs. 1,40,544.51 nP. The Company claimed in the High Court that it was not liable to pay octroi on categories other than the first. This claim was rejected but the Municipality agreed to give a refund according to rules- in respect of the fourth category. Before dealing with the contentions in the case it is necessary to refer briefly to the scheme of taxation under the Bombay Municipal Boroughs Act, 1925, by which the Belgaum Municipality is governed and the by-laws and rules made by the Municipality for the levy of octroi within the octroi limits of the Municipality. The Municipality draws its power to levy taxes from section 73. That section provides inter alia as follows :-

Under section 60 the Municipality has to follow as far as may be the same procedure for the suspension, modification or abolition of any tax and the suspension, alteration or recession of any rule prescribing a tax. In 1925 the Municipality had framed rules and by-laws before it became a Borough Municipality. These rules are called the "The Belgaum Municipality Octroi Rules and By laws" and are continued by virtue of section 5 (b) of the Borough Act. Before the amendment of the: Boroughs Act in 1954, rule 4(1) of the Octroi Rules and By-laws ran as follows:--

The Company which had paid octroi on all its products brought within the octroi limits of the Belgaum Municipality. before the amendment including , the goods not consumed by itself but sold to others started a correspondence saying that in 'as much as the law was newly amended to include "sale" in the description of "octroi", the Rules and By-laws ought to have been framed again and the procedure under section 76 read, with section 58 (j) followed. As this was not done, the Company contended, the tax could not be collected on goods which were merely sold but not consumed inside-the octroi limits. In the course of this correspondence, the Company did not object generally to the levy of octroi on goods brought inside the octroi limits for consumption, use or sale but asserted that octroi on goods which were sent out of the said limits was liable to be refunded. This the Municipality was prepared to grant subject to the rules. Even before the High Court the learned Advocate appearing for the Municipality stated that if any goods belonging to the company were actually sent outside the octroi limits the Municipality was prepared to grant refund on proof thereof, That is the stand of the Municipality even to-day. The Company also stated before us that it was liable to pay octroi on goods consumed by itself.' The dis-