Civil Appeal Nos
2330 2331 of 1969
Appeals by Special Leave from the Judgment and order dated 17 18 1 69 of the Gujarat High Court in Second Appeal No 187 and 85761
H section Parihar and I N Shroff for the Appellant
K J John for the Respondent
The Judgment of the Court was delivered by KAILASAM J
These two Civil Appeals are by the Kathiawar Industries Ltd by special leave against the judgment of the Gujarat High Court holding that the appellants are liable to pay octroi duty on uncrushed salt which is brought by the appellant to the factory situate within the octroi limits and crushed there
The appellant is running a salt manufacturing works at Jaffrabad called Nawabsidi Mohmad Khan Salt Works
The company had constructed salt works grinding mills trolly tracks and a jetty at e port site
The major portion of the salt works is situate out of the Municipal limits
The salt is manufactured outside the municipal limits
The grinding mills and the part of the trolly track leading to jetty come within the municipal limits of the respondent Jaffrabad Municipality
The Municipality by a notice dated 3 1 1955 demanded from the appellant Rs 7289 6 0 as arrears of octroi
The appellant paid under protest and filed the suit out of which this appeal arises before the Civil Judge Gohilwad District Bhavnagar against the respondent for a declaration that the salt manufactured by the appellant at its salt works at Jaffrabad and exported uncrushed andor crushed was not liable to octroi duty and that the goods passing through municipal limits from the salt works are not liable to octroi duty and for an injunction restraining the respondent from recovering an amount of Rs 7289 6 0 and for a further injunction restraining the Municipality from hindering or obstructing the free passage of salt and goods and for the refund of Rs 250
The appellant also filed another suit for the refund of Rs 1271 14 O paid under protest
These two suits were decreed the court declaring that the salt manufactured by 246 the appellant company is not liable to octroi duty
The court also granted an injunction as prayed for
The Municipality preferred appeals
The appellate court while dismissing the appeals and confirming the decree of the trial court observed that the perpetual injunction granted by the trial court would not apply to the salt entering the octroi limits for consumption or use for the factory situated within the octroi limits of the municipality
The Municipality preferred two Second Appeals to the High Court of Gujarat at Ahmedabad
A Bench of the High Court allowed the appeals except to the extent of confirming the declaration that uncrushed salt of the appellant company which is directly sent from the stacking ground to the jetty is not liable to octroi provided the plaintiff company followed the prescribed rules and formalities
The other claims in the suits were dismissed
Against the judgment of the High Court the plaintiff company has preferred these two appeals
The only question that falls for consideration in these civil appeals is whether the salt manufactured by the appellant outside the octroi limits of the respondent and brought by the appellant within those limits for the purpose of being crushed into powder in the appellant s factory situate within those limits and then exported is liable to octroi
The facts as found by the High Court and which cannot be questioned are that the salt works consists of i salt pans ii stacking ground for the salt collected from the pans iii trolly track for carrying salt from stacking ground to the factory within the octroi limits of the Municipality and to the jetty which is outside the octroi limits iv jetty v Power house vi store room vii workshop and viii grinding mill which is referred to in the evidence as the crushing factory
f these the crushing factory and part of the trolly track about 1400 feet are within the octroi Limits of the Municipality and the rest outside those limits
Thus it is not in dispute that only the crushing factory and part of the trolly track are within the octroi limits
salt is prepared is the salt pans outside the octroi limit and the salt which is to be crushed is taken to the crushing factory and the salt which is not to be crushed is taken in uncrushed form directly to the jetty over the trolly track part of which passes through the octroi limits of the Municipality
The salt that is crushed in the crushing factory is also after crushing taken by the trolly to the Jetty
From the jetty the salt whether crushed or uncrushed as the case may be is exported by steamers
The High Court has found that the salt which is taken to the crushing factory within the octroi limits for the purpose of crushing and is crushed and later taken to the jetty is liable to octroi
The question is whether this levy is sustainable in law
247 In 1948 on the formation of Saurashtra State Jaffrabad came with in the territorial limits of the Saurashtra State and the Bombay District Municipal Act 1901 as adapted and applied to Saurashtra State became applicable to Jaffrabad
The Jaffrabad Municipality the predecessor of the respondent was constituted under the Bombay District Municipal Act
1901 
The State of Saurashtra within the territorial limits of which the said Municipality was situate published an ordinance on 31 8 1949 being ordinance No 47 of 1949 called the Saurashtra Terminal Tax and octroi ordinance 1949
The ordinance extended to the whole of The State of Saurashtra and came into force from 31 8 1949
Section 2 clause 2 of the ordinance defines octroi  as including a terminal tax
Section 3 empowers the Government to impose terminal tax and octroi duty
It provided that octroi may be imposed on animals or goods or both within the octroi limits brought for consumption or use therein
Under section 4 Government is empowered to make rules
In exercise of the powers under the ordinance the State Government n made rules relating to octroi known as the Saurashtra octroi and Terminal Tax Rules on 8th December 1949 which was published in the Saurashtra Gazette on 15th December 1949
Rule 3 is the charging rule which provides that octroi is payable in respect of goods set out in the Schedule I attached to the Rules and prescribed that octroi shall be payable at the nakas at rates set out therein
Item No 23 is Salt for Factory
Schedule II which gives a list of items which are exempt from octroi duty contains in item No 6 a sub item in Gujarat which means Salt
Thus under item 23 Salt for Factory is liable to octroi duty
The octroi duty may be imposed under section 3 on animals or goods or both within the octroi limits brought for consumption or use therein
Oh the facts found namely that uncrushed salt was brought into the factory situate within the octroi limits and crushed salt taken away for export from the octroi limits can it be said that the salt thus brought are goods for consumption or use therein
It is the common case that the uncrushed salt as brought into the octroi limits is crushed and in the crushed form sent to the jetty for export
The finding of the High Court is that the crushing of the uncrushed salt and sending the crushed salt to the jetty within the octroi limits will be used therein as required under section 3
In this appeal it is necessary for us to consider the scope of the I words consumption and use
The precise meaning to be given to the words consumption and use will depend upon the context in 17 475 SCI79 248 which they are used
These words are of wide import
In the Constitution of India Entry 52 in List II in Seventh Schedule a right to impose tax on entry of goods into the local area for consumption use or sale is conferred
In Burmah Shell oil Storage  Distributing Co India Ltd vs The Belgaum Borough Municipality this Court after tracing the history of octroi and terminal tax observed that while terminal tax is a kind or octroi which is 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 the goods put to some use or the other in the area but only if they were meant for such user
In considering the meaning of the words consumption and use this Court observed in Burmah Shell case supra that the word consumption 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
n Ms
Anwarkhat Mahboob Co vs The State of Bombay now Maharashtra and others the question that arose was whether conversion of one commodity into another commercially different article would amount to consumption
The facts of the case were that tobacco was purchased and in the Bombay State the stem and dust from the tobacco was removed
It was contended that removing the stem and dust from the tobacco did not amount to consumption of tobacco or had the effect of converting tobacco into an article commercially different
The Court held that when the tobacco was delivered in the State of Bombay for the purchase of changing it into a commercially different article viz biddipatti the delivery was for the purpose of consumption
This Court followed the decision in State of Travancore Cochin and ors
v Sanmugha Vilas Cashew Nut Factory and Ors
wherein it was held that the raw cashew nuts were put through a process and new articles of commerce namely cashew nut oil and edible cashew nut kernels were obtained
The Court expressed the view that the raw cashew nut is consumed in the process
On the facts the High Court found alter referring to the different processes of baking or roasting
Shelling pressing pealing etc
that although most of the process is done by hand part of it is also done mechanically by drums
Oil is extracted out of the outer shells as a result of roasting
After roast 249 ing the outer shells are broken and the nuts are obtained
The i J poison is eliminated by pealing oil the inner skin
By this process of manufacture
the respondents really consume the raw cashew and produce new commodities
This Court accepted this finding and observed at p 113 that the raw cashew nuts after they reach the respondents are put through a process and new articles of commerce namely cashew nut oil and edible cashew nut kernels are obtained
In Anwarkhan Mahboob Co supra this Court gave the example of the process through which cotton is put through before ultimately the final product the wearing apparel is consumed by men women and children
The Court observed But before cotton has become a wearing apparel it passes through the hands of different producers each of whom adds some utility to the commodity received by him
There is first the act of ginning ginned Cotton is spun into yarn by the spinner the spun yarn is woven into cloth by the weaver the woven cloth is made into wearing apparel by the tailor
 At each of these stages distinct utilities are produced and what is produced is at the next stage consumed
It is usual and correct to speak of raw cotton being consumed in ginning
Applying this test the conclusion is irresistible that when uncrushed salt is crushed in the factory it is commercially a different article and the uncrushed salt must be held to have been consumed
The word use is of wider import than consumption
It cannot be denied that the uncrushed salt has been used and by the user a new product crushed salt has come into existence
On a consideration of the facts and circumstances of the case we are satisfied that octroi is leviable on the uncrushed salt which is brought to the octroi area and crushed as the activity would amount to both consumption and use of the uncrushed salt
In the result the appeals fail and are dismissed with costs
NVK Appeals dismissed


Summary:
In 1948 on the formation of Saurashtra State Jaffrabad came within its territorial limits and the Bombay District Municipal Act 1901 as adapted and applied to the said State became applicable to Jaffrabad
Jaffrabad Municipality the predecessor of the respondent was constituted under the Bombay District Municipal Act 1901
The State of Saurashtra within the territorial limits of which the said Municipality was situate promulgated ordinance No 47 of 1949 on 31 X 49 called the Saurashtra Terminal octroi ordinance 1949
Section 2 cl
2 of the said ordinance defines octroi as including a terminal tax
Section 3 empowered the Government to impose terminal tax and octroi duty and provided that octroi may be imposed on animals or goods or both within the octroi limits brought for consumption or use therein
 Section 4 empowered the Government to make rules in exercise of which the State Government made the Saurashtra octroi and Terminal Tax Rules on 8th December 1949
Rule 3 the charging rule provided that octroi is payable in respect of goods set out in Schedule I of the Rules and prescribed that it shall be payable at the nakas at rates set out therein
Item No 23 is Salt for Factory
Schedule II enumerated a list of items which are exempt from octroi duty and contained in Item No 6 a sub item in Gujarat which means salt
The appellant was running a salt manufacturing works at Jaffrabad
The company had constructed salt works grinding mills trolly tracks and a jetty at the port site
The major portion of the salt works is situated out of the municipal limits
The salt is manufactured outside the municipal limits
The grinding mills and the part of the trolly track leading to jetty came within the municipal limits of the respondent Jaffrabad Municipality
The salt is prepared in the salt pans outside the octori limit and the salt which is crushed is taken to the crushing factory and the salt which is not to be crushed is taken in uncrushed form
directly to the jetty over the trolly track part of which passes through the octroi limits of the municipality
The salt that is crushed in the crushing factory is also after crushing taken by trolly to the jetty
From the jetty the salt whether crushed or uncrushed as the case may be is exported by steamers
244 The Municipality demanded from the appellant octroi in respect of salt manufactured by it
The appellant paid under protest and filed a suit against the respondent for declaration that the salt manufactured by the appellant at its salt works at Jaffrabad and exported uncrushed andor crushed was not liable to octroi duty and the goods passing through municipal limits from the salt works are not liable to octroi duty and for an injunction restraining the respondent from recovering the amount claimed as octroi
Another suit claiming refund of the octroi paid was also filed
The two suits were decreed the court declaring that the salt manufactured by the appellant company is not liable to octroi duty
The Municipality being aggrieved preferred appeals and the appellate court while dismissing the appeals and confirming the decrees of the trial court held that the perpetual injunction granted by the trial court would not apply to the salt entering the octroi limits for consumption or use for the factory situated within the octroi limits of the Municipality
The Municipality preferred second appeals to the High Court which allowed them except to the extent of confirming the declaration that uncrushed salt of the appellant company which is directly sent from the stacking ground to the jetty is not liable to octroi provided the plaintiff company followed the prescribed rules and formalities
The other claims in the suits were however dismissed
On the question whether the salt manufactured by the appellant outside the octroi limits of the respondent and brought within those limits for the purpose of being crushed into powder in the appellant s factory situated within those limits and then exported is liable to octroi
 HELD 1
Octroi is leviable on the uncrushed salt which is brought to the octroi area and crushed as the activity would amount to both consumption and use of the uncrushed salt
249 F Burmah Shell oil Storage Distributing Co India Ltd vs The Belgaum Borough Municipality 1963 Supp
2 SCR 216 Ms Anwarklan Mahboob Co vs The State of Bombay now Maharashtra 161 1 SCR 709 State of Travancore Cochin  Ors
vs Shanmugha Vilas Cashew Nut Factory  ors
  referred to
In the Constitution of India Entry 52 in List II in Seventh Schedule a right to impose tax on entry of goods into the local area for consumption use or sale is conferred
The precise meaning to be given to the words consumption and use will depend upon the context in which they are used
These words are of wide import the word use being of wider import than consumption
248A 247H 249E
While terminal tax is a kind of octroi which is 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 are leviable in respect of the goods put to some use or the other in the area but only if they were meant for such use
248B 4
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 leal contents the word 245 consumption has a wider meaning
It is not necessary that by the act of consumption the commodity must be destroyed or used up
248C D In the instant case the uncrushed salt is crushed in the factory which is commercially a different article and the uncrushed salt must be held to have been consumed
The uncrushed salt has been used and by the use a new product crushed salt has come into existence
249E