1 S.A. 233/2010 - ( J ) IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABAD SECOND APPEAL NO. 233 OF 2010 Union of India Owner of the Central Railways represented by Central Railways by its General Manager Bombay V.T. Through its Divisional Materials Manager, Central Railway, Bhusawal, Tq. Bhusawal, Dist. Jalgaon. .... APPELLANT V E R S U S 1. The Municipal Council by its Chief Officer Bhusawal, Tq. Bhusawal, Dist. Jalgaon. 2. The State of Maharashtra (Already deleted in the Trial Court by Order below Exh. 17, dated 17/04/1995 ). .... RESPONDENTS ------------------------------------------------------------------------------------------------------- Mr.M.N.Navandar, Advocate for appellants. Mr. G.V. Wani, Advocate for respondent no. 1. -------------------------------------------------------------------------------------------------------- 2 S.A. 233/2010 - ( J ) CORAM : S.V. GANGAPURWALA, J. DATE: 07/09/2010 JUDGMENT : 1. Admit. With the consent of the learned counsel for the parties, the matter is taken up for final hearing. 2. Heard Mr.M.N.Navandar, the learned counsel for appellant and Mr. G.V. Wani, the learned counsel for respondent no. 1. 3. The present appellant had filed Spl. Civil Suit No. 359 of 1992 for declaration and perpetual injunction against present respondent no. 1 contending that the goods brought by the appellant are not leviable for octroi duty. 4. The present appellant had imported the goods such as gears, wheels required for locomotive within the municipal limits of respondent no. 1 – Municipal Council. The defendant detained the said material. It is further case of the appellant that in spite of repeated representations, amount of Rs. 3,08,219.45 Ps. was illegally collected as octroi duty by the defendant. The plaintiff as such filed Suit for declaration that the defendant is not entitled to claim octroi on the goods brought by plaintiff or 3 S.A. 233/2010 - ( J ) for itself within octroi limits of the defendant and for injunction. The said Suit bearing Spl. Civil Suit No. 358 of 1992 came to be dismissed. It was held that the action and demand of the defendant imposing octroi duty on the goods is not illegal and is under the authority of law. The present appellant aggrieved by the said Judgment and Decree, preferred Appeal before the District Court, Jalgaon bearing R.C.A. No. 256 of 2003. The Appellate Court vide its Judgment and Decree dated 13/11/2009 dismissed Appeal confirming the judgment and Decree passed by the trial Court. The appellant has assailed the said Judgment before this Court. 5. Having heard the learned counsel for the respective parties, following substantial question of law arises : “ Whether the respondent is entitled to levy octroi duty on the goods imported by the appellant within the municipal limits of the defendant ? ” 6. Mr. M.N. Navandar, the learned counsel for the appellant canvassed following proposition - (i) As per Article 285 of the Constitution of India, the goods 4 S.A. 233/2010 - ( J ) imported by the appellant could not be leviable to octroi duty . (ii) As per Section 135 of the Railways Act, the Railway administration is not liable to pay tax. For the said purpose, has relied on the Judgment of the Division Bench of this Court in the case of the Union of India V/s Bhusawal Municipal Council reported in AIR 1982 Bombay – 512. (iii) The approach of the Courts below was erroneous and not in consonance with the provisions of the Statute. (iv) According to the learned counsel for the appellant, when the goods are imported by the Railway administration and is consignee, then in such circumstances, the goods which are passed to the Railway administration becomes the property of the Railways and the same would be exempted from levy of octroi duty. 7. Per contra, Mr. G.V. Wani, the learned counsel for the respondent has submitted that the Courts below have properly construed the fact on the day when the octroi duty was levied, the property had not been transferred to the appellant nor it can be said that the property was owned by the appellant. According to him, the Courts below on examining 5 S.A. 233/2010 - ( J ) the terms of contract between the consignor and the appellant and by applying the provisions of the Sale of Goods Act, have properly come to the conclusion. According to him, no fault can be found with the Judgments of the Courts below. 8. Before proceeding to deal with the rival contentions of the respective counsels, it would be appropriate to refer to the provisions relied by the parties. 9. Article 285 of the Constitution of India reads thus : “ 285. (1) The property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State. (2) Nothing in clause (1) shall, until Parliament by law otherwise provides, prevent any authority within a State from levying any tax on any property of the Union to which such property was immediately before the commencement of this Constitution liable or treated as liable, so gone as that tax continues to be levied in that State. ” 6 S.A. 233/2010 - ( J ) Article 285 of the Constitution is thus in two parts. Sub Article (1) provides for exemption of the property of the Union from all taxes imposed by a State or by any authority within a State which will include a Local Authority like a Municipal Council. This exemption can, however , be taken away by a law made by the Parliament. In other words, the property of the Union could be subjected to tax by a State or by a local authority only if it is so permitted by a law made by the Parliament after the Constitution has come into force. It is therefore a blanket exemption in respect of Union property from State taxation or taxation by any authority within a State. It is on the same pattern as is to be found with regard to exemption of federal property from State taxation in the Australian and the Canadian Constitution. Sec. 114 of Commonwealth of Australia Constitution Act 1900 provides inter alia that “ A State shall not, without the consent of the Parliament of the Commonwealth, raise or maintain any naval or military force or impose any tax on property of any kind belonging to the Commonwealth, nor shall the Commonwealth impose any tax on property of any kind belonging to a State ”. Section 125 of the British North America Act 1867 provides as 7 S.A. 233/2010 - ( J ) follows : “ No lands or property belonging to Canada or any Province shall be liable to taxation ”. It is, however, open to the Parliament to enact a law which will enable the State or any authority within a State to tax the property of the Union. ” 10. Section 135 reads thus : “ 135. Notwithstanding anything to the contrary in any enactment, or in any agreement or award based on any enactment, the following rules shall regulate the levy of taxes in respect of railways and from railway administrations in aid of the funds of local authorities, namely : (1) A railway administration shall not be liable to pay any tax in aid of the funds of any local authority unless the Central Government has, by notification in the Official Gazette, declared the railway administration to be liable to pay the tax. (2) While a notification of the Central 8 S.A. 233/2010 - ( J ) Government under Cl. (1) of this section is in force, the railway administration shall be liable to pay to the local authority either the tax mentioned in the notification or, in lieu thereof, such sum, if any, as an officer appointed in this behalf by the Central Government may having regard to all the circumstances of the case, from time to time determine to be fair and reasonable. (3) The Central Government may at any time revoke or vary a notification under Cl. (1) of this section ”. 11. Section 154 of the Government of India Act, 1935 reads thus : “ 154. Property vested in His Majesty for purposes of the government of the Federation shall save in so far as any Federal law may otherwise provide, be exempt from all taxes imposed by, or by any authority within a province or Federated State. Provided until any Federal law otherwise provides any property so vested which was immediately before the commencement for Part III of this Act liable or treated as liable to any such tax shall so long as that tax continues continue to be liable, or 9 S.A. 233/2010 - ( J ) to be treated as liable, thereto. ” 12. Section 2 (28) of the Maharashtra Municipalities Act, 1965 ( as it existed then ) defines Octroi as under : “ Octroi : Octroi is a tax (1) on the entry of the goods, (2) into a municipal area, for (3) consumption, use or sale (4) therein i.e. in the municipal area. If the goods are brought into the municipal area for any other purpose e.g. Exhibition, repairs etc., they are not liable to octroi duty. If the goods are only passing by a road through the village octroi can not be levied thereon as is clear from the word ‘ therein ’ used in the definition. “ Goods ’ as defined in cl. (16) includes animals also. As it is not possible to ascertain at the time of the entry of the goods that they are only passing by a road through the village, the octroi on them is recovered, but on further proof that the goods have left the municipal area, octroi rules provide for the refund. Entry of goods within the local area for consumption, use or sale therein is made taxable. The Municipal Council derives its power to tax from the State Legislature, and can not have more extensive authority than the authority of the State Legislature (a). 10 S.A. 233/2010 - ( J ) Octroi is one of the compulsory taxes which a Municipal Council is bound to levy under S. 105, N. 6. Provisions regarding the recovery of octroi are to be found in Ss. 136 to 143. The bye-laws framed by the Municipal Council under S. 322, specify the goods and animals, on which octroi is imposed and their rates. Octroi includes ‘ Terminal tax ’ ” . 13. Section 105 of the Maharashtra Municipalities Act, 1965 gives the power to impose the taxes. Section 105 (1) reads thus : A - xxxxxxxxxxxxxxxxx B - Octroi C - xxxxxxxxxxxxxxxxx D - xxxxxxxxxxxxxxxxx E - xxxxxxxxxxxxxxxxx 14. Section 137 Maharashtra Municipalities Act, 1965 ( as it existed then ) reads thus : “ 137 (1) : A person bringing into or receiving from beyond the octroi limits of a Council any animal or goods, on which octroi is payable shall, when required by an officer authorized in this behalf by the Chief Officer and so far as may be necessary for ascertaining the amount of tax chargeable, - 11 S.A. 233/2010 - ( J ) (a) permit that Officer to inspect, examine, weigh and otherwise deal with such animal or goods ; (b) communicate to that Officer any information and exhibit to him any bill, invoice or document of a like nature, which he may possess relating to such animal or goods; and (c) make a declaration in writing to that Officer regarding the correctness and accuracy of the document shown to him. (2) If any person bringing into or receiving from beyond the octroi limits of a Council in which octroi is leviable, any conveyance or package, refuses on demand of an officer authorized by the Chief Officer in this behalf, to permit the officer to inspect the contents of the conveyance or package for the purpose of ascertaining whether it contains anything in respect of which octroi is payable, the officer may cause the conveyance or package to be taken without unnecessary delay before such Executive Magistrate, as the State Government appoints in this behalf by name or office, who shall cause the inspection to be made in his presence ”. 12 S.A. 233/2010 - ( J ) 15. It is undisputed that the appellant had imported the said goods within the municipal limits of the respondent – Municipal Council for the purpose of its consumption. Octroi is leviable on the entry of goods in to the local area for consumption, use or sale therein. The appellant had ordered the said goods and had imported the same for consumption within the municipal limits of respondent. The appellant had placed the order with the consignor. Pursuant to the said order, the consignor dispatched the said goods to the appellant for use of the appellant within the municipal limits of the respondent. As such, if at all any person is liable to pay octroi, the same would be the appellant and not the consignor who had dispatched the goods as the goods were meant for the use and consumption by the appellant within the municipal limits of the respondent. The pleadings in the plaint are specific in this regard. The appellant has pleaded that the goods in question are imported by the appellant within the municipal limits of defendant – Municipal Council for its use and consumption. The Court below has dilected on the count that there is nothing on record to show that the goods were transferred to the appellant. The said discussion was not relevant in as much as when the goods were imported by the appellant for its use and consumption within the octroi limits of the respondent, the primary responsibility to pay the octroi would rests with the appellant only and in view of Section 184 and 135 of the Railways Act, 1989 read with Article 285 of the Constitution of India, the appellant would not be liable to 13 S.A. 233/2010 - ( J ) pay the octroi duty. The said issue is no longer res-integra in view of the Judgment of the Division Bench of this Court in the case of the Union of India V/s Bhusawal Municipal Council reported in AIR 1982 – Bombay – 512, wherein the Division Bench has held thus, “ Looking at the matter from a different aspect, it will have to be ascertained whether the notification of 1907 is such that the proviso to Section 154 of the Government of India Act would be attracted to it. Now there can be no doubt, as already pointed out, that the notification of 1907 enables even Octroi Duty to be levied in respect of goods. But for the purposes of the proviso to S. 154, the requirement of that proviso has to be satisfied. The requirement as pointed out by Ormond, J. in Calcutta Corporation’s case, is that the property which is being subjected to tax must be in existence before 1st April, 1937 physically and the property must be the same at the time when the tax is sought to be levied. This is the undisputable effect of the proviso and the manner in which it is worded and thus the proviso to Section 154, Government of India Act, 1935 saved some taxes. The taxes saved were in respect of property which vested in His Majesty and was immediately before 1st April, 14 S.A. 233/2010 - ( J ) 1937 liable to tax and taxes only in respect of such property could be recovered after 1st April 1937. The physical identity of the property, before and after 1st April 1937, is therefore, a sine qua non for levy of a tax after 1st April, 1937 by virtue of the proviso of S. 154 of the Government of India Act, 1935. Such can not however be said to be the case where Octroi Duty is sought to be levied. Octroi Duty is levied once and for all on any particular article or goods. There is no occasion to levy Octroi Duty again and again in respect of the same property. In other words, the Octroi Duty is paid on a property which comes for the first time within the municipal limits and that is brought for consumption, sale or use and the same goods are not again liable to duty. Therefore, the physical identity of the property prior to 1st April 1937 can not be the same where on and after 1st April, 1937 new goods are brought within municipal limits and Octroi Duty is sought to be levied on those goods or articles. In the case of Octroi Duty, therefore, it is obvious that the proviso to S. 154 would be wholly inapplicable and unless there is a Federal Law as contemplated by the substantive provision in Section 154 of the Government of India Act 1935, there will be no power in any Municipal Council to levy Octroi Duty in respect 15 S.A. 233/2010 - ( J ) of Government property after 1st April 1937. That will also be the position in the post constitution period and unless there is a law made by the Parliament permitting the property of the Union to be taxed, Octroi Duty could not be levied after 25th January, 1950 ”. 16. The said case referred supra was in respect of the respondent Municipal Council itself. When the appellant has come with the specific case that the said goods were imported by it, then in such circumstances, the Courts below could not have presumed that the said goods have not passed to the appellant, inter-alia the said goods would be subject to payment of octroi. In view of the Judgment of the Division Bench in the case of Union of India V/s Bhusawal Municipal Council referred supra, the said issue is no longer open and the goods imported by the appellant for its use and consumption within the Municipal limits of the respondent, the railway administration would not be liable to pay octroi and the demand made by the respondent in that regard would not be in consonance with the provisions of the statute. 17. In light of the above, the Judgment passed by the Courts below can not be sustained. The Suit of the plaintiff as such deserves to be decreed and it is declared that the defendant is not entitled to claim octroi on the goods brought by the plaintiff within the octroi limits of the 16 S.A. 233/2010 - ( J ) defendant. 18. In the result, the Appeal is allowed with no order as to costs. [ S.V. GANGAPURWALA ] JUDGE knp/ SA 233.2010