AJN 00-AS-WP5867.10J 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE CIVIL JURISDICTION WRIT PETITION NO.5867 OF 2010 Pepsico India Holdings Private Limited, a company duly registered under the Companies Act, 1956, having its Registered Office at 3-B, DLF Corporate Park, S-Block, Qutab Enclave, Gurgaon – 122 002, and having its Plant at Plot No.100/1A, MIDC, Dhatav, Roha, District Raigad, through its Authorized Signatory and Sale and Accounts Manager, Mr. Ajay Kedia, having his office at the address mentioned above at Mumbai. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ... Petitioners Versus 1. Sangli Miraj Kupwad Municipal Corporation, a statutory body, constituted under the provisions of the Bombay Provincial Municipal Corporation Act, 1949, having its Head Office at Sangli, Maharashtra, notice may served on The Commissioner, Sangli Miraj Kupwad Municipal Corporation. ) ) ) ) ) ) ) ) ) ) ) AJN 00-AS-WP5867.10J 2 2. The Deputy Commissioner, Sangli Miraj Kupwad Municipal Corporation, having his office at Sangli, Maharashtra. ) ) ) ) 3. The Octroi Superintendent, Sangli Miraj Kupwad Municipal Corporation, having his office at Sangli, Maharashtra. ) ) ) ) ... Respondents Mr. Janak Dwarkadas, senior counsel i/b Mr. R.V. Talasikar for the petitioners. Mr. A.A. Kumbhakoni, senior counsel i/b Mr. Sudhir Prabhu for respondents 1 to 3. Mrs. M.P. Thakur, A.G.P. for the State. CORAM: MRS. RANJANA DESAI & R.V. MORE, JJ. DATE ON WHICH THE JUDGMENT IS RESERVED : 24TH SEPTEMBER, 2010. DATE ON WHICH THE ORDER IS PRONOUNCED: 8TH OCTOBER, 2010. JUDGMENT :- (Per Smt. Ranjana Desai, J.) 1. The petitioner-Company is, inter alia, engaged in the manufacture and sale of aerated beverages marketed under different brands. The products of the company are distributed from its plant at Roha, District Ratnagiri AJN 00-AS-WP5867.10J 3 through its chain distributors to places like Sangli, Miraj and Kupwad. 2. Respondent 1 is the Sangli Miraj Kupwad Municipal Corporation (for short, “the Corporation”) constituted under the Bombay Provincial Municipal Corporation Act, 1949 (for short, “the BPMC Act”). Respondents 2 and 3 are the officers of respondent 1. Respondent 3 is the Octroi Superintendent, who has issued the impugned Bill dated 17/2/2010 demanding Octroi from the petitioners amounting to Rs.8,22,986/-. 3. The petitioners' challenge to the bill must be stated. According to the petitioners, their products are distributed and sold in returnable and reusable glass bottles. Glass bottles are stored in plastic crates. Glass bottles and crates are owned by the petitioners. They are never sold to any distributor or retailer. Once the product in the glass bottles kept in crates is consumed, glass bottles along with crates are returned to the petitioners for filling AJN 00-AS-WP5867.10J 4 after cleaning and washing them. The petitioners pay Octroi levied on the aerated beverages when they enter Octroi limits of Sangli, Miraj, Kupwad City Municipal Corporations. The impugned bill has the effect of levying Octroi separately on the glass bottles and plastic crates utilized by the petitioners to pack and transport the aerated beverages manufactured by them. The aerated beverages cannot be separated from bottles and crates. The bottles and crates are neither consumed nor sold but are returned. Hence, Octroi cannot be levied on them. The impugned bills are, therefore, illegal and arbitrary. 4. We have heard Mr. Dwarkadas, learned senior counsel for the petitioners at some length. Mr. Dwarkadas reiterated the contentions raised in the petition. He submitted that plastic crates and glass bottles are durable and reusable. They are used a number of times by the petitioners. The cost of the bottles and crates is amortized and included in the retail sale price of the soft drinks. Since the cost of glass bottles and crates is AJN 00-AS-WP5867.10J 5 already included in the price of the beverage on which the Octroi is levied and collected, no further Octroi can be levied on the glass bottles and crates. The cost of the durable and returnable bottles and crates cannot be added to the cost of the beverage as is also the case under the Central Excise Act and the Maharashtra Value Added Tax Act, 2005. Mr. Dwarkadas drew our attention to the definition of the term Octroi as found in Section 2(42) of the BPMC Act. He submitted that as per this definition, Octroi means a cess on the entry of goods into the limits of a city for consumption, use or sale therein. Counsel submitted that the bottles and crates are not sold. They are not consumed. The bottles are used but again sent out and refilled. The crates are also similarly sent back. Hence, the levy of Octroi is unjustified. 5. Mr. Kumbhakoni, learned senior counsel for the respondents submitted that the petitioners have made out no case for quashing the impugned bill. He relied on the judgment of the Supreme Court in Acqueous Victuals AJN 00-AS-WP5867.10J 6 Private Limited v. State of Uttar Pradesh & Ors. (1998) 5 SCC 474. He pointed out that in this judgment, the Supreme Court has held that to attract Octroi to goods imported within the Municipal limits, the goods must be completely consumed within the Municipal limits, or used for an indefinite period in such a way that they come to rest finally and permanently within the Municipal limits or sold within the Municipal limits. That is the underlying idea behind the words 'sale', 'consumption' or 'use' found in the definition of the term 'Octroi'. Counsel submitted that in this case, the Supreme Court has stated that it is for the Companies who bring the said bottles in the Municipal limits to satisfy the authorities that they are not liable to pay Octroi in respect of those bottles which were not used, consumed or sold in the Municipal limits but were taken out for recycling. Counsel submitted that on the importers so satisfying the authorities, they would be entitled to refund. Counsel submitted that the present case is completely covered by the said judgment. Counsel submitted that refund can be claimed under the Sangli, AJN 00-AS-WP5867.10J 7 Miraj and Kupwad City Municipal Corporation Octroi Rules, 1999 (for short, “the said Rules). 6. In rejoinder, Mr. Dwarkadas submitted that judgment in Acqueou's case is not applicable to the present case because in that case the entry whereby Octroi could be levied provided levy of Octroi on the basis of weight. Weight of bottles and crates was taken into account while computing Octroi. Counsel pointed out that in the present case, the impugned bill seeks to levy Octroi on the basis of value of the bottles and value of the crates on the ground that these bottles and crates are being used in the Municipal limits. The impugned bill is, therefore, clearly illegal. 7. We have already narrated the facts of the present case. It is necessary to refer to Acqueous in detail and then revert to the said facts, because in our opinion the judgment in Acqueous applies to the present case on all fours. AJN 00-AS-WP5867.10J 8 8. In Acqueous, the petitioner-Company was engaged in the business of bottling soft drinks like Gold Spot, Limca, etc. under an agreement with M/s. Parle (Exports) Private Limited, the manufacturer of the said soft drinks. After bottling these beverages at its plants at Bareilly, the petitioner-Company distributed the same to wholesalers in Districts of Uttar Pradesh, which included the respondent Municipalities of Moradabad, Rampur, Shahjahanpur and Pilibhit. Section 128 of the Uttar Pradesh Municipalities Act, 1916 conferred powers on the Municipal Boards to impose Octroi on goods or animals brought within the Municipality for consumption, use or sale therein. Bye- laws of the Municipalities provided for levying Octroi on soft drinks like Coca-cola, Fanta, etc. As the Municipalities were seeking to levy Octroi on the basis of gross weight not only of the beverages but also of the bottles containing the beverages which were brought within the Municipal limits, the petitioner-Company filed writ petition in the Allahabad High Court challenging the said levy. AJN 00-AS-WP5867.10J 9 According to the petitioner-Company, the bye-laws provided for levying Octroi on soft drinks but not on the weight of bottles which contained those soft drinks. Hence, the levy of Octroi was illegal. The High Court dismissed the petition. The High Court held that the bottles in which the soft drinks were carried could be said to have been used within the Municipal limits for the purpose of storing them till they were ultimately utilized by the consumers concerned. Therefore, even the weight of bottles containing these liquids could legitimately be taken into consideration by the Municipalities for imposing the Octroi duty thereon. 9. Dealing with the petition challenging the High Court's decision, the Supreme Court referred to Section 128(1) (viii) of the Uttar Pradesh Municipalities Act, 1916 which states that subject to any general rules or special orders of the State Government in this behalf, the taxes which a Board may impose can consist of Octroi on goods or animals brought within the Municipality for consumption, AJN 00-AS-WP5867.10J 10 use or sale therein. The rates of levy were given in Schedule I. Schedule I referred to aerated water but not to aerated water bottles. 10. The Supreme Court considered the main charging provision i.e. Section 128(1)(viii) which stated that Octroi can be charged on goods which were brought within the Municipality for consumption, use or sale (emphasis supplied) and held that packing which contains the consignment of octroiable beverages would remain liable to be included in the taxable gross weight of consignment provided such packing is shown to be brought within the Municipal limits for the purpose of its sale, consumption, or use within the Municipal limits. But, if the packing is found to have been taken out of the Municipal limits after its contents were discharged within the Municipal limits, then the weight of such packing cannot be brought to Octroi tax or if such tax is levied at the entry point, it would become liable to be refunded. The Supreme Court further observed that the claim of refund would involve AJN 00-AS-WP5867.10J 11 disputed questions such as whether such consignments with the packing were actually sold with their contents to the local consumers, or wholesalers, whether they were consumed or used up within the local limits or whether they were used for an indefinite period and ultimately rested within the Municipal limits and had not been taken out. These disputed questions of fact are required to be examined and adjudicated upon when claims for refund are considered by the appropriate authorities. 11. While arriving at the above conclusion, the Supreme Court referred to the Constitution Bench judgment in Burmah Shell Oil Storage & Distributing Company of India Limited v. Belgaum Borough Municipality, AIR 1963 SC 906 where it was dealing with the question whether Octroi was leviable on the goods brought within the limits of Belgaum for consumption by Burmah Shell, for reexport and for sale. While interpreting the words found in Entry No.52 of the State list in the Constitution dealing with taxes on the entry of goods into a local area AJN 00-AS-WP5867.10J 12 for consumption, use or sale therein, the Supreme Court observed that the two expressions, use and consumption together connote the bringing in of goods and animals with a view to their retention either for use without using them up or for consumption in a manner which destroys, wastes or uses them up. The Supreme Court observed that this authoritative pronouncement of the Supreme Court makes it clear that before a Municipality can impose Octroi duty on any commodity, it has to be shown that the commodity concerned was brought within the Municipal limits for consumption, that is, for being totally used up so that it ceases to exist within the Municipal limits or it was to be used for an indefinite period within the Municipal limits so that it ultimately rests within the Municipal limits and does not go out subsequently, or the commodity concerned must be shown to have been brought within the Municipal limits for the purpose of sale within the said limits. 12. The Supreme Court also referred to its judgment in AJN 00-AS-WP5867.10J 13 S.M. Ram Lal & Co. v. Secretary to Government of Punjab, 1969 UJ 373 (SC), where the Supreme Court was dealing with the question whether the wool imported within the Municipal limits of Faridabad in raw form for dyeing within the Municipal limits could be said to have been used in the Municipal limits or consumed therein so as to attract Octroi duty thereon. The Supreme Court observed that the word 'use' occurs in Entry No.52 of List II of Seventh Schedule sandwiched between 'consumption' and 'sale', and it must take colour from the context in which it occurs. The Supreme Court further observed that the coupling of three words 'consumption', 'use' and 'sale' connotes that the underlying common idea was that either the title of the owner is transferred to another or the thing or commodity ceases to exist in its original form. 13. The Supreme Court did not approve of the High Court's reasoning that the bottles and shells were used as containers till final consumption of contents and, therefore, the bottles which contained the beverage were AJN 00-AS-WP5867.10J 14 used till the final consumption stage and were, therefore, liable to levy of Octroi leaving aside the question whether they were brought within the Municipal limits for consumption thereof. Referring to Burmah Shell's case, the Supreme Court held that though the use of the bottles may not amount to its destruction or total using up but to attract Octroi, the bottles must have finally rested within the Municipal limits and not taken out. The Supreme Court concluded that to attract the levy of Octroi on the goods brought within the Municipal limits, there must be proof of the fact that the goods got consumed completely within the Municipal limits or were used for an indefinite period in such a way that they come to rest finally and permanently within the Municipal limits or sold within the said limits. It is also pertinent to note that when certain judgments of the Supreme Court dealing with the question whether value of the bottles could be subjected to sales tax and liable to be included in the taxable turnover including the value of the beer contained therein were cited, the Supreme Court observed that the said AJN 00-AS-WP5867.10J 15 judgments cannot be of any avail to the petitioner especially when direct judgment of the Constitution Bench in Burmah Shell's case was in the field. 14. With reference to the facts of the case before it, the Supreme Court observed that the moot question was whether the bottles which were filled in with beverages imported for sale within the Municipal limits could be said to have been consumed or used within the Municipal limits. The question whether the bottles were really sold by the petitioner-Company within the Municipal limits requires resolution on consideration of relevant facts. If empty bottles are taken out of Municipal limits, they cannot be said to have been consumed or destroyed within the Municipal limits. The question which needs investigation is whether out of total consignment of bottled beverages imported within the Municipal limits, the entire consignments of the very bottles after getting emptied got re-exported or whether some of the said bottles forming part of the original consignments got AJN 00-AS-WP5867.10J 16 destroyed by way of breakage, etc. or were never returned by the consumers concerned and only rest of the imported bottles were re-exported by enabling the consumers and retailers or wholesalers to get refund of the price of the bottles paid by way of advance security from the petitioner-Company on return of these empty bottles for recycling. It is axiomatic, observed the Supreme Court, that if the bottles in which beverages were brought within the Municipal limits for sale to consumers had themselves got destroyed by breakage, etc. or were not returned by consumers, they could be said to be consumed within the Municipal limits and, hence, there would be no occasion for their export at any time thereafter. In the view that it had taken, the Supreme Court held that if the petitioner-Company satisfied the authorities concerned that the bottles containing the original consignments after getting emptied within the Municipal limits were actually taken out of the Municipal limits for recycling, then it would be entitled to claim proportionate refund of the Octroi duty AJN 00-AS-WP5867.10J 17 assessed on the weight of such empty bottles only subject to the burden of such amount of duty not being shown to have been passed on to consumers of beverages or to anyone else, i.e. there is no unjust enrichment. 15. Setting aside the High Court's order to the above extent, the Supreme Court permitted the petitioner- Company to lodge its claim for refund by producing evidence on the following points : “(a) Nature of the consignments concerned with their dates and the number of bottles packed with beverages brought within the municipal limits with their weight; (b) Proof regarding the fact that these bottles were not sold within the municipal limits to wholesalers, retailers or to any other person; (c) Number of bottles covered by the consignments concerned which were subsequently taken out as empty bottles beyond the municipal limits for recycling and weight of such empty bottles; (d) Whether the bottles which are actually found to have been taken out of the municipal limits were the very same bottles containing beverages brought AJN 00-AS-WP5867.10J 18 within the municipal limits by way of relevant consignments; (e) Whether the value of such bottles and amount of octroi duty on their weight was passed on to the consumers or not?” 16. In our opinion, the present case is completely covered by Acqueous. Mr. Dwarkadas tried to distinguish this judgment from the present case on the ground that here the impugned bill seeks to levy Octroi on the basis of the value of bottles and the crates and the petitioner- company has while bringing the bottles and crates within the limits of the respondent-corporation paid Octroi on the invoice price which includes cost of the bottles and crates. Mr. Dwarkadas submitted that in Acqueous, weight of bottles was taken into account while computing Octroi because the relevant entry provided for it. Such is not the situation here. We are not impressed by this submission. The principles laid down by the Supreme Court namely that Octroi would be leviable in case the bottles and the crates finally rest in the Municipal limits, i.e. they are consumed, used or sold will be applicable to all cases. If AJN 00-AS-WP5867.10J 19 however, any company or importer feels that Octroi is already charged on the goods brought by him within the Municipal limits or that since the goods are taken out of the Municipal limits for recycling, no Octroi can be levied, it can always resort to the provisions of refund contained in the said Rules. 17. In the instant case, we are concerned with definition of Octroi contained in Section 2(42) of the BPMC Act. It reads as under : “2(42). Octroi means a cess on the entry of goods into the limits of a city for the consumption, use or sale therein; but does not include a cess as defined in clause 6A.” 18. Relevant entry in respect of aerated water in the Octroi schedule under the said Rules is at serial no.11(D). Relevant entry as regards bottles is at serial no.52. Relevant entry as regards barrel crate and individual crate, is at serial No.53E. The said Rules contain detailed provisions under which an importer can make an application for refund. AJN 00-AS-WP5867.10J 20 19. In our opinion, as laid down by the Supreme Court in Acqueous in case the petitioner-company is sending out the same bottles for recycling and if the bottles and crates are not sold, used, or consumed in the Municipal limits of the respondent-corporation, that is to say, if they have not finally rested in the Municipal limits of the respondent- corporation in which they are imported, the petitioner- company can always make an application for refund under the said Rules. The petitioner-company will have to produce evidence on the points detailed by the Supreme Court in Acqueous, which we have quoted hereinabove. On the petitioner-company making such application, the concerned authority will consider it in its proper perspective and if a case is made out shall grant refund. 20. The petition is disposed of in the aforestated terms. [MRS. RANJANA DESAI, J.] [R.V. MORE, J.]