Case: M/s. Hiralal Thakorlal Dalal Vs. Broach Municipality and Others

Burmah Shells case (supra) and felt that there were "burred areas" of sale within the territory which may attract a tax under entry 52 (List II of Seventh Schedule) left uncertain by the aforesaid decision of this Court so that the matter deserved consideration by a larger Bench. This is how the case has come up before us for hearing. We have allowed Municipal Council, Jodhpur, to intervene in the hearing at its request.The short question before us is whether this Courts decision in the Burmah Shells case (supra) squarely covers the present controversy or whether that decision requires reconsideration. The learned counsel have in fact confined their arguments to this narrow field.3. In order to appreciate the controversy, it will be desirable to refer to the basic facts of the Burmah Shells case (supra). The Burmah Shell Oil Storage and Distribution Co. India Ltd., hereinafter referred to as the Company, was a dealer in petrol and other petroleum products which it manufactured in its refineries situated out-side the octroi limits of Belgaum Municipality. It brought these products inside that area either for use or consumption by itself or for sale generally to its dealers and licensees who in their turn sold them to others. According to the Company the goods brought by it within the octroi limits could be divided into four categories as follows:"1. Goods consumed by the Company;2. Goods sold by the Company through its dealers or by itself and consumed within the octroi limits by persons other than the Company;3. Goods sold by the Company through its dealers or by itself inside the octroi limits to other persons but consumed by them outside the octroi limits; and4. Goods sent by the Company from its Depot inside the octroi limits to extra-municipal points where they are bought and consum ed by persons other than the company."4. This Court examined the scheme of taxation under the Act and the rules and the bye-laws made by the Municipality for the levy of octroi. It also took note of the fact that the words "use or sale" were substituted for the words "or use" by Bombay Act 35 of 1954, which are the subject matter of a fresh controversy before us, and made a reference to the Legislative Lists in the Government of India Act, 1935 and the Constitution. After examining the history of octrois and terminal taxes, this Court held that "octrois were taxes on goods brought into the local area for consumption, use or sale", and that "they were leviable in respect of goods put to some use or other in the area but only if they were meant for such user." It was specifically clarified that the word "sale" was included only in 1954 in order to bring the description of octroi in the Act in line with the Constitution, and that the expression "consumption" and "use" together "connote the bringing in of goods and animals not with a view to taking them out again but 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."Looking to the trade of the Company, this Court held that sale by it directly to consumers or to dealers was "merely the means for putting the goods in the way of use or consumption" and that the word "therein" does not mean that all the act of consumption must take place in the area of the municipality. The Court therefore went to hold as follows.-"In other words, a sale of the goods brought inside, even though not expressly mentioned in the description of octroi as it stood formerly, was implicit, provided the goods were not re-exported out of the area but were brought inside for use or consumption by buyers inside the area. In this sense the amplification of the description both in the Government of India Act, 1935 and the Constitution did not make any addition to the true concept of octroi as explained above. That concept included the bringing in of goods in a local area so that the goods come to a repose there. When the Government of India Act, 1935 was enacted, the word octroi was deliberately avoided and a description added to forestall any dispute of the nature which has been raised in this case. In other words, even without the description the tax was on goods brought for consumption, use or sale. The word octroi was also avoided because terminal taxes are also a kind of octroi and the two were to be allocated to different legislatures."5. In our opinion, even without the word sale in the Boroughs Act the position was the same provided the goods were sold in the local area to a consumer who bought them for the purpose of use or consumption or even for resale to others for the purpose of use or consumption by them in the area. It was only when the goods were re-exported out of the area that the tax could not legitimately be levied......"This Court categorically held that the Company was liable to pay octroi on goods brought into the local area (a) to be consumed by itself or sold by it to consumers direct, and (b) for sale to dealers who in their turn sold the goods to consumers within the municipal area irrespective of whether such consumers bought them for use in the area or outside it, but it was "not liable to octroi in respect of goods which it brought into the local area and which were re-exported."6. The law on the subject matter of the present controversy has thus been laid down quite clearly in the Burmah Shells case (supra) and the present case squarely falls to be governed by it. We are also in agreement with that interpretation of the law. It may be mentioned that the learned counsel have not been able to advance any new argument justifying a reconsideration of the decision.7.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]This Court examined the scheme of taxation under the Act and the rules and the bye-laws made by the Municipality for the levy of octroi. It also took note of the fact that the words "use or sale" were substituted for the words "or use" by Bombay Act 35 of 1954, which are the subject matter of a fresh controversy before us, and made a reference to the Legislative Lists in the Government of India Act, 1935 and the Constitution. After examining the history of octrois and terminal taxes, this Court held that "octrois were taxes on goods brought into the local area for consumption, use or sale", and that "they were leviable in respect of goods put to some use or other in the area but only if they were meant for such user." It was specifically clarified that the word "sale" was included only in 1954 in order to bring the description of octroi in the Act in line with the Constitution, and that the expression "consumption" and "use" together "connote the bringing in of goods and animals not with a view to taking them out again but 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."Looking to the trade of the Company, this Court held that sale by it directly to consumers or to dealers was "merely the means for putting the goods in the way of use or consumption" and that the word "therein" does not mean that all the act of consumption must take place in the area of the municipality. The Court therefore went to hold asother words, a sale of the goods brought inside, even though not expressly mentioned in the description of octroi as it stood formerly, was implicit, provided the goods were not re-exported out of the area but were brought inside for use or consumption by buyers inside the area. In this sense the amplification of the description both in the Government of India Act, 1935 and the Constitution did not make any addition to the true concept of octroi as explained above. That concept included the bringing in of goods in a local area so that the goods come to a repose there. When the Government of India Act, 1935 was enacted, the word octroi was deliberately avoided and a description added to forestall any dispute of the nature which has been raised in this case. In other words, even without the description the tax was on goods brought for consumption, use or sale. The word octroi was also avoided because terminal taxes are also a kind of octroi and the two were to be allocated to differentour opinion, even without the word sale in the Boroughs Act the position was the same provided the goods were sold in the local area to a consumer who bought them for the purpose of use or consumption or even for resale to others for the purpose of use or consumption by them in the area. It was only when the goods were re-exported out of the area that the tax could not legitimately be levied......"This Court categorically held that the Company was liable to pay octroi on goods brought into the local area (a) to be consumed by itself or sold by it to consumers direct, and (b) for sale to dealers who in their turn sold the goods to consumers within the municipal area irrespective of whether such consumers bought them for use in the area or outside it, but it was "not liable to octroi in respect of goods which it brought into the local area and which werelaw on the subject matter of the present controversy has thus been laid down quite clearly in the Burmah Shells case (supra) and the present case squarely falls to be governed by it. We are also in agreement with that interpretation of the law. It may be mentioned that the learned counsel have not been able to advance any new argument justifying a reconsideration of the decision.