Case: Municipal Council Of Jodhpur Vs. M/S. Parekh Authmobilies Ltd

2. Writ Petition No. 17 of 1976 was filed by M/s. Parekh Automobiles, respondent 1 in C.A. No. 1552 of 1981. The said appeal may be take up and disposal of the same would lead to the disposal of other appeals. In the said writ petition, the petitioner prayed for a direction or an order restraining the respondents therein from realising any tax on diesel, etc. Which are supplied to the respondent herein at Dangiawas by the Indian Oil Corporation, being respondent 2 herein. It was further prayed that the respondents therein be ordered to refund the octroi tax as mentioned in the Schedule to the said petition which, it was alleged, had been illegally realised from the petitioner. It was further prayed that respondent 1 be directed to provide transport passes to the Indian Oil Corporation under Rule 13 of the Rajasthan Municipal Octroi Rules, 1962 read with Section 133 of Rajasthan Municipalities Act. It was the case of the petitioner in the High Court, respondent 1 herein, that the Municipal Council had no jurisdiction to levy octroi tax on the goods brought within the municipal limits but not sold, consumed or used therein and subsequently exported outside the said limits. The case of respondent 2 was that HSD (diesel) which was brought by the Indian Oil Corporation within the local limits of Jodhpur Municipality was ultimately exported and sold to respondent 1 at Dangiawas for use, consumption or sal outside the municipal limits and as such the Municipal Council had no jurisdiction to levy octroi tax on the same. In reply to the said writ petition, it was stated by the Municipal Council, being the appellant herein, that the sale of HSD (diesel) by respondent 2 to respondent 1 took place at Jodhpur, and only the delivery was effected at Dangiawas as respondent 1 did not have its own tankers but for this respondent 2 was charging, mileage for transmission of goods from its depot to Dangiawas. It was stated that the appellant was charging octroi from respondent 2 and not from respondent 1. It was stated that the question whether the contract of sale between respondent 2 and respondent 1 took place at Jodhpur or at Dangiawas was a disputed question of fact to be decided by reference to the original agreement qua each transaction. It was further stated that the disputed question of fact could not be adjudicated under Article 226 of the constitution. In reply to para 6, it was stated that the current account facility was still provided and had not been stopped, that respondent 2 did not make the declaration as required by Rule 9 and Rule 13(4) of the Rajasthan Municipal Octroi Rules, 1962 and that the goods exported were to be lessened only if such goods had not been sold within the municipal limits and were exported out within a period of six months from the date of entry. The relevant provisions of Section 104 of Rajasthan Municipalities Act, 1959 (hereinafter referred to as the Act) are as(2) An octroi on goods and animals brought within the limits of the municipality for consumption use or sale therein; andSection 133 of the Act provides as follows"133. Power to keep account current with Firm pr Public Body in lieu of levying Octroi on introduction of Goods - (1) The Board if it thinks fit instead of requiring payment of octroi due from any mercantile firm or public body to be made at the time when the articles in respect of which it is leviable are introduced within the octroi limits of the municipality, at any time direct that an account current shall be kept on behalf of the Board of the octroi so due from any such firm or body as the Board specifies in this behalf(2) Every such account shall be settled at intervals not exceeding one month and such firm or public body shall make such deposit or furnish such security as the Board or any committee or officer authorised by it in this behalf shall consider sufficient to cover the amount which may at any time be due from such firm or body in respect of such dues. Every amount so due at the expiry of any such interval shall for the purpose of Chapter VIII be deemed to be and shall be recoverable in the same manner as amount claimed on account of any tax recoverable under the same chapter."3. The Rules, being Rajasthan Municipal Octroi Rules 1962, framed thereunder are relevant and Rule 13 of the said Rules provides as. Facilities for Current Accounts - (1) The Board shall maintain a list in Form No. 6 of all persons whether firms or individuals allowed special facilities under Section 133 of the Act for the payment of octroi. The list shall be kept corrected up-to-date and a copy of the list signed by the Executive Officer shall be kept at each octroi outpost(2) The person to whom such facilities are given printed books of entry passes in duplicate shall be supplied in Form No. 7 on payment of such price as may be fixed by the Board. When such a person wishes to bring his goods into the municipality, he shall fill up the entry pass, the goods shall be dealt with under the ordinary rules. On receipt of the entry pass, the in-charge of the octroi out-post shall see that the person who has signed it is named on his list, and if so, he shall, after satisfying himself that the goods agree with the details entered in the entry pass, fill up the certificate at the foot thereof as well as the coupon. He shall then tear of the coupon, deliver it to the person who presents the entry pass, and admit the goods named in the pass. He shall send the entry passes to the Octroi Superintended, where they shall be examined that the certificate covers the details of the entry pass and the amount of octroi due shall be debited to the account of the person concerned(3) The persons to who special facilities have been given, a printed book of transport passes shall be supplied in Form No. 5 on payment of such a price as may be fixed by the Board. When such a person wishes to transport his goods from the municipality, he shall fill up a transport pass and send it with his goods to the octroi outpost of exit. On receipt of the transport pass, the in-charge of octroi outpost shall see that the person who has signed it is named on the list; and if, so he shall after satisfying himself that the goods to be transported agree with the details entered in the transport pass, fill up the certificate at the foot thereof as well as the coupon. He shall then tear of the coupon and deliver it to the person who presents the transport pass. He shall sent the transport passes to the Octroi Superintendent, where they shall be examined to see that the certificate covers the details of the transport pass and shall be filed separately under the name of each such person(4) In cases provided for sub-rule (3) amount of octroi duty payable shall be based on the total amount of the octroi as shown by the entry passes less the total amount of goods transported outside the municipal limits as shown by the transport passesProvided that in computing the octroi duty payable under sub-rule (4), the goods transported outside the municipal limits shall be lessened only if such goods have not been sold within the municipal limits and if they have been exported out of such limits within a period of six months from the date of their import in such limits(5) Payments by such person shall be made strictly in advance, and at the expiry of his period for which facilities have been given, the name of the person shall immediately be struck off."4. Rule 6 deals with the payment of octroi duty and provides as follows"6. Payment of Octroi Duty - No goods liable to payment of octroi shall, except as otherwise provide in these rules, be brought within the municipal limits until the octroi duty leviable in respect of such goods has been paid at the octroi outpost situated on the route of entry as notified by the Board from time to time for the purpose."Rule 9 deals with the declaration of goods brought into the municipal limits and provides as follows9. Declaration of goods brought into the Municipal Limits. - (1) Every person bringing within the municipal limits goods liable to payment of octroi shall produce such goods at the octroi outpost and shall declare whether goods are intended(i) for consumption, use or sale within the municipality; or(ii) for immediate transportation outside the municipality; or(iii) for temporary detention within municipal limits and eventual transportation outside municipal limits(2) Declaration under clause (i) of sub-rule (1) may be oral, declaration under clause (ii) and (iii) shall be in writing in Form No. 1 and shall be tendered to the in-charge of the octroi outpost at the time of bringing the goods shall be treated as having been brought within the municipal limits for consumption, use or sale therein."It is not necessary for the purpose of this appeal to deal with the facts agitated and found by the High Court. We will, however, refer to the same in brief. Respondent 1 had been allotted retail outlet by respondent 2, Indian Oil Corporation, for sale of petroleum products such as diesel oil, mobile oil, etc. at Dangiawas, which was outside the limits of Jodhpur Municipal Council, appellant herein. Respondent 2 had its depot near Raikabag Station at Jodhpur where it stored petroleum products. Respondent 2 from its depot at Jodhpur supplied the petroleum products to various pump stations situated within the limits of appellant as well situated outside the limits of appellant in several districts such as Districts of Jodhpur, Pali Barmer, Jalore, Nagaur, etc. including the retail outlet of the respondent 1 at Dangiawas. Respondent 2, being a public sector undertaking, was provided current account facilities under Section 133 of the Act, and so respondent 2 had not to pay octroi tax no such consignment at the time of entry of goods within the limits of appellant. It was alleged by respondent 1 that under Rule 13 of the said Rules, respondent 2 was supplied printed books for entey passes in duplicate in Form No. 7 appended to the said Rules. Rules 13 provides, as noted before, that if the goods which are imported within the municipal limits are not used, consumed or sold within the municipal limits and are exported out of municipal limits for supply at various the retail outlets no octroi duty is charged on those goods for the reason that under Rule 13(4) octroi tax payable shall be based on the total amount of octroi tax as shown by the entry passed less the octroi tax on the total amount of goods transported outside the municipal limits. It was contended that the appellant had been following the aforesaid procedure till July 24, 1975, but all of a sudden on July 25, 1975, it was alleged, the appellant had suspended the transport facilities to respondent 2 and took the stand that octroi would be charged from respondent 2 on the goods brought within the municipal limits even though these were exported by it outside the municipal limits if these were sold within the limits of appellant although such goods were meant for use and consumption of the consumers outside the municipal limits. The appellant, it is alleged, cancelled the transport passes supplied to respondent 2 from July 25, 1975. As a consequence of this action of the appellant, 1 at Dangiawas by respondent 2 since July 25, 1975 by adding the amount of octroi tax in the bills for the supplies made to respondent 1s retail outlet at Dangiawas. Respondent 2 challenged the right of the appellant to charge the octroi on such goods approached the State Government. Upon that, the State Government by its letter wrote to the appellant that it having granted current account facilities under Section 133 of the Act to respondent 2 should charge octroi on the basis of petroleum products imported by respondent 2 minus the goods exported by it to its other distributing centers in Rajasthan. Respondent 1 also made representation to the appellant challenging its right to realise octroi on the petroleum products which were received at the depot of respondent 2 at Jodhpur but were transported by it to its retail outlets but of no avail. The case of respondent 1 was that the goods were not sold at Jodhpur but actually the sale took place at Dangiawas, the retail outlet of respondent 1. Secondly, even if the sale was held to have taken at Jodhpur merely on that account octroi could not be levied unless the goods so sold were meant for the use or consumption of the consumers within the octroi limits. Respondent 2, Indian Oil Corporation, supported the case of respondent 1. Respondent 2 is a public sector undertaking and has got vast network of retail outlets, i.e., distribution centers for distribution of petroleum products throughout India including Rajasthan. For the purpose of distribution, it had got its depots at various important places where it stored its petroleum products for supply to its various retail outlets, i.e., distributing centers. Likewise respondent 2 had got its depot situated near Raikabag Station, Jodhpur where it stored its petroleum products for sale and supply of its petroleum products to its numerous retail outlets situated within the district of Jodhpur, Pali, Barmer, Jalore, Jaisalmer, Nagaur, Sirohi, etc. It was further alleged by respondent 2 that it stored petroleum products in its depot at Jodhpur for purposes which might be classified into different classes,) for sale by respondent 2 to its consumers such as railways, police, etc. and to its dealers of retail outlets situated within municipal limits of Jodhpur city who distributed or sold the petroleum products within the area covered by municipal limits of Jodhpur city(2) for re-export by itself for supply to its dealers in charge of various retail outlets situated outside the municipal limits of Jodhpur city within the various districts specified above. Such retail outlets distributed or sold the petroleum products to ultimate consumers outside the limits of Jodhpur Municipal Council

Reasoning:
We are, however, unable to accept these contents. If the goods were brought within the municipal limits for the purpose of sale (sale means pausing of the title to the purchaser), then different considerations might have appliedBut in view of the facts of this case, the title passed to the goods outside the municipal limits even in respect of the petroleum products which were sold within the municipal limits. It was contended by Shri Sorabjee that Rule 13 had no application. Shri Sorabjee drew our attention to certain paragraphs of the writ petition, in particular to paragraph 18(b) where it was stated that it is obligatory for respondent 1 to grant respondent 2 transport passes and it had no jurisdiction to withdraw that facility. It was submitted with reference to that and other paragraphs that it was the case of respondent 1 that facility was withdrawn and suspended and prayer was made for restoration of that facility. It was, therefore, submitted on behalf of the appellant that in the absence of facilities being granted under Rule 13, it was incumbent on the parties to make a declaration under Rule 9 of the said Rules. As no such declarations had admittedly been made, Rule 9(2) of the said Rules was attracted. Accordingly, the goods in the present case were to be treated as having been brought within the municipal limits for consumption, use or sale therein and as such liable for octroi duty, according to the appellant. Therefore, Shri Sorabjee submitted that this appeal should only be confined to the applicability of Rule 9(2) of the said RulesIn the present case, there is no dispute regarding diesel exported to Dangiawas from Jodhpur Municipality. The Municipal Council has not refuted in its reply in paragraph 11 at p. 117 of the paper book, the quantity of petroleum products exported to Dangiawas as mentioned in Schedule A (p. 104 of paper book) from July 25, 1975 to date of writ petition. The Municipal Council gave an undertaking to refund the octroi tax charged from the petitioner on the diesel exported to Dangiawas outside the limits of Municipal Council, Jodhpur as will be clear from the order of the learned Single Judge dated February 7,1976.It wasalso stated that the Division Bench vide its order dated April 1, 1977 has already ordered that respondent 2 would deposit the octroi tax on diesel exported to Dangiawas. Thus, the octroi tax which became due on diesel exported to Dangiawas from April 1, 1977 up to date is being deposited in the bank account and there is no dispute regarding quantity of diesel exported to Dangiawas. Thus, it appears to us that the controversy raised by Municipal Council referring to cancellation of transport passes is unfounded. The object of the transport passes was to ascertain the quantity of diesel exported to Dangiawas. There appears to be no dispute regarding quantity of diesel exported to Dangiawas from July 25, 1975. The Depot Superintendent of Indian Oil Corporation, Jodhpur had disposed that current account facilities to Indian Oil Corporation is being continued till today.It wasstated that the octroi as paid periodically on settlement of account between Municipal Council and Indian Oil Corporation and not at the time of entry of petroleum products. It appears that the contention that cancellation of transport passes is equivalent to cancellation of current account facilities, made on behalf of the appellant, is incorrect. A perusal of Section 133 would show that current account facility is provided by substantive section, whereas Rule 13 of the said Rules is procedure provided with the object of providing facility of settlement account of payment of octroi tax. In other words, according to Rule 13 (4), octroi tax is charged on quantity mentioned in entry passes minus the quantity mentioned in transport passes, i.e., on quantity of pertroleum products used or consumed within the municipal limits of Jodhpur Municipality. It is also unsustainable, according to Shri Bhandari to contend that M/s. Parekh Automobiles has recovered octroi tax from consumers. It has been asserted in the writ petition on oath as well as before this Court on filing affidavit that no octroi was recovered by M/s. Parekh Automobiles from consumers. On the other hand, it is the case of M/s. Parekh automobiles that it had to pay octroi taxes out of commission which it received from Indian Oil Corporation on sale of diesel. This fact, according to Shri Bhandari was never refuted by the Municipal Council or the Indian Oil corporation. Thus there is no question of unjust enrichment, and as such M/s. Parekh Automobiles is entitled to octroi tax which was recovered from it and which is lying deposited in separate bank account by the Indian Oil Corporation as per order of Division Bench dated April 1, 1977 up to date. For period before April 1, 1977, the Municipal Council has already given an undertaking to refund octroi taxPleadings in this case and the averment are rather confusing. On the consideration of all the facts and the circumstances of the case, we are of the opinion that the principles of the aforesaid two decisions of this Court have been correctly applied by the High Court in the facts and the circumstances of the case. The octroi duty is, therefore, not chargeable on the transactions mentioned herein. We are further of the opinion that in view of the confused state of the pleadings and averment, it is not possible to hold that current account facilities were withdrawn or cancelled. If that is the position, then there is no question that the High Court was right in the order it passed and the direction it gaveChapter II of the Rules provide for the manner of assessment and collection of octroi duty. Rules 3 to 5 provide for the establishment of octroi outposts with powers to the inspecting staff to stop the vehicles at the outposts. Rule 6 lay down that no goods liable payment of octroi shall, except as otherwise provided in these rules, be brought within the municipal limits until the octroi duty leviable in respect of such goods has been paid at the octroi outposts. Where goods arrive at an octroi outpost, they may be coming in either for consumption, use or sale within the municipal limits or for transpiration outside those limits, whether immediately or after a period of time. If they have come in merely for the purpose of transportation, they are not liable to pay octroi duty. If, therefore, became necessary to make a detailed provision as to the manner of assessment and collection of duty having regard to this consideration. That is why Rule 9 requires every person bringing goods with the municipal limits to make a declaration as to what the goods are intended for. If however, the goods are intended for immediate or eventual transportation outside the municipality, a written declaration should be filed by the importer. In respect of goods declared intended for immediate transportation, thee of the octroi outpost receives by way of deposit such amount as may be equivalent to the duty payable thereon and issues a transit pass to the importer. The importer should transport the goods outside the municipal limits within a period not exceeding eight hours (which can be extended to 24 hours at the most). On such transportation being effected, the amount of octroi deposited in respect of the goods so transported is returned to the importer and the transit pass taken back. This is the procedure envisaged in Rule 11. (Certain refinements in procedure in the case of travelling agents is provided for in RulesA andB with which we are not concerned). Where, however, the goods are not immediately to be transported outside the municipal limits but are to be temporarily detained within the municipal limit and eventually transported outside the municipal limits, Rule 12 is attracted. In the case of such goods they have to be sent to a bonded warehouse. The goods may be withdrawn from time to time either on payment of octroi in the event of their being consumed, used or sold within the municipal limits or without any payment of octroi duty in case of their being transported outside the municipal limits. This procedure is outlined in Rules 12 and 16 to 22. But one important condition is that the maximum period for which the goods can be placed in the bonded warehouse is six months. If the goods are not removed within the said time limit, they are liable to be sold by public auction and the warehouse charges and octroi recovered from the sale proceeds. This is the normal procedure for the assessment and collection of octroi duty. It is in respect of this procedure that the declaration in Rule 9 becomes important. The terms of the declaration determine the incidence of the duty. Regarding the first category goods, mentioned in Rule 9(1) the collection of duty is immediate; regarding the second category, a deposit is demanded which can be refunded on transportation within a few hours; and in respect of the third, duty has to be paid unless the goods are transported outside the municipal limits within six monthsRule 13 however, contemplates a totally different scheme for the assessment and collection of octroi for the special type of cases envisaged therein. From the terms of Section 133, it would appear to be intended to cover mercantile firms or bodies which may be bringing goods into, or taking goods out of, the municipal limits frequently and, perhaps, also firms or bodies about whose capacity to pay the duty in due course the Municipal Board has confidence. These persons are given the facility of having a current account with the municipality and the amount of duty payable by such a person is determined and collected from time to time. Such an account is opened on the firm or body making such deposit or furnishing such security as the municipality may require, for the due discharge of its liabilities under the Act and the Rules. When this facilities provided, the procedure to be followed is set out in Rule 13, Here what is done is that the firm or body is given a books of entry passes and a book of transport passes from time to time. As and when the firm or body brings goods into the municipality, it is required to fills in one of the entry passes setting out the details of the goods which are being brought in under any particular consignment and present the same at octroi outpost of entry. After verifying that the details of the goods brought in tally with the details of the goods entered in the entry pass, the details are passed on the octroi Superintendent who debits is the account of the person concerned with the amount of octroi payable in respect of the goods listed in the pass. As and when the firm or body wishes to transport the goods out of the municipality, it fills up a transport pass containing the details of the goods proposed to be transported outside and presents it to the octroi outpost of exit. The officer at the outpost verifies that the goods mentioned in the pass and the goods sought to be transported tally with each other. Then the transport as duly certified by him is passed on to the Octroi Superintendent. The Octroi Superintendent, after verification, files the certificates of export separately in respect of each such body or firm. The amount of octroi payable in these cases is based on the total amount of octroi on the good shown by the entry passes less the goods transported out under the transport passes. In other worlds, in the case of persons who have the current account facilities, the duty is calculated on the basis of the total amount of goods that have come in as reduced by the total amount of the goods that have gone out, the balance being presumed to have been consumed, used or sold within the municipal limits. In order to ensure that there is a correspondence between the good that have come in and those that have gone out, the proviso toe (4) of Rule 13 provides that, in computing the octroi duty payable, the goods transported outside the municipal limits shall be lessened only if (a) such goods have not been sold within the municipal limits, and (b) they have been transported out of such limits within a period of six months from the data of their importA comparison of the above two sets of provision will make it clear that they are two independent and mutually exclusive modes of assessment and collection of duty. Under the cash system of payment, a declaration under Rule 9 is absolutely essential because of the official at the outpost will have to determine the mode of dealing with the goods on the basis of such declaration. The octroi duty has to be collected then and there in respect of the goods which are to be consumed, used or sold within the municipal limits; a depots has to be taken in respect of those goods which are intended to be immediately transported outside; and the rest of the goods on which the transportation is to be effected on a future time, have to be directed to a bonded warehouse. The mode of collection of duty in respect of a person having current account facilities, however, does not depend upon any such declaration or upon the mode of utilisation of the goods as indicated in such declaration, because, in the case of the current account holders, the duty payable in respect of the entirety of the goods brought in is straightway debited to his account on the basis of entry passes. The duty payable in respect of the goods transported outside is later on credited to his account on the basis of the transport passes. The difference is the amount of the duty payable by him and this is recovered from the person concerned from time to time either by adjustment out of the deposits earlier obtained from him or by other processes of recovery. The procedure as to issue of transit passes or storage in a warehouse are also irrelevant for the purpose of dealing with the goods under Rule 13It, therefore, appears, appears to me that High Court was fully justified in holding that the terms of Rules 6 and 9 have no reliance to the payment of duty in cases covered by the current account facility envisaged under Rule 13. The High Court was, therefore, right in holding that the present case cannot be brought within the terms of proviso to Rule 9(2) on the basis of a deemed consumption. Use or sale within the municipal limitsIt is true that the proviso toe (4) of Rule 13 also envisages the exclusion from levy of octroi duty only where the goods are not sold within the municipal limits. It may be contended that, in the present case, as the IOC had sold the goods within the municipal limits and the subsequent transport to Dangiawas, though effected by the IOC was really on behalf of the dealer the goods so transported and entered in the transport passes of the IOC should be excluded from dedication undere (4) of Rule 13. But this construction;, in my view, cannot be accepted. The expressions used in the proviso toe (4) cannot be interpreted differently from the words used in Section 104, on the basis of which chargeability to duty arises. If as we have held, there can be no octroi duty at all levied by the Jodhpur Municipality in respect of the good sold by the IOC within, but clearly intended to be transported for use or consumption outside, the municipal limits, then this statutory limitation cannot be defeated by interpreting the proviso in such a way as to make all goods sold within the municipality liable to duty even if the sale is in pursuance of a clear intention that the goods are to be dispatched outside. The terms of the proviso and the main section have to be read harmoniouslyThe result of the above discussion is that the present case is governed by the terms of Rules 13 and the IOC is entitled to go on paying octroi duty on the basis of the goods brought by it within the municipality less the goods transported outside the municipality even where the transport outside the municipality may be in pursuance of a sale within the municipality so long as such sale is in pursuance of an intention that the goods should be consumed or used outside the municipal limits. As we have already said, in cases where Rule 13 applies, Rule 9 is excluded and, therefore, the High Court rightly held the octroi charged on the IOC in respect of the impugned sales was not justifiedBefore concluding I wish to refer to three aspects. The first is as to whether even assuming that Rule 9 was applicable to a case where the current account facility has been provided, the terms of that rule can be read in such a manner as to militate against the very concept of octroi duty as explained in the Burmah Shell case ((1963) Supp 2 SCR 216 : AIR 1963 SC 906 ). A question may arise whether the terms of Rule 9(2) so interpreted would be intra vires the rule making power of the legislature. I express no opinion on this issue as I have already expressed my view that Rule 9 has no application to the present case. The second aspect, which I wish to touch upon, is a point sought to be raised on behalf of the appellant in the course of the present hearing that the current account facility granted to the IOC had been revoked. My learned brother has referred to the pleadings in this regard at great length and, as pointed out by him. The factual position is by no means clear. I do not think that the appellant should be permitted to raise at this stage a new plea when all along, in the earlier proceedings in the High Court, the case has proceeded on the footing that the IOC had been having and continues to have current account facilities. The third aspect to which I would like to make a reference is that we have principally passed our decision only on the facts in regard to the sales to Parekh Automobiles Ltd. We are told that there are a number of suits, other than those before us today, which are pending at various stages in which various pleas have been raised. I would only like to make it clear that we express no opinion regarding the factual position in those cases and those cases will have to be disposed of in the light of the legal position set out in our judgment. Except for the above clarifications I have nothing to add to what my learned brother Mukharji, J. has said and I respectfully agree with his conclusion that the appeals must fail and are dismissed.