1991 (11) TMI 221 - SC - VAT and Sales Tax

Whether the company had not followed any of the procedures prescribed and the right of the Corporation to deny refund of octroi on non-compliance with any of those provisions in the Rules? Held that - Appeal allowed. There is no evidence that any of the articles sold by the company is subject to any price control by the Government or that the company had charged any octroi separately in the bills. Invoices and the other documents of sale to the outside purchasers produced before us do not also show that any octroi was separately charged and collected by the company. It may be mentioned that in the rejoinder filed by the appellant in the writ petition they have specifically denied that they have recovered the amount paid by them by way of octroi duty from the dealers to whom they had sold the goods or that the dealers in turn have recovered the octroi duty from the customers . In view of this the question of unjust enrichment does not arise.

Issues Involved:
1. Rejection of refund claims based on alleged sales within octroi limits.
2. Non-compliance with the prescribed procedure for export and refund claims.
3. Interpretation of the term "sale therein" in the context of octroi.
4. Compliance with procedural rules for breaking bulk and repacking.
5. Allegations of unjust enrichment by the appellants.

Detailed Analysis:

1. Rejection of Refund Claims Based on Alleged Sales within Octroi Limits:

The appellants, a company engaged in manufacturing and selling motor vehicles and parts, had their refund claims rejected by the Thane Municipal Corporation on grounds that the company had "sold" spare parts within the octroi limits, contravening Rule 25(3)(c) of the Maharashtra Municipalities (Octroi) Rules, 1968. The appellants argued that the sales were not for consumption or use within the octroi limits but for parties outside these limits, making the rejection of claims illegal. The court noted that the legislative entry for octroi tax is found in List II, Entry 52 of the Seventh Schedule to the Constitution, which reads: "Taxes on the entry of goods into a local area for consumption, use or sale therein." The court held that the term "sale therein" means sale for consumption within the octroi limits, and if the goods were intended for consumption outside the limits, no octroi duty was leviable. Thus, the rejection of refund claims on this ground was deemed illegal.

2. Non-Compliance with the Prescribed Procedure for Export and Refund Claims:

The Corporation also rejected the refund claims on the grounds that the appellants did not comply with the prescribed procedures, such as submitting Form 4 and original invoices, and obtaining the certificate of the Octroi Exit Naka Officer. The court examined the procedural rules and concluded that the rules should be interpreted in a manner consistent with the current account facility granted to the company. The court noted that Form 5, applicable to the company, does not require a declaration at the entry point or a deposit equivalent to the octroi duty. The court also stated that the production of original invoices is not mandatory if the particulars can be verified by other documents. Therefore, the rejection of claims based on procedural non-compliance was also found to be invalid.

3. Interpretation of the Term "Sale Therein" in the Context of Octroi:

The court discussed the interpretation of the term "sale therein" in the context of octroi, referring to previous judgments, including Burmah-Shell Oil Storage and Distributing Co. of India Ltd. v. Belgaum Borough Municipality and Hiralal Thakorlal Dalal v. Broach Municipality. The court held that the term "sale therein" means a sale for consumption within the octroi limits, and if the goods are sold for consumption outside the limits, no octroi is payable. The court emphasized that the legislative intent is to levy octroi on goods meant for consumption within the local area, and any sale intended for consumption outside the limits does not attract octroi.

4. Compliance with Procedural Rules for Breaking Bulk and Repacking:

The court examined the procedural rules for breaking bulk and repacking, specifically Rule 24(2), which requires sanction from the Superintendent of Octroi and the presence of an officer during the process. The court compared this with Rule 62 of Chapter VIII of the Schedule to the Bombay Provincial Municipal Corporation Act, 1949, which only requires prior intimation. The court held that both rules can coexist and are not inconsistent. The court referred to the case of HMM Limited v. Administrator, Bangalore City Corporation, which held that breaking bulk for repacking does not amount to use within the octroi limits, and refund cannot be denied on this ground.

5. Allegations of Unjust Enrichment by the Appellants:

The respondent contended that the appellants had recovered the octroi duty from their customers, and refunding the duty would result in unjust enrichment. The court found no evidence that the company had charged octroi separately in their bills. The court noted that the appellants had specifically denied recovering octroi from their dealers or customers. Therefore, the argument of unjust enrichment was not upheld.

Conclusion:

The court allowed the appeal, holding that the rejection of refund claims on the grounds of sales within octroi limits and procedural non-compliance was illegal. The court clarified the interpretation of "sale therein" and emphasized that octroi is not leviable on goods intended for consumption outside the octroi limits. The court also addressed the procedural requirements for breaking bulk and repacking, stating that compliance with the rules should be interpreted in a manner consistent with the current account facility. The allegations of unjust enrichment were dismissed due to lack of evidence. The appeal was allowed, and the rejection of refund claims was set aside.

← Previous Next →