1988 (8) TMI 392 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of octroi duty on cinematograph films brought from outside for exhibition in cinema halls.
2. Interpretation of the term "use" in the context of octroi duty under Section 131(1)(kk) of the Orissa Municipal Act, 1950.

Detailed Analysis:

1. Levy of Octroi Duty on Cinematograph Films:
The petitioner, a cinema hall owner in Dhenkanal, challenged the demand for octroi duty imposed by the Dhenkanal Municipality on cinematograph films brought from distributors for exhibition. The municipality issued a notice requiring the petitioner to pay octroi duty at the rate of 3% for the use of films by screening them in the cinema hall. The petitioner disputed this demand, arguing that bringing films on hire for exhibition did not attract the provision of the Orissa Municipal Act, 1950.

2. Interpretation of the Term "Use":
Section 131(1)(kk) of the Orissa Municipal Act, 1950 authorizes the Municipal Council to impose octroi on goods brought within the municipality for "consumption, use or sale." The term "use" has been subject to varied interpretations. The Division Bench previously concluded that films brought within municipal limits for exhibition were considered "used" within the meaning of clause (kk), thus making the petitioner liable for octroi duty.

Relevant Case Law and Precedents:
- Burmah-Shell Co. v. Belgaum Municipality (AIR 1963 SC 906): The Supreme Court held that octroi duty is payable if goods are brought into an area to reach an ultimate user or consumer, even if they are not consumed or sold but are re-exported.
- Jafarabad Municipality v. Kathiawar Industries Ltd. (AIR 1969 Guj 344): The Gujarat High Court held that the term "use" does not necessarily mean "using up" and can include bringing goods for a specific purpose without them being consumed.
- S.M. Ram Lal & Co. v. Secretary to Government of Punjab ([1969] 1 UJ (SC) 373): The Supreme Court observed that unless it is shown that goods were brought within municipal limits to convert them into a different commercial commodity, octroi is not leviable. However, this case was deemed not directly applicable to the exhibition of cinematograph films.
- Hiralal Thakorlal v. Broach Municipality (AIR 1976 SC 1446): This case reiterated the principles from the Burmah-Shell case.

Judgment Analysis:
The Full Bench agreed with the Division Bench's interpretation that the term "use" in Section 131(1)(kk) of the Orissa Municipal Act includes the exhibition of films in cinema halls. The court emphasized that the term "use" should be understood in a broader context, encompassing any application that results in some form of wear and tear or depreciation, even if the goods are not consumed or sold. The court referred to the historical context of octroi and terminal taxes, noting that octroi is intended to cover goods brought into an area for consumption, use, or sale.

The court concluded that the exhibition of films constitutes "use" within the meaning of the Act, and thus, the petitioner is liable to pay octroi duty on the films brought for exhibition. The writ application was dismissed with costs assessed at Rs. 250.

Conclusion:
The Full Bench upheld the Division Bench's decision, affirming the levy of octroi duty on cinematograph films brought for exhibition in cinema halls. The interpretation of "use" under Section 131(1)(kk) of the Orissa Municipal Act was clarified to include the exhibition of films, thereby making them subject to octroi duty. The writ application was dismissed, and the petitioner was ordered to pay the assessed costs.