1994 (7) TMI 93 - HC - Customs

Summary

Issues:
1. Interpretation of Rule 2(7)(a) of the Bombay Municipal Corporation (Levy of Octroi) Rules, 1965.
2. Whether the customs duty can be included in the value of the article for the purpose of octroi duty determination.

Detailed Analysis:
1. The case involved a company registered under the Companies Act that imported raw materials, including nylon tyre yarn, for manufacturing products for export. The company obtained an advance license for import and faced a dispute with the octroi authorities regarding the inclusion of customs duty in the value of the imported goods for octroi duty calculation.

2. The company argued that customs duty should not be loaded onto the value of the article for octroi assessment, as the duty was exempted under a government notification. The Corporation, however, contended that the customs duty, although exempted conditionally, should be considered in the assessable value as it might become payable if the company breached the license conditions.

3. The High Court analyzed Rule 2(7)(a) of the Octroi Rules, which defines the "value of articles" for octroi calculation. The Court found that the definition includes various charges but does not explicitly mention exempted customs duty. The Court emphasized that the value should be ascertained at the time of the taxing event, which, in this case, was the entry of the article into the octroi limits.

4. The Court held that including customs duty in the value of the article for octroi assessment, based on a potential future liability, was not permissible. The Court reasoned that the company was not liable to pay customs duty at the time of import, and the Corporation had no authority to include it in the value. The Court rejected the Corporation's argument that excess duty could be refunded later if the liability did not materialize.

5. The judgment concluded that the Corporation should refund the excess octroi duty collected by including customs duty in the value of the imported articles. The Court emphasized that the Corporation could take actions against defaulting importers in the future but could not include customs duty in the current value calculation for octroi purposes.

6. Consequently, the Court allowed the appeal, set aside the previous judgment, and directed the Corporation to refund the excess octroi duty within a specified period. The Court highlighted that the Corporation's inclusion of customs duty in the value of the article for octroi assessment was not legally justified.