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TMI Blog1988 (8) TMI 371X X X X Extracts X X X X X X X X Extracts X X X X ..... s the event which simultaneously attracts both octroi and customs, I think that the later change of language was only clarificatory and I agree with the conclusion my learned brother has reached that the position should be the same for the first period also. - Civil Appeal No. 737 of 1988, S.L.P. (Civil) Nos. 2617, 2618 of 1988 - - - Dated:- 12-8-1988 - SABYASACHI MUKHARJI AND RANGANATHAN S. JJ. Anil B. Divan, Senior Advocate (D.N. Misra. Advocate, with him), for the respondents. Rajinder Sachar and L.M. Singhvi, Senior Advocate (K.C. Dua and Abhishek Singhvi, Advocates, with them), for the petitioners in S.L.P. No. 2617 of 1988. Soli J. Sorabjee, Senior Advocate, (G.E. Vehanvati, J.R. Gagrat, P.G. Gokhale, R.J. Gagrat, R.B. Hathikhanawala and Miss Sushma Manchanda, Advocates, with him), for the appllants. D.N. Misra, Advocate, for the respondents in S.L.P. No. 2618 of 1988. -------------------------------------------------- SABYASACHI MUKHARJI, J.- This appeal by special leave is directed against the decision of the Division Bench of the High Court of Bombay dated 24th/25th November, 1987. The other two special leave petitions challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned single judge and held that countervailing duty was includible in the assessable value for the imposition of octroi. In pursuance of the same, the Deputy Assessor and Collector (Octroi), Bombay, issued notice demanding payment of octroi amounting to ₹ 76,70,308.71. The facts and circumstances of the other two special leave petitions are more or less identical and are governed by the same judgment. The sole question, therefore, involved in this appeal is, whether countervailing duty is includible in the octroi. Octroi, as Shri Soli J. Sorabjee, appearing for the appellants, in the instant appeal drew our attention, is governed by entry 52 of List II of the Seventh Schedule being tax on the entry of goods into a local area for consumption, use or sale therein. It is submitted that in order to be a valid octroi, there must not only be a physical entry of the goods within the limits of the municipality but the entry of the goods must be either for consumption, use or sale. Bearing in mind the basic constitutional provision, therefore, octroi should be so construed as to follow upon the entry of goods either for consumption or for use or for sale and not mere physical entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er this Act, or (ii) by rate charged in accordance with such scale of equivalents calculated on the quantity of materials used or by the degree or attenuation of the wash or wort, as the case may be, as the State Government may prescribe; (e) in the case of intoxicating drugs manufactured in the State by payment upon the quantity produced or manufactured or issued from a warehouse established or licensed under this Act: Provided that where payment is made upon issue for sale from a warehouse established or licensed under this Act, such payment shall be at the rate of the duty in force at the date of issue from the warehouse: Provided further that where one and the same person is permitted- (i) to manufacture or import and to sell, or (ii) to manufacture and export, country liquor or any intoxicant, such duty may be levied in consideration of the joint privileges granted, as the Collector deems fit. Section 26 of the Act provides as follows: 26. The State Government may- (a) establish a distillery in which spirit may be manufactured in accordance with a licence issued under this Act on such conditions as the State Government deems fit to impose; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import. III. After 28th June, 1983 and onwards. 'Value of the articles' where octroi is charged ad valorem shall mean the value of the articles as ascertained from original invoice plus shipping dues, insurance, customs duties, excise duties, countervailing duty, sales tax, transport fee, vend fees, freight charges, carrier charges and all other incidental charges, excepting octroi incurred or liable to be incurred by the importer till the articles are removed from the place of import. Our attention was drawn to the Octroi Rules applicable to Nagpur City as considered in a Division Bench judgment (reported in 1977 Mah LJ 293) by Masodhkar and Kemble, JJ. The said Rules provided for the imposition of octroi on goods and animals brought within the octroi limits of the Nagpur Municipal Corporation for sale, consumption or use therein. Our attention was also drawn to certain different provisions as considered by the Division Bench consisting of Mohta and Qazi, JJ., on 30th November, 1985. It is instructive at this stage to refer to the Rules in respect of levy, assessment and collection of octroi. Rule 2(2) defines import to mean conveying of any article liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the goods were dealt with after such entry. The Nagpur Municipal Corporation was, therefore, directed not to collect octroi upon bonded liquor brought into the limits of Nagpur without payment of excise duty by adding the excise duty payable in the incidental charges contemplated by rule 10(a). The learned judge was of the view that section 192(1) of the Bombay Municipal Corporation Act empowered the collection of octroi upon entry of articles into Greater Bombay for consumption, use or sale. The emphasis is upon the entry of the goods into the city limits. Octroi therefore is attracted on entry. The taxable event for octroi is the entry of the goods. But the question is when do the goods enter? The learned single judge was of the view that the liquor in bond is imported when it is conveyed into Greater Bombay from outside Greater Bombay. When it is conveyed into Greater Bombay by road the place of import is the octroi post on the road across the limits of Greater Bombay. The Nagpur rule applied to the charges incurred by the importer till the arrival of the goods at the octroi naka. The learned single Judge noted that it would not be proper to include within the word incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... countervailing duty is to set-off the effect of non-payment of tax on manufacture. It is meant to protect the indigenous production. The nature of countervailing duty was explained by this Court in Kalyani Stores v. State of Orissa [1966] 1 SCR 865. There this Court observed that power to levy countervailing duties under entry 51, List II, is meant to be exercised for the purposes of equalising the burden on alcoholic liquors imported from outside the State and the burden placed by excise duties on alcoholic liquors manufactured or produced in the State. Therefore, countervailing duties can only be levied if similar goods are actually produced or manufactured in the State on which excise duties are being levied. Our attention was also drawn to the decision of the Allahabad High Court in Mohan Meakin Breweries Ltd., Ghaziabad v. State of U.P. 1979 UPTC 284, where it was held that the excise duty is a single point duty, that is, if it is charged at the stage of manufacture or at the stage of transport, it cannot be charged at both the points. Shri Divan, appearing for the Corporation, drew our attention to rules 18, 19 and 31 of the Import and Export Rules. Rule 3(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the railway station to which the consignment is to be booked is situated. (3) Every pass granted under sub-rule (1) shall be in four parts. Part I shall be retained on the records of the officer issuing the pass; Parts II and III shall be sent by post to the Excise Officer at the exporting place with a request to endorse on Part III the quantity of foreign liquor in litres and proof litres issued to the importer and thereafter to return Part III to the officer issuing the pass. Part IV shall be handed over to the importer or his agent together with the form 'Certificate-2' annexed thereto. (4) No pass under sub-rule (1) shall be granted unless the foreign liquor is to be exported to the place of import from a distillery, brewery or bonded warehouse in the exporting place. Rule 18 enjoins as follows: 18. Deposit of consignment in, and withdrawal from the bonded warehouse in the case of import in bond.-(1) Where the foreign liquor is imported in bond, the consignment shall, after it is examined under rule 16, be sent to the bonded warehouse together with Part IV of the pass and the certificate. Particulars of the consignment shall be entered by the officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en paid or that the importer has agreed in writing to pay any excess amount of duty or fees that may be found to be due from him on the result of the examining officer's examination or on receipt of the report of the Chemical Analyser to Government. He shall then hand over Part IV of the pass to the importer after making a note thereon in this respect and keeping a copy of Part IV of the pass. A similar note shall also be made on the certificate which shall be kept by the examining officer. (2) On result of his examination or on receipt of the Chemical Analyser's report, as the case may be, the examining officer shall calculate the amount of duty and the aforesaid fees due on the consignment and forward the copy of Part IV of the pass to the Collector stating what excess amount of duty or fees, if any, is recoverable from the importer. The Collector shall then take the necessary steps to recover the amount from the importer. The copy of Part IV of the pass shall be recorded by the Collector with Part I of the pass keeping note thereon as to the excess amount of duty or fees paid by the importer. Therefore, clearance from bonded warehouses, it was contended on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delegated such power to the State Government. There at page 402 of the report, the court had considered section 3(10) of the Bombay Abkari Act which defines to transport to mean to move to one place from another place within the State . On the construction of the present rules, it was contended on the authority of the said decision that unless there was movement, there was no imposition of the countervailing duty. But that is not a correct assessment of the nature of duty. Our attention was also drawn to the observations of this Court in Central India Spinning and Weaving and Manufacturing Company Ltd., The Empress Mills, Nagpur v. Municipal Committee, Wardha [1958] SCR 1102. There at page 1107 of the report this Court observed that import is derived from the Latin word importare which means to bring in and export from the Latin word exportare which means to carry out but these words were not to be interpreted only according to their literal derivations. Lexico-logically these do not have any reference to goods in transit a word derived from transire bearing a meaning similar to transport, i.e., to go across. The dictionary meaning of the words import and export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] AC 735 (PC) where at page 740 it was observed as follows: The real question, of course, is whether the sugar was 'imported' within the meaning of section 4 of the Tariff Act, 1894, before or after May 3, because it is by that section as amended by the Act of 1895 that the duty is imposed. By the provisions of section 4 the duties are to be 'levied, collected, and paid' (which means nothing more than paid) upon the enumerated goods 'when such goods are imported into Canada or taken out of warehouse for consumption therein'. Their Lordships make the following observations upon this language: (1) The imposition of the duties is contained only in the direction for their payment. There are no words which render the goods liable for the duty or make the duty (as it is said) attach at any date prior to the date of payment. (2) The words 'when such goods are imported into Canada' express the time at which the duties are to be paid. If therefore the goods are imported into Canada when the vessel enters a port of call on her way to her ultimate destination, the duties would be payable at that date, which is highly improbable, and contrary to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paint on board. No duty was paid in respect of any of the paint. It was held (1) that the paint was imported, that the consignee had failed to enter imported goods as required by section 68 of the Customs Act, 1901-1920, and that C had been directly concerned in that offence within the meaning of section 236; (2) that the consignee had not, by reason of the arrangement made for the paint being taken over for the use of the ship, interfered with goods subject to the control of the customs within the meaning of section 33; (3) that the consignee had not evaded payment of duty which was payable within the meaning of section 234. Starke, J., observed at page 150 of the report as follows: It cannot, in my opinion, be maintained that the mere act of bringing goods into port constitutes an importation; though unexplained it may be evidence of the fact. If goods, however, are brought into their port of destination for the purpose of being there discharged, the act of importation is complete. On the other hand, the act of importation is not complete if a ship enter some port of call with goods on board which is not the destined port of discharge for those goods. Actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olic liquor meant for human consumption. This position stands confirmed by the observations of this Court in Re. The Bill to amend section 20 of the Sea Customs Act, 1878 and section 3 of the Central Excises and Salt Act, 1944 [1964] 3 SCR 787. Therefore, bringing goods into Greater Bombay with intention to use and not in transit, in our opinion, was decisive and any imposition on that would form part of the duty which could be imposed at the time of the entry and could be included in the octroi. However, for goods in transit section 194A of the Bombay Municipal Corporation Act, 1888 provides an exemption in accordance with the Octroi Rules framed. In section 195 of the said Act refund is provided for in relation to articles which are exported from Greater Bombay after having paid octroi. Immediate exportation makes it inapplicable for imposition of tax on goods in transit. That problem does not arise in respect of importation into Greater Bombay. Section 105 of the Bombay Prohibition Act, 1949 which has been set out hereinbefore read with sections 2(14), 2(20) and 2(36) makes the position clear beyond doubt that the taxable event in the case of excise duty would be manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... station as designated. Rule 31 clearly exempts consignments of foreign liquor which are conveyed under the Maharashtra Through Transport Rules, 1962. In other words, goods in transit are not subjected to duty. Collection of excise duty may be deferred if the goods are kept under bond. See in this connection the observations of this Court in R. C. Jall v. Union of India [1962] Supp 3 SCR 436, where at page 451 of the report this Court reiterated that the method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience. In McDowell v. Commercial Tax Officer [1985] 59 STC 277 (SC); [1985] 3 SCR 791 at pages 813-815 the position in relation to excise duty has been clearly stated. In the case of Chatturam Horilram Ltd. v. Commissioner of Income-tax, War and Orissa [1955] 2 SCR 290 at 297-298 the concept of imposition of duty has been explained. There are three stages in the imposition of tax. It was observed as follows: As has been pointed out by the Federal Court in Chatturam v. Commissioner of Income-tax, War [1947] FCR 116 at 126 (quoting from the judgment of Lord Dunedin in Whitney v. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgments in the above cases accept the position that if goods are imported into Australia for the purpose of the goods becoming part of the commerce of the country, these could be said to be imported. This is clear from the observations of Chief Justice Knox at page 136 of (38 CLR) the report as well as the argument of Mr. Mitchell, counsel at pages 132 and 133 of the report. Therefore, the purpose of the import is decisive. If these are brought for the purpose of commerce or trade, these are imported. Justice Isaacs at page 139 highlighted the expression imported goods , in section 68 as meaning goods which, in fact, are brought from abroad into Australian territory, and in respect of which the carriage is ended or its continuity in some way in fact broken. The observations of justice Starke set out at page 150 of the report reaffirm this position. Countervailing duty also does form part of the incidental charges. Countervailing duty is clearly contained in rule 2(7)(a) of the Octroi Rules. The rule prevalent prior to 28th June, 1983 was in the following terms: 'Value of the articles' where the octroi is charged ad valorem shall mean the value of the article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f and the Rules framed thereunder imposes octroi, in respect of the goods with which we are concerned, on an ad valorem basis. Rule 2(7)(a) defines the value of the articles concerned for the purpose of octroi duty. Broadly, the rule defines the value of article for the purpose of octroi duty as made up of the cost price of the article plus certain items of additions specifically mentioned in the rule itself and a residuary clause. There are three periods of time that have to be considered (i) prior to 28th July, 1976, (ii) between 28th July, 1976 and 28th June, 1983 and (iii) after 28th June, 1983. For the first period, the rule specifically mentioned shipping dues, insurance, excise duties, sales tax, vend fees, freight charges, carrier charges and added all other incidental charges incurred by the importer till the arrival of the articles at the place of import . For the period between July 28, 1976 and June 28, 1983, it added customs duties to the items specifically mentioned and added all other incidental charges excepting octroi incurred by the importer till the articles are removed from the place of import . For the period after June 28, 1983, the rules spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the privilege of deferment given to the assessee. The second question is regarding the includibility of the countervailing duty for purposes of octroi. So far as the two periods after July 28, 1976 are concerned, I agree with my learned brother that there can be no doubt that this is included. The specific inclusion of the word countervailing duty and broader reference to duties incurred or liable to be incurred in the 1983 amendment in my opinion, only further clarifies the position which was prevalent even prior to June 28, 1983. The word incidental charges has a very wide meaning, particularly in a context where duties and taxes are referred to and the idea seems to be to include all items that will be taken into account by an importer as part of his cost. In regard to the period till July 28, 1976, I had a little doubt as the rule included only charges incurred till the arrival of the article at the place of import . But, considering that arrival is the event which simultaneously attracts both octroi and customs, I think that the later change of language was only clarificatory and I agree with the conclusion my learned brother has reached that the position ..... X X X X Extracts X X X X X X X X Extracts X X X X
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