RAYMOND WOOLEN MILLS LIMITED Vs. STATE OF MAHARASHTRA

JUDGEMENT

(1.) THE petitioner No. 1 is a Public Limited Company incorporated under the Companies Act and runs its factory at Jekogram, Thane. The company claims to be one of the largest units manufacturing worsted woollen fabrics, polyester wool fabrics, other blended fabrics, woollen blankets, synthetic yarn and blended yarn. The company imports greasy wool, polyester fibre, acrylic fibre, nylon fibre for the manufacture of its products in the Mills at Thane. The goods are imported from abroad and are received at Bombay Docks. Some of the consignments which are required for immediate consumption are transported to Thane by filing bills of entry for Home Consumption. Some of the consignments are stored in the Customs Bonded Warehouse located within the Municipal limits of Bombay Municipal Corporation. Chapter VIII of Bombay Municipal Corporation Act, 1888 (hereinafter referred to as the Act) provides for municipal taxation and section 192 onwards deal with levy of octroi tax. Sub-section (1) of section 192 of the Act provides that the tax shall be levied in respect of articles mentioned in Schedule H on the entry of the said articles into Greater Bombay for consumption, use or sale therein. The tax shall be called an octroi. Schedule H sets out the list of articles liable to payment of octroi and Class VII deals with piece goods cotton, yarn and threads of all sorts and starching and sizing materials, leather and articles of leather and rubber goods. Item 40 under Class VII provides for levy of 2 per cent ad-valorem as octroi duty on import of raw or unspuo wool, hemp, jute, coconut and other fibres and rope and articles made thereof. It is not in dispute that the articles imported by the company squarely fall within Item 40 of Class VII of Schedule H. Section 194-A of the Act, inter alia, provides that any article imported into Greater Bombay for the purpose of immediate exportation shall be exempted from the levy of octroi if such article is conveyed direct from the place of import to the place of export under such supervision and on payment of such fees as shall be determined in the rules to be framed by the Commissioner with the approval of the Standing Committee. It is not is dispute that in respect of consignment imported by the company and which are immediately removed to Thane factory, the Corporation does not levy any duty but recovers only the fees as determined by the rules framed by the Commissioner and approved by the Standing Committee. Section 195 of the Act deals with refund of octroi duty paid on export of the articles. Sub-section (1) prescribes that when any article upon which octroi has been paid shall be exported from Greater Bombay, then the amount of the tax levied shall be refunded. Sub-section (1a) reads as follows:

(2.) IN this petition filed under Article 226 of the Constitution of India, the company raises two contentions in regard to levy of octroi duty. The first contention is that it is not permissible for the Municipal Corporation to levy octroi duty when the consignments imported from abroad are merely stored in the Customs Bonded Warehouse. The second contention raised by the company is that in any event, it is not permissible for the Corporation to recover octroi duty at the rate of 2 per cent ad-valorem and then refund only 93 3/4% when the consignments are exported out of Greater Bombay to Thane Factory. The Corporation challenges both the claims made by the company. Shri Parasurampuria, learned Counsel appearing on behalf of the company submitted that the levy of octroi duty is permissible in accordance with Entry 52 of List II of Schedule VII of the Constitution of India and for the purpose of valid levy of octroi, it is necessary that not only the goods enter the local area but such entry is for the purpose of consumption, use or sale in that local area. There cannot be any debate about the accuracy of the proposition. Shri Parasurampuria then submits that when the imported consignments are stored in the Customs Bonded. Warehouse as permissible under the provisions of the Customs Act, it cannot be held that the import is complete. The next submission advanced was that the title in the imported consignment does not vests in the Company till the Customs duty is paid. It is impossible to find any merit in because the goods are stored in the Customs Bonded Warehouse and payment of Customs duty is deferred till its removal, that would not vest the title of the goods in the Central Government. Shri Parasurampuria realising the folly in his submission, urged that the import is not complete because the Company had no right to use the imported articles till the goods are removed from the Customs Bonded Warehouse and the Customs duty is paid after filing bills of entries for home consumption. It was also contended by the learned Counsel that the intentions of the Company in importing the consignment is to make use of the same for their factory at Thane and which is situated outside the octroi limits of the Bombay Municipal Corporation. Shri Parasurampuria submits that as the intention of the Company is exportation outside the octroi limits of the Municipal Corporation, the Company is not liable to pay any octroi duty. It is impossible to find any merit in the submission urged on behalf of the Company. The liability to pay duty arises as soon as the goods are brought within the octroi limits of the Corporation. Once the goods cross the octroi barrier, then the liability for payment of tax arises and the liability is not deferred till the Company chooses to file bills of entry for home consumption and remove the goods from the Customs Bonded Warehouse. The contention that the Company intends to use the imported articles only in their factory at Thane and which is outside the octroi limits of the Corporation and, therefore, the Company is not liable to pay octroi duty is without any merit. It is not possible for the Corportion to imagine or to ascertain what is the intention of the importer. Section 194-A of the Act specifically provides that when the goods are imported for the purpose of immediate exportation, then the importer will not be liable to pay octroi duty but only the fees as prescribed by the rules. In the case where the Company choses to store the imported consignments in the Customs Bonded Warehouse, then the purpose of import is not for immediate exportation and consequently the Company is liable to pay the octroi duty at the rate of 2 per cent ad valorem. Section 195 clearly provides that in case the imported goods are subsequently exported by the importer, then the duty will be refunded. In our judgment, the challenge to the levy of octroi duty by the Company is without any merit. Shri Bharucha, learned Counsel appearing on behalf of the Corporation, invited out attention to the decision of the Supreme Court reported in 1989 Supplement Volume 1. Supreme Court Cases, 347 (M/s. Shroff and Co. v. Municipal Corporation of Greater Bombay and another) and where it was observed that the charge or incidence correlated to the taxable event is on entry into the State by way of import. The purpose of import is decisive. In our judgment, as soon as the goods enter the octroi limits of the Municipal Corporation, then the liability to pay octroi duty in accordance with the rates set out in Schedule H arises unless the purpose of the import is immediate exportation outside the octroi limits as prescribed under section 194-A of the Act and the rules framed by the Commissioner.

(3.) SHRI Parasurampuria submitted that the claim of the Company that in cases where the imported articles are stored in Customs Bonded Warehouse, then the liability is not to pay the octroi duty at the rates prescribed in Schedule H but to pay the duty only at the rate of 6 1/4% is accepted by the Corporation and in support of the submission reliance is placed on two circulars dated May 13, 1989 and July 24, 1990. The second circular merely modified the first circular on some minor details. The first circular dated May 13, 1989 deals with the subject of exemption from payment of octroi on consignments removed to Customs Bonded Warehouses. The circulars recites that in Writ Petition No. 1337 of 1988 filed by M/s. Krislon Texturisers Private Limited in Bombay High Court, the Court has passed interim order directing the petitioners to pay to the Corporation 6 1/4% of octroi amount due towards services charges. The Assistant Municipal Commissioner, therefore, decided to pass general orders to exempt goods imported into Greater Bombay and removed to Customs Bonded Warehouses from payment of octroi subject to payment of 6 1/4% of octroi amount due towards service charges and production of an undertaking specifying that the goods are not meant for consumption, use or sale in Greater Bombay. Shri Bharucha submits and, in our judgment, with considerable merit that the circular was issued by the Municipal Corporation with a view to prevent filing of large number of petitions in this Court by the importers who store the imported consignments in Customs Bonded Warehouses. Shri Bharucha submits that the Corporation thought it fit that instead of entering into multiplicity of litigation by large number of importers, it is desirable to respect the interim order of this Court and to furnish the same advantage to all the importers till disposal of the petition. Shri Bharucha also points out that it is not permissible for the Corporation by issuance of circulars to depart from the statutory provisions of section 195 of the Act. Shri Bharucha, therefore, submits that issuance of the circulars cannot amount to acceding to the claim of the Company that it is not permissible to levy octroi duty in cases of import of articles and where the articles are stored in Customs Bonded Warehouses. In our judgment, the submission of Shri Bharucha is correct and deserves acceptance. The circular was obviously issued to respect the interim order of this Court and to avoid presentation of large number of petitions in this Court by importers whose imported articles are stored in Customs Bonded Warehouses. In our judgment, the circulars cannot confer any right upon the Company, the arrangement being only interim or temporary pending the disposal of the petition. In our judgment, the first contention urged on behalf of the Company that the Company is not liable to pay duty as long as the imported articles are stored in Customs Bonded Warehouse is without any merit and is required to be turned down.