CASE NO.: Appeal (civil) 1388 of 2004 PETITIONER: EAGLE FLASK INDUSTRIES LTD. RESPONDENT: TELEGAON DABHADE MUNICIPAL COUNCIL AND ORS. DATE OF JUDGMENT: 06/10/2004 BENCH: ARIJIT PASAYAT & C.K. THAKKER JUDGMENT:
JUDGMENT
2004 Supp(5) SCR 137
The Judgment of the Court was delivered
ARIJIT PASAYAT, J. The challenge in this appeal is to the judgment rendered
by a Division Bench of the Bombay High Court dismissing the writ petition
filed by the appellant. Challenge was to the levy of octroi by respondent
No. 1 Talegaon Dabhade Municipal Council (hereinafter referred to as
“Municipal Council”) which was established under the Maharashtra Municipal
Council Nagar Panchayat and Industrial Townships Act, 1965 (in short “the
Act”). The respondent No. 1- Municipal Council proposed to levy octroi in
terms of the Maharashtra Municipalities (Octroi) Rules, 1968 (in short the
“Rules”) .
The appellant used to import raw material and components into the octroi
limits of the Municipal Council. The appellant took the stand that the
three items i.e. plastic powder, plastic components and glass refills were
covered under the Residuary Entry 86 of the Rules. The stand of the
appellant was that it had paid octroi on the three items under protest
under Rule 15(1) of the Rules. It requested the concerned Superintendent
for determination under Rule 15(3) the correct amount of duty payable. It
also prayed for a direction to respondent No. 1- Municipal Council for
refund of difference between the octroi levied and the octroi due under
Entry 86 of the Rules. As the Municipal Council failed to refund the
octroi, a writ petition was filed in the High Court under Article 226 of
the Constitution of India, 1950 (in short the “Constitution”) by the
appellant herein.
The High Court held that in view of the decision of this Court in Municipal
Corporation for the City of Thane and Ors. v. Asmaco Plastic Industries and
Ors., [1999] 1 SCC 372, Entry 53(c) applies to plastic goods and plastic
powder and the glass refills were covered by Entry 49. Accordingly, the
writ petition was dismissed. Direction was given to the appellant to pay
the difference of octroi payable and paid at different rates along with the
interest depending on the period in view of what is provided in Section 166
of the Act,
Learned counsel for the appellant submitted that the view of the High Court
is clearly untenable as the decision in Asmaco’s case (supra) is
distinguishable. In that case, taking into account the type of articles
involved, this Court held that the heading of an Entry was really of no
consequence. But if one looks at the concerned Entry 49 in the background
of the concerned items, the heading becomes important. Reference was also
made to Entry 14(a), I4(b) to contend that it cannot be laid down as a rule
of universal application that in matters of levy of octroi, the headings of
Entries are not relevant. It was also submitted that the appellant has
become a sick industry and the proceedings are pending before the Board for
Industrial and Financial Reconstruction (in short the “B1FR”). It was,
therefore, submitted that no recovery in respect of concerned amount can be
directed . Finally, it was submitted that there is a power for remission of
interest and the direction of the High Court to pay interest has to be
varied leaving the matter open to Municipal Council to consider whether
interest is chargeable. In any event, the amendment to Entry 49 shows that
prior to the amendment residual Entry was applicable. The High Court
proceeded on the basis that amendment to Entry 49 was really of no
consequence as the unamended Entry also covered the articles.
In reply learned counsel for respondent No. 1- Municipal Council submitted
that with reference to Entry 56 that even if for the sake of argument it is
conceded and not accepted that Entry 49 does not cover glass articles,
Entry 56 clearly takes care of those articles. Entry 56 excludes “articles
used for building construction” to which reference is made in Entry 49.
Therefore, in any event, in view of Entry 56, the levy is in order. So far
as the recovery is concerned, it is submitted that only on adhoc basis duty
was levied, but no final assessment, as contemplated under the Rules, has
been made. Therefore, the plea relating to recovery under Section 22 of the
Sick Industrial Companies (Special Provisions) Act, 1985 (in short “SICA”)
is premature. It is also submitted that until the duty is quantified, the
question of recovery does not arise and the question of recovery shall be
considered by the Municipal Council in its proper perspective.
Entry 49 and Entry 56 read as follows:-
49. Glass, glassware, chinaware enamelware, all kinds of crockery used for
construction or decoration of buildings and sanitary fittings, metal
valves, coppwercocks and their fittings Thermos shells glass shells require
for Thermos).
56. Glass and glassware including bangles, bottles, articles of china and
porcelain wares and earthern wares (excluding articles used for
construction or decoration of buildings)
The High Court placed reliance on Asmaco ‘s case (supra). In paragraph 6,
it was observed by this Court as follows;-
“We may firstly refer to the scheme of bringing several commodities to tax,
i.e. the several goods under the Octroi Schedules. In either Rules, several
classes of goods are mentioned in various headings like articles of goods,
animals, articles used for fuel, lighting, washing and industrial use,
articles used in the construction of building, roads and other structures
and articles made of wood or cane, perfumes, toilet requisites, colours and
household goods, tobacco requisites and so on. Under each heading, several
goods are mentioned, but we cannot discern any scientific basis in bringing
these goods under one heading or the other. For example in Class III
articles used for fuel, lighting, washing and industrial use, it is not
clear whether charcoal, which is at Item 14, when brought into a local area
which is to be used to industrial use could be subjected to octroi duty.
Similarly, when soap of all kinds is used in Item 17, boot and metal polish
are lugged in. While detailing the rates of duty, what is stated is 2 per
cent ad valorem for washing soap and bath soap costing not more than Rs.
1.25 per cake. It obviously would indicate that these goods need not
necessarily be used for industrial purpose or as fuel for lighting or
washing. While soap is used as a washing material, boot and metal polish
cannot be stated to be a washing materials. Again, various detergents used
in washing clothes, floor and utensils are referred to in Item 18. It is
not clear whether it is related only to such goods which are meant for the
purpose of industrial use. Viewed from this angle, we do not think the
classification of goods made in these entries is on any scientific basis
and heading as such in any one group does not by itself control the meaning
to be attached to each of such goods.”
We find substance in the plea of the learned counsel for respondent No. 1
Municipal Council that the goods are clearly covered under Entry 56.
Unfortunately it appears that reference was not made to Entry 56 before the
High Court. We confirm the High Court’s view though on a different basis
i.e. with reference to Entry 56.
The effect of Section 22 of “SICA” has been considered by this Court in
Real Value Applicance Ltd v. Canara Bank and Ors.. [1998] 5 SCC 554 and
Rishabh Agro Industries Ltd. v. PNB Capital Services Ltd, [2000] 5 SCC 515.
It has rightly been contended by the learned counsel for respondent No. 1
Municipal Council that the effect of Section 22 is to be considered only
when there is a demand for recovery. The question of recovery would arise
only when there is a quantified demand on assessment. Admittedly that stage
has not reached. Therefore, it is open to the Municipal Council to make an
assessment and quantification of the octroi duty payable, if not already
done. Only after the quantification is done and assessment made as provided
in law, the question of recovery would arise. At that stage the effect of
Section 22 can be considered in the back ground of what has been stated in
Real Value and Rishabh Agro (supra).
So far as the question of interest is concerned, it is open to the
appellant to move the Municipal Council for waiver/remission of octroi duty
in terms of Section 166 of the Act. It goes without saying that the
direction given by the High Court for payment of interest in terms of
Section 166 of the Act shall not be the determinative factor to deny the
waiver/remission if it is found entitled thereto. However we make it clear
that we have not expressed any opinion on the appellant’s entitlement to
such waiver or remission. The appeal is disposed of accordingly. No costs.