JUDGMENT
Rajesh Balia, J.
1. Heard learned Counsel for the parties.
2. The three writ petitions concerns the levy of octroi duty on the supplies of petroleum products made by the petitioner companies in each case, to its dealers for their sale consumption and use outside the municipal limits. Under the terms of dealership the petroleum products are transported from respective depot of the respective petitioners at Jodhpur and supplies of petroleum products to such dealers at different places are made at the risk of the petitioners. The sale of such petroleum products takes place outside the municipal limits of Jodhpur and not at the Jodhpur depot of the petitioner. Since July, 1975, the respondent Municipal Council suspended the transport facility of the petitioner in each case on the ground that the octroi duty could be charged from the petitioners in respect of goods transported from within the municipal limits, even though they were to be exported for sale outside the municipal limits and made a demand for levy of octroi duty on the supplies made by the petitioner companies to their dealers outside such local limit.
3. The said levy was challenged by one of the dealers M/s. Parikh Automobiles contending that the Municipal Council had no right to charge octroi on goods transported outside its limits to dealers of oil companies for their ultimate use, consumption or sale outside such limits when the goods were not sold at Jodhpur but the sale took place only at the destination. Accordingly, it was contended that since no taxable event for levy of octroi viz. entry of the goods within municipal limits for sale, use or consumption therein, took place therefore no tax could be levied under the Rajasthan Municipal Act by way of levy of octroi.
4. It was ultimately held by the Apex Court in the case of M/s Parikh Automobiles that sending of goods outside municipal limits by the oil company deposits, situated within the municipal limits would not attract levy of tax under Section 104 of Rajasthan Municipalities Act and the levy was held to be ultra vires.
5. Since order of the Division Bench dated 1st April, 1977 passed in Parikh Automobiles case, the petitioner has deposited octroi duty on such transactions in a separate bank Account till 7.11.1989 and stop depositing the amount in the bank after the decision of the Supreme Court on 23.1.1990.
6. Thereafter, the State Government passed an Act called the ‘Rajasthan Municipalities Amendment Act No. 13 of 1990 by which Section 104 of the Rajasthan Municipalities Act 1959 was amended. The amendment was brought into effect by creating legal fiction that once the goods have entered the local limits of a municipality, thereafter notwithstanding such goods are ultimately consumed, sold or used outside the local limits of municipality on their transport outside such limit, still it shall be deemed that such goods have been sold used or consumed within the limits of municipality. With this amendment provision was also made for validating the levy of octroi which was declared ultra vires by the Supreme Court.
7. Consequently, notices were issued to the respective oil companies having there depot within municipal limit, Jodhpur to pay the amount deposited by them in a separate account with the bank in terms of order passed in Parikh Automobiles case, and also made a demand for payment of octroi and arrears of octroi since they have stopped depositing the amount in the bank when the petition filed by M/s. Parikh Automobiles was allowed by the Supreme Court.
8. This led to filing of three writ petitions by the three oil companies challenging the constitutional validity of Sections 4, 5 and 6 of the Rajasthan Municipalities (Second Amendment) Act No. 13 of 1990. In the alternative it was prayed that amended provisions be read down as not to include goods brought within the municipal limits for its ultimate use, consumption or sale outside municipal limits and consequently to quash the demands raised by the respondent Municipal Council.
9. Since filing of this writ petition, the provision similar to the amendment in question under Punjab Municipalities Act has been held to be ultra vires. The authority to levy tax in the nature of octroi Duty flows from Entry 52 of the II list of Schedule VII which deals ‘taxes on the entry of goods within the local area for consumption, use or sale therein’. Apparently the legislative power conferred on the State legislation to levy tax under entry 52 of the said list is not to levy tax merely on the entry of goods in local area, but is conditioned with the object with which the goods enter into the local area only. The entry of such goods can be subjected to octroi which is meant for use or sale on consumption within the local area in which such goods have entered. The legislative authority to levy tax under Article 265 of the legislature of the State does not carry beyond this. If the goods enter into local authority is not used sold or consumed within such area, but is exported outside it where it is sold used or consumed, then no taxing event takes place which could be subjected to octroi.
10. Supreme Court in Indian Oil Corporation v. Municipal Corporation, Jullundhar and Ors. while interpreting Section 113 of the Punjab Municipal Corporation Act, Section 113, which were like the provisions under challenge, has held that entry of goods within the local area for consumption, use or sale therein is made taxable by the State legislature on the authority of Entry 52 of List 2 of Schedule VII, the Municipality derives its power to tax from the State legislature and it obviously cannot have any authority more extensive than the authority of State legislature. Since, the State legislature in view of Entry 52 of List 2 of Schedule VII is competent to levy tax only on the entry of goods for consumption, use or sale into a local area, the Municipality cannot under a legislation enacted in exercise of the powers conferred by Entry 52 of List 2 have the power to levy tax in respect of goods brought into the local area for purposes other than for consumption, use or sale, therein.
11. Dealing with the authority to levy octroi duty on the transactions like one which are subject matters of the writ petitions. The Court said:
The terms of the agreement executed between the IOC and its dealers showed that in respect of the goods which were re-exported by the IOC to its dealers outside the municipal limits, the risk, till the delivery of the goods at the premises of the dealers, continued to remain with the IOC which was also obliged to make good any loss during transit and therefore the transaction by the IOC with its dealers or agents did not amount to any sale at the depot within the municipal limits of the Municipal Corporation. The High Court did not consider various clauses of the agreement or the effect of the affidavits which had been filed by IOC before the Appellate Commissioner or the categorical statement in the writ petition showing that the risk till delivery of the products to the dealers continues to remain with the IOC and the goods are re-exported at the risk of the IOC and not at the risk of the dealers.
In such circumstances it was held that the transaction where the petroleum products transported to the depot of the IOC are meant for export from its depot inside the octroi limits to outside the municipal limits to its dealers for sale, use and consumption by person other than the IOC, outside the octroi limits, is a transaction of re-export and that the appropriation of the goods does not take place at the depot but at the outlets of the dealers or the agents outside the municipal limits. The octroi duty is, therefore, not chargeable on such a transaction. The levy and collection of the octroi duty on such goods by the Municipal Corporation is, therefore, not justified.
12. In view of the aforesaid pronouncement of the Supreme Court, the amended provisions had to be read authorizing the levy of octroi duty on goods which are brought within the local limits of Jodhpur. Municipal Council only if they are sold, consumed or used within the municipal limits. To hit because under the terms of agreement the goods from the depots the petitioners companies are exported outside the local limits for their use, consumption or sale outside municipal limits, and the sale is not completed within the municipal limits no octroi duty can be levied in respect of such transactions. There is no authority of law to impose such levy. So far as the terms of agreement are concerned, separate affidavits filed by the respective petitioners conform to the terms of agreement executed between the IOC and its dealers.. As a result, it must be held that the petitioners in each case are not liable to octroi duty in respect of transactions where the petroleum products brought to the depot of the oil company in each case are meant for transporting outside the octroi limits to its dealers for sale, use and consumption by persons other than the IOC outside the octroi limits does not take place at the depot of the agents outside the municipal limits. The octroi duty is therefore not chargeable on such transactions. The levy and collection of the octroi duty on such goods by the Municipal Corporation is therefore not justified. Consequently the demand for octroi on the transactions in question cannot be sustained.
13. The next question that arises for consideration in these three writ petitions is about the mandamus sought by the petitioners for refund of the octroi duty paid by them, under the orders of court.
14. So far as the liability to pay octroi duty in terms of the notice issued by the Municipal Council in pursuance of the amendment relates to the arrears of octroi which was deposited by the petitioners in each case with the respective bank but has not been paid to the municipality, obviously cannot now recovered from the petitioners as there is no liability to pay octroi duty exists against them. The tax not authorised to be levied cannot also be collected, if it has not been collected from the petitioners so far.
15. However, question of refund claimed by the petitioners of the amount which they have paid to the municipality though under protest stand on a different footing. It is true that no levy and collection of tax can be made from a person where such levy of tax is not authorized by law. In the present case on the transaction concerned to which the petitions relate, the levy has been held by us to be not authorised by law. Ordinarily, in such event the person from whom the collection has been made becomes entitled to refund of the amount on the principle of restitution. However, the law in this connection is now well settled so far as the refund in-direct taxes is concerned by a constitutional Bench of the Supreme Court of nine Judges in Mafatlal Industries Ltd. and Ors. v. Union of Indian and Ors. . The Court has ruled that this entitlement of refund is not absolute or automatic. Jeevan Reddy J. speaking for the majority said that;
Where a provision of the Act whereunder the duty has been levied is found to be unconstitutional for violation of any of the constitutional limitations. This is a situation not contemplated by the the Act. The Act does not contemplate any of its provisions being declared unconstitutional and therefore it does not provide for its consequences. Rule 11/Section 11-B are premised upon the supposition that the provisions of the Act are good and valid. But where any provision under which duty is levied is found to be unconstitutional, Article 265 steps in. In other words, the person who had paid the tax is entitled to claim refund and such a claim cannot be governed by the provisions in Rule 11/Section 11-B. The very collection and/or retention of tax without the authority of law entitles the person, from whom it is collected, to claim its refund. A corresponding obligation upon the State to refund it can also be said to flow from it. This can be called the right to refund arising under and by virtue of the constitutional provisions, viz., Article 265. But, it does not follow from this that refund follows automatically. Article 265 cannot be read in isolation. It must be read in the light of the concepts of economic and social justice envisaged in the preamble and the guiding principles of State Policy adumbrated in Articles 38 and 39–an aspect dealt with at some length at a later stage. The very concept of economic justice means and demands that unless the claimant (for refund) establishes that he has not passon on the burden of the duty/tax to others, he has no just claim for refund. It would be a parody of economic justice to refund the duty to a claimant who has already collected the said amount from his buyers. The burden–that would be economic justice. Conferring an unwarranted and unmerited monetary benefit upon an individual is the very antithesis of the concept of economic justice and the principles underlying Articles 38 and 39. Now, the right to refund arising as a result of declaration of unconstitutionality of a provision of the enactment can also be looked at as a statutory right of restitution. It can be said in such a case that the tax paid has been paid under a mistake of law which mistake of law was discovered by the manufacturer/assessee on the declaration of invalidity of the provision by the Court. Section 72 of the Contract Act may be attracted to such a case and a claim for refund of tax on this score can be maintained with reference to Section 72. This too, however, does not mean that the taxes paid under an unconstitutional provision of law are automatically refundable under Section 72. Section 72 contains a rule of equity and once it is a rule of equity, it necessarily follows that equitable considerations are relevant in applying the said rule-an aspect which we shall deal with a little later. Thus, whether the right to refund of taxes paid under an unconstitutional provision of law is treated as a constitutional right flowing from Article 265 or as a statutory right/equitable right affirmed by Section 72 of the Contract Act, the result is the same–there is no automatic or unconditional right to refund.
16. The Court further went on to say that:
A claim for refund, whether made under the provisions of the Act as contemplated in Proposition (i) above or in a suit or writ petition in the situations contemplated by Preposition (ii) above, can succeed passed on the burden of duty to another person/other persons. His refund claim shall be allowed/decreed only when he establishes that he has not passed on the burden of the duty or to the extent he has not so passed on, as the case may be. Whether the claim for restitution is treated as the constitutional imperative or as a statutory requirement, it is neither an absolute right nor an unconditional obligation but is subject to the above requirement, as explained in the body of the judgment. Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice is suffered in such a case by the person who has ultimately claim its refund. But where such person does not come forward or where it is not possible to refund the amount to him for one or the other reason, it is just and appropriate that that amount is retained by the State, i.e. by the people. There is no immorality or impropriety involved in such a proposition.
The doctrine of unjust enrichment is a just and salutary doctrine. No person can seek to collect the duty from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is, however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched.
From the aforesaid, it is apparent that unless the petitioner establishes in each case that it has not transferred the burden of octroi duty which has been levied and collected from them to their buyers though cannot claim refund as a matter of course as automatic consequence of levy having been held to be ultra vires. For raising a claim of refund of octroi duty paid by or levied and collected from the petitioners, a claim before the municipality may be made by asserting that the amount of octroi recovered from them has not been passed on to their buyers. Only those persons who have ultimately borne the burden of such tax are entitled for the refund.
17. In the present case so far as any recovery of arrears is concerned from the petitioners, that is to say that the tax which is not leviable and not collected therefrom, cannot now be collected.
18. Thus the amount which the petitioner has deposited in a separate account but has not paid to the Municipal Corporation, cannot now be collected from the petitioner. However, the amount which has been paid by the petitioners to the Municipal Council though under protest, they may make appropriate applications for claiming the refund, and pursue the remedies, as may be available to them under law.
19. We may also notice that at one stage petroleum Dealers Association have made application for being impleaded as party asserting that members of said association have ultimately paid the octroi to the company, and are entitled to refund, and therefore the company is not entitled and the octroi duty may be refunded to them. The application of petroleum Dealers Association was rejected by order dated 19.4.1991. They are free to prosecute their remedies, subject to same limitation as are applicable to original tax payer.
20. These writ petitions are disposed of accordingly.