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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH : NAGPUR
Writ Petition No. 1086 of 1994
M/s. Bakshi Steels Ltd.,
18, Commercial Complex,
Malcha Marg, Diplomatic
Enclave, New Delhi-110 021,
a registered Company under the
Companies Act, through
Mahendra Dindayal Sharma,
aged about 36 years,
Packet-B-10, House No. 110,
Sector 3,
Mohini, New Delhi,
Auithorized Agent -
Holding Power of Attorney. .... Petitioner.
Versus
1. The City of Nagpur
Corporation, through
Municipal Commissioner,
Civil Lines,
Nagpur.
2. Union of India, through
Secretary,
Ministry of Railways, Rail Bhavan,
New Delhi.
3. Chief Project Manager
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[Gauge Conversion],
D.R.M. s Office,
Building-IIIrd Floor,
South Eastern Railway,
Nagpur-1. .... Respondents.
*****
Mr. W.G. Charde, Adv., for the petitioner.
Mr. C.S. Kaptan, Adv., for respondent no.1.
*****
CORAM : A.H. JOSHI AND
ig Date :
A.R. JOSHI, JJ.
03rd November,2009.
ORAL JUDGMENT [Per A.H. Joshi, J]:
1. Heard learned Adv. Mr. W.G. Charde for the
petitioner and learned Adv. Mr. C.S. Kaptan for
respondent no.1. Perused annexures to the petition and
judgments cited at bar.
2. Petitioner herein is a manufacturer of
metallic castings, which are, inter alia, used as
inputs by Railways in the manufacturing of cement
concrete railway sleepers.
3. Respondent nos. 2 and 3 have placed with
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petitioner an order for one lakhs pieces of Malliable
Iron Casting Insert , described briefly as MIC
inserts . Copy of Work Order-cum-agreement is dated
6th December, 1993, which is at Annexure-A to the Writ
Petition at Page Nos. 12 to 22.
4. It is seen that in the process of supply, the
petitioner had to deliver the goods freight prep-paid
to the convenient Railway Station, or when transported
by road, the delivery has to be done, freight pre-paid
and goods have to be delivered to the designated
representative of Railway at the factory/work site.
5. Whenever MIC inserts are delivered, those
would be received and upon inspection accepted by the
specified representative of Railway.
This mode of delivery is provided in Clause 8
of the Work Order, the Annex.A foregoing.
6. In the situation at hand, petitioner has
preferred to deliver the goods by road at the appointed
destination, i.e., at the factory of M/s. ISCO Track
Sleepers Pvt. Ltd., Railway Yard, Kalamna, Nagpur.
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7. Having elected to transport the goods by road,
the petitioner was required to deliver the goods,
secure acknowledgment after inspection of MIC inserts
at the factory of the consignor, secure a certificate
from Specified Railway Officer and receive the payment
of bills from the respondent no.3 s designated officer.
8. The
petitioner under
MIC inserts were dispatched
lorry receipt dated 25th February,
by
1994 [one lorry], and lorry receipt dated 7th March,
1994 [one lorry] and 9th March, 1994 [two lorries].
These lorries and consignments were detained by
respondent no.1 for recovery of octroi.
9. It is seen that on all consignments till four
lorries transporting the MIC inserts and all
subsequent consignments, the respondent no.1 did not
charge octroi on the MIC inserts transported from the
petitioner to the ISCO TS Pvt. Ltd. for the Railways.
10. Lorries/consignments were not released in
spite of communications/certificates issued by the
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Railways through their certificates dated 9th March,
1994 [Annex.F], and letter dated 15th March, 1994 [J]
to the Respondent No.1.
By these certificates/letters, the Respondent
Nos.2 and 3 had certified and had reiterated that the
goods transported through concerned lorries were
railway material purchased by Executive Director Track
[M], Railway Board, Ministry of Railways, New Delhi.
Only upon deposit of octroi amount by the petitioner,
respondent no.1 released the four trucks/consignments.
11. Petitioner herein has challenged the said levy
of octroi and claimed the refund of said amount of
octroi which seems to be around Rs.7,212-00 per truck,
and total sum of Rs. 30,558/- inclusive of demurrage
charges.
12. The levy of octroi was done and it appears,
was recovered by the Respondent no.1 thereafter
successively. Petitioner has challenged the said levy
of octroi by filing this petition.
13. Petitioner claims that after the goods,
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subject-matter, were manufactured, those were got
inspected by authorities prior to delivery of
consignment to transporter. Relevant averment is seen
in para 7 of the Writ Petition, which reads as
follows:-
7. After this release order was
received, the four truck loads of the MIC
parts each of the truck containing 6000
pieces were got inspected by the
authorities of the Railways and the
consignee s receipts in the name of the
Railway Authority Executive Director in
respect of the four trucks were issued by
the petitioner. The lorry receipts are at
Annexures C,D, E & F respectively. The
Inspection Certificate in this respect of
the purchasing authority viz. Railways,
through its Executive Director, Track (M),
Railway Board, New Delhi is at Annexure-
G.
[Quoted from page nos. 3 and 4 of the Writ Petition
paper book].
14. Relying on facts as pleaded and the effect of
provisions of Sale of Goods Act, petitioner has urged
that Railway is the owner of MIC inserts , the
subject-matter of these consignments, stating that the
MIC inserts are :-
[1] Specific goods. [Section 22].
[2] The goods were inspected before
delivery to the transporter. [Section
20].
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[3] Goods have been unconditionally
appropriated to the contract by the
seller with the assent of the buyer.
[Section 23 (1)].
[4] Goods are delivered by the seller to
the carrier without a right of disposalunder the instructions of the buyer.
[Section 23 (2)].
[5] Delivery by road is authorized by the
contract and hence when consigned to
transporter, property in the goods[6]
ig passes to the buyer. [Section 39 (1)].
The property in the goods has passed asintended. [Section 19].
[7] The property/title in the goods passes
whether the payment is made or not,
because future payment can be a goodcondition for transfer of ownership.
[8] Petitioner is a bailee of the
Respondent Nos. 2 and 3 on the date
when those were detained by RespondentNo.1 for demanding octroi.
15. In brief, case of petitioner is that when
goods were detained by the respondent no.1, those were
owned by Railway, since same were specific goods and
were appropriated towards sale by seller at the
directions of buyers as those were inspected by
purchaser the respondent nos. 2 and 3 and being
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railway property when detained, levy of octroi is not
attracted, and hence the claim by respondent no.1 is
unlawful and arbitrary.
16. The challenge, as presented in the petition in
a condensed form as found in paragraph no.14 can be
better read by quotation, which is as follows:-
14. The petitioner submits that this
action on the part of the Respondents isarbitrary and
jurisdiction.
unlawful and without
It constitutes invasion on
the right of the petitioner to carry on the
business and occupation and infringes theright conferred under Article 19 (G) of the
Constitution of India. It also invades the
right under Articles 14 and 21 of the
Constitution of India. In any case, it was
not within the powers of the Respondent No.1 to charge the octroi duty in question
only because the petitioner happened tobring the property of the Railways i.e.,
Union Government according to their
instructions for delivering the same at
Kalamna Railway Yard. It was impermissibleand directly in contravention of Articles
265 and 285 of the Constitution of India
and also sections 184 and 187 of the Indian
Railways Act. …..
[Quoted from page nos.6 and 7 of the Writ Petition
paper-book].
17. Learned respective Advocates have placed
reliance on following reported judgments :-
By petitioner :
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[a] M/s. Marwar Tent Factory Vs. Union of India
& ors. [AIR 1990 SC 1753],
[b] Agricultural Market Committee Vs. Shalimar
Chemical Works Ltd. [AIR 1997 SC 2502],
[c] Birendra Nath Guha & Co., Vs. State of
Bihar [AIR 1955 Patna 245SC 1753],
[d] Commissioner of Sales Tax, Eastern
Division, Nagpur Vs. Husenali Adamji & Co.
[AIR 1959 SC 887],
[e] The Union of India Vs. Bhusawal Municipal
Council [AIR 1982 Bombay 512], and
[f]
Maharashtra Distilleries Ltd. Vs. Municipal
Corporation of Aurangabad & another [AIR
2005 SC 760].
By Respondent No.1 :-
Municipal Commissioner of Dum Dum
Municipality & ors. Vs. Indian Tourism
Devpt. Corpn. & ors. [(1995) 5 SCC 25].
18. Plea of the respondent no.1-Corporation is of
a simple denial of exemption claimed by the petitioner.
Respondent no.1 urges that goods have been consigned by
the petitioner and Railway is the recipient. It further
urges that so long the Railways do not themselves come
forward and claim to be owner of the property, the
exemption would not apply.
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19. The plea of Indian Railways is not disclosed,
as they have chosen to be mute. It is seen that
various certificates and communications are issued by
Railways to the respondent no.1, stating that the
subject-matter is railway material . At no point of
time, the respondent nos. 2 and 3 came forward to seek
release of goods, claiming ownership thereof. Even
before this Court, respondent nos.2 and 3 have not
appeared to support the plea of the petitioner.
20. It is to be seen as to when the consignments
were detained for demanding octroi, whether those
specified goods manufactured for railway had vested in
Railways rather whether property in the goods had
passed on to Railway.
21. The points on which there is no controversy as
has revealed from the rival submissions demonstrate the
following:-
[a] It is not in dispute that the railway
property is not taxable in view of
Sections 148 and 187 of the Indian
Railways Act.
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[b] The taxation may come under the bar
of Articles 265 and 285 ofConstitution of India once it is a
property belonging to Union of India
or the Railways.
[c] If the levy is not authorized by law,
it would otherwise come into clutchesof being arbitrary, unreasonable, and
would be hit by Articles 14 and 19 ofConstitution of India.
22. The points on which dispute arises are:-
[a] Whether the MIC inserts on the
date of entry into the limits ofCorporation are imported for use
or consumption by the Railways as
Railway property?
[b] Whether the petitioner/consignor
was acting sheerly as an agent of
Railways, when it had entrusted the
MIC inserts to the transporterand property in goods had already
passed to the Railways?
[c] Whether the MIC inserts were
inspected by Railways as averred in
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the effect of said inspection, ifadmittedly done or proved?
23. The fact of the matter is required to be
ascertained and dealt with on the basis of facts as
obtaining between the parties and stipulations of sale
as spelt out from the work order, which is the contract
document deciding the relations between the parties,
i.e. Railway and the petitioner, and their mutual
rights and obligations.
24. Clauses 7 and 8 of Work Order [Annex.A] are
relied upon by both the parties, though with divergent
objects.
Clause 7 pertains to mode of dispatch and
Clause 8 acceptance, inspection and payment.
25. Clause 7.2 is quoted ad verbatim for a quick
access and understanding, which reads as follows:-
7.2 The contractor shall load and
arrange dispatch as per the mode of
transport preferred by the consignee
(s) at contractor s own cost, booking
the consignment freight pre-paid.
The contract rate is inclusive of the
cost of finished inserts supplied at
the consignees works and contractor
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towards any cost incurred in the
loading, packing and transport of thefinished inserts.
[Quoted from page no.16 of the Writ Petition paper-
book].
26. From Clause No.7 quoted above, it is apparent
that the consignment is to be done by the consignor at
own costs, with freight pre-paid and any additional
claim towards costs of loading, packaging,
transportation
ig etc., of finished inserts is not
admissible.
27. Clause 8 is quoted ad verbatim as follows:-
8. Payments :
8.1. The time to time payment at the
accepted rate towards supply of finished
inserts will be made by the FA & CAO,
Central Railway, Bombay.
8.1.1 Payment of 98% of contract rate
shall be made towards the inspected and
passed inserts when despatched by rail.
The claim for payment shall be supported by
inspection certificate as also proof ofdespatch (clear RR) where booking is done
by Rail. Balance 2% payment shall be made
on certification of receipt in good
condition by the respective consignee (s)
duly verified by Railway representative
(Concrete Sleeper Inspecting Engineer) at
the consignee (s) factory of receipt of
consignment in good condition.
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8.1.2 Where the passed inserts as
allotted (under Release Order (s) aresupplied direct to the consignee by road
transport, payment shall be made at 100% ofcontract rate by the paying authority on
production of relevant inspection
certificate (s) and a certificate from the
consignee s authorised representative for
the receipt of consignment in goodcondition and the same duly verified by the
concrete sleeper inspecting authority (not
below the rank of AEN/AIE) nominated at the
consignees works. The consignee (concrete
sleeper manufacturer) shall certify thereceipt of consignment (s) on behalf of the
Purchaser.
[Quoted from page no.16 of the writ petition paper-
book].
28. Said Clause 8 can be analyzed as follows:-
As to Clause 8.1.1:-
The contractor/supplier is entitled
for the 98% payment no sooner
delivery of goods is certified by the
Representative of Railways and
balance payment is to be made afterverification of Railway s
representative Concrete Sleeper
Inspecting Engineer at the factory on
receipt of the consignment of goods
at Railway yard.
As to Clause 8.1.2 :-
100 per cent payment will be made by
the paying authority on production of
relevant Inspection Certificates and
Certificate from Consignee s
authorized representative for the
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verified by the specified Concrete
Sleeper Inspecting Authority at theconsignee s work.
29. It is seen from Clause 8.1.1 that the
specified representative of Railway receives the
delivery at the Railway yard whenever transportation is
by railway freight pre-paid, and there the delivery of
goods is complete and there and then upon said
inspection and acceptance of goods, the property in
goods gets transferred to Railways.
30. It is seen that in the situation governed by
Clause 8.1.2, the delivery is complete only when the
goods physically reach the consignee s work and the
specified Concrete Sleeper Inspecting Authority of
Railway inspects the MIC inserts and accepts the
delivery.
31. What is common in Clauses 8.1.1 and 8.1.2 is
Delivery upon inspection to specified representative
of Railway .
32. This Court finds that delivery of physical
possession to the Railway or for and on behalf of
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Railway after inspection in the manner prescribed is
made a pivotal and common point in Condition No.8.
33. Now, this Court has to see how was the
consignment done. For this purpose, Transport Invoice
has to be seen.
34. The Transport Invoices/Lorry Receipts are four
in number, and are concurrent as to form and details of
consignor and consignee and relevant part thereof reads
as follows:-
Consignor s Name & Address : M/s.
Bakshi Steels Ltd., Bhiwadi.
Consignee Bank s name and address :
M/s. Executive Director Track (M),Railway Board, Ministry of Railway,
New Delhi at M/s. ISCO Track Sleeper
(P) Ltd., Railway Yard, Kalamana,
Nagpur.
[Quoted from page no.26 of the Writ Petition paper-
book].
Reference to Bank appearing in the portion
quoted above, is in-redundant, as the transaction is
direct and not through Bank, and word only consignee
will have to be read.
35. In present case, consignor, as seen from
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documents admitted/relied upon by the petitioner, is
the seller the petitioner.
36. Now it is to be seen whether petitioner has
acted as bailee, and for this purpose, it is also to be
seen whether title/property in goods has transferred to
seller before consignment.
37.
It follows by essential inference from Clauses
8.1.1 and 8.1.2 that in either case of transportation
either by rail or by road, the property in goods does
not pass to the railway until the inspection is done by
the specified Inspecting Authority, when goods actually
reach the consignee s yard (when transported by
Railway) or place of work and in the facts of present
case, at the Kalamana-based factory of ISCO TS [P] Ltd.
38. Therefore, the property in goods would pass
unto the Railways, soon the inspection is done at the
time of taking delivery by the specified officer of
Railway under Clause 8.1.1 or 8.1.2.
Thus, in both the situations, a common factor
is inspection by specified authority at the time of
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taking physical delivery. This inspection before
delivery by specified representative of Railway was not
completed when the goods were consigned to transporter.
39. The goods were detained demanding octroi by
the respondent no.1 before the stage of delivery to
Railway Officer at ISCO TS [P] Ltd., has matured.
40.
It is seen that the choice of transport by
road was made by the petitioner. Had the goods been
delivered at Railway Yard, wherever outside territorial
limits of Nagpur Municipal Corporation whenever the
goods would arrive within limits of Corporation while
those would stand already vested in Railway, and were
to be in physical possession of Railway as the
Railway s owned property at the time of entry in limits
of Corporation.
41. From what is shown by the petitioner as the
transport free of freight to destination , was
selected by seller, the entrustment of
goods/consignment to the transporter was not as per the
choice or direction of the buyer Railway.
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42. The inspection note on record Annexure-G at
page 30 is dated 3rd March, 1991. Goods inspected are
described therein, but those are not shown or proved to
be the very goods which are consigned. It is also not
shown that due to any subsequent agreement, inspection
as prescribed in Clause 8 has been altered and
dispensed with so as to render inspection represented
in Inspection Note [Annex. G ] dated 3rd March, 1991
to be the inspection as contemplated by Clause 8.1.2.
43. Moreover, while Railways supported the
petitioner before the Respondent No.1 in the form of
letters/Certificates at Annexures H and I , they
have not filed in this Court any consenting reply.
Railways has refrained from appearing and supporting
the petitioner.
44. It is not a case where like in an
interpleader, the petitioner may have said that not the
petitioner, but respondent nos. 1 and 2 are liable for
octroi, and, if any, levy is due, it be recovered from
the respondent nos. 1 and 2. Railway Establishment
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was, therefore, not called upon to traverse the
contents of the petition, and they have chosen to
remain mute.
45. It has to be noted that they have not come
forward to own the responsibility of title of goods and
claim exemption from duty, by virtue of title, probably
because they wish to say that ownership in the goods
was not so far passed unto them, which would occur only
after the goods are physically delivered.
46. The term railway material or any other
loose description as to Railway s interest in goods or
alleged admission by Railway that MIC parts are
purchased by Railway in itself does not prove that the
ownership of goods on the day of detention was that of
Railway.
47. It is pertinent to note that at no point of
time, Respondent Nos. 2 and 3 themselves did come
forward to urge before the respondent no.3 that
consignments belonged to them and those be released in
their favour, and that the consignor was justa
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bailee as their agent, no sooner first inspection at
manufacturer s [petitioner s] site represented through
Annexure G [at page 30] was conducted.
48. It is thus clear that Respondent Nos. 2 and 3
do not claim the ownership in goods so long those are
put in physical possession of Railway s representative,
as is clear without any ambiguity from Clauses 8.1.1
and 8.1.2 and mute stance of these respondents.
49. It is, thus, seen that inspection by Railway
Officer prior to delivery to truck for transport by
itself and in isolation would not pass the title in the
goods to Railway, and by fiction of law, make it a
railway property , since the inspection prior to
actual delivery of consignment to railway was
contemplated by Clauses 8.1.1 and 8.1.2.
50. In the given situation as obtaining on record,
Railway is not shown to be the consignor, but is the
consignee, as owner of goods on facts or by fiction of
law.
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51. On facts, the petitioner has failed to bring
on record any material or jurisdictional facts, to
prove or demonstrate that indisputably Railway is the
owner.
52. Petitioner has failed to prove fact crucial to
attract the fiction of passing property in goods ,
which is inspection followed by delivery. By
application of various provisions of law relied upon
while urging points referred to in para 14 of this
judgment are, property in goods does not pass unto
Railway. Facts crucial to passing the property in
goods are not proved from the material relied upon by
the petitioner.
53. This Court holds that the goods were not
appropriated to the sale either by seller or purchaser
to the contract, and the property in goods did not pass
to the buyer.
54. The petitioner, therefore, continued to hold
the goods for himself when detained by the Respondent
No.1, and, therefore, was not a bailee of Respondent
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Nos. 2 and 3.
55. It is, thus, clear on facts, and this Court
holds that:-
[a] The said MIC inserts are owned,
imported and possessed by
petitioner, and not by respondent
nos. 2 and 3, on the date of entryin municipal limits of the
respondent no.1.
[b] Petitioner is not bailee of
Railway, but a consignor itself for
own purpose of delivery to Railway.
[c] The inspection done by some
organization represented through
Annexure G is not the inspection
as contemplated by Clause 8.1.2.
56. In the result, goods imported by the
petitioner do attract octroi as has happened in the
present case.
57. Analysis of facts done herein before does not
warrant any further detailed discussion about the
precedents relied upon by the petitioner.
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58. In the circumstances, Rule is discharged.
Parties are directed to bear own costs.
JUDGE JUDGE
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