PETITIONER:
MUNICIPAL COUNCIL DAMOH
Vs.
RESPONDENT:
VRAJ LAL MANILAL & CO. & OTHERS.
DATE OF JUDGMENT23/02/1982
BENCH:
TULZAPURKAR, V.D.
BENCH:
TULZAPURKAR, V.D.
SEN, AMARENDRA NATH (J)
CITATION:
1982 AIR 844 1982 SCR (3) 307
1982 SCC (1) 637 1982 SCALE (1)436
ACT:
Central Provinces & Berar Municipalities Act, 1922-
Rules made under the Act-Rule 27(b) of the Octroi Rules-
Octroi duty paid on raw material imported into the
municipality for manufacture of bidis-Manufactured bidis
exported outside the municipal limits-Refund, if allowable
under rule 27(b).
Words & phrases: "manufacture" and "manufacturing
process"-Meaning of.
HEADNOTE:
The respondents manufacture and sell bidis in the
state. At the time of import of tobacco and other raw
materials into the municipal limits for the manufacture of
bidis they paid octroi duty payable under the rules. Their
claim for refund of octroi duty on the raw materials
utilised for the bidis which they manufactured and exported
outside the municipal limits was rejected by the municipal
council.
Rejecting the appellant-council's contention that the
benefit of rule 27(b) of the Rules was not available to the
respondents for the reason that the exported goods (bidis)
were not the same or identical as the imported raw materials
the Sub-Divisional Officer allowed the respondent's appeal.
In revision the High Court upheld the order of the Sub-
Divisional Officer.
In appeal to this Court it was contended that refund is
available under rule 27(b) only where even after undergoing
the manufacturing process the imported article retained its
essential character as such article and the same was
exported outside the municipal limits. (2) The respondents
were not entitled to refund as they failed to satisfy the
committee that the same or identical goods had been
exported.
Dismissing the appeal,
^
HELD : 1 (a) Rule 27(b) of the Octroi Rules in terms
provides for refund of octroi paid on imported raw materials
when such raw material is actually used within the municipal
limits for manufacturing the exported articles, Clause (b)
of this rule itself speaks of the raw materials being "used
in the manufacture"
308
so that use or consumption which a manufacturing process
entails was present to the mind of the framers of the rule
when they provided for the refund on the export of finished
goods manufactured within municipal limits. [313 F-H]
(b) The well settled connotation of "manufacture" and
"manufacturing process" is that as a result of undergoing
the process, a distinct commercial commodity different from
the raw materials, comes into existence. Therefore the
expression 'manufacture' occurring in rule 27(b) cannot be
given a limited meaning as suggested by the appellant. [313
H, 314 A-B]
2. The proviso to the rule is not attracted to a case
of manufactured goods falling under clause (b). The proviso
is applicable to cases where there is an export of the
imported goods themselves without subjecting them to any
manufacturing process. It is in such cases that in order to
claim refund the exporter has to satisfy the committee that
the same goods on which import duty had been paid were being
exported. The proviso is not a proviso to clause (b) at all
but will be applicable to the other parts of the rule. [314
C, D, E]
3. It is not just to permit the appellant to raise the
plea of limitation in the case because at one stage it
acquiesced in the trial court's finding and did not raise
the question in appeal before the High Court. While asking
for a certificate for appeal the appellant did not raise the
question of limitation before the High Court nor did it
include the point of limitation in the memo of appeal filed
in this Court. The point raised needs investigation into
facts. [316 F-G]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1048
of 1970 & 845 of 1971.
Appeals by certificate from the judgment and decree
dated the 11th March & 15th November 1969 of the Madhya
Pradesh High Court (Jabalpur) in Misc Petition No. 96 of
1969 and in First Appeal No. 44 of 1966 respectively.
AND
Civil Appeals Nos. 1047, 1048 & 1049 of 1971.
Appeals by special leave from the judgment and decree
dated the 17th April, 1971 of the Madhya Pradesh High Court
at Jabalpur in Second Appeal Nos. 415, 416 & 417 of 1966
respectively.
D.V. Patel, S.S. Khanduja and C.L. Sahu for the
Appellants in all the Appeals.
Dr.Y.S. Chitale and Rameshwar Nath for Respondent No. 1
in Civil Appeals Nos. 1048/70 & 845 of 1971.
309
Rameshwar Nath for Respondent No. 1 in Civil Appeals
Nos. 1047-1049 of 1971.
Gopal Subramanium and S.A. Shroff for Respondents Nos.
2 & 3 in all the appeals.
The Judgment of the Court was delivered by
TULZAPURKAR, J. The aforesaid five appeals, the first
two on a certificate granted by the Madhya Pradesh High
Court and the last three by special leave granted by this
Court, raise a common question in regard to refund of octori
duty collected by the appellant-Council from the respondent
firms and are, therefore, disposed of by common judgment.
The principal question raised in these appeals relates to
the proper construction of Rule 27 of the Octroi Rules of
Damoh Municipal Council (the appellant) framed in exercise
of powers conferred by ss.71, 76 and 85 of the Central
Provinces & Berar Municipalities Act, 1922-which Rules were
continued in operation even after the coming into force of
the new Act, the Madhya Pradesh Municipalities Act, 1961 and
the question arises in these circumstances :
The two respondent firms in the two sets of appeals
(M/s. Vraj Lal Manilal & Co. and M/s. Prabhudas Kishoredas)
carry on business of manufacturing and selling bidis in
Damoh and other cities in Madhya Pradesh and for that
purpose they import tobacco and other raw material into the
Municipal limits of Damoh city and after manufacturing bidis
out of such imported raw material they export their finished
product (bidis) outside Damoh Municipal limits. The
respondents’ case was that at the time of import of tobacco
and other raw material into the municipal limits of Damoh
they paid octroi duty as per Octroi Rules of the appellant
Council and after utilising the said raw material for
preparing bidis when they exported the manufactured bidis
outside the limits of the appellant Council, they were
entitled to a refund of the octroi duty paid by them on the
raw material so utilized under Rule 27 of the Octroi Rules
but inspite of refund vouchers having been issued by the
concerned official of the appellant council and inspite of
having complied with the Rules and procedure prescribed in
that behalf, the appellant Council refused to pay the
amounts of the refund
310
vouchers to them. In Civil Appeal No. 1048 of 1970 since the
claim for refund to the sum of Rs. 33,409.52 based on 1866
refund vouchers relating to the period from 4.12.1952 to
12.12.1959 arose under the old Act, namely, Central
Provinces and Berar Municipalities Act 1922, the respondent
firm M/s Vraj Lal Mani Lal & Co. filed an appeal before the
Sub Divisional Officer Damoh under s. 83 (1-A) of the Act
against the refusal of the appellant-Council to make the
refund. Apart from raising technical pleas such as non-
maintainability of the appeal, bar of limitation etc. the
appellant Council resisted the claim on merits on the two
grounds: (a) that since the raw material had been used or
consumed in the manufacture of bidis and since the exported
goods (finished products) were not the same or identical as
the imported raw material on which the octroi duty had been
paid no refund under Rule 27 (b) was available to the
respondent firm and (b) that the respondent firm had failed
to prove to the satisfaction of the Municipal Council as
required by the proviso to Rule 27 (b) that the same or
identical goods were being exported on which import octroi
had been paid by them. The Sub Divisional Officer by his
order dated 30th June, 1961 negatived the technical pleas of
the appellant council, which order was finally confirmed by
the High Court on 25th February, 1963. The Sub Divisional
Officer also over-ruled the defences raised by the appellant
Council on merits and by his final order dated 4th April,
1964 directed that the amount of 1865 refund vouchers
aggregating to Rs. 33409.52 minus the amount recovered under
19 vouchers should be refunded to the respondent firm. The
appellant Council went in revision to the State Government
but the same was dismissed on 28th September, 1968. The Sub
Divisional Officer’s decision as well as the State
Government’s order in revision were challenged by the
appellant Council before the High Court by a Writ Petition
(Miscellaneous Petition No. 96 of 1969) but the writ
petition was dismissed by the High Court summarily and in
doing so the High Court followed its earlier judgment in the
case of Municipal Committee, Burhanpur v. Allauddin Aolia
Saheb and Co. where in regard to a similar refund rule
obtaining in Burhanpur Municipal Committee the Court had
taken the view that “Octori duty paid on imported tendu
leaves and tobacco is refundable under the provisions of
Rule 25 (b) of the Rules framed under s. 85 of the Act when
bidis manufactured within the limits of the Municipal
311
Committee are exported.” In the remaining four matters,
being Civil Appeals 845, 1047, 1048 and 1049 of 1971 the
claims for refund made by the respondents in similar
circumstances were required to be prosecuted by filing civil
suits against the appellant Council, inasmuch as when action
was contemplated by the respondents, the new Act, namely,
Madhya Pradesh Municipalities Act 1961 had come into force
and no remedy by way of any appeal to Sub Divisional Officer
was available. In each of these suits the appellant Council
resisted the claims for refund on merits on the same grounds
mentioned above. The respondents failed in their suits in
the two lower courts but succeeded in second Appeals in the
High Court.
In these appeals the self-same two contentions were
urged before us on behalf of the appellant-council. First,
since Octroi duty is a levy on imported goods meant for use,
consumption and sale there of within the municipal limits
and since the raw material (tobacco) was used or consumed in
the manufacture of bidis the same or identical goods were
not exported by the respondent firms and so no refund under
Rule 27 (b) was available to the respondent firms. Secondly
no attempt was made by the respondent firms to satisfy the
Municipal Committee that the same or identical goods had
been exported as required by the proviso to Rule 27 (b). For
both these reasons it was urged that the respondent firms’
claim to refund of octroi should have been rejected. Counsel
urged that these points did not arise and were not
determined in Allaudin Saheb’s case (supra).
The admitted facts in these appeals are that the
respondent firms, who carry on the business of manufacturing
and selling bidis imported or brought into the municipal
limits of Damoh during the relevant period tobacco and other
raw material, that they paid the requisite octroi duty on
such raw material on its import at the prescribed rates,
that they utilised the said raw material for manufacturing
bidis and they exported the finished product (bidis) outside
the municipal limits of Damoh and it was at that stage of
export of bidis that they claimed under Rule 27 (b) a refund
of octori duty paid by them on the raw material from the
appellant Council. The question raised is whether under the
said provision they are entitled to the refund of octroi as
claimed by them. Rule 27 which deals with refund of octroi
runs thus:
312
“27. Refund of octroi. On the exportation of
dutiable goods outside municipal limits the exporter
shall be entitled to a refund of duty paid on them at
the time of their import, provided that,
(a) no refund shall be given, if the amount to be
refunded be less than Re. 1 or if the claim
be made after the expiry of two months from
the date of export, unless the exporter is
able to explain satisfactorily the reason for
the delay.
(b) the refund on the exported goods which have
been manufactured within the municipal
committee from imported raw materials liable
to octroi, shall not exceed the octroi on the
raw materials used in the manufacture, and
Provided that the exporter shall not be entitled
to a refund of octroi duty unless he proves to the
satisfaction of the committee that the goods brought
for export belong to him and are the same on which duty
was paid by the importer in whose favour the octroi
receipt is produced in support of the claim for refund
of duty.”
In support of their claim for refund the respondents
obviously rely upon cl. (b) of Rule 27 under which refund is
available on exported goods provided those have been
manufactured within the municipal limits from out of the
imported raw materials on which octroi has been paid and the
clause indicates that quantum of refund shall not exceed the
octroi duty actually paid on such raw materials at the time
of their import. Counsel for the appellant, however,
contended that in its very nature octroi is a duty levied on
import of goods which are meant for use, consumption or sale
within the municipal limits and counsel urged that it cannot
be disputed that when raw material like tobacco is utilized
in the manufacture of bidis such raw material is used or
consumed in the process of manufacture and it is such
finished product (bidis), a disputed commercial commodity
that is being exported by the respondent-firms and,
therefore, no refund under cl. (b) or Rule 27 would be
available to them. Counsel urged that the word ‘manufacture’
occurring in the clause must be given a limited meaning,
that is to say, only such
313
manufacturing process is contemplated by that clause which
does not alter or change the identity of the imported
commodity and only in respect of the export of such
manufactured goods the refund would be available and not
where the imported commodity gets converted into an all
together different commercial article. Counsel also invited
our attention to the proviso following cl. (b) which states
that the exporter shall not be entitled to refund of octroi
duty unless he proves to the satisfaction of the committee
that the goods brought for export are the same on which duty
had been paid by the importer and according to Counsel the
‘bidis’ cannot be said to be the same goods on which the
respondent-firms could be said to have paid the duty. In
other words refund is available under cl. (b) in cases where
even after undergoing the manufacturing process the imported
article or commodity retains its essential character as such
article or commodity and the same is exported outside the
municipal limits. It is not possible to accept the aforesaid
construction sought to be placed on cl. (b) of Rule 27 of
the Octroi Rules by the appellant’s counsel for reasons
which we shall presently indicate. In the first place,
though it is true that octroi by its nature is a levy on
import within the municipal limits of articles or goods
meant for use, consumption or sale therein that does not
prevent a Municipal Council from framing a rule either
granting exemption from that duty or refund of such duty
after its collection in cases of certain type of use or
consumption of the imported articles or goods for certain
purposes. Secondly, a Municipal Council may do so for
achieving certain objectives like increasing
industrialisation by encouraging manufacturing activities
within its limits. Clearly the avowed object of Rule 27 (b)
appears to be of this nature for in terms it provides for
refund of octroi paid on imported raw materials when such
raw-material is actually used within the municipal limits
for manufacturing the exported article and it is in light of
this objective that the said rule will have to be
interpreted. Looked at from this angle it will be difficult
to accept the narrow or limited construction of the word
‘manufacture’ appearing in cl. (b) as is suggested by
Counsel for the appellant and the same could not have been
intended by the framers of the rule. Further clause (b)
itself speaks of the raw materials being “used in the
manufacture” so that use or consumption which a
manufacturing process entails was present to the mind of the
framers of the Rule when they provided for the refund on the
export of finished goods manufactured within the municipal
limits. Moreover, the well-settled connotation of the
314
concept of ‘manufacture’ and ‘manufacturing process’ is that
as a result of undergoing the process a distinct commercial
commodity different from the raw materials comes into
existence; it is difficult to visualise degrees of
manufacture as suggested by counsel for the appellant and in
any case none could be attributed to the framers of the
Rule. It is, therefore, not possible to accept the
contention that the expression “manufacture” occurring in
cl. (b) of Rule 27 should be given a limited meaning as is
suggested. Turning to the proviso on which strong reliance
was placed by the counsel for the appellant, it seems to us
that the proviso by its very terms is not attracted to a
case of manufactured goods falling under cl. (b). If cl. (b)
confers the benefit of refund of octroi duty on the export
of goods manufactured out of raw material then it is
difficult to appreciate how the exporter will be able to
satisfy the Municipal Committee that the exported goods are
the same or identical on which duty has been paid, for
admittedly the exported goods are the finished product and
no import duty is paid thereon by the exporter. The proviso
in our view is applicable to cases where there is an export
of the imported goods themselves without subjecting them to
any manufacturing process and it is in such cases that the
exporter has to satisfy the Committee that the same goods on
which import duty has been paid are being exported which
would entitle the exporter to claim a refund; in other words
it is not a proviso to cl. (b) at all but will be applicable
to the other parts of the Rule. It is thus clear to us that
when raw materials like tobacco etc. were imported by the
respondent-firms within the limits of Damoh, on which they
paid octroi-duty and when they manufactured bidis out of
such raw-materials and exported the same they were entitled
to get refund to the extent of quantum mentioned in cl. (b)
of Rule 27.
In view of our aforesaid conclusion that the proviso is
not applicable to cases of manufactured goods falling under
cl. (b) of the rule the second contention urged by the
Counsel for the appellant that the respondent-firms were not
entitled to refund as they failed to satisfy the Municipal
Committee that the same or identical goods had been exported
does not survive. That apart, the High Court has on a
conspectus of the Octroi Rules came to the conclusion and in
our view rightly, that the Octroi Superintendent is
responsible for the proper administration of the Octroi
Department in
315
all its branches which necessarily includes that it is he
who should be satisfied as to the identity of the goods that
are to be exported or that are utilized in the manufacture
of goods which are to be exported.
The last contention sought to be urged on behalf of the
appellant-council before us related to the bar of limitation
to the respondents’ claim arising under section 319 (2) of
the Madhya Pradesh Municipalities Act, 1961 and counsel
fairly stated that this arises only in Civil Appeal No. 845
of 1971. The facts in this behalf are these: Civil Suit No.
1-B of 1964, out of which the aforesaid appeal arises, was
filed by the respondent-firm M/s Vraj Lal Manilal & Co. on
7.5.1964 claiming refund in respect of goods exported during
the years 1959-1964; in other words, part of the claim from
1959 to 31st January, 1962 arose under 1922 Act while the
claim pertaining to the period from 1.2.1962 to April 1964
arose under the 1961 Act, which came into force from
1.2.1962. The trial Court as well as the High Court took the
view that non-payment of refund under the 1922 Act could be
agitated only by way of an appeal under section 83 and other
remedies were barred under s. 84 of the Act and, therefore,
that part of the respondent’s claim was dismissed as being
not tenable but both the Courts held that non-payment of
refund after 1.2.1962 could be agitated by a suit and the
same was tenable On the question of limitation the trial
Court held that that part of the claim was not barred but
since it had negatived the respondent’s claim for refund on
merits it dismissed the respondent’s suit entirely but the
High Court, which reversed the trial Court’s view on merits
allowed the respondent’s claim in respect of refund vouchers
which had been certified and presented after 1.2.1962.
Since, however, it was not possible for it to sort out the
refund vouchers which had been certified the High Court by
its judgment and decree dated 15.12.1969 remanded the matter
to the trial Court for determining the amount payable to the
respondent-firm. Upon remand the trial Court on the basis of
statements made by the parties passed a decree in
respondent’s favour for Rs. 21,023.53 with interest thereon
4% and this decree was drawn up on 23.4.1970.
Section 319 (2) of the 1961 Act runs thus;
“Every such suit shall be dismissed unless it is
instituted within 8 months from the date of the accrual
of the alleged cause of action.”
316
Relying upon this provision counsel for the appellant urged
that since the suit had been filed on 7.5.1964 the
respondent’s claim for refund during 8 months prior to
7.5.1964 would be within limitation but the rest of the
claim from 1.2.1962 to 7.9.1963 would be barred by
limitation and to that extent the decree in favour of the
respondent-firm deserves to be modified
We are not inclined to entertain this contention sought
to be urged by counsel for the appellant before us for more
than one reason. It is true that this bar of limitation
under s. 319 (2) was pleaded by the appellant council in its
written statement and an issue thereon was also raised at
the trial but the trial Court held that the claim arising
under the new Act after 1.2.1962 was not barred by
limitation because cause of action arose on 24.9.1963 when
there was refusal to pay or accede to the notice of demand
but when the matter was carried in appeal to the High Court
by the respondent firm against the dismissal of their claim
on merits and the High Court reversed the trial Court’s view
on merits and held that the plaintiffs’ claim for the period
subsequent to 1.2.1962 was liable to be decreed, this point
of limitation arising under s. 319 (2) was neither raised
nor pressed before the High Court. No contention was raised
that the refusal to pay on 24.9.1963 did not give rise to
the cause of action but that it arose on dates when goods
were exported and refund vouchers were presented or
certified. Had it been pressed the High Court would have,
while remanding the matter given appropriate directions to
the trial Court in that behalf. This shows that the
appellant council acquiesced in the trial Court’s finding on
the question of limitation, namely, the cause of action
arose on 24.9.1963. Secondly, while applying for a
certificate from the High Court for appeal to this Court the
appellant-Council sought the certificate on points touching
the merits of the claim and not on the question of
limitation. Further in the Memo of Appeal filed in this
Court the grounds do not include the point of limitation.
Lastly the point raised cannot be said to be a pure question
of law as it will require investigation into facts to
ascertain the exact date or dates of accrual of the cause of
action. When on the point of limitation the appellant-
Council had at one stage acquiesced in the trial Court’s
finding and did not raise the question in appeal before the
High Court we do not think it would be fair or just to
permit the appellant-Council to raise the plea of limitation
in this Court,
317
especially when the result of allowing such plea might be to
defeat the just claim of the respondent firm.
In the result the appeals are dismissed and each party
will bear its own costs.
P.B.R. Appeals dismissed.
318