Supreme Court of India PETITIONER:
BURMAH SHELL OIL STORAGE &DISTRIBUTING CO. INDIA LTD.
Vs.
RESPONDENT:
THE BELGAUM BOROUGH MUNICIPALITY
DATE OF JUDGMENT:
16/11/1962
BENCH:
HIDAYATULLAH, M.
BENCH:
HIDAYATULLAH, M.
DAS, S.K.
KAPUR, J.L.
SARKAR, A.K.
DAYAL, RAGHUBAR
CITATION:
1963 AIR 906 1963 SCR Supl. (2) 216
CITATOR INFO :
F 1976 SC1446 (1,2,3,5)
RF 1979 SC1721 (6,7)
RF 1981 SC 991 (12)
R 1984 SC 583 (17)
F 1990 SC 47 (10)
RF 1992 SC 645 (4,10,11,28)
ACT:
Octroi-Levy of Octroi on goods by Belgaum Municipality-
Consumption, use or sale-Meaning of-Difference between
Terminal tax and Octroi-Bombay Municipal Boroughs Act, 1925,
(Bom. 18 of 1925), s. 73.
HEADNOTE:
The appellant company deals in petrol and other petroleum
products which it manufactures in its refineries situated
outside the octroi limits of Belgaum Municipality. It
brings those products inside the said area either for use or
consumption by itself or for sale generally to its dealers
and licensees who in their turn sell them to others. The
Company also directly sells its products to Government, both
civil and military, and to local bodies and big private
concerns. The goods brought by the company within the
octroi limits fall into four categories, viz. (i) goods
consumed by the Company, (ii) goods sold by the Company
through its dealers or by itself and
217
consumed within the octroi limits by persons other than the
Company, (iii) goods sold by the Company through its dealers
or by itself inside the octroi limits to other persons but
consumed by them outside the octroi limits and (iv) goods
sent by the Company from its Depot inside the octroi limits
to extramunicipal points where they are bought and consumed
by persons other than the Company.
The Company filed a writ petition in the High Court against
the respondents for a writ or writs to prohibit them from
charging octroi from the Company on its products brought
inside the octroi limits for sale. The writ petition was
dismissed by the High Court. The appellant came to this
Court by certificate under Art. 133(i)(b) of the
Constitution. During the course of arguments, the
respondents agreed to grant a refund on those goods
belonging to the appellant company which were actually sent
outside octroi limits. The appellant also admitted its
liability to pay octroi on goods consumed by itself This
Court was required to give its decision only on the rest of
the two categories of goods.
Held, that the Company was liable to pay octroi tax on goods
brought into local area (a) to be consumed by itself or sold
by it to consumers direct and (b) for sale to dealers who in
their turn sold the goods to consumers within the municipal
area irrespective of whether such consumers bought them for
use in the area or outside it. The company was held not
liable to octroi in respect of goods which it brought into
the local area and which were re-exported.
The word consumption in its primary sense means the act of
consuming and in ordinary parlance means the use of an
article in a way which destroys, wastes or uses up that
article. But in some legal contexts, the word 'consumption'
has a wider meaning. It is not necessary that by the act of
consumption the commodity must be destroyed or used up.
Octroi and terminal tax resemble in the sense that they are
both leviable in respect of goods brought into a local area.
Otherwise, they are quite, different from each other. While
terminal taxes are leviable on goods "imported or exported"
from municipal limits denoting thereby that they are
connected with the traffic of goods, octrois are leviable in
respect of the goods brought into a municipal area for
consumption or use or sale. The history of these two taxes
shows that while terminal taxes were a kind of octroi which
were concerned only with the entry of goods in a local area
irrespective of whether they would be: used there or not,
octrois were taxes on goods brought into
218
the area for consumption, use or sale. They were leviable
in respect of the goods put to some use or the other in the
area but only if they were meant for such user. Another
difference between the two is that there is no system of
refund under terminal tax but that is so for octroi.
Burmah Shell Oil and Dist. Co. v. Manmad Municipality,
A.I.R. 1958 Bom. 43, The State of Bombay v. The United
Motors (India) Ltd., [1953] S.C.R. 1069 and Anwar Khan
Mahboob Co. v. The State of Bombay, [1961] 1 S.C.R. 709,
relied upon.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No 431/1961.
Appeal from the judgment and order dated May 31, 1960, of
the Mysore High Court in Writ Petition No. 94 of 1959.
M. C. Setalvad, Attorney-General of India, D.N. Mukherjee
and B. N. Ghosh, for the appellant.
A.V.Viswanatha Sastri and R. Gopalakrishnan,-for
the respondent.
1962. November 16. The judgment of the Court was delivered
by
HIDAYATULLAH, J. In this appeal by certificate ,under
Article 133 (1) (b) of the Constitution granted by the High
Court of Mysore against its judgment and order dated May 31,
1960, the Burmah Shell Oil Storage & Distributing Company of
India Ltd. is the appellant and the Belgaum Borough
Municipality, Belguam, the respondent. The appeal arises
out of proceedings commenced by the Company against the
Municipality under Article 226 of the-constitution for a
writ or, writs to prohibit the Municipality from arguing'
octroi from the Company on its products brought inside the
octroi limits for sale. The petition of the company was
dismissed by the High Court. The Company deals in petrol
and other petroleum' products which it manufactures in its
refineries situated outside the octroi limits of Belgaum
219
Municipality It brings these products inside the said area
either for use or consumption by itself or for sale
generally to its dealers and licensees who in their turn
sell them to others. The Company also directly sells its
products to Government both Civil & Military, and to local
bodies and big private concerns. The Company has a
Divisional Office and Depot in Belgaum and the petition in
the High Court was filed ,by the Divisional Manager in-
charge of that area. The Company in the normal course of
its business operations appoints dealers and licensees and
typical forms of agreement between the Company and such
dealers and licensees have been exhibited in the case.
According to the Company, the goods, brought by it within
the octroi limits can be divided into four separate
categories as follows
1 . Goods consumed by the Company
2. Goods sold by the Company through its
dealers or by itself and consumed within the
octroi limits by persons, other than the
Company;
3. Goods sold by the Company through its
dealers or by itself inside- the octroi limits
to other persons but consumed by them outside
the octroi limits ; and
(4) Goods sent by the company from its Depot
inside the octroi limits to extra-municipal
points where they are bought and consumed by
persons other than the company.
We are concerned in this appeal with a period of three years
commencing on October 22, 1955, and ending on a like date in
1958. During this time, octroi duty levied on all goods
brought inside the octroi limits of the Municipality,
irrespective of' their destination according to 'the four;
categories above enumerated,
220
amounted to Rs. 1,40,544.51 nP. The Company claimed in the
High Court that it was not liable to pay octroi on
categories other than the first. This claim was rejected
but the Municipality agreed to give a refund according to
rules- in respect of the fourth category.
Before dealing with the contentions in the case it is
necessary to refer briefly to the scheme of taxation under
the Bombay Municipal Boroughs Act, 1925, by which the
Belgaum Municipality is governed and the by-laws and rules
made by the Municipality for the levy of octroi within the
octroi limits of the Municipality. The Municipality draws
its power to levy taxes from section 73. That section
provides inter alia as follows :-
"(1) Subject to any general or special orders
which the State Government may make in this
behalf and to the provisions of section 75 and
76 a Municipality may impose for the purposes
of this Act any of the following taxes, namely
x x x x
(iv an octroi on animals or goods or both,
brought within the octroi limits for con-
sumption, use or sale therein;"
The words '-use or sale" were substituted for the words
"'or use" from May 5, 1954, by an Amending Act of 1954
(Bombay Act 35 of 1954). In other words, before 1954 the
word "sale" did not figure in the description of "octroi on
animals or goods or both" which the Municipality was
authorised to impose.
Sections, 75 and 76 lay down the procedure which the
Municipality must follow before imposing a tax. It is not
necessary to quote the sections-. It
221
is sufficient to say that the Municipality passes a re-
solution at a general meeting, selects one of the taxes
mentioned in section 73 and approves rules prepared for the
purpose of clause (j) of section 58 specifying the classes
of persons or property or both which would be made liable,
any exemptions to be granted, the amount or rate at which
the tax is to be levied and any remission or refund to be
allowed together with the conditions under which such
exemption, remission or refund would be granted. There are
other matters which the rules cover but it is not necessary
to mention them here.
After the resolution is passed the Municipality publishes
the rules together with a notice informing all persons
concerned. Any inhabitant of the Municipal Borough
objecting to the imposition of the tax, or its amount or the
rate proposed or the classes of persons or property to be
made in able or to any exemption proposed may object within
one month. The Municipality then considers the objection,
records its opinion upon them and forwards the notice, the
objections, its opinion upon them and the rules with
modifications, if, any, in view of the objections, to the
State Government. Section 76 then lays down that the State
Government may refuse to sanction the rules submitted or to
sanction them with or without modification and under section
77 the rules are once again published along with the
sanction and from the date prescribed by the rules so
published the tax is imposed. Section 58 to which reference
was made above confers power on the Municipality to make
rules not inconsistent with the Act and clause (j) in so far
as relevant to our purpose reads as follows :-
"(j) prescribing the taxes to be levied in the
municipal borough for municipal purposes, the
circumstances in which exemption will be
allowed, the conditions on which and the
222
extent to which remission will be granted, and
the system on which refunds will- be allowed
and paid, in respect of such taxes ; the
limits of the charges or payments to be
fixed......... ...............
Section 61 (1) confers on the Municipality the power to make
by-laws for many purposes. Clause (n) thereof authorises-
"fixing of octroi limits and stations;
providing for the exhibition of tables of
octroi ; regulating, subject to any general or
special orders which the State Government may
make in this' behalf, the system under which
refunds are to be made on account thereof when
the animals or goods on which octroi has been
paid, or .articles manufactured wholly or in
part from such animals or, goods, are agai
n
exported, and the custody or storage of
animals or goods declared not to be intended
for consumption, use or sale within the
municipal borough and prescribing a period of
limitation after which no claim for refund of
octroi shall be entertained and the. minimum
amount for which any claim to refund may be
made."
Under section 60 the Municipality has to follow as far as
may be the same procedure for the suspension, modification
or abolition of any tax and the suspension, alteration or
recession of any rule prescribing a tax. In 1925 the
Municipality had framed rules and by-laws before it became a
Borough Municipality. These rules are called the "The
Belgaum Municipality Octroi Rules and By laws" and are
continued by virtue of section 5 (b) of the Borough Act.
Before the amendment of the: Boroughs Act in 1954, rule 4(1)
of the Octroi Rules and By-laws ran as follows:--
"Subject to the exemptions and the provisions
hereinafter' expressly specified, a tax on all
223
goods of the description mentioned in Schedule
"A" hereto annexed, shall, on the import
there. of, be payable to the Municipality at
the rates specified for such goods
respectively in the said schedule."
When the Act was amended in 1954 by including the word
"'sale" in the description of octroi the rules and by-laws
were not reframed nor was the procedure under section 76
read with section 58 followed to impose octroi on animals
and goods sold within the octroi limits. Rule 4 (1) also
continued as before.
The Company which had paid octroi on all its products
brought within the octroi limits of the Belgaum
Municipality. before the amendment including , the goods not
consumed by itself but sold to others started a
correspondence saying that in 'as much as the law was newly
amended to include "sale" in the description of "octroi",
the Rules and By-laws ought to have been framed again and
the procedure under section 76 read, with section 58 (j)
followed. As this was not done, the Company contended, the
tax could not be collected on goods which were merely sold
but not consumed inside-the octroi limits. In the course of
this correspondence, the Company did not object generally to
the levy of octroi on goods brought inside the octroi limits
for consumption, use or sale but asserted that octroi on
goods which were sent out of the said limits was liable to
be refunded. This the Municipality was prepared to grant
subject to the rules. Even before the High Court the
learned Advocate appearing for the Municipality stated that
if any goods belonging to the company were actually sent
outside the octroi limits the Municipality was prepared to
grant refund on proof thereof, That is the stand of the
Municipality even to-day. The Company also stated before us
that it was liable to pay octroi on goods consumed by
itself.' The dis-
224
pute has thus narrowed down to the second and third
categories.
The learned Attorney General appearing for the Company
contends that the words "consumption or use" must be
contrasted with the word "sale". Sale, he argues,
introduces a person other than the one who brings the goods
or animals within the Municipal limit and as the words
"consumption or use" are not qualified to say that the
consumption or use may be by any one, those words must
necessarily denote consumption or use by the, very person
who brings the goods or animals. In support of this
argument he refers to entry No. 49 of the second list of the
Government of India Act, 1935, Sch. VII
which reads:-
"49. Cesses on the entry of goods into a
local area for consumption, use or sale," and
entry No. 52 of the State List in the
Constitution which reads:-
"52. Taxes on the entry of goods into a local
area for consumption use or sale therein."
It is pointed out that these Constitutional documents
themselves indicate that octroi may be on goods (or animals)
brought into a local area (a) for consumption (b) for use or
(c) for sale, and the Boroughs Act, before the amendment,
had selected only two, namely, consumption and use and left
out the third that is, sale". The tax was thus payable
only when the goods or animals were brought for consumption
or use, by the person who brought them in, but not when the
goods or animals were brought in and sold and were consumed
or used by the purchaser or someone else. It is conceded
that after the amendment the tax was intended to be
collected even in respect of goods brought for sale but here
it is pointed out that the procedure under sections 75, 76
and 77 has not been followed as required by section 60 of
the Boroughs Act and the imposition of
225
octroi on goods and animals brought in, for sale fails to be
effective. It is said that this amounts to a new tax and it
needed to be imposed according to the provisions above-
mentioned and reliance is placed ,upon Burmah Shell Oil
Storage and Dist. Co. v. Manmad Municipality (1).
"The Boroughs Act defines octroi in section 2
(12)-"octroi" shall include a terminal tax."
In clause (v) of section 73 (1) terminal tax is mentioned
separately and section 61 (1) (0) gives the power to fix
terminal tax limits And stations and other ancillary
matters. The proviso to section 73 (1) is material and it
reads:
" provided that, save as provided in clause
(xiv) no such tax shall be leviable in
boroughs in which an octroi was not levied on
or before the 6th July, 1917."
Clause (xiv) says that the Municipality may impose any other
tax "which under the Constitution the State Legislature has
power to impose in the State."
The entries in the Legislative Lists which have been cited
from the Government of India Act 1935 and the present
Constitution and the definition of octroi as including
terminal tax need some explanation. The definition of
octroi is subject to the context and may not apply to
enlarge the ambit of octroi. But the reason underlying the
extended definition gives us the true meaning of octroi as
described in section 73 (1) (iv). The Boroughs Act was
passed in 1925 and replaced art earlier Act of 1901. The
Boroughs Act, therefore, was prior to the Government of
India Act, 1935. Under section 80A (3) (a) of the
Government of India Act, the Governor General-in-Council had
framed rules; on December 16, 1920, which were known as the
Scheduled-tax Rules. Schedule II of these Rules
(1) A. I.R. 1958 Bom, 43.
226
dealt with taxes for the benefit of Local Authorities and
included :
7. Octroi
8. A terminal tax on goods imported into,
or exported from a local area, save where such
tax is first imposed in a local area in which
octroi was not levied on or before July
6,1917.
[Entry No. 8 quoted above was substituted by
the Government of India Notification No. 7
dated January 24, 1924, for an entry which
read formerly "'A terminal tax on goods
imported into a local area in which an octroi
was levied on or before July 6, 1917"]
The particular tax was 'octroi' and there was no description
of the tax. The word 'octroi' comes from the word
'octroyer' which means "to grant' and in its original use
meant 'an import' or 'a toll' or (a town duty' on goods
brought into a town. At first octrois were collected at
ports but being highly productive, towns began to collect
them by creating octroi limits. They came to be known as
'town duties'., These were collected not only on 'imports'
but also on 'exports' see Beuhler: Public Finance (3rd Edn.)
p. 426. Grice in his National and Local Finance p. 303 says
that they were known as 'ingate tolls' because they were
collected at toll gates or barriers. Normally, they were
levied on goods meant for consumption but in Seligman's
Encyclopaedia of Social Sciences Volume IX page 570,
'octrois' are described without any reference to consumption
or use. This is how the editors describe octrois :-
or " As compared with the facilities of the
National Government the possibilities of
raising revenue by local bodies arc quite
limited. All forms of indirect taxation are
practically closed to local authorities. They
are unable to levy
227
customs duties, although they may collect the
so-called octrois that is, duties levied on
goods entering town."
It will be noticed that in the Government of India Act
"octroi' was named but not described and now the
Constitution avoids the word 'octroi , as did the Government
of India Act 1935 before, and gives a description. In the
Boroughs Act the definition of octroi' includes Terminal
Tax. Terminal Tax, as the Indian Statutory Commission
points out, formerly meant in Indian fiscal, terminology a
tax which was levied at Railway Stations and collected by
the Railway Administration on all goods imported or exported
from the Station. It was also collected from passengers in
some Municipalities. We also learn from the Report that on
the recommendation of a Committee appointed in 1908 terminal
tax took the place of octroi in a large number of
Municipalities at first in the United Provinces and then in
others. At first the Government of India were not in favour
of such a change. Octrois were levied on goods brought
into, a local area for consumption, use or sale and were
indirect taxes but. terminal taxes were regarded as direct.
On July 6, 1917, the Government of India by a Resolution
reversed their former policy and agreed that the conversion
was not a change from indirect to direct taxation. Terminal
taxes were of the nature of octrois, but were not quite the
same. The main differences were : that there was no system
of refunds under the Terminal Tax Rules (Terminal taxes as
Findlay Shiffas tells us were sometimes known as 'octrois
without refunds'.) and for octroi to be levied the goods
must be brought in for sale, use or consumption.
After the Scheduled-tax Rules the collection of terminal tax
was restricted to those areas in which octroi was levied on
or before July 6, 1917. Most of the Municipal laws allowed
collection of terminal taxes only if octrois were not
levied. As the Taxation
228
Enquiry Commission observes (Vol. III Ch. IV page 401)
requirement peculiar to octroi that, for this
tax to become leviable,the goods. must not
only enter the area, but, must be, "for the
purpose of consumption, use or sale therein."
Usually,, this requirement is sought to be
satisfied by (a) the ab initio exemption of
the goods which merely pass , through the
area, whether the exit is immediate or after
an interval, or (b) by the subsequent refund
of the tax collected on such goods.,
Exemptions and refunds, therefore, are the
distinguishing features of the octroi system."
Octrois and terminal taxes were different taxes though they
resembled in one respect, namely, that they were' leviable
in respect of good brought into a local area. While
terminal taxes were leviable on goods imported or exported'
from the Municipal limits denoting thereby that they were
connected with the traffic of goods, octrois, according to
the legislative practice then obtaining 'were, leviable in
respect of goods brought into a Municipal area for
consumption or use or sale. It is "not necessary to cite
the Municipal Acts prior to' 1935 but a reference to them
will amply prove that such was the' tax which was
contemplated as octroi.
When the Government of India. Act 1935 was enacted terminal
taxes became a central subject vide entry No. 58 of List I,
which.:reals as; follows:-
"58. Terminal taxes on 'goods or passengers
carried by railway or air."
At that time, it was suggested by sir Walter Leyton that
both octrois and terminal taxes should be provincial
subjects and that it would perhaps be possible to fuse the
two The Joint Committee however,
229
recommended otherwise and terminal taxes were separated from
octrois and included in the central list. The proceeds of
the terminal taxes, however, were to be distributed among
the provinces. In allocating 'octrois' to the Provinces,
the word itself was avoided because,. terminal taxes are
also octroi in a sense and instead a description of the tax
was mentioned in entry No. 49, which has been quoted
already, and which read "Cesses on the. entry of goods into
a local area for consumption, use or sal This scheme has
been repeated in the Constitution with the difference that
the entry relative to terminal 'tax now reads "terminal
taxes on goods and passengers carried by railway, sea or
air", and the word "taxes" replaced the word "cesses" in the
entry, relative to octrois.
The history of these two taxes clearly shows that while
terminal taxes were kind of octroi which were concerned only
with the entry of goods in a local area irrespective of
whether they would be used there or not octrois were taxes
on goods brought into the area for consumption, use or sale.
They were leviable in respect of goods put to some use or
other in. the area but only if they were meant for such
user. When the Government of India Act, in its Scheduled
Tax Rules, mentioned "octrois", it intended to give the
power to levy taxes in this well-understood sense, namely,
on the entry of goods in a local area, for consumption, use
or sale. The Boroughs Act, which was enacted in 1925
mentioned only "consumption and use.",, Ever since its
enactment, no dispute seems to have been raised by any
person that goods brought in for sale were exempt from
octrois. All persons who brought the goods apparently paid
this tax without objection. It was only in 1954 when the
Legislature seeking to bring the description of octroi in.-
the Municipal Act in line,. with the Constitution included
the word "sale" also, that the dispute was raised by persons
who were affected, and they were
230
some of the persons who had paid the tax before, even though
the word "sale" was not there. Of course, the conduct of
the tax-payer is not determinative of the meaning of the
words ",,consumption or use." But it shows how the term was
always understood. The word consumption in its Primary
sense means the act of consuming and in ordinary parlance
means the use of an article in a way which destroys, wastes
or uses up that article. But in some legal contexts, the
word "consumption" has a wider meaning. It is not necessary
that by the act of consumption the commodity must be
destroyed or used up. The word '-consumption" occurs in
explanation to sub-Article 1 of Article 286 of the
Constitution. In explaining the ambit of that word, this
Court observed in The State of Bombay v. The United Motors
(India) Ltd. (1) as follows:-
"The expression "for the purpose of consump-
tion in that State" must, in our opinion, be
understood as having reference not merely to
the individual importer or purchaser but as
contemplating distribution eventually to
consumers in general within the State."
It is not the immediate person who brings the goods into a
local area who must consume them himself, the act of
consumption may be postponed or may be performed by someone
else but so long as the goods have been brought into the
local area for consumption in that sense,, no matter, by
whom, they satisfy the requirements of the Boroughs Act and
octroi is payable. Added to the word "consumption" is the
word "use" also. There may be certain commodities which
though put to use are not "used-, up in the process. A
motor-car brought into an, area for use is not used up in
the same sense as food-stuffs. The two expressions use and
consumption together therefore, connote the bringing in of
goods and animals not with a view to taking them out again
but with a view to their retention either for use without
using
(1) [1953] S. C. R. 1069, 1084.
231
them up or for consumption in a manner which destroys,
wastes or uses them up. In this context, the word
"'consumption", as has been shown above, must receive. a
larger meaning than merely the act of consuming in the
generally understood sense. Recently, in M/s . Anwarkhan
Mahboob Co. v. The State of Bombay(1) while dealing with the
Explanation to Article 286(1), this Court observed as
follows
"In answering that question it is unnecessary
and indeed inexpedient to attempt an exhaus-
tive definition of the word "consumption" as
used in the explanation to Art. 286 of the
Constitution. The act of consumption with
which people are most familiar occurs when
they eat, or drink or smoke. Thus, we speak o
f
people consuming bread, or fish or meat or
vegetables, when they eat these articles of
food ; we speak of people consuming tea or
coffee or water or wine, when they drink these
articles ; we speak of people consuming cigars
or cigarettes or bidis, when they smoke these.
The production of wealth, as economists put
it, consists in the creation of "utilities."
Consumption consists in the act of taking such
advantage of the commodities and services
produced as constitutes the 'utilization'
thereof. For each commodity, there is
ordinarily what is generally considered to be
the final act of consumption. For some
commodities, there may be even more than one
kind of final consumption. Thus grapes may be
"finally consumed" by eating them as fruits ;
they may also be consumed by drinking the wine
prepared from "grapes." Again, the final act
of consumption may in some cases be spread
over a considerable period of time. Books,
articles of furniture, paintings may be
mentioned as examples. It may even happen in
such caes,
(1) [1961] 1 S. C. R. 709, 715.
232
that after one consumer has performed part of
the final act of consumption, another portion
of the final act of consumption may be per-
formed by his heir or successor-in-interest, a
transferee, or even one who has obtained
possession by wrongful means. But the fact
that there is for each commodity what may be
considered ordinarily to be the final act of
consumption, should not make us forget that in
reaching the stage at which this final act of
consumption takes place the commodity may pass
through different stages of production and for
such different stages, there would exist one
or more intermediate acts of
consumption........ In the absence of any
words to limit the connotation of the word
"consumption, to the final act of
consumption, it will be proper to think that
the constitution-makers used the word to
connote any kind of user which is ordinarily
spoken of as consumption of the particular
commodity."
Looking to the trade of the company, it is quite obvious
that it brings in the goods (a) for consumption by itself-
which of course is within the term 'octroi' as described;
(b) for re-export either by itself or through dealers
outside the are a which as is admitted by the municipality,
entitles the company to a refund of tax and (c) for sale by
it directly to consumers or to dealers who distribute the
goods within the area to ultimate consumers. So long as the
goods are brought inside the area for sale within the area
to an ultimate consumer, it makes no difference that the
consumer does not consume them in the area but takes them
out for consumption elsewhere. A motorist who buys petrol
within the municipal area and goes outside it for a drive
buys the petrol in the area for purposes of consumption and
the person who keeps and stores the petrol for sale in such
circumstances keeps it for consumption
233
therein. The word '-therein" does not mean that all the act
of consumption must take place in the area of the
municipality. It is sufficient if the goods are brought
inside the area to be delivered to the ultimate consumer in
that area because the taxable event is the entry of goods
which are meant to reach an ultimate user or consumer in the
area. Indeed, the consumer may never consume them as, for
example, a motorist buys a tin of oil and finds that it does
not suit his vehicle and leaves it lying on his shelf. The
goods must be regarded as having been brought in for
purposes of consumption when a person brings them either for
his own use or consumption, or to put them in the way of
others in the area, who are to use and consume. In this
process the act of sale is merely the means for putting the
goods in the way of use or consumption. It is an earlier
stage, the ultimate destination of the goods being 'use or
consumption'. The earlier stage, namely, the sale by him,
does not save the person who brought the goods into the
local area from liability to the tax if the goods were
brought inside for consumption or use. In other words, a
sale of the goods brought inside, even though not expressly
mentioned in the description of octroi as it stood formerly,
was implicit, provided the goods were not re-exported out of
the area but were bought inside for use or consumption by
buyers inside the area. In this sense the amplification of
the description both in the Government of India Act 1935 and
the Constitution did not make any addition to the true
concept of 'octroi' as explained above. That concept
included the bringing in of goods in a local area so that
the goods come to a repose there. When the Government of
India Act 1935 was enacted, the word 'octroi' was
deliberately avoided and a description added to forestall
any dispute of the nature which has been raised in this
case. In other words, even without the description the tax
was on goods brought for 'consumption, use or sale'. The
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word 'octroi' was also avoided because terminal taxes are
also a kind of octroi and the two were to be allocated to
different legislatures.
In our opinion, even without the word 'sale' in the Boroughs
Act the position was the same provided the goods were sold
in the local area to a consumer who bought them for the
purpose of use or consumption or even for resale to others
for the purpose of use or consumption by them in the area.
It was only when the goods were re-exported out of the area
that the tax could not legitimately be levied and in this
case the municipality has agreed to refund the amount of tax
on goods re-exported without being used or consumed in the
municipal area. In this view of the matter it was not
necessary for the Municipality to follow the procedure for
imposing taxes when the section was amended. The tax still
remained the same. Its nature, incidence or rate were not
altered.
In our opinion, the company was liable to pay octroi tax on
goods brought into local area, (a) to be consumed by itself
or sold by it to consumers direct and (b) for sale to
dealers who in their turn sold the goods to consumers within
the municipal area irrespective of whether such consumers
bought them for use in the area or outside it. The company
was, however, not liable to octroi in respect of goods which
it brought into the local area and which were re-exported.
But to enable the company to save itself from tax in that
case it had to follow the procedure laid down by rules for
refund of taxes.
For the reasons above stated this appeal must fail. It will
be dismissed with costs.
Appeal dismissed.
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