Back
2000(2) Supreme 53
SUPREME COURT OF INDIA
(From Gujarat High Court)
S.P. Bharucha, S.N. Phukan and Ruma Pal, JJ.
Mafatlal Industries Ltd. -Appellant
versus
Nadiad Nagar Palika & Anr. -Respondents
Civil Appeal No. 143 of 1992
Decided on 1-3-2000
Counsel for the Parties :
For the Appearing Parties : B.K. Mehta, R.P. Bhat, M.L. Verma and K.G. Shah, Sr. Advocates, Arun N. Mehta, Mrs. Ketty, M.N. Shroff, Ms. Priya Hingorani, Ms. Hemantika Wahi, Mrs. Tanuja Sheel, Ms. Anu Sawhney, and Chirag M. Shroff, Advocates.
Octroi duty can be levied when goods are brought into the octroi area for consumption, use or sale - mere physical entry of the goods into the octroi area would not attract the levy of octroi. Mere physical entry of goods into the octroi limits would not attract levy of octroi unless goods are brought in for use or consumption or sale. Use and consumption would involve conversion of the commodity into a different commercial commodity by subjecting it to some processing. (Paras 7 and 12)
In the instant case cloth pieces of 100 meters length were brought within the octroi limits and those cloth pieces were cut into smaller pieces of different sizes. By doing so, no different commercial commodity is shown to have been produced, so it cannot be said that there was use or consumption of the cloth within the octroi limits. Therefore, we hold that no octroi is leviable on the cloth pieces of 100 meters length brought by the appellant within the octroi limits of Nadiad town. (Para 13)
For the reasons stated above we hold that in the case in hand cutting of cloth pieces into smaller sizes would not amount to consumption or use of the cloth of 100 meters length and, therefore, octroi is not leviable. (Para 16)
JUDGMENT
Phukan, J.-This appeal by special leave is against the judgment of the Gujarat High Court holding that the appellant is liable to pay octroi duty under Section 99 of Gujarat Municipal Act, 1963 (for short the Act).
2. The appellant, a textile manufacturing company, brought cloth pieces of 100 meters length within the octroi limits of Nadiad town. To meet the requirement of relevant excise rules and also demands in the market, cloth pieces were cut into smaller pieces of different sizes and thereafter sent outside the octroi limits of the said town.
3. On the above facts, the High Court held that in the process of cutting, the cloth pieces are used as well as consumed, therefore, the cloth pieces brought into the octroi limits for this purpose, would attract octroi duty.
4. The Act is relatable to entry 52 of List -II (State List) of the 7th Schedule to the Constitution and the said entry runs as follows :-
"taxes on the entry of goods into a local area for consumption, use or sale therein."
5. Clause (16) of Section 2 of the Act defines octroi and it is stated as follows :
" Octroi means a tax on the entry of goods into the limits of a municipal borough for consumption, use or sale therein;"
6. Clause (iv) of sub-section (1) of Section 99 of the Act is quoted below :-
"99. Taxes which may be imposed.-(1) Subject to any general or special orders which the State Government may make in this behalf and to the provisions of Sections 101 and 102, a municipality may impose for the purposes of this Act any of the following taxes, namely :-
(i) ........
(ii) ........
(iii) ........
(iv) an octroi on animals or goods or both, brought within the octroi limits for consumption, use or sale therein;"
7. In view of the above legal provisions, octroi duty can be levied when goods are brought into the octroi area for consumption, use or sale - mere physical entry of the goods into the octroi area would not attract the levy of octroi.
8. The only question that falls for consideration in this appeal is whether cloth pieces of 100 meters length brought into octroi area and cutting into smaller pieces within that area and then exported would be liable to levy of octroi.
9. In M/s. Anwarkhan Mahboob Co. v. The State of Bombay & Ors.1, this Court considered the term consumption with reference to explanation to sub-clause (a) of clause (1) to Article 286 of the Constitution, which was omitted by the Constitution (6th Amendment Act), 1956. The said explanation is extracted below :-
"Explanation. For the purposes of sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State."
10. The facts of that case were that tobacco was purchased and in the State of Bombay the stem and dust from tobacco were removed. It was contended that removing of stem and dust from tobacco did not amount to consumption of tobacco. This Court held that when tobacco was delivered in the State of Bombay for the purpose of changing it into commercially different articles, namely bidi patti, the delivery was for the purpose of consumption, as conversion of a commodity into a different commercial commodity by subjecting it to some processing is consumption within the meaning of explanation of Article 286. This Court gave the example of the process through which cotton is put before ultimately the final product of wearing apparel is consumed. The Court observed:-
"But before cotton has become a wearing apparel, it passes, through the hands of different producers, each of whom adds some utility to the commodity received by him. Their is first the act of ginning; ginned cotton is spun into yarn by the
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
