1. Dispute over whether customs duty is includible in the valuation of goods for charging octroi under Rule 17(a) of the Maharashtra Municipalities (Octroi) Rules, 1968. (Para 1 , 2 )
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1995 Supreme(SC) 451
SUPREME COURT OF INDIA
BEFORE R.M. SAHAI AND S.B. MAJMUDAR, JJ.
GARWARE NYLONS LTD.
Versus
PIMPRI CHINCHWAD MAHANAGAR PALIKA AND OTHERS
Civil Appeal No. 1662 of 1988{From the Judgment and Order dated 1-3-1988 of the Bombay High Court in W.P. No. 420 of 1987}
Decided on 28-3-1995
Advocates appeared:
M.L. Verma, Senior Advocate (Pallav Sisodia, Ms Punita Singh, Ms Sonu Bhatnagar and Sanjay Kishan Kaul, Advocates, with him) for the Appellant;
V.E. Joshi, Advocate, for the Respondents.
Important Points
Customs duty is includible in the valuation of goods for octroi purposes under Rule 17(a) of the Maharashtra Municipalities (Octroi) Rules, 1968. The term 'incidental charges' is broad and encompasses costs like customs duty, which are necessary incidents of importation.
Subject
Taxation Law - Octroi
Act Referred
MAHARASHTRA MUNICIPALITIES ACT: S.105(1), S.321(2)
Headnote
Maharashtra Municipalities Act, 1965 - Section 105 - Determining Valuation for Purposes of Charging Octroi - Appeal is whether customs duty paid by appellant could be included for determining valuation for purposes of charging octroi - Appellant is public limited company - It manufactured nylon and polyester yarn. Between September 1983 and August 1984 it imported goods liable to octroi. The Corporation authorities claimed that the appellant was liable to include customs duty paid by it in the valuation of the goods as it was a component of value of said goods for the purpose of Rule 17(a). The appeal filed by the appellant before the Civil Judge failed - Order was challenged by way of writ petition under Article 226 of the Constitution. High Court negative claim – Held, It is not only expenses which are usually incurred in normal course of commercial activity, but any incidental expenditure shall constitute value of the goods. The rule has to be understood in broad sense. No goods can be imported from outside without payment of customs duty unless it is exempt. There appears to be no reason to exclude it while determining the value of the goods. In any case, if duty countervailing could be considered to be incidental charges for importation, there is no valid reason to exclude customs duty from it - Appeal dismissed
Legal Category Hierarchy
Advocates:
M.L.Verma, PALLAV SHISHODIA, PUNITA SINGH, SANJAY KISHAN KAUL, SONU BHATNAGAR, V.E.Joshi
M.L.Verma, PALLAV SHISHODIA, PUNITA SINGH, SANJAY KISHAN KAUL, SONU BHATNAGAR, V.E.Joshi
Table of Contents
2. Whether the absence of the specific term customs duty in Rule 17(a) excludes it from valuation, or if it falls under the ambit of incidental charges. (Para 2 )
3. The list of charges in Rule 17(a) is illustrative, and incidental charges broadly include all costs incurred by an importer until goods reach octroi limits. (Para 3 , 4 )
4. Customs duty constitutes an incidental charge for importation and must be included in the valuation of goods for octroi purposes under Rule 17(a). (Para 4 )
5. Appeal dismissed. (Para 5 )
6. Does the absence of the specific term customs duty in Rule 17(a) of the Maharashtra Municipalities (Octroi) Rules, 1968, exclude it from the valuation of goods?
No. The mention of various charges and duties in Rule 17(a) is illustrative rather than exhaustive. Customs duty is an incidental expenditure incurred during importation and is therefore includible in the valuation of goods. (Para 4 )
7. What is the scope of the term incidental charges for determining the value of imported goods for octroi?
The term incidental charges has a wide meaning, encompassing all items that an importer takes into account as part of the cost of the goods until they arrive within octroi limits. (Para 3 , 4 )
8. Is countervailing duty includible in the valuation of goods for octroi?
Yes, countervailing duty, being imposed to compensate for excise duty, is includible in the expression duty and falls under the ambit of incidental charges of importation. (Para 3 )
ORDER
1. The question that arises for consideration in this appeal is whether the customs duty paid by the appellant could be included for determining valuation for purposes of charging octroi under Rule 17(a) of the Maharashtra Municipalities (Octroi) Rules, 1968 made under sub-section (2) of Section 321 read with proviso to sub-section (1) of Section 105 of the Maharashtra Municipalities Act, 1965.
2. The appellant is a public limited company. It manufactured nylon and polyester yarn. Between September 1983 and August 1984 it imported goods liable to octroi. The Corporation authorities claimed that the appellant was liable to include the customs duty paid by it in the valuation of the goods as it was a component of the value of the said goods for the purpose of Rule 17(a). The appeal filed by the appellant before the Civil Judge failed. The order was challenged by way of writ petition under Article 226 of the Constitution. The High Court negatived the claim. Rule 17(a) is extracted below:
"17. Provisions to determine value where octroi is leviable ad valorem.- (a) If the original invoice is produced by the importer and accepted by the Octroi Officer the value of the goods means the value made up of the cost price of the goods as ascertained from that invoice plus freight charges, carrier charges, shipping dues, insurance, excise duties, sales tax, vend fee and all other incidental charges incurred by the importer till the arrival of the goods within the octroi limits."
Since the words "customs duty" are not mentioned in the rule, it gave rise to an argument before the High Court and in this Court whether it could be included while determining the value under Rule 17. The High Court relying basically on the decision of this Court in Shroff & Co. v. Municipal Corpn. of Greater Bombay{1989 Supp (1) SCC 347} held that even though the customs duty was not mentioned in the rule yet it was liable to be included while determining the value under Rule 17. The learned counsel for the appellant urged that since the words "customs duty" do not find place in Rule 17, they could not be included for determining valuation under the rule. Reliance was also placed on Goodyear India Ltd. v. State of Haryana{(1990) 2 SCC 71} and McDowell & Co. Ltd. v. CTO{(1977) 1 SCC 441} and it was urged that in case the provision in taxing statute was susceptible to two constructions, then the one favouring the assessee should be accepted.
3. In Shroff case{1989 Supp (1) SCC } it was held by this Court that countervailing duty being imposed for the purpose of compensating excise duty, it was includible in the expression duty. The Court further held that expression incidental used in the rule expanded its ambit and extended it to such duty that was an incident of importation. It was explained that the words "incidental charges" have a very wide meaning, particularly in the context where duties and taxes are referred to and the idea seems to be to include all items that will be taken into account by an importer as part of his cost.
4. Rule 17 provides for determination of value of goods brought inside the Corporation or Municipal Board for consumption, use or sale. The use of various words in the rule widens its scope. It provides for inclusion of cost price, charges such as freight, carrier, customs duties and then all other incidental charges, dues etc. The mention of various charges and duties is more illustrative than exhaustive. It only indicates that it is not only the expenses which are usually incurred in normal course of commercial activity, but any incidental expenditure shall constitute the value of the goods. The rule has to be understood in broad sense. No goods can be imported from outside without payment of customs duty unless it is exempt. There appears to be no reason to exclude it while determining the value of the goods. In any case, if duty countervailing could be considered to be incidental charges for importation, there is no valid reason to ex
