The central legal point established in the judgment is that the exemption from customs duty was specific to the imported goods and did not extend to the manufactured articles. The court emphasized that the payment of excise duty on manufactured articles did not create a liability for customs duty on the imported goods, and therefore, the provision to add customs duty under Rule 2(7)(a) was not applicable.

ORDER :

Civil Appeal No. 3653 of 2007

Civil Appeal No. 3656 of 2007

By common judgment rendered by the High Court of Bombay, the two writ petitions filed by the appellants herein have been dismissed accepting the contention of the respondent, Brihanmumbai Mahangar Palika, that for the purpose of payment of octroi duty when the goods are to be valued, customs duty shall also be added. The entire dispute in these appeals is, therefore, as to whether such customs duty is to be added to the value of goods for the purpose of payment of octroi under Bombay Municipal Corporation (Levy of Octroi) Rules, 1965 (hereinafter referred to as 'Rules'). This issue has arisen in the following background :

The appellants herein had imported certain computer parts and claimed exemption from payment of customs duty thereupon invoking the provisions of Notification No. 133 of 1994 dated 22.06.1994. As per the aforesaid notification, certain goods would not be liable for any customs duty if after the import of the goods they are manufactured into articles and those articles are exported. There are various conditions stipulated in the said notification to be eligible for exemption from payment of customs duty. We are not concerned with all other conditions mentioned therein as pointed out above. One of the conditions is that the goods are re-exported. Paragraph 3 of this notification allows this exemption even when part of the articles manufactured are allowed to be cleared outside the Santacruz Electronic Export Processing Zone (SEEPZ) under and in accordance with the Export-Import policy on the condition that where the goods are not exicisable, custom duty is paid thereon and if they are exicisable, excise duty is paid thereon. Since the said paragraph 3 is the bone of contention, we reproduce the same in its entirety :-

“3. Notwithstanding anything contained in this notification the exemption contained herein shall also apply to the said goods which on importation into India are used for the purposes of production, manufacture, processing or packaging of articles in a unit in the Zone and such articles (including rejects, waste and scrap material) arising in the course of production, manufacture, processing or packaging of such articles even if not exported out of India, are allowed to be cleared outside the Zone under and in accordance with Export-Import Policy and subject to such other limitations and conditions as may be specified in this behalf by the Development Commissioner of the Zone, on payment of duty of excise leviable thereon under section 3 of the Central Excises & Salt Act, 1944 (1 of 1944) or where such articles (including rejects, waste and scrap material) are not excisable, on payment of customs duty on the said goods used for the purpose of production, manufacture, processing or packaging of such articles in an amount equal to the customs duty leviable on such articles as if imported as such :

Provided that goods which have been repaired, reconditioned or re-engineered shall not be allowed to be cleared outside the Zone.”

2. It is the case of the appellants that in terms of the relevant Export-Import policy, the appellants were entitled to clear 25 per cent of its production into domestic area on payment of excise duty calculated at the rate of 50 per cent of each of the duty of customs payable on the like goods manufactured outside India and the appellants, accordingly, during the period in question, i.e., April, 1992, to November, 1994, cleared the computer systems manufactured in the export processing zone in the domestic tariff area. For the purpose of octroi that is to be paid under the aforesaid Rules, the respondent-Corporation included the customs duty component as well for the purpose of arriving at the value of the goods on which the octroi duty is payable. This is so done by the respondent taking aid of Rule 2(7)(a) of the Rules 1965. This Rule reads as under :-

Rule 2(7)(a) :

“The value of the articles as ascertained from ori