The BMC is entitled to levy octroi on the basis of the customs duty declared in the Bill of Entry at the time of import, even if the importer is entitled to a concessional rate of customs duty under various schemes.

Headnote:
OCTROI - REFUND - ACT-SECTION REFERRED : Bombay Municipal Corporation Act, 1888 - Section 192, 195 - Bombay Municipal Corporation of Levy of Octroi Rules, 1965 - Rule 2(7)(a), 4(c), 26 - SUMMARY : The petitioners imported goods under various schemes that exempted or reduced customs duty. The BMC levied octroi on the CIF value of the goods plus the estimated customs duty. The petitioners sought a refund of the octroi paid on the difference between the estimated and actual customs duty. The Court held that the BMC was entitled to levy octroi on the basis of the customs duty declared in the Bill of Entry at the time of import. The fact that the petitioners were not required to pay or paid reduced customs duty at the time of removal of goods from the customs bonded warehouse did not entitle them to a refund of octroi. The Court distinguished the case of Ceat Tyres of India Ltd. v. Municipal Corporation of Greater Bombay, where the goods were exempted from customs duty under an exemption scheme, from the present case, where the goods were subject to customs duty but the petitioners were entitled to a concessional rate of duty under various schemes.
Fact of the Case:

The petitioners imported goods under various schemes that exempted or reduced customs duty. The BMC levied octroi on the CIF value of the goods plus the estimated customs duty. The petitioners sought a refund of the octroi paid on the difference between the estimated and actual customs duty.
Finding of the Court:

The Court held that the BMC was entitled to levy octroi on the basis of the customs duty declared in the Bill of Entry at the time of import. The fact that the petitioners were not required to pay or paid reduced customs duty at the time of removal of goods from the customs bonded warehouse did not entitle them to a refund of octroi.
Issues: Whether the BMC was entitled to levy octroi on the CIF value of the goods plus the estimated customs duty when the petitioners were entitled to a concessional rate of customs duty under various schemes.
Ratio Decidendi: The Court held that the liability to pay octroi arises when the goods are brought within the octroi limits of the Corporation. Once the goods cross the octroi barrier, then the liability for payment of tax arises and the liability is not deferred till the company chooses to file bills of entry for home consumption and remove the goods from the customs bonded warehouse.
Final Decision: The Court dismissed the petitions with no order as to costs.

JUDGMENT - A.P. SHAH, J.:---These petitions under Article 226 of the Constitution arise out of orders passed by the Bombay Municipal Corporation (BMC) by which refund applications of the petitioners were rejected. Since common question of law is involved in these petitions all the petitions are heard and disposed of by this common judgment.

2. Few facts giving rise to these petitions are these. The petitioners imported certain consignments of goods under Duty Exemption Entitlement Certificate (DEEC) Scheme and Project Import Scheme. The petitioners claim that when the shipments arrived in Mumbai, they removed the goods to the customs bonded warehouse to avoid demurrage till the completion of the formalities for availing the concessional/reduced custom duty under the DEEC Scheme and the Project Investment Scheme. When the goods were removed to the customs bonded warehouses the petitioners lodged the Bills of Entry for warehousing and furnished bonds to the custom authorities equivalent to the whole of the estimated/provisional custom duty. At the time of removal of the goods to the customs bonded warehouse the BMC Bombay Municipal Corporation levied octroi duty on the said goods by adding the amount of estimated provisional custom duty to the CIF value of goods. Thereafter the goods were removed from the customs bonded warehouse by the petitioners on payment of reduced concessional custom duty. The petitioners preferred applications to the BMC for refund of octroi levied on the difference between the provisional/estimate custom duty and the concessional/reduced duty actually paid. The applications for refund were rejected by the BMC on the ground that the octroi charged on the value of consignment at the time and place of import was legal and proper.

3. The petitioners had also imported certain goods, such as components for heat exchangers, etc. to be used in their manufacturing process. When the goods arrived to the custom bonded warehouse, the custom authorities provisionally calculated the custom duty likely to be payable thereon as Rs. 5,04,201 on the CIF value of Rs. 8,20,373/-. The goods were cleared by the petitioners from the custom bonded warehouse at a concessional custom duty which was arrived at after deducting the total amount on the basis of a licence under the Duty Entitlement Pass Book (DEPB) Scheme acquired by the petitioners when the goods were stored in the customs bonded warehouse. In the meantime on 14-11-1998 the octroi duty was levied at Rs. 13,24,574 (CIF value of Rs. 8,20,373 plus provisional custom duty of Rs. 5,04,201). An application for refund was made to the BMC which also came to be rejected for the same reason viz. that the levy of octroi on the value of the consignment at the time and place of import is in accordance with law. The legality and correctness of the impugned orders passed by the BMC is questioned in these petitions.

4. Mr. Chitale learned Counsel for the petitioners strenuously urged that the BMC is entitled to add custom duty to the CIF value of the imported goods only if customs duty is incurred or liable to be incurred. In the case of the petitioners, they are not liable to incur the full customs duty in view of the exemption granted under the various schemes. Mr. Chitale submitted that the liability to incur the customs duty arises only in the remote eventuality of the petitioners failing to utilise the said licence within its stipulated period. In that event the customs authorities are entitled to call upon the petitioners to pay the full customs duty from which they would have been otherwise exempted. Octroi duty becomes payable only in the event of the aforesaid remote eventualities taking place and therefore the Corporation is not at all justified in claiming octroi duty at the threshold on the national custom duty. Mr. Chitale placed heavy reliance on the decision of the Division Bench of this Court in the case of (Ceat Tyres of India Ltd. v. Municipal Corporation of Greater B

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Judicial Analysis

1999 Supreme(Bom) 616

The BMC is entitled to levy octroi on the basis of the customs duty declared in the Bill of Entry at the time of import, even if the importer is entitled to a concessional rate of customs duty under various schemes.

Cases Referred (1)

Judicial Analysis