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1989 Supreme(P&H) 479
PUNJAB & HARYANA HIGH COURT
S.S.Kang and J.S.Sekhon JJ.
Indian Oil Corporation
Versus
Municipal Corporation, Jullunder
Civil Writ Petition No. of,
Civil Writ Petition No. 3361 of 1984,
Decided On : JUNE 2, 1989
The levy of octroi duty on goods imported into local areas is permissible only if such goods are meant for consumption, use, or sale within those local areas. The State Legislatures cannot impose taxes on the entry of goods into local areas for purposes other than consumption, use, or sale.
Headnote:
Octroi Duty - Levy on Petroleum Products - Constitutional Validity of Section 113 of Punjab Municipal Corporation Act, 1976 - Interpretation of Entry 52 of List II of Schedule VII of the Constitution - Applicability to Goods Imported for Consumption, Use or Sale within Municipal Limits - Determination of Sale Transaction - Passing of Property in Goods - Construction of Agreement between Petitioner and Dealers - Application of Sale of Goods Act, 1930 - Relevance of Sales Tax Registration and Payment.
Fact of the Case:
The petitioner, Indian Oil Corporation, challenged the imposition of octroi duty by the Municipal Corporation, Jalandhar, on petroleum products imported within its municipal limits. The petitioner argued that Section 113 of the Punjab Municipal Corporation Act, 1976, which authorized the levy of octroi duty on articles and animals imported into the local area, was beyond the competence of the State Legislature and violated Entry 52 of List II of Schedule VII of the Constitution, which restricted the levy of taxes on the entry of goods into local areas for consumption, use, or sale therein. The petitioner also contended that the sale of petroleum products took place at the premises of its dealers outside the municipal limits and not at its depot within the municipal limits, and therefore, octroi duty could not be levied.
Finding of the Court:
The Court held that Section 113 of the Punjab Municipal Corporation Act, 1976, was not ultra vires the Constitution and could be read down to mean that a Corporation shall levy octroi on articles and animals imported into the local area for consumption, use, or sale therein. The Court interpreted Entry 52 of List II of Schedule VII of the Constitution to mean that the State Legislatures could not impose taxes on the entry of goods into local areas for purposes other than consumption, use, or sale. The Court further held that the sale of petroleum products took place at the depot of the petitioner within the municipal limits, as the property in the goods passed to the buyers when the goods were loaded in the tank lorries for transmission to the buyers' premises. The Court relied on the provisions of the Sale of Goods Act, 1930, and the agreement between the petitioner and its dealers to determine the time of passing of property in the goods.
Issues: 1. Whether Section 113 of the Punjab Municipal Corporation Act, 1976, was beyond the competence of the State Legislature and violated Entry 52 of List II of Schedule VII of the Constitution? 2. Whether the sale of petroleum products took place at the premises of the petitioner's dealers outside the municipal limits or at the petitioner's depot within the municipal limits?
Ratio Decidendi: 1. The Court held that Section 113 of the Punjab Municipal Corporation Act, 1976, was not ultra vires the Constitution and could be read down to mean that a Corporation shall levy octroi on articles and animals imported into the local area for consumption, use, or sale therein. The Court interpreted Entry 52 of List II of Schedule VII of the Constitution to mean that the State Legislatures could not impose taxes on the entry of goods into local areas for purposes other than consumption, use, or sale. 2. The Court held that the sale of petroleum products took place at the depot of the petitioner within the municipal limits, as the property in the goods passed to the buyers when the goods were loaded in the tank lorries for transmission to the buyers' premises. The Court relied on the provisions of the Sale of Goods Act, 1930, and the agreement between the petitioner and its dealers to determine the time of passing of property in the goods.
Final Decision: The Court dismissed the writ petition filed by the petitioner, Indian Oil Corporation, challenging the imposition of octroi duty by the Municipal Corporation, Jalandhar, on petroleum products imported within its municipal limits.
SUKHDEV SINGH KANG, J.
1. Challenge by M/s. Indian Oil Corporation in this writ petition under Articles 226/227 of the Constitution is directed against orders of the authorities of Municipal Corporation, Jalandhar (hereinafter referred to as respondent No. 1) imposing octroi duty and appellate order dated June 5, 1985 (Annexure-P-6 to the writ petition) passed by the Commissioner, Jalandhar Division, Jalandhar, dismissing 19 appeals filed by the petitioner-Corporation. The petitioner also challenges the constitutional validity of Section 113 of the Punjab Municipal Corporation Act, 1976 (for short, the Act ) being beyond the competence of the State Legislature. The circumstances which have led to the controversy may briefly be stated thus :
The petitioner-Corporation has set up a Pipe Line Terminal and L.P.G. Bottling Plant at Suchi Pind in District Jalandhar in the State of Punjab. it constructed buildings and storage tanks and other installations for the purpose of the abovesaid plant. In those days, the area of village Suchi Pind wherein the establishment of the petitioner-Corporation was located, was not included within the municipal limits of respondent No. 1. Its limits were extended in the month of September, 1973 and the depot of the petitioner was included within the municipal limits. The petitioner imports through underground pipelines motor spirits, high-speed diesel, kerosene oil and other petroleum products within the territorial limits of respondent No. 1. The petroleum products are brought within the municipal limits of respondent No. 1 for use or consumption by itself or for sale jointly to its dealers and licensees who, in their turn, sell these to others. The petitioner in the normal course of its business operations appoints dealers and licensees for the sale of its petroleum products and supplies these products on certain stipulated terms and conditions. According to the petitioner, the goods brought by it within the territorial limits of respondent No. 1 can be divided into four separate categories:-
(i) Goods consumed by the petitioner-Corporation;
(ii) Goods sold by the petitioner-Corporation through its dealers or by itself and consumed within the octroi limits by persons other than the petitioner-Corporation;
(iii) Goods sold by the petitioner-Corporation through its dealers or by itself inside the octroi limits to other persons who consumed them outside the octroi limits; and
(iv) Goods sent by the petitioner-Corporation from its depot inside the octroi limits to extra municipal limits to its dealers where they are bought and consumed by persons other than the petitioner.
2. x x x x x x x x x x xx
3. Respondent No. 1 made a demand by sending Octroi Bills on the petitioner-Corporation for the period from September 7; 1983 till May, 1984. There was some misunderstanding at the Jalandhar office of the petitioner-Corporation inasmuch as the said office had taken the position that the goods supplied to dealers outside the municipal limits of respondent No. 1 were exempt from Octroi Duty irrespective of the fact whether the sale took place within or outside the municipal limits. On clarification, the Jalandhar office of the petitioner-Corporation had been advised to make payment of Octroi on the goods sold to dealers outside the municipal limits of respondent No. 1 when the sale had taken place within the municipal limits. Respondent No. 1, vide its letter dated May 9, 1984, had also served a notice upon the petitioner-Corporation to pay Octroi to the tune of Rs. 40,26,230.17 within thirty days of the receipt of the said notice.
4. The petitioner-Corporation challenged these notices through the present writ petition. Notice of motion was issued to the respondents. The respondents filed the written statement. The Motion Bench admitted the writ petition to be heard by a Division Bench and vacated the stay order earlier granted on certain terms. The Bench also permitted the petitioner-Corporation to fi
