Holding

Customs duty is an incidental charge of importation and must be included in the value of goods for octroi under Rule 17(a).

Summary

Mis Garware NyLons Ltd., a manufacturer of nylon and polyester yarn, imported goods that were subject to octroi. The municipal corporation valued the goods for octroi under Rule 17(a) of the Maharashtra Municipalities (Octroi) Rules, 1968 and included the customs duty paid on the imports. The appellant challenged this inclusion, arguing that the rule does not expressly mention customs duty. The Supreme Court examined the language of Rule 17, noting that it lists various charges as illustrative and that the term "incidental charges" is broad enough to cover customs duty, which is an inevitable expense of importation. Relying on earlier decisions, the Court held that customs duty must be included in the valuation for octroi. Consequently, the appeal was dismissed.

Issues considered

Whether customs duty paid on imported goods can be included in the valuation for octroi under Rule 17(a) of the Maharashtra Municipalities (Octroi) Rules, 1968.

Legislation cited

Maharashtra Municipalities Act, 1965s. 105(1), s. 321(2)

Subjects

OctroiValuationCustoms dutyIncidental chargesMunicipal taxMaharashtra Municipalities ActRule 17Import dutyTax law interpretation

Judgment

MIS GARWARE NYLONS LTD. A
v.
PIMPRI CHINCHWAD MAHANAGAR PALIKA AND ORS.
"\
MARCH 28, 1995

(R.M. SAHAI AND S.B. MAJMUDAR, JJ.) B

Maharashtra Municipalities (Octroi).Rules, 1968:

~ Rule 17-Scope and intetpretation o~ctroi-Goods imported-Cus-
tom duty paid on-Held liable to be included while valuing the goods-Men-
tion of charges in rnle is illustrative and not exhaustive.
c
The appellant-company-a manufacturer of nylon and polyster yarn
- imported goods which were liable to octrol. The Respondent-Corporation
while valuing the goods for charging octroi under Rule 17(a) of the
Maharashtra Municipalities (Octroi) Rules 1968 included the custom duty D
paid by the company on the imported goods. The appellant-company
preferred an appeal which was dismissed. The High Court also held that
---.;
even diough the custom duty was not mentioned In Rule 17(a) yet It was
' liable to be Included while determining the value under Rule 17. In appeal
to this Court it was contended for the appellant- company that since the
E
words 'custom duty' do not find place in Rule 17, they could not be lnclnded
for determining valuation under the Rule.

Dismissing the appeal, this Court

HELD : Rule 17 of the Maharashtra Municipalities (Octroi) Rules, F
- 1968 provides for determination of value of goods brought inside the
Corporation or Municipal Board for consumption, use or sale. The use of
various words iu the rule widens its scope. It provides for Inclusion of cost
price, charges such as freight, carrier, custom duties and then all other
incidental charges, dues etc. The mention ofvarious charges and duties Is
more illustrative than exhaustive. It only indicates that It is not only the G
expenses which are usually incurred in normal course of commercial
activity, but any incidental expenditure shall also constitute the value of
~ the goods. The rule has to be understood in broad sense. No good can be
imported from outside without payment of custom duty unless It Is exempt.
There appears to be no reason to exclude it while determinini: the value of H
23
24 SUPREME COURT REPORTS [1995) 3 S.C.R.

A the goods. In any case, if duty counter-vailing could be considered to be
incidental charges for importation, there is no valid reason to exclude
. ,,._
custom duty from it. (25-H, 26-A-B]

Mis Shroff and Co. v. Municipal Corporation of Greater Bombay,
[1989] Supp. 1 SCC 347, referred to.
B
Mis Goodyear India Ltd. v.State of Haryana andAnr., JT (1989) 4 SC
229 and Mis McDowell and Co. Ltd. v. Commercial Tax Officer, [1977] 1
sec 44, cited

c 1988. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1662 of

From the Judgment and Order dated 1.3.88 of the Bombay High
Court in W.P. No. 420 of 1987.

D M.L. Verma, Palhv Sisodia, Ms. Punita Singh, Ms. Sonu Bhatnagar
aod Sanjay !Gshao Kaul with him for the Appellaot.

V.E. Joshi for the Respondents.

The following Order of the Court was delivered :
E
The question that arises for consideration in this appeal is whether
Jhe customs duty paid by the appellaot could be included for determining
valuation for purposes of charging octroi under Rule 17(a) of the
Maharashtra Municipalities (Octroi) Rules, 1%8 made under sub-section
F (2) of Section 321 read with proviso to sub-section (1) of Section 105 of
the Maharashtra Municipalities Act, 1965. -
The appellaot is a public limited compaoy. It maoufactured nylon
and polyster yarn. Between September 1983 aod August 1984 it imported
goods liable to octroi. The corporation authorities claimed that the appel-
G laot 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 appellaot 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
H 17(a) is extracted below:
" v. MAHANAGAR PALIKA
GARWARE 25
"R. 17.-Provisions to determine value where octroi is Jeviable A
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, car- B
rier 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 'custom duty' are not mentioned in the rule, it gave rise
c
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 Mis. Shroff & Co. v.
Municipal Corporation of Greater Bombay, [1989] Supp. 1 SCC 347 held
that even though the custom duty was not mentioned in the rule yet it was D
liable to be included while determining the value under rule 17. The
learned counsel for the appellant urged that since the words 'custom dnty'
do not find place in rule 17, they could not be included for determining
valuation under the rules. Reliance was also placed on Mis. Goodyear India
Ltd. v. State of Haryana and Anr., JT [1989) 4 SC 229 and Mis. McDowell E
& Co. Ltd. v. Commercial Tax officer, [1977) 1 SCC 441 and it was urged
that in case the provision in taxing statute was susceptible to two constrnc-
tions, then the one favouring the assessee should be accepted.

In Shroffs case (supra), it was held by this Court that countervailing
duty being imposed for the purpose of compensating excise dnty, it was F
includible in the expression 'dnty'. The Court further held that expression
'incidental' used in the rule expand"d 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 G
all items that will be taken into account by an importer as part of his cost.

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, custom duties and then all other H
26 SUPREME COURT REPORTS [1995) 3 S.C.R.

A 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. N? good can be
B imported from outside without payment of custom 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 counter-vailing could be considered to be
incidental charges for importation, there is no valid reason to exclude
custom duty from it.

result, the appeal fails and is dismissed. But there shall be no
c order Inas the
to costs.

T.NA. Appeal dismissed.