Holding

Terminal tax under Section 178 is exigible only when Delhi is the final destination of the goods, and Rule 26 must be construed to allow a reasonable period rather than an instantaneous export.

Summary

Man Mohan Tuli owned godowns on the Grand Trunk Road where goods destined for places beyond Delhi were unloaded, sorted and reloaded before passing through Delhi. The Delhi Municipal Corporation had issued orders to collect terminal tax on these goods at the entry to Tuli's land. The High Court upheld the levy, holding that entry into Delhi made the goods taxable. On appeal, the Supreme Court interpreted Section 178 of the Delhi Municipal Corporation Act, 1957 and Rule 26 of the Terminal Tax Rules, holding that terminal tax can be imposed only when Delhi is the final destination of the goods, not merely when goods transit through the territory. The Court further ruled that the word "immediately" in Rule 26 must be given a liberal meaning of a reasonable period, and tax is exigible only if goods remain in the Delhi godown for an indefinite, unexplained time. Consequently, the appeals were allowed, setting aside the High Court judgment except for the quashing of the impugned orders.

Issues considered

The proper interpretation of Section 178 of the Delhi Municipal Corporation Act, 1957 with respect to the levy of terminal tax
Whether goods merely passing through Delhi en route to other destinations are liable to terminal tax
The meaning of "immediately" in Rule 26 of the Terminal Tax Rules
The distinction between terminal tax and octroi and the relevance of the goods' final destination
The criteria for determining a reasonable period for unloading, sorting and reloading before tax becomes exigible

Legislation cited

Delhi Municipal Corporation Act, 1957s. 158, s. 178
Terminal Tax Ruless. 26

Subjects

terminal taxoctroiDelhi Municipal Corporation Acttaxation of goods in transitinterpretation of statutesRule 26final destinationtax levy

Judgment

894

.A MAN MOHAN TULi
v.
MUNICIPAL CORPORATION OF DELHI & ORS.
February 18, 1981
lJ [S. MURTAZA FAZAL ALI, A. D. KosHAL AND A. VARADARAJAN, JJ.I

Delhi Municipal Corporation Act, 1957, section 158 and rule 26 of the
•
Terminal Tax Rule frarned under the Act, interpretation of-Exigibility of
Terminal Tax, explained.

c landMan Mohan Tuli, appellant in C.A. 2004/80, is the owner of a piece of
situate on the Grand Trunk Road near the sixth n1ilestone as one goes
from Delhi to Ghaziabad. Appellant Tuli has constructed various bui1dings
on his land for use as godowns and has rented them out to various transport
companies engaged in bringing goods from other States and storing them
before their transhipment to Delhi and other States beyond Delhi. The trucks
carrying the goods for various destinations pass along the G .T. Road and move
·o into Tuli's land. After the trucks enter the ln,nd, the goods are unloaded into
the godowns, sorted out and reloaded into the respective trucks meant for

..
various destinations. Thereafter, the trucks move out of the land and, passing
through the Union Territory of Delhi after crossing the border line, proceed to
their destinations. The Municipal Corporation of Delhi by i~s Orders dated May
23, 1975 and July 7, 1975 directed that a Terminal Tax post be set up at
the entrance to Tuli's land in order to collect terminal tax on goods carried
E into that land. A writ was filed before the High Court by the owners of
transport companies as also by Tuli for quashing the orders of the Corporation
seeking to levy Terminal Tax on the goods which were not meant for Delhi
but for places beyond Delhi. The High Court held that the Corporation was
legally entitled to levy Terminal Tax at the point of territory of the Union
Territory of Delhi even though the goods were sorted out in the godown of
Tuli, resorted out and re-loaded since as they while passing through tlle
territory of Delhi undoubtedly entered the said territory. Hence the appeal'\
by special leave by appellant Tuli and others,

Allowing the appeal in part, the Court

HELD : 1. It is well settled that taxing statutes must be strictly interpreted
giving every benefit of doubt to the tax-payer. A Terminal Tax could be
G levied only by the Corporation or the State which is the final destination of
the goods sent from any other area. A Terminal Tax signifies that there must
be a terminus for the journey of the goods. Terminus means the point to
which main action tends, goal, end, finishing point, the point at which some
thing comes to an end. [899 D, 901 B-D]

2.1. From a consideration of the decided cases of the Supreme Court, the
following propositions emerge : -
-H
(i) Terminal tax and octroi are similar kinds of levies which are closely
interlinked with (a) destination of the goods (b) the user in the local area
M. M. TULi v. M.C.D. 895

-on arrival of the goods. Where the goods merely pass through a local area A
without being consumed therein the mere fact that the transport carrying the
.goods halt within the local area for transhipment or allied purposes would not
justify the levy of either the terminal tax or octroi duty. This is because tho
halting of the goods is only for an incidental purpose to effectuate tho journey
.of the goods to the final destination by unloading, sorting and reloading them
at a particular place. [803 A-Cl
B
(ii) There is a very thin margin of difference between a terminal tax. and
• octroi. In the case of the former (terminal tax) the goods reach their final
destination and their entry into the area of destination immediately, attracts,
payment of terminal tax irrespective of their user. In the case of octroi,
however, the tax is levied on goods for their use and consumption. [903 D-El
c
(iii) But at the same time, the goods while halting at a local area 1 should
leave for their destination within a reasonable time which may depend on
circumstances of each case and if the goods are kept within the area for such
a long and indefinite period that the purpose of reaching the final destination
lying in a dicerent area is frustrated or defeated, they may be exigible to termi-
nal tax. [903 E-FJ
D
(iv) \\'here the goods enter into a local area which is also the destination

.. -Of the goods either temporarily or otherwise, the terminal tax would be leviable.
For instance, if A consigns goods from Patna in Bihar to Delhi in the name
of X and X after having received the goods at Delhi rebooks or reloads the
same on a transport for Chandigarh in the name· of Y, terminal tax would be
Ieviablt~ by the Corporation at Delhi because the destination of the goods in
the first instance was Delhi and that by itself would attract the imposition E
of terminal tax. The fact that X rebooks them to Chandigarh Would not
make any difference because the act of rebooking by X at Delhi would consti-
tute a fresh transaction by which the goods after having been carried into
Delhi are further exported to Chandigarh. On the other hand, when there
is one continuous journey of the goods from Patna to Chandigarh without
any break, the final destination would be Chandigarh even though the goods
may have to be halted in Delhi for the purpose of unloading, sorting and
F
! reloading and may have to be kept in Delhi for a reasonable time. In such
~~-a case terminal tax would not be exigible. [903 G-H, 904 A-CJ

Pun;ab Flour & General Mills v. Lahore CorpOraJion, A.I.R. 1947 F.C. 14;
The Central India Spinning & Weaving & Manufacturing Co. Ltd., The Empress G
Mills, Nagpur v. The Municipal Committee, Wardha, [1958] SCR 1102;
Bangalore Woollen, Cotton & Silk Mills Co. Ltd, Bangalore v. Corporation
of the City of Bangalore, [1961] 3 SCR 707; Diamond Sugar Mills Ltd. & Anr-
v. The State of Uttar Pradesh, [1961] 3 S.C.R. 242; Burmah Shell Oil Storage &
• Distributing Co. India Ltd. v. The Belgaum Borough Municipality, [1963] Supp.
2 SCR 216; Khyerbari Tea Co. Ltd. & Anr. v. The State of Assam, [1964] 5
SCR 975, followed.
H
Champlain Realty Co. v. Town of Brattleboro, 67 L Ed. U.S. 309, quoted
with approval.
896 SUPREME COURT REPORTS [1981] 2 S.C.R •.

A 2.2. What would be a reasonable time for interpretation of the goods or
halting, in the instant case, at the godown of Tuli, will naturally depend upon
the special features or circumstances of each case, namely, the nature of the
goods, the tin1e taken in loading, sorting and unloading, the obstacles or diffi..
culties which may be fa~ed by the transporters and similar other factors. Nor-
,mally, a time of two to three days or even a week should be sufficient to clear
the goods for its journey to the ultimate destination. It may sometimes happen
B that goods may have to be kept in the godowns 1n the territory of Delhi for
circumstances beyond the control of the consignee or the consignor, for exam-
ple, a garnishee order. In considering what is reasona.ble time these circums-
tances would have to be taken into consideration. [906 H, 907 A-C] • '"'
2.3. Rule 26 of the Terminal Tax Rules will have to be interpreted on tho I

~
footing that seclion 178 of the Delhi Municipal Corporation Act, 1957 does
C not contemplate levy of terminal tax for goods meant for destinations other
thain. De1hi. The v,rord "imn1ediately" appearing in Rule 26 has to be liberally r·
construed so as to imply a reasonable period and if the export is delayed the,
rules may apply if a reasonable explanation has been given. So far as niles
regarding taking of passes, etc., a•t the barrier are concerned they would, of
course, apply but subject to the conditions under which terminal tax can be r

D
imposed under section 178 of the Act \vhich is the main charging section. {907
C-EJ
Amtit Banaspati Co. Ltd. v. The. Union of India I.L.R. 1973(1) Delhi 237,
•
distinguished.

E
3.1. Section 178 of the Dehli Municipal Corporation Act, cannot be inter-
preted so as to justify imposition of ternllnal tax even on goods which merely
passed through the territory of Delhi, although their destination is not Delbi
but places beyond Delhi. [908 F-G]
-
3.2. I\iferely because the goods after having been unloaded in the gOOown of
appellant Tuli are sorted, reloaded in different trucks and thereafter pass through
the territory of Delhi, they do not become exigible to terminal tax. [908 G-H]

3.3. Rule 26 of the Terminal Tax cannot be interpreted so that exemption
F could be granted only if the goods are exported immediately which means
within a very short time irrespective of any other consideration. Terminal tax
can br. leviable only if it is proved that the goods remained at the godown for
an indefinite and unexplained period which could not be said to be reasonable · ~ 1--.
in the circumstances. [908 H, 909 A-Bl
3.4. Whete the goods arc Ca-rried by trucks into the territory of Delhi and
G unloaded there and are ah.o 1ncant for Delhi and soon thereafter may be re-
booked by the receiver of the gocxls to some other place, terminal tax wou1d be
levirble because in this case there are two separate transa-ctions-(i) by which
the goods are meant for Delhi and (ii) by which after having reached and
having been unloaded at Delhi they are rebooked and reloaded for some other
p1ace and which therefore is a fresh and different transaction. In such a case, '•
terminal tax would be leviable at the entry point in the·territory of Delhi. [909
H B-Cl
3.5. The direction given by the High Court to the Terminal Tax Officer to
fix a reasonable time for unloading, sorting and reloading the goods which are
M. M. TUU '" M.C.D. (Fazal Ali,!.) 897
, meant for dif~ercnt destinations takin£ into consideration the quantity of the A
goods. the ti1ne for unloading, sorting etc. aud for further reloading and tran-
shipment r;hould be done within a tin1e to be fixed by a Tern1inal Tax. Officer
is correct. [909 E-FJ

CIVIL APPELLATE JURISDICTION : Civi,J Appeal Nos. 2004-
2005 of 1980. B
Appeals by Special Leave from the Judgment and Order dated
~ 13-10-1978 of the Delhi High Court in LPA Nos. 73/77 and 103177.
Madan Bhatia and Sushi/ Kumar for the Appellant in both the
appeals.
R. B. Datar, Lalit Bhardwaj and Miss Madhu Mulchandani for Res- c
pondent Nos. 1-3.
P. R. Rao, S. R. Venkataraman, P. C. Kapur, R. C. Bhatia and S. L.
Sharma for Respondent ND. 5 in Civil Appeal No. 2004/80.
N. B. Si"ha and S. K. Sinha for Respondent No. 4.
D
The Judgment of the Court was delivered by

FAzAL Au, J. These appeals by special leave are directed against
a Division-Bench common judgment dated October 13, 1978 of the High
- Court of Delhi by which the Letters Patent Appeals were allowed and
the impugned Orders dated May 23, 1975 and July 7, 1975 passed by
E
the Terminal Tax Officer, Municipal Corporation of Delhi were quashed.

The facts of the case lie within a very narrow compass and may
be summarised as follows. Manmohan Tuli, appellant in C.A. No.
2004/80, is the owner of a piece of land situate on the Grand Trunk
Road near the sixth milestone as one goes from Delhi to Ghaziabad.
F
Appellant Tuli has constructed various buildings on his land for use
as godowns and has rented them out to various transport companies
._l_ ~.,ngagcd in bringing good from other States and storing them before their
transhipment to Delhi and other States beyond Delhi. The trucks
""' carrying the goods for various destinations pass along the G.T. Road
and move into Tuli's land. It is not disputed that after the trucks enter G
the land, the goods arc unloaded into the godowns, sorted out and re-
loaded into the respective trucks meant for various destinations. There-
after the trucks move out of the land and passing through the Union
• Territory of Delhi after crossing the border line, proceed to their destina-
' tions. The Municipal Corporation of Delhi (hereinafter referred to as
the 'Corporation') by its Orders dated May 23, 1975 and July 7, 1975 H
(hereinafter referred to as the 'inpugned orders') directed that a Termi-
•• nal Tax post be set up at the entrance to Tuli's land in order to collect
I0-214SCI/81
898 SUPREME COURT REPORTS [1981] 2 S.C.R.

A terminal tax on goods carried into that land The Ghaziabad Nagar
Palika also purported to levy terminal tax on such goods but this levy
was neither assailed before the High Court nor has been challenged
before us and is therefore left out of con~ideration. A writ was filed
before the High Court by the owners of transport compiinies as a.lso
by Tull for quashing the orders of the Corporation seeking kl levy termi-
B nal tax on the goods which were not meant for Delhi tut for places
beyond Delhi. Further details are not necessary for the decision of these
appeals and both the appeals (C.A. Nos. 2004 and 2005 of 1980) will
be disposed of by a common judgment.
•
The High Court vide the impugned judgment was of the opinion
C that even though the goods were stored in the godown of Tuli, sorted
out and reloaded but as they while passing through the territory of
Delhi undoubtedly entered the said territory, the Corporation was legally
entitled to levy terminal tax at the point of entry into the Union Terri-
tory of Delhi. The case of the appellant was that the goods were not
meant either to be used or consumed in Delhi nor was Delhi the final
D
destination of the goods. It was a different matter that as the goods
were to be sent to destination beyond Delhi the transport carrying the
goods had perforce to pass through the territory of Delhi. It was thus
contended that the goods were not carried into the territory of Delhi

E
but were merely carried through the territory of Delhi to other destina-
tions which were beyond Delhi. It was argued that s. 178 of the Delhi
-
Municipal Corporation Act, 1957 (hereinafter referred to as the 'Act')
had in terms no application to the case and that therefore the terminal
tax imposed by the impugned orders was legally invalid.

The counsel for the respondent, however, submitted that even though
F the goods may have been meant for other destinations but as they were
unloaded in the godown and reloaded in various trucks and actually
entered into the territory of Delhi, they were factually carried into the
Delhi territory and that was sufficient to empower the Corporation to.~.l.
levy the terminal tax. According to the argument of the counsel for ·
the Corporation, the question of destination was not at all germane for
G the purpose of adjudicating the competency of the Corporation to levy
terminal tax at the point of entry into Delhi.
Thus, the entire question turns upon the interpretation of s. 178 of
the Act and some Rules framed under the Act. Relevant portion of
•
section 178 runs thus :
B "178 (1). On and from the date of the establishment of the
Corporation under section 3, there shall be levied on a11 goods
carried by railway or road into the Union ·Territory of Delhi •
M. M. TULi v. M.C.D. (Fazal Ali, J.) 899

from any place outside thereof, a terminal tax at the rates A
specified in the Tenth Schedule."
(Emphasis supplied)
The crucial words which have to be interpreted are : 'goods car-
ried by railway or road into the Union Territory of Delhi from any
place outside Delhi'. The contention of the appellant is than.the words B
'goods carried into the Union Territory' clearly indicate that: the final
• destination of the goods must be Delhi and by virtue of this fact, the
natural consequence would be that the goods should be carried from
other places either by rail or by road into the territory of Delhi. This
argument was reinforced by the words 'terminal tax' used in s. 178
which imply that the terminus of the journey of the goods must be
c
Delhi and only in that event the Corporation would be competent to
levy a terminal tax. This argument was sought to be rebutted by the
respoo.dents on the ground that the words 'carried into the Union
Territory of Delhi' should be interpreted independently and literally
so as to indicate that even if the goods passed through Delhi, the D
moment they entered into the territory of Delhi terminal tax became
exigible. So far as. this aspect of the argument is concerned, we ar(1
unable to accept the same because it is well setlled that taxing statu-

- tes must be strictly interpreted giving every benefit of doubt to the tax .
payer.
E
Before, however, examining the respective contentions of the
parties it may be necessary to refer to the authorities dealing with the
history of terminal tax or octroi duty. To begin with, it is not disputed
that the pcwer to subject the goods either to octroi or to terminal tax
squarely falls within entries numbers 52 and 56 of List II to the
Seventh Schedule of the Constitution. In Punjab Flour & General F
Mills v. Lahore Corporation(') the Court while drawing a distinction
between the type of taxes referred to as terminal taxes in Entry No. 58
_.~of List I of Schedule 7 to the Government of India Act, and those
described as cesses in Entry No. 49 of List II thereof observed as
follows :
"There appears to us a definite distinction between the G
type of taxes referred to as terminal truces in Enlry No. 58
of List I of Sch. 7 and the type of taxes referred to as cesses
• on the entry of goods into a local area in Entry No. 49 of
• List IL The former taxes must be (a) terminal (b) con-
fined to goods and passengers carried by railway or air.
They must be chargeable at a rail or air terminus and be H
•
(!)_AIR 1947 F.C. 14.
900 SUPREME COURT REPORTS [1981] 2 S.C.R.

A referable to services (whether of carriage or otherwise)
rendered or to be rendered by some rail or air transport
organisation. The essential features of the cesses referred
to in Entry No. 49 of List II are on the other hand simply
(a) the entry of goods into a ddinite local area and (b)
the requirement that the goods should enler for the purpose
B of consumption, use or sale therein. . . . The grounds of
taxation under the two entries are, as indicated above, radi-
cally differenl, and there is no case for suggesting that taxa-
•
tion under the one entry limits or interferes in any way with
taxation under the other."
c In The Central India Spinning & Weaving & Manufacturing Co.
Ltd., The Empress Mills, Nagpur v. The Municipal Committee,
Wardha(') this Coort examined the entire matter exhaustively and
after giving the history of terminal tax or oclroi observed as follows :
"ll 'terminal' besides the above meaning has an addi-
D tional meaning also and that meaning signifies the termini
or the jurisdictional limits of the municipal area even then
the construction to be placed on the term should be the one
that favours the tax-payer, in accordance with the principle
of construction of taxing statutes, which must be strictly
construed and in case, of doubt must be construed against
E the taxing authorities and doubt resolved in favour of the
tax-payer."

"The legislative history of this tax thus shows that octroi
was Jeviable on the entry of goods in a local area when the
F goods were for consumption, use or sale therein. The
substituted tax was terminal tax on goods imported into or
exported from a local area and by rules this tax in the case
of Wardha Municipal Committee was imposed on certain
class of goods imported and on others exported by railway
or road."
G
"That by the substitution of tcrn1inal tax on gocxls im-
ported into a local area the nature of the tax had not been
altered from what it was when octroi was in force or when
instead of "terminal tax" octroi (\vithout refund) was substi~
tuted . . . . . . . Therefore terminal \ax on goods imported
H or exported is similar in its incidence and is payable on
•
(t) [1958] S.C.R. 112
XI. M. TULi "' M.C.D. (Fo~al Ali, J.) 90 I

goods 011 their journey e11<ling within the rnunicipal limits or A
comn1cncing thcreiron1 and not V\i'here the goods v. ere 1nerely
1

in transit through the municipal limits and had their termi-
• nLIS eiscwhere."

'T!Jcrefore, according to the Federal Court '·terminal" ll
• has r~ferencc to the terminus of the railway or air, i.e., the
end of journey."
A close «nalysis of this decision, therefore clearly discloses that
a tern-iinal tax signified that there must be n tcrn1inus for the journey
of the goods. Th·c word 'terminus' according lo Oxford Dictionary C
means-a point ~ituatcd at or forrning the end or extrcrnity of son1e~
thing. situated at the end of a line of railway. In other words, tenni-
nus 111eans- the point to \Vhich main action tends, goali end, finishing
point, the point at which something comes to an end. In Corpus
Juris Vol. 62 at p. 729 the word 'terminal' in connection with trans-
portation means the fixed beginning or ending point of a given run. It D
would thus appear that a terminal tax could be levied only by the Cor-
poration or the State which is the final destination of the goads sent
from any other area.
A similar view was taken by a later decisiou of this Court in
Bangalore Woollen, Cotton & Silk Mill.1 Cu. Ltd. Bangalore v. Corpo-
rafio11 oi the Ci1y of Bangalore(') where Kapur, J., speaking for the
E
Court observed as follows :
"The history of these taxes therefore shows that in the
Devolut;on Rules under the Government oi India Act, 1915
octroi, terminal tax and taxes on professions and callings
were three distinct heads of taxation. . . Therefore, when
s. 142-A was added in the Government of India Act, 1935,
its operation was limited to entry 46 of List II and had no
reference to entry 49 which deals with cesses on entry of
goods. The position under the Constitution is exactly the
samt and therefore neither s. 142-A of the Government of
India Act, 1935 nor Art. 276 has any effect on entry 49 in G
the Government of India Act, 1935 or entry 52 in the
Constitution."
• In this case also a distinction between a terminal tax and octroi
was clcaily brought out. In Diamond Sugar Mills Ltd. & Anr. v.
• The State oi Utwr Pradesh & Am'.(2) while defining a local area within B
(!) [1961] 3 .>.C.R. 707.
(2) [1961] J S.C.R. 242.
902 SUPREME COURT REPORTS [1981) 2 S.C.R.

A the meaning of Entry 52 of List II of Seventh Schedule to the Consti-
tution, the Court observed as follows :
"We are of opinion that the proper meaning to be attached
to the words 'local area' in Entry 52 of the Constitu-
tion, (when the area is a part of the State imposing the
B law) is an area administered by a local body like a muni-
cipality, a district board, a local board, a union board, a
Panchayat or the like."
In Burmah Shell Oil Storage & Distributing Co. India Ltd. v. The
Belgaum Borough Municipality(') this Court again fully discussed the
matter and Hidayatullah, J., speaking for the Court stressed the essen-
C tial distinction between octroi and terminal tax in the following
words:
"Octrois and terminal taxes were different taxes though
they resembled in one respect, namely, that they were leviable
in respect of goods brought into a local area. While terminal
mxes were leviable on goods 'imported or exported' from the
D Municipal limits denoting thereby that they were connected
with the traffic of goods, octrois, according to the legislative
practice then obtaining were, Jeviable in respect of goods
brought into a Municipal area for consumption or use or
sale.
E ~·~··
...
The history of these two taxes clearly shows that while
terminal taxes were a kind of octroi which were con-
cerned only with the entry of goods in a local area irrespective
of whether they would be used there or not; octrois were ta.xes
on goods brought into the area for consumption, use or sale.
F They were leviable in respect of goods put to some use or
other in the area but only if they were meant for such user." ...,. l ·
In Khyerbari Tea Co. Ltd. & Anr. v. The State of Assam(')
Gujendragadkar, J. speaking for the Court drew a very apt distinction
regarding the concept of import and observed as follows : -
G "In that connection, the legislative history of the octroi
duty was examined and it was held that the concept of im-
port requires that the goods which are brought into must mix
up with the mass of the property in the local area where the •
.·goods are alleged to have been imported. If the goods are
just carried and not mixed with the mass of the property in
H the area through which they are carried, they cannot b~ said •
(1) [1963] Supp. 2 S.C.R. 216.
(2) [1964] 5 S.C.R. 975.
M. M. TULi v. M.C.D. (Fazal Ali, J.) 903

to have been imported into that area . . . . . . . . . . The word A
"carried" is of much wider denotation, and it would be un-
reasonable to limit its scope by introducing considerations
which are relevant in dealing with the question of import."
Thus, from a consideration of the cases cited above, the following
prqpositions emerge : - B
(1) Terminal tax and octroi are similar kinds of levies which
are closely interlinked with ( 1) destination of the goods,
(2) the user in the local area on arrival of the goods.
Where the goods merely pass through a local area without
being consumed therein the mere fact that the transport
carrying the goods halt within the local area for tranship- c
ment or >allied purposes would not justify the levy of either
the terminal tax or octroi duty. This is because the halt-
ing of the goods is only for an incidental purpose to
effectuate the journey of the goods to the final destination
by unloading, sorting and reloading them at a particular
place. D
(2) There is a very thin margin of difference between a termi-
nal _tax and octroi. In the case of the former (terminal
tax) the goods reach their final destination and their entry
into the area of destination immediately attracts payment
of terminal tax irrespective of their user. In the case of
octroi, however the fax is levied on goods for their nse
and consum1Ption.
( 3) But at the same time, the goods while halting at a local
area should leave for their destination within a reasonable
time which niay depend on circumstances of each case and
if the goods are kept within the area for such a long and F

"·-·
indefinite period that the purpose of reaching the final
destination lying in oa different area is frustrated or de-
feated, they may be exigible to terminal tax.
( 4) Where the goods enter into a local area which is also the
destination of the goods either temporarily or otherwise, G
the terminal tax would be leviable. For instance, if A
consigns goods from P.afna in Bihar to Delhi in the name
of X and X after having received the goods at Delhi re-
books or reloads the same on a transport for Chandigarh
in the name of Y, terminal tax would be leviable by the
Corporation at Delhi beC'ause the destination of the goods H
in the first instance was Delhi and that by itself would
attract the imposition of terminal tax. The fact that X
SUPREME COURT REPORTS [J 981] 2 S.C.R.

A rebooks them to Chandigarh \VOuid not n1akc any diffe-
rence because the act of rebooking by X at Delhi would
constitute a fresh transaction by \vhich the goods after
having been carried into Delhi are further exported to
Chandigarh. On the other hand, when there is one conti-
nuou~ journey of 1hc good~ fro1n Patna to Ch',-tndigarh
B
\Vithout any break. the final dc~tination v.could be Chandi-
garh even though the gocids lll<t:.r haYe to be halted in '
Delhi for the purpose o'.' unloading. sorting a!1d reloading
and may have to he ke:pt in [)clhi for a reasonable time.
In such a case tcn11i11al tax \vould not he cxigiblc.
c These principles arc also spelt out by the American law on the
subject \Vhich deals \l\·ith intcr-'.--1~1tc tran~pllrt of goods. In A1n.eri-
can Jmispruclence (2d. Vol. 15. p. 689, para 49) the following state-
m•.:nt is niadc, which is spelt out fron1 various American decisions
including those of the U.S. Supreme Court :

D "In the determination of whether a transportation of
persons or property constitutes interstate or intrastate con1-
merce, the essc"ntial character or unity of the movement
is the decisive factor. While the intention of the shipper
or passenger is probab'.y the most important single factor
in determining whether transportation is interstate or intra-
E state intention alone ha-s b;;:cn ~aid not to he a controlling
factor in making such determination. Inter-state journeys
are to be measured by the commonly awcpted sense of
the 1ransport.ati0n concept ...... l"he parties cannot, by
dcscriptiY2 tern1s of co'ntract, convert a local business,
serving as an agency of a transp~1rt~1tion con1pany. into·
F
an interstate con1mercc husiness, nor. conversely, may a
through shipment be transformed into intrastate cornnu~rce
by separating the rate into its co1npone;it parts, charging
1ocal rates, and issuing Jocal \Vaybills''.

Similar observation:; are to be found in th.:: ~atnc volume of Anieri-
G can Jurisprudence (p. 697, para 56) which re:atc to the continuity
of t:ansit of goods and may be extracted !hus :
''The cruci;I question to be sctt!eu in determining \Vhcther
;_;ersonal property n1oving 111 intcr~tatc co1nmcrce is '
suhjcct to local taxation l~ that of its continuity of
H trar.si t and this question IS to be dL'tc:rmin.:J by vanous •
L1ctors, an1ong which arc the intention nf the owner, the
co11trol he retains In change cl i:~ ti 11 a tio ii. the ugei:cy by
\1. M. TULi v. M.C.D. (Fa;.a/ Aii, J.) 905

which the transit is eflcckd. and th•c occasion or purpose A
of tht? interruption during v.-hich th·~ ~ax is sought to be
levied. fntcnt, \\·hile not alone conclusive, is probably the
most l1nportant single dct~rn1inant of contir:uous carri-
agl..'.
H a break in the interstate journey is caused by the'
,:xi~c,1cies or convcnie11c~s of the c:hos~11 n1cans of tran~
port:ition. consideration of the safety of the goous during
transit. or natural causes over which the taxpayer has no
con1rc'1. the continuity of the transit rcn1ains uni111µair-
cd".
The tol:owing state-1ncnt of l~nv occurs 1n the s;1n1:.· \'olun1l' ( p::ra c
57, p. 698) : -
"Ii during transit. property is stored f,,, an indefinite
link lor other than natural causes or for lack of facilities
for immediate transportation, it is subject to state or lecal
laws, including inspection laws ...... On the other hand, D
if the entry of goods into a warehouse is a convenient in-
k:rmediate step in the process of getti·ng them to their final
destination, they remain in interstate or foreign comn1ercc
until they reach those points".
In the case of Champlain Realty Co. v. Town of Brnt!/eboro(')
F
one important aspect of the matter has ken dealt with, viz., the
fact that if the goods halt in an intermediate State whilst on their
journey to their destination for a Jong period due to circunistanccs
beyond the control of the own•er. whether or not the goods lose ',he
nature of th:; interstate transaction and could be free fron1 thl? t,t~tte
taxation, \\'a:-; clearly highlighted by he- following observations : - F
"'Longs of puip \Vcod which have been plao2d in a river
to b2 floated info another state are in interstate co111-
mercc, so as to be free from state taxation, although, be-
cause of the high wat•er in a connecting river into which
they \vill ultin1atcly pass. it is unsafe to permit thcn1 to enter
that river, and they are tcn1porarily he~d in a boon1 'near G
the mouth of its tributary".
In the sa1nc case, the various a~pects of
C.J. l'aft indicat 2d
1

_.. interruptions in the journey and the incidence thereof and observed
as follows : -
''The doubt arises whon there ar.:'. int•:rruption:-. in tlil: H
journey, aml whe·n the property, in its transp0rtatic.11, i.:;
(1) 67 L Ed. US 309.
906 SUPREME COURT REPORTS [1981] 2 S.C.R.

A under the complete control of the owner during the passage
If the inrerruptions are only to promote the safe or con-
venient transit, then the continuity of the interstate trip is
qot broken.

B
Chief among these are the intention of the owner, the
control he Petains to change destination, the agency by
which the transit is effected, the actual continuity of the
transportation, and the occasio'n or purpose of the inter-
ruption during which the tax is sought to be levied".
c
In Voume 78 L Ed at p. 13 8 the test laid down was that if the \
shipment was made in good faith to a destination and the interrup-
tion was not indefinite but reasonable the co'ntinuity of the journey
cannot be said to be broken. It was also pointed out that where the
interruption of the movement of commodities at an intermediate point
D is not incidental to the transporation, the shipment loses the charac-
ter of interstate commerce so as to be exigible to local taxation. In
this connection, the following observations were made :

"If the shipment has been made in good faith to a
destination the interruption is not indefinite, but is reason-
E able and solely in furtherance of the intended transporta-
tion of the shipment to its ultimate destination, then the
continuity of the jonrney is not broken by the delay nor
by the mere power of the owner there to destroy its charac-
ter as interstate commerce ....... any interruption of the
movement of commodities at an inrermediate point between
F origin and final destination that is not incidental to the
transportation or the use of the means of transportation
or, being so incidental, is used or extended for purposes of
the owner not incidental to the transport transportation or
the mea'ns used therefor, breaks the continuity in transit
and subjects the shipment to local taxation at the point of
G interruption".

We have laid special stress on tl1e circumstances under which the
terminal tax becomes leviable if the halt or interruption of the goods •
at an intermediate point is for an indefinite and unexplained period. •
The answer to the question as to what would be a reasonable
n time for interruption of the goods or h~lting in the instant case
at the godown of Tuli, will naturally depend on the special fea-
tures or circu1nstances of each cases, .viz., the nature of the goods,
M. M. TULi v. M.C.D. (Fazal Ali,/.) 907

the time taken in loading, sorting and unloading, the obstacles A
or difficulties which may be faced by the transporters and
similar other factors. Normally, a time of two to three days or
even a week should be sufficient to clear the goods for its journey to
the ultimate destination. It may sometimes happen that goods may
have to be kept in th~ godowns in the territory of Delhi for circums-
tances beyond the control of the consignee or the consignor, e.g., B
wl)ile the goods are lying in a godown at Delhi a dispute occurs
between the concerned parties as a result of which an injunction is
issued by a court restraining the transporters from moving the goods.
In considering what is reasonable time these circumstances would
have to be taken into consideration. c
It, was, however, argued before us that according to the
Terminal tax Ru1es framed under the Act, Rule 26 exempts goods
from terminal tax if the same are exported immediately ahd are
declared to b~ intended for immediate export. In view of the inter-
pretation we have placed on s. 178 it is obvious that the word
'immediately' appearing in Rule 26 has to be liberally construed so D
as to imply a reasonable period and if the export is delayed the rules
may apply if a reasonable explanation has been given. So far as
- rules regarding taking of passes, etc., at the barrier are concerned
they would, of course, apply but subject to the conditions under
which terminal tax can be imposed under s. 178 of the Act which
is the main charging section. E

The High Court appears to have placed some reliance on Amrit
Banaspati Co. Ltd. v. The Union of l11dia(') in coming to the conclu-
sion that in the instant case the Corporation was legally entitled to
levy terminal tax. With dTh~ re3pect to the Judges of the High
Court who decided the Appeals, we would like to point out that F
the case just above referred to is clearly distinguishable from the
present appeals. The most crucial fact in the Delhi decision was
that the goods were bei'ng carried into the Union Territe>ry of Delhi
for the purpose of sale at Delhi. Thus, the case proceeded on the
admitted position that the goods were carried from Ghaziabad into
the Delhi territory for sale at Delhi. The final destination of the G
goods being Delhi, there can be no doubt that the Corporation was fully
entitled to levy terminal tax on such goods. In this connection, the
High Courc observed as follows : -
"Th•c Petitioner-company was i'ncorporated under the
• companies Act, 1956, and it had its registered office at H
• G. T. Road, Ghaziabad, in the State of Uttar Pradesh ....
(I) I.LR. 1973 (I) Delhi 237.

~---
908 SUPREME COURT REPORTS [1981] 2 S.C.R.

A It has a factory, intt"r oliu, at Ghaziabad for ntanufacturing
the said \lanaspati products. In the course of its business,
lhe company carried <111d still carries its products by railway
and/or road into tlic Union -rcrrit~1ry of D1..":lhi from Ghazia-
bad for th., purpose of sa'.c al DJhi.
B
The words "shall be :evied on all goods carried by rail-
way or road" i"n sub-section (I) show ckarly that the section
imposes terminal tax on the carriage or moven1ent of
goods fro1n outside the L'nicn rrcrritory of Delhi into the
said Territory. In other \Vords, the taxable event is the
c carriage or movcn1cnt of goods into thi: Union "fcrritory of
Delhi".
The observations last •extructed must be nndcrstood m the light
of the admitted facts in A twit Banaspati Company's case (supra).
We are u·nable to accept that case as an authority for the proposition
D that even if the final destination of the goods was not Delhi but as
the goods were carried through the territory ol' Delhi, they would still
be extgible to terminal tax. fn the impugned judgment the High
Court, however, seems to have laid undue emphasis and special stress
on th•e fact that the goods were carried into the Union territory of
Delhi, the moment they passed through it even though the destina-
tio"n of the goods may be some other area. This appeared, accord-
ing to the High Court. the real purport and intention of s. 178.
We are, however, unable to agree with this view which is patently
wrong and does not at all now from the plain and unambiguous
language of s. 178 of the Act nor docs s. 178 warrant such an i'ntcr-
pretation. ~fhus, our conclu~ions are as fo:Jcnvs : -
F
(1) The High Court was wrong in interpreting s. 178
of the Act so as to justify imposition of termiml tax
even on goods which merely passed through the
territory of Delhi, although their destination is i1ot
Delhi but places beyond Delhi.
G
(2) The High Court was wrong in holding that merely
b2causc the goods after having been unloaded in
the godown of appellant Tuli arc sorted, reloaded in
different trucks and thereafter pass through the
'•
territory of Dc:hi, they become exigiblc to t•er-
H. minal tax.
•
(3) The High Court \\as wron~ i"n interpreting Rule 26
literally and hr:!ding that cxcn1ption could be grant-
M. M. TULi v. M.C.D. (Fa~al Ali, J.) 909

ed only if the goods are exported immediately which A
means within a very short time irrespective of any
other consideration. In view of our interpretation
of s. 178, Rule 26 must be interpreted in the light
of the object of s. 178 and terminal tax can be
leviable only if it is proved that the goods remained
at the godown for an indefinite and unexplained B
period which could not be said to be reasonable as
discuss•od by us in the circumstances.
( 4) Where the goods are carried by trucks into the terri-
tory of Delhi and unloaded there a'nd arc also meant
for Delhi and soon thereafter may be rebooked c
by the receiver of the goods to some other place,
terminal tax would be leviable becau~2 in this case
there are two separate transactions-( 1) by which
the goods arc meant for Delhi, and (2) by which
after having reached and having been unloaded at
Delhi they are rebooked and reloaded for some other D
place and which therefore is a fresh and diffe-
rent transaction. In such a case, terminal tax would
be leviable at the entry in the territory of Delhi.
We might mention that the High Court whil·o holding that terminal
tax is exigible has construed the word 'immediately' in Rule 26 li!e-
rally and directed the Terminal Tax Officer to fix a reasonable time E
for unloading, sorting and reloading the goods which are mea'nt for
different destinations taking into consideration the quantity of the
goods, the time for unloading, sorting, etc., and has further directed
that reloading or tra'nshipment should be done within a time to be
fixed by the Terminal Tax Officer. Though the directions given are
correct but they will ha vc to be construed in the light of the various
F
factors which we have referred to. Rule 26 will have to be int,or-
preted on the footing that s. 178 of the fact does not contemplate
levy of terminal tax for goods meant for destinations oth>cr than
Delhi.
For the reasons given above, we allow these appeals, set aside the G
impugned judgment exeo:pt the pmtion quashing the impugned or-
ders. That portion we uphold (though on grounds different from the
ones given by the High Court) in the light of the decision given and
the observations made by us regarding the interpretation of s. 178 of
• the Act. In the special circumstances of the case there will be no
order as to costs, H

V.D.K, Appeal allowed