Supreme Court of India

MUNICIPAL COUNCIL, JODHPURversusPAREKH AUTOMOBILES LTD. AND ORS.

Citation: 1989 INSC 334
Decided: 7 November 1989
Disposal: Dismissed
Bench: SABYASACHI MUKHERJI

Holding

Octroi is not chargeable on goods brought into a municipal area for onward transmission and consumption outside the limits, and Rule 13's scheme for current‑account facilities supersedes the declaration requirements of Rule 9.

Summary

Parekh Automobiles Ltd. (respondent No.1) obtained petroleum products from Indian Oil Corporation (respondent No.2) at a depot inside Jodhpur municipal limits, which were then re‑exported to the dealer's outlet at Dangiawas outside the limits. The Jodhpur Municipal Council claimed octroi was payable because the goods entered its limits, while the respondents argued that octroi could not be levied as the goods were intended for consumption outside the municipality and were covered by a current‑account facility under Section 133 and Rule 13 of the Octroi Rules. The High Court held that octroi was not chargeable on re‑exported goods and restrained the Council from collecting it, also directing a refund to Indian Oil Corporation. On appeal, the Supreme Court affirmed that the taxable event does not arise when goods are brought in for onward transmission for use outside the municipal limits, and that Rule 13 overrides Rules 6 and 9 for entities with current‑account facilities. Consequently, the Council could not levy octroi on the diesel supplied to the dealer, and the appeals were dismissed.

Issues considered

The applicability of Section 104 of the Rajasthan Municipalities Act to goods brought into municipal limits but intended for export.
Whether Rule 9's declaration requirement applies when a party enjoys a current‑account facility under Section 133 and Rule 13.
The interpretation of 'sale' in the context of octroi liability – whether sale alone suffices or must be linked to consumption or use within the municipality.
The right of the Municipal Council to demand refund of octroi paid by the dealer when the tax was not lawfully levied.

Legislation cited

Rajasthan Municipalities Act, 1959s. 104, s. 133
Rajasthan Municipal Octroi Rules, 1962s. 13, s. 6, s. 9

Subjects

octroicurrent account facilitysale vs consumptionmunicipal tax jurisdictionSection 104Section 133Rule 13Rule 9refund

Judgment

MUNICIPAL COUNCIL, JODHPUR
v.
A
PAREKH AUTOMOBILES LTD. AND ORS.
NOVEMBER 7, 1989
[SABYASA CHI MUKHARJI, M.H. KANIA AND
S. RANGANATHAN, JJ.]
Rajasthan Municipalities Act 1959/Rajasthan Municipal Octroi Rules, B
1962: Sections 104, 133 Rules, 6, 9 and 13-0ctroi-Liability for-When arises.
M/s. Parekh Automobiles Ltd., respondent No. 1, had been allotted
retain outlet by Indian Oil Corporation, respondent No. 2, for sale of its
petroleum products at Dangiawas, which was outside the limits of the appel-
lant. Respondent No. 2 had its depot near Raikabag Station at Jodhpur where
it stored petroleum products for supply to various pump stations situated C
within the limits of the appellant as well as situated outside its limits. Respon-
dent No. 2, being a pnblic sector undertaking, was provided current account
facilities under section 133 of the Rajasthan Municipalities Act, 1959, and so
respondent No. 2 had not to pay octroi tax on such consigmnents at the time of
entry of goods within the limits of the appellant. For this purpose, respondent D
No. 2 was provided with the export facilities and supplied with entry passes
under Rule 13 of the Rajasthan Municipal Octroi..Rilles 1962. Under rule
13(4), the amount of duty payable, in the case or persons who had the current
account facilities, was determined and collected on the basis of the total
amount of goods that had come in as reduced by the total amount of goods that
had gone out, the balance being presumed to have been consumed, used or
sold within the municipal limits. E
It was alleged that the appellant suspended the current account facility
under section 133 of the Act and took the stand that octroi would be charged
from Respondent No. 2 on the goods brought within the municipal limits if
these were sold within the limits of the appellant although such goods were
mean for use and consumption of the consumers outside the municipal limits.
As a consequence of this action of the appellant, respondent No. 2 charged F
octroi duty on Sl'pplies made to respondent No. I at Dangiawas by adding the
amout of octroi tax in the bills.
Respondent No. l filed a writ petition in the High Court praying inter
alia for a direction or an order restraining the Municipal Coundl from
realising any tax on diesel, etc. which were supplied to respondent No. I at G
Dangiawas by respondent No. 2, and for refund of octroi tax already paid. It
was contended on behalf of respondent No. I, in the High Court, that the
Municipal Council had no jurisdiction to levy octroi on the goods brought
within the municipal limits but not sold, consumed or used therein and
subsequently exported outside the said limits; that actual sale took place only
at Dangiawas and since neither the sale nor the consumption nor the use ofthe
petroleum products in question took place within the limits of the municipa- H
49
50 SUPREME COURT REPORTS [ 1989) Supp. 2 S.C.R

lity of Jodhpur, and Municipal Council was not entitled to levy any octroi
A thereon; alternatively, even if the sale was held to have taken place at
J.odhpur, still, octroi could not be levied as the goods so sold were meant for
use of consumption outside the municipal limits; and that the word 'sale'
occuring under s, .104 of the Municipalities Act could not be read without
reference to use or consumption, as sale simplicitor by itself did not attract the
levy of octroi, unless the goods were meant for use or consumption of the
B
ultimate consumer in the area of the Municipal Council.
The defence of the Municipal Council was that because the sale took
place at Jodhpur, octroi was chargeable irrespective of the fact where it was
consumed or used; that as soon as the goods entered the octroi limits, it gave
rise to taxable event unless a declaration as contemplated under rule 9 had
been made; that respondent No. 2 did not make the declaration as required by
c 11ule 9 and rule 13(4) of the Octroi Rules; and that under sub-rule (4) of rule 13
the goods exported were to be lessened only if such goods had not been sold
within the municipal limits and were exported out within a period of six
months from the date of entry. The claim of refund was contested on the
ground that there was no privily of contract between respondent No. I and
the Municipal Council as the demand of octroi was not made from respondent
0
No. I.
The case of the Indian Oil Corporation, respondent No. 2, was that
under the terms of the agreement respondent No. 2 was obliged to transport
pertrolenm products out of its depots and supply petroleflm products to its
dealers at the destination in its own truck-tankers, and Iii.I the supplies were
E made at the destination, the goods were at the risk of respondents No. 2 and
therefore the goods were sold at the retail outlet where the deliveries were
made and not at Jodhpur.
The learned Single Judge did not permit the petitioners to raise the
question that the sale took place only outside the municipal limits of Jodhpur
since that involved an investigation into facts which could not be undertaken
F in a writ petition, and proceeded on the footing that the sale of the products in
question took place within the limits of Jodhpur. He, however, accepted the
contention of IOC and the dealer that even if the sale was taken to have been
effected within Jodhpur, no octroi was leviable as admittedly the goods had
been sold in Jodhpur only for their onward transmission for use and con-
sumption in Dangiawas outside the municipal limits. The prayer for refund of
G the octroi tax was, however, refused.
The Division Bench dismissed the appellant's appeal and partly allowed
the appeal filed by respondent No. I. On the basis of the judgments of this
Court in Burmah Shell Oil Storage & Distribution Co. Tndia Ltd. v. The
Belgaum Borough Municipality, [!963] Supp. 2 SCR 216 and Hiralal
Thakorlal Dalal v. Broach Municipality, [1976] Supp. SCR 82 wherein it was
H held that the sine qua non for levy of octroi was consumption, and that the sale
in order to attract levy of octroi shall be for the purpose of use or consumption
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES 51

of the ultimate consumer, the Division Bench held that sale simplicitor would ot
attract the levy of the octroi, that the word 'sale' in this context had to beread A
with reference to the use or consumption and •use, consumption and sale' had
to read in a disjunctive manner.
The Division Bench further held that rule 13 was a special provision in
regard to the persons who had been granted current account facilities and this
rule was not subject to either rule 6 or rule 9 but was an overriding rule B
independent of rules 6 and 9. The Division Bench was of the opinion thats.
· 133 of the Municipalities Act, alongwith rule 13 of the octroi Rules left no
doubt that no conclusive presumption of the goods having been brought
within the municipal limits for consumption, use or sale therein could be
drawn in cases where special current account facilities had been given to a
person.
c
The Division Bench also held that the claim ofrefund by respondent No.
1 was not maintainable. The Bench however directed that the Municipal
Council would have to refuud to the Indian Oil Corporation, respondent No.
2, the amount of octroi duty paid on the petroleum products re-exported by it
to Dangiawas outlet for supply to respondent No. I, who would recover the
same from the Indian Oil Corporation. D
Mis. Motilal PadampatSugar Mills Co. Ltd. v. StateofUttar Pradesh
& Ors., AIR 1979 SC 621 and State of Madhya Pradesh & Anr. v. Bhailal
Bhai, AIR 1964 SC 1006, relied upon.
Before this Court, the parties reiterated their contentions raised befure
the High Court. In additiou, it was contended on behalf of the appellant that E
there was nothing in the two judgments of this Court to the effect that if goods
were brought into a local area for sale to a dealer who then transported the
goods outside the local area for sale to consumers, no octroi would be
chargeable. It was further contended that during the period in dispute, as
also today, there was no current account facility to the respondent No. l
under rule 13 of the Octroi Rules and as admittedly the respondent No. l was
F
not complying with the requirements of rules 6 and 9 of the said Rules and not
filing any declaration, the Municipal Council had the right to treat the goods
brought within the Municipal limits, as tli0se brought for consumption, use
or sale under sub-rule (2) of rule 9 of the said Rules and thereby attracting
octroi. On the other hand; it was contended on behalf of the respondents that
it was incorrent to say that the current account facility was suspended or
withdrawn. G

Dismissi!'g the appeal, this Court,
HELD: (Sabyasachi Mukharji and M.H. Kania, JJ.-Per Sabyasaehi
Mukharji, J).
( 1) The High Court was right in holding that it was difficult and H
inappropriate under Article 226 to determine the question as t9 where the sale
52 SUPREME COURT REPORTS [1989] Supp. 2 S.C.R.

A took place, and that even ifothe sale took place within the octroi limits of
Jodhpur Municipal Coundl for the- use or consumption of the ultimate
consumer outside the octroi limits of Jodhpur then the taxable even did not
take place in the octroi limits of Jodhpur. [66F-GJ
(2) In view of the decisions of this Court and in view of the language of
section 104 of the Municipalities Act and the facts, the High Court was right in
B holding that no octroi was leviable on petroleum products re-exported outside
the mullicipal limits for consumption and use outside the municipal limits. l65FI
Burmah Shell Oil Storage & Distributing Co. Ltd. v. The Belgaum
Borough Municipality, [1963) Supp. 2 SCR 216 and Hiralal Thakorelal Dalal
v. Broach Municipality & Ors., 119761 Sup. SCR 82, followed.
(3) In view of the facts of this case, the title passed to the goods outside
c the municipal limits even in respect of the petroleum products which were
sold within the municipal limits. If the goods were brought within the munici-
pal limis for the purpose of sale (sale means passing of the title to the
purchaser), then different considerations might have applied. [7 3D]
(4) Analysis of Section 133 and the current account facility therein indi-
D cates that only on the goods for use, consumption or sale, octroi is leviable.
Under this provision, octroi tax is paid at the time of settlement of periodical
account, say after every month. Thus, question of complying with rule 6 or
rule 9 does not arise as they apply when octroi tax is paid at the time of entry of
goods. The delivery of entry passes and transport passes is only to facilitate
settlement of octroi account on goods which have been retained in Municipal
E area for use and consumption. l73H; 74AI
(5) A perusal of section 133 would show that current account facility is
provided by substantive section, whereas rule 13 is procedure provided with
the object of providing facility of settlement of account of payment of ociroi
tax. In other words, according to rule 13(4), octroi tax is charged on quantity
mentioned in entry passed minus the quantity mentioned in transport passes,
F i.e., on quantity of petroleum products used or consumed within the Munici-
pal limits of Jodhpur Municipality. [75A-B)
(6) In view of the confu.<ed state of pleadings and averments, it was not
possible to hold that current account facilities were withdrawn or cancelled.
If that is the position, then there is no question that the High Court was right
in the order it passed and the direction it gave. [75EJ
G
Per Ranganathan, J.
(I) When goods arrive at an octroi outpost, they may be coming in
either for consumption, use or sale within the municipal limits or for trans-
portation outside these limits. Rule 9 requires every person bringing goods
within the municipal limits to make a declaration aS to what the goods are
H intended for. l77EJ
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES 53

(2) Under the normal procedure for the assessment and collection of
octroi duty, the declaration under Rule 9 becomes important and the terms of A
the declaration determines the incidence of the duty. Rule 13, however,
contemplates a totally different scheme for the assessment and collection of
octroi for the special type of cases. [78C-Df
(3) A comparison of the two sets of provisions will make it dear that
they are two independent and mutually exclusive modes of assessment and B
collection of duty. Under the cash system of payment, a declaration under
rule 9 is absolutely .SS.ntial. The mode of collection of duty in respect of a
person having current a<eount facilities, however, does not depend upon any
such declaration or upon the mode of utilisation of the goods as indicated in
such declaration,_because in the case of the current account holders, the duty
payable-in respect of the entirety of the goods brought in is straightway
debited to his account on the basis of entry passes. The duty payable in resFCt c
of the goods transported outside is later on credited to his account on the basis
of the transport passes. [79E-G r
(4) The High Conrt was fully justified in holding that the terms of rules
6 and 9 have no relevance to the payment of duty in cases covered by the
current account facility envisaged under rule 13, and that the present case D
cannot he brought within the terms of proviso to rule 9(2) on the basis of a
deemed consumption, use or sale within the municipal limits. In cases where
rule 13 applies, rule 9 is excluded. [SOB]
(5) The present case is governed by the terms of rule 13 and the Indian
Oil Corporation is entitled to go on paying octroi duty on the basis of the goods
brougbt by it within the Municipality less the goods transported outside the E
Municipality, may he in pursuance of a sale within the Municipality, so long
as such sale is in pursuanee of an intention that the goods should he consumed
or used outside the Municipal limits. [80G I
(6) The appellant should not he permitted to raise at this stage a new
plea that the current account facility granted to the Indian Oil Corporation
F
had been revoked when all along, in the earlier proceedings in the High
Court, the case had proceeded on the footing that the Indian Oil Corporation
had been having and continued to have current account facilities. [8 IC I
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1552 of
1981.
From the Judgment and Order dated 1.2.1980 of the Jodhpur High G
Court in D.B. Civil Appeal No. 9 & 31of1977.
Soli J. Soiabji, Tapas Ray, L.C. Agarwal, Mrs. Pratibha Jain,
Pradeep Aggarwal, Sushi! Kumar Jain, Sudhansu Atreya and S.D. Shal'!Ila
for the Appellant.
Dalveer Bhandari, Badridas Sharma, B.Y. Kulkarni, S.K. Mehta, H
D. Mehta, S.M. Sarin, Aman. Vathher, Atul Nanda, Mrs. P.S. Shroff,
54 SUPREME COURT REPORTS [1989] Suop. 2 S.C.R.

R. Sasiprabhu, S.S. Shroff, S.A. Shroff, R.Jagannath Goulay and
A D. Goburdhan for the Respondents.
The Judgments of the Court were delivered by
SABYASACHI MUKHARJI, J. This appeal by special leave is
directed against the judgment and order of the High Court of Rajasthan at
B Jodhpur in D.B. Civil Special Appeals Nos. 9 and 31 of 1977 and which
raised common questions of law and fact, and were disposed of together.
Writ Petition No. 17 of 1976 was filed by Mis Parekh Automobiles,
respondent No. 1 in C.A. No. 1552/81. The said appeal may be taken up and
disposal of the same would lead to the disposal of other appeals. In the said
writ petition, the petitioner prayed for a direction or an orderrestraining the
respondents therein from realising any tax on diesel, etc. which are supplied
C to the respondent herein at Dangiawas by the Indian Oil Corporation, being
the respondent No. 2 herein. It was further prayed that the respondents
therein be ordered to refund the octroi tax as mentioned in the Schedule to
the said petition which, it was alleged, had been illegally realised from the
petitioner. It was further prayed that the respondent No. 1 be directed to
D provide transport passes to the Indian Oil Corporation under rule 13 of the
Rajasthan Municipal Octroi Rules, 1962 read with section 133 ofRajasthan
Municipalities Act. It was the case of the petitioner in the High Court,
respondent No. 1 herein, that the Municipal Council had no jurisdiction to
levy octroi tax on the goods brought within the municipal limits but not sold,
consumed or used therein and subsequently exported outside the said limits.
The case of the respondent No. 2 was that H.S.D. (diesel) which was
E brought by the Indian Oil Corporation within the local limits of Jodhpur
Municipality was ultimately exported and sold to respondent No. 1 at
Dangiawas for use, consumption or sale outside the Municipal limits and as
such the Municipal Council had no jurisdiction to levy octroi tax on the
same. In reply to the said writ petition, it was stated by the Municipal
Council, being the appellant herein, that the sale of H.S.D. (diesel) by the
F respondent No. 2 to respondent No. 1 took place at Jodhpur, and only the
delivery was effected at Dangiawas as respondent No. 1 did not have its own
tankers but for this the respondent No. 2 was charging mileage for transmis-
sion of goods from its depot to Dangiawas. It was stated that the appellant
was charging octroi from the respondent No. 2 and not from respondent No.
I. It was stated that the question whether the contract of sale between the
G respondent No. 2 and respondent No. l took place at Jodhpur or at
Dangiawas was a disputed question of fact to be decided by reference to the
original agreement qua each transaction. It was further stated that the
disputed question of fact could not be adjudicated under Article 226 of the
Constitution. In reply to para 6, it was stated that the current account facility
was still provided and had not been stopped, that respondent No. 2 did not
H make the declaration as required by"* 9 and rule 13(4) of the Rajasthan
Municipal Octroi Rules, 1962 and that the goods exported were to be
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES 55

lessened only if such goods had not oeen sold within the Municipal limits and
· were exported out within a period of six months' from the date of entry. The A
relevant provisions of s. 104 of the Rajasthan Municipalities Act, 1959
(hereinafter referred to as 'the Act') are as follows:
"Sec. 104: Obligatory Taxes-Every board shall levy, at such
rate and from such date as the State Governnient may in each
case direct by notification in the official gazette and in such B
manner as is laid down in this Act and as may be provided in the
rules made by the State Government in this behalf, the following
taxes, namely:
(1) ...
(2) an octroi on goods and animals brought within the limits of
the municipality for consumption, use or sale therein; and C
(3) ...
Section 133 of the Act provides as follows:
"133. POWER TO KEEP ACCOUNT CURRENT WITH
FIRMORPUBLICBODYINLIEUOFLEVYINGOCTROI D
ON INTRODUCTION OF GOODS:
The Board if it thinks fit instead of requiring payment of octroi
due from any mercimtile firm or public body to be made at the
time when the articles in respect of which it is leviable are
introduced within the octroi limits of the municipality, at any
time direct that an account current shall be kept on behalf of the E
board of the octroi so due from any such firm or body as the
board specifies in this behalf.
(2) Every such account shall be settled at intervals not exceed-
ing one month and such firm or public body shall make such
deposit or funish such security as the board or any committee or
officer authorised by it in this behalf shall consider sufficient to F
cover the amount which may at any time be due from such firm
or body in respect of such dues. Every amount so due at the
expiry of any such interval shall, for the purposes of Chapter
VIII be deemed to be and shall be recoverable in the same
manner as amount claimed on account of any tax recoverable
under the same Chapter." G
The Rules, being Rajasthan Municipal Octroi Rules, 1962, frru;ned
t(\ereunder are relevant and rule 13 of the said Rules provided as follows:
"13. FACILITIES FOR CURRENT ACCOUNTS: (l)The
Board shall maintain a list, in Form 6, of all persons whether
firms or individuals i.Howed special facilities under s.-133 of the H
Act for the payment of octroi. The list stiall be· kept corrected
56 SUPREME COURT REPORTS [1989] Supp. 2 S.C.R.

A upto date and a copy of the list signed by the Executive Officer
shall be kept at each octroi out-post.
(2) The person to whom such facilities are given, printed books
of entry passes in duplicate shall be supplied in Form No. 7 on
payment of such price as may be fixed by the Board. When such
B a person wishes to bring his goods into the Municipality, he shall
fill up the entry pass, the goods shall be dealt with unnder the
ordinary rules. On receipt of the entry pass, the Incharge of the
octroi out-post shall see that the person who has signed it is
named on his list, and if so, he shall, after satisfying himself that
the goods agree with the details entered in the entry pass, fill up
the certificate the at foot thereof as well as the coupon. He shall
c then tear off the coupon, deliver it to the person who presents
the entry pass, and admit the goods named in the pass. He shall
se·nd the entry passes to the Octroi Superinten9ent, where they
shall be examined that the certificate covers the details of the
entry pass and the amount of octroi due shall be debited tO the
account of the person concerned.
D
(3) The persons to whom special facilities· have been· given,. a
printed book of transport passes shall be supplied in Form No. 5
on payment of such a price as may be fixed by the Board. When
such a person wishes to transport his goods from the Municipa-
lity, he shall fill up a tranport pass and send it with his good to the
octroi smt-post of. e)tit. On receipt of the Transport p~, the
E Incharge of octroi out-post shall see that the person who has
signed it is named on the list; and if so, he shall after satisfying
himself that the goods to be transported agree with the details
entered in the Transport pass, fill up the certificate at the foot
thereof as well as the coupon. i'le shall then tear off the coupon
and deliver it to the person who presents the Transport pass. He
F shall send the transport passes to the Octroi Superintendent,
where they shall be examined to see that the certificate covers
the details of the transport pass and shall be filed separately
under the name of each such person.
( 4) In cases provided for in sub-rule (3) amount of octroi duty
payable shall be based on the total amount of the octroi as shown
G by the entry passes less the total amount of goods transported
outside the Municipal limits as shown bythe transport passes:
Provided that in computing the octroi duty payable under
sub-rule (4), the goods transported outside the Municipal Limits
shall be lessened only j(sµch goods have not been sold within the
.H Municipal limits and 'if"they have been exported out of such
limits within a period of (six months) from the date of their
import in such limits.
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES [MUKHARJI, J.] 57

(5) Payments by such person shall be made strictly in advance,
and at the expiry of his period for which facilities have been A
given, the name of the person shall immediately be struck off."
Rule 6 deals with the payment of octroi duty and provids as follows:
"6. PAYMENT OF OCI'ROI DUTY: No goods liable to pay-
ment of octroi shall, except as otherwise provided in these rules, B
be brought within the Municipal limits until the octroi duty
leviable in respect of such goods has been paid at the octroi
out-post situated on the route of entry as notified by the Board
from time to time for the purpose."
Rule 9 deals with the declaration of goods brought into the Municipal
limits and provides as follows: ·
c
"9. DECLARATION OF GOODS BROUGHT INTO THE
MUNICIPAL LIMITS: (1) Every person bringing within the
Municipal limits goods liable to payment of octroi shall produce
such goods at the octroi out-post and shall declare whether
goods are intended:-
D
(i) for cosumption, use or sale within the municipalitiy; or
(ii) for immediate transportation outside the Municipality; or
(iii) for temporary detention witbin Municipal limits and
eventual transportation outside Municipal limits.
(2) Declaration under clause (i) of sub'iule (1) may be oral, E
declaration under clauses (ii) and (iii) shali.oe;in writing in Form
No. 1 and shall be tendered to tbe incharge of the octroi outpost
at the time of bringing the goods shall be treated as having been
brought within the Municipal limits for consumption, use or sale
therein."
It was urged by the appellant that the respondent No. 2 had not made F
the declaration as required by rule 9 and that under rule 13(4) of the rules,
the goods exported were only. to be lessened only if such goods had not bee
sold within the municipal limits and were exported out within a period of six
months' from the date of entry. The Municipal Council also raised tbe plea
that there was no privily ·Of contract between respondent No. 1 and the
Municipal Council as the demand of octroi tax was not made from respon- G •
dent No. l. The Writ petition of the respondent No. 1 along with another
writ petition being No. 82 of 1976 filed by one Shri Sukh Sarnpat Raj was
heard by the learned Single Judge of High Court of Rajasthan. The learned
Single Judge by his judgment dated 28th January, 1977 allowed the writ
petition and restrained the appellant from charging or realising octroi on the
_,
goods brought within the municipal limits by the Indian Oil Corporation but H
re-exported outside the said municipal limits to its retail outlets for the use
58 SUPREME COURT REPORTS [1989] Supp. 2 S.C.R.

A and consumption of the ultimate consumers outside the limits of the Munici-
pal Counsel. The prayer for refund of the octroi.tax was, however, refused.
Appeals were filed therefrom against the judgment and order of the learned
Single Judge. The appellant herein filed the appeal No. 9 arising out of the
Writ Petition No. 17 of 1976 and also Special Appeal No. 13 arising out of
Writ Petition No. 82 of 1976. Mis Parekh Automobiles also filed a Special
B Appeal being Special Appeal No. 31of1977. Thus, three appeals were filed.
All the three appeals were heard by the Division Bench of the High Coµrt
and by its judgment and order dated 1st February, 1980, the Division Bench
dismissed the Special Appeal Nos. 9 and 13 filed by the appellant herein.
The special appeal filed by Mis Parekh Automobiles was partly allowed. It
was directed that the Municipal Council would have to refund to the Indian
Oil Corporation the amount of octroi duty paid on the petroleum products
C re-exported by it to Dangiawas outlet for supply to the writ petitioner who
would recover the same from the Indian Oil Corporation.

It is not necessary for the purpose of this appeal to deal with the facts
agitated and found by the High Court. We will, however, refer to the same in
brief. Respondent No. 1 had been allotted retail outlet allotted by the
D respondent No. 2, Indian Oil Corporation, for sale of petroleum products
such as diesel oil, mobile, iii, etc. at Dangiawas, which was outside the limits
of Jodhpur Municipal Council, appellant herein. The respondent No. 2 had
its depot ear Raikabag Station at Jodhpur where it stored petroleum
products. The respondent No. 2 from its depot at Jodhpur supplied the
petroleum products to various pump stations situated within the limits of
appellant as well as situated outside the limits of appellant in several districts
E
such as Districts of Jodhpur, Pali, Barmer, Jalore, Nagaur, etc. including the
retail outlet of the appellant at Dangiawas. The respondent No. 2, being a
public sector undertaking, was provided current account facilities under
s. 133 of the Act, and so the respondent No. 2 had not to pay octroi tax on
such consignment at the time of entry of goods within the limits of appellant.
It was alleged by respondent No. 1 that under rule 13 of the said Rules,
F respondent No. 2 was supplied printed books for entry passes in duplicate in
Form No. 7 appended to the said Rules. Rule 13 provides, as noted before,
that if the goods which are imported within the Municipal limits are not
used, consumed or sold within the Municipal limits and are exported out of
Municipal limits for supply at various other retail outlets no octroi duty is
charged on those goods for the reason that under rule 13(4) octroi tax
. G payable shall be based on the total amount of octroi tax as shown by the'
entry passes less the octroi tax on the total amount of goods transported
outside the Municipal limits. It was contended that the apellant had been
following the aforesaid procedure till 24th July, 1975, but all of a sudden on
25th July, 1975, it was alleged, the appellant had suspended the transport
facilities to the respondent No. 2 and took the stand that octroi would be
,_
H charged from respondent No. 2 on the goods brought within the municipal
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES [MUKHARJI, J.] 59

limits even though these were exported by it outside the municipal limits, if
these were sold within the limits of appellant although such goods were A
meant for use and consumption of the consumers outside the Municipal
limits. The appellant, it is alleged, cancelled the transport passes supplied to
the respondent No. 2 from 25th July, 1975. As a consequence of this action
of the appellant, the respondent No. 1 was charged octroi duty on supplies
made to the respondent No. 1 at Dangiawas by the respondent No. 2 since
B
25the July, 1975 by adding the amount of octroi tax in the bills for the
supplies made to the respondent No. l's retail outlet at Dangiawas. The
respondent No. 2 challenged the right of the appellant to charge the octroi
on such goods and approached the State Government. Upon that, the State
Govt. by its letter wrote to the appellant that it having granted current
account facilities under s. 133 of the Act to the respondent No. 2 should
charge octroi on the basis of petroleum products imported by respondent c
No. 2 minus the goods exported by it to its other distributing centres in·
Rajasthan. The respondent No. 1 also made representation to the appellant
challenging its right to realise octroi on the petroleum products which were
received at the depot of the respondent No. 2 at Jodhpur but were trans-
ported by it to its retail outlets but of no avail. The case of the respondent
No. 1 was that the goods were not sold at Jodhpur but actually the sale took D
place at Dangiawas, the retail outlet of the respondent No. J Secondly, even
if the sale was held to have taken place at Jodhpur merely on that account
octroi could not be levied unless the goods so sold were meant for the use or
consumption of the consumers within the octroi limits. Respondent No. 2,
Indian Oil Corporation, supported the case of respondent No. J. Respon-
dent No. 2 is a public sector undertaking and has got vast network of retail E
outlets, i.e., distribution centres for distribution of petroleum products
throughout Indian including Rajasthan. For the purpose of distribution, it
had got its depots at various important places where it stored its petroleum
products for supply to its various retail outlets, i.e., distributing centres.
Likewise the respondent No. 2 had got its depot situated near Raikabag
Station, Jodhpur where it stored its petroleum products for sale and supply
of its petroleum products to its numerous retail outlets situated within the F
districts of Jodhput, Pali, Barmer, Jalore, Jaisalmer, Nagaur, Sirohi, etc. It
was further alleged by respondent No. 2 that it stored petroleum products in
its depot at Jodhpur for purposes which might be classified into different
classes, namely.
(l) for sale by respondent No. 2 to its consumers such as Rail- G
ways, Police, etc. and to its dealers of retail outlets situated within
Municipal limits of Jodhpur city who distributed or sold the petroleum
products within the area covered by municipal limits of Jodhpur city,
(2) for re-export by itself for supply to its dealers in charge of
various retail outlets situated outside the municipal limits of Jodhpur
city within the vari.ous districts specified above. Such retail outlets H
distributed or sold the petroleum products to ultimate consumers
60 SUPREME COURT REPORTS [1989] Supp. 2 S.C.R. j
A outside the limits of Jodhpur Municipal Council. I
I
According to the respondent No. 2, it had allotted the retail outlets to
various dealers under dealers agreement. Under the terms of the said I
agreement, the respondent No. 2 was obliged to transport petroleum pro-
ducts out of its depots and supplied petroleum products to its dealers at the
J
destination in its own truck-tankers or the tankers of its contractors and
B obtained the signatures of the dealers of the retail outlet in token of the
delivery of the goods and till the supplies were made at the destination the
goods were at the risk of the respondent No. 2. It was further alleged by
respondent No. 2 that the pump tank and other outfits which were fitted at
the retail outlets belonged to it and these were its property. It was, there-
fore, alleged that the goods supplied at retail outlets situated outside the
limits of Municipal Council, Jodhpur were sold at the retail outlets where the
c deliveries were made and not at Jodhpur although the dealers were required
to deposit the price of the petroleum products in the respondent No. 2's
account in the bank unless they were allowed credit facilities but the sale
took place only when the respondent No. 2 delivered itc pcoducts at the
dealers' retail outlets outside the municipal limits as per the terms of the
• D dealers' agreement. The appellant, Municipal Council, had, h,1wever, dis-
puted the aforesaid position. It contended that whenever the sale was made
at the Jodhpur depot at Jodhpur, Octroi was chargeatle irrespective of the
fact where it was consumed or used. It was further contended that whether a
contract of sale had taken place at Jodhpur or retail outkl is a question of
fact and unless the contracts (agreements) were placed on the record by the
respondent No. 1, the Court should not decide whether the sale by the
E respondent No. 2 had taken place at Jodhpuror at Dangiawas. Rule 13(4) of
the said Rules would be operative only in those cases where the goods had
not been sold within the Municipal limits or if they had been exported out of
such limits within a period of six months from the date of its import. The
Municipal Council's further case was that the respondent No. 2 sold the
goods at Jodhpur. The respondent No. 2 never submitted its declaration as
F required by rule 9 of the said Rules and, therefore, the goods brought within
the limits of Municipal Council were, according to the appellant, liable to
octroi. It was contended on behalfof the respondent No. I that the appellant
was not entitled to levy the octroi on lhe petroleum products which were
re-exported by the respondent No. 2 to the retail outlet of the respondent
No. l at Dangiawas as the goods were neither brought for consumption or
G use in the limits of the Municipal Counci! of Jodhput, nor sold in the
Municipal area. It was further contended that evenif it was assumed that the
petroleum products which had been exported to the_ respondent No. l's
outlet at Dangiawas have been sold at Jodhpur then to the appellant had no
jurisdiction to levy the octroi and realise the same as good so sold were not
meant for the use of ultimate consumer in the municipal area. The taxable
H event for the purpose of levy of octroi duty takes place, according to
respondent No. l, only if the entry of the goods in the limits of appellant was
MuNICIPAL COUNCIL v. PAREKH AUTOMOBILES [MUKHARJI, J.] 61

meant for the use of ultimate consumer or user. lt was contended that the
petroleum products which had been exported to the respondent No. l's A
retail outlet at Dangiawas were meant for the use of ultimate consumer for
use outside the limits of the Municipal Council so these were not chargeable
to octroi. It is not necessary in view of the findings of the High Court to deal
with the preliminary objections of the appellant, namely, respondent No. l
was a firm and not competent to bring the writ petition, that the respondent B
No. 1 had no locus standi to file the writ petition, or that there was an
alternative remedy under rule 40 of the said rules and as such writ petition
would not be maintainable. The learned Single Judge of the High Court
rejected these contentions of the appellant. Two main contentions involved
before the High Court and us were and are, namely, where the taxable even
took place and whether respondent No. l, in the facts and the circumstances
of this case, was liable to pay octroi duty and secondly, whether in view of c
the maintenance of the current account facilities, as ,nentioned hereinbe-
fore, the Municipal Council was entitled to charge the octroi duty in the
manner it has purported to do from the 25th July, 1975 and whether that the
appellant was liable to refund the said duty.
Section 104 of the Act by sub-section (2) provides that an octroi on D
goods and animals brought within the limits of the municipality for con-
sumption, use or sale therein, is liable to be charged by the State Govern-
ment. It was contended on behalf of the respondent No. I that the taxable
event in respect of the goods supplied at its reail outlet at Dangiawas had not
taken place within the limits of the appellant. It was submitted that the goods
brought by the respondent No. 2 and exported to the respondent No. l's
retail outlet at Dangiawas were in the first place not sold at all within the E
Municipal limits; secondly, even if the sale of the goods so exported was held
to have taken place within the Municipal limits than too the taxable event
had not taken place as such goods were not meant for sale or use or
consumption of the ultimate consumer residing within the local limits of the
appellant but were meant for the consumption of the ultimate consumer
residing outside the local limits of the appellant. It was contended that the F
word 'sale' occurring under s. 104 of the Act cannot be read without
reference to use or consumption. Sale simplicitor by itself did not attract the
levy of octroi, it was submitted, unless the goods were meant for use or
consumption of the ultimate consumer in the area of the appellant. Refe-
rence was made before the High Court as before us to the decision of this
Court in Burmah Shell Oil Storage & Distributing Co. India Ltd. v. The G
Belgaum Borough Municipality, [1963] SCR Supp. 2 216 as well as the
decision of this Court in Hirata/ Thakorlal Dalal v. Broach Mur.icipality &
Ors., [1976] Supp. SCR 82. In Burmah Shell's case (supra), the company
was a dealer in petrol and petroleum products which it manufactured in its
refinery situated outside the octroi limits of Belgaum Municipality. It
brought those products inside that area either for use or consumption by
H
itself or for sale generally to its dealers and the licensees who in their turn
62 SUPREME COURT REPORTS [1989] Supp. 2 S.C.R.

sold these to others. According to the Company, the goods brought by it
A within the octroi limits could be divided into four separate categories,
namely:
(i) goods consumed by the company within the octroi limits,
(ii) goods sold by the company through its dealers or by itself
B and consumed within the octroi limits by persons other than the
company,
(iii) goods sold by the company through its dealers or by itself
inside the octroi limits to other persons to be consumed by them
outside the octroi limits.
(iv) goods sent by the company from its depot inside the octroi
C limits to extra municipal points where these were brought and con-
sumed by persons other than the company.
In that case, the company had objected to the levy of octroi on the
goods which were sent by it out of the octroi limits for the outside ultimate
consumers and claimed refund of the amount so charged as octroi. Clause
D ( 4) of sub-section ( 1) of section 73 of the Bombay Municipal Boroughs Act,
1925 which was under consideration in that case was analogous to sub-
section (2) of section 104 of the present Act in question. The words 'use or
sale' were substituted for the words 'for use' by the Bombay Act of 35 of
1954. This Court examined the scheme of the taxation under the Bombay
Boroughs Act and the Rules and bye-laws made by the Municipality for the
levy of octroi. After examining the history of octroi, this Court in that
E decision held 'octrois were tax on goods brought into the local area for
consumption, use or sale and that 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.'
This Court specifically clarified that the word 'sale' was included only in 1954
in order to bring the description of the octroi in the Act in line with the
Constitution of India. While doing so this Court further observed that the
F expression 'consumption' and 'use' together 'connote' the bringing in of the
goods and animals not with a view to taking them out again but with a view to
their retention either for use without using them up or for consumption in
manner which destroys, wates or uses them up. This Court further obse• ·ed
in that case that octroi and terminal tax resemble each other in the sense that
they are both leviable in respect of goods brought into a local area.
G Otherwise, these are quite different from each other. While terminal taxes
are leviable on goods 'imported or exported' from municipal limits denoting
thereby that they are connected with the traffic of goods, octrois are leviable
in respect of the goods brought into a municipal area for consumption or use
or sale. The history of these two taxes showed that while terminal taxes were
a kind of octroi which were concerned only with the entry of goods in a local
H area irrespective of whether they would be used there or not, octrois were
taxes on goods brought into the area for consumption, use or sale. These
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES [MUKHARJI, J.] 63

were leviable in respect of the goods put to some use or the other in the area
but only if these were meant for such user. Another difference between the A
two is that there is no system of refund under terminal tax but that is so for
octroi. This Court held that the sale by it directly to consumer or dealers was
merely the means for putting the goods in the way of use or consumption and
that the word therein does not mean that all the acts of consumption must
take place in the area of the municipality. Hidayatullah, J. (as the learned
B
Chief Justice then was) speaking for this Court observed at p. 233 of the
report as follows:
"In other words, a sale of the goods brought inside, even though
not expressly mentioned in the description of octroi as it stood
formerly, was implicit, provided the goods were not re-exported
out of the area but were bought inside for use or consumption by
buyers inside the area. In this sense the amplification of the C
description both in the Government of India Act 1935 and the
Constitution did not make any addition to the true concept of
'octroi' as explained above. That concept included the bringing
in of goods in a local area so that the goods come to a repose
there. When the Government of India Act, 1935 was enacted,
0
the word 'octroi' was deliberately avoided and a description
added to forestall any dispute of the nature which has been
raised in this case. In other words, even without the description
the tax was on goods brought for 'consumption, use or sale'. The
word 'octroi' was also avoided because terminal taxes are also a
kind of octroi and the two were to be allocated to different
legislatures. E
In our opinion, even without the word 'sale' in the
Boroughs Act the position was the same provided the goods
were sold in the local area to a consumer who bought them for
the purpose of use or consumption or even for resale to others
for the purpose of use or consumption by them in the area. It was
F
only when the goods were re-exported out of the area that the
tax could not legitimately be levied and in this case the munici-
pality has agreed to refund the amount of tax on goods
re-exported without being used or consumed in the municipal
area. In this view of the matter, it was not necessary for the
municipality to follow the procedure for imposing taxes when
the section was amended. The tax still remained the same. Its G
nature, incidence or rate were not altered.''
The aforesaid observa!Jons were approved by this Court in Hirata/
Thakor/al Dalal v. Broach Municipality & Ors., (supra). On the basis of the
aforesaid decisions of this Court, the Division Bench of the High Court in
the instant case in appeal filed from the aforesaid judgment of the learned H
Single Judge held that sale simplicitor would not attract the levy of the
64 SUPREME COURT REPORTS [1989) Supp. 2 S.C.R.

octroi. The word 'sale', in this context, has to be read in reference to the use
A or consumption, according to the Division Bench and 'sue, consumption and
sale' have to be read in disjunctiye manner. Reference, in this connection,
was made to rule 6 of the said Rules, which provides that no goods liable to
payment of octroi shall except as otherwise provided in these Rules be
brought within the Municipal limits until the octroi duty leviable in respect
B of such goods have been paid at the octroi outpost situated on the route of
the entry as notified by the Board from time to time. Rule 9 of the said Rules
further provides that every person bringing within the Municipal limits
goods liable to payment of octroi shall produce such goods at the octroi,
outpost and shall declare whether the goods are intended (i) for consump-
tion, use or sale within the Municipality, or (ii) for immediate transport
outside the Municipality or (iii) for temporary detention within Municipal •
c limits and eventual transportation outside the Municipal limits. It further
provides that if no succh declaration is made the goods shall be treated as
having been brought within the Municipal limits for consumption, use or
sale therein. On the basis of these rules, it was contended before the
Division Bench that as soon as the goods enter within the octroi limits it gives
rise to taxable event unless a declaration as contemplated rule 9 has been
D made by the person bringing such goods. It was submitted that no such
declaration had been made in this case, and therefore, a conclusive pre-
sumption arose that the goods should be treated as having been brought
within the Municipal limits for consumption, use or sale therein. The divi-
sion bench was unable to accept this submission. The division bench was of
the view that this argument ignored the import of rule 13. Rule 13 dispensed
E with the requirements of rules 6 and 9 and it was a special rule applicable to
the persons, firms and individuals under section 133 of the Act. Section 133
of the Act provides that the Board if it thinks fit instead ofrequiring payment
of octroi due from any mercantile firm or public body it may at the time when
the articles in respect of which it is leviable are introduced within the octroi
limits of the municipality, direct that an account current shall be kept on
F behalf of the Board of the octroi so due from any such firm or body as the
Board specifies in this behalf. It further provides that every such account
shall be settled at the intervals not exceeding one month and such firm or
public body shall make such deposit or furnish such security as the Board or
any committee or officer authorised by it in this behalf shall consider it
sufficient to cover the amount which may at any time be due to such firm or
body in respect of such dues. Rule 13, therefore, dispenses with the require-
G ment of rule 6. It further dispenses with the requirements of rule 9 in regard
to declaration. The division bench of the High Court also referred to
sub-rule (3) of rule 13, which has been set out before. The High Court held
that rule 13 is a special provision in regard to the persons who had been
granted current account facilities and this rule is not subject to either rule 6
or rule 9 but is a over-riding rule independent of rules 6 and 9. The High
H Court found that respondent No. 2 had been granted current account

.
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES [MUKHARJI, J.l 65

facilities and, therefore, the octroi duty shall be charged from it under
s.ub-rule (4) of rule 13 on the goods brought by it in the Municipal area minus A
the goods transported by it outside the Municipal limits. Therefore, the
contention of the appellant herein on rules 6 and 9 was rejected. It is,
therefore, necessary for these appeals to consider the validity or otherwise
of the said findings of the High Court in these appeals.
The High Court dealt with the contentions based on sub-rule (4) of B
rule 13 and considered if the sale of the goods had taken place within the
Municipal limits to see if the octroi shall be leviable or not. The High Court
feld that the rule had to be construed in consonance withs. 104 of the Act.
As mentioned herein before, section 104 of the Act was analogous to s. 73 of
the Bombay Boroughs Act which had been interpreted by this Court in the
aforesaid two decisions, wherein it was held that the sale in order to attract
levy of octroi should be for the purpose of use or consumption of the ultimate c
consumer in the area. (Emphasis supplied). The High Court further
observed that the meaning of the word 'sale', therefore, has to be given as
per this Court's view and any other meaning to 'sale' contained in the rules
shall not be justified as it will be repugnant to s. 104 of the Act. The High
Court found that the goods were re-exported by the Indian Oil Corporation
from its depot to its retail outlet for the use or consumption of the ultimate D
consumer outside the municipal limits. (Emphasis supplied). The Municipal
Council was not entitled to levy octroi on goods so exported by respondent
No. 2 to its retail outlet for use and consumption by the ultimate consumer
outside the local limits of the Municipal Council. Therefore, it was held that
the Municipal Council had no jurisdiction to levy octroi on the goods
re-exported by the respondent No. 2, the Indian Oil Corporation to the E
retail outlets of its dealers located outside the Municipal limits for the use of
the ultimate consumers outside the Municipal limits. Though the aforesaid
finding of the High Court has been assailed before us in this appeal, in view
of the decision of this Court referred to hereinbefore and in view of the
principles laid down therein and the language of s. 104 of the Act and the
facts, we are unable to accept the challenge on behalf of the appellant F
herein. It was, however, contended by the respondent No. 1 before the High
Court that the taxable even had taken place at Dangiawas and not at the
octroi limits of Jodhpur as the sale had not taken place in. the octroi limits but
had taken place at Dangiawas. It was contended by the respondent No. I
that goods were supplied by the respondent No. 2 in its ta~kers at Dangiawas
and till the goods were supplied at the respondent no. l's outlet at G
Dangiawas, the risk in respect of the goods was with.the respondent no. 2,
the Indian Oil Corporation. This fact, it was stated, had been admitted by
the Corporation in its return wherein it had been clearly admitted that till the
goods are supplied to the respondent No. l's outlet stations the goods were
at the risk of respondent no. 2. It was, therefore, contended that till the
goods wer delivered at Dangiawas, there was no contract for sale. The
contract for·sale, it was contended, had taken place at Dangiawas where the H
66 SUPREME COURT REPORTS [1989] Supp. 2 S.C.R. ••
goods were delivered at the respondent no. l's outlet and receipt was
A
obtained from the respondent no. l's outlet acknowledging the delivery of
the goods at that place. In this connection, reference was made to para 25 of
the model agreement Ex. B. I. According to para 25, the quantity of
petroleum and other allied products shall be delivered by the Corporation as
measured by the Corporation's measuring device and a receipt signed by or
B on behalf of the dealer at the time of delivery by the Corporation would be
conclusive evidence that the petroleum products mentioned therein were in
fact delivered to the dealer. It was submitted that the delivery was made by
the respondent No. 2's tankers at Dangiawas and the receipt obtained there.
On the other hand before the High Court, as mentioned hereinbefore, it was
contended on behalf of the appellant that this question involved disputed
questions of facts, which was beyond the pale of jurisdiction under Article
c 226 of the Constitution. It was submitted that neither indents in regard to the
transactions of sale had been produced nor there was any evidence as to the
quantities for which the sale had taken place and in the absence of material
documeuts it was not possible to determine the question as to where the sale
had taken place. It further appeared that the respondent No. l used to
deposit the amount in advance against the supplies to be made to its retail
D outlet at Jodhpur. According to the appellant, as the material and relevant
evidence had not been produced on the record, it would be hazardous to
reach a definite conclusion as to where the contract of sale had taken place.
The High Court held that it was difficult and inappropriate to go into under
Article 226 of the Constitution. The High Court referred to certain deci-
sions. The High Court, however, rested on the view that even if the sale took
E place within the octroi limits of Jodhpur Municipal Council for the use or
consumption of the ultimate consumer outside the octroi limits of Jodhpur
then the taxable event did not take place in the octroi limits of Jodhpur. In
those circumstances, the High Court held that the Municipal Council had no
jurisdiction to levy octroi on the goods so exported. We have considered the
submissions of the appellant on this point. We are, however, in view of the
facts and circumstances of the case, of the opinion that the High Court was
F
right. The High Court issued an order of restraint. It directed that the
Municipal Council be restrained by way of Mandamus not to levy octroi on
the goods exported by the respondent No. 2 for the use of the ultimate user
outside the octroi limits of Municipal Council even if the sale took place
within the octroi limits of Municipal Council, Jodhpur.

G The next aspect of the matter, is, whether the respondent No. l was
entitled to refund of the octroi realised from respondent No. 2. It had been
contended by the respondent No. l that although the octroi had been
realised directly from the respondent No. 2 but in fact and in reality it was
the respondent No. 1 who had been made to pay the octroi as the same had
been realised by the respondent No. 2 by adding the octroi realised by the
H Municipal Council in its bills for the supply of the goods made to respondent
No. l. It was contended on behalf of the appellant that there was no ]Jrivity
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES [MUKHARJJ, J.] 67

of obligation between respondent No. I and the appellant and therefore,
respondent No. l had no right to ask for a refund of the octroi. Secondly, it A
was urged that the respondent No: l had realised the amount of octroi while
selling the petroleum products to the retail consumers by adding the same in
the retail price charged from the consumers. So far as the first contention is
concerned, the division bench found that there was no privily of obligation
between respondent No. 1 and the appellant. The same had not been
B
realised from the respondent No. I. It was, therfore, held that there being no
privily of obligation between respondent No. l and th_e appellant, the
respondent No. 1 could not ask for a refund of the money which it has not
paid to the appellant. There was no provision for refund in the Act or in the
Rules which enabled the respondent No. l to claim refund from the appel-
lant even though it had been paid by the respondent No. 1indirectly. There
was, however, an undertaking given to the Hign Court by the appellant on c
3rd February, 1976 in the High Couurt. On that date, the appellant had
given an undertaking that the appellant would refund the octroi charged
from the respondent No. 1 on the diesel re-exported outside the Municipal
limits of Jodhpur in case the writ petitions were allowed. The undertaking is
however, fOnfined to the refund of the amount charged from the respondent
No. 1 by the appellant and not from respondent No. 2. The basis for refund D
of the amount undertaking from respondent No. 2 has not been established.
To that extent, the writ petition was bound to fail, the High Court held. If
that was the position, there cannot be any basis for refund of the same on the
basis of the undertaking. The Division Bench of the High Court held that as
the challenge in this case was that the words 'use or sale' could not make any
difference so far as the event of taxability was concerned, as according to this E
Court, 'sale' simplicitor would not attract the levy of the octroi. The sine qua
non for levy of octroi is consumption, according to this Court. Therefore, no
octroi could be levied in respect of goods which were re-exported for
consumption or use outside the Municipal limits, the Division Bench held.
In that view of the matter, the Division Bench of the High Court jheld that in
view of the decisions of this Court, no octroi was leviable on petroleum
prod . ccts re-exported to the retail outlets situated outside the municipal F
limits for consumption and use -outside the limits. In our opinion, the
division bench is rig_ht insofar as it held as aforesaid.
It was, however, submitted that the ratio of the decisions of this Court
had no application because of rules 6 and 9 of the sa;d Rules. We have
referred to the said rules. The contention of the appellant on the basis of the G
aforesaid rule was that since the goods were brought within the octroi limits,
these became liable to octroi unless a declaration as contemplated by rule 9
had been made by the person bringing such goods. It was submitted by the
appellant that no such declaration had been made in the present case.
According to the High Court rule 13 contemplates, as we have noticed,
special facilities for current account under which in case of a person to whom
H
such facilities are given, amount of octroi duty payable is determined by
68 SUPREME COURT REPORTS [1989] Supp. 2 S.C.R.

A deducting the total amount of goods transported outside the municipal limits
as shown by the transport passes from the total amount of octroi as shown by
the entry passes. The High Court noted thats. 133 of the Act confers power
on the Board to direct that current accounts may be kept on behalf of the
Board with fhe firm or public body in lieu of octroi on introduction of goods.
The Division Bench was of the opinion thats . .133 of the Act along with rule
B 13 of the said Rules left no doubt that no conclusive presumption of the
goods having been brought within the municipal limits for consumption, use
or sale therein, could be drawn in cases where special current account
facilities were given to a person. In the instant case, special facilities for
current accounts had been given to the respondent No. 2. Therefore, rule 9
had no application according to the Division Bench. Learned counsel for the
respondent No. I had contended before the Division Bench that at the time
C of entry of petrol or diesel, it was not possible for the Indian Oil Corporation
to give a declaration as to how much would be re-exported to retail outlets
situated outside the Municipal limits. The Division Bench found that the
argument on behalf of the Municipal Council regarding necessity of giving a
declaration was vital. The appeal filed by the Municipal Council was,
D therefore, dismissed. Coming to the appeal for refund, it was urged before
the Division Bench that Municipal Council had given an undertaking that it
would refund the octroi charged from the respondent No. 1 on the
petroleum products re-exported outside the Municipal limits of Jodhpur.
The Division Bench noted that the learned Single Judge had disallowed fhis
firstly on the ground that the octroi had been charged from the respondent
No. 2 and not from the respondent No. I and, secondly, the respondent No.
E 1 had not succeeded in establishing his claim for refund against the respon-
dent No. 2. The Division Bench held that the refund was not possible. In fhis
connection, reliance was placed on the decisions of this Court in M Is Mo ti/al
Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh & Ors., AIR 1979
SC 621 and State of Madhya Pradesh & Anr. v. Bhai/al Bhai etc., AIR 1964
SC 1006. The Division Bench of the High Court, therefore, held that the
F claim for refund is not sustainable but the High Court found that the octroi
had been paid by the Indian Oil Corporation and not by the respondent No.
1 an\[ therfore, directed that the Municipal Council would have to refund to
the Indian Oil Corporation the amount of octroi paid on the petroleum
products re-exported by it to Dangiawas outlet for supply to the respondent
No. 1 and the respondent No. I may recover the same from the Indian Oil
G Corporation. The appeals were allowed to the extent indicated above.
Otherwise, the decision of the learned Single Judge was confirmed. As
mentioned hereinbefore, being aggrieved, the appellant came up for appeal
by special leave to this Court.
On behalf of the appellant, Shri Soli Sorabjee and Shri Tapash Ray
made their submissions. On the main point as held by the division bench of
H the High Court there was not much substantial challenge. We agree with the
High Court. It was, however, contended that during the period in respect of
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES [MUKHARJI, J.J 69

which the claim had been made by the respondent, there was no continua-
tion of the current account facilities in favour of the rspondent No. 2, Indian A
Oil Corporation as provided under s. 133 of the Act read with rule 13 of the
said Rules, and the question was whether the goods brought within the
Municipal limit by the Indian Oil Corporation were liable to payment of
octroi because of non-compliance with the procedure in rules 6 and 9 of the
said Rules. The other question which required consideration is that assum-
ing that current account facilities in favour of respondent No. 2 existed, B·
whether by reason of such, respondent No. 2 was exempted from complying
with the rules 6 and 9 of the said Rules. Counsil submitted that it was strange
that the respondent No. 1 was purporting to make out a case that the current
account facility to the respondent No. 2 by the appellant was not withdrawn
and the same was still continuing. An affidavit in support of this contention
was filed by one Shri R.C. Parekh after the conclusion of the hearing in this
case on the 30th September, 1988. The case was reargued again in Feb. 1989.
c
It was contended thai the Writ Petition in Mis Parekh Automobiles' case
showed beyond doubt that the writ petition was made on a positive case that
all of a sudden on 25th July, 1975, the appellant had suspended the current
account facilities in respe'ct of also the goods which were exported out of
Jodhpur Municipal limit'by the respondent No. 2 and supplied to respondent D
No. 1 at Dangiawas. It was further the case of Mis Parekh Automobiles that
upon suspending such current account facility the municipality was charging
octroi on all petroleum products brought by respondent No. 2 within the
Municipal limits without making a distinction amongst goods which were
exported outside the Municipal limits. In this connection, reference was
made to paragraph 9 of the writ petition. On behalf of the appellant, it was
contended that the terrn 'export facilities' used in that paragraph was to E
mean 'current account facility' as it appeared from the pleadings of the
respondent No. 1 in paragraph 16 of the said writ petition. Reference was
also made to other paragraphs of the writ petition, namely, paragraph IO,
paragraph 11 and paragraph 12 which proceeded on the basis that current
account facilities had been withdrawn and a complaint was made on that
basis. Reference was also made to the paragraph 17 at p. 107 of the appeal F
paper book. The Municipal Council, Jodhpur filed a reply to the writ
petition where also statements were made. It was submited that reading of .
the said pleadings make it clear that the respondent No. 2 was not making
any declaration under rule 9 of the said Rules. A declaration under rule 9 of
the said Rules was to be.made in Forrn I, a specimen copy of which was
enclosed to the written argument. it was further stated that in the affidavit of G
the Indian Oil Corporation, nowhere it was stated that the said current
account facility had not been suspended and was still continuing. It was the
case of the appellant that current .account facilities were not provided to the
respondent No. 2 as contemplated under s. 133 of the Act. It was the case of
the municipality that even now the facilities are provided to a public sector
unde1taking provided they act in compliance with the provisions of.s. 104 of H
the Act read with rules 6 and 9 of the said Rules. But so far as the facts of this
70 SUPREME COURT REPORTS (1989] Supp. 2 S.C.R.

case are concerned, it was submitted that during the period in dispute as also
.\today there is no facility to the respondent No. 2 under rule 13 of the said
Rules and as admittedly, the respondent No. 2 was not complying with the
requirements of rules 6 and 9 of the said Rules and was not filing any
declaration, the Municipality had the right to treat the goods, brought within
the Municipal limits, as those brought for consumption, use or sale under
sub-rule (2) of rule 9 of the said Rules and thereby attracting octroi. The
B
Division Bench of the High Court, it was contended by the appellant, failed
to appreciate the implication of the aforesaid provisions of law and the fact
that in respect of the period in question, admittedly, the current account
facility was not available with the Indian Oil Corporation and as admittedly,
the Indian Oil Corporation did not file any declaration under rule 9 of the
said Rules, the petroleum products brought within the Municipal limits by
c the Indian Oil Corporation were to be prsumed to be for consumption, use
or sale and as such liable to octroi duty. The High Court, according to Shri
Ray for the appellant, should have appreciated that the questions raised,
gone into but the questions decided by the High Court were not gennane to
the issue and as such were not required to be gone into the decided. On this
aspect, it was submitted that the appeals should be allowed so far as refund
D was concerned, and the impugned decisions of the High Court should be set
aside. It was further submitted that aan analysis of law while dealing with
this point would indicate that a declaration under s. 133 of the Act read with
rule 13 of the said Rules cannot be interpreted as one dispensing with the
requirent of the declaration under rule 9 of the Rules and if that be so then
the presumption of non-declaration would be available to the Municipality.
E It would, therefore, be a case of deemed use or consumption. It was
submitted that the aspect whether sale alone would be sufficient to levy
octroi or along with sale there should be consumption or use within the
municipal limits, would require consideration. It was submitted that con-
ceivably goods can be brought within the municipal limits of a municipality
for the purposes of (i) use, consumption or sale; or (ii) for immediate
transportation outside the Municipality; or (iii) for temporary detention
F within the Municipal limits and eventual transportation outside the Munici-
pal limits; or (iv) goods brought by a travelling agent for sale or exhibiting
them for the purposes of securing orders for sale thereafter. Octroi, it was
submitted, can only be levied on goods which are brought within the munici-
pal limits for the purpose of consumption, use or sale therein. No octroi can
be charged on any goods which are brought within the municipal limits
G either for immediate transportation outside the municipality or for tempor-
ary detention within the municipal limits or for sale or exhibition by a
travelling agent, it was submitted. The provisions of the Act and the Rules
have been made for the different categories in different ways, it was submit-
ted. S. 104 of the Act is the charging section and authorises municipality to
impose octroi on goods and animals brought within the limits of the munici-
H pality for consumption, use or sale. The said section, it was submitted, is to
be read with rule 6 providing for payment of octroi duty on goods liable to
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES [MUKHARJI, J.] 71

payment of octroi. Rule 6 of the said Rules, would indicate that octroi is to
be paid only on goods liable to payment of octroi and not other goods. Rule 7 A
indicates that import of the goods should be through prescribed routes. This
has been made for preventing clandestine importation of goods. Rule 8
provides that the importors are to furnish documents and information in
respect of the dutiable goods to be brought. Rule 9 en joins that the person
bringing within the municipal limits good liable to payment of octroi, shaall
produce such goods at the octroi outpost and shall declare whether the goods B
are intended for consumption, use or sale within the municipality or for
immediate transportation outside the municipality or for temporary deten-
tion within the municipal limits. Referring to the scheme of the Act and the
rules, it was submitted on behalf of the appellant that an analysis of s. 133
and the current account facility therein indicate that only on· the goods for
use consumption or sale octroi is leviable. Grant of current account facility
does not mean providing facility to bring within Municipal limits which are
c
liable to payment of octroi without complying with the other rules specifi-
cally applicabl!! in respect of such goods. It was submitted that respondent
No. 1 knew well that current account is in respect of those goods which are
brought within the Municipal limits for use, consumption and sale. In this
connection, reference was made to certain paragraphs in the pleadings. D
There was no current acc0unt facility, according to the appellant. It was
submitted that when the writ petition was moved at the particular point of
time the current account facility stood suspended. Xerox copy of the Order
Sheet of the Trial Court was relied upon. It would appear from that the trial
court did not grant any stay because there was nothing to be stayed as by the
time the writ petition was moved the current account facility stood
E
suspended, it was submitted. If the Court desired, a mandatory order
reviving the current account facility was required to be made. That was not
done. Therefore, the court of first instance heard the writ petition and
disposed of the same. The Court of first instance did not grant any relief to
the writ petitioner and as such the writ petitioner filed the appeal before the
Division Bench. In the appeal the appellate Court refused to stay the
operation of the writ issued by the learned Single Judge. Therefore, by F
reason of that order also, there was no revival of the current account facility
to the respondent No. 2, according to the appellant. The Division Bench, as
appears from the saicl order dated 1st April, 1977, restrained the payment of
the octroi duty by the respondent No. 2 to the Municipality pending the said
appeal and directed the Indian Oil Corporation to maintain a separate
account in respect of the same and to keep the same in a separate bank G
account with the State Bank of India, Jodhpur. The said order speaks of
deposit of the octroi tax payable in respect of such despatches. As the
Division Bench partly allowed the writ petition, the Municipality moved this
Court and this Court,stayed the operation of that order. Therefore, when
the petitioner moved this Court, the Current Account facility stood
wspended, according to the appellant, and at no stage thereafter till now the H
same stood revived by any order or otherwise. -
72 SUPREME COURT REPORTS [1989] Supp. 2 S.C.R.

But it may be noted, as mentioned hereinbefore, that an affidavit was
A filed by one Shri R.C. Parekh. It was stated that current account facility as
mentioned ins. 133 of the Act was provided to the respondent No. 2, but the
said facility was never discontinued even after 25th July, 1975 and is still
being provided till the date of the hearing of the matter before this Court.
The current account facility under section 133 of the Act is not to recover
B octroi tax on goods at the time of entry but to keep current account and
recover it periodically. Reference was made to paragraph 6 of the writ
petition and in reply, the Municipal Council admitted para No. 6 of the writ
petition and stated that the facilities are still provided and has not been
stopped. Therefore, it is clear, according to the deponent, and according to
the respondent, that according to the Municipal Council, Jodhpur itself
current facilities as provided under s. 133 of the Act were never withdrawn
c and therefore, any submissions made by the Municipal Council to the
contrary are totally unfounded. It could not have been withdrawn unila-
terally without notice to the Indian Oil Corporation. According to the
deponent, the petitioner ne.ver stated that the current account facility pro-
vided to the Indian Oil Corporation had been withdrawn by the Municipal
Council. It only stated in paragraph 9 of the writ petition that suddenly on
D 25th July, 1975, the Municipal Council, Jodhpur mspended the export
facilities provided to the respondent No. 2 and informed the respondent No.
2 that henceforth octroi tax would be charged from the respondent even on
those goods which were exported outside the Municipal limits and which
were not used or consumed within the municipal limits. The export facility,
i.e., facility on the issue of transport passes under rule 13 of the said Rules
E was only with the object to ascertain that quantity of petroleum products
that have been exported out of Jodhpur Municipal limits and it did not
amount to withdrawal of current account facilities. The object of current
account facilities is not to realise octroi tax on each consignment of goods at
the time of its entry in Municipal limits of Jodhpur, but to keep current
account and realise octroi tax after specified time periodically. It is the case
of the respondent No. l that the current account facility was never discon-
F tinued and it is still continuing. In fact it is the duty of the Municipal Council
to provide passes under rule 13 to person who have been provided current
account facility. In reply to para 9 of the writ petition, it was stated by the
Municipal Council that it never suspended the export facilities of Indian Oil
Corporation. It was further stated that it was decided between the officers of
the Indian Oil Corporation and Administrator that export facility shall
G remain in force only for goods exported to such distribution centres in
respect of goods of which no sale is done atJodhpur. Therefore, the affidavit
stated that there was no suspension. Reference was made to the order of the
High Court dated 9th February, 1976 and other orders.
Shri Soli Sorabjee referred to the scheme of the Act and submitted
H that the two decisions of this Court referred to by the High Court were not
applicable. Neither of these cases, it was submitted, was concerned with the
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES [MUKHARJI, J.l 73

situation where the goods were sold within the octroi limits and thereafter
A
exported for consumption outside the said limits. In the Burmah Shell's case
(supra), there was no sales by the company to its dealers. The company solci
goods through its dealers to the customers both" within and outside the local
area. He submitted that the observations of this Court to the effect that
octroi is chargeable on goods brought into the area for sale to cosumers must
be understood in that context. It was submitted that there was nothing in the B
said judgments of this Court to the effect that if goods are brought into a
local area for sale to a dealer who then transports the goods outside the local
area for sale to consumers, no octroi would be chargeable. It was submitted
that as the goods were brought into the local area for sale within that area,
octroi would be chargeable. It is significant to note, it was submitted, that
the Burmah Shell's case (supra) makes it clear that to attract liability to pay
octroi duty it is not necessary that the goods should be consumed within the c
octroi limits.
We are, however, unable to accept these cnntentions. If the goods
were brought within the municipal limits for the purpose of sale (sale means
passing of the title to the purchaser), then different considerations might
have applied.
But in view of the facts of this case, the title passed to the goods outside
the municipal limits even in respect of the petroleum products which were
sold within the municipal limits. It was contended by Shri Sorabjee that rule
13 had no application. Shri Sorabjee drew our attention to certain
paragraphs of the writ petition, in particular to paragraph 18(b) where it was
stated that it is obligatory for the respondent No. I to grant respondent No. 2
transport passes and it had no jurisdiction to withdraw that facility. It was
submitted with reference to that and other paragraphs that it was the case of
the respondent No. I that facility was withdrawn and suspended and prayer
was made for restoration of that facility. It was, therefore, submitted on
behalf of the appellant that in the absence of facilities being granted under
rule 13, it was incumbent on the parties to make a declaration under rule 9 of F
the said Rules. As no such declarations had admittedly been made, rule 9(2)
of the said Rules was attracted. Accordingly, the goods in the present case
were to be treated as having been brought within the municipal limits for
consumption, use or sale therein and as such liable for octroi duty, according
to the appellant. Therefore, Shri Sorabjee submitted that this appeal should
only be confined to the applicability of rule 9(2) of the said Rules.
On the other hand, it was disputed by Shri Dalveer Bhandari and
others that it is incorrect to say that the facility was suspended or withdrawn.
Reading of the pleadings, according to Shri Bhandari, would make it clear
that these were not suspended or withdrawn. Reference was made to
paragraphs 6 and 7 of the reply to the writ petition at p. 116of the paper book
to the effect that it was the case of the appellant that facilities provided to the
Indian Oil Corporation were never stopped and this submission. has been
74 SUPREME COURT REPORTS [1989} Supp. 2 S.C.R.

repeated several times. It was further submitted that when current account
A facility has been provided, there is no question of payment of octroi at the
time of entry of petroleum products. On the other hand, the octroi tax is paid
at the time of settlement of periodical account, say after every month. Thus,
question of complying with rule 6 or rule 9 of the said Rules does not arise as
they apply when octroi tax is paid at the time of entry of goods. In fact, the
B account of petroleum products imported and exported is kept by delivery -of
entry passes and transport passes by Indian Oil Corporation at Octroi
outpose, which passes are given by Municipal Council. In fact, it is obli-
gatory duty, according to counsel, of Municipal Council to provide entry
passes and transport passes to Indian Oil Corporation which have been
provided current account facilities. The delivery of entry passes and trans-
port passes is only to facilitate settlement of octroi account on goods which
C have been retained in Municipal area for use and consumption. If munici-
pality does not provide transport passes, it cannot take advantage of its own
default, according to Shri Bhandari. It is obligatory duty of Municipality, it
was urged, to provide transport and entry passs to Companies and persons
who have been provided current accout facilities. In any way, even it
transport passes are not given by the Municipal Council, the quantity
D exported can be ascertain by other means also.
In the present case, there is no dispute regarding diesel exported to
Dangiawas from Jodhpur Municipality. The Municipal Council has not
refuted in its reply in para I1 at p. 117 of the paper book, the quantity of
petroleum products exported to Dangiawas as mentioned in Schedule 'A'
(p. 104 of paper book) from 25th July, 1975 to date of writ petition. The
E Municipal Council gave an undertaking to refund the octroi tax charged
from the petitioner on the diesel exported to Dangiawas outside the limits of
Municipal Council, Jodhpur as will be clear from the order of the learned
Single Judge dated 7th February, 1976. It was also stated that the Division
Bench vide its order dated !st April, 1977 has already ordered that respon-
dent No. 2 would deposit the octroil tax on diesel exported to Dangiawas.
F Thus, the octroi tax which became due on diesel exported to Dangiawas.
from !st April, 1977 upto date is being deposited in the Bank accunt and
there is no dispute regarding quantity of diesel exported to Dangiawas.
Thus, it appears to us that the controversy raised by Municipal Council
referring to cancellation of transport passes is unfounded. The object of the
transport passes was to ascertain the quantity of diesel exported to
G Dangiawas. There appears to be no dispute regarding quantity of diesel
exported to Dangiawas from 25th July, 1975. The Depot Superintendent of
Indian Oil Corporation, Jodhpur had deposed that current account facilities
to Indian Oil Corporation is being continued till today. It was stated that the
octroi is paid periodically on settlement of account between Municipal
Council and Indian Oil Corporation and not at the time of entry of
H petroleum products. It appears that the contention that cancellation of
transport passes is equivalent to cancellation of current account facilities,
MUNICIPALCOUNC!Lv. PAREKHAUTOMOBILESlRANGANATiiAN,J.] 75

made on behalf of the appellant, is incorrect. A perusal of s. 133 would show
that current account facility is provided by substantive section, whereas rule A
13 of the said Rules is procedure provided with the object of providing
facility of settlement account of payment of octroi tax. In other words,
according to rule 13(4), octroi tai< is charged on quantity mentioned in entry
passes minus the quantity mentioned in transport passes, i.e., on quantity of
petroleum products used or consumed within the Municipal limits of Jodh- 8
pur Municipality. It is also unsustainable, according to Shri Bhandari to
contend that M/s Parekh Automobiles has recovered octroi tax from con-
sumers. It has been asserted in the writ petition on oath as well as before this
Court on filing affidavit that no octroi was recovered by Mis Parekh Auto-
mobiles from consumers. On the other hand, it is the case of Mis Parekh
\
Automobiles that it had to pay octroi tax out of commission which"it received
from Indian Oil Corporation on sale of diesel. This fact, accOiding to Shri c
Bhandari was never refuted by the Municipal Council or the Indian Oil
Corporation. Thus there is no question of unjust enrichment, and as such
Mis Parekh Automobiles is entitled to octroi tax which was recovered from
it and which is lying deposited in separate Bank Account by the Indian Oil
Corporation as perorderof Division Bench dated 1st April, 1977 upto date.
For period before 1st April, 1977, the Municipal Council has already given D
an undertaking to refund octroi tax.
Pleadings in this case and the averments are rather confusing. On the
consideration ofall the facts and the circumstances of the case, we are of the
opinion that the principles of the aforesaid two decisions of this Court have
been correctly applied by the High Court in the facts and the circumstances
of the case. The octroi duty is, therefore, not chargeable on the transactions E
mentioned herein. We are further of the opinion that in view ofthe confused
state of the pleadings and averments, it is not possible to hold that current
account facilities were withdrawn or cancelled. If that is the position, then
there is no question that the High Court was right in the order it passed and
the direction it gave.
F
In view of the aforesaid, appeals must fail and are accordingly dismis-
sed. In the facts and the circumstances of the case, howeyer, we make no
orders as to costs.
RANGANATHAN. J. I have i:one through the judgment pro-
posed to be delivered in the abO\ e cases by my learned brother
Sabyasachi Mukharji, J. I agree but I would like to add a few words on G
one of the questions raised.
The controversy before us-I shall refer only to the facts in CA.
1552/1981 for purposes of the discussion-relates to the claim of the
Municipal Council, Jodhpur (appellant) to octroi on the petroleum
products sent from the depot of the Indian Oil Corporation (IOC) at H
Jodhpur, to retail outlets at Dangiawas where they are sold by Parekh
76 SUPREME COURT REPORTS [1989] Supp. 2 S.C.R.

Automobiles Co. (hereinafter referred to as 'the dealer') for sale at
A
Dangiawas. Dangiawas is admittedly situated outside the limits of
Jodhpur Municipal Council. The case of IOC and the dealer is that the
goods in question are not sold at Jodhpur. According to them, the
actual sale took place only at Dangiawas and, since neither the sale nor
the consumption nor the use of the petroleum products in question
B took place within the limits of the municipality of Jodhpur, the appel-
lant council was not entitled to levy any octroi thereon. Alternatively,
it was contended that, even if the sale is held to have taken place at
Jodhpur, still, octroi cannot be levied as the goods so sold were meant
for use or consumption outside the municipal limits, in view of the
decision of this Court in Burmah Shell Oil Storage & Distributing Co.
India Ltd. v. The Belgaum Borough Municipality, [1963] Supp. (2)
c SCR 216 as followed in Hirata/ Thakor/al Dalal v. Broach Municipality
& Ors., [1976] Supp. SCR 82. The learned Single-Jtrl!ge in the High
Court did not permit the petitioners to raise the question that the sale
took place only outside the municipal limits of Jodhpur since that
involved an investigation into facts which could not be undertaken in a
D writ petition and proceeded on the footing that the sale of the products
in question took place within the limits of Jodhpur. He, however,
accepted the contention of IOC and the dealer that even if the sale is
taken to have been effected within Jothpur, no octroi was leviable as
admittedly the goods had been sold in Jodhpur only for their onward
transmission for use and consumption in Dangiawas outside the
E Municipal limits. The Division Bench of the High Court has also
approved of this conclusion and, in our opinion, rightly. As pointed
out by my learned brothr in his detailed discussion on this aspect, this
issue is covered by the two decisions of the Supreme Court which have
already been referred to. I have nothing to add, so far as this part of
the case is concerned.
F It was urged before the High Court, on behalf of the Municipal
Council, that the levy of octroi could be justified on the terms of rule 9
of the Rajasthan Municipalities (Octroi) Rules, 1962, (hereinafter
referred to as 'the rules'). It is unnecessary to set out again the terms of
this rule which have already been extracted in the judgment of my
learned brother. Under sub-rule (1) of this rule, every person bringing
G his goods within the municipal limits should make a declaration in
terms thereof. In the present case, it is common ground that no such
declaration had been made. It is, therefore, urged that by virtue of the
closing words of rule 9(2), the goods in question should be treated "as
having been brought within the Municipal limits for consumption, use
or sale therein" and thus attract the charge of tax under clause 2 of
H sub-section (1) of section 104 of the Rajasthan Municipalities Act,
1959 (hereinafter referred to as 'the Act'). The respondents have
MUNICIPALCOUNC!Lv.PAREKHAUTOMOBILES[RANGANA'IHAN,J.) 77

attempted to couuter this argument by urging that this provision
regarding declaration does not apply in their case. Their argument is A
that their case is covered by section 133 of the Act read with rule 13 of
the rules. The argument is that rule 13 is a special provision applicable
to a class of persons which has been allowed current account facilities
under section 133 of the Act and that the procedure under rule 13
overrides the requirements of rule 9. This argument has been accepted B
by the High Court. The question is whether the High Court's conclu-
sion on this issue is correct. I think that the High Court rightly
accepted this argument and I should like to elaborate a little my
reasons for this conclusion.
Chapter II of rules provide for the manner of assessment and
collectioa vfoctroi duty. Rules 3 to 5 provide for the establishment of octroi c
outposts with powers to the inspecting staff to stop the vehicles at the
outposts. Rule 6 lays down that no goods liable to payment of octroi shall,
except as otherwise provided in these rules, be brought within the Muni-
cipal limits until the octroi duty leviable in respect of such goods has been
paid at the octroi outposts. Where goods arrive at an octroi outpost
they may be coming in either for consumption, use or sale within the Muni- D
cipal Limits or for transportation outside those limits, whether immedia-
tely or after a period of time. If they have come in merely for the purpose of
transportation, they are not liable to pay octroi duty. It, therefore, became
necessary to make a detailed provision as to the manner of assessment
and collection of duty having regard to this consideration. That is why
rule 9 requires every person bringing goods within the municipal limits E
to make a declaration as to what the goods are intended for. If any of
the goods are intended for consumption, use or sale within the Munici-
pality, a declaration could be made orally to this effect; thereupon the
octroi would be collected then and there in respect of those goods. If,
however, the goods are intended for immediate or eventual transpor-
tation outside the Municipality, a written declaration should be filed F
by the importer. In respect of goods declared intended for immediate
transportation, the officr-in-charge of the octroi outpost receives by
way of deposit such amount as may be equivalent to.the duty payable
thereon and issues a transit pass to the importer. The importer should
transport the goods outside the Municipal limits within a period not
exceeding eight hours (which can be extended to 24 hours at the most). G
On such transportation being effected, the amount of octroi deposited
in respect of the goods so transported is ret~rned to .the importer and
the transit pass taken back. This is the procedure envisaged in rule 1I.
(Certain refinements in procedure in the case of travelling agents is
provided for in rules llA & llB, with which we are not coneerned}.
Where, however, the goods are not immediately to be transported H
outside the Municipal limits but are to be temporarily detained within
78 SUPREME COURT REPORTS [ 1989] Supp. 2 S.C.R.

the Municipal limits and eventually transported outside the Municipal
" limits, rule 12 is attracted. In the case of such goods they have to be
sen.t to a bonded warehouse. The goods may be withdrawn from time
to time either on payment of octroi in the event of their being
consumed, used or sold within the Municipal limits or without any
payment of octroi duty in case of their being transported outside the
B Municipal limits. This procedure is outlined in rules 12 and 16 to 22.
But one important condition is that the maximum period for which the
goods can be placed in the bonded warehouse is 6 months. lf the goods
are not removed within the said time limit, they are liable to be sold by
public auction and the warehouse charges and octroi recovered from
the sale proceeds. This is the normal procedure for the assessment and
collection of octroi duty. It is in respect of this procedure that the
c declaration in rule 9 becomes important. The terms of the declaration
determine the incidents of the duty. Regarding the first category of
goods mentioned in rule 9(1), the collection of duty is immediate;
regarding the second category, a deposit is demanded which can be
refunded on transportation within a few hours; and in respect of the
D third, duty has to be paid unless the goods are transported outside the
municipal limits within 6 months.
Rule 13, however, contemplates a totally different scheme for
the assessment and collection of octroi for the special type of cases
envisaged therein. From the terms of S. 133, it would appear to be
intended to cover mercantile firms or bodies which may be bringing
E goods into, or taking goods out of, the municipal limits frequently and,
perhaps, also firms or bodies about whose capacity to pay the duty in
due course the Municipal Board has confidence. These persons are
given the facility of having a current account with the Municipality and
the amount of duty payable by such a person is determined and col-
lected from time to time. Such an account is opened on the firm or
F body making such deposit or furnishing such security as the Municipal-
ity may require, for the due discharge of its liabilities under the Act
and the Rules. When this facility is provided, the procedure to be
followed is set out in rule 13. Here what is done is that the firm or body
is given a book of entry passes and a book of transport passes from
time to time. As and when the firm or body brings goods into the
G Municipality, it is required to fill in one of the entry passes setting out
the details of the goods which are being brought in under any particu-
lar consignment and present the same at the octroi outpost of entry.
After verifying that the details of the goods brought in tally with the
details of the goods entered in the entry pass, the details are passed on
to the octroi Superintendent who debits the account of the person
H concerned with. the amount of octr.oi payable in rspect of the goods
MUNJCIPALCOUNC!Lv. PAREKH AUTOMOBILES [RANGANATHAN,J.] 79

listed in the pass. As and when rn~ nrm or body wishes to transport the
goods out of the Municipality, it fills up a transport pass containing the A
details of the goods proposed to be transported outside and pre-
sents it to the octroi outpost of exit. The officer at the outpost verifies
that the goods mentioned in the pass and the goods sought to be
transported tally with each other. Then the· transport pass duly
certified by him is passed on to the octroi Superintendent. The octroi B
Superintendent, after verification, files the certificates of export sepa-
rately in respect of each such body or firm. The amount of octroi
payable in these cases is based on the total amount of octroi on the
goods shown by the entry passes less the goods transported out under
the transport passes. In other words, in the case of persons who have
the current account facilities, the duty is calculated on the basis of the
total amount of goods that have come in as reduced by the total c
amount of the goods that have gone out, the balance being presumed
to have been consumed, used or sold within the Municipal limits. In
order to ensure that there is a correspondence between the goods that
have come in and those that have gone out, me proviso to su.b-rule (4)
of rule 13 provides that, in computing the octroi duty payable, the D
goods transported outside the Municipal limits shall be lessened only if
(a) such goods have not been sold within the Municipal limits and (b)
they have been transported out of such limits within a period of 6
months from the date of their import.
A comparison of the above two sets of provisions will make it
clear that they are two independent and mutually exclusive modes of E
assessment and collection of duty. Under the cash system of payment,
a declaration under rule 9 is absolutely essential because the officials at
the outpost will have to determine the mode of dealing with the goods
on the basis of such declaration. The octroi duty has to be collected
then and there in respect of the goods which are to be consumed, used
or sold within the Municipal limits; a deposit has to be taken in respect F
of those goods which are intended to be immediately transported out-
side; and the rest of the goods on which the transportation is to be
effected on a future time, have to be directed to a bonded warehouse.
The mode of collection of duty in respect of a person having current
account facilities, however, does ·not depend upon any such declara-
tion or upon the mode of utilisation of the goods as indicated in such G
declaration, because, in the case of the current account holders, the
duty payable in respect of the entirety of the goods brought in is
straightaway debited to his account on the basis of entry passes. The
duty payable in respect of the goods transported outside is later on
credited to his account on the basis of the transport passes. The diffe-
rence is the amount of the duty payable by him and this is recovered H

•'
80 SUPREME COURT REPORTS (1989] Supp. 2 S.C.R.

from the person concerned from time to time either by adjustment out
of the deposits earlier obtained from him or by other processes of
recovery. The procedure as to issue of transit passes or storage in a
warehouse are also irrelevant for the purposes of dealing with the
goods under rule 13.

B It, therefore, appears to me that High Court was fully justified in
holding that the terms of rules 6 and 9 have no relevance to the pay-
ment of duty in cases covered by the current account facility envisaged
under rule 13. The High Court was, therefore, right in holding that the
present case cannot be brought within the terms of proviso to rule 9(2)
on the basis of a deemed consumption, use or sale within the Munici-
pal limits.
c
It is true that the proviso to sub-rue 4 of rule 13 also envisaged
the exclusion from levy of octroi duty only where the goods are not
sold within the Municipal limits. It may be contended that, in the
present case, as the IOC has sold the goods within the Municipal
o limits, and the subsequent transport to Dangiawas, though effected by
the roe, was really on behalf of the dealer the goods so transported
and entered in the transport passes of the roe should be excluded
from deduction under sub-rule (4) of rule 13. But this construction, in
my view, cannot be accepted. The expressions used in the proviso to
sub-rule (4) cannot be interpreted differently from the words used in
E section 104, on the basis of which chargeability to duty arises. If, as we
have held, there can be no octroi duty at all levied .by the Jodhpur
Municipality in respect of the goods sold by the IOC within, but clearly
intended to be transported for use or consumption outside, the Munic-
ipal limits, then this statutory limitation cannot be defeated by
interpreting the proviso in such a way as to make all goods sold within
F the Municipality liable to duty even if the sale is in pursuance of a clear
intention that the goods are to be despatched outside. The terms of the
proviso and the main section have to be read harmoniously.

The result of the above discussion is that the present case is
governed by the terms of rule 13 and the IOC is entitled to go on
G paying octroi duty on the basis of the goods brought by it within the
Municipality less the goods transported outside the Municipality even
where the transport outside the Municipality may be in pursuance of a
sale within the Municipality so long as such sale is in pursuance of an
intention that the goods should be consumed or used outside the Munici-
pal limits. As we have already said, in cases where rule 13 applies, rule
H 9 is excluded and, therefore, the High Court rightly held that the octroi
charged on the IOC in respect of the impugned sales was not justified.
MUNICIPAL COUNCIL v. PAREKH AUTOMOBILES [RANGANATiiAN, J.I 81

Before concluding I wish to refer to three aspects. The first is as A
to whether even assuming that rule 9 was applicable to a case where
the current account facility has been provided, the terms of tliat rule
can be read in such a manner as to militate against the very concept of
octroi duty as explained in the Burmah Shell case. A questio11 may
arisE whether the terms of rule 9(2) so interpreted would be intr4 vires
the rule making power of the legislature. I express no opinion on this B
issue as I have already expressed my view that rule 9 has no applic~tion
to the presel)t case. The second aspect, which I wish to touch upon, is a
point sought to be raised on behalf of the appellant in the course oUhe
present hearing that the current account facility granted to the IOC
had been revoked. My learned brother has referred to the pleadings in
this regard at great length and, as pointed out by him, the factual c
position is by no means clear. I do not think that the appellant should
be permitted to raise at this stage a new plea when all along, in the
earlier proceedings in the High Court, the case has proceeded on the
footing that the IOC had been having and continues to have current
account facilities. The third aspect to which I would like to make a
reference is that we have principally based out decision only on the D
facts in regard to the sales to Parekh Automobiles Ltd. We are told
that there are a number of suits, other than those before us today,
which are pending at various stages in which various pleas have been
raised. I would only like to make it clear that we express no opinion
regarding the factual position in those cases and those cases will have
to be disposed off in the light of the legal position set out in our E
judgment. Except for the above clarifications I have nothing to add to
what my learned brother Mukharji, J. has said and I respectfully agree
with his conclusion that the appeals must fail and are dismissed.

R.S.S. Appeals dismissed.

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