SHROFF & CO., ETC.versusMUNICIPAL CORPORATION OF GREATER BOMBAY AND ANOTHER, ETC.

A                 SHROFF & CO., ETC.
                          v.
    MUNICIPAL CORPORATION OF GREATER BOMBAY AND
                    ANOTHER, ETC.

B
                              AUGUST 12, 1988.

     [SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.)

         Bombay Municipal Corporation Act, 1888-Sections· 192, 194-
    0ctroi-Levy and collection of.

c         Bombay Municipal Corporation Levy of Octroi Rules, 1965-
    Rules 2(5), 2(7)(a)-Countervailing duty-Whether inc/udible in
    assessable value for imposition of octroi.

          Bombay Prohibition Act, 1949-Sections 2( 14), 2(20), 2(36), 26,
    105. 106 and 192-Manner of levy of excise duty-Duty allracted at the
D
    point of import.

          The appellants were registered partnership firms carrying on
    business of dealing in wines and spirits and were licensed to import and
    store liquors in their bonded warehouse at Bombay. They were also
    holders of licence issued under the Maharashtra Foreign Liquor
E
    (Import and Export) Rules, 1963 framed under the Prohibition Act of
    1949 of the State Government.
          The Maharashtra Foreign Liquor (storage in Bond) Rules, 1964,
    under which, an importer could import liquor and store the same in a
    warehouse without payment of countervailing duty, were amended on
F   28th July, 1976 and 28th June, 1983, to impose octroi on the assessable
    value which includes customs duty paid on import of liquor.

          The appellants filed a writ petition in the High Court, challenging
    the inclusion of the countervailing duty in the assessable value for octroi
    on the ground that the said duty was not incurred 'till the date of
G   removal of the goods from the place of import'.
          A Single Judge of the High Court allowed the writ petition. The
    respondent filed Letters Patent Appeals against the decision of the
    Single Judge. The Division Bench of the High Court by the impugned
    judgment held that countervailing duty was includible in the assessable
H   value for the imposition of octroi.


                                       406
                 SHROFF & CO. v. MUNICIPAL CORPN.                      407

      Dismissing the appeal, the Court,                                       A
      HELD: Per Sabyasachi Mukharji, J.

     Countervailing duty .is imposed for the purpose of setting off or
compensating some other duty so as to place the home producer on an
equal footing with the importer of foreign goods. The essence of              B
countervailing duty is to set off the effect of non-payment· of tax on
manufacture meant to protect the indigenuous production. [417H; 418AJ

      Bringing goods with intention to use and not in transit is
decisive and any imposition on that would form part of the duty which
could be imposed at the time of entry and could be included in the
Octroi. [427C]
                                                                              c

      For goods in transit section 194A of the Bombay Municipal
Corporation Act, 1888 provides an exemption in accordance with the
octroi Rules. Section 105 of the Bombay Prohibition Act, 1949, read
with Sections 2(14), 2(20) and 2(36) makes the position clear that the        D
taxable event in the case of excise duty would be manufacture or
production and in the case of countervailing duty, import within the
State. [427C-E]

      The Maharashtra Foreign Liquor (Storage in Bond) Rules, 1964
were framed subsequent to the Act of 1949. The charge and.incidence of        E
countervailing duty under the Act and the relevant Notifications of 1949
were already subsistin!:· By subsequent framing of the storage in Bond
Rules, incidence or charge cannot be deflected or altered. Under Rule
2(2) administrative facility is granted for deferred payment to the asses.
see. The words "without payment of duty" indicate that duty has be-
come chargeable and the incidence was complete; if, however, the asses-       F
see complies with the Rules, he is given a facility to defer payment. This
clearly shows that duty has become payable already. This is only consis·
tent with the fact that the charge or incidence has already been at-
tracted on the taxable event taking place, namely, the manufacture or
production in the case of excise duty or import in the State in the case of
countervailing duty. The fact that a bond has to be executed means the        G
goods, to be stored, have already been the subject matter of duty or
charge. If they have been so, there is no question of bonding them with
an undertaking to make payment of.duty at the lime of removal or
before removal from bond. Normal rule is pre-payment of duty at the
time or before the import. The purpose of the import is decisive. If
goods are brought for the purpose of commerce or trade, these are             H
imported. i4l7G-H; 428A-C; 430A-B]
    408          SUPREME COURT REPORTS                 (1988] Supp. 2 S.C.R.

          Countervailing duty also does not form part of the incidental
A
    charges. Countervailing duty is contained in Rule 2(7)(a) of the Octroi
    Rules. This Rule uses the words "excise duties" as also the words "all
    other incidental charges." Section 105 of the Bombay Prohibition Act,
    1949 itself talks of excise duties so as to include both excise duty as well
    as contervailing duty. Therefore, the normal connotation of the words
B   "excise duties" would take in countervailing duty also. Apart from that
    charges include taxes. [430C, E-F]

          Contervailing duty is an incident of importation and as such it
    was includible as an octroi even prior to 28th June, 1983. [431A]

          Per S. Ranganathan, J. (concurring)
c
         The language of section 105 which imposes the charge, of section
  106 which talks of payment and of the rules, leaves no doubt that the
  duty is attracted at the point of import (i.e. physical entry of the goods
  into the taxing territory) and that only the payment of duty is deferred,
D in case the goods imported are removed to a bonded warehouse, to a
  later point of time, for purposes of convenience of collection. It will not
  be appropriate to construe the prov'isions in such a manner as imposing
  a liability on some persons (who have no bonded warehouse) at one
  point of time and on the others, at a different point of time. If the
  liability to pay the duty itself were referrable to a later point of time, the
E insistence on a bond in the terms prescribed would appear to be
  redandant. The provision that where the facility is availed of, the
  assessee would pay duty at the rate prevalent at the later point of time
  (often higher than at the point of import but not necessarily so) is rather
  a logical consequence of the privilege of deferment given to the asses-
  see. [432C-E]
F
         So far as the two periods after 28th July, 1976 were concerned,
  there could be no doubt that this was included. The specific inclusion of
  the word "countervailing" duty and broader reference to duties
  "incurred or liable to be incurred" in the 1983 amendment, only
  further clarifies the position prevalent even prior to 28. 7.1983. The
G words "incidental charges" have a very wide meaning particularly in a
  context where duties and tax are referred to and the idea seems to be to
  include all items that will be taken into account by an importer as part
  of his cost. In regard to the period till 28. 7.1978, the position should be
  the same for the first period also. [432F-H; 433A]

H          Mis J.E. Bilimoria & Sons, Nagpur v. Corporation of the City of
                 SHROFF & CO. v. MUNICIPAL CORPN.               409

Nagpur, Special Civil Application No. 779 of 1971, decided on
                                                                       A
23.12.1976 by Bombay High Court; Kalyani Stores v. The State of
Orissa and O(hers, [1966] I SCR 865; Mis. Mohan Meakin Breweries
Ltd. Ghaziabad v. State of V.P. and Others, [1979] U.P.T.C. 284; Mc
Dowell & Company Limited v. The Commercial Tax Officer, [1985] 3
SCR 791; State of Bombay v. M/s. S.S. Miranda Limited, [1960] 3 SCR
397; The Central India Spinning and Weaving and Manufacturing Com-     B
pany Ltd., The Empress Mills, Nagpur v. The Municipal Committee,
Wardha, [1958] SCR 1102, 1114; Brown v. State of Maryland, [1827] 12
Wheat 419, 442; Corpus Juris Volume 62 page 729; Canada Sugar
Refining Company Ltd. v. The Queen, [1898] Appeal Cases 735; Wilson
v. Chambers and Company Proprietary Limited, 38 Commonwealth
Law Reports 131; Halsbury's Laws of England, fourth Edition,
Volume 12, paragraph 889, p. 313; Mohan Meakin Breweries Ltd. v.
                                                                       c
Excise and Taxation Commissioner, Chandigarh & Others, [1976]
Suppl. SCR 510 at 517; In re Bill to amend !jection 20 of·the Sea
Customs Act, I878 and Section 3 of the Central Excises and Salt Act,
I944, [1964] 3 SCR 787; R.C. Jail v. Union of India, [1962] Suppl. 3
SCR 436; M/s. Chatturam Hori/ram Ltd. v. C.I.T. Bihar & Orissa,        D
[1955] 2 SCR 290 at 297-298; The Gramophone Company of India v.
Birender Bahadur Pandey, [1984) 2 SCR 664; D.G. Gouse & Co. v.
State of Kera/a, [1980] 1 SCR 804· at 815 and State of Orissa v.
Chakobhai, [1961] 1 SCR 719 at 726, referred to.

      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 737               E
of 1988.

     From the Judgment and Order dated 25.11.1987 of the Bombay
High Court in Appeal No. 217 of 1986.

                                WITH                                   F

      SL.P. (Civil) Nos. 2617 & 2618 of 1988.

     From the Judgment and Order dated 25.11.1987 of the Bombay
High Court in Writ Petition No. 948 of 1982 and Appeal No. 591 of
l~.                                                                    G

     Soli J. Sorabjee, G.E. Vehanvati, J.R. Gagrat, P.G. Gokhale,
R.J. Gagrat, R.B. Hathikhanawala and Miss Sushma Manchanda for
the Appellants.         ·

      RajinderSachhar, L.M. Singhvi, K.C. Dua and Abhishek Singhvi     H
    410         SUPREME COURT REPORT'                 [19881 Supp. 2 S.C.R.

    for the Petitioner in S.L.P. No. 2617/1988.
A
          Anil B. Divan and D.N. Misra for the Respondents.

          D.N. Misra for the Respondent in S.L.P. No. 2618/88.

B         The following Judgments of the Court were delivered:

           SABYASACHI MUKHARJJ, J. This appeal by special leave is
    directed against the decision of the Division Bench of the High Court
    of Bombay dated 24th/25th November, 1987. The other two special
    leave petitions challenge the same judgment and the points and the
    facts involved are also more or less identical and it is, therefore, desir-
c   able to deal with the facts of the first appeal. Disposal of the first
    appeal would entail the disposal of the other two special leave
    petitions.

          The appellants are registered partnership firms carrying on busi-
D   ness of dealing in wines and spirits and are licensed to import and store
    liquors in their bonded warehouse at Maulana Shaukat Ali Road,
    Bombay. The appellants are also holders of licence issued under the
    Maharashtra Foreign Liquor (Import and Export) Rules, 1963 framed
    under the Prohibition Act of 1949 being Act No. XXV of 1949 of the
    State Government. As early as 1888 Bombay Municipal Act was enac-
E   ted empowering the Bombay Municipal Corporation to levy octroi on
    goods brought to the city. We shall refer to the provisions of the said
    Act as relevant to the present purpose later. In 1949 Bombay Prohibi-
    tion Act (hereinafter called 'the Act') was passed. The provisions of
    the Act and the Rules which will be referred to hereinafter empowered
    the State Government to impose excise and other duties. In 1965
F   Maharashtra Foreign Liquor (Storage in Bond) Rules, 1964 were enac-
    ted. Under these rules, the importer can import liquor and store the
    same in warehouses without payment of countervailing duty. The
    Octroi Rules were amended time and again on 28th July, 1976 and
    28th June, 1983 to impose octroi on the assessable value which
    includes customs duty paid on import of liquor. The appellah.ts herein
G   filed writ petition challenging the inclusion of countervailing duty in
    the assessable value for octroi on the ground that the said duty was not
    incurred 'till the date of removal of the goods from the place of
    import'. On 28th June, 1983 the words 'countervailing duty' were
    included in the definition of Rule 2(7)(a) of the Bombay Municipal
    Corporation Levy of Octroi Rules, 1965. A learned Single Judge of the
H   High Court of Bombay allowed the writ petition on 14the January,
         SHROFF & CO. v. MUNICIPAL CORPN. IMUKHARJI, J.I             411

1986 holding that countervailing duty was neither incurred nor was it       A
liable to be incurred until after the bonded liquor had been removed
from the place of import and allowed the wrii petition. Respondents
herein filed Letters Patent Appeals against the decision.of the learned
Single Judge. The Division Bench by the impugned judgment reversed
the judgment of the learned Single Judge and held that countervailing
                                                                            B
duty was includible in the assessable value for the imposition of octroi.
In pursuance oflhe same the Deputy Assessor and Collector (Octroi),
Bombay°, issued notice demanding payment of octroi amounting to
Rs.76,70,308.71. The facts and circumstances of the other two special
leave petitions are more or less identical and are governed by the same
judgmento
                                                                            c
      The sole question, therefore, involved in this appeal is, whether
countervailing duty is includible in the octroi. Octroi, as Shri Soli J.
Sorabjee appearing for the appellants in the instant appeal drew our
attention, is governed by Entry 52 of List II of the.Seventh Schedule
being tax on the entry of goods into a local area for consumption, use D
or sale therein. It is submitted that in order to be a valid octroi, there
must not only be a physical entry of the goods within the limits of the
municipality but the entry of the goods must be either for consump-
tion, use or sale. Bearing in mind the basic constitutional provision,
therefore, octroi should be so construed as to follow upon the entry of
goods either for consumption or for use or for sale and not mere
phsyical entry.                                                            E

      Section 105 of the Act provides as follows:

            "105. (1) An excise duty or countervailing duty, as the
            case may be, at such rate or rates as the State Government
                                                                            F
            shall direct may be imposed either generally or for any
            specified local area on-

            (a) any alcoholic liquor for human consumpti9n,

            (b) any intoxicating drug or hemp,
                                                                            G
            (c) opium,

            (d) any other excisable article, when imported, exported,
            transported, possessed, manufactured or sold in or frobi
            the State, as the case may be:
                                                                            H
    412         SUPREME COURT REPORTS                [1988] Supp. 2 S.C.R.

                      Provided that duty shall not be so imposed on any
A
               article which has been imported into the territory of India
               and was liable on such importation to duty under the Indian
               Tariff Act, 1934, or the Sea Customs Act, 1878 or on any
               medicinal or toilet preparation containing alcohol, opium,
               hemp or other narcotic drugs or narcotics."
B
          Section 2(14) of the Act defines "excise duty" and ."countervail-
    ing duty" as follows:

               "2(14) 'excise duty' and 'countervailing duty' means such
               excise duty or countervailing duty, as the case may be, as is
               meniioned in entry 51 in List II of the Seventh Schedule to
c              the Constitution."

          Section 106 of the Act provides as follows:

               "106. Subject to any regulations to regulate the time, place
D              and manner of payment made by the Commissioner in this
               behalf, the duties referred to in section 105 may be levied
               in one or more of the following ways:

                (a) in the case of an excisable article imported-

E                   (i) by payment either in the State at the time of its
               import or in the State or territory of export at the time of its
               export, or

                     (ii) by payment upon issue for sale from a warehouse
               established or licensed under the provisions of this Act;
F
               (b) in the case of an excisable article exported by payment
               in the State at the time of its export, or in the State or
               territory of import;

                (c) in the case of excisable articles transported-
G
                     (i) by payment in the district from which they are
                transported, or

                     (ii) by payment upon issue, for sale from a ware-
                house established or licensed under the provisions of this
H               Act;
        SHROFF & CO. v. MUNICIPAL CORPN. IMUKHARJI, J.I               413

           (d) in the case of spirit or beer manufactured in any distil-
                                                                             A
           lery established or any distillery or brewery licensed under
           this Act-

                   (i) by a rate charged upon the quantity produced in
             or issued from the distillery.orbrewery,.as the case maybe,
          ·· br issued from a warehouse established or licensed under        B
           this Act, or,

                  (ii) by rate i;harged in accordance with suh scale of
            equivalents calculated on the quantity .of materials used or
            by the degree or attenuaiion of the wash or wort, as the
            case may be, as the State Government may prescribe;
                                                                             c
           (e) in the case of intoxicating drugs manufactured in the
           State by payment upon the quantity produced or manu-
           factured or issued from a werehouse established or licensed
           under this Act:
                                                                             I)
                 ProVided···that where payment is made upon issue for
            sale from a wherehouse established or licensed under this
            Act, such payment shall be at the rate of the duty in force at
          · th.e date of issue from the werehouse:

                  Provided further that where one and the same person        E
            is permitted-

                 (i) to manufacture or import and to ·sell, or

                 (ii) to manufacture and export, country liquor or any
           intoxicant, such duty may be levied in consideration of the       F
           joint privileges ·granted, as the Collector deems fit."

Section 26 of the Act provides as follows:

            "26. The State Government may-
                                                                             G
                   (a) establish a distillery in which spirit may be
           manufactured in accordance with a licence issued under
           this Act on such conditions as the State Government deems
            fit to impose;

                 (b) discontinue any distillery established;
      414         SUPREME COURT REPORTS                [1988] Supp. 2 S.C.R.

                        (c) license, on such conditions as the State Govern-
A
                 ment deems fit to impose, the construction and working of
                 a distillery or brewery;

                       (d) establish or license a warehouse wherein any
                 intoxicant hemp, mhowra flowers or molasses_may be
B                deposited and kept without payment of duty; and

                       (e) discontinue any warehouse so established."

            In the licence held by the appellants for storage in bond of
      foreign liquor there is a provision that no liquor shall be removed by
      them from the licensed premises for consumption within the State
c     except on payment of excise duty and fees.

           Section 192(1) of the Bombay Municipal Corporation Act, 1888
      as amended provides as follows:

D                 "192. (1) Except as· hereinafter provided, a tax, at rates
                  not exceeding those respectively specified in Schedule· H,
                  shall be levied in respect of the several articles mentioned
                  in the said Schedule, or so many of them or such of them as
                  the Corporation shall from year to year in accordance with
                  section 128 determine on the entry of the said articles into
E                 Greater Bombay for consumption, use or sale therein. The
                  said tax shall be called an 'octroi'."

            In other words, it provides for a tax in accordance with section
      128 on the entry of the articles into Greater Bombay for consumption,
      use or sale therein. The said tax shall be called "octroi". It is
F     appropriate at this stage to refer to Rule 2(7)(a) of the Octroi Rules as
      amended from time to time:

                  "I. Prior to 28th July, 1976.

                 'Value of the articles' where the Octroi is charged ad
G                valorem shall mean the value of article made up of the cost
                 price of the Articles as ascertained from the original
                 invoice plus shipping dues, insurance, excise duties: sales-
                 tax, vend fees, freight charges, carrier charges and all other
                 incidental charges incurred by the importer till the arrival
                 of the article at the place of import.'
l-1
             SHROFF & CO. v. MUNICIPAL CORPN. [MUKHARJI, J.J             415

                II: With Effect From 28th July, 1976.                           A
                'Value of the articles' where the Octroi is charged ad
                valorem shall mean the value of the articles made up of the

J               cost price of the articles as ascertained from original
                invoice plus shipping dues, insurance, customs duties, ex-
                cise duties, sales-tax, vend fees, freight charges, carrier     B
                charges and all other incidental charges excepting octroi
                incurre'd by the importer, till the articles are removed from
                the place of import'.

                III. After 28th June, 1983 and onwards.

                'Value of the articles' where octroi is charged ad valorem
                                                                                c
                shall mean the value of the articles as ascertained from
                original invoice plus shipping dues, insurance, customs
                duties, excise duties, countervailing duty, sales-tax, trans-
                port fee, vend freight charges, carrier charges and all other
                incidental charges, excepting octroi incurred or liable to be   D
                incurred by the importer till the articles are removed from
                the place of import."

          Our attention was drawn to Octroi Rules applicable to Nagpur
    City as considered in a Division Bench judgment reported in 1977
    Maharashtra Law Journal 293 by Masodhkar and Kemble, JJ. The said           E
    rules provided for the imposition of octroi on goods and animals
    brought within the octroi limits of the Nagpur Municipal Corporation
    for sale, consumption or use therein.

          Our attention'was also drawn to certain different provisions as
)   considered by the Division Bench consisting of Mohta and Qazi, JJ.
    on November 30, 1985. It is instructive at this stage to refer to the
                                                                                F   -
                                                                                    "'"
    Rules in respect of levy, assessment and colleciion of octroi. Rule 2(2)
    defines "import" to mean conveying of any article liable to octroi into
    Greater Bombay from any other area outside Grater Bombay. "Place
    of Import" has been define in Rule 2( 4) to mean the Docks, Bunders,
    Wharfs, Railway Yards, Sidings, Depots, Air Port Terminus, Munici-          G
    pal Octroi Posts at roads across Greater Bombay limits and such other
    places at which the articles arrive within Greater Bombay for the
    purposes of import. Section 12 of the Customs Act, 1962 imposes
    customs duty and provides that except as otherwise provided in that
    Act, or any other law for the time being in force, duties of customs
    shall be levied at such rates as may be specified under the Customs         H
    416         SUPREME COURT REPORTS                [1988] Supp. 2 S.C.R.

    Tariff Act, 1975 or any other law for the time being in force, on goods
A
    imported into, or exported from India.

         The learned Single Judge in his judgment noted that a question          [
   almost identical to the question posed above came to be considered by
 · the Nagpur Bench of the Bombay High Court in Special Civil Applica-
B lion No. 779 of 1971, Mis. J.E. Bilimoria & Sons, Nagpur v. Corpora-
   tion of the City of Nagpur. A Division Bench comprised of Masodhkar
   and Kemble, JJ upheld the petitioners' contention by their judgment
   dated 23rd December, 1976. Rule IO(a) framed under the City of
   Nagpur Corporation Act, 1948, read thus:

                "R. lO(a) Where the duty is chargeable on weight, gross
c               profit including that of the package or container shall be
                adopted. When the duty is chargeable ad valorem the value
                thereof shall be the cost price to the importer plus all inci-
                dental charges, such as custom duty, insurance, excise
                duty, sales-tax and freight and such other charges incurred
D               by the importer, till the arrival of the goods at the octroi
                naka, if these have not already been included in the cost
                price."

          The Division Bench in that case held, construing the rule, that it
    did not operate upon liabilities attached to imported goods that arose
E   after the goods had entered the limits of the city of Nagpur for use,
    consumption or sale. Thus, the value at the entry was only relevant for
    the purposes of calculation of the octroi and not its appreciation or
    depreciation thereafter but prepaid or pre-incurred though not paid
    duties before the goods were imported into Nagpur would be the part
    of the value. It was held that that would not be the position of duties or   (
F   charges which were not incurred at the time of the entry of the goods        .
    within Nagpur but which were charged when the goods were dealt with
    after such entry .. The Nagpur Munic.ipal Corporation was, therefore,
  directed not to collect octroi upon bonded liquor brought into the
   limits of Nagpur without payment of excise duty by adding the excise
  duty payable in the 111cidcntal charges co11tcrnplatcd by Rule IO(a).
G The learned Judge was of the view that section 192( l) of the Bombay
  Municipal Corporation Act empowered the collection of octroi upon
  entry of articles into Greater Bombay for consumption, use or sale.
  '[he emphasis is upon the entry of the goods into the city limits. Octroi
  therefore is attracted on entry. The taxable event for octroi is the entry
  of the goods. But the question is when do the goods enter? The
H learned Single Judge was of the view that the liquor in bond is

                                                                                 I
                  SHROFF & CO. v. MUNICIPAL CORPN. IMUKHARJI, J.l            417

         imported when it is conveyed into Greater Bombay from outside              A
         Greater Bombay. When it is conveyed into Greater Bombay by road
         the place of import is the octroi post on the road across the limits of

    ..   Greater Bombay. Nagpur rule applied to the charges incurred by the
         importer till the arrival of the goods at the Octroi Naka. The learned
         Single Judge noted that it would not be proper to include within th~
         word 'incur' the charges to be incurred after .the import, and that th~    ~
         Bombay rule as it is now read used the words 'liable to be incurred."

                Rule 2(7)(a) as it read before 28th July, 1976 mentioned charges
         incurred till the arrival of the articles at the place of import. The
         charge of countervailing duty incurred subsequent to the arrival of the
         bonded liquor at the place of import fell outside the rule as it then C
         read. Between 28th July, 1976 and 27th June, 1983 the rule mentioned
         charges incurred till the articles were removed from the plac~ of im-
         port. Inasmuch as the charge.of countervailing duty was incµrred after
         the bonded liquor had been removed from the place of import, the rule
,,       as it then read could not apply to such countervailing duty. The rule a~
         it reads subsequent to 28th June, 1983 mentions countervailing duty D
         but among charges incurred or liable to be incurred till the articles ar!'
         'removed from the place of import. According to the learned Single
         Judge, the countervailing duty is neither incurred nor is liable to be
         incurred until after the bonded liquor has been removed from the
         place of import. He was, therefore, of the view that the countervailing
         duty could not be included in the value,of the octroi.                  · E

               The Division Bench disagreed. It has to be emphasised that Rule
         : of the Octroi Rules deals with the definition of various terms and the
         expression "import" under Rule 2(2) means conveying of any article
         liable to octroi into Greater Bombay from any o_ther area outside
         Greater Bombay. Rule 2(5) defines expression "date of import'' which       F
         means the date on which the octroi is paid and in the event of non-
         pa yrr1ent of octroi at the tin1e of import on account of any inadver-
         tence, error or misunderstanding, it shall mean the date on which the
         articles are cleared from the place of import. The question is when the
         liability to pay countervailing duty was incurred by the importers of
         liquor. We have noticed Entry 51 of List II and also Section 105 of the G .
         Prohibition Act. Excise Duty is in essence a tax on manufacture or
         production of goods and.excise duty can be levied only on such goods
,        as are manufactured or produced within the State. The countervailing
         duty on the other hand is imposed for the purpose of setting off the
         compensating some other duty so as to place the home producer on an
         equal footing with the importer of foreign goods. The essence of H
    418         SUPREME COURT REPORTS                 I 1988] Supp. 2 S.C.R.
                                                                                  l
    countervailing duty is to set off the effect of non-payment of tax on
A
    manufacture. It is meant to protect the indigenous production.

           The nature of countervailing duty was explained by this Court in
    Ka/yani Stores v. The State ofOrissa and others. [1966] I S.C.R. 865.
    There this Court observed that power to levy countervailing duties
B   under Entry 51 List II is meant to be exercised for the purposes of
    eq ual1Sing, the burden on alcoholic liquors imported from outside the
    State and the burden placed by excise duties on alcoholic liquors
    manufactured or produced in the State. Therefore, countervailing
    duties can only be levied if similar goods are actually produced or
    manufactured in the State on which excise duties are being levied.
c       Our attention was also drawn to the decision of the Allahabad
  High Court in Mis. Mohan Meakin Breweries Ltd. Ghaziabad v. State
  of U.P. and others, [1979] U.P.T.C. 284, where it was held that the
  excise duty is a single point duty, that is, if it is charged at the stage of
  manufacture or at the stage of transport, it cannot be charged at both
D the points.

          Shri Divan, appearing for the Corporation, drew our attention to
    Rules 18, 19 and 31 of the Import and Export Rules. Rule 3(2) of the
    Maharashtra Foreign Liquor (Import and Export) Rules, 1963 defines
    "bonded warehouse" to mean a place appointed by the State Govern-
E   ment as a bonded warehouse for the storage in bond of Indian-made
    foreign liquor and includes a bonded laboratory. "Importing place"
    has been defined under Rule 3(8) to mean any place in India outside
    the State of Maharashtra to which foreign liquor is to be sent from the
    State of Maharashtra. Rule 11 of the said Rules is as follows:

F               "11. Issue of pass.-(1) On receipt of the application
                made under rule 10, the Collector shall make such inquiries
                as he may deem necessary and if he sees no objection he
                may-

                      (a) where the foreign liquor is to be imported in
G               bond, require the importer to execute a bond, in Form C,
                with two sureties, for the payment of the amount of duty
                leviable on the foreign liquor to be imported or a general
                bond, in Form D which would remain in force for a period
                of three years, along with two sureties for the payment of a
                sum sufficient to cover the amount of duty leviable on the
H               total quantity of foreign liquor which may be imported by
SHROFF & CO. v. MUNICIPAL CORPN. [MUKHARJI, J.]               419

  him from time to time during the period of three years, and         A
  on the execution of the bond grant an import-in-bond pass
  inFormE:

        Provided that the execution of the bond .under this ·
  clause may be dispensed with by the Collector in the case of
  any importer of known good standing who has deposited B
  with the Collector a sum which in the opinion of the Col-
  lector is sufficient to cover the amount of duty payable by
  him.

         (b) where the foreign liquor is to be imported on
   pre-payment of duty in the State of Maharashtra, grant an
   import pass in Form F provided that the duty leviable un-
                                                                      c
   der the Act on the foreign liquor to be imported has been
   paid.

          (2) Every pass granted under sub-rule(!) shall show
   the designations of the officers by whom, and the places at        D
   which, the consignment of liquor to be imported is to be
   inspected en route under the 15 aid examined on arrival at
   the place of import under rule 16. In cases of import by
   road, one of the inspecting officers shall be the Prohibition
   and Excise Officer-in-charge of the taluka in which the
   place where the consignment enters the limits of the State         E
   is situated. In cases of import by rail direct to the place of
   import, one of the inspecting officers shall be the Prohibi-
   tion and Excise Officer-in-charge of the place where the
   railway station to which the consignment is to be booked is
   situated.
                                                                      F
         (3) Every pass granted under sub-rule(!) shall be in
   four parts. Part I shall be retained on the records of the
   officer issuing the pass; Parts II and III shall be sent by post
   to the Excise Officer at the exporting place with a request
   to endorse on Part III the quantity of foreign liquor in litres
   and proof litres issued to the importer and thereafter to          G
   return Part III to th~ officer issuing the pass. Part IV shall
   be handed over to the importer or his agent together with
   the Form "Certificate-2" annexed thereto.

         (4) No pass under sub-rule (I) shall be granted unless
   the foreign ·liquor is to be exported to th,e place of import      H
    420        SUPREME COURT REPORTS                [ 1988] Supp. 2 S.C.R.

               from a distillery, brewery or bonded warehouse in the
A
               exporting place.··

          Rule 18 enjoins as follows:


               "18. Deposit of consignment in, and withdrawal from the
B
               bonded warehouse in the case of import in bond. (1) Where
               the foreign liquor is imported in bond, the consignment
               shall, after it is examined under rule 16, be sent to the
               bonded warehouse together with Part IV of the pass and
               the certificate. Particulars of the consignment shall be
               entered by the Officer-in-charge of such warehouse in the
c              register of deposits and withdrawals which shall be kept in
               such form as the Director may direct. Where the consign-
               ment is of rectified spirit imported for use in a bonded
               laboratory, it shall be allowed to be removed to the bonded
               laboratory and the Prohibition and Excise Officer-in-
               charge of such laboratory snail after entering particulars
D              about it in the register of receipts verify its quantity and
               strength. On(.eceipt of the Chemical Analysers report, the
               officer-in-charge of the bonded warehouse or laboratory
               shall fill in the various columns on the reverse of Part IV of
               the pass. The co11signment shall then be allowed to be
               removed from the 'bonded warehouse under a transport
E              pass on payment of-

               (a) the duty leviable under the Act, on the foreign liquor
               imported,

F              (b) the fees prescribed under the Bombay Foreign Liquor
               and Rectified Spirit (Transport) Fees Rules, 1954, and

               (c) other charges, if any, payable in respect of the con-
               signment.

G              The officer-in-charge of the bonded warehouse shall then
               prepare a copy of the Part IV of the pass and forward it to
               the Collector for record with Part I of the pass in his office.

                     (2) the whole consignment of the foreign liquor
                imported into and stored in the bonded warehouse under
H               these rules shall be removed from the warehouse at one
  SHROFF & CO. v. MUNICIPAL CORPN. [MUKHAIUI, J.]             421

     and the same time and within a fortnight from the date of       A
     receipt in the warehouse. If any liquor remains in the
     warehouse for a longer period than a fortnight, warehouse
     rent at the rate of one paisa per week, per litre, or at such
     other rate as may from time to time be fixed by the
     Director shall be charged, but in no case shall a consign-
     ment or any part thereof be allowed to be kept in bond for      B
     a period exceeding one month."

Rule 19 provides as follows:

     "19. Release of consignment after examination in cases of
     imports of Indian-made foreign liquor on pre-payment of         C
     duty. (1) Where the foreign liquor is imported on pre-
     payment of duty in this State, the examining officer shall
     note the result of his examination under rule 16 on the
     reverse of Part IV of the pass and on the certificate. He
     shall then allow the consignment to be removed if he is
     satisfied that the full amount of duty on the foreign liquor    D
     imported and the fees leviable under the Bombay Foreign
     Liquor and Rectified Spirit (Transport) Fees Rules, 1954,
     have been paid or that the importer has agreed in writing to
     pay any excess amount of duty or fees that may be found to
     be due from him on the result of the examining officer's
     examination or on receipt of the report of the Chemical         E
     Analyser to Government. He shall then hand over Part IV
     of the pass to the importer after making a note thereon in
     this respect and keeping a copy of Part IV of the pass. A
     similar note shall also be made on the certificate which
     shall be kept by the examining officer.
                                                                     F
           (2) On result of his examination or on receipt of the
     C.hemical Analyser's report, as the case may be, the
     examining officer shall calculate th.e amount of duty and
     the aforesaid fees due on the consignment and forward the
     copy of Part IV of the pass to the Collector stating what
     excess amount of duty or fees, if any, is recoverable from      G
     the importer. The Collector shall then take the necessary
     steps to recover the amount from the importer. The copy of
     Part JV of the pass shall be recorded by the Collector with
     Part I of the pass· keeping note thereon as to the excess
     amount of duty or fees paid by the importer."
                                                                     H
    422         SUPREME COURT REPORTS               (1988] Supp. 2 S.C.R.

A        Therefore, clearance from bonded warehouses, it was contended
  on behalf of the respondents, envisaged payment of an incurred liabi-
  lity. Our attention was drawn to the observations of this Court in Mc
  Dowell & Company Limited v. The Commercial Tax Officer, (1985] 3
  SCR 791 and reliance was placed on the observations at page 814 of
  the report that these cases establish that in order to be an· excise duty
B (a) the levy must be upon 'goods' and (b) the taxable event must be the
  manufacture or production of goods. It was further submitted that
  countervailing duty is an incidental charge. Our attention was drawn
  to the expression "incidental" in the Words & Phrases, Permanent
  Edition, 20A, pages 100-101 and also to Webster's New Twentieth
  Century Dictionary, page 922 and Webster's Third New International
C Dictionary page 1142.

          In State of Bombay v. M/s. S.S. Miranda Limited, [1960] 3
    S.C.R. 397, the respondent held a trade and import licence for foreign
    liquor as well as a vendor's licence under the Bombay Abkari Act. It
    kept liquor in a bonded warehouse. On April 2, 1948, the appellant
D   asked the respondent to remove the liquor from the bonded warehouse
    after paying the necessary excise duty. The respondent paid the duty,
    got the transport permits and took over the liquor, some of which was
    sold. On December 16, 1948, the appellant issued a notification doubl-
    ing the duty on foreign liquor and called upon the respondent to pay
    the additional duty on the liquor which was still lying in its godown.
E   The respondent contended that the imposition of additional duty on
    the stock on which duty had already been paid at the time of its issue
    from the bonded warehouse was illegal.. The appellant's case was that
    the respondent was bound to pay the duty prevailing on the transport
    of liquor at the time of transporting the same from its premises to
    another place within the State of Bombay. It was held that the imposi-
F   tion of the additional excise duty was illegal. Once the duty had been
    paid the liquor could be transported free from any further imposition,
    except where it was transported to a region where the duty was diffe-
    rent from the region where the duty was paid. There was no power in
    the State Government to impose duty at every movement during the
    course of the trade. Though there was power in the legislature to levy
G   duty at every movement of liquor, it had not exercised that power; nor
    had it delegated such power to the State Government. There at page
    402 of the report, the Court had considered section 3( 10) of the
    Bombay Abkari Act which defines "to transport" to mean "to move to
    one place from another place within the State". On the construction of
    the present Rules, it was contended on the authority of the said deci-
H   sion that unless there was movement, there was no imposition of the
        SHROFF & CO. v. MUNICIPAL CORPN. [MUKHARJI, J.I             423

cquntervailing duty. But that is not a correct assessment of the nature    A
of, duty.

       Our attention was also drawn to the observations of this Court in
The Central India Spinning and Weaving and Manufacturing Company
Ltd., The Empress Mills, Nagpur v. The Municip'al Committee,
Wardha, f1958] S.C.R. 1102. There at page 1107 of the report this          B
Court observed that 'import' is derived from the Latin word importare
which means 'to bring in' and 'export' from the Latin word exporture
which means to carry out but these words were not to be interpreted
only according to the'ir literal derivations. Lexico-logically these do
not have any reference to goods in 'transit' a word derived from trans-
ire bearing a meaning similar to transport, i.e., to go across. The        C
dictionary meaning of the words 'import' and 'export' is not restricted
to their derivative meaning but bear other connotations also. Accord-
ing to Webster's International Dictionary the word "import'.' means to
bring in from a foreign or external source; to introduce from without;
especially to bring (wares or merchandise) into a place or country from
a foreign country in 14e transactions of commerce; opposed to export.,     D
Similarly "export" according to Webster's International Dictionary
means "to carry away; to remove; to carry or send abroad especially to
foreign countries as merchandise or commodities in the way of com-
merce; the opposite of import". The Oxford Dictionary gives a similar
meaning to both these words. At page 1113 of the report, it observed
as follows:                                                                E

           "By, giving to the words "imported into m exported from"
           their derivative meaning without any reference to the ordi-
           nary connotation of these words as used in the commercial
           sense, the decided cases in India have ascribed too general
           a meaning to these words which it appears from the setting, F
           context and history of the clause was not intended. The
           effect of the construction of "import" or "export" in the
           manner insisted upon by the respondent would make rail-
           borne goods passing through a railway station within the
           limits of a Municipality\iiable to the imposition of the tax
           on their arrival at the railway station or departure there- G
           from or both which would not only lead to inconvenience
           but confusion; and would also result in inordinate delays
           and unbearable burden on trade both inter State and intra
           Siate. It is hardly likely that was the intention of the legisla-
           ture. Such an interpretation would lead to absurdity which
           has, according to the rules of interpretation, to be H
           avoided."
    424         SUPREME COURT REPORTS                [1988] Supp. 2 S.C.R.

          Reference was also made to the observations of Chief Justice
A
    Marshall dealing with the word "importation" in Brown v. State of
    Maryland, [1827] 12 Wheat 419, 442. Reference was also made to
    Corpus Juris, Volume 62 page 729 and it was emphasised that "ter-
    minal" in connection with transportation means inter alia "the fixed
    beginning or ending point of a given run". The Court concluded that
B   the terminal tax under section 66(1)(0) of the Act was not leviable on
    goods which were in transit and were only carried across the limits of
    the Municipality.


         Reference was also made to Canada Sugar Refining Company
    Ltd. v. The Queen, [1898] Appeal Cases 735 where at page 740 it was
c   observed as follows:

               "The real question, of course, is whether the sugar was
               "imported" within the meaning of s. 4 of the Tariff Act,
               1894, before or after May 3, because it is by that section as
D              amended by the Act of 1895 that the duty is imposed. By
               the provisions of s. 4 the duties are to be "levied, collected,
               and paid" (which means nothing more than paid) upon the
               enumerated goods "when such goods are imported into
               Canada or taken out of warehouse for consumption
               therein." Their Lordships make the following observations
E              upon this language: (!)The imposition of the duties is con-
               tained only in the direction for their payment. There are no
               words which render the goods liable for the duty or make
               the duty (as it is said) attach at any date prior to the date of
               payment. (2) The words "when such goods are imported
               into Canada" express the time at which the duties are to be
F              paid. If therefore the goods the imported into Canada
               when the vessel enters a port of call on her way to her
               ultimate destination, the duties would be payable at that
               date, which is highly improbable, and contrary to the
               express provisions of s. 31. (3) The duties are payable at
               one of two dates-either the date of importation or the
G              date when they are taken out of warehouse. There is no
               real contrast between the date of arrival at a port of call
               and the date when the goods are taken out of warehouse,
               because if the words mean in the first case that the duty
               attaches when the vessel l!_rrives at a port of call, it must
               equally do so whether on arrival at the port of discharge
H              they are delivered to the importer of warehoused in bond.
         SHROFF & CO. v. MUNICIPAL CORPN. IMUKHARJI, J.]            425

           The true contrast is that which their Lordships have just A
           indicated, and the words appear to them to mean-when
           the goods are landed and delivered to the importer or to his
           order, or when they are taken out of warehouse, if instead
           of being delivered they have been placed in bond. (4) The
           result is that, in the opinion of their Lordships, the words B
           "imported into Canada" must, in order to give any rational
           sense to the clause, mean imported at the port of.discharge,
           and cannot be used in the sense attributed to the word
           "imported" by the appellants, in accordance with the con-
           struction placed by them on the definition in s. 150 of the
           Customs Act. (5) If the goods were "imported" within the
           meaning of the Tariff Act, on or after May 3, (in other C
           words) if the duty became payable after that date, the
           Crown was entitled to it."

      Our attention was also drawn to the observations in the case of
Wilson v. Chambers and Company Proprietary Limited, (38 Common- D
wealth Law Reports 131) where it was emphasised that the quantity of
paint was shipped in England and consigned to a consignee in Sydney.
The paint would have been dutiable under the Customs Tariff if im-
ported into the Commonwealth. The ship did not go to Sydney but
entered another port in New South Wales. The ship was about to
discharge the paint there, and the consigne.e was willing to take deli-
very. While the ship was in the port an arrangement was made bet- E
ween C, acting on behalf of the consignee, and the captain of the ship,
whereby the paint was taken over for the use of the ship. No Customs
entry was made in respect of the paint and it was not landed. By
permission of the Customs officer at the port, a guarantee having been
giving by the captain to furnish a list of all dutiable stores consumed on F
the voyage to Melbourne, the next port of call, the ship left the port
with the paint on board. No duty was paid in respect of any of the
paint. It was held (I) that the paint was imported, that the consignee
had failed to enter imported goods as required by section 68 of the
Customs Act 1901-1920, and that C had been directly concerned in
that offence within the meaning of section 236; (2) that the consignee G
had not, by reason of the arrangement made for the paint being taken
over for the use of the ship, interfered with goods subject to the con-
trol of the Customs within the meaning of section 33; (3) tbat the
consignee had not evaded payment of duty which was payable within
the meaning of section 234. Starke, J. observed at page 150 of the
report as follows:
                                                                           H
       426         SUPREME COURT REPORTS               (1988] Supp. 2 S.C.R.

                  "It cannot, in my opinion, be maintained that the mere act
A
                  of bringing goods into port constitutes an importation;
                  though unexplained it may be evidence of the fact. If
                  goods, however, are brought into their port of destination
                  for tbe purpose of being there discharged, the act of impor-
                  tation is complete. On the other hand, the act of importa-
B                 tion is not complete if a ship enter some port of call with
                  goods on board which is not the destined port of discharge
 -~.
                  for those goods. Actual landing is not necessary, as was
                  argued, to constitute an importation for fiscal purposes.

                        Now, in the present case the goods were not brought
                  to their port of destination but to Port Kembla, where the
c                 goods were to be landed with the assent of the consignees.
                  That, in my opinion, was an importation of the goods
                  within the meaning of the Customs Act. It is clearly the
                  duty of an "owner" who imports goods into Australia to
                  enter them at the Customs, and the term "owner" includes
D                 the consignee of the goods (vide secs. 37 and 4, "owner").
                  Consequently, in my opinion, the defendant should have
                  been convicted of the offence that it did not enter the
                  goods, but there was no evidence of any intent t_o defraud
                  the revenue."

E             Our attention was drawn to certain observations in Halsbury's
       Laws of England, Fourth Edition, Volume 12, paragraph 889, page
       313." There the law is different and value added tax on the importation
       of goods is charged and is. payable as if it were a duty of customs. For
       the purposes of value added tax goods of which entry has been made
       under the provisions relating to customs are treated as imported on the
F      date on which the·entry was made except where the entry is for ware-
       housing, in which case the goods are treated as being imported on the
       date on which they are removed from warehouse

        The question that arises is whether the Division Bench was right
  in the facts and circumstances of the case. We have noted the relevant
G provisions of Entry 51 of List II of the Seventh Schedule in Mohan
  Meakin Breweries Ltd. v. Excise and Taxation Commissioner,
  Chandigarh and others, (1976] Suppl SCR 510 at 517, where it was held
  that the contentions advanced on behalf of the appellant which seemed
  to proceed on the assumption that the Chandigarh Administration
  could impose duty only if liquor was consumed in its territory was
H erroneous as according to section 31 of the Act read with the aforesaid
         SHROFF & CO. v. MUNICIPAL CORPN. (MUKHARJI, J.I             427

Entry 51 of List II of the Seventh Schedule of the Constitution,
                                                                             A
countervailing duty could be imposed on liquor meant for consump-
tion which was manufactured or produced elsewhere in India. It was
immaterial whether the liquor for which permits were obtained was
consumed within the Union Territory of Chandigarh or was in exis-
tence in/that territory or not. What is material is whether permits were
obtained for import from IJ.Uar Pradesh of alcoholic liquor meant for        B
human consumption, This-position stands confirmed by the observa-
tions of-this Court in Re. The Bill to amend section 20 of the Sea
Custarµ$ Act, 1878 and Section 3 of the Central Excises and Salt Act,
1944, 11964] 3 S.C.R. 787. Therefore, bringing goods into the Greater
Bombay with intention to use apd not in transit, in our opinion, was deCi-
sive and any imposition on that would form part of the duty which
could be imposed at the time of the entry and could be included in the
                                                                             c
octroi. However, for goods in transit Section 194A of the Bombay
Municipal Corporation Act, 1988 provides an exemption in accord-
ance with the Octroi Rules framed. In section 195 of the said Act
refund is provided for in relation to articles which are exported from
Greater Bombay after having paid octroi. Imme.diate exportation              D
makes it inapplicable for imposition of tax on goods in transit. That
problem does not arise in respect of importation into Greater Bombay.
Section 105 of the Bombay Prohibition Act, 1949 which has been set
out hereinbefore read with Sections 2(14), 2(20) and 2(36) makes the
position clear beyond doubt that the taxable event in the case of excise
duty would be manufacture or production and in the case of                   E
countervailing duty, import within the State. Section 106 of the
Bombay Prohibition Act, 1949 is headed "Manners of levying excise
duties". This clearly envisages administrative convenience for the
point of levy in the sense of 'collection'. The charge 'or incidence
co-related to the taxable event is on entry into the State by way of
import. The rate applicable would normally be the rate prevailing at         F
that time. However, a specific provision is made to get over this nor-
mal position by the proviso. The proviso would otherwise be
redundant.

      The Maharashtra Foreign Liquor (Storage ih Bond) Rules, 1964
had been framed in 1964. These do not indicate )Vhether any earlier          G
similar Rules were framed. In any event, these Rule~ have been
framed subsequent to the Act of 1949. Thus the charge and incidence
of countervailing duty under the Act and the re.levant Notification of
1949 were already sul).sisting. By subsequent framing of these Storage
in Bond Rules, incidence or charge cannot be deflected Of altered. As
a matter of fact the position is re-inforced by proper reading of Rule       H
    428         SUPREME COURT REPORTS                 I19881 Supp. 2 S.C.R.

A   2(2). Administrative facility is granted for deferred payment to the
    assessee. The words •'without payment of duty" indicate that duty has
    become chargeable and the incidence was complete if. however, the
    assessee complies with the Rules, he is given a facility to defer pay-
    ment. Rule 2(9) also reiterates the same position. This clearly shows
    that the duty has become payable already. This is, therefore, only
B   consistent with the fact that the charge or incidence has already been
    attracted on the taxable event taking place, namely, the manufacture
    or production in the case of excise duty or import in the State in the
    case of countervailing duty. The fact that a bond has to be executed,
    means the goods which are to be stored have already been the subject
    matter of duty or charge. If they have not been so, there is no question
    of bonding them with an undertaking to make payment of duty at the
c
    time of removal or before removal from bond.

          Rules 3(2), 3(3) 3(4), 3(8), 11, 18, 19 and 31 of the Maharashtra
    Foreign Liquor (Import and Export) Rules, 1963 clearly show that the
    normal rule is pre-payment of duty at the time or before the import.
D   These co-relate to the consignment entering the limits of the State. In
    case of import by railway, it is the nearest railway station as designa-
    ted. Rule 31 clearly exempts consignments of foreign liquor which are
    conveyed under the Maharashtra Through Transport.Rules, 1962. In
    other words, goods in transit are not subjected to duty. Collection of
    excise duty may be deferred if the goods are kept under bond. See in
E   this connection the observations of this Court in R.C. Jail v. Union of
    India, [1962] Suppl. 3 S.C.R. 436 where at page 451 of the report this
    Court reiterated that the method of collection does not affect the
    essence of the duty, but only relates to the machinery of collection for
    administrative convenience.

F         In Mc. Dowell v. Union of India, at pages 813-815 (supra) the
    position in relation to excise duty has been clearly stated. In the case of
    Mis. Chatturam Hori/ram Ltd. v. C.I. T. Bihar & Orissa, [1955) 2 SCR
    290 at 297-298 the concept of imposition of duty has been explained.
    There are three stages in the imposition of tax. It was observed as
    follows:             '·
G
                "As has been pointed out by the Federal Court in Chat-
                turam v. CIT Bihar, [1947] F.C.R. 116 at 126 quoting from
                the judgment of Lord Dunedin in Whitney v.' Commis-
                sioners of Inland Revenue, [1926] A.C. 37 there are three
                stages in the imposition of a tax. There is the declaration of
H               liability, that is the part of the statute which determines
  ~·.



          SHROFF & CO. v. MUNICIPAL CORPN. !MUKHARJI, J.]            429

             what persons in respect of what property are liable. Next,
                                                                           A
             there is the assessment. Liability does not depend on as-
             sessment. That ex-hypothesi, has already been fixed. But
             assessment particularise& the exact sum which a person
             liable has to pay. Lastly, come the methods of recovery if
             the person taxed does not voluntarily pay."
                                                                           B
        An argument was advanced on the basis of certain observations
of this Court in The Central India Spinning and Weaving and
Manufacturing Company Ltd., the Empress Mills, Nagpur v. The
Municipal Committee, Wardha, [1958] S.C.R. 1102 at 1114 that there
is no mixing up of goods which are in bond till these are removed from
bond. The observations were made in the context of the facts of that
case. There, the facts were that certain cotton bales were being trans- c
ported in transit through Wardha. The municipality wanted to impose
terminal tax. In that context it was observed that there was no mix.ing
up of the goods in the mass of the property in the area. This case was
not fully approved in Gramophorze Company of India v. Birendr
Bahadur Pandey, 11984] 2 S.C.R. 664 where at page 691 this Court D
observed as follows:

             "We are afraid the case (i.e., the Empress Mills case-1958
             S.C.R. 1102) is really not of any guidance to us, since in the
             context of a 'terminal tax' the words 'imported and
             exported' could be construed in no other manner than was E
             done by the Court. We must, however, say that the
             'original package doctrine' as enunciated by Chief Justice
             Marshall on which reliance was placed was expressly disap-
             proved first by the Federal Court in the Province of Madras
             v. Buddu Paidanna, [1942] FCR 90 and again by the
             Supreme Court in State of Bombay v. F.N. Balsara, [1951] F
             S.C.R. 682. Apparently these decisions were not brought
             to the notice of the Court which have decided the case of
             Central Iridia Spinning and Weaving and Manufacturing
             Co., Ltd., the Empress Mills, Nagpur v. Municipal Com-
             mittee, Wardha ..... "
                                                                            G
      It is clear from the observations made in Wilson v. Chamber and
Company Proprietary Ltd. (supra) that these observations were made
in the context of goods in transit or goods arriving by way of wrecks.
All the judgments in the above cases accept the position that if goods
are imported into Australia for the purpose of the goods becoming
part of the commerce of the country, these could be said to be H
    430         SUPREME COURT REPORTS                 (1988) Supp. 2 S.C.R.

    imported. This is clear from the observations of Chief Justice Knox at
A   page 136 of (38 CLR) the report as well as the argument of Mr.
    Mitchell, Counsel at pages 132 and 133 of the Report. Therefore, the
    purpose of the import is decisive. If these are brought for the purpose
    of commerce or trade, these are imported. Justice Isaacs at page 139
    highlighted the expression "imported goods", in section 68 as meaning
B   goods which, in fact, are brought from abroad into Australian terri-
    tory, and in respect of which the carriage is ended or its continuity in
    some way in fact broken. The observations of Justice Starke set out at
    page 150 of the report reaffirm this position.

          Countervailing duty also does form part of the incidental
    charges. Countervailing duty is clearly contained in Rule 2(7)(a) of the
c   Octroi Rules. The rule prevalent prior to 28th June, 1983 was in the
    following terms:

                "Value of the articles' where the Octroi is charge_d ad
                valorem shall mean the value of the articles made up of the
D               cost price of the articles as ascertained from original
                invoice plus shipping dues, insurance, customs duties,.
                excise duties, sales-tax, vend fees, frieght charges, carrier
                charges and all other incidental charges excepting octroi
                incurred by the importer, tiJI the articles are removed from
                the place of import."
E
          This rule used the words "excise duties" as also the words "all
    other incidental charges". Section 105 of the Bombay Prohibition Act,
    1949 itself talks of excise duties so as to include both excise duty as well
    as countervailing duty. Therefore, the normal connotation of the
    words "excise duties" would take in countervailing duty also. Apart
F   from that charges include taxes. In this connection reference may be
    made to the observations of this Court in D. G. Gouse & Co. v. State of
    Kera/a, (1980) 1 S.C.R. 804 at 815. It was observed as follows:

                "The word 'tax' in its widest sense includes all money
                raised by taxation. It, therefore, includes taxes levied by
G               the Central and the State legislatures, and also these
                known as 'rates' or other charges levied by local authorities
                under statutory powers."

       The expression "incidental" has also been judicially interpreted.
  The expression "incidental" means necessary in certain contexts which
H does not mean a matter of casual nature only. See State of Orissa v.
      SHROFF & CO. v. MUNICIPAL CORPN. I RANGANATHAN, J.I            431

Chakobhai, [1961] 1 S.C.R. 719 at 726.                                     A

      In that view of the matter we are of the opinion that countervail-
ing duty was an incident of importation and, as such, it was includible
even prior to 28th June, 1983, as an octroi.

      In that view of the matter, in our opinion, the Division Bench       B
was right in the view it took and the appeal therefore fails and is
accordingly dismissed. In the facts and circumstances of the case, the
parties will pay and bear their pwn costs. All interim orders will stand
vacated and taxes will be recovered in accordance with law.

       S. RANGANATHAN, J. I agree. In the ultimate analysis,"the C
question arising for consideration in the present case is within a narrow
compass. For answering this question, two sets of provisions have to
be considered: (a) The Bombay Municipal Corporation Act and the
octroi rules framed thereunder and (b) the Bombay Prohibition Act
and the rules framed thereunder. Section 192 of the Bombay Municipal
Corporation Act, 1888, read with section 128 thereof and the rules D
framed thereunder imposes octroi, in respect of the goods with which
we are concerned, on an ad valorem basis. Rule 2(7)(a) defines the
value of the articles concerned for the purpose of octroi duty.
Broadly, the rule defines the value of article for the purpose of octroi
duty as made up of the cost price of the article plus certain items of
additions specifically mentioned in the rule itself and a residuary E
clause. There are three periods of time that liave to be considered (i)
prior to 28th July, 1976, (ii) between 28th July, 1976 and 28th June,
 1983 and (iii) after 28th June, 1983. For the first period, the rule
specifically mentioned "shipping dues, insurance, excise-duties, sales-
tax, vend fees, frieght charges, carrier charges" and added: "all other
incidental charges incurred by the importer till the arrival of the articles F
at ·the place of import". For the period between 28.7.1976 and
28.6.1983, it added customs duties to the items specifically mentioned
and added "all other incidental charges excepting octroi incurred by
the importer till the articles are removed from the place of import". For
the period after 28.6.1983, the rules specifically included countervail-
ing duty in the list of specific items and "all other incidental charges G
excepting octroi duty incurred or liable to be incurred by the importer
till the articles are removed from the place of import". Under the
Bombay Prohibition Act, the relevant sections are section 2(14), sec-
tion 26, section 105 and section 106. These and -some of the rules on
which reliance was placed have been referred to in the judgment of my
learned brother Mukharji, J. and need not be repeated here.                  H
    432         SUPREME COURT REPORTS                 [1988] Supp. 2 S.C.R.

A         In the light of these provisions, two issues arise for considera-
    tion. The first is the point of time at which the liability to pay
    countervailing duty arises. On this the appellants' argument is that, in
    principle, this liability is not attracted merely by the entry of goods at,
    or their removal from the customs barrier of the concerned territory
    but arises only at the point of time when those goods enter the market
B
    for purposes of use, sale or consumption and mix with other goods. It
    is said that this is why while section 105 is general, section 106 clearly
    lays down that the countervailing duty is payable only as and when the
    goods are removed from the bonded warehouse for such purpose and
    not earlier. I agree with my learned brother's conclusion that this
    argument cannot be accepted. The language of section 105 which
c   imposes the charge, of section 106 which talks of payment and-of the
    rules leaves no doubt that the duty is attracted at the point of import
    (i.e. physical entry of the goods into the taxing territory) and that onry
    the payment of duty is deferred, in case the goods imported are
    removed to a bonded warehouse, to a later point of time, for purposes
    of convenience of collection. It will not be appropriate to construe the
D   provisions in' such a manner as imposing a liability on some persons
    (who have no bonded warehouse) at one point of time and on others,
    at a different point of time. Also, if, as urged, the liability to pay the
    duty itself were referrable to a later point of time, the insistence on a
     bo·nd in the terms prescribed would appear to be redundant. The pro-
     vision that, where the facility is availed of, the assessee would pay duty
E   at the rate prevalent at ihe later point of time (often higher than at the
     point of import but not necessarily so)· is not inconsistent with the
     above con_cept but is rather a logical consequence of the.privilege of
     deferment given to the assessee.

          The second question is regarding the includibility of the
F   countervailing duty for purposes of octroi. So far as the two periods
    after 28th July, 1976 are concerned, I agree with my learned brother
    that there can be no doubt that this is included. The specific inclusion
    of the word "countervailing" duty and broader reference to duties
    "incurred or liable to be incurred" in the 1983 amendment in my
    opinion, only further clarifies the position which was prevalent even
G   prior to 28. 7.1983. The word "incidental charges" has a very wide
    meaning, particularly in a context where duties and taxes are referred
    to and the idea seems to be to include all items that will be taken into
    account by an importer as part of his cost. In regard to the period till
    28.7.1976, I had a little doubt as the rule included only charges incur-
    red "till the arrival of the article at the place of import". But, consider-
H
       SHROFF & CO. v. MUNICIPAL CORPN. ( RANGANATHAN, J.) 433

ing that "arrival" is the event wliich simultaneously attracts both      A
ocfroi and customs, I think that the later change of language was only
clarificatory and I agree with the conclusion my learned brother has
reached that the position should be the sameJor the first period also.

S.L.                                                Appeal dismissed.
                                                                         B