Larsen and Toubro Ltd. Vs Municipal Corpn. of Gr. Mumbai and Anr.

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IN	THE ORDINARY	HIGH	COURT ORIGINAL	OF J	UDICATUR CIVIL	E AT BOMBAY JURISDICTION
		APPEAL		NO.87		OF 2000
	WRIT		IN PETITION	N	O.1904	OF 1999
Larsen and Tou Municipal	bro Ltd. v/s		Corp	oration	...Ap	pellants of
Greater Mumba	i and anr.				...Res	pondents
Mr	Aditya		Chitale		for	Appellants.
Mr A.Y.	Sakhare	with	Mr	Nazir	Shaikh	for Respondents.
CORAM DATE	: D.K.	DES :	HMUKH 11T	AND H	J.H. OCT	BHATIA JJ. OBER 2007.

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ORAL JUDGMENT (PER D.K. D	ESHMUKH J	.) :-
1. By this appeal, the appellant challenges	the
order dated 20th August 1999 passed	by the	learned
single Judge of this Court in writ	petition No.1904	of
1999. The relevant facts that are	material for	deciding
this appeal are that the appellants	imported	certain
consignment of goods under Duty	Exemption	Entitlement
Certificate Scheme and Project Import	Scheme.	When
shipment arrived at Bombay Port, the	goods were	kept in
custom bonded warehouse to avoid	demurrage till	the
completion of formalities for availi	ng concessional	/
reduced custom duty under the above	referred	Scheme.
When the goods were removed to	the custom	bonded
warehouse, the petitioners lodged bill	of entry	for
warehousing and furnished bonds to	custom	authorities
equivalent to the whole of the esti	mated /	provisional
custom duty. At the time of removal	of the goods	from
the custom bonded warehouse, the	Bombay	Municipal
Corporation levied octroi duty on the	said goods	by
adding the amount of estimated provi	sional custom	duty
to the CIF value of goods. Thereaft	er, the goods	were
removed from the custom bonded w	arehouse but	admittedly
at the time of removal of goods,	the petitioners	were
not required to pay any custom du	ty as they	were

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exempted	from	pay	ment	of	custo	m	duty.	As	octroi	duty
was	recovered	from	the		petitio	ners	by	adding	the	amount
of	estimated		provisio	nal	cus	tom	duty,	the	p	etitioners
applied	for	refund	of		excess		octroi	duty r	ecovered	from
them.	That	app	lication		was	mad	e to	the	Cor	poration.
The	Corporatio	n	rejected		that		application.		T	herefore,
the	petition	was	filed		praying	f	or a	direction	to	the
Corporation	to	re	fund	th	e ex	cess	octroi	duty	that	was
recovered	by the	Cor	poration.			The	petitio	n was	heard	by
the	learned	Single	Judg	e	of	this	Court	alo	ngwith	two
other	connected	peti	tions.		Th	e	learned	Single	Judge	by

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judgment dated 20th August 1999 dismissed the petitions.

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The present appeal is directed against that order.

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2.		The lear	ned counsel appearing for app	ellants
submits	that	under	rule 4(c) of the	B	ombay		M	unicipal
Corporat	ion (Le	vy of	Octroi) Rules	1965	(for	sh	ort,	the
said	Rules), for	recovery	of octroi duty	to	the		value	of
the	goods s	hown in	the invoice, the	amount		of		custom
duty	is to be	added	in custom duty	actually	bee	n	paid	or
the	consignee is	liable	to pay custom	duty.		The		learned
counsel	submits	that	after the goods	were	rec	eived		on
the	dock, wh	ile remo	ving the goods	to th	e c	ustom		bonded
warehou	se, under	the bil	l of entry, the	am	ount	of		custom
duty	which mi	ght have	been required to	be	paid	had		the
goods	not been	exempted	from payment	of c	ustom	d	uty,	was
indicated	and	the	Corporation included	that	am	ount		in

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the v	alue	of	the goods shown in the bill of entry	and
charged	o	ctroi	duty. According to the learned	counsel,
in t	erms	of	provisions of Rule 4(c) of the said	Rules,
octroi	can		be levied on articles liable to octroi	on
ad-valorem		basis	by adding the customs duty incurr	ed or
liable	to	be	incurred. In the instant case,	admittedly
the	custom	dut	y has neither been incurred nor were	the
petitioners	l	iable	to pay the custom duty. The	amount
of custo	m du	ty	could not have been added to the v	alue of
the	goods.		The leaned counsel submits that the	learned
Single	Judge	has	misconstrued the provisions of the	said
Rules.		The	learned counsel appearing for C	orporation,
on	the	othe	r hand, submits that octroi becomes	leviable
on the	go	ods	entering the limits of the Corporatio	n i.e.
the	goods	bec	ome liable for payment of octroi duty	when
the g	oods	are	received in the dock. In the	present
case,	when	the	goods were received at the dock, as	per
he bill	of	en	try, custom duty was payable and	therefore,
the	Corpo	ration	was justified in adding the custom	duty
to th	e	value	of the goods. Reliance is placed on	the

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provisions of rule 2(7)(a) which defines the term ’Value

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of the Articles’.

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3.			Now, in	the light	of these rival	submissions
if	the	record	of	the	case is	perused,	it appears	that
the	cha	rging	section	for	octroi	is section	192 of	the
Bombay		Municipal	C	orporatio	n Act,	1888.	It lays	down

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that	a	tax	at	rates	not	excee	ding	those	res	pectively
specified	in	Sche	dule	H,	shall	be	levied	in	respect	of
the	several	artic	les	mention	ed	in	the	said S	chedule	or
so many	of	them	or	such	of	them	as	the	Corporation	shall
from	year	to	year	in		accorda	nce	with	section	128
determine	on	the	entry	of		the	said	articles	into	Greater
Bombay	for	cons	umption	, use	o	r sale	ther	ein.	The	said
Rules	lay	down	the	proce	dure	that	is	to be	followed	for
collection	of	octr	oi	duty.		The	provision	relied	on	by

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the Corporation is the provision of rule 2(7)(a) of the

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said Rules which reads as under :-

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"2(7)(a)	’Value of	the	articles	’ wher	e	octroi
is	charged ad-valorem	shall	mean	the	value	of
the	articles as	ascert	ained	from		original
invoice	plus shipp	ing	dues,	insurance,		custom
duties,	excise	duties,	counte	rvailing		duty,
sales	tax, transport		fee,	vend		freight
charges,	carrier char	ges	and	all		other
incidental	charges,	exce	pting	octroi		incurred
or	liable to be	incurred	by	the im	porter	till

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the articles are removed from the place of

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import."

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.		Perusal	of	the above quote	d provision shows
that	where	octroi	is	charged	ad-valorem, value	of	the
articles	is	to be		ascertained	from original		invoice,

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shipping	dues,	in	surance,	cu	stom		duties, excise	duties,
countervailing	duty,		sales		tax,	tran	sport fee,	vend
freight	charges,	carri	er	charges			and all	other
incidental	charges	inc	urred	or	liab	le	to be incurred	by
the imp	orter are		to be	inclu	ded	in	the value of	the
articles.	Thus,	it	is	clear	that	in	the value of	the
articles	shown	in	the	origina	l	invoic	e, the amount	of
custom	duty inc	urred	or	liable	to	be	incurred can	be
included.	Rule	4	deals	with	pro	cedure	that is to	be

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followed. For our purpose, it is Rule 4(c) which is

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relevant, which reads as under :-

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"4(c) In respect of articles imported from foreign ports subject to customs duty and liable to octroi it shall not be necessary for the importer to produce the original invoice but the weight and value accepted by the Customs shall be accepted as basis for the levy of octroi and octroi shall be levied on articles liable to octroi on ad-valorem basis by adding the customs duty incurred or liable

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to be incurred to the aforesaid value accepted

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by the customs." (emphasis supplied)

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. Perusal of the above quoted Rule shows that it

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lays custom	down duty	that and	goods liable	whi to	ch are octroi	sub on	ject the	to basis	payment of	of value

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of	the goods shown in the invoice, the amount paid	or
liable	to be paid as custody duty is to be added.	In
the	present case, admittedly, the amount of custom	duty
which	the petitioners would have been liable to pay,	had
the	petitioners not been exempted from payment of	custom
duty,	has been added to the value of the articles	shown
in	the original invoice and octroi duty has	been
charged.	Perusal of the bill of entry itself shows	that
no	custom duty was payable on the goods. The amoun	t of
custom	duty, which was mentioned in the bill of	entry
was	the amount which the importer would have been	liable
to	pay had there been no exemption from payment	of
custom	duty the amount mentioned is the estimated	amount
of	custom duty payable had there been no exe	mption.
Therefor	e, even when the goods were received on	the
dock,	custom duty was not payable by the pet	itioners.
In	any case, in our opinion, the language of	Rules
2(7)(a)	and 4(c) is absolutely clear that the amount	of
custom	duty which can be added to the value of the	goods
shown	in the invoice is the amount of custom duty,	which
the	importer is liable to pay or which is actually	paid
by	the importer. In other words, before charging	octroi
duty	by including the custom duty in the value of	the
goods	shown int he invoice, the Corporation will have	to
show	either that the custom duty has actually been	paid
or	that the importer was liable to pay the octroi	duty.
In	so far as the present case is concerned,	there

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appears	to be	no dispute	that custom		duty was not
actually	paid bec	ause of the	exemption.		In our opinion,
therefore,	the	Corporation	was	not	justified in
including	the	estimated custom	duty in	the	value of the
articles	shown	in the origin	al invoice	for	the purpose
of	calculating	the amount	of octroi	duty	liable to be

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paid and therefore it is obvious that the octroi was

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recovered in excess by the Corporation.

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An application was made by the petitioners

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under Rule 26 of the said Rules. Rule 26 reads as under

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:-

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"26.	Repa	yment or refund of	octroi	paid
wrongly	or	in excess :- When octroi	has	been
wrongly	rec	overed or has been rec	overed	in
excess		through inadvertence,		error,
misconst	ruction,	misinterpretation or		any
other	reason	on the part of the		Municipal
Octroi	staf	f or that of the agents		appointed
by	the	Commissioner under section 213	of	the
Bombay		Municipal Corporation Act,	such	excess
may	be	refunded to the importer	provide	d that
a	claim	for such refund accompanied	by	the
original		invoice, octroi import bill,		octroi
receipt	if	any is lodged in the off	ice	of the
Deputy		Assessor and Collector (O	ctroi)	within

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a period of three months from the date of such recovery or within such longer period as the Commissioner may in any special case or class of cases allow. The said officer may, after being satisfied about the correctness and genuineness of the claim, grant refund of

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octroi wrongly recovered or recovered in

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excess."

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. Perusal of the above quoted rule shows that

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when	octroi am	ongst other thi	ngs,	has been recovere	d due
to	any e	rror, misconception	or	misinterpretation,	then
refund	can be	claimed by the	impo	rter. As we fi	nd that
octroi	was	recovered in	excess	from the	petitioners
inasmuch	as	the amount of	custom	duty was included	in
the	value o	f the articles	shown	in the invoice,	the
petitioners	are e	ntitled to the	refun	d of octroi pa	id in
excess.	I	n our opinion,	ther	efore, writ petition	filed
by	the petiti	oners deserves	to be	allowed. In	the
result	therefore,	appeal succeeds	and	is allowed.	The
order	impugned	in the appeal	is s	et aside. Rule	in the
writ	petition	filed by the	pet	itioners is made	absolute
in	following	terms. The	order	impugned in the	petition
dated	18th F	ebruary 1999 is	set	aside. The	Deputy
Assessor	and	Collector (Octroi),	B.M	.C., Bombay 400	001,
who	has	passed the order,	is	directed to consider	the
application	filed	by the p	etitioners	for refund de	novo

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in accordance with law and the observations made in this judgment and make his order within a period of twelve weeks from the date of receipt of this order.

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. Parties to act on the copy of this order duly authenticated by the Associate / Private Secretary as true copy.

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. Certified copy expedited.

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( D.K. DESHMUKH J.)

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( J.H. BHATIA J.)

Larsen and Toubro Ltd. v. Municipal Corpn. of Gr. Mumbai and Anr.

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Larsen and Toubro Ltd. v. Municipal Corpn. of Gr. Mumbai and Anr.

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