whether Octroi can be demanded on “Re-usable Empty glass bottles” on the premise that filled glass bottles were imported into municipal limits ?

A Less interesting Case took nearly two hours of Bombay High Court (dated 24.09.2010) and the Division Bench at Court No.2 presided by Smt.Justice Ranjana Desai and Mr Justice R.V. More were constrained to observe and say to the arguing Counsel-- So should we discharge rest of the Board for the day ?

The facts leading to the filing of above cases by Hindustan Coca Cola (5510 of 2010) & PepsiCo India (5867 of 2010) are few and simple. Sangli Municipal Corporation issued Notice / Bills of Octroi to be paid on Re-usable Empty Glass Bottles of Beverages to above parties. It is the case of Sangli Municipal Corporation that above parties have imported within municipal limits, say about 100 filled Soft drink Glass bottles and therefore, they are liable to pay Octroi on 100 Re-usable Empty glass bottles.

And Parties, instead of making due representations before the Sangli Municipal Commissioner, preferred, though rightly, a Writ, challenging the notices / Bills. Interim relief were granted to parties and Municipal authorities were directed not to take any action till further order of this Hon'ble Court.

The Sangli Municipal Corporation were heavily relying on Judgment of Hon'ble SC in M/s Acqueous Victuals Pvt. Ltd. v. State of U.P. and Others, JT 1998 14 SC 195. Although the facts of the case in this case were quite different that from present case at hand, the above judgment, among other things, stated that Parties may claim refund of Octroi after paying the same and also that principles of Sales Tax and Excise cannot be applied in cases of Octroi.

The Counsels of PepsiCo (Sr.Advocate Janak Dwarkadas & Learned Advocate Rajeev Talasikar) were also in fact relying on above SC Judgment and also one unreported Judgment of SC in S.M. Ram Lal & Co. v. Secy. to Govt. of Punjab and were of the view that in the light of interpretation of relevant words "consumption, use or sale”, no liability to pay Octroi accrues.

The Counsels of Coca Cola (Learned Advocate Madhur Baya & the team of Economic Law Practice) were vehemently arguing that in fact they have already paid Octroi on the Glass Bottle, as they are already paying Octroi on the filled Bottles.

In a way, both Counsels were absolutely correct in their views. But in my humble view, learned Counsels there have failed to appreciate the spirit of Octroi Taxation. And, also, they have failed to appreciate that the Judgment on which Sangli Municipal Corporation were heavily relying upon is in fact in their favour.

The Hon'ble SC in M/s Acqueous Victuals Pvt. Ltd. v. State of U.P. and Others observed in para 21 of the Judgment that principles of Sales tax cannot be applied in Octroi. The Hon'ble Apex Court is very right when it says that principles of imposing Octroi cannot be equated with other taxing statutes. Let me try to illustrate this principle.

Every goods that is manufactured is subject to Excise duty, but the same goods is not subject to Octroi unless that goods is transported to another municipal limit. The short point I am making is that -- “A goods is not subject to Octroi unless it knocks the doors of a Municipal limit expressing its desire to enter into its limits, for consumption, sale or use." Therefore, a goods manufactured is certainly going to be Excised but that goods may or may not attract Octroi. Both taxes operate on different principles.

The sweeping spirit of Octroi Tax is that it becomes payable when the goods are imported within any municipal limit for the purposes of consumption, sale or use; In the present case, it is no case of the Municipality to say that the Parties have brought in Empty Bottles within the municipal limits; and therefore, when Octroi is demanded on empty bottles & empty crates, the taxing municipal authorities must be told to produce documents which show that the person has imported within that municipal limits empty bottles & empty crates.
It is a settled position of law that Taxing statutes are to be strictly construed and logic has little role to play and the persons’ liability to pay 'a tax' must be strictly brought within the four corners of the charging section. I take leave to repeat—“It is the case of Sangli Municipal Corporation that above parties have imported within municipal limits, say about 100 filled Soft drink Glass bottles and therefore, they are liable to pay Octroi on 100 Re-usable Empty glass bottles.”

In the last, I take liberty to take you to the observation of Justice CHINNAPPA REDDY in McDowell & Co Ltd versus Commercial Tax Officer (1985) 3 SCC 230-- “..... In our view, the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provision should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the Statute, but whether the transaction is a device to avoid tax.”. In the above cases of Hindustan Coca Cola & PepsiCo India, it is not the case of Sangli Municipal Corporation that they are evading to pay Octroi duty.

Therefore, the essential question (though not raised by Parties therein) before the Hon'ble Court is-- whether Octroi can be demanded on “Re-usable Empty glass bottles” on the premise that filled glass bottles were imported into municipal limits ?
Anyway, the case is reserved for Judgment. Let’s wait anxiously.

I have apprised Advocates of both parties to consider this proposition of law and they may consider to move appropriate Application before Bombay High Court in this regard.

Sandeep Jalan
(advocate)
Mumbai.

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