Hindustan Coca-Cola Beverage Pvt. Ltd. vs Sangli Miraj & Kupwad Municipal Corporation & Ors.

Hindustan Coca-Cola Beverage Pvt. Ltd. .... Appellant

Versus

Sangli Miraj & Kupwad Municipal

Corporation & Ors. ....Respondents

WITH

CIVIL APPEAL NO. 4918 OF 2011

[Arising out of S.L.P (C) No. 16771 of 2011]

CC No. 2284 of 2011

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. Delay condoned.

2. Leave granted.

3. As both the appeals involve identical question of law the same

were heard together and are disposed of by this common

judgment. Both the present Civil Appeals are filed against the

judgment dated 08.10.2010 in the Writ Petition No. 5510 of

2010 and against the judgment dated 08.10.2010 in the Writ

Petition No. 5867 of 2010, passed by the Division Bench of

the High Court of Judicature at Bombay whereby the Division

Bench has dismissed the writ petitions filed by the appellants

herein challenging the validity of the bill issued by the

Respondent Corporation, levying and demanding octroi from

the appellants on glass bottles and crates.

4. In the Civil Appeal filed against the judgment dated

08.10.2010 in the Writ Petition No. 5510 of 2010 the

appellant company is, inter alia, engaged in the manufacture

of aerated beverages marketed under different brands. The

products of the company are distributed from its plant

located at Pirangut Taluka, Mulshi, District Pune to amongst

other places like Sangli Miraj and Kupwad.

5. According to the appellant, their products are distributed and

sold in returnable and reusable glass bottles. Glass bottles

are stored in plastic crates. Glass bottles and crates are

owned by the appellant. They are never sold to any

distributor or retailer. Once the product in the glass bottles

kept in crates is consumed, glass bottles along with crates are

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returned to the appellant for filling after cleaning and

washing them. The appellant pays octroi levied on the aerated

beverages when they enter octroi limits of Municipal

Corporations. The impugned bill has the effect of levying

octroi separately on the glass bottles and plastic crates

utilized by the appellant to pack and transport the aerated

beverages manufactured by them. The aerated beverages

cannot be separated from bottles and crates. The bottles and

crates are neither consumed nor sold but are returned. The

glass bottles and plastic crates are both reusable and durable

and are repeatedly used by the appellant. Moreover, it is

alleged that the cost of the glass bottles and crates is

amortized and included in the retail sale price of the aerated

beverages. Hence, it was suggested that Octroi cannot be

levied on the value of the glass bottles and crates and the

impugned bills are, therefore, illegal and arbitrary.

6. The said challenge did not find favour with the High Court

and the High Court after placing reliance on the judgment of

this Court in the case of Acqueous Victuals Private Limited

v. State of Uttar Pradesh & Ors. reported at (1998) 5 SCC

474 dismissed the Writ Petition. However, liberty was granted

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to the appellant company to claim refund by filling

appropriate application, in case, the bottles and crates are

not sold, used, or consumed in the Municipal limits of the

respondent-corporation, that is to say, if they have not finally

rested in the Municipal limits of the respondent-corporation;

and a further direction was issued that if such an application

is filed, the same will be considered in its proper perspective

by the concerned authority and if a case is made out the

refund shall be granted.

7. We heard the learned senior counsel appearing for the parties

at length. Similar submissions, as were made before the High

Court, were also made before this Court. It was submitted by

the learned senior counsel appearing for the appellant that

plastic crates and glass bottles are durable and reusable.

They are used a number of times by the appellant. The bottles

and crates are not sold. They are not consumed. The bottles

are used but again sent out and refilled. The crates are also

similarly sent back.

8. It was further submitted that as per the definition of the term

octroi as found in Section 2(42) of the Bombay Provisional

Municipal Corporation Act, 1949 (for short "BPMC Act"),

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"octroi" means a cess on the entry of goods into the limits of a

city for consumption, use or sale therein and as in the

present case there is no consumption, use or sale, the levy of

octroi is unjustified.

9. Strong emphasis was placed on the submission that, the cost

of the bottles and crates is amortized and included in the

retail sale price of the aerated beverage. Since the cost of

glass bottles and crates is already included in the price of the

beverage on which the octroi is levied and collected, no

further octroi can be levied on the glass bottles and crates.

10.All the above said submissions and contentions were refuted

by the learned senior counsel appearing for the respondents.

It was submitted that the issue in the present case stands

settled by this Court, long back, in the case of Acqueous

Victuals (supra) and the High Court has rightly dismissed

the Writ Petition by following the ratio laid down in the said

judgment of this Court. Further, it was submitted that the

appellant cannot be aggrieved by the said levy of the octroi on

glass bottles and crates, as in case the appellant can satisfy

the authorities that they were not used, consumed or sold in

the Municipal limits but were taken out for recycling, in the

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said case they can claim refund and as such are not

burdened with the liability of octroi on such bottles and

crates.

11.Before we proceed further it would be relevant to refer to the

judgment of this Court in the case of Acqueous Victuals

(supra). In Acqueous Victuals (supra), the petitioner-

Company was engaged in the business of bottling soft drinks.

After bottling these beverages at its plants at Bareilly, the

petitioner-Company distributed the same to wholesalers in

Districts of Uttar Pradesh. Section 128 of the Uttar Pradesh

Municipalities Act, 1916 conferred powers on the Municipal

Boards to impose octroi on goods or animals brought within

the Municipality for consumption, use or sale therein.

Byelaws of the Municipalities provide for levying octroi on soft

drinks. As the Municipalities were seeking to levy Octroi on

the basis of gross weight not only of the beverages but also of

the bottles containing the beverages which were brought

within the Municipal limits, the petitioner-Company filed writ

petition in the Allahabad High Court challenging the said

levy. According to the petitioner-Company, the bye-laws

provided for levying octroi on soft drinks but not on the

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weight of bottles which contained those soft drinks. The High

Court dismissed the petition. The High Court held that the

bottles in which the soft drinks were carried could be said to

have been used within the Municipal limits for the purpose of

storing them till they were ultimately utilized by the

consumers concerned. Therefore, even the weight of bottles

containing these liquids could legitimately be taken into

consideration by the Municipalities for imposing the octroi

duty thereon.

12.Dealing with the petition challenging the High Court's

decision, this Court referred to Section 128 (1) (viii) of the

Uttar Pradesh Municipalities Act, 1916 which states that

subject to any general rules or special orders of the State

Government in this behalf, the taxes which a Board may

impose can consist of Octroi on goods or animals brought

within the Municipality for consumption, use or sale therein.

The rates of levy were given in Schedule I. Schedule I referred

to aerated water but not to aerated water bottles. This Court

considered the main charging provision i.e. Section

128(1)(viii) which stated that Octroi can be charged on goods

which were brought within the Municipality for consumption,

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use or sale and held that packing which contains the

consignment of octroiable beverages would remain liable to be

included in the taxable gross weight of consignment provided

such packing is shown to be brought within the Municipal

limits for the purpose of its sale, consumption, or use within

the Municipal limits. But, if the packing is found to have been

taken out of the Municipal limits after its contents were

discharged within the Municipal limits, then the weight of

such packing cannot be brought to octroi tax or if such tax is

levied at the entry point, it would become liable to be

refunded. This Court further observed that the claim of

refund would involve disputed questions such as whether

such consignments with the packing were actually sold with

their contents to the local consumers, or wholesalers,

whether they were consumed or used up within the local

limits or whether they were used for an indefinite period and

ultimately rested within the Municipal limits and had not

been taken out. These disputed questions of fact are required

to be examined and adjudicated upon when claims for refund

are considered by the appropriate authorities.

Page 8 of 20 13.While arriving at the above conclusion, this Court referred to

the Constitution Bench judgment in Burmah Shell Oil

Storage & Distributing Company of India Limited v.

Belgaum Borough Municipality reported at AIR 1963 SC

906 where it was dealing with the question whether octroi

was leviable on the goods brought within the limits of

Belgaum for consumption by Burmah Shell, for re-export and

for sale. While interpreting the words found in Entry No.52 of

the State list in the Constitution dealing with taxes on the

entry of goods into a local area for consumption, use or sale

therein, this Court observed that the two expressions, "use"

and "consumption" together connote the bringing in of goods

and animals with a view to their retention either for use

without using them up or for consumption in a manner which

destroys, wastes or uses them up. This Court observed that

this authoritative pronouncement of the Court makes it clear

that before a Municipality can impose octroi duty on any

commodity, it has to be shown that the commodity concerned

was brought within the Municipal limits for consumption,

that is, for being totally used up so that it ceases to exist

within the Municipal limits or it was to be used for an

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indefinite period within the Municipal limits so that it

ultimately rests within the Municipal limits and does not go

out subsequently, or the commodity concerned must be

shown to have been brought within the Municipal limits for

the purpose of sale within the said limits.

14.This Court also referred to its judgment in S.M. Ram Lal &

Co. v. Secretary to Government of Punjab reported at

1969 UJ 373 (SC), where this Court was dealing with the

question, whether the wool imported within the Municipal

limits of Faridabad in raw form for dyeing within the

Municipal limits could be said to have been used in the

Municipal limits or consumed therein so as to attract Octroi

duty thereon. This Court observed that the word 'use' occurs

in Entry No.52 of List II of Seventh Schedule sandwiched

between 'consumption' and 'sale', and it must take colour

from the context in which it occurs. This Court further

observed that the coupling of three words 'consumption', 'use'

and 'sale' connotes that the underlying common idea was that

either the title of the owner is transferred to another or the

thing or commodity ceases to exist in its original form.

Page 10 of 20 15.However, this Court did not approve of the High Court's

reasoning that the bottles and shells were used as containers

till final consumption of contents and, therefore, the bottles

which contained the beverage were used till the final

consumption stage and were, therefore, liable to levy of Octroi

leaving aside the question whether they were brought within

the Municipal limits for consumption thereof. Referring to

Burmah Shell's case, this Court held that though the use of

the bottles may not amount to its destruction or total using

up, but to attract octroi, the bottles must have finally rested

within the Municipal limits and not taken out. This Court

concluded that to attract the levy of octroi on the goods

brought within the Municipal limits, there must be proof of

the fact that the goods got consumed completely within the

Municipal limits or were used for an indefinite period in such

a way that they come to rest finally and permanently within

the Municipal limits or sold within the said limits.

16.With reference to the facts of the case before it, this Court

observed that the moot question was whether the bottles

which were filled in with beverages imported for sale within

the Municipal limits could be said to have been consumed or

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used within the Municipal limits. The question whether the

bottles were really sold by the petitioner-Company within the

Municipal limits requires resolution on consideration of

relevant facts. If empty bottles are taken out of Municipal

limits, they cannot be said to have been consumed or

destroyed within the Municipal limits. The question which

needs investigation is whether out of the total consignment of

bottled beverages imported within the Municipal limits, the

entire consignments of the very bottles after getting emptied

got re-exported or whether some of the said bottles forming

part of the original consignments got destroyed by way of

breakage, etc. or were never returned by the consumers

concerned and only rest of the imported bottles were re-

exported by enabling the consumers and retailers or

wholesalers to get refund of the price of the bottles paid by

way of advance security from the petitioner-Company on

return of these empty bottles for recycling. It is axiomatic that

if the bottles in which beverages were brought within the

Municipal limits for sale to consumers had themselves got

destroyed by breakage, etc. or were not returned by

consumers, they could be said to be consumed within the

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Municipal limits and, hence, there would be no occasion for

their export at any time thereafter. In the said circumstance

the intention with respect to the fact that whether or not, the

said goods were brought for consumption and usage will

become clear only at the subsequent stage i.e. when the

bottles are re-exported. In the view that it had taken, this

Court held that if the petitioner-Company satisfied the

authorities concerned that the bottles containing the original

consignments after getting emptied within the Municipal

limits were actually taken out of the Municipal limits for

recycling, then it would be entitled to claim proportionate

refund of the octroi duty assessed on the weight of such

empty bottles only subject to the burden of such amount of

duty not being shown to have been passed on to consumers

of beverages or to anyone else, i.e. there is no unjust

enrichment.

17.Setting aside the High Court's order to the above extent, this

Court permitted the petitioner-Company to lodge its claim for

refund by producing evidence on the following points:

"(a) Nature of the consignments concerned

with their dates and the number of bottles

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packed with beverages brought within the

municipal limits with their weight;

(b) Proof regarding the fact that these bottles

were not sold within the municipal limits to

wholesalers, retailers or to any other person;

(c) Number of bottles covered by the

consignments concerned which were

subsequently taken out as empty bottles

beyond the municipal limits for recycling and

weight of such empty bottles;

(d) Whether the bottles which are actually

found to have been taken out of the

municipal limits were the very same bottles

containing beverages brought within the

municipal limits by way of relevant

consignments;

(e) Whether the value of such bottles and

amount of octroi duty on their weight was

passed on to the consumers or not?"

18.In our considered opinion the present case is squarely

covered by the above said decision of this Court in the case of

Acqueous Victuals (supra), and the said decision was

passed on the similar facts as of the present case, the only

difference being that in the case of Acqueous Victuals

(supra) octroi was computed and levied on the basis of the

weight of the bottles and crates, whereas in the present case,

the impugned bill seeks to levy octroi on the basis of value of

the bottles and value of the crates. It was suggested by the

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learned senior counsel appearing for the appellant that due to

the said difference the judgment in the case of Acqueous

Victuals (supra) will not be applicable to the present case. In

our opinion the said difference of the mode of computation of

the octroi will not affect the applicability of the ratio of the

said decision to the present case and the same applies to the

present case on all fours.

19.It was also suggested by the learned senior counsel appearing

for the appellant that the decision in the case of Acqueous

Victuals (supra) cannot be said to be the correct law as the

said decision did not correctly appreciate the law laid down

by the Constitution Bench of this Court in the case of

Burmah Shell Oil (supra). In order to appreciate the said

submission it would be appropriate to extract the relevant

portion of the judgment in the case of Acqueous Victuals

(supra) wherein this Court has elaborately considered the law

laid down by the Constitution Bench in the case of Burmah

Shell Oil (supra):-

"15. In view of the aforesaid decision, it becomes obvious that the word "retention" is held to be a synonym with the word "repose", meaning thereby the article concerned must finally rest within the municipal

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limits. In the light of the aforesaid judgment of the Constitution Bench of this Court, therefore, it is obvious that before a municipality can impose octroi duty on any commodity, it has to be shown that the commodity concerned was brought within the municipal limits for consumption, that is, for being totally used up so that it ceases to exist within the municipal limits themselves or it was to be used for an indefinite period within the municipal limits so that it ultimately rests within the municipal limits and does not go out subsequently, or the commodity concerned must be shown to have been brought within the municipal limits for the purpose of sale within the said limits. Having thus laid down the aforesaid legal position concerning the imposition of octroi in the penultimate paragraph of the Report at p. 234, the Court observed that the Burmah Shell was liable to pay octroi tax on goods brought into local area

(a) to be consumed by itself or sold by it to consumers direct and (b) for sale to dealers who in their turn sold the goods to consumers within the municipal area irrespective of whether such consumers bought them for use in the area or outside it. The Company was, however, not liable to octroi in respect of goods which it brought into the local area and which were re-exported.

But to enable the Company to save itself from tax in that case it had to follow the procedure laid down by rules for refund of taxes.

16. The aforesaid authoritative pronouncement of the Constitution Bench of this Court, therefore, sets at rest the controversy in the present case. If it is the case of the writ petitioner that during the relevant period from 1980 to 1987 it brought within the municipal limits of the four respondent-Municipalities beverages packed in bottles and the bottles were not sold within the municipal limits and after the beverages were taken out of these bottles, these very bottles were returned to the petitioner and were taken back to Bareilly, then for claiming the refund of the octroi paid on the weight of these bottles during the relevant period when the consignments entered the municipal limits from time to time, the writ petitioner had to follow the procedure laid down by the Municipality concerned under its rules for refund of taxes and had to comply with the statutory gamut of these rules. It had also to show that the burden of disputed octroi duty was borne by it and was not passed on to consumers of beverages contained in these bottles. In other words, it would not be guilty of unjust enrichment if refund was granted. If the refund claim on furnishing the relevant proofs was not

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ultimately granted, the remedy of appeal provided under the rules had to be followed."

20.On a minute and detailed perusal of the judgment of the

Constitution Bench in the case of Burmah Shell Oil (supra),

and the above noted inference drawn in the case of Acqueous

Victuals (supra), we do not agree with the said submission of

the appellant. We respectfully agree with the above noted

inference drawn and are of the considered opinion that this

Court in Acqueous Victuals (supra) has correctly

appreciated the law laid down by the Constitution Bench in

Burmah Shell Oil (supra).

21.Though it was vehemently argued that the cost of the bottles

and crates is amortized and included in the retail sale price of

the aerated beverage but no facts were placed before the High

Court in that regard. Moreover, even in case the same were

placed, the same being disputed question of fact could not

have been gone into by the High Court exercising the

jurisdiction under Article 226 of the Constitution of India.

22.In the present case, the definition of "octroi" is contained in

Section 2(42) of the BPMC Act. Relevant entry in respect of

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aerated water in the octroi schedule under the said Rules is

at serial no.11 (D). Relevant entry as regards bottles is at

serial no.52. Relevant entry as regards barrel crate and

individual crate, is at serial No.53E. The said Rules contain

detailed provisions under which an importer can make an

application for refund.

23.Accordingly, in our opinion, as also laid down by this Court

in Acqueous Victuals (supra), in case the appellant-

company is sending out the same bottles for recycling and if

the bottles and crates are not sold, used, or consumed in the

Municipal limits of the respondent-Corporation, that is to say,

if they have not finally rested in the Municipal limits of the

respondent-Corporation in which they are imported, the

appellant-company can always make an application for

refund under the said Rules. The appellant-company will

have to produce evidence on the points detailed in the

Acqueous Victuals (supra) which we have quoted

hereinabove. As submitted by the appellant, in case, the cost

of the bottles and crates is amortized and included in the

retail sale price of the aerated beverage, the evidence can also

be placed in that regard, in order to claim refund on any such

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amount. Besides, it was also pointed out that bottles in which

beverages are brought are recycled and used bottles and

therefore levy of octroi cannot be at the same rate as that of

the new bottles. These are also disputes on the facts, which

would require production of evidence. On the appellant-

company making an application for refund, the concerned

authority will consider it in its proper perspective and if a

case is made out shall grant refund.

24.Needless to say, in case, the appellant is aggrieved by the

valuation of the bottles and crates on the basis of which the

impugned bill is issued they are at the liberty to file

objections before the appropriate authority, and the

appropriate authority will adjudicate the same in accordance

with the law, as against which if still aggrieved, further

remedy as available could be resorted to.

25.At this stage it is pertinent to mention that during the

hearing, the appellant has expressed its concern about the

mechanism by which the said levy could be computed and

collected as according to them the present procedure is very

cumbersome and unworkable at both the ends, and moreover,

the same would result into incurring of huge managerial time

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and administrative cost. After the present judgment was

reserved for pronouncement, the appellant has also given

proposals to the respondent corporation for devising a suitable

and convenient mechanism. The said request on the part of

the appellant requires consideration. Accordingly, the

responded corporation shall consider the said proposal in

accordance with law and even otherwise on their part devise a

suitable, convenient and workable mechanism for levy and

collection of octroi.

26.With the above said directions both the appeals are

dismissed with no order as to costs.

.............................................J

[Dr. Mukundakam Sharma]

.............................................J

[Anil R. Dave]

New Delhi,

July 4, 2011.

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