1987 (12) TMI 313 - HC - VAT and Sales Tax

Court deems octroi collection at exit points illegal, instructs refund. Octroi duty can only be imposed at entry points.

The Court allowed the writ petition, deeming the imposition and collection of octroi at exit points by Puri Municipality illegal. The Municipality was ... - Issues Involved:1. Validity of levy of octroi duty by Puri Municipality on the purchase and despatch of marine fish and prawn.2. Whether octroi can be charged at the exit point within municipal limits.3. The compensatory nature of octroi duty and its compliance with Articles 301 and 304 of the Constitution.4. The locus standi of the petitioners to file the writ petition.Detailed Analysis:1. Validity of Levy of Octroi Duty by Puri Municipality:The petitioners, consisting of a registered association of fish merchants and an individual, challenged the imposition of octroi duty by Puri Municipality on fish and prawn purchased and transported outside the municipal limits. The Municipality imposed octroi under section 131(1)(kk) of the Orissa Municipal Act, which allows for the imposition of octroi on goods brought within municipal limits for consumption, use, or sale therein. The petitioners argued that the Municipality was transgressing constitutional limitations by charging octroi on goods exiting the municipal limits, which contradicts the statutory provision that octroi can only be levied at the point of entry.2. Charging Octroi at the Exit Point:The petitioners contended that the Municipality's practice of collecting octroi at the exit point, such as at the railway station, was illegal. This argument was supported by a previous judgment in I.T.C. Limited v. Puri Municipal Council, where it was held that octroi could only be levied at the entry point. The Court reaffirmed that the taxable event for octroi is the entry of goods into the municipal limits, and any collection at the exit point without following due process was invalid. The Municipality's argument that it was difficult to check the entry of marine fish due to geographical constraints was rejected as it did not justify the imposition of octroi at the exit point.3. Compensatory Nature of Octroi Duty:The petitioners also challenged the vires of the octroi duty, arguing that it was not compensatory in nature and violated Articles 301 and 304 of the Constitution, which guarantee the freedom of trade, commerce, and intercourse. The Court reviewed several precedents, including Bhaskar Textile Mills Ltd. v. Jharsuguda Municipality and Automobile Transport Ltd. v. State of Rajasthan, which upheld the compensatory nature of octroi duty. It was established that octroi duty is a compensatory tax for the use of municipal facilities and does not impose unreasonable restrictions on trade. Therefore, the imposition of octroi under section 131(1)(kk) was held to be constitutional and did not violate Articles 301 and 304.4. Locus Standi of the Petitioners:A preliminary objection was raised regarding the maintainability of the writ petition by the association (petitioner No. 1), as it was not a legal entity. However, since petitioner No. 2, an individual fish merchant, had a legal right that was allegedly infringed, the writ petition was maintainable. The Court held that petitioner No. 2 had the locus standi to file the writ petition under Article 226 of the Constitution.Conclusion:The Court allowed the writ petition, holding that the imposition and collection of octroi at the exit points by the Puri Municipality were illegal. The Municipality was directed to refund any octroi collected in this manner. The judgment reaffirmed the principle that octroi can only be levied at the point of entry into the municipal limits and not at the exit points. The compensatory nature of octroi duty was upheld, and it was found to be in compliance with the constitutional provisions regarding trade and commerce. The writ petition was thus allowed, with parties bearing their own costs.