Octroi valuation excludes contingent customs duty where duty was not payable on entry of imported goods.

Customs duty that was not payable when imported capital goods and raw materials entered the municipal octroi limits could not be included in the goods' value for octroi assessment. The valuation rules tied assessable value to cost price plus duties and incidental charges actually payable or incurred at the time of arrival, so a contingent or future customs liability could not be notionally added merely because exemption conditions might later be breached. The HC followed the Bombay High Court's approach and held that the customs duty component was not includible for octroi purposes; the municipal corporation could not levy or recover octroi on that component, and reassessment and refund of excess collection were directed.

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Issues: Whether the customs duty component, not payable at the time of entry of imported capital goods and raw materials into the octroi limits of the municipal corporation, could be included in the value of goods for the purpose of levy and recovery of octroi.

Analysis: The petitioner was a 100 per cent Export Oriented Unit and, on the material placed before the Court, was exempt from payment of customs duty at the time of import under the applicable notifications. The octroi rules defined the value of goods by reference to the cost price together with duties and incidental charges payable or incurred by the importer at the time of arrival at the import naka. The Court followed the reasoning adopted by the Bombay High Court in similar matters and held that customs duty which was not payable at the time of entry could not be notionally added to the assessable value merely because a future liability might arise on breach of conditions or on a later stage of the exemption scheme. The Court also noted that the dispute did not require factual adjudication on the legality of the valuation principle itself, as the central question was whether the customs duty component was legally includible in octroi valuation.

Conclusion: The customs duty component was not includible in the value of goods for octroi purposes, and the municipal corporation was not entitled to levy or recover octroi on that component. The petition was allowed to that extent, with directions for reassessment and refund of the excess amount collected.

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