Octroi valuation cannot include notional customs duty where import duty was not presently payable under advance licences.

Municipal octroi valuation under Clause 2(7)(a) of the Bombay Municipal Corporation (Levy of Octroi) Rules, 1965 could not include notional customs duty or additional/countervailing duty that was not actually payable at the time of import under advance licences. A duty exemption under the Duty Exemption Scheme did not create a present liability capable of being added to the assessable value merely because a contingent liability might arise on breach of licence conditions. The earlier Division Bench view was applied: the Corporation had no authority to recover excess octroi by loading notional customs duty, and the possibility of later refund did not validate the inclusion. The petitioners therefore succeeded.

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Issues: Whether the Municipal Corporation could include notional customs duty and additional or countervailing duty, not actually payable at the time of import under advance licences, in the assessable value for levy of octroi.

Analysis: The levy under Clause 2(7)(a) of the Bombay Municipal Corporation (Levy of Octroi) Rules, 1965 could not be expanded to include duties that were not incurred or immediately liable to be incurred at the time of entry of the goods. The duty exemption obtained under the Duty Exemption Scheme did not create a present liability capable of being loaded into the value of the goods merely because a contingent liability might arise on breach of licence conditions. The earlier Division Bench decision had already held that the Corporation had no authority to recover excess octroi by adding notional customs duty, and the possibility of later refund did not cure the absence of power to make such inclusion.

Conclusion: The inclusion of notional customs duty and additional or countervailing duty in the octroi valuation was unlawful, and the petitioners succeeded.

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