1999 (8) TMI 97 - HC - Customs

Court Upholds Octroi Duty on Goods in Bonded Warehouses, Rejects Refund Claims

The court upheld the BMC's decision to levy octroi duty on goods stored in customs bonded warehouses based on the value of the consignment at the time of ... Valuation (Otroi) Issues Involved:1. Legality of octroi duty levied on goods stored in customs bonded warehouses.2. Entitlement to refund of octroi duty based on reduced/concessional customs duty.3. Applicability of the decision in Ceat Tyres of India Ltd. v. Municipal Corporation of Greater Bombay.4. Interpretation of relevant provisions of the Bombay Municipal Corporation Act, 1888, and the Levy of Octroi Rules, 1965.Detailed Analysis:1. Legality of Octroi Duty Levied on Goods Stored in Customs Bonded Warehouses:The petitioners argued that the octroi duty should not be levied on the value of goods including the provisional customs duty when the goods are stored in customs bonded warehouses. They contended that octroi should be calculated based on the reduced/concessional customs duty actually paid upon removal from the warehouse. The BMC, however, maintained that the octroi duty was correctly levied on the value of the consignment at the time and place of import, including the provisional customs duty, as per the rules.2. Entitlement to Refund of Octroi Duty Based on Reduced/Concessional Customs Duty:The petitioners sought refunds for the octroi duty charged on the difference between the provisional customs duty and the reduced/concessional customs duty actually paid. The BMC rejected these applications, asserting that the octroi duty was correctly levied on the value of the consignment, including the provisional customs duty, at the time of import. The court upheld the BMC's stance, stating that the liability to pay octroi arises when the goods enter the municipal limits, and subsequent reductions in customs duty do not entitle the importers to a refund of octroi already levied.3. Applicability of the Decision in Ceat Tyres of India Ltd. v. Municipal Corporation of Greater Bombay:The petitioners relied heavily on the decision in Ceat Tyres of India Ltd., where it was held that the value of goods for octroi purposes should not include customs duty if the goods are exempt under an exemption scheme. The court distinguished the present case from Ceat Tyres, noting that the BMC had levied octroi based on the value declared in the Bill of Entry, which included the provisional customs duty. The court emphasized that the liability to pay octroi arises when the goods cross the octroi barrier, and any subsequent reduction in customs duty does not affect the octroi already levied.4. Interpretation of Relevant Provisions of the Bombay Municipal Corporation Act, 1888, and the Levy of Octroi Rules, 1965:The court examined the relevant provisions, including Section 192 and Section 195 of the Bombay Municipal Corporation Act, 1888, and Rule 2(7)(a) and Rule 4(c) of the Levy of Octroi Rules, 1965. It concluded that the BMC had correctly levied octroi based on the value of the goods, including the provisional customs duty, as per the rules. The court also referred to the decision in Raymond Woollen Mills Ltd. v. State of Maharashtra, which supported the view that the liability to pay octroi arises when goods enter the municipal limits and is not deferred until the goods are removed from the customs bonded warehouse.Conclusion:The court dismissed the petitions, upholding the BMC's rejection of the refund applications. It affirmed that the octroi duty was correctly levied based on the value of the goods, including the provisional customs duty, at the time of import. The court found no fault with the BMC's impugned orders and ruled that the petitioners were not entitled to refunds based on the reduced/concessional customs duty paid upon removal of the goods from the customs bonded warehouse.