TaxTMI 
TaxTMI 
TaxTMI 
1988 (8) TMI 371
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....p firms carrying on business of dealing in wines and spirits and are licensed to import and store liquors in their bonded warehouse at Maulana Shaukat Ali Road, Bombay. The appellants are also holders of licence issued under the Maharashtra Foreign Liquor (Import and Export) Rules, 1963 framed under the Prohibition Act of 1949 being Act No. 25 of 1949 of the State Government. As early as 1888, the Bombay Municipal Act was enacted empowering the Bombay Municipal Corporation to levy octroi on goods brought to the city. We shall refer to the provisions of the said Act as relevant to the present purpose later. In 1949 the Bombay Prohibition Act (hereinafter called "the Act") was passed. The provisions of the Act and the Rules which will be referred to hereinafter empowered the State Government to impose excise and other duties. In 1965 the Maharashtra Foreign Liquor (Storage in Bond) Rules, 1964 were enacted. Under these Rules, the importer can import liquor and store the same in warehouses without payment of countervailing duty. The Octroi Rules were amended time and again on 28th July, 1976 and 28th June, 1983 to impose octroi on the assessable value which includes customs duty paid ....
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....ny intoxicating drug or hemp, (c) opium, (d) any other excisable article, when imported, exported, trans- ported, possessed, manufactured or sold in or from the State, as the case may be: Provided that duty shall not be so imposed on any article which has been imported into the territory of India and was liable on such importation to duty under the Indian Tariff Act, 1934, or the Sea Customs Act, 1878 or on any medicinal or toilet preparation containing alcohol, opium, hemp or other narcotic drugs or narcotics." 5. Section 2(14) of the Act defines "excise duty" and "countervailing duty" as follows: "2. (14) 'excise duty' and 'countervailing duty' mean such excise duty or countervailing duty, as the case may be, as is mentioned in entry 51 in List II of the Seventh Schedule to the Constitution." 6. Section 106 of the Act provides as follows: "106. Subject to any regulations to regulate the time, place and manner of payment made by the Commissioner in this behalf, the duties referred to in section 105 may be levied in one or more of the following ways: (a) in the case of an excisable article imported- (i) by payment either in the S....
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....t of duty; and (e) discontinue any warehouse so established." 7. In the licence held by the appellants for storage in bond of foreign liquor there is a provision that no liquor shall be removed by them from the licensed premises for consumption within the State except on payment of excise duty and fees. 8. Section 192(1) of the Bombay Municipal Corporation Act, 1888 as amended provides as follows: "192. (1) Except as hereinafter provided, a tax, at rates not exceeding those respectively specified in Schedule H, shall be levied in respect of the several articles mentioned in the said Schedule, or so many of them or such of them as the Corporation shall from year to year in accordance with section 128 determine on the entry of the said articles into Greater Bombay for consumption, use or sale therein. The said tax shall be called an 'octroi'." 9. In other words, it provides for a tax in accordance with section 128 on the entry of the articles into Greater Bombay for consumption, use or sale therein. The said tax shall be called "octroi". It is appropriate at this stage to refer to rule 2(7)(a) of the Octroi Rules as amended from time to time: "I. Prior to 28th July, ....
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....e within Greater Bombay for the purposes of import. Section 12 of the Customs Act, 1962 imposes customs duty and provides that except as otherwise provided in that Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 or any other law for the time being in force, on goods imported into, or exported from India. 12. The learned single judge in his judgment noted that a question almost identical to the question posed above came to be considered by the Nagpur Bench of the Bombay High Court in Special Civil Application No. 779 of 1971, J.E. Bilimoria & Sons, Nagpur v. Corporation of the City of Nagpur. A Division Bench comprised of Masodhkar and Kemble, JJ., upheld the petitioners' contention by their judgment dated 23rd December, 1976. Rule 10(a) framed under the City of Nagpur Corporation Act, 1948, read thus: "Rule 10. (a) Where the duty is chargeable on weight, gross profit including that of the package or container shall be adopted. When the duty is chargeable ad valorem the value thereof shall be the cost price to the importer plus all incidental charges, such as customs duty....
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....uent to the arrival of the bonded liquor at the place of import fell outside the rule as it then read. Between 28th July, 1976 and 27th June, 1983 the rule mentioned charges incurred till the articles were removed from the place of import. Inasmuch as the charge of countervailing duty was incurred after the bonded liquor had been removed from the place of import, the rule as it then read could not apply to such countervailing duty. The rule as it reads subsequent to 28th June, 1983 mentions countervailing duty but among charges incurred or liable to be incurred till the articles are removed from the place of import. According to the learned single judge, the countervailing duty is neither incurred nor is liable to be incurred until after the bonded liquor has been removed from the place of import. He was, therefore, of the view that the countervailing duty could not be included in the value of the octroi. 15. The Division Bench disagreed. It has to be emphasised that rule 2 of the Octroi Rules deals with the definition of various terms and the expression "import" under rule 2(2) means conveying of any article liable to octroi into Greater Bombay from any other area outside Greater....
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....y place in India outside the State of Maharashtra to which foreign liquor is to be sent from the State of Maharashtra. Rule 11 of the said Rules is as follows: "11. Issue of pass.-(1) On receipt of the application made under rule 10, the Collector shall make such inquiries as he may deem necessary and if he sees no objection he may- (a) where the foreign liquor is to be imported in bond, require the importer to execute a bond, in form C, with two sureties, for the payment of the amount of duty leviable on the foreign liquor to be imported or a general bond, in form D which would remain in force for a period of three years, along with two sureties for the payment of a sum sufficient to cover the amount of duty leviable on the total quantity of foreign liquor which may be imported by him from time to time during the period of three years, and on the execution of the bond grant an import-in-bond pass in form E: Provided that the execution of the bond under this clause may be dispensed with by the Collector in the case of any importer of known good standing who has deposited with the Collector a sum which in the opinion of the Collector is sufficient to cover the amount of duty p....
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....e of such laboratory shall after entering particulars about it in the register of receipts verify its quantity and strength. On receipt of the Chemical Analyser's report, the officer-in-charge of the bonded warehouse or laboratory shall fill in the various columns on the reverse of Part IV of the pass. The consignment shall then be allowed to be removed from the bonded warehouse under a transport pass on payment of- (a) the duty leviable under the Act, on the foreign liquor imported, (b) the fees prescribed under the Bombay Foreign Liquor and Rectified Spirit (Transport) Fees Rules, 1954, and (c) other charges, if any, payable in respect of the consignment. The officer-in-charge of the bonded warehouse shall then prepare a copy of the Part IV of the pass and forward it to the Collector for record with Part I of the pass in his office. (2) The whole consignment of the foreign liquor imported into and stored in the bonded warehouse under these rules shall be removed from the warehouse at one and the same time and within a fortnight from the date of receipt in the warehouse. If any liquor remains in the warehouse for a longer period than a fortnight, warehouse rent at th....
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....that in order to be an excise duty (a) the levy must be upon "goods" and (b) the taxable event must be the manufacture or production of goods. It was further submitted that countervailing duty is an incidental charge. Our attention was drawn to the expression "incidental" in the Words & Phrases, Permanent Edition, 20A, pages 100-101 and also to Webster's New Twentieth Century Dictionary, page 922 and Webster's Third New International Dictionary, page 1142. 20. In State of Bombay v. S.S. Miranda Limited [1960] 3 SCR 397, the respondent held a trade and import licence of foreign liquor as well as a vendor's licence under the Bombay Abkari Act. It kept liquor in a bonded warehouse. On April 2, 1948, the appellant asked the respondent to remove the liquor from the bonded warehouse after paying the necessary excise duty. The respondent paid the duty, got the transport permits and took over the liquor, some of which was sold. On December 16, 1948, the appellant issued a notification doubling the duty on foreign liquor and called upon the respondent to pay the additional duty on the liquor which was still lying in its godown. The respondent contended that the imposition....
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....nsactions of commerce; opposed to export. Similarly "export" according to Webster's International Dictionary means "to carry away; to remove; to carry or send abroad especially to foreign countries as merchandise or commodities in the way of commerce; the opposite of import". The Oxford Dictionary gives a similar meaning to both these words. At page 1113 of the report, it observed as follows: "By giving to the words 'imported into or exported from' their derivative meaning without any reference to the ordinary connotation of these words as used in the commercial sense, the decided cases in India have ascribed too general a meaning to these words which it appears from the setting, context and history of the clause was not intended. The effect of the construction of 'import' or 'export' in the manner insisted upon by the respondent would make rail-borne goods passing through a railway station within the limits of a municipality liable to the imposition of the tax on their arrival at the railway station or departure therefrom or both which would not only lead to inconvenience but confusion, and would also result in inordinate delays and unbearable burden ....
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....hat the duty attaches when the vessel arrives at a port of call, it must equally do so whether on arrival at the port of discharge they are delivered to the importer or warehoused in bond. The true contrast is that which their Lordships have just indicated, and the words appear to them to mean-when the goods are landed and delivered to the importer or to his order, or when they are taken out of warehouse, if instead of being delivered they have been placed in bond. (4) The result is that, in the opinion of their Lordships, the words 'imported into Canada' must, in order to give any rational sense to the clause, mean imported at the port of discharge, and cannot be used in the sense attributed to the word 'imported' by the appellants, in accordance with the construction placed by them on the definition in section 150 of the Customs Act. (5) If the goods were 'imported' within the meaning of the Tariff Act, on or after May 3 (in other words), if the duty became payable after that date, the Crown was entitled to it." 24. Our attention was also drawn to the observations in the case of Wilson v. Chambers and Company Proprietary Limited [1925-26] 38 CLR 131 w....
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....aning of the Customs Act. It is clearly the duty of an 'owner' who imports goods into Australia to enter them at the customs, and the term 'owner' includes the consignee of the goods (vide sections 37 and 4, 'owner'). Consequently, in my opinion, the defendant should have been convicted of the offence that it did not enter the goods, but there was no evidence of any intent to defraud the Revenue." 25. Our attention was drawn to certain observations in Halsbury's Laws of England, Fourth Edition, Volume 12, paragraph 889, page 313. There the law is different and value added tax on the importation of goods is charged and is payable as if it were a duty of customs. For the purposes of value added tax goods of which entry has been made under the provisions relating to customs are treated as imported on the date on which the entry was made except where the entry is for warehousing, in which case the goods are treated as being imported on the date on which they are removed from warehouse. 26. The question that arises is whether the Division Bench was right in the facts and circumstances of the case. We have noted the relevant provisions of entry 51 of List II....
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.... on entry into the State by way of import. The rate applicable would normally be the rate prevailing at that time. However, a specific provision is made to get over this normal position by the proviso. The proviso would otherwise be redundant. 27. The Maharashtra Foreign Liquor (Storage in Bond) Rules, 1964 had been framed in 1964. These do not indicate whether any earlier similar rules were framed. In any event, these Rules have been framed subsequent to the Act of 1949. Thus the charge and incidence of counter- vailing duty under the Act and the relevant notifications of 1949 were already subsisting. By subsequent framing of these Storage in Bond Rules, incidence or charge cannot be deflected or altered. As a matter of fact the position is reinforced by proper reading of rule 2(2). Administrative facility is granted for deferred payment to the assessee. The words "without payment of duty" indicate that duty has become chargeable and the incidence was complete if, however, the assessee complies with the rules, he is given a facility to defer payment. Rule 2(9) also reiterates the same position. This clearly shows that the duty has become payable already. This is, therefore, only ....
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.... been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay." 30. An argument was advanced on the basis of certain observations of this Court in Central India Spinning and Weaving and Manufacturing Company Ltd., The Empress Mills, Nagpur v. Municipal Committee, Wardha [1958] SCR 1102 at 1114 that there is no mixing up of goods which are in bond till these are removed from bond. The observations were made in the context of the facts of that case. There, the facts were that certain cotton bales were being transported in transit through Wardha. The municipality wanted to impose terminal tax. In that context it was observed that there was no mixing up of the goods in the mass of the property in the area. This case was not fully approved in Gramophone Company of India v. Birendra Bahadur Pandey [1984] 2 SCR 664 where at page 691 this Court observed as follows: "We are afraid the case (i.e., the Empress Mills case [1958] SCR 1102) is really not of any guidance to us, since in the context of a 'terminal tax' the words 'imported and exported' could be constru....
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....This rule used the words -excise duties" as also the words "all other incidental charges". Section 105 of the Bombay Prohibition Act, 1949 itself talks of excise duties so as to include both excise duty as well as countervailing duty. Therefore, the normal connotation of the words "excise duties" would take in countervailing duty also. Apart from that charges include taxes. In this connection reference may be made to the observations of this Court in D.G. Gouse and Co. v. State of Kerala [1980] 1 SCR 804 at 815. It was observed as follows: "The word 'tax' in its widest sense includes all money raised by taxation. It, therefore, includes taxes levied by the Central and the State Legislatures, and also those known as 'rates', or other charges, levied by local authorities under statutory powers." 34. The expression "incidental" has also been judicially interpreted. The expression "incidental" means necessary in certain contexts which does not mean a matter of casual nature only. See State of Orissa v. Chakobhai [1960] 11 STC 716 (SC); [1961] 1 SCR 719 at 726. 35. In that view of the matter we are of the opinion that countervailing duty was an incident of importatio....
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....n 105 and section 106. These and some of the rules on which reliance was placed have been referred to in the judgment of my learned brother Mukharji, J., and need not be repeated here. 38. In the light of these provisions, two issues arise for consideration. The first is the point of time at which the liability to pay countervailing duty arises. On this the appellants' argument is that, in principle, this liability is not attracted merely by the entry of goods at, or their removal from the customs barrier of the concerned territory but arises only at the point of time when those goods enter the market for purposes of use, sale or consumption and mix with 'other goods. It is said that this is why while section 105 is general, section 106 clearly lays down that the countervailing duty is payable only as and when the goods are removed from the bonded warehouse for such purpose and not earlier. I agree with my learned brother's conclusion that this argument cannot be accepted. The language of section 105 which imposes the charge, of section 106 which talks of payment and of the rules leaves no doubt that the duty is attracted at the point of import (i.e., physical entry of....