CEAT Ltd. vs Municipal Corporation of Greater Bombay

Rule. Respondents waive service.

By consent, Rule is made returnable forthwith.

The 1st petitioner is a Company registered under the Companies Act, 1958. The 1st petitioner imported raw material under the Duty Exemption Scheme (DES) under various advance licences without payment of duty of customs or the additional duty of customs. The Octroi Authorities of BMC added to the assessable value as declared by the 1st petitioner the notional amount of additional customs duty and special additional customs duty which was exempted. This action of the Corporation is impugned in the present petition.

Mr. Bharucha, learned Counsel for the petitioners, submitted that levy of octroi on the notional additional duty of customs/special additional duty by the Corporation is completely without jurisdiction. Mr. Bharucha relied upon an unreported decision of the Division Bench of this Court in the case of Ceat Tyres of India Ltd. Vs. Municipal Corpn. of Greater Bombay, . Relying upon the said decision, Mr. Bharucha submitted that the impugned order whereby the national additional duty of customs/countervailing duty has been added to the assessable value is liable to be set aside.

Mr. Rao, learned Counsel for the 1st respondent-Corporation, submitted that the judgment of the Division Bench in Ceat Tyre''s case (supra) is applicable only to customs duty and not to the additional and/or countervailing duty. Therefore, according to Mr. Rao, there is no illegality committed by the Corporation in adding the additional/countervailing duty to the assessable value.

We have given our anxious thought to the rival contentions advanced by both the learned Counsel. We have also gone through the un-reported decision relied upon by Mr. Bharucha. In our opinion, the controversy involved in the present case is squarely covered by the decision of the Division Bench. In that case, the Corporation had claimed that under Clause 2(7) (a) of the Bombay Municipal Corporation (Levy of Octroi) Rules, 1965, the value of the article for the levy of octroi includes duties which are incurred or liable to be incurred by the assessee. The stand taken by the Corporation was that the exemption granted of non-levy of duty was conditional on the Company fulfilling certain conditions and in case the Company commits a breach of those conditions then the Customs duty was liable to be recovered and therefore, the quantum of customs duty falls within the expression liable to be incurred under Rule 2(7)(a) of the Octroi Rules. The Company''s argument was that the provisions of Rule 2(7)(a) provide for octroi to be charged ad valorem which includes all Customs duties, Excise duties etc. except octroi duty incurred or liable to be incurred. It was not open to load the value of the article taking into consideration the Customs duty which was not payable at the time of entry of the article within the Octroi limit but was a contingent liability which may arise in case the conditions of the advance licence were not complied with. The Division Bench upheld the contention of the Company and held that the Corporation had no authority to recover the excess Octroi duty by loading the value of the article by inclusion of notional Customs duty and in the absence of authority to recover, the fact that the Corporation subsequently refunds the excess duty is no answer. The Division Bench also observed that the difficulty of the Corporation in recovering additional octroi charges in respect of some of the importers is not a ground to assume powers to include the Customs duty not payable in the value of the article. In view of the law laid down by the Division Bench, the action of the Corporation in loading additional duty of customs/countervailing duty to the value of the goods cannot be sustained. Rule is accordingly made absolute in terms of prayers (a) and (b). No order as to costs.

It is clarified that this order is without prejudice to the Corporation''s right to frame appropriate Scheme as stated in paragraph 5 of the decision of the Division Bench. This order to be complied with within six weeks after verification of calculations submitted by the Company.