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SC verdict on octroi levy limits

Our Legal Correspondent

NEW DELHI, March 30

THE Supreme Court has held that the mere physical entry of goods into the octroi limits would not attract levy of octroi unless goods are brought in for use or consumption or sale.

``Use and consumption would involve conversion of the commodity into a different commercial commodity by subjecting it to some processing'', the court said.

The ruling was given by a three-judge Bench comprising Mr. Justice S.P. Bharucha, Mr. Justice S.N. Phukan and Mrs. Justice Ruma Pal, while allowing an appeal in the case of Mafatlal Industries Ltd, vs. Nadiad Nagar Palika and another.

The appeal was against a judgment of the Gujarat High Court holding that the appellant was liable to pay octroi duty under Section 99 of the Gujarat Municipal Act, 1963.

The appellant, a textile manufacturing company, brought cloth pieces of 100 m length within the octroi limits of Nadiad town. To meet the requirement of relevant excise rules and also demands in the market, cloth pieces were cut into smaller pieces of di fferent sizes and, thereafter, sent outside the octroi limits of the town.

On these facts, the High Court held that in the process of cutting, the cloth pieces were used as well as consumed and, therefore, the cloth pieces brought into the octroi limits for this purpose, would attract octroi duty.

The Supreme Court, in its judgment, said that in view of the legal provisions, octroi duty could be levied when goods were brought into the octroi limits for consumption, use or sale mere physical entry of the goods into the octroi limits would not attra ct levy of octroi.

The only question that fell for the consideration of the court was whether cloth pieces of 100 m length brought into the octroi limits and cutting them into smaller pieces would amount to their use, consumption or sale so as to attract octroi duty.

By cutting the cloth of one metre length into small pieces, the court said, no different commercial commodity was shown to have been produced and so it could not be said that there was use or consumption of the cloth within the octroi limits.

``Therefore, we hold that no octroi is leviable on the cloth pieces of 100 m length brought by the appellant within the octroi limits of Nadiad town'', the judges observed.