Holding

The goods are covered by Entry 56; Section 22 applies only after a demand for recovery is made, and the appellant may seek remission of interest under Section 166.

Summary

Eagle Flask Industries Ltd imported plastic powder, plastic components and glass refills and paid octroi under protest, seeking a refund of the excess duty. The Talegaon Dabhade Municipal Council levied the duty under the Maharashtra Municipalities (Octroi) Rules, and the High Court dismissed the writ petition, directing payment of the difference and interest. On appeal, the Supreme Court held that the goods fall within Entry 56 of the Rules, confirming the High Court's dismissal but on a different basis. It clarified that Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, can be invoked only after a quantified demand for recovery is made, i.e., after assessment. The Court also noted that the appellant may seek remission of interest under Section 166, but made no determination on entitlement. The appeal was disposed of without costs.

Issues considered

Whether the imported plastic powder, plastic components and glass refills are covered by Entry 56 of the Maharashtra Municipalities (Octroi) Rules, 1968.
Whether Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, can be invoked to prevent recovery of octroi before an assessment and quantification of duty is made.
Whether interest under Section 166 of the same Act can be waived or remitted in the present circumstances.

Legislation cited

Sick Industrial Companies (Special Provisions) Act, 1985s. Section 166, s. Section 22

Subjects

octroimunicipal councilEntry 56Sick Industrial Companies ActSection 22Section 166interest remissionassessmentrefund

Judgment

EAGLE FLASK INDUSTRIES LTD. A
v.
TELEGAON DABHADE MUNICIPAL COUNCIL AND ORS.

OCTOBER 6, 2004

[ARIJIT PASAYAT AND C.K. THAKKER, JJ.] B

Maharashtra Municipalities (Octroi) Rules, 1968; Entries 14(a), (b), 49,
53(c), 56, 86 and Rule 15(1) and (3):

Levy of octroi on plastic powder, plastic component and glass refills- C
Payment by assessee under protest-Municipal Council did not refund excess
amount of duty paid by the assessee-High Court dismissed the writ petition
filed by the assessee-On appeal, Held: Though goods are covered under
Entry 56, yet reference to the Entry not made before High Court-Hence,
High Court rightly dismissed the petition. D
Sick Industrial Companies (Special Provisions) Act, 1985; Section 22 &
166:

Section 22-Recovery of octroi-Scope of-Held: Since question of
recovery would arise only when Municipal Council could make an assessment E
and quantification ofthe octroi duty on the imported raw material in question,
provisions of Section 22 could be considered at that stage-Directions iisued

Respondent No.I-Municipal Council levied octroi on raw-material,
namely, plastic powder, plastic component and glass refills imported by
Appellant-industry. Appellant had made payment of octroi under protest F '
and filed application before the authorities concerned for determination
of correct amount of the duty and for refund of the differential amount.
Since the authorities failed to refund the differential amount, a writ
petition was filed by the appellant, which was dismissed by the High Court
directing the appellant to pay the duty at correct rates applicable with G
interest thereon for the relevant period. Hence the present appeal.

It was contended for the appellant that the headings of the entries
are relevant in the matter of levy of octroi; that since appellant was a sick
industry, no recovery of the duty could be directed; that it should be left
137 H
138 SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A open to the Municipal Council to decide whether interest could be charged
on the amount of duty.

Respondent No.I submitted that iri view of Entry 56, the levy is in
order; that since duty was levied on ad hoc basis, the plea relating to
recovery under Section 22 of the Sick Industrial Companies (Special
B Provisions) Act is premature.

Disposing of the appeal, the Court

HELD: 1. The goods are clearly covered under Entry 56 of
Maharashtra Municipalities (Octroi) Rules. However, no reference of the
C Entry was made before the High Court. The view of the High Court is
confirmed, though on a different basis. (141-G]

2.1. The effect of Section 22 of Sick Industrial Companies (Special
Rules) Act has to be considered only when there is a demand for recovery.
The question of recovery would arise only when there is .i quantified
D demand on assessment. However that stage has not reached. Therefore,
it is open to the Municipal council to make an assessment and
quantification of the octroi duty .p!lyable, if not already done. Only after
the quantification is done an~ assessment made as provided in law, the
question of recovery would atise. At that stage the effect of Section 22 of
E ' in the background of the decided cases.
the Act could be consideted
! (142-A, BJ

Real Value Applicance Ltd v. Canara Bank and Ors., (1998] 5 SCC
554 and Rishabh Agro Industries Ltd v. PNB Capital Services Ltd, (2000) 5
sec 515, relied on.
F
2.2. It is open to the appellant to move the Municipal Council for
waiver/remission of octroi duty in terms of Section 166 of the Act. The
direction given by the High Court for payment of interest in terms of
Section 166 of the Act shall not be the determinative factor to deny the
waiver/remission if it is found entitled thereto. However, no opinion is
G expressed on the appellant's entitlement to such waiver or remission.
(142-D]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1388 of2004.

From. the Judgment and Order dated 16.10.2003 of the Bombay High
H Court in W.P. No. 295 of 1992.
EAGLE FLASK INDUS.LTD. v. TELEGAON DABHADE MUNI. COUNCIL [PASAYA T, 1.113 9

Ashish Dholakia, U.A. Rana, Madhup Singhal for M/s. Gagrat & Co. A
for the Appellant.

Subrat Birla and Subhash Chandra Birla for the Respondents.

The Judgment of the Court was delivered
~
ARIJIT PASAYA T, J. The challenge in this appeal is to the judgment
rendered by a Division Bench of the Bombay High Court dismissing the writ
petition filed by the appellant. Challenge was to the levy of octroi by
respondent No. 1 Talegaon Dabhade Municipal Council (hereinafter referred
to as "Municipal Council") which was established under the Maharashtra
Municipal Council Nagar Panchayat and Industrial Townships Act, 1965 (in C
short "the Act"). The respondent No. 1- Municipal Council proposed to levy
octroi in terms of the Maharashtra Municipalities (Octroi) Rules, 1968 (in
short the "Rules") .

The appellant used to import raw material and components into the
octroi limits of the Municipal Council. The appellant took the stand that the D
three items i.e. plastic powder, plastic components and glass refills were
covered under the Residuary Entry 86 of the Rules. The stand of the appellant
was that it had paid octroi on the three items under protest under Rule 15(1)
of the Rules. It requested the concerned Superintendent for determination
under Rule 15(3) the correct amount of duty payable. It also prayed for a E
direction to respondent No. 1- Municipal Council for refund of difference
between the octroi levied and the octroi due under Entry 86 of the Rules. As
the Municipal Council failed to refund the octroi, a writ petition was filed in
the High Court under Article 226 of the Constitution of India, 1950 (in short
the "Constitution") by the appellant herein.

The High Court held that in view of the decision of this Court in
Municipal Corporation for the City of Thane and Ors. v. Asmaco Plastic
Industries and Ors., [1999] 1 SCC 372, Entry 53(c) applies to plastic goods
and plastic powder and the glass refills were covered by Entry 49. Accordingly,
the writ petition was dismissed. Direction was given to the appellant to pay G
the difference of octroi payable and paid at different rates along with the
interest depending on the period in view of what is provided in Section 166
of the Act.

Learned counsel for the appellant submitted that the view of the High
Court is clearly untenable as the decision in Asmaco 's case (supra) is H
140 SUPRE;:ME COURT REPORTS [2004] SUPP. 5 S.C.R.

A distinguishable. In that case, taking into account the type of articles involved,
this Court held that the heading of an Entry was really of no consequence.
But if one looks at the concerned Entry 49 in the background of the concerned
items, the heading becomes important. Reference was also made to Entry
14(a), 14(b) to contend that it cannot be laid down as a rule of universal
B application that in matters of levy of octroi, the headings of Entries are not
relevant. It was also submitted that the appellant has become a sick industry
and the proceedings are pending before the Board f~r Industri~I and Financial
Reconstruction (in short the "BIFR"). It was, therefore, submitted tliat no
recovery in respect of concerned amount can be directed . Finally, it was
submitted that there is a power for remission of interest and the direction of
C the High Court to pay interest has to be varied leaving the matter open to
Municipal Council to consider whether interest is chargeable. In any event,
the amendment to Entry 49 shows that prior to the amendment residual Entry
was applicable. The High Court proceeded on the basis that amendment to
Entry 49 was really of no consequence as the unamended Entry also covered
the articles.
D
In reply learned counsel for respondent No. 1- Municipal Council
submitted that with reference to Entry 56 that even if for the sake of argument
it is conceded and not accepted that Entry 49 does not cover glass articles,
Entry 56 clearly takes care of those articles. Entry 56 exclude~ "articles used
E for building construction" to which reference is made in Entry 49. Therefore,
in any event, in view of Entry 56, the levy is in order. So far as the recovery
is concerned, it is submitted that only on adhoc basis duty was levied, but no
final assessment, as contemplated under the Rules, has been made. Therefore,
the plea relating to recovery under Section 22 of the.Sick Industrial Companies
(Special Provisions) Act, 1985 (in short "SICA") is premature. It is also
F submitted that until the duty is quantified, the question of recovery does not
arise and the question of recovery· shall be considered by the Municipal
Council in its proper perspective.

Entry 49 and Entry 56 read as follows:-

G 49. Glass, glassware, chinaware enamelware, all kinds of crockery
used for construction or decoration of buildings and sanitary fittings,
metal valves, coppwercocks and their fittings Thermos shells glass
shells require for Thermos).

56. Glass and glassware including bangles, bottles, articles of china
H and porcelain wares and earthern wares (excluding articles used for
EAGLE FLASK INDUS. LTD. ''·TELEGAON DABHADE MUNI. COUNCIL (PASAYA T, J .] ] 41

construction or decoration of buildings) A
The High Court placed reliance on Asmaco 's case (supra). In paragraph
6, it was observed by this Court as follows:-

"We may firstly refer to the scheme of bringing several
commodities to tax, i.e. the several goods under the Octroi Schedules. B
In either Rules, several classes of goods are mentioned in various
headings like articles of goods, animals, articles used for fuel, lighting,
washing and industrial use, articles used in the construction of building,
... roads and other structures and articles made of wood or cane, perfumes,
toilet requisites, colours and household goods, tobacco requisites and
so on. Under each heading, several goods are mentioned, but we c
cannot discern any scientific basis in bringing these goods under one
heading or the other. For example in Class III articles used for fuel,
lighting, washing and industrial use, it is not clear whether charcoal,
which is at Item 14, when brought into a local area which is to be
used to industrial use could be subjected to octroi duty. Similarly, D
when soap of all kinds is used in Item 17, boot and metal polish are
lugged in. While detailing the rates of duty, what is stated is 2 per
cent ad valorem for washing soap and bath soap costing not more
than Rs. 1.25 per cake. It obviously would indicate that these goods
need not necessarily be used for industrial purpose or as fuel for
lighting or washing. While soap is used as a washing material, boot E
and metal polish cannot be stated to be a washing materials. Again,
various detergents used in washing clothes, floor and utensils are
referred to in Item 18. It is not clear whether it is related only to such
goods which are meant for the purpose of industrial use. Viewed
from this angle, we do not think the classification of goods made in
F
these entries is on any scientific basis and heading as such in any one
group does not by itself control the meaning to be attached to each
of such goods."

We find substance in the plea of the learned counsel for respondent No.
Municipal Council that the goods are clearly covered under Entry 56. G
.- Unfortunately it appears that reference was not made to Entry 56 before the
High Court. We confirm the High Court's view though on a different basis
i.e. with reference to Entry 56.

The effect of Section 22 of "SICA" has been considered by this Court
in Real Value Applicance ltd. v. Canara Bank and Ors., [1998[ 5 SCC 554 H
142 SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A and Rishabh Agro Industries Ltd. v. PNB Capital Services Ltd., [2000] 5 SCC
515. It has rightly been contended by the learned counsel for respondent No.
I Municipal Council that the effect of Section 22 is to be considered only
when there is a demand for recovery. The question of recovery would arise
only when there is a quantified demand on assessment. Admittedly that stage
has not reached. Therefore, it i_s open to the Municipal Council to make an
B assessment and quantification of the octroi duty payable, if not already done.
Only after the quantification is done and assessment made as provided in
law, the question of recovery would arise. At that stage the effect of Section
22 can be considered in the back ground of what has been stated in Real
Value and Rishabh Agro (supra).
c So far as the question of interest is concerned, it is open to the appellant
to move the Municipal Council. for waiver/remission of octroi duty in terms
of Section 166 of the Act. It goes without saying that the direction given by
the High Court for payment of interest in terms of Section 166 of the Act
shall not be the determinative factor to deny the waiver/remission if it is
D found entitled thereto. However we make it clear that we have not expressed
any opinion on the appellant's entitlement to such waiver or remission. The
appeal is disposed of accordingly. No costs.

S.K.S. Appeal disposed of.

-.