INDIAN OIL CORPORATIONversusMUNICIPAL CORPORATION, JULLUNDHAR AND ORS.

A                  INDIAN OIL CORPORATION
                              v.
         MUNICIPAL CORPORATION, JULLUNDHAR AND ORS.

                               OCfOBER 20, 1992

B                  [J.S. VERMA AND DR. A.S. ANAND, JJ.)

         Punjab Municipal Corporation Act, 1976 :

          S. JJ 3-£evy of OctroHndian Oil Corporbtio~etroleum Products
C -Transportation to depot within municipal limits for export therefrom to
    dealers outside municipal limits at risk of IOC-Held transaction of re-a·
    polt-Octroi duty-Not chargeable on such transaction.

          Constitution of India, 1950 :

D          Article 246, Seventh Schedule, List II, Entry 5J;--Tax on entry of goods
    into local area for consumption use or sale thereirr---state Legislature-f'ower
    to legislate-Held Municipal Corporation cannot have authority more exten·
    sive than that of State Legislature.

          Words and Phrases:
E
         "Imported into the city"-S.113 of Punjab Municipal Corporation
    Act-Meaning of

          The appellant, Indian Oil Corporation (IOC), had a depot, comprls·
    ing a pipeline terminal and LPG bottling plant, within the limits of
F   Municipal Corporation, Julhmdhar. The IOC transported various
    petroleum products to the depot through underground pipelines.

          The respondent Municipal Corporation raised a demand on the
    IOC for octroi. ·The IOC deposited the octroi duty but filed appeals before
G   the appellate authority challenging the demand notice so far as it related
    to the petroleum products imported to the depot for export by the IOC
    therefrom to its dealers for the sale, use and consumption by persons
    other than the IOC, outside the octroi limits. The appeals were dismissed.

          In the writ petition before the High Court the IOC, besides impugn·
H ing the judgment of the appellate anthority, challenged the validity of s.
                                          62
            INDIAN OIL CORPN. v. MUNICIPAL CORPN.                       63

113 of the Punjab Municipal Corporation Act, 1976 authorising levy of A
octroi on articles and animals imported within the municipal limits of the
respondent Corporation without any reference to the use, consumption or
sale of the said goods, as being beyond the power of the State Legislature
in view of entry 52 of List II of Schedule VII to the Constitution of India.
It was contended that the Municipal Corporation could not impose and
demand octroi duty on the petroleum products imported by the IOC to its
                                                                             B
depot for being exported at the risk of the IOC to its dealers at their sale
points situated outside the area of the Municipal Corporation in as much
as the petroleum products in such transactions only entered the area of
the Municipal Corporation for the purpose of re-export to the place of
business of its dealers and the property in such petroleum products           c
passes to the dealers only at their premises outside the Municipal limits
and not at the depot of the IOC and as such it could not be said that any
transaction takes place within the municipal limits of the respondents for
use, consumption or sale of the imported petroleum products and thus
attract any octroi duty.
                                                                              D
      The respondent contended that the transactions by the IOC were
sale simplicitor at the depot with.in the municipal limits of the Corpora-
tion and the export of the goods to the premises of the dealers outside the
octroi limits was of no consequence, since the IOC received payment in
advance as the sale proceeds from its various dealers and collected the       E
local taxes etc. like the sales tax and MST from the dealers at its depot;
that the IOC could not either in law or in equity retain the octroi duty so
collected.

      The High Court held s. 113 of the Punjab Municipal Corporation
Act, 1976 as intra vires, and upheld the levy and demand of octroi duty by    F
the Municipal Corporation. It dismissed the writ petition holding that the
property in the goods passed on to the dealers as and when the goods were
laden in the truck{lorries and that the sale was complete at the depot of
the IOC. The IOC filed the appeal by special leave.
                                                                              G
      Allowing the appeal, this Court,

     HELD : 1.1. Entry of goods within the local area for consumption,
use or sale therein is made taxable by the State Legislature on the
authority of Entry 52 of List II of Schedule VII to the Constitution. The
municipality deriving its power to tax from the State Legislature cannot      H
    64                  SUPREME COURT REPORTS [1992] SUPP. 2 S.C.R.

A have any authority more extensive than that of the State Legislature. Since
    the State Legislature under a legislation enacted in exercise of the powers
    conferred by Entry 52 of list II, is competent to levy a tax only on the entry
    of goods for "consumption, use or sale" into a local area, the municipality
    cannot under such a legislation, have the power to levy tax in respect of
    goods brought into the local area for purposes other than consumption,
B
    use or sale. Section H3 of the Act bas, therefore, reasonably to be read
    subject to the same limitations as are contained in Entry 52 List II or
    Schedule VII. [69·E·G)

          1.2. The expression "imported into the city" in Section 113, has to be
C interpreted as meaning "importe<I into the municipal limits for purposes
    of consumption, use or sale" only. Thns, construed in the limited sense,
    Section 113 of the Municipal Act is not ultra vires Entry 52 of List II of
    Schedule VII. Interpretiug the expression as meaning "imported into the
    city for any purpose and without any limitation", would amount to at·
    tributing to the legislature an intention to give a go-by to the restrictions
D   contained in Entry 52 of List II. That is not permissible. [69-G·H; 70 A·B)

           1.3. The High Court was right in holding that the provisions of
    Section 113 of the Municipal Act are not beyond the competence of the
    State Legislature and the same are to be read along with Entry 52 of List
E   II of Schedule VII of the Constitution. [70-D·E)

           2.1. The transaction whereunder the petroleum products trans-ported
    to the depot of the IOC are meant for export from its depot inside the octroi
    limits to outside the municipal limits to its dealers for sale, use and con·
    sumption by persons other than f.he IOC, outside the octroi limits, is a
F   transaction of re-export and the appropriation of the goods does not take
    place at the depot but at the outlets of the dealers or the agents outside the
    municipal limits. The octroi duty is, therefore, not chargeable on such a
    transaction. The levy and collection of the octroi duty on such goods by the
    Municipal Corporation is, therefore, not justified. [76-G-H; 77-A)
G        Bunnah-Shell Oil Storage and Distributing Co. of India Ltd. Belgaum
    v. Belgaum Borough Municipality Belgaum, AIR 1963 SC 906 and
    Municipal Council, Jodhpur v. M/s. Parekh Automobiles Ltd. and Ors.,
    [1990) l sec 367, relied on.

H         2.2. The High Court erred in not considering various clauses of the
                  INDIAN OIL CORPn. 1·. MUNICIPAL CORPN.                       65

    agreement or the effect of the affidavits filed by the IOC before the            A
    appellate authority or the categorical statement in the writ petition and
    rejoinder affidavit, shomng that the risk till delivery of prodncts to the
    dealers continues to remain with the IOC and the goods are re-exported
    at the risk of the IOC and not at the risk or .the dealers; and that the
    property in the goods passed on to the dealers only on delivery of the           B
    products at their place of business and at no point of time prior thereto.
    This evidence bad a material bearing on the case and deserved proper
    consideration and in the absence of any rebuttal should have been con·
    sidered in its correct perspective. The Municipal Corpm a tion took no
    steps to produce any. material to show that the delivery of the goods
    outside the municipal limits was not at the risk and responsibility of the       C
    IOC. [72·C·D, G; 74-G-H; 75-A)

         3.1. Since the IOC has collected the octroi duty from its dealers and
    agents, who have in tum passed on the burden to the consumer, there is
    no equity in favour of the IOC lo claim a refund of the same. [77-B..C]
                                                                                     D
            3.2. The appellant shall not be entitled to any refund of the octroi
    duty, already deposited by it with the Municipal Corporation. The IOC
    shall not be liable to pay the octroi duty, in respect of such transaction in
    future only on the condition that it does not collect any octroi duty ftom
    its dealers or agents in respect of the re-exported goods at the time of their   E
    appropriation outside the municipal limits. Should the IOC collect any
    such octroi duty from its dealers or agents, it shall remain liable to
'   deposit the same with the Municipal Corporation and shall not retain any
    such octroi duty for its own henefiL [77-C-EJ

            CIVIL APPELLATE JURISDICTION : Civil Appeal No. 46 of                    F
    1990.

         From the Judgment and Order dated 2.6.89 of the Punjab and
    Haryana High Court in C.W.P. No. 3361 of 1984.

            A.N. Haksar, Ms. Ritu Bhalla and S.S. Shroff for the Appellant.          G
           G.L. Sanghi, V.C. Mahajan, S.K. Mehta, Dhruv Mehta, Aman Yach- .
    bar, Tajinder Singh Dobia and Ms. Kamini Jaiswal (N.P.) for the Respon-
    dents.

            The Judgment of the Court was delivered by                               H
    66                   SUPREME COURT REPORTS [1992] SUPP. 2 S.C.R.

A         DR. A.S. ANAND, J. The controversy in this appeal, by special leave,
    directed against the judgment of the Division Bench of the Punjab and
    Haryana High Court, dated 2nd of June 1989 in Writ Petition No. 3361 of
    1984, is rather limited.

          The appellant (hereinafter IOC) set up a pipe-line terminal and LPG
B bottling plant at Suchi Pind in District Jullundhar. In 1983, the limits of the
    respondent, Municipal Corporation Jullundhar, (hereinafter the Municipal
    Corporation) were extended and depot of the appellant came to be in-
    cluded within the municipal limits. The appellant transports through un-
    ~erground pipelines various petroleum products to its depot situated
C   within the municipal limits of the Municipal Corporation. These petroleum
    products are meant :

             (i) either for use or consumption by the IOC within the
                 limits of the Municipal Corporation; or

D            (ii) for sale by IOC through its dealers or by itself for
                 consumption within the octroi limits, by persons other
                 than the IOC; or

             (iii) for sale by the IOC through its dealers or by itself
                  inside the octroi limits and the vendee, after comple-
E
                  tion of sale, take those products outside the octroi
                  limitS for sale, use or consumption; and

              (iv) for export by the IOC from its depot inside the octroi
                  limits to outside the municipal limits, to its dealers for
F                 sale, use and consumption by persons other than the
                  IOC, outside the octroi limits.

           The Municipal Corporation raised a demand on the IOC for octroi
     for the period September 7, 1983 to May, 1984. The demand was to the
     tune of Rs. 40,26,230.17. The IOC challenged the demand notice by filing
G    a writ petition in the High Court of Punjab and Haryana. Since the IOC
     had approached the High Court without first exhausting the statutory
     remedies under the Punjab Municipal Act, the High Court allowed the
     appellant to file a statutory appeal under the Act against the demand notice
     before the Appellate Authority, Commissioner of Jullundhar Division and
H    kept the writ petition pending. The High Court, however, directed the IOC
           INDIAN OIL CORPN. i·. MUNICIPAL CORPN. [ANAND, J.j                   67

    to deposit arrears of octroi duty in order to avail of the remedy of statutory A
    appeals and commanded the Appellate Authority to hear the appeals in
    accordance with law after condoning the delay in the filing of the appeals.
    Accordingly, after the deposit of the arrears of octroi duty, the appeals
    were filed before the Appellate Authority, Commissioner Jullundhar
    Division, Jullundhar. The appeals, after a contest on merits, were dismissed B
    by the Appellate Authority. The lOC thereafter amended the writ petition
    and also challenged the order of the Appellate Authority before the High
    Court.

            In the writ petition, the IOC inter alia challenged the validity of
    Section 113 of the Punjab Municipal Corporation Act, 1976 on the ground C
    that it had authorised the ievy of octroi on articles and animals imported
    within the municipal limiis of the corporation without any reference to the
    use, consumption or sale of the said goods as being beyond the power of
    the State Legislature. Reliance was placed on Entry 52 of List II of
    Schedule VU of the Constitution in that behalf. The IOC did not dispute D
    its liability to pay octroi duty in relation to the first three categories noticed
    above but it only disputed the authority of the Municipal Corporation to
    impose and demand octroi duty on the petroleum products imported by
    the IOC within the limits of the Corporation which are only exported to its
    dealers at their sale points situated outside the area of the Municipal
    Corporation. The IOC, in its writ-petition, explained the procedure in- E
    valved in the sale of the goods to its dealers, outside the municipal limits
    of the Municpal Corporation and pointed out that the dealers placed
    orders for unascertained petrole•1m products which were carried in the
    tank lorries either belonging to the IOC or engaged by the IOC for
    transportation and delivery of the petroleum products at the outlets of its F
    dealers, located outside the municipal limits. The precise case of the
    appellant-IOC was that the property in such of the petroleum products
    passes to the dealers only at their premises and not at the depot of the
    IOC and, as such, it could not be said that any transaction takes place
    within the municipal limits of the Municipal Corporation for the use, G
    consumption or sale of the imported petroleum products. It was em-
    phasized that the petroleum products in such transactions only entered the
    area of the Municipal Corporation for the purpose of being re-exported to
    the place of business of its dealers/agents and it was asserted that the
    transactions could not attract imposition of any octroi duty for no 'sale, use
    or consumption' took place within the octroi limits.                               H
•
    68                  SUPREME COURT REPORTS (1992J SUPP. 2 S.C.R.

A          The case of the Municipal Corporation on the other hand as pleaded
    and argued before the High Court was that though no octroi duty is leviable
    or levied in respect of articles brought by the lOC within the municipal
    limits of the Municipal Corporation for purposes other than consumption,
    use or sale therein, transactions in the instant case by the IOC were sale,
    simplistor at their depot within the municipal limits of the Corporation and
B   the export of the goods to the premises of the dealers outside the octroi
    limits was of no consequence. Reliance was place on certain circumstances
    in support of this assertion. It was pointed out by the Municipal Corpora-
    tion that the IOC receives payment in advance either in cash or through a
    demand-draft, as the sale proceeds, from its various dealers at its depot
C   situated within the municipal limits of the Corporation; that the IOC also
    collects the local taxes etc. like the Sales Tax and MST from the dealers
    at their depots; that the IOC also collects delivery charges (based on
    kilometres covered) from its dealers at its depot for transportation of the
    products and from these circumstances it was sought to be argued that the
D   'sale' to the dealers was complete within the municipal limits of the
    Corporation and the export of goods after the sale was complete could not
    effect the levy and collection of octroi duty. Reliance was placed on certain
    cash-memos also to show that the IOC had collected octroi duty and it was
    argued that the IOC could not either in law or in equity retain the octroi
    duty so collected.
E
          The High Court noticed that the parties were at variance as to
    whether the property in the goods is conditionally appropriated to the
    contract and passed on to the buyer at the depot of IOC at Jullundhar or
    at the dealers outlets and after considering the submissions made and the
F   pleadings of the parties held that the property in the goods passed on to
    the dealers as and when the goods were laden in the tank lorries and that
    the sale was complete at the depot of the IOC and that it did not take
    place at the respective places of business of the dealers and as snch octroi
    duty was rightly levied and demanded.

G        The High Cburt after extracting the provisions of Section 113 of the
    Municpal Act and Entry 52 of List II of the VII Schedule, which read thus:

             "113. Levy of Octroi. - Except as hereinafter provided, the
             Corporation shall levy octroi on articles and animals im-
H            ported into the city, at such rates as may be specified by
           INDIAN OIL CORPN. v. MUNICIPAL CORPN. (ANAND, J.)                   69
                              1
             the Government   '.                                                     A
             Entry 52 of List II provides :

            "Taxes on the entry of goods into the local area for con-
            sumption,. use or sale therein."
                                                                                     B
    opined that the words and phrases employed in Section 113 of the
    Municipal Act were of wide content and general connotation and since the
    power of the Stale Legislature are circumscribed by List II of Schedule
    VII, the State Legislature could not empower the municipal committees to
    levy tax only on the entry of goods within the local area when those goods
    were not meant for cousumption, use or sale within that area. It rightly held    C
    that the auihority of the State Legislature in those matters is subject to the
    restrictions imposed by Entry 52 and since source of power of Section 113
    of the Municipal Act is traceable-to Entry 52, the wide language employed
    in Section 113 of the Municipal Act had to be read down to mean that the
    Municipal Corporation could levy octroi on articles and animals imported         D
    into a local area for consumption, use .or sale therein afi"d construing the
    provisions of Section 113 in that manner held the sallle to be intra-vires.

           We are in agreement with the High Court that the provisions of
    Section 113 of the Municipal Act are not beyond the competence of the            E
    State Legislature and the same are to be read alongwith Entry 52 of List
    II of Schedule Vil of the Constitution.

          Entry of goods within the local area for consumption, use or sale
    therein is made taxable by the State Legislature on the authority of Entry
    52 of List II of Schedule VII. The municipality derives its power to tax from F
    the State Legislature and it obviously cannot have any authority more
    extensive than the authority of the State Legislature. Since, the State
    Legislature in view of Entry 52 of List II of Schedule VII is competent to
    levy a tax only on the entry of goods for "consumption, use or sale" into a
    local area, the municipality cannot under a legislation, enacted in exercise G
    of the powers conferred by Entry 52 of List II, have the power to levy tax
    in respect of goods brought into the local area for purposes other than
    consumption, use or sale. Section 113 of the Act has, therefore, reasonably
    to be read subject to the same limitations as are contained in Entry 52 of
    List II of Schedule VII. The expression "imported into the city" used in
    Section 113 of the Act, as meaning "imported into the city for any purpose H


•
     70                  SUPREME COURT REPORTS (1992] SUPP. 2 S.C.R.

A and without any limitation", would amount to attributing to the legislature
     an intention to give a go-by to the restrictions contained in Entry 52 of List
     II. That is not permissible. The expression 'imported into the city'' in
     Section 113, therefore, has to be interpreted as meaning "imported into the
     municipal limits for purposes of consumption, use or sale" only. Thus,
     construed in the limited sense, S~ction 113 ofthe Municipal Act is not ultra
B    vires Entry 52 of List 11 of Schedule VII. In fairness to the learned counsel
     for the appellant, it mqst be recorded, that the finding of the High Court
     regarding vires of Section 113 of the Municipal Act was not seriously
     questioned before us.

·C           There is no dispute before us on the legal issue, namely, that no
     octroi is leviable on the goods re-exported by the IOC from its depot inside
     ihe octroi limits to outside such limits to its dealers where those goods are
     meant 'for use, consumption or sale' by the consumers outside the octroi
     limits.

D
           The only controversy before us is whether the transaction within the
     municipal limits reflected in category ( 4) above, in the facts and cir-
     cumstances of the case, can be treated to be sale to the dealers at the depot
     or is only in the nature of re-e>.port. Learned counsel for the respondent.
     Municipal Corporation did not dispute that if the transaction is only in the
E    nature of re-export, it is not exigible to the levy of the octroi duty but he
     asserted that the finding recorded by the High Court on that aspect did
     not call for any interference and that the nature of the transaction could
     not be said to be 're-export'.

p           With a view to resolve the controversy, we shall have to examine the
     agreement executed between the IOC and its dealers and other relevant
     material produced before the authorities as also the pleadings of the
     parties. We must, however, hasten to add that the pleadings, both before
     the High Court as also before the appellate authority, were neither clear
     non specific on this issue and left much to be desire. But mere vagueness
G    of the pleadings or their confused state cannot relieve us of our obligation
     to sift the material and ascertain the true nature of the transaction.

          The High Court referred to the copy of the Memorandum of Agree-
     ment between the IOC and its dealers, which had been filed by the
H    Municipal Corporation as Annexure R· 7 to the written statement and
       INDIAN OIL CORPN. v. MUNICIPAL CORPN. [ANAND, J.]                  71

  observed that the agreement did not contain any clause which could lead A
  to the conclusion that the property in the goods did not pass to the dealers
  when the goods cm1tracted to be supplied were separated from the main
  bulk and loaded in the tank lorries. Observed the High Court that the
  goods, on their separation from the unascertained bulk, became ascer-
  tained and the property in such ascertained goods passed on to the dealers B
  as soon as they got ascertained. The High Court also opined that the terms
  of the contract did not lend themselves to the construction thai the proper-
  ty in the goods was not transferred to the dealer at the time the goods were
  loaded in the tank lorries for transmission to the buyers. It found that the
  IOC had not placed on the file any document to show that the IOC had C
  reserved the right of disposal of the goods even after they had been
  delivered to the carrier for the purpose of supply to the buyer which could
  have altered the nature of. the transaction. Relying upon the bills and cash
  memos prepared and the payments received by the IOC within the
  municipal limits of Jullundhar, the High Court held that the sale was
  complete at the depot of IOC and did not take place at the respoctive D
  places of business of the dealers outside the municipal limits. The Court
  held that the property in the goods passes to the dealers at the depot of
  IOC and rejected the case oUhe IOC to the effect that the property in the
  goods passes to the dealers only on their delivery at the place of business
  outside the municipal limits and that the sale takes place at the time of E
  delivery only. The High Caurt then went on to say that since the goods
  were not re-experted as contended by the IOC, it was liable to pay the
  oetrol duty on the sale of their products wiihin the municipal limits of
  Jullundhar Municipality to their dealers, irrespective of the fact whether
  the goods were ultimately sold, used and/or consumed by persons, other F
· than the IOC and the dealers, outside the municipal limits.

       In our opinion, the circumstances relied upon by the High Court to
 negative the case of the IOC were not sufficient much less clinching to
 come to the conclusion,that the transaction, as per the fourth category, in
 the facts and circumstances of this case, was not 're-export'.                 G

        From a perusal of the order of the appellate authority, we find that
 some affidavits had been filed by the IOC of their dealers to establish that
 the title in the property of the goods passes on to the dealers only after
 delivery and till that time the goods remained in the ownership of roe. In     H
    72                   SUPREME COURT REPORTS [1992] SUPP. 2 S.C.R.

A   reply, the Municipal Corporation had only submitted before the appellate
    authority that the affidavits were. 'not correct' and that it had been wrongly
    stated in the affidavits that the petroleum products were supplied at the
    responsibility of JOC or that any loss or damage in the _transportation was
    to be made good by the JOC till they reach the dealer. No material_ was
B   placed by the Municipal Corporation to controvert the averments made in
    the affidavits of the dealers. The appellate authority, however, did not
    express any opinion on the correctness or otherwise of those affidavits. It
    virtually ignored the same without assigning any reasons, much less satis-
    factory ones. Even the High Court did not advert to, much less consider
C   and discuss, the effect of the affidavits. In the affidavits, it had been clearly
    stated that the goods were transported from the depot to the outlets of the
    dealers at the risk of IOC and the property in the goods passed on to the
    dealers only on delivery of the products at their place of business and at
    no point of time prior thereto. This evidence had a material bearing on the
    case and deserved proper consideration and in the absence of any rebuttal
D   should have been considered in its correct perspective. In the writ petition,
    in para (5) also, it bad been asserted by IOC that the goods were sold
    outside the municipal limits and delivered to the dealers at the risk and
    responsibility of the IOC. In para (ii) of the writ petition also, it was
    averred as follows:
E
             "... ,.. .It is, thus, clear that there is neither any consumption
             nor sale of the said quantity within the Octroi limits of the
             respondent Corporation, and the respondent Corporation
             cannot make a demand for octroi."

F         While reply to paragraph 5 of the writ petition was simply to the
    effect that the contents were 'not correct', the reply to paragraph (ii) in
    the counter affidavit also did not controvert the position and the Municipal
    Corporation remained content by stating that 'the IOC be directed to place
    on record documents and bills through which the sales are conducted'. The
G   Municipal Corporation was aware of the affidavits which had been filed by
    the dealers before the appellate authority yet it took no steps to produce
    any material to show that the delivery of the goods outside the municipal
    limits was not at the risk and responsibility of the IOC. Reference in this
    connection may also be made to lhe replication/rejoinder, filed by IOC to
H   the written statement, in which inter alia it was stated:
      INDIAN OIL COREN . .-. MUNIOPAL CORPN. [ANAND, J.]                          73

        "......It may again be mentioned here that transit losses is
        the responsibility of the petitioner Corporation and the
        dealer measures the quantity received by him at his des-
        tination and claims credit for the short fall. In fact, at the
        delivery voucber the shortage is recorded as is clear from
        Annexure P-7. There are many other incidents where for
        shortage credit has been given to the dealer and also where
                                                                                       B
        the supplies have been diverted. It is incorrect to say that
        the transportation is done by the dealers and they have
        their own arrangements for the said purpose. The transpor-
        tation is done ·by the Indian Oil Corporation and by the
        transport contractors of the Indian Oil Corpora-                               c
        tion .............................it is absolutely incorrect to suggest
        that the supplies are insured and that insurance premium
        is paid by the carriers. The supplies are never insured. Of
        course, tile vehicles are insured and insurance premium is
        paid by the owner of the vehicle. It is, therefore, wrong to
                                                                                       D
        assert that the sale takes place within the municipal limits.
        The Municipal Corporation. has no right to levy octroi on.
        the supplies whicb are neither consumed nor used or sold
        within its territorial limits."

       Indeed the pleadings, as already observed, are vague and non- E
specific but the High Court did not deal with the pleadings at all and
dismissed the case of the petitioners by simply stating that "we are not
impressed". We cannot concur with the approach. The High Court should
have considered the totality of the material on the record including the
pleadings and other material, before coming to any final conclusion. The F
observation that the agreement (Ex. R-7) did not have any clause from
which it could be said that the title in the goods passed on at the outlet of
the dealers or that the IOC was under no obligation to make good any loss
incurred during transportation of the goods from the depot to the places
of business of the dealers, is not justified on a careful reading of the terms
of the agreement. The terms of the agreement executed between the IOC G
and its dealers (Ex. R- 7) and particularly paras 25, 26 and 34 which read
as follows :

        '25. The quantities of petrolenm and other allied products
        stated to be delivered by the Corporation as measured by                       H
    74                 SUPREME COURT REPORTS [1992) SUPP. 2 S.C.R.

A           the Corporation's measuring devices of means shall be final
            and binding upon the parties hereto. A receipt signed by
            or on behalf of the Dealer at the time of delivery by the
            Corporation of petroleum products will be conclusive
            evideru:e that the products mentioned therein were in fact
            delivered to the Dealer, that such products were in (ac-
B
            cord) with the specification therefor mentioned hereunder
            and that th<; quantities of such mentioned in the receipt are
            correct, and the Dealer shall thereafter be precluded from
            any elaim against the Corporation for compensation or
            otherwise on the ground of short (quantification) of such
c           products.

            26. The Dealer shall be responsible for all loss, contamina-
            tion, damage or shortage of or to the products whether
            partial or entire and no claim will be entertaihed by the
            Corporation therefor under any circumstances except in
D           cases where the Corporation is satisfied that loss arose
            from leakage from underground tank or pipes which the
            Dealer could not reasonably have discovered and of which
            the Dealer gave immediate notice to the Corporation on
            discovery.
E
            34. Alf expenses in connection with or incidental to the
            storage, handling, sale and distribution of the
            Corporation's products shall be borne by the Dealer. The
            Dealer shall be solely responsible for the payment of all
F           local and other taxes in respect of the sale of the
            Corporation's products."

    lend credence to the case as set up by the IOC and go to show that in
    respect of the goods which were re-exported by the IOC to its dealers
G   outside the municipal limits, the risk, till the delivery of the goods at the
    premises of the dealers, continued to remain with the IOC which was also
    obliged to make good any loss during transit and therefor the transaction
    by the IOC with the dealers or agents as reflected in category four (supra)
    did not amount to any sale at the depot within the municipal limits of the
    Municipal Corporation. The High Court did not consider various clauses
H   of the agreement referred to herein above or the effect of the affidavits
       INDIAN OIL CORPN. v. MUNICIPAL CORPN. [ANAND, J.J                   75

which had been filed by IOC before the Appellate Conmmissioner or the            A
categorical statement in the writ petition and rejoinder affidavit, showing
that the risk till delivery of the products to the dealers continues to remain
with the IOC and the goods are re-exported at the risk of the IOC and not
at the risk of the dealers while rejecting the case of the IOC.

      In Burmah-Shell Oil Storage and Distributing Co. of India Ltd., Bel-
                                                                                 B
gaum. v. Belgaum Borough Municipality, Belgaum, AIR 1963 SC 906 a
somewhat similar question arose. A Constitution Bench of this Court held
that the company which dealt with petroleum products was liable to pay
octroi tax on goods brought into the local area (a) to be consumed by itself
or sold by it to consumers and (b) for sale to dealers who in their turn sold    C
the goods to consumers within the municipal limits irrespective of whether
such consumers brought them for use in the area or outside it but that the
company was "not liable to octroi in respect of goods which it brought into
the local area and which were re-exported."
                                                                                 D
      Again, in Municipal Counci~ Jodhpur v. Mis. Parekh Automobiles Ltd.
and ors., [1990] 1 SCC 367, the precise question which was involved was as
to whether octroi was leviable on the goods imported within the municipal
limits, stored in its depot there and exported therefrom for use or con-
sumption of the ultimate consumer outside the municipal limits. That case        E
related to the sale of petroleum products by the IOC from its depot within
the municipal limits of Jodhpur, Rajasthan, to its dealers outside the
municipal limits. After considering the facts and circumstances of the case
and various clauses of the agreement (which is identical to the agreement
in the present case) Sabyasachi Mukharji, J. (as His Lordship then was)
                                                                                 F
dealt with the case put up by the Indian Oil Corporation Respondent No.
2 and Noticed :

         "According to respondent 2, it had allotted the retail outlets
         to various dealers under dealer's agreement. Under the
         terms of the said agreement, respondent 2 was obliged to
                                                                                 G
         transport petroleum products out of its depots and sup-
         plied petroleum products to its dealers at the destination
         in its own truck tankers or the tankers of its contractors
         and obtained the signatures of the dealers of the retail
         outlet in token of the delivery of the goods and till the               H
    76                  SUPREME COURT REPORTS [1992] SUPP. 2 S.C.R.

A           supplies were made al the destination the goods were at
            the risk of respondent 2. It was further all~ged by respon-
            dent 2 that the pump tauk and other outfits which were
            fitted at the retail outlets belonged to it and these were its
            property. It was, therefore, alleged that the goods supplied
            at retail outlets situated outside the limits of Municipal
B           Council, Jodhpur were sold at the retail outlets where the
            deliveries were made and not at Jodhpur although the
            dealers were required to deposit the price of the petroleupi
            products in respondent 2's account in the bank unless they
            were allowed credit facilities but the sale took place only
c           when respondent 2 delivered its products at the dealers'
            retail outlets outside the municipal limits as per the terms
            of the dealer's agreemant. The appellant, Municipal Coun-
            cil, had, however, disputed the aforesaid position. It con-
            tended that whenever the sale was made at the Jodhpur
            depot at Jodhpnr, octrco was chargeable irrespective of the
D
            fact where it was consllmed or used...... "

          The Court then referred to the finding of the High Court that the
    Municipal Corporation had no jurisdiction to levy octroi on the goods so
    exported and accorded its approval of that finding. It upheld the order of
E   the Jfigh Court restr<tlning the Municipal Corporation to levy octroi on
    goods re•exported by IOC to its dealers or agents for the use of ultimate
    user outside the octroi limits of Municipal Corporation.

          Both the above noted judgments clearly support the case of the
F appellant.

           On a consideration of the peculiar facts and circumstances of the
    case, we are of the opinion that both the judgments of this Court, noticed
    above, have direct application to the facts and circumstances of this case.
    On the basis of the material on record, we are satisfiedthat the transaction
G   covered by category (4) above, viz, where the petroleum products trans-
    ported to the depot of the IOC are meant for export from its depot inside
    the octroi limits to outside the municipal limits to its dealers for sale, use
    and consumption by persons other than the IOC, outside the octroi limits,
    is a transaction of re-export and that the appropriation of the goods does
H   not take place at the depot bot at the outlets of the dealers or the agents
           INDIAN OIL CORPN. v. MUNICIPAL CORPN. !ANAND, J.]               77

    outside the municipal limits. The octroi duty is, therefore, not chargeable A
    on such a transaction. The levy and collection of the octroi duty on such
    goods by the Municipal Corporation is, therefore, not justified. The judge-
    ment in Writ Petition No. 3361 of 1984 is, therefore, set aside and the
    appeal accordingly allowed but without any order as to costs.

          Before parting with the appeal, we would however, like to take note B
    of the submission made on behalf of the Municipal Corporation with
    regard to the question of refund of the octroi duty, already deposited by
    the appellant. The question of refund, in our opnion, does not arise. The
    IOC has collected the octroi duty from its dealers and agents, who have in
    turn passed on the burden to the consumer. Thus, having collected the C
    octroi duty, there is no equity in favour of the IOC to claim a refund of
    the same. Learned counsel for the appellant also conceded that the ques-
    tion of refund, in the facts and circumstances of the case, does not arise
    and we, therefore, hold that the appellant' shall not be entitled to any
    refund of the octroi duty, already deposited by the appellant with the
    Municipal Corporation. We also clarify that the IOC shall not be liable to D
    pay the octroi duty, in respect of the transaction covered by the 4th
    category, hereafter, only on the condition that the IOC does not collect any
/   octroi duty from its dealers or agents in respect of the re-exported goods
    at the time of their appropriation outside the municipal limits. Should the
    IOC collect any such octroi duty from its dealers or agents, it shall remain E
    liable to deposit the same with the Municipal Corporation and shall not
    retain any such octroi duty for its own benefit.

    R.P.                                                     Appeal allowed.