Holding

Rectified spirit is dutiable at Rs 0.05 per litre under Class III of the octroi schedule, not at Re 1 per litre under Class VI.

Summary

The Nagar Mahapalika, Bareilly imposed octroi duty on country spirit supplied from a bonded warehouse at a rate of Re 1 per litre, classifying it under Class VI of a 1986 notification as "foreign imported liquor and all kinds of wines made in India." The respondents, licensed retailers of country liquor, contended that the spirit was rectified spirit and should be taxed at Rs 0.05 per litre under Class III, which lists "methalated denatured and rectified spirit." The High Court restrained the municipality from collecting the higher rate, and the matter was appealed to the Supreme Court. The Court held that the taxable event for octroi is the entry of goods and that the nature of the goods at entry determines the applicable rate. It found that rectified spirit falls within the Class III description and is therefore dutiable at Rs 0.05 per litre, not at the higher rate for foreign liquor. Consequently, the petition was dismissed, affirming the lower court's decision.

Issues considered

The correct classification of rectified (country) spirit under the octroi schedule – whether it falls under Class VI (foreign imported liquor) or Class III (rectified spirit).
The appropriate rate of octroi duty applicable to rectified spirit upon entry into the municipal limits.

Legislation cited

U.P. Excise Act
U.P. Nagar Mahapalika Adhiniyam, 1959s. 172(2)(b)

Subjects

octroitaxable eventstatutory interpretationschedule classificationrectified spiritliquormunicipal tax

Judgment

NAGAR MAHAPALIKA BAREILLY A
v.
' I STATE OF U.P. & OTHERS

FEBRUARY 2, 1988

[SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.] B

U.P.Nagar Mahapalika Adhiniyam, 1959: Section 172 (2)(b) and
Notification dated April 30, 1986, Schedule Class III Item No. 7 &
Class VI Item No. 6-'Foreign imported liquor and all kinds of wine
made in India' -Interpretation of-Levy and realisation of octroi-
Taxable event is entry-Nature and type of goods the relevant factor- C
Country spirit/rectified spirit-Levy of octroi duty.

Statutory Interpretation: Taxing Statute-Taxable items mentwned
in Schedule to enactment-Court to give meaning intended by framers
of schedule-All items in one group to be considered in a generic sense.
.- The Nagar Mahapalika, Bareilly petitioner imposed octroi duty
D

on goods brought within its limits for 'consumption, use or sale therein'
through a Notification dated April 30, 1986 in exercise of powers under
section 172(2)(b) of the U.P. Nagar Mahapalika Adhiniyam, 1959. In
the Schedule forming part of this notification are mentioned the articles
on which octroi duty is payable and the rates thereof. The articles have E
been grouped together in different classes from Class I to Class X. Class
III which hears the Heading "Articles of lighting, fuel, washing and
lubricants contains the entry Item No. 7 as "7. Methalated denatured
and rectified spirit-Rs.0.05 per litre." Class VI with the heading
"Tobacco and other intoxicating goods" contains the entry at Item
No. 6: as "6. Foreign imported liquor and all kinds of wines made in F
India-Re. I per litre."

Kasturi Lal Satantra Kumar and his partner-respondents 3 and
4 by a bid in the auction held for retail vend of country liquor for the
excise year 1987--SS ending on March 31, 1988 obtained the necessary
licence under the U.P. Excise Act for a group of shops in the district of G
Bareilly. One of the conditions of the auction which also formed part of
the licence was that the licensee would obtain supply of country liquor
for retail vend from the bonded warehouse in respect of Bareilly
district.

The Nagar Mahapalika sought to realise octroi duty on the H
865
866 SUPREME COURT REPORTS [1988) 2 S.C.R.

A country spirit supplied by the bonded warehouse at the rate of Re. l per
litre treating it to be 'liquor fit for human consumption' under Entry 6 of
Class VI of the Notification. I •

The respondents filed a writ- petition for a direction to restrain the
Nagar Mahapalika from collecting octroi at the rate of Re .1 per litre
B contending that. country spirit is nothing but rectified spirit and that
octroi duty could not be charged in excess of Rs.0.05 per litre under
Item No. 7 of Class III of the Notification.

The High Court allowed the writ petition and restrained the
Nagar Mahapalika from requiring payment of octroi duty at Re. l per
litre upon the country spirit brought within its limit under Item No. 6 of
c Class VI of the Schedule to the Notification.

Dismissing the SLP of the Nagar Mahapalika, this Court,

HELD: l. The taxable event for the imposition of octroi is the
D entry, and the nature and type of the goods at the point of entry on the
- <
relevantfactors. [870A)
2. The normal meaning of the expressions "foreign imported
liquor or all kinds of wine made in India" would not fit in the descrip-
tion of the rectified spirit. Ordinary people would not consider rectified
E spirit to be 'foreign imported liquor or all kinds of wines made in
India'. That is not the natural meaning as understood by common
people. That is the yardstick by which this should be judged. The dic-
tionary meaning also corresponds to the same view. [868E-F]

3. While giving a meaning to an Item contained in the Schedule of
articles, the Court should normally give it a meaning intended by the
F
framers of the Schedule by looking at the various articles mentioned in
a particular group. All the items in one group should be considered in a
generic sense. l868H; 869A)

In the instant case, having regard to the nature of the duty and the
G type of the goods, rectified spirit is dutiable at the rate of Rs.0.05 per • ..J
litre and not on the basis that it was 'foreign wine or liquor.' l870B) •

State of U.P. and others v. Synthetics and Chemical Ltd. etc. etc.,
A.I.R. 1980 S.C. 614, referred to.

H Heeralal and others v. State, A.I.R. 1979 Rajasthan 133,
approved.
NAGAR MAHAPALIKA v. STATE OF U.P. IMUKHARJI, J.( 867

CIVIL APPELLATE JURISDICTION: S.L.P. (CIVIL) No. A
14968 of 1987.

' ' From the Judgment and Order dated 2.11.1987 of the High
Court of Allahabad in Civil Misc. Petition No.492of1987.

S.N. Kacker and Pramod Swamp for the Petitioner. B

'] Soli J. Sorabjee and R.B. Mehrotra for the Respondents.

.
I
The Judgment of the Court was delivered by

SABY ASA CHI MUKHARJI, J. This petition under Article 136
of the Constitution for leave to appeal is against the decision of the
c
.( High Court of Allahabad dated 2nd of November, 1987. The question
involved here is regarding the levy and realisation of octroi duty by the
Nagar Mahapalika, Bareilly in Uttar Pradesh. Kasturi Lal Satantra
Kumar and his partner, respondents herein, by a bid in the auction
held for retail vend of country liquor for excise year 1987-88 ending on D
'~
March 31, 1988 obtained the necessary licence urtder the U.P. Excise
Act for a group of shops known as Faridpur Group in the district of
Bareilly. The auction was held in the month of March, 1987. One of
the conditions of the auction which also formed part of the licence, was
that the licensee would obtain supply of country liquor for retail vend
~y- from the bonded warehouse in respect of Bareilly district situated E
within the limits ofNagar Mahapalika Bareilly.

Indubitably the said Kasturi petitioner in the original writ
petition brought into the territory country spirit, the question was at
• what rate the municipality was to impose octroi duty on the rectified
spirit which was brought. F
·~ It appears that there was a notification dated 30th of April, 1986,
published in the U .P. Gazette in exercise of powers under section
172(2)(b) of the U.P. Nagar Mahapalika Adhiniyam, 1959. In the
Schedule forming part of that notification are mentioned the articles
on which the octroi duty is payable and the rates thereof. The articles G

k- have been grouped together in different classes from Class I to Class
X. Class III which bears the heading "Articles of lighting, Fuel, Wash-
ing and.Lubricants" contains the following entry as item No. 7:

"7. Methelated denatured and rectified spirit
..... Rs.0.05 per litre" H
868 SUPREME COURT REPORTS [1988] 2 S.C.R.

A Class VI with the heading "Tobacco and other intoxicating goods"
contains the following entry at item No. 6:

"6. Foreign imported liquor and all kinds of wines made in
India.
. .... Re.1 per litre"
B
It is asserted on behalf of the respondents that the point of entry
within the Nagar Mahapalika limits, the plain spirit is nothing but
rectified spirit and that octroi duty could not be charged upon it in
excess of Rs.0.05 per litre under Item No. 7 of Class III of the
aforesaid Gazette Notification. The Municipality contends otherwise
.
C that it is foreign imported liquor of all kinds of wines made in India.
The base for this contention is that for foreign liquor or wine rectified
spirit is used. Reliance was placed on a decision of this Court in the
State of U.P. and others v. Synthetics and Chemical Ltd. etc. etc.,
A.I.R. 1980 S.C. 614, where this Court observed that the term 'liquor'
in the various Abkari Acts in the provinces of India would not only
D cover those alcoholic liquids which are generally used for beverage
purposes and produce intoxication but also all liquids containing
alcohol. It is, therefore, submitted that the payment of octroi duty
could not be avoided by the respondents saying that the plain country
spirit was not liquor in the sense that it was not fit for human consump-
tion at the stage when it was brought within the limits of the Nagar
E Mahapalika. The normal meaning of the expression "foreign imported
liquor or all kinds qf wine made in India" would not fit in the descrip- Y'"'
tion of the rectified spirit. Ordinary people would not consider recti-
fied spirit to be foreign imported liquor or all kinds of wines made in
.
India. That is not the natural meaning as understood by common
people. That is the yardstick by which this should be judged. The
F dictionary meaning also corresponds to the same view. "Wine"
according to Collins Dictionary of the English language means an
alcoholic drink produced by the fermenting of grapes with water and
sugar and an alcoholic drink produced in this way from other fruits,
flowers etc.

G By any common notion it could not be considered that the res-
pondents having regard to the nature of the goods, brought into the
territory liquor or wine. The High Court has come to that conclusion
after taking into consideration the ordinary notion. While giving a
meaning to an item contained in the Schedule of articles, the Court
should normally give it a meaning intended by the framers of the
H Schedule by looking at the various articles mentioned in a particular
NAGAR MAHAPALIKA v. STAIB OF U.P. [MUKHARJI, J.[ 869

group. All the items in one group should be considered in a generic A
sense. It appears that Class III of the Schedule in the instant case was
intended to deal with the subjects of Methelated denatured and
rectified spirit which was brought within the limits of the Nagar
Mahapalika for use as articles for lighting, fuel, washing and lubricants
at the low rate of Rs.0.05 per litre while liquor brought within its limits
for use as an article of intoxication was intended to be subjected to B
levy of octroi duty at the higher rate of Re.1 per litre. Class VI con-
tains the following items:

"Class VI-Tobacco and other intoxicating goods:

1. Field dried tobacco, its chura and roots ordinary
tobacco for eating and Rugga. c

2. Scented tobacco for eating and smoking, Qimam, Surti,
Sugni.

3. Leaves ofbidi. ·o
4. Bidi tobacco, finished bidi, prepared khamira tobacco.

5. Cigarette cigar, foreign type manufactured tobacco
which is smoked through cigarette and pipe, cigarette
paper, pipe and other such articles E
·Y
6. Foreign imported liquor and all kinds of wines made in
India.

7. Bear."
F
The scheme is found in respect of the articles mentioned in the
various other classes also. The High Court has noted Class-I which
deals with articles of food and drinks for men and animals. Item No. 1
of the said class mentions wheat and paddy; item No. 6 mentions
chemical fodder meant for animals and birds; item No. 16 mentions ice
made of water and item No. 17 mentions all cold drinks like Double G
Seven, Thumps-up, Limca, Gold-spot, etc. Likewise, in Class III,
articles for lighting, fuel, washing and lubricants, one finds at item 1
fuel and wood etc.

We must reiterate that we are concerned with a duty which is
imposed at the time of entry and not how it is used thereafter. The H
870 SUPREME COURT REPORTS [1988) 2 S.C.R.

A taxable event for the impositiQn of octroi is the entry and the nature >-
and type of the goods at the point of entry is the relevant factor.

We may note that this view was taken by the Rajasthan High
Court in Heeralal and others v. State, A.I.R. 1979 Rajasthan 133.
Having regard to the nature of the duty and the type of the goods with
8 which we are concerned, we are·of the opinion that the rectified spirit
is dutiable at the rate of Rs.0.05 per litre and not on the basis that it '
was foreign wine or liquor.

In the premises, the view taken by the High Court is right. This
petition therefore, fails and is accordingly dismissed.
c
N.V.K. Petition dismissed.

y