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2001 DIGILAW 760 (PNJ)

Eco Electronics v. State of Punjab

2001-07-25

ARUN B.SAHARYA, V.K.BALI

body2001
JUDGMENT V.K. Bali, J. - There is no dispute that, in view of the provisions contained in Article 256 of the Constitution of India read with Entry 52 of List I of the VII Schedule, the State can levy taxes on the entry of any goods into the local area for consumption, use or sale therein. There is also no dispute that the State has delegated these powers to the Municipal Committee under Section 61 of the Punjab Municipal Act, 1911 (hereinafter referred to be as the "1911 Act). Explanation to Section 61(2) of the 1911 Act further clarifies that in the said section, tax includes any duty, cess or fee, which the State Legislature has the power to impose in the State under the Constitution, of course, with the previous sanction of the State Government. "Octroi has been defined in Chapter V of Rule I to mean entry into limits of Municipality, of goods for consumption, use or sale therein. What is, however, seriously disputed, is competence of the Government of Punjab giving powers as per instructions dated 27.5.1989 (Annexure P-1), to the Commissioner, Municipal Corporation, Jalandhar, Ludhiana and Amritsar and all Executive Officers of the Municipal Committees and Notified Area Committees in the State of Punjab, whereby it has been clarified that Municipal Authority can inspect shops and buildings to see whether any good have been imported without payment of octroi and further that in their endeavour to check the octroi evasion they can also take police assistance from District Administration. The primary grouse of the petitioners, who are dealing in electronic goods in Patiala, is that instructions (Annexure P-1) go far beyond the provisions of Sections 76 and 77 of the 1911 Act, by virtue of which provisions alone, the Municipal Authorities have power to check the evasion of octroi. Challenge to Annexure P-1 on the ground aforesaid failed, as Civil Writ Petition filed by the petitioners bearing No. 9892 of 1990 was dismissed by the learned Single Judge vide order dated June 4, 1993. In this Letters Patent Appeal filed under Clause X of the Letters Patent, challenge is, obviously, to the judgment of learned Single Judge. 2. Before we may examine legality of instructions (Annexure P-1), it would be appropriate to extract facts of the case even though succinctly. In this Letters Patent Appeal filed under Clause X of the Letters Patent, challenge is, obviously, to the judgment of learned Single Judge. 2. Before we may examine legality of instructions (Annexure P-1), it would be appropriate to extract facts of the case even though succinctly. All the appellants, for facility of reference, hereinafter referred to as the petitioners, are running their shops of electronic goods at Patiala. As per the case set up by them, they bring television sets, radios, watches and other electrical goods to their shops after paying the octroi. They have their godowns outside the limits of the periphery of the Municipal Committee from where they are also selling goods to the villagers. When Municipal Committee started harassing them for giving accounts of goods brought in their shops within the municipal limits, they submitted their accounts to the Municipal Committee by showing each and every article which had been brought within the municipal limits, after paying octroi at the barriers of the Municipal Committee. However, Municipal staff came to different bazars from 14.7.1992 to 16.7.1992 along with C.R.P.F. personnel and started raiding their shops in the town. They picked up goods from the shops of number of the petitioners, which includes television sets, watches, radios etc. without even issuing receipts. They forcibly entered the shops and whatever they found, they took in their custody with a threat to arrest the owners of the shops and, thus, created anarchy in different bazars of the city. The members of the Association wanted to know under which law they can enter the premises of the petitioners for search and seizure, but, the raiding party only gave a threat to them to arrest them for creating hindrance in the matter of search and seizure. After reproducing Section 77 of the 1911 Act, the petitioners submitted that the action of the authorities is without jurisdiction because circular/instructions (Annexure P-1) issued by the Punjab Government is against the provisions of the 1911 Act. The Act nowhere authorises raiding of shops/premises and, therefore, instructions (Annexure P-1) are contrary to the provisions of Sections 76 and 77 of the 1911 Act or in other words, giving such powers to the Municipal Authorities would result in insertion or addition to Sections 76 and 77, which cannot be done but for by legislative measures. 3. The Act nowhere authorises raiding of shops/premises and, therefore, instructions (Annexure P-1) are contrary to the provisions of Sections 76 and 77 of the 1911 Act or in other words, giving such powers to the Municipal Authorities would result in insertion or addition to Sections 76 and 77, which cannot be done but for by legislative measures. 3. The cause of the petitioners was hotly contested in the written statement filed on behalf of respondents 1 and 2. By way of preliminary objections, it was pleaded that the petitioners have not come to this Court with clean hands, as they have failed to bring true facts to the notice of this Court. The Act authorises the Local body to search and seize an article on which the octroi is chargeable to satisfy the demand in case the person bringing or receiving conveyance or package within the octroi or terminal taxes are leviable refuses to pay the same on demand by an officer authorised by the State Government or the Committee in this behalf. As such circular, Annexure P-1, is stated to be in consonance and not against the provisions of Section 77 of the 1911 Act and Section 115 of the Punjab Municipal Corporation Act, 1976. Respondent No. 3, the Municipal Committee, in its written statement asserted that the petitioners have mis-stated while alleging that the Municipal Committee staff along with C.R.P.F. personnel had gone to raid the premises of the petitioners in different shops in the town and picked up goods from there. This is a false allegation. The factual position is that after receiving letter from the State Government, Municipal Committee has issued notice to all the dealers engaged in sale of electronics goods. Specimen of the notice has been annexed to the written statement as Annexure R-1. Through this notice, they were informed that the electronic goods, which they have brought within the municipal limits without paying octroi charges, are tenable to octori and, therefore, the petitioners were requested to show the receipts of the electronic goods for which octroi has been paid. If the octroi had not been paid then the goods were to be seized by the inspection staff. After receiving the notice, the deputation of the dealers met the Administrator, Municipal Committee, on 13.7.1992 and requested that they may be given a chance to pay octroi voluntarily. If the octroi had not been paid then the goods were to be seized by the inspection staff. After receiving the notice, the deputation of the dealers met the Administrator, Municipal Committee, on 13.7.1992 and requested that they may be given a chance to pay octroi voluntarily. The Administrator gave them 15 days time upto 28.7.1992 and keeping their promise, the respondent committee did not raid any premises of the petitioners. It is then pleaded that after taking a period of 15 days, most of the reputed dealers (13 of them) deposited octroi that had been evaded to the Municipal Committee and writ petition on their behalf, in any case, has become infructuous. It is further pleaded that the allegation of the petitioners that Municipal Committee staff had raised their premises, shops or house and had taken the goods from there is incorrect and the same is mis- statement on facts. Neither any municipal staff nor the CRPF had gone to their premises. On facts, it is further stated that it is an admitted position that the petitioners have their stores/godowns outside the area of Municipal Committee, from where delivery of articles is given to the customers of the villages and town with an intention to evade octroi while the sale is always executed from their shops within the municipal limits. This evasion of octroi leads to huge loss of public funds. The petitioners charge octroi from the purchaser along with price of the article but do not pay the octroi to the Municipal Committee and, therefore, they intend to defraud the Municipal Committee. Validity of Annexure P-1 has been defended by pleading that the same does not violate Sections 76 and 77 of the 1911 Act. 4. Before we may deal with the legal questions as formulated above, we could like to mention that after going through the pleadings of the parties we are convinced that the allegation made by the petitioners that their shops were raised by the staff of the Municipal Committee along with CRPF personnel and their goods were picked up does appear to be false. The facts of the case reveal that before any action could be taken or the shops could be inspected, a notice was given to the petitioners. The facts of the case reveal that before any action could be taken or the shops could be inspected, a notice was given to the petitioners. It is conceded position that some of the petitioners, pursuant to the notice, referred to above, did pray for time to pay the octroi and indeed paid the same. 5. Instructions/circular dated 27.5.198 (Annexure P-1) records that it came to the notice of the Government that most of the dealers, specially dealing with the sale of electrical goods such as television, refrigerators etc., indulge in large scale evasion of octroi because on these items octroi is charged at the rate of 3% advalorem which is quite high and, therefore, evasion of octroi results in huge profits to them on the sale of these goods. In order to indulge in the octroi evasion such dealers maintain godowns outside the municipal limits and fresh consignments of these goods are loaded in these godowns. Thereafter, they carry these goods into their shops, which are located in municipal limits in driblets without paying. They are indulging in the same on the belief that once the goods are inside their shops even without paying octori, Municipal staff is not legally permitted to enter their shops and inspect the goods to see whether they were imported without paying octroi. It is then stated that their presumption, as stated above, arises from the impression that there is no provision in the Act of 1911 to check up the goods which have been imported without paying octroi but the same is not legally correct. There are specific provisions in the 1911 Act under Sections 76 and 77, which contain powers of the Municipal Committee to examine articles liable to octroi and power to search where octroi is leviable. Perusal of these sections would reveal and the Municipal authority can inspect shops and buildings to see whether any goods have been imported without paying octroi. In support of what has been stated above, reference was also made to the judgment in Parekh Brothers v. Corporation of the City of Nagpur and others, 1975 Mh. L.J. 86. Perusal of these sections would reveal and the Municipal authority can inspect shops and buildings to see whether any goods have been imported without paying octroi. In support of what has been stated above, reference was also made to the judgment in Parekh Brothers v. Corporation of the City of Nagpur and others, 1975 Mh. L.J. 86. The operative part of Annexure P-1 runs thus :- "In view of the above decision of the Court as well as the statutory provisions of the Act, Government has decided to clarify that Municipal authority can inspect shops and buildings to see whether any goods have been imported without payment of octroi. You are, therefore, requested to check the octroi evasion accordingly and for this purpose you can also take police assistance from District Administration." 6. It is now time to evaluate the contention of Mr. Dhuriwala that instructions (Annexure P-1) are beyond the scope of Sections 76 and 77 of the 1911 Act. The same for ready reference are reproduced below :- "76. Power to examine article liable to octroi :- Every person bringing or receiving with the octroi of terminal limits of any municipality any article on which octroi or terminal tax is payable shall when required by an officer duly authorised by the State Government of the Committee in this behalf and so far as may be necessary for ascertaining the amount of tax chargeable :- (a) permit that officer to inspect, examine, weight and otherwise deal with the article, and (b) communicate to that officer any information and exhibit to him any bill, invoice for document of like nature which he may possess relating to the article." "77. Power to search where octroi is leviable :- (1) If any person, bringing or receiving conveyance or package within the octroi or terminal tax limits of a municipality on which octroi or terminal tax is or is believed to be leviable, shall refuse, on the demand of an officer authorized by the State Government of the committee in this behalf, to permit the officer to inspect, weigh or otherwise examine the contents of the conveyance or package for the purpose of ascertaining whether it contains any articles in respect of which octroi or terminal tax is payable or shall refuse to communicate to the officer any information and exhibit to him any bill, invoice or document of a like nature which he may possess relating to the article or with the intention of defrauding the committee or a lessee under Section 83 shall communicate any such information which is false or exhibit any such bill, invoice or document of a like nature which is false, forged or fraudulent he shall be punishable with a fine which may extend to fifty rupees. (2) Any such person may demand that the conveyance or package or both as the case may be, shall be taken without unnecessary delay before a member of the committee or the secretary or a magistrate who shall cause the inspection to be made in his presence. (3) Without prejudice to the provisions of sub-section (1) in case in non- payment of any octroi on demand, the officer referred to in section 76 may seize any article on which the octroi is chargeable to satisfy the demand. (3) Without prejudice to the provisions of sub-section (1) in case in non- payment of any octroi on demand, the officer referred to in section 76 may seize any article on which the octroi is chargeable to satisfy the demand. (4) The committee or an officer authorised by it in this behalf may after the lapse of five days from the seizure and after the issue of proclamation fixing the time and place of sale, cause any property so seized, or so much thereof as may be necessary to be sold by auction to satisfy the demand including the amount of penalty with the expenses occasioned by the seizure custody and sale thereof, unless the demand including the amount of penalty and expenses are in the meantime paid : Provided that by order of the officer authorised by the committee in this behalf, articles of a perishable nature which cannot be kept for five days without serious risk of damage may be sold after the lapse of such shorter time as he may, having regard to the nature of the articles, think proper." 7. The question that may arise in the context of the contention raised by learned counsel for the petitioners would be as to whether the Municipal Authorities have power to check the evasion of octroi by importing the articles leviable to octroi in the business premises of the shopkeepers located within the municipal limits of that area or that such checking can be made only when a person is bringing or receiving such articles in the municipal limits. A bare reading of Sections 76 and 77 reproduced above would manifest that it is not only bringing an article in the limits of the Municipal Committee but receiving also such an article that entails payment of octroi. The contention of Mr. Dhuriwala could be accepted if it was only bringing an article on which octroi is payable and not receiving thereof within the municipal limits. Further, what Mr. Dhuriwala contends, cannot be accepted as in that event goods escaping inspection deliberately or otherwise would also escape liability to tax. The contention of Mr. Dhuriwala could be accepted if it was only bringing an article on which octroi is payable and not receiving thereof within the municipal limits. Further, what Mr. Dhuriwala contends, cannot be accepted as in that event goods escaping inspection deliberately or otherwise would also escape liability to tax. It is too well known and indeed present is a case of the same nature where businessmen, dealers or other persons engaged in purchase and sale of goods leviable to octroi devise number of means to bring such goods or articles within the municipal limits with a view to evade the payment of octroi and thus, earn huge profits. Insofar as, authorities constituted under the Municipal Act are concerned, they have octroi posts only at specified places, but such specified places are not the only routes to the towns and Municipalities. What we have observed above was also held in a judgment of Bombay High Court (Nagpur Bench) in Parekh Brothers v. Corporation of the City of Nagpur and others, 1975 Mh. LJ. 86. The facts of the case aforesaid reveal that the petitioner, a partnership concern, was carrying on business of purchasing and selling of gold and silver ornaments as also silver bars. The said partnership concern challenged the validity Rules 43, 45 and 47 of the Otroi Rules for the assessment, collection and refund of the cess imposed under Section 114(1) (e) of the City Nagpur Corporation Act, 1946, and for prevention of evasion thereof, on goods and animals brought within the octroi limits of the Nagpur Corporation for sale, consumption or use therein. Occasion to challenge these rules had arisen as a notice by the Octroi Superintendent of the Corporation calling upon the petitioner to furnish information as required under Section 150(b) of the Corporation Act read with Rule 43 of the Octroi Rules was issued. Occasion to challenge these rules had arisen as a notice by the Octroi Superintendent of the Corporation calling upon the petitioner to furnish information as required under Section 150(b) of the Corporation Act read with Rule 43 of the Octroi Rules was issued. Sections 150 and 151, on the basis of which a similar contention as the one in the present case was made, read as follows: Sections 150 and 151 "Every person bringing or receiving within the limits of the city any article in respect of which a toll or cess or imports is payable, shall when required by an officer duly authorised by the Chief Executive Officer in this behalf and so far as may be necessary for ascertaining the amount of tax chargeable, (a) permit the officer to inspect, examine, weigh and otherwise deal with the article, (b) and communicate to the officer any information and exhibit to him any bill, invoice of document of a like nature which such person may possess relating to the article. 151. (1) If any person, bringing or receiving within the prescribed limits of the City a conveyance or package on which to tall or cess on imports if or is believed to be leviable, refuses on the demand of an officer authorised by the Chief Executive Officer in this behalf to permit the officer to inspect, weight or otherwise examine the contents of the conveyance or package for the purpose of ascertaining whether it contains any article in respect of which a toll or cess on imports is payable, or refuses to communicate to the officer any information or to exhibit to him any bill, invoice or document of a like nature which he may possess relating to the article, or with the intention of defrauding the Corporation communicates false information or exhibits any false, forged or fraudulent bill, invoice on document of a like nature, he shall be punished with a fine which may extend to fifty rupees. (2) Any such person may demand that the conveyance or package or both, as the case may be, shall be taken without unnecessary delay before the Chief Executive Officer or a person appointed by him for this purpose, who shall cause the inspection to be made in his presence." 8. (2) Any such person may demand that the conveyance or package or both, as the case may be, shall be taken without unnecessary delay before the Chief Executive Officer or a person appointed by him for this purpose, who shall cause the inspection to be made in his presence." 8. The precise contention that came up for scrutiny by the Division Bench was that while the goods are being brought within the limits of the City, the power under Section 150 may be exercised at that time at the octroi post, and if goods pass the octroi post without payment of octroi duty, if it is payable, then it is open to the Corporation staff at a late state while in transit to get hold of those goods and make the inquiry contemplated by Section 150, but that no such inquiry can be made from the petitioner after he has already received the goods. It was further urged that there was no time limit and no octroi duty is payable on exports and, therefore, the authorities have really no jurisdiction or power to ask for any information with regard to the goods exported by the petitioners. The contention aforesaid was met by observing as follows :- "Now, having read Section 150 carefully, it appears to us that the very narrow construction which the learned counsel for the petitioner is wanting to place on it will really not be permissible. It cannot be disputed that when octroi tax has been levied and goods on which octroi duty is payable are brought within the limits of the City, they can be brought in various ways. They may be brought by road and in such a case they could be intercepted at the octroi post. They may be brought by rail and the goods could be subjected to levy of octroi at the octroi naka if one is established near the railway station. But apart from this, the goods could be brought within the city clandestinely. Evasion may take place by the person bringing them not stopping at the octroi post. Good may be brought in by postal parcels or in such a way that they may not be subject to inspection or verification at the octroi post. But apart from this, the goods could be brought within the city clandestinely. Evasion may take place by the person bringing them not stopping at the octroi post. Good may be brought in by postal parcels or in such a way that they may not be subject to inspection or verification at the octroi post. But the fact that they have not been inspected or were not possible to be inspected at the octroi post cannot affect the liability to pay the octroi duty if it was in law payable, i.e. if the goods were such as were specified in the rules regarding levy of octroi and they were brought for the purposes of consumption, sale or use in the City. While the power under Section 150 of inspection and asking for information could no doubt be exercised when the goods are inspected at the octroi post, the obvious purpose of using the words "every person bringing or receiving within the limits of the City" was to indicate not the time when the power could be exercised but to indicate the person who was obliged to permit inspection and furnish information and the event which would give rise to the exercise of such power of inspection or asking for information. In the case of octroi, the taxing event is the import of the article within the limits of the Corporation and that is why the words used are "bringing or receiving within the limits of the City". When goods were brought within the City or when they were received was really not relevant. But if it is found that the goods were in fact brought or received by a person then under Section 150 the person, who has either brought or received the article, incurs the liability under that section. When goods were brought within the City or when they were received was really not relevant. But if it is found that the goods were in fact brought or received by a person then under Section 150 the person, who has either brought or received the article, incurs the liability under that section. The Octroi Rules are framed with a view to enforce the liability for payment of octroi and to avoid evasion of octroi duty and it is to subserve this object that Rules 43 and 45 have been made ........Having regard to the object and purpose of Section 150, it appears clear to us that if the petitioner or a person bringing or receiving within the limits of the Corporation any goods which were liable to duty and that had to be ascertained, nothing prevented the authorities concerned from asking the necessary information from the petitioner the whole object being to ascertain whether the octroi duty has been paid or not. It is of course open to the petitioner to give such information as is true to his knowledge and belief, subject to the consequences which may follow if the information is found to be false or incorrect." 9. Mr. Dhuriwala, in his endeavour, to hold in tune with his contention, however, relies upon a Full Bench of Orissa High Court in The Puri Fish Merchants Association and another v. Puri Municipal Council and others, Municipalities and Corporation Case, 1987 268. The validity of levy of octroi duty by the Puri Municipality on the purchase and dispatch of marine fish and prawn was the question that came up for decision in the case aforesaid. The brief facts of the case were that the petitioner, who was registered association of fish merchants in the town of Puri, was carrying on business in fish and prawn. In course of his business, admittedly it would purchase fish, both marine and fresh water, from vendors and fisherman within the limits of Puri Municipality and thereafter transport them mostly to their commission agents in Howrah for onward consumption. The Puri Municipality, in exercise of this powers under Section 113(1)(kk) of the Orissa Municipal Act, imposed octroi duty on fish and prawn either caught from the sea or brought from outside. Levy of octroi is governed by the Puri Municipality Bye-laws. The Puri Municipality, in exercise of this powers under Section 113(1)(kk) of the Orissa Municipal Act, imposed octroi duty on fish and prawn either caught from the sea or brought from outside. Levy of octroi is governed by the Puri Municipality Bye-laws. Bye-law No. 11, which is relevant, reads this :- "11(1) Every person in charge of good or articles subject to octroi shall as soon as they are brought within the octroi limits, take them to the nearest octroi check post is required by the octroi official to be dealt with in accordance with these bye-laws. (2) If any goods or articles are brought within the limits by evading payment of octroi and is proved to the satisfaction of the Octroi Superintendent that the goods or articles are liable to payment of octroi and have been brought without payment of such octroi, the said Superintendent may after giving reasonable opportunity to the owner or person in charge by serving a notice on him make the necessary assessment and on such assessment the owner or person in charge of goods or articles shall pay the octroi;" 10. Established facts of the case aforesaid were that fish, both marine and fresh water, was brought into the limits of Puri Municipality by the catchers, fishermen and fish vendors and would be purchased by merchants, such as petitioner, for the purpose of transporting the same outside. The case aforesaid is clearly distinguishable on facts from the present case. In this case, petitioners are dealers in various electronic items, mentioned above, and the facts reveal that they, some-how or the other manage to bring these items, leviable to octroi within municipal limits without payment thereof. 11. Nothing else has been urged on behalf of the petitioners but for half heartedly saying, that if what municipal authorities are doing is permitted, no shopkeeper would be safe, as in that event, the municipal authorities with the help of police would raid any shop, godown or house, resulting into crises in the municipality. The Court, on the aforesaid contention, can only comment that, what has been urged by the counsel, is only a figment of imagination of the petitioners. Nothing, as such, has happened and we have already held in the earlier part of the order that allegation of the petitioner that their shops were raided with the help of police is false. The Court, on the aforesaid contention, can only comment that, what has been urged by the counsel, is only a figment of imagination of the petitioners. Nothing, as such, has happened and we have already held in the earlier part of the order that allegation of the petitioner that their shops were raided with the help of police is false. Quite to the contrary, a notice preceded any other action in contemplation and in fact 13 petitioners, after seeking some time, paid octroi on item it was not paid earlier. Further, sub-section (2) of Section 77 gives right to a person to ask for inspection by a member of the Committee or Secretary or even a Magistrate and this demand of his has to be met without any unnecessary delay as is spelt out from sub- section (2) of Section 77 of the 1911 Act. Still further, Annexure P-1, instructions, that have been challenged in the present case, authorise the Municipal Authorities only to inspect the shops and buildings and not to raid and seize the articles, as is made to look by the petitioners. In the operative part of Annexure P-1, reproduced above, no doubt, it has been mentioned that in order to check the octroi evasion, the Municipal Authorities can take police assistance from the District Administration. We are sanguine that if the Municipal Authorities might resort to police assistance in checking the octroi evasion, the District Administration would provide such help only in accordance with law. We do not wish to detail as to under what circumstances police assistance can be obtained but with a view to allay unnecessary fear in the minds of the petitioners, we would only hasten to add that such an assistance becomes available to the authorities only in a case when a person resists even inspection of the shops. Finding no merit in the appeal, we dismiss the same, leaving, however, the parties to bear their own costs. Appeal dismissed.