National Fertilizer Ltd. vs Municipal Committee and Others

G.S. Singhvi, J.—Notice Annexure P5 dated 25.1.1989 issued by the Executive Officer, Municipal Committee, Bhatinda, u/s 80(2) of the Punjab Municipal Act, 1911 (for short, the Act) and order Annexure P50 dated 26.9.1989 passed by the Special Executive Magistrate, Ferozepur Region, Ferozepur, have been challenged in this writ petition filed by the National Fertilizers Limited, Bhatinda. The prayer of the petitioner is to quash the impugned notice and the order, as well as for restraining the Municipal Committee, Bhatinda (hereinafter referred to as, the Committee) from realising the so-called arrears of octroi.

The petitioner is engaged in the manufacture of the fertilizer, popularly known as Kishan Urea. For manufacturing the urea, the petitioner imports/purchases different raw material including furnace oil which is used as feed stock. The furnace oil is purchased and imported from the Indian Oil Corporation, a Government of India Undertaking. The prices of the various commodities sold by the Indian Oil Corporation are fixed by the Government of India on the recommendations of the Oil Coordination Committee. The Oil Coordination Committee has classified the furnace oil under two heads for the purpose of price, namely, furnace oil for general purpose and furnace oil for manufacture of fertilizers. In support of this assertion, the petitioner has produced Annexures P1 to P6. As on 1..1986, the selling price of furnace oil per kilo litre was Rs. 2903.06 ps. (for general use) and Rs. 1320.2 ps. (for manufacture of fertilizer). Similar difference has persisted for many years. According to the petitioner, furnace oil supplied to it was used exclusively for manufacture of fertilizer and for no other purpose.

The Committee has been charging octroi on the actual price paid by the petitioner on the purchase of furnace oil and as and when some doubts were expressed by the Committee about the rate of octroi, the petitioner clarified the mode of sale of furnace oil to it by the Indian Oil Corporation on concessional rates. On 25.1.1989, the Executive Officer of the Committee issued a notice to the petitioner u/s 80(2) of the Act for recovery of the octroi amounting to Rs. 65,85,938.62 ps. To this, a reply came to be filed by the petitioner and after hearing the parties respondent No. 2 passed impugned order Annexure P50 and held that the amount of Rs. 65,85,938.62 ps. was payable as arrears of octroi.

The argument of Shri Aggarwal, Senior Advocate, learned counsel appearing for the petitioner, is that the Committee is entitled to charge octroi on the goods imported within its limits for consumption, sale or use and as the petitioner was importing furnace oil for use and consumption within the limits of the Committee, it could charge the octroi on the price paid by the petitioner to the Indian Oil Corporation as per the price fixation devised by the Indian Oil Corporation and respondent-Committee cannot force the petitioner to pay octroi on the basis of fictional price mentioned by the supplier on the invoices with a view to secure immediate user of the goods supplied by it. Shri Aggarwal argued that the Committee has throughout accepted octroi on the basis of the price paid by the petitioner and, therefore, it had no authority to issue notice u/s 80(2) of the Act and in any case, respondent No. 2 could not have held the petitioner liable to pay a huge amount of over Rs. 65 lacs. Learned counsel contended that the Committee cannot charge octroi on the basis of price of the furnace oil paid by the general users and there is nothing wrong in fixing price - one meant for general use and the other meant for manufacture of fertilizers.

The Committee has contested the writ petition on the ground that the concession given by the Indian Oil Corporation in the price of furnace oil supplied to the petitioner cannot be made basis for charging octroi. According to the Committee, octroi is payable on the price at which the goods are available in the open market and it is always not necessary for the Committee to accept the price indicated in the bills. By making reference to Rule 17(3), Chapter-V of the Punjab Municipal Accounts Code, the Committee has pleaded that charging of octroi on the market value of the furnace oil does not suffer from any illegality.

In a separate reply, respondent No. 2 has supported the stand of respondent no. l.

There is no controversy between the parties that the Committee has a right to charge octroi on the goods imported within its limits for consumption, use and sale. There is also no controversy between the parties that the petitioner has been importing furnace oil from the Indian Oil Corporation for its use, namely, manufacture of fertilizer and that the Committee has been charging octroi on the concessional price paid by the petitioner to the Indian Oil Coordination. Respondent Committee has also not been able to place any material before the Court to doubt the case set up by the petitioner that Oil Coordination Committee has approved dual pricing of the finance oil i.e. one meant for general use and the other meant for manufacture of fertilizer. The petitioner is importing furnace oil from Indian Oil Corporation at concessional rates which are definitely lower than the rates payable by other consumers or the rates which are payable in the open market. The issue which needs determination is whether the petitioner which has been receiving furnace oil at concessional rates as fixed by the Oil Coordination Committee can be made to pay octroi on the basis of the price prevalent in the open market. The argument of the learned counsel appearing for the respondents is founded on an assumption that the Committee can charge octroi on the basis of the price which the consumer may not have actually paid for the purchase of the goods imported by it. In substance, the Committee wants to charge octroi from the petitioner on the basis of an assumed price i.e. price of the goods in the open market, even though the petitioner is not required to pay such price as per the existing policy of the Indian Oil Corporation. In our opinion, this action of the Committee is without any sanction of law. The policy of the Government of India of supply of furnace oil to the Fertilizers Units at concessional rates has a rational objective behind it namely, to keep the prices of the fertilizers low. The policy of making available fertilizers at low price is intended to boost the agricultural production in the country. Therefore, dual pricing of furnace oil does not suffer from any inherent illegality. The Committee can charge octroi on the basis of the value of the goods at which such goods are imported within its municipal limits and, therefore, if the petitioner has been importing goods at concessional rates, the Committee is not entitled to charge octroi on the basis of the market price which may be higher than the price paid by the Petitioner.

Part-V(17) of the Municipal Account Code, 1930 on which Shri Doabia has placed reliance, reads as under:-

"agency and method of assessment:- (1) The octroi payable in respect of goods imported otherwise than by rail for consumption, use or sale within octroi limits shall be assessed :-

(a) by the officer-in-charge of the barrier of import, if :-

(i) the octroi is leviable by weight or tale, or

(ii) the octroi is leviable ad valorem according to the provisions of rule V-12.

(b) by the Octroi Superintendent.

(2) When octroi liable ad valorem is to be assessed by an officer-in-charge of a barrier, he shall calculate their value on the information at his disposal with regard to the invoice produced by the importer or the value declared by the importer.

(3) When octroi leviable ad valorem is to be assessed by the Octroi Superintendent, he shall, if no invoice is presented with the goods, calculate the value of the goods on the information at his disposal with due regard to the value declared by the importer, and, if an invoice is presented, calculate the value on the entered in the invoice plus the Excise Duty and fee, if any, the cost of freight unless he has reason to suspect that the invoice is not genuine in which case he shall proceed as if no invoice had been presented."

A look at the above quoted provision shows that it is applicable on the goods which are imported for consumption, use or sale otherwise than by rail and, therefore, on the face of it, sub-para (1) of Rule 17 of Chapter-V is not applicable. Even if we were to assume that this part can be applied to the goods imported by the petitioner, it cannot be said that the respondent no. l is entitled to take action against the petitioner under clause (3) thereof. Under that clause, the Superintendent can discard the price disclosed in the documents produced by the assessee but his can be done only in the cases where he has reasons to suspect that invoice is not genuine. In that case, he can make his own enquiry and can come to a conclusion about the price of the goods. In such situation, it may be open to the competent officer to make enquiry regarding price of the goods in open market. That is not the case of the respondents. It has not been urged by Shri Doabia that the petitioner has done under-invoicing or has made any attempt to defraud the Committee by not disclosing the true price of the goods, namely, furnace oil. Therefore, by placing reliance on clause (3) of Chapter V (17), the Committee cannot say that the petitioner has, in any manner, avoided payment of octroi on the real value of the goods imported by it.

Respondent No. 2 has passed the impugned order dated 26.9.1989 without examining various provisions of the Act and without considering the issue whether the petitioner can be charged octroi on the basis of the market price of the goods. In our considered view, that order suffers from an error of law apparent on the face of it and deserves to be quashed.

Consequently, the writ petition is allowed. Order Annexure P-50 is declared illegal and is hereby quashed. The amount of Rs. 5 lacs .deposited by the petitioner in terms of the interim order passed by this Court on 26.10.1989 shall, however, be liable to be adjusted by the Committee towards the octroi payable by the petitioner infuture.