INDIAN OIL CORPORATION versus MUNICIPAL CORPORATION, JULLUNDHAR AND ORS.

Citation: [1992] SUPP. 2 S.C.R. 62 · Decided: 20-10-1992 · Supreme Court of India · Bench: J.S. VERMA · Disposal: Appeal(s) allowed

Judgment (excerpt)

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 
E 
F 
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: 
"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 
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 
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 
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. 
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 
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 
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. 
Allowing the appeal, this Court, 
HELD : 1.1. Entry of goods within the local area for consumption, 
B 
c 
D 
E 
F 
G 
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 ta

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