KATHIAWAR INDUSTRIES LTD. versus JAFFRABAD MUNICIPALITY

Citation: [1980] 1 S.C.R. 243 · Decided: 08-08-1979 · Supreme Court of India · Bench: A.C. GUPTA · Disposal: Dismissed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

243 
KATHfAWAR INDUSTRIES LTD. 
v. 
JAFFRABAD MUNICIPALITY 
August 8, 1979 
[A. C. GUPTA AND P. S. KAILASAM, JJ.] 
Octroi-Terminal tax a kind of Octroi-Levy of Octroi on uncrushed salt-
Uncrushed salt crushed in factory-Whether conversion into another commer-
cially different article-If amounts to consumption-"Consumption", "Use"-
Meaning of. 
Saurashtra Terniinal Octroi Ordinance, 1949, Ss. 2(2) & 3; & Saurashtra 
Octroi and Terminal Tax Rules 1949, Rule 3 Schedule I lten1 No. 23. 
In 1948 on the formation of Saurashtra State, Jaffrabad came within its 
territorial limits and the Bombay District Municipal Act, 1901 as adapted and 
applied to the said State became applicable to Jaffrabad. 
Jaffrabad Munici-
pality the predecessor of the respondent was constituted under the 
Bombay 
District Municipal Act, 1901. 
The State of Saurashtra, within the territorial limits of which the said 
Municipality was situate, promulgated Ordinance No. 47 of 1949 on 31-8-49 
called the Saurashtra Terminal Octroi Ordinance, 1949. 
Section 2 ..:..1. (2) oi 
the said Ordinance defines ''octroi" as including a terminal 
tax. Section 
3 
empowered the Government to impose terminal tax and octroi duty, and pro-
vided that Octroi may be imposed on "animals or goods, or both, within the 
octroi limits brought for consumption or use therein." Section 4 empowered the 
Government to make rules in exercise of which the State Government made 
the Saurashtra Octroi and Terminal Tax Ru1es on 8th December, 1949. Rule 
3, the charging rule provided that octroi is payable in respect of goods set out 
in Schedule I of the Rules and prescribed that it shall be payable at the nakas 
at rates set out therein. Item No. 23 is "Salt for 
Factory!>. Schedule 
II 
enumerated a list of items which- are exempt from octroi duty and contained 
in Item No. 6, a sub-item in Gujarat which means "salt''. 
The appellant \Vas running a salt manufacturing works at Jaffrabad. 
The 
company had constructed salt works, grinding mills, trolly-tracks and a jetty 
at the port site. The major portion of the salt works is situated out of the 
municipal limits. The salt is manufactured outside the municipal limits. The 
grinding mills and the part of the trolly-track leading to jetty came within the 
municipal limits of the respondent Jaffrabad Municipality. 
The salt is prepared in the salt pans outside the Octori limit and the salt 
which is crushed is taken to the crushing factory and the salt which is not to 
be crushed is taken in uncrushed form directly to the jetty over the trolly-
track part of which passes through the octroi limits of the municipality. The 
salt that is crushed in the crushing factory is also after crushing taken by trolly 
to the jetty. From the jetty the salt whether crushed or uncrushed as the case 
may be is exported by . steamers. 
' 
A 
B 
c 
D 
E 
F 
G 
H 
A 
B 
c 
D 
244 
SUPREME COURT REPORTS 
fl 980] J. S.C.R. 
The 1'1unicipality demanded from the appellant octroi in respect 
of salt 
manufactured by it. 
The' appellant paid under protest and filed a suit against 
the respondent for declaration that the salt manufactured by the lppellant at 
its sa1t \VOrks at Jaffrabad and exported uncrushed and/or crushed 
was 
not 
liable to octroi duty and the goods passing through municipal limits irom the 
salt works are not hable to octroi duty and for an injunction restraining the 
re:spondent from recovering the amount claimed as octroi. 
Another suit claim· 
ing refund of the octroi paid was also filed. 
'The t¥:o suits were decreed, the court declaring that the salt manuf:.u.:tured 
by the appeJlaIU company is not liable to octroi duty. The Municipality being 
aggrieved preferred appeals and the appellate· court while dismissing the ~ppeals 
and confirming the decrees of the trial court held that the perpetual injunction 
granted by the trial court would not apply to the salt entering the octroi limits 
for consumption or use for the factory situated within the octroi limits of the 
~Iunicipality. 
The :r-.1 unicipality preferred second appeals to the High Court, which allowed 
them except to the extent of confirming the declaration that uncrushed salt of the 
appellant company which is directly sent from the stacking ground to the jetty is 
not Jiable to octroi provided the plaintiff company followed the prescribed rules 
and formalities. 
The other claims. in the suits were however dismissed. 
On the question whether the salt manufactured by the ap

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