SHROFF & CO., ETC. versus MUNICIPAL CORPORATION OF GREATER BOMBAY AND ANOTHER, ETC.

Citation: [1988] SUPP. 2 S.C.R. 406 · Decided: 12-08-1988 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

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Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
SHROFF & CO., ETC. 
v. 
MUNICIPAL CORPORATION OF GREATER BOMBAY AND 
ANOTHER, ETC. 
AUGUST 12, 1988. 
[SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.) 
Bombay Municipal Corporation Act, 1888-Sections· 192, 194-
0ctroi-Levy and collection of. 
Bombay Municipal Corporation Levy of Octroi Rules, 1965-
Rules 2(5), 2(7)(a)-Countervailing duty-Whether inc/udible in 
assessable value for imposition of octroi. 
Bombay Prohibition Act, 1949-Sections 2( 14), 2(20), 2(36), 26, 
105. 106 and 192-Manner of levy of excise duty-Duty allracted at the 
point of import. 
The appellants were registered partnership firms carrying on 
business of dealing in wines and spirits and were licensed to import and 
store liquors in their bonded warehouse at Bombay. They were also 
holders of licence issued under the Maharashtra Foreign Liquor 
(Import and Export) Rules, 1963 framed under the Prohibition Act of 
1949 of the State Government. 
The Maharashtra Foreign Liquor (storage in Bond) Rules, 1964, 
under which, an importer could import liquor and store the same in a 
warehouse without payment of countervailing duty, were amended on 
28th July, 1976 and 28th June, 1983, to impose octroi on the assessable 
value which includes customs duty paid on import of liquor. 
The appellants filed a writ petition in the High Court, challenging 
the inclusion of the countervailing duty in the assessable value for octroi 
on the ground that the said duty was not incurred 'till the date of 
removal of the goods from the place of import'. 
A Single Judge of the High Court allowed the writ petition. The 
respondent filed Letters Patent Appeals against the decision of the 
Single Judge. The Division Bench of the High Court by the impugned 
judgment held that countervailing duty was includible in the assessable 
H value for the imposition of octroi. 
406 
SHROFF & CO. v. MUNICIPAL CORPN. 
407 
Dismissing the appeal, the Court, 
HELD: Per Sabyasachi Mukharji, J. 
Countervailing duty .is imposed for the purpose of setting off or 
compensating some other duty so as to place the home producer on an 
equal footing with the importer of foreign goods. The essence of 
countervailing duty is to set off the effect of non-payment· of tax on 
manufacture meant to protect the indigenuous production. [417H; 418AJ 
Bringing goods with intention to use and not in transit is 
decisive and any imposition on that would form part of the duty which 
could be imposed at the time of entry and could be included in the 
Octroi. [427C] 
For goods in transit section 194A of the Bombay Municipal 
Corporation Act, 1888 provides an exemption in accordance with the 
octroi Rules. Section 105 of the Bombay Prohibition Act, 1949, read 
with Sections 2(14), 2(20) and 2(36) makes the position clear that the 
taxable event in the case of excise duty would be manufacture or 
production and in the case of countervailing duty, import within the 
State. [427C-E] 
A 
B 
c 
D 
The Maharashtra Foreign Liquor (Storage in Bond) Rules, 1964 
were framed subsequent to the Act of 1949. The charge and.incidence of 
E 
countervailing duty under the Act and the relevant Notifications of 1949 
were already subsistin!:· By subsequent framing of the storage in Bond 
Rules, incidence or charge cannot be deflected or altered. Under Rule 
2(2) administrative facility is granted for deferred payment to the asses. 
see. The words "without payment of duty" indicate that duty has be-
come chargeable and the incidence was complete; if, however, the asses-
F 
see complies with the Rules, he is given a facility to defer payment. This 
clearly shows that duty has become payable already. This is only consis· 
tent with the fact that the charge or incidence has already been at-
tracted on the taxable event taking place, namely, the manufacture or 
production in the case of excise duty or import in the State in the case of 
countervailing duty. The fact that a bond has to be executed means the 
G 
goods, to be stored, have already been the subject matter of duty or 
charge. If they have been so, there is no question of bonding them with 
an undertaking to make payment of.duty at the lime of removal or 
before removal from bond. Normal rule is pre-payment of duty at the 
time or before the import. The purpose of the import is decisive. If 
goods are brought for the purpose of commerce or trade, these are 
H 
imported. i4l7G-H; 428A-C; 430A-B] 
A 
B 
c 
408 
SUPREME COURT REPORTS 
(1988] Supp. 2 S.C.R. 
Counter

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