Yawalkar Pesticides Pvt . Ltd. Vs Nagpur Municipal Corporation a body constituted by the City of Nagpur Corporation Act, 1948 and The Octroi Superintendent, Nagpur Municipal Corporation

A.P. Bhangale, J.@mdashThe prayer in the present writ petition is for to quash and set aside the impugned communication dated 10th October, 1995 issued by the second Respondent and for issuance of an appropriate writ directing the Respondents to refund the entire amount of the octroi duty collected from the Petitioner during the period from 18.04.1985 to 15.4.1995 on raw materials imported by the Petitioner from outside the city limits, but, immediately taken for being consumed in their factory situated outside the Octroi limits of the Respondent/Municipal Corporation. In the alternative, it is prayed that direction be issued to the Respondent to decide the application of the Petitioner for refund dated 25.7.1995 afresh after giving an opportunity of hearing to the Petitioner to substantiate its claim by documentary and available evidence within a stipulated period of two months from the date of decision of the Writ Petition.

2. Heard the submissions advanced before us. Perused copies of the documents annexed with the Petition and also the rulings cited before us.

3. The case urged on behalf of the Petitioner is that the Petitioner is a Private Limited Company duly incorporated under the Companies Act, 1956. It had set up its registered Office at 52, Bajaj Nagar, Nagpur. The Petitioner is having a business to manufacture Pesticides at its factory situated at plot Nos. 51 to 59 in Industrial Estate at Uppalwadi, Kamptee Road. This is situated beyond the octroiable city limits of the City of Nagpur Municipal Corporation. Initially, the Petitioner had a factory at Plot Nos. 26 and 27 in the same Industrial Estate. Nagpur Municipal Corporation, local Civic Authority for the City of Nagpur is a body constituted under the City of Nagpur Municipal Corporation Act, 1948. u/s 114 of the said Act, it is entitled to impose taxes and collect cess in accordance with the Rules framed under the Act, (Octroi duty) on the goods brought within the city limits for sale, consumption or use therein. Section 114 (3) of the Act indicates that the Municipal Corporation derives its authority to impose, assess and collect taxes at the rates specified under the Rules framed by the State Government under the Act. According to the Petitioner, the Uppalwadi Industrial Estate lay out consists of two village areas of Mashala and Wanzra. Former village is beyond the city limits of Nagpur, while later village is within the City Octroi limits. Earlier the Petitioner Company had its factory in plot No. 26 and 27 which were within the City limits, but, since it shifted its factory to plot Nos. 51 to 59, it is situated beyond the city limits of the Nagpur Municipal Corporation. It is also urged on behalf of the Petitioner that, due to internal arrangement between the Industries Department of the State of Maharashtra and The Nagpur Municipal Corporation, the Corporation was treating the entire Uppalwadi Industrial estate to be beyond the Municipal Octroi limits and therefore, was not charging any Octroi duty on the goods being exported to any of the places falling within the Uppalwadi industrial estate. However, as a matter of policy sometime in the month of November 1983, the Corporation withdrew its exemption insofar as the plots which were within the Octroi limits are concerned. Thus, the Corporation started imposing the Octroi duty on all the goods brought within the City Octroi limits. In the year 1985, the Petitioner, who could not sustain the Octroi duty, shifted its factory beyond the Octroi limits, within the village area of Mhasala with the sole intention that it would not be required to pay the Octroi duty for the raw material exported to its factory, outside the Corporation limits. The Petitioner, therefore, informed the Corporation on 18.4.1985 and to second Respondent on 14.5.1985 about its factory shifting to plots Nos. 51 to 59 at Uppalwadi Industrial estate, outside the Corporation limits. The Petitioner had, by various communications to the Corporation, sought permission to transport their goods through the Municipal areas on "Rahadari" pass by issuing necessary instructions to the Octroi posts under the control of Corporation. But, since the Corporation failed to instruct in the matter, the Officials at the Octroi posts refused to issue the transit pass for the goods being taken to the factory site. In the result, the Petitioner had to pay the Octroi duty under protest on all the goods intended to be consumed at the factory, admittedly beyond the Corporation limits. The Corporation, thus, by refusing to issue the transit pass, and for want of ''exit naka'' in Uppalwadi industrial Estate, illegally received the Octroi duty, though it was not entitled to impose and recover it on the raw materials not intended to be used, consumed or sold within the city Octroi limits of the Corporation. In the spirit of good will and co-operation, the Petitioner had magnanimously, by communication dated 21st September, 1985 offered to provide a room with a table and two Chairs without charging any rent to accommodate the staff of the Corporation for the Octroi post/exit naka. Learned Advocate for the Petitioner placed reliance upon the ruling in Union of India and others Vs. E.G. Nambudiri, . Generally, the principles of natural justice require that opportunity of hearing should be given to the person against whom an administrative order is passed. The application of principles of natural justice and its sweep depend upon the nature of the rights involved, having regard to the setting and context of the statutory provisions. Where a vested right is adversely affected by an administrative order, or where civil consequences ensue, principles of natural justice apply even if the statutory provisions do not make any express provision for the same, and the person concerned must be afforded an opportunity of hearing before the order is passed.

4. The Respondents, in their reply, do not dispute that the Petitioner''s factory is outside the City limits, but expressed practical difficulties to issue the transit pass, as requested by the Petitioner. The Corporation expressed its readiness and willingness to accept the request of the Petitioner to establish the Octroi post at the entrance of its factory, provided if the Petitioner is prepared to bear the expenses for the staff required to be deployed for that purpose. The Respondent referred to the earlier Writ Petition no 2150 of 1986 decided by this Court on 7th December 1994 whereby the statement that the Corporation shall abide by its letter dated 7.3.1986 was recorded and it was left open for the Petitioner to make an appropriate application to the Competent authority on the question of refund. Learned Advocate for the Respondent/Corporation submitted that u/s 387 of the Act an aggrieved person has an opportunity to seek redress by appealing to any Corporation Officer duly appointed to hear such Appeals or by moving before the Municipal Commissioner. He further submitted, in view of the ruling in Bata Shoe Co. Ltd. Vs. City of Jabalpur Corporation, , that if a statute creates a special right or liability, it provides for the determination of that right or liability by Tribunals specially constituted in that behalf and lays down that all questions in regard to that right or liability shall exclusively be determined by the Tribunals so constituted. It becomes pertinent to enquire whether the remedies normally associated with actions in a civil Court are prescribed by the said statute or not. If the Court is satisfied that the Act provides no remedy for making a claim for the recovery of an illegally collected tax, the Court might hesitate to construe a provision giving finality to the orders passed by the Tribunals specially created by the Act as creating an absolute bar to the suit and if such a construction was not reasonably possible, the Court would be called upon to examine the constitutionality excluding the civil Court''s jurisdiction.

5. It is specific grievance of the Petitioner that a detailed application for refund was made on 25.7.1995 pursuant to the order passed by this Court in Writ Petition no 2150 of 1995, but the Respondent did not refund the Octroi dues. It is case of the Petitioner that no any opportunity of hearing was granted before the Corporation and by its letter dated 10.10.1995, the request application by the Petitioner was rejected for obscure reason refusing to refund the Octroi dues.

6. Statutory power to impose Octroi tax is conferred on the Respondent-Corporation by Section 114 of the said Act, found in Part IV Chapter XI dealing with ''Taxation''. Section 114(1)(e) of the said Act reads as under:

114. (1) For the purposes of this Act, the Corporation shall impose

(a) ...

(b) ...

(c) ...

(d) ...

(e) a cess on animals or goods brought within the City for sale, consumption or use therein.

This imposition is compulsory imposition of the cess by the Corporation.

Sub-section (3) of Section 114 is also relevant. It reads as under:

114. (1) ...

(2) ...

(3) The State Government may, by rules made under this Act, regulate the imposition, assessment and collection of taxes under this section and specify maximum amounts of rates for any tax and for preventing evasion of assessment and payment of taxes.

The procedure for imposing the taxes as envisaged by Section 114 is laid down by Section 115 which, with its Sub-sections, reads as under:

115. The Corporation may, at a special meeting, bring forward a resolution to propose the imposition of any tax u/s 114.

(2) When such a resolution has been passed the Corporation shall publish in accordance with the rules made under this Act, a notice, defining the class of persons or description of property proposed to be taxed, tile amount or rate of the tax to be imposed, and the system of assessment to be adopted.

(3) Any person resident within the City and objecting to the proposed tax may, within thirty days from the publication of the said notice, submit his objection in writing to the Corporation and the Corporation shall at a special meeting take his objection into consideration.

(4) If the Corporation decides, to amend its proposals or any of them, it shall publish amended proposals, along with a notice indicating that they are in modification of those previously published for objection.

(5) Any objections which may be received to the amended proposals within thirty days shall be dealt with in the manner prescribed in Sub-section (3)

(6) The Corporation shall forward its final proposals to the State Governments which shall either refuse to sanction them or return then for further consideration, or sanction them without modification or with such modification not involving an increase of the rate to be proposed as it thinks fit.

(7) Such sanction, if any shall be published in the Gazette and the tax shall then come into force on such date as may be specified in that notification.

(8) A notification of the imposition of a tax under this section shall be conclusive evidence that the tax has been imposed in accordance with the provisions of this Act.

7. The Government of Maharashtra have framed the Octroi Rules for the assessment, collection and refund of the cess (octroi duty) imposed u/s 114 (1) Clause (e) of the City of Nagpur Corporation Act which made it obligatory for the Corporation to establish Octroi nakas, This is to facilitate record in respect of entry of the goods inside and exit of the goods from the city limits with suitable number of the staff at such places which are in the immediate vicinity of the Octroi limits. Superintendent of the Octroi is responsible for the Octroi administration assisted by the officers and the staff as may be duly appointed. Corporation is under obligation to facilitate the convenience of the importers of the goods by providing weigh bridge, scales for weighment of the goods and for to declare the goods in prescribed forms (A to J). Rule 29 (a) provides for refund to the importer of goods who brought them within the city limits, but exported the goods within the period of limitation through the exit naka, without being sold, consumed, or used within the city limits.

8. In view of the aforesaid relevant statutory provisions, we may now proceed to examine the controversy. The Petitioner had sent a communication dated 25.7.1995 along with detailed statement of the Octroi duty paid by the Petitioner from time to time to the Corporation during the period between 1985 to 1995. The communication was addressed to the Corporation and the Octroi superintendent with a request to refund the Octroi duty claimed to have been paid by the Petitioner without being liable according to law. The detailed communication was cryptically brushed aside by the Octroi Superintendent of the Corporation of the City of Nagpur refusing to refund the Octroi cess feigning ignorance as to the quantity of the raw material used, consumed or sold within the Nagpur Municipal Corporation limits. The statutory Authority was expected to perform its legal duty to pass a reasoned order on merits of the refund claim after giving an opportunity of hearing to the Petitioner. For these reasons, the impugned communication dated 10.10.1995 is indefensible and unsustainable. It is crystal clear that mere physical entry into city limits would not attract the levy of Octroi unless goods were brought in for use or consumption or sale within Octroiable city area limits. The Corporation had no right to retain the amount of wrongly imposed cess (Octroi duty) which was refundable within the period of limitation. Refund to a party aggrieved who is entitled to it must be made. Refund of Octroi duty ought to be granted where the goods were not brought into the Octroiable area limits of the City for consumption or use in such area but for the export outside the city limits and where the goods had, in fact, been exported accordingly beyond the City limits of the Nagpur Municipal Corporation. If no Octroi was leviable on goods i.e. raw material and still on a wrong interpretation of mere entry of goods, Octroi was demanded, levied and collected from the party aggrieved, such payments made on demands from the statutory Authority can not be termed as ''voluntary payments'' but may be termed as ''payments made under duress''. In our opinion, in such cases, the Courts can and shall direct the Municipal Corporation to compute the amount so collected and to refund the same as the right to refund arise when goods -raw materials-were not intended to be consumed inside the municipal area, but were to be immediately exported outside the municipal limits and were intended to be used or consumed outside the Octroiable city limits.

9. By denial of natural justice from the decision making Authority, a party who raised grievance by means of application/representation is bound to suffer from miscarriage of justice or serious prejudice to his entitlement if one-sided decision is taken against him without due notice. Principles of Natural Justice are required to be complied with for a just and fair decision in any administrative or quasi-judicial inquiry, particularly when the order which may be passed is bound to entail civil consequences i.e. Infraction of property right or material deprivations. The party likely to be affected by the decision, therefore, is required to be given a fair treatment by an opportunity of hearing at pre-decisional stage. This is based on the principle that justice should not only be done but must be manifestly seen to have been done. The decision making process must be transparent and non-arbitrary guided by rules of reason, fairness and justice.

10. For the reasons above-mentioned, we find that the impugned communication dated 10.10.1995 passed by Respondent No. 2/Octroi Superintendent of the Nagpur Municipal Corporation is unjust, arbitrary and unsustainable. We quash and set aside the impugned communication dated 10.10.1995 issued by Respondent No. 2 to the Petitioner and direct that the Municipal Commissioner on behalf of the Respondent No. 1, shall either himself or by deputing a competent Officer on behalf of the Corporation, shall decide the application made by the Petitioner for refund of cess (Octroi duty) dated 25.7.1995 afresh in accordance with law by a reasoned order after giving an opportunity of hearing to the Petitioner to produce all the relevant record/documents. The question of limitation of the claim is kept open to be decided in accordance with law in the light of the relevant statutory provisions/Rules.

11. In the event the competent Officer of the Corporation orders refund of the cess or Octroi to the Petitioner, the same shall be paid along with simple interest at the rate of Rs. 6% p. a. from the date the amount became due and payable to the Petitioner till the date the actual payment is made. The proceedings pursuant to this order be heard and decided expeditiously and preferably within three months from the date of communication of this writ. The Rule is made absolute accordingly. Under the circumstances, the Parties are left to bear their own costs.