REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  4917 OF 2011 [Arising out of S.L.P (C) No.  16769 of 2011]

                             CC No. 1039 of 2011

Hindustan Coca-Cola Beverage Pvt. Ltd.             …. Appellant

Versus

Sangli Miraj & Kupwad Municipal  Corporation & Ors.             ....Respondents

WITH

CIVIL APPEAL NO. 4918  OF 2011 [Arising out of S.L.P (C) No. 16771 of 2011]                               CC No. 2284 of 2011

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. Delay condoned.

2. Leave granted.

3. As both the appeals involve identical question of law the same  

were  heard  together  and  are  disposed  of  by  this  common  

judgment. Both the present Civil Appeals are filed against the

judgment dated 08.10.2010 in the Writ Petition No. 5510 of  

2010 and against the judgment dated 08.10.2010 in the Writ  

Petition No. 5867 of 2010, passed by the Division Bench of  

the High Court of Judicature at Bombay whereby the Division  

Bench has dismissed the writ petitions filed by the appellants  

herein  challenging  the  validity  of  the  bill  issued  by  the  

Respondent Corporation, levying and demanding octroi from  

the appellants on glass bottles and crates.

4. In  the  Civil  Appeal  filed  against  the  judgment  dated  

08.10.2010  in  the  Writ  Petition  No.  5510  of  2010  the  

appellant company is, inter alia, engaged in the manufacture  

of  aerated beverages marketed under  different  brands.  The  

products  of  the  company  are  distributed  from  its  plant  

located at Pirangut Taluka, Mulshi, District Pune to amongst  

other places like Sangli Miraj and Kupwad.

5. According to the appellant, their products are distributed and  

sold in returnable and reusable glass bottles.  Glass bottles  

are  stored  in  plastic  crates.  Glass  bottles  and  crates  are  

owned  by  the  appellant.  They  are  never  sold  to  any  

distributor or retailer. Once the product in the glass bottles  

kept in crates is consumed, glass bottles along with crates are  

Page 2 of 20

returned  to  the  appellant  for  filling  after  cleaning  and  

washing them. The appellant pays octroi levied on the aerated  

beverages  when  they  enter  octroi  limits  of  Municipal  

Corporations.  The  impugned  bill  has  the  effect  of  levying  

octroi  separately  on  the  glass  bottles  and  plastic  crates  

utilized by the appellant to pack and transport the aerated  

beverages  manufactured  by  them.  The  aerated  beverages  

cannot be separated from bottles and crates. The bottles and  

crates are neither consumed nor sold but are returned. The  

glass bottles and plastic crates are both reusable and durable  

and  are  repeatedly  used  by  the  appellant.  Moreover,  it  is  

alleged  that  the  cost  of  the  glass  bottles  and  crates  is  

amortized and included in the retail sale price of the aerated  

beverages.   Hence,  it  was suggested that  Octroi  cannot  be  

levied on the value of the glass bottles and crates and the  

impugned bills are, therefore, illegal and arbitrary.

6. The said challenge did not find favour with the High Court  

and the High Court after placing reliance on the judgment of  

this Court in the case of Acqueous Victuals Private Limited  

v. State of Uttar Pradesh & Ors. reported at (1998) 5 SCC  

474 dismissed the Writ Petition. However, liberty was granted  

Page 3 of 20

to  the  appellant  company  to  claim  refund  by  filling  

appropriate  application,  in case,  the bottles  and crates are  

not sold, used, or consumed in the Municipal limits of the  

respondent-corporation, that is to say, if they have not finally  

rested in the Municipal limits of the respondent-corporation;  

and a further direction was issued that if such an application  

is filed, the same will be considered in  its proper perspective  

by the  concerned authority  and if  a  case is  made out  the  

refund shall be granted.

7. We heard the learned senior counsel appearing for the parties  

at length. Similar submissions, as were made before the High  

Court, were also made before this Court. It was submitted by  

the learned senior counsel appearing for the appellant that  

plastic  crates  and  glass  bottles  are  durable  and  reusable.  

They are used a number of times by the appellant. The bottles  

and crates are not sold. They are not consumed. The bottles  

are used but again sent out and refilled. The crates are also  

similarly sent back.

8. It was further submitted that as per the definition of the term  

octroi  as found in Section 2(42)  of  the Bombay Provisional  

Municipal  Corporation  Act,  1949  (for  short  “BPMC  Act”),  

Page 4 of 20

“octroi” means a cess on the entry of goods into the limits of a  

city  for  consumption,  use  or  sale  therein  and  as  in  the  

present case there is no consumption, use or sale, the levy of  

octroi is unjustified.

9. Strong emphasis was placed on the submission that, the cost  

of  the  bottles  and crates is  amortized and included in the  

retail  sale  price  of  the  aerated  beverage.  Since  the  cost  of  

glass bottles and crates is already included in the price of the  

beverage  on  which  the  octroi  is  levied  and  collected,  no  

further octroi can be levied on the glass bottles and crates.    

10.All the above said submissions and contentions were refuted  

by the learned senior counsel appearing for the respondents.  

It  was submitted that the issue in the present case stands  

settled by this  Court,  long back,  in  the  case  of  Acqueous  

Victuals (supra) and the High Court has rightly dismissed  

the Writ Petition by following the ratio laid down in the said  

judgment of this Court.  Further, it was submitted that the  

appellant cannot be aggrieved by the said levy of the octroi on  

glass bottles and crates,  as in case the appellant can satisfy  

the authorities that they were not used, consumed or sold in  

the Municipal limits but were taken out for recycling, in the  

Page 5 of 20

said  case  they  can  claim  refund  and  as  such  are  not  

burdened  with  the  liability  of  octroi  on  such  bottles  and  

crates.

11.Before we proceed further it would be relevant to refer to the  

judgment  of  this  Court  in  the  case  of  Acqueous Victuals  

(supra).   In  Acqueous  Victuals  (supra), the  petitioner-

Company was engaged in the business of bottling soft drinks.  

After  bottling  these  beverages  at  its  plants  at  Bareilly,  the  

petitioner-Company  distributed  the  same  to  wholesalers  in  

Districts of Uttar Pradesh. Section 128 of the Uttar Pradesh  

Municipalities Act, 1916 conferred powers on the Municipal  

Boards to impose octroi on goods or animals brought within  

the  Municipality  for  consumption,  use  or  sale  therein.  

Byelaws of the Municipalities provide for levying octroi on soft  

drinks. As the Municipalities were seeking to levy Octroi on  

the basis of gross weight not only of the beverages but also of  

the  bottles  containing  the  beverages  which  were  brought  

within the Municipal limits, the petitioner-Company filed writ  

petition  in  the  Allahabad  High  Court  challenging  the  said  

levy.  According  to  the  petitioner-Company,  the  bye-laws  

provided  for  levying  octroi  on  soft  drinks  but  not  on  the  

Page 6 of 20

weight of bottles which contained those soft drinks. The High  

Court dismissed the petition. The High Court held that the  

bottles in which the soft drinks were carried could be said to  

have been used within the Municipal limits for the purpose of  

storing  them  till  they  were  ultimately  utilized  by  the  

consumers concerned. Therefore, even the weight of bottles  

containing  these  liquids  could  legitimately  be  taken  into  

consideration  by  the  Municipalities  for  imposing  the  octroi  

duty thereon.

12.Dealing  with  the  petition  challenging  the  High  Court's  

decision,  this  Court  referred to  Section 128 (1)  (viii)  of  the  

Uttar  Pradesh  Municipalities  Act,  1916  which  states  that  

subject  to  any general  rules  or  special  orders  of  the  State  

Government  in  this  behalf,  the  taxes  which  a  Board  may  

impose  can consist  of  Octroi  on goods or  animals  brought  

within the Municipality for consumption, use or sale therein.  

The rates of levy were given in Schedule I. Schedule I referred  

to aerated water but not to aerated water bottles.  This Court  

considered  the  main  charging  provision  i.e.  Section  

128(1)(viii) which stated that Octroi can be charged on goods  

which were brought within the Municipality for consumption,  

Page 7 of 20

use  or  sale  and  held  that  packing  which  contains  the  

consignment of octroiable beverages would remain liable to be  

included in the taxable gross weight of consignment provided  

such packing is shown to be brought within the Municipal  

limits for the purpose of its sale, consumption, or use within  

the Municipal limits. But, if the packing is found to have been  

taken  out  of  the  Municipal  limits  after  its  contents  were  

discharged  within  the  Municipal  limits,  then  the  weight  of  

such packing cannot be brought to octroi tax or if such tax is  

levied  at  the  entry  point,  it  would  become  liable  to  be  

refunded.  This  Court  further  observed  that  the  claim  of  

refund  would  involve  disputed  questions  such  as  whether  

such consignments with the packing were actually sold with  

their  contents  to  the  local  consumers,  or  wholesalers,  

whether  they  were  consumed  or  used  up  within  the  local  

limits or whether they were used for an indefinite period and  

ultimately  rested  within  the  Municipal  limits  and  had  not  

been taken out. These disputed questions of fact are required  

to be examined and adjudicated upon when claims for refund  

are considered by the appropriate authorities.

Page 8 of 20

13.While arriving at the above conclusion, this Court referred to  

the  Constitution  Bench  judgment  in  Burmah  Shell  Oil  

Storage  &  Distributing  Company  of  India  Limited  v.  

Belgaum Borough Municipality reported at AIR 1963 SC  

906 where it was dealing with the question whether octroi  

was  leviable  on  the  goods  brought  within  the  limits  of  

Belgaum for consumption by Burmah Shell, for re-export and  

for sale. While interpreting the words found in Entry No.52 of  

the State list in the Constitution dealing with taxes on the  

entry of goods into a local area for consumption, use or sale  

therein, this Court observed that the two expressions, “use”  

and “consumption” together connote the bringing in of goods  

and  animals  with  a  view  to  their  retention  either  for  use  

without using them up or for consumption in a manner which  

destroys, wastes or uses them up. This Court observed that  

this authoritative pronouncement of the Court makes it clear  

that  before  a  Municipality  can  impose  octroi  duty  on  any  

commodity, it has to be shown that the commodity concerned  

was  brought  within  the  Municipal  limits  for  consumption,  

that is,  for  being totally used up so that it  ceases to exist  

within  the  Municipal  limits  or  it  was  to  be  used  for  an  

Page 9 of 20

indefinite  period  within  the  Municipal  limits  so  that  it  

ultimately rests within the Municipal limits and does not go  

out  subsequently,  or  the  commodity  concerned  must  be  

shown to have been brought within the Municipal limits for  

the purpose of sale within the said limits.

14.This Court also referred to its judgment in S.M. Ram Lal &  

Co.  v.  Secretary  to  Government  of  Punjab reported  at  

1969 UJ 373 (SC),  where this Court  was dealing with the  

question,  whether  the  wool  imported  within  the  Municipal  

limits  of  Faridabad  in  raw  form  for  dyeing  within  the  

Municipal  limits  could  be  said  to  have  been  used  in  the  

Municipal limits or consumed therein so as to attract Octroi  

duty thereon. This Court observed that the word 'use' occurs  

in  Entry  No.52  of  List  II  of  Seventh  Schedule  sandwiched  

between  'consumption'  and  'sale',  and  it  must  take  colour  

from  the  context  in  which  it  occurs.  This  Court  further  

observed that the coupling of three words 'consumption', 'use'  

and 'sale' connotes that the underlying common idea was that  

either the title of the owner is transferred to another or the  

thing or commodity ceases to exist in its original form.

Page 10 of 20

15.However,  this  Court  did  not  approve  of  the  High  Court's  

reasoning that the bottles and shells were used as containers  

till final consumption of contents and, therefore, the bottles  

which  contained  the  beverage  were  used  till  the  final  

consumption stage and were, therefore, liable to levy of Octroi  

leaving aside the question whether they were brought within  

the  Municipal  limits  for  consumption  thereof.  Referring  to  

Burmah Shell's case, this Court held that though the use of  

the bottles may not amount to its destruction or total using  

up, but to attract octroi, the bottles must have finally rested  

within the  Municipal  limits  and not  taken out.  This  Court  

concluded  that  to  attract  the  levy  of  octroi  on  the  goods  

brought within the Municipal limits, there must be proof of  

the fact that the goods got consumed completely within the  

Municipal limits or were used for an indefinite period in such  

a way that they come to rest finally and permanently within  

the Municipal limits or sold within the said limits.  

16.With reference to the facts of the case before it, this Court  

observed  that  the  moot  question  was  whether  the  bottles  

which were filled in with beverages imported for sale within  

the Municipal limits could be said to have been consumed or  

Page 11 of 20

used within the Municipal limits. The question whether the  

bottles were really sold by the petitioner-Company within the  

Municipal  limits  requires  resolution  on  consideration  of  

relevant  facts.  If  empty  bottles  are  taken out  of  Municipal  

limits,  they  cannot  be  said  to  have  been  consumed  or  

destroyed  within  the  Municipal  limits.  The  question  which  

needs investigation is whether out of the total consignment of  

bottled beverages imported within the Municipal limits,  the  

entire consignments of the very bottles after getting emptied  

got re-exported or whether some of the said bottles forming  

part  of  the  original  consignments  got  destroyed  by  way  of  

breakage,  etc.  or  were  never  returned  by  the  consumers  

concerned  and  only  rest  of  the  imported  bottles  were  re-

exported  by  enabling  the  consumers  and  retailers  or  

wholesalers to get refund of the price of the bottles paid by  

way  of  advance  security  from  the  petitioner-Company  on  

return of these empty bottles for recycling. It is axiomatic that  

if  the  bottles  in  which  beverages  were  brought  within  the  

Municipal  limits  for  sale  to consumers had themselves  got  

destroyed  by  breakage,  etc.  or  were  not  returned  by  

consumers,  they could be said to  be consumed within the  

Page 12 of 20

Municipal limits and, hence, there would be no occasion for  

their export at any time thereafter.  In the said circumstance  

the intention with respect to the fact that whether or not, the  

said  goods  were  brought  for  consumption  and  usage  will  

become  clear  only  at  the  subsequent  stage  i.e.  when  the  

bottles  are re-exported. In the view that  it  had taken,  this  

Court  held  that  if  the  petitioner-Company  satisfied  the  

authorities concerned that the bottles containing the original  

consignments  after  getting  emptied  within  the  Municipal  

limits  were  actually  taken  out  of  the  Municipal  limits  for  

recycling,  then  it  would  be  entitled  to  claim  proportionate  

refund  of  the  octroi  duty  assessed  on  the  weight  of  such  

empty bottles only subject to the burden of such amount of  

duty not being shown to have been passed on to consumers  

of  beverages  or  to  anyone  else,  i.e.  there  is  no  unjust  

enrichment.

17.Setting aside the High Court's order to the above extent, this  

Court permitted the petitioner-Company to lodge its claim for  

refund by producing evidence on the following points:

“(a)  Nature  of  the  consignments  concerned  with  their  dates  and  the  number  of  bottles  

Page 13 of 20

packed  with  beverages  brought  within  the   municipal limits with their weight;  

(b) Proof regarding the fact that these bottles   were not sold within  the municipal  limits to  wholesalers, retailers or to any other person;

(c)  Number  of  bottles  covered  by  the   consignments  concerned  which  were  subsequently  taken  out  as  empty  bottles  beyond the municipal limits for recycling and  weight of such empty bottles;

(d)  Whether  the  bottles  which  are  actually   found  to  have  been  taken  out  of  the   municipal  limits  were the very same bottles  containing  beverages  brought  within  the  municipal  limits  by  way  of  relevant  consignments;

(e)  Whether  the  value  of  such  bottles  and  amount  of  octroi  duty  on  their  weight  was  passed on to the consumers or not?”

18.In  our  considered opinion  the  present  case  is  squarely  

covered by the above said decision of this Court in the case of  

Acqueous  Victuals  (supra),  and  the  said  decision  was  

passed on the similar facts as of the present case, the only  

difference  being  that  in  the  case  of  Acqueous  Victuals  

(supra) octroi was computed and levied on the basis of the  

weight of the bottles and crates, whereas in the present case,  

the impugned bill seeks to levy octroi on the basis of value of  

the bottles and value of the crates. It was suggested by the  

Page 14 of 20

learned senior counsel appearing for the appellant that due to  

the  said  difference  the  judgment  in  the  case  of  Acqueous  

Victuals (supra) will not be applicable to the present case.  In  

our opinion the said difference of the mode of computation of  

the octroi will not affect the applicability of the ratio of the  

said decision to the present case and the same applies to the  

present case on all fours.  

19.It was also suggested by the learned senior counsel appearing  

for the appellant that the decision in the case of  Acqueous  

Victuals (supra) cannot be said to be the correct law as the  

said decision did not correctly appreciate the law laid down  

by  the  Constitution  Bench  of  this  Court  in  the  case  of  

Burmah Shell Oil (supra).  In order to appreciate the said  

submission it  would be  appropriate  to  extract  the  relevant  

portion of  the judgment  in the case of  Acqueous Victuals  

(supra) wherein this Court has elaborately considered the law  

laid down by the Constitution Bench in the case of Burmah  

Shell Oil (supra):-  

“15.  In  view  of  the  aforesaid  decision,  it  becomes  obvious  that  the  word  “retention”  is  held  to  be  a  synonym with the word “repose”, meaning thereby the   article concerned must finally rest within the municipal   

Page 15 of 20

limits.  In  the  light  of  the  aforesaid  judgment  of  the  Constitution Bench of this Court, therefore, it is obvious  that before a municipality can impose octroi duty on any  commodity,  it  has  to  be  shown  that  the  commodity   concerned was brought within  the municipal  limits  for  consumption, that is, for being totally used up so that it   ceases to exist within the municipal limits themselves or   it  was  to  be  used for an  indefinite  period within  the   municipal  limits  so  that  it  ultimately  rests  within  the  municipal  limits  and does not go out subsequently, or  the commodity concerned must be shown to have been  brought within  the municipal  limits  for the purpose of   sale within the said limits. Having thus laid down the   aforesaid  legal  position  concerning  the  imposition  of   octroi  in  the  penultimate  paragraph  of  the  Report  at   p. 234, the Court observed that the Burmah Shell was   liable to pay octroi tax on goods brought into local area  (a) to be consumed by itself or sold by it to consumers  direct and (b) for sale to dealers who in their turn sold  the  goods  to  consumers  within  the  municipal  area  irrespective of whether such consumers bought them for  use  in  the  area  or  outside  it.  The  Company  was,   however, not liable to octroi in respect of goods which it   brought into the local area and which were re-exported.   But to enable  the  Company to save  itself  from tax  in  that case it had to follow the procedure laid down by  rules for refund of taxes.

16.  The aforesaid  authoritative  pronouncement  of  the   Constitution Bench of this Court, therefore, sets at rest  the controversy in the present case. If it is the case of   the writ petitioner that during the relevant period from  1980 to 1987 it brought within the municipal  limits of   the four respondent-Municipalities beverages packed in  bottles  and  the  bottles  were  not  sold  within  the   municipal limits and after the beverages were taken out  of these bottles, these very bottles were returned to the  petitioner  and  were  taken  back  to  Bareilly,  then  for  claiming the refund of the octroi paid on the weight of   these  bottles  during  the  relevant  period  when  the  consignments entered the municipal limits from time to  time, the writ petitioner had to follow the procedure laid   down by the Municipality concerned under its rules for  refund of taxes and had to comply with  the statutory   gamut  of  these  rules.  It  had  also  to  show  that  the  burden of disputed octroi duty was borne by it and was   not passed on to consumers of beverages contained in  these bottles. In other words, it would not be guilty of   unjust enrichment if refund was granted. If the refund  claim  on  furnishing  the  relevant  proofs  was  not  

Page 16 of 20

ultimately  granted,  the  remedy  of  appeal  provided  under the rules had to be followed.”

20.On a  minute  and detailed  perusal  of  the  judgment  of  the  

Constitution Bench in the case of Burmah Shell Oil (supra),  

and the above noted inference drawn in the case of Acqueous  

Victuals (supra), we do not agree with the said submission of  

the  appellant.  We  respectfully  agree  with  the  above  noted  

inference drawn and are of the considered opinion that this  

Court  in  Acqueous  Victuals  (supra) has  correctly  

appreciated the law laid down by the Constitution Bench in  

Burmah Shell Oil (supra).    

21.Though it was vehemently argued that the cost of the bottles  

and crates is amortized and included in the retail sale price of  

the aerated beverage but no facts were placed before the High  

Court in that regard. Moreover, even in case the same were  

placed, the same being disputed question of fact could not  

have  been  gone  into  by  the  High  Court  exercising  the  

jurisdiction under Article 226 of the Constitution of India.

22.In the  present case, the definition of “octroi” is contained in  

Section 2(42) of the BPMC Act. Relevant entry in respect of  

Page 17 of 20

aerated water in the octroi schedule under the said Rules is  

at  serial  no.11 (D).  Relevant  entry  as  regards  bottles  is  at  

serial  no.52.  Relevant  entry  as  regards  barrel  crate  and  

individual crate, is at serial No.53E. The said Rules contain  

detailed  provisions  under  which an importer  can make an  

application for refund.

23.Accordingly, in our opinion, as also laid down by this Court  

in  Acqueous  Victuals  (supra),  in  case  the  appellant-

company is sending out the same bottles for recycling and if  

the bottles and crates are not sold, used, or consumed in the  

Municipal limits of the respondent-Corporation, that is to say,  

if they have not finally rested in the Municipal limits of the  

respondent-Corporation  in  which  they  are  imported,  the  

appellant-company  can  always  make  an  application  for  

refund  under  the  said  Rules.  The  appellant-company  will  

have  to  produce  evidence  on  the  points  detailed  in  the  

Acqueous  Victuals  (supra) which  we  have  quoted  

hereinabove. As submitted by the appellant, in case, the cost  

of  the  bottles  and crates is  amortized and included in the  

retail sale price of the aerated beverage, the evidence can also  

be placed in that regard, in order to claim refund on any such  

Page 18 of 20

amount. Besides, it was also pointed out that bottles in which  

beverages  are  brought  are  recycled  and  used  bottles  and  

therefore levy of octroi cannot be at the same rate as that of  

the new bottles.  These are also disputes on the facts, which  

would  require  production  of  evidence.  On  the  appellant-

company  making  an  application  for  refund,  the  concerned  

authority  will  consider  it  in its  proper perspective and if  a  

case is made out shall grant refund.  

24.Needless to say,  in case,  the appellant  is  aggrieved by the  

valuation of the bottles and crates on the basis of which the  

impugned  bill  is  issued  they  are  at  the  liberty  to  file  

objections  before  the  appropriate  authority,  and  the  

appropriate authority will adjudicate the same in accordance  

with  the  law,  as  against  which  if  still  aggrieved,  further  

remedy as available could be resorted to.

25.At  this  stage  it  is  pertinent  to  mention  that  during  the  

hearing,  the  appellant  has  expressed  its  concern  about  the  

mechanism by  which the said  levy  could  be  computed  and  

collected as according to them the present procedure is very  

cumbersome and unworkable at both the ends, and moreover,  

the same would result into incurring of huge managerial time  

Page 19 of 20

and  administrative  cost.  After  the  present  judgment  was  

reserved  for  pronouncement,  the  appellant  has  also  given  

proposals to the respondent corporation for devising a suitable  

and convenient mechanism. The said request on the part of  

the  appellant  requires  consideration.   Accordingly,  the  

responded  corporation  shall  consider  the  said  proposal  in  

accordance with law and even otherwise on their part devise a  

suitable,  convenient  and  workable  mechanism  for  levy  and  

collection of octroi.  

26.With  the  above  said  directions  both  the  appeals  are  

dismissed with no order as to costs.  

        .............................................J            [Dr. Mukundakam Sharma]

.............................................J  [Anil R. Dave]

New Delhi, July 4, 2011.

Page 20 of 20