THE MUNICIPAL COMMISSIONER, THANE AND ANR V. H AND R JOHNSON LTD. AND ANR INSC 899; 1996 JT 473; 1996 SCALE 590

THE MUNICIPAL COMMISSIONER, THANE AND ANR V. H AND R JOHNSON LTD. AND ANR INSC

2. Facts The case revolved around a dispute between the Municipal Commissioner of Thane and the ceramic tile manufacturing company, H & R Johnson (India) Ltd. The dispute arose from an octroi tax levied on material brought into the jurisdiction of Thane Municipal Corporation. This octroi was contested by H & R Johnson, which argued its impossibility on the basis of taxation on imported raw materials that were used in production. The city stated that the final products were exported outside city limits and that consequently there could not be any local consumption or usage. It also argued that the levy was illegal since it contended that only articles that were meant for selling or usage or consumption inside the municipal territory were subject to octroi. In its earlier decision in this case, the Bombay High Court held in favor of H & R Johnson, suggesting that octroi on imported raw materials used in export and manufacture was void and not allowed. An appeal was filed by the Thane Municipal Commissioner in the Supreme Court.

3. Issues: 1. The levy of octroi on goods or articles imported within municipal boundaries and exclusively meant for manufacture and export outside city limits is illegal under the provisions of the Maharashtra Municipal Corporation Act, 1965. 2. Could raw materials, when used in the production of goods for exportation, be levied with octroi as per the definition laid down in the Maharashtra Municipalities Act, 1965?

4. Holding: 1. No octroi was levy able on goods imported solely for manufacturing and export. 2. The word octroi is defined in the Act and only applies in cases where it is meant for consumption, use, or sale within the boundaries of the municipal area.

5. Rationale: The critique of revision was that the definition of octroi in the Maharashtra Municipalities Act referred to sale, consumption, or use within municipal boundaries, according to which octroi was criticized by the Supreme Court. The Court stated that the intention of octroi was to raise money for the performance of local government functions in relation to use or consumption of products within the region, and not of the products themselves.