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CASE NO.: Appeal (civil)  4657 of 2006

PETITIONER: RANBAXY LAB. LTD.

RESPONDENT: MUNICIPAL COUNCIL, ROPAR

DATE OF JUDGMENT: 02/11/2006

BENCH: Dr. AR. LAKSHMANAN & TARUN CHATTERJEE

JUDGMENT: J U D G M E N T (@ SLP(C)No.12343/2005)

Dr. AR. Lakshmanan, J.         Leave granted.         The above appeal is directed against the final  judgment/order dated 18.2.2005 passed by the High  Court of Punjab & Haryana at Chandigarh in R.S.A.  no.704 of 2005.  The unsuccessful plaintiff is the  appellant in this appeal.  The respondent is the  Municipal Council, SAS Nagar, Mohali.         We have perused pleadings and the judgments of  all the three courts and heard the arguments of Mr. Arun  Jaitley, learned Senior Counsel for the appellant and Mr.  A.P. Bhandari, learned counsel for the respondent.   

       The issue which arises for consideration in the  present appeal is whether an entry in a tariff schedule  which after specifying the subject matter of the entry and  illustrating it with examples by using the word ’like’ can  be construed as being limited to only the items listed by  way of illustration or includes all such products as  answer the classification of the entry and further whether  the revenue can change the classification of the product  from the specific enumerated entry, which was accepted  for 13 years to the residuary clause without any change  of circumstance and without discharging the burden of  proof cast on the revenue to show that the particular  product falls in the residuary tariff item and not in the  specific enumerated entry.           In the plaint, in paragraph 4, it has been mentioned  that the description of Annexure-’A’ itself shows that the  quantity of the Heavy Commercial Chemicals is brought  to the factory premises in bulk, for example, in a period  of nine months from April to December 29, 1995 the  receipts of Commercial Heavy Chemicals like Ascetic Acid  Glacial - 3,06,415 kg, Caustic Lye  - 6,82,205 kg, Ethyl  Acetate - 3,65,270 kg., Hemane - 3,45,094 kg.,  Hydrochloric Acid - 39,22,195 kg., Methylene Chloride  -  7,82,203 kg. Penicillin G-4,32,812 Bous, Pen V Acid- 1,75,027 kg.  The quantities as highlighted above would  show that the Heavy Commercial Chemicals are being  brought to the factory premises by the appellant/Plaintiff  is bulk.  

       The case of the appellant, according to the learned  Senior Counsel, is covered for the purposes of payment  of octroi duty only under clause (a) of Entry 40 as  mentioned in the heading of the plaint which reads as

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under and the appellant is liable to pay octroi duty @ =%  only on Heavy Commercial Chemicals. "Heavy commercial chemicals like Sulphur,  refined soda, caustic soda, acids, bleaching  power, carbonates excluding sodium  carbonate, bicarbonates of ammonia, calcium,  zinc and sodium, etc. magnesium chloride and  soda silicate."

       It is the further case of the appellant that the  appellant has been paying octroi duty on Commercial  Heavy Chemicals brought by it to its factory under clause  40(a) right from the beginning when octroi duty was  imposed, without any difficulty.  Some of the receipts of  last five years wherein octroi duty has been charged  under clause 40(a) were attached with the plaint.  Thus,  it is submitted that keeping in view the nature of the  Commercial Heavy Chemicals brought by the appellant  to the factory premises which is situated within the  municipal limits of the respondent’s Committee, the  appellant is liable to pay octori duty only at =% and not  more than that.  It is the further case of the appellant  that there has been no trouble in payment of octroi duty  as per the schedule during the last six years as it was  being charged rightly so much so that the appellant was  extended     O-4A facility for making the payment.  But of  late the respondent had started claiming that the  appellant is liable to pay octroi duty not under clause  40(a) but under clause 40(e) which is altogether illegal  and has even threatened to withdraw O-4A facility.  It is  further submitted that the respondent is bound to charge  and levy only octroi duty as per the schedule mentioned  above and is under obligation not to make any illegal  false claim thus the appellant cannot be made liable to  pay something for which the appellant is not liable at all.   Thus, it is submitted by the learned Senior Counsel that  the appellant is entitled to the  injunction as prayed for  in the plaint.

       Mr. A.P. Bhandari, learned counsel appearing for  the Municipal Council submitted that the appellant is  using different types of chemicals; some of them are   heavy commercial chemicals and some of them are fine  chemicals and that the chemicals which are heavy  chemicals are having more weight and they are in crude  form and for those chemicals, the octroi will be charged  at a =% whereas the fine chemicals are those chemicals   which are mainly produced in comparatively small  quantities but are costlier  and for those chemicals, the  octroi is being charged @ 1%.  It is further  submitted  that the  Taxing Authority or a Taxing Statute does not  debar to ractify the wrong which has already been done.   And that the appellant prayed to charge 1% octroi for  taking the goods in its factory and was submitting the  Form-0(4A) which means that they were sending  themselves suo motu the octroi of =% which naturally  escaped from the Taxing Authority of the respondent,  because at that time, the tax was being paid by the  appellant on his own so the wrong could not be detected  earlier.  It was however submitted  that if the wrong  done, this does not mean that the same cannot be set  right, and as in this case, it has escaped in the initially  from the respondent and as and when  it came to the  notice, they rectified its  wrong.  The learned counsel  further submitted that the  High Court has correctly

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appreciated the distinction between two entries i.e. 40(a)  and 40(e) and that, therefore,  it does not require for this  Court any interference.   

       We have perused the judgment of the High Court  and considered the rival claims.  The High Court has not  discussed many important issues raised by the  appellant-plaintiff and also by the respondent-defendant.   The High Court has not decided as to whether the onus  or  burden of proof to show that a product falls within a  particular item is on the department or the assessee.   The High Court has also not properly interpreted the  Entries which is contrary to the settled principles of   interpretation.  It is settled by catena of decisions of this  Court that the burden of proof to show that a product  falls within a particular tarrif item is always on the   revenue.  In our view, the respondent, Municipal Council  has failed to establish and justify the burden of proof,  the taxability ingredient of the appellant’s goods under  Entry 40, sub-clause (e).  As rightly pointed out by the  learned counsel for the appellant, the High Court has  failed to appreciate that it is the respondent- Revenue  Authority which  is cast with the duty of assessing octroi  to be imposed on the appellant and that the said  respondent, Municipal Council  has for 13 continuous  years assessed the goods in question under Entry 40(a)  of the Schedule  as heavy commercial chemicals.

       Since the High Court disposed of the Second Appeal   at the admission stage and without notice to the  respondent, we feel that the interest of justice would  require that another opportunity  should be given to both  the parties to argue the appeal afresh and on merits.                  The High Court, in cases like this, ought to have  ordered notice to the respondent and disposed of the  matter after hearing both the parties and after  ascertaining as to which rate of duty Entry is applicable  and payable for the product in question.                   We, therefore, have no other option except to set  aside the judgment dated 18.02.2005 and remand the  matter to the High Court for fresh disposal of the Second  Appeal in accordance with law and after affording  opportunity to both parties.

       Now, the Second Appeal is remitted to the High  Court for fresh disposal, the High Court is requested to  frame the substantial questions of law in accordance  with the Section 100 C.P.C. and decide the matter on  merits.

       It is stated by learned counsel for the appellant that  the appellant had the benefit of stay during the pendency  of the proceedings before the Trial Court and also the  Appellate Court.  We, therefore, direct the appellant to  pay a =% duty for the product till the disposal of the  Second Appeal.  The Respondent - Municipal Council is  directed to receive the same without prejudice to the  rights and contentions in the Second Appeal and the  final outcome of the Second Appeal.                  In the result, the judgment passed by the High  Court in R.S.A. No. 704 of 2005 is set aside and the High  Court is requested to dispose of the Second Appeal as

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expeditiously as possible.                    The Civil Appeal is disposed of accordingly.  No   costs.