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CASE NO.: Appeal (crl.)  647-650 of 2002

PETITIONER: MUNICIPAL CORPORATION OF CITY OF THANE

RESPONDENT: M/S VIDYUT METALLICS LTD. & ANR

DATE OF JUDGMENT: 14/09/2007

BENCH: C.K. THAKKER & TARUN CHATTERJEE

JUDGMENT: J U D G M E N T

CRIMINAL APPEAL NOs. 647-650 OF 2002

Hon. C.K. THAKKER, J.

1.              All these criminal appeals are filed by  Municipal Corporation of City of Thane (’Corporation’ for  short) against M/s Vidyut Metallics Ltd.- respondent No.  1 aggrieved by the order dated June 14, 2001 passed by  a Single Judge of the High Court of Judicature at  Bombay in Criminal Writ Petition Nos. 593, 594, 595 &  596 of 1996. By the said order, the learned Single Judge  dismissed the writ petitions filed by the Corporation and  confirmed the order passed by the VIth Additional  District & Sessions Judge, Thane holding that the  respondent No. 1 herein was not liable to pay octroi at  the rate of 1%, but only at the rate of 0.5%. 2.              Short facts giving rise to the present appeals  are that the respondent No.1 is a Company registered  under the Indian Companies Act, 1913 having its  registered office and factory at Bombay-Agra Road, Wagle  Estate, Thane.  The Company is engaged in the process  of manufacturing safety razor blades of various qualities  and types. For the said purpose, the Company was  importing stainless steel strips and bringing them to its  factory within the octroi limits of the Corporation.  According to the Corporation, since 1968, the Company  had been importing stainless steel strips to its factory  and it was paying octroi at the rate of 1% under Item No.  77 of the Schedule to the Maharashtra Municipalities  (Octroi) Rules, 1974 (hereinafter referred to as ’the  Rules’). The Company was also maintaining a current  account with the Corporation under Section 142 of the  Maharashtra Municipalities Act, 1965 (hereinafter  referred to as ’the Act’). 3.              It is the case of the Corporation that in the  year 1974, a sudden turn was taken by the Company. It  obtained a copy of the Rules and found that it was paying  octroi at an enhanced rate of 1% though it was liable to  pay such octroi at the rate of 0.5% only.  It, therefore,  stopped paying octroi at the rate of 1% as provided in  Item 77 of the Schedule and started to pay at the rate of  0.5% as provided under Item 71 of the Schedule.  According to the Corporation, the said action was totally  illegal, unlawful and inconsistent with the provisions of  the Rules. From October 1, 1974 to March 31, 1979, the  Company paid octroi at the rate of 0.5% instead of 1%.

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The Corporation, hence, wrote a letter on May 10, 1978  to the respondent-Company stating therein that the  Company was liable to pay octroi at the rate of 1% under  Item 77 and not at the rate of 0.5% under Item 71 of the  Schedule. The Company was also called upon to pay the  remaining amount within a period of 15 days or to show  cause as to why the Company should not be made liable  to pay the amount in accordance with law and in  accordance with provisions of Section 169 of the Act. The  respondent-Company replied to the said letter contending  that the Company was liable to pay only at the rate of  0.5% under Item 71 and had been correctly paying octroi  and no action could be taken against it. 4.              Since the appellant-Corporation was not  satisfied with the explanation submitted by the  respondent-Company, it issued additional bills which the  respondent-Company was liable to pay. Being aggrieved  by the claim of the Corporation, the Company preferred  appeals in the Court of IIIrd Joint Civil Judge, Senior  Division, Thane which were registered as Municipal  Appeal Nos. 3 to 6 of 1979. The learned Judge, by an  order dated January 29, 1988 dismissed the appeals filed  by the Company holding that Item No. 77 expressly  referred to ’stainless steel’ which was applicable and Item  No. 71 could not be attracted to the goods brought by the  appellant-Company within the Municipal limits and the  Company was liable to pay octroi at the rate of 1%. 5.              The Company challenged the order passed by  the learned IIIrd Joint Civil Judge, Senior Division by  filing revision petitions.  The VIth Addl. District &  Sessions Judge, Thane allowed those revisions, set aside  the order passed by the trial Court and held on merits  that the contention raised by the Company was well  founded.  It also held that at an earlier occasion, a  similar question had arisen and a competent Court of the  Chief Judicial Magistrate, Thane held that the Company  could be charged only under Item 71 and not under Item  77 of the Schedule.  The said order was confirmed by the  Revisional Court and also by the High Court of Bombay  vide its order dated July 16, 1990, in Writ Petition No.  2987 of 1990.  It was, therefore, held that the point was  finally concluded and the Company had paid proper  octroi and it was not liable to pay octroi under Item No.  77.  The revision petitions were, therefore, allowed and  the order passed by the learned Judge was set aside.   The High Court also dismissed writ petitions.  The said  order is challenged by Thane Municipal Corporation in  this Court. 6.              On January 9, 2002, notice was issued by this  Court. On July 8, 2002, leave was granted and the  matters have been placed before us for final hearing. 7.              We have heard learned counsel for the parties. 8.              Learned counsel for the appellant-Corporation  contended that the Revisional Court as well as the High  Court had committed an error of law in holding that Item  No. 71 of the Schedule to the Octroi Rules would apply  and not Item No. 77. It was submitted that Item No. 77  was clear and unambiguous and the Courts ought to  have decided the case on that basis. It was also  submitted that even the respondent-Company was  satisfied that it was liable to pay octroi at the rate of 1%  under Item No. 77 and accordingly for about seven years  (1968 to 1974), the Company paid octroi at the rate of  1%.  It was only from 1974 that it contended that it was  liable to pay only 0.5% octroi under Item No. 71 of the

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Schedule which was illegal. The counsel also submitted  that in such matters, a decision taken in earlier  assessment year cannot be said to be final and  conclusive operating res judicata or estoppel and since  the items are different and the goods brought by the  Company is covered by Item No. 77, the Company is  bound to pay octroi duty at the rate of 1%. It was,  therefore, prayed that the trial Court was right in  invoking Item No. 77 and in dismissing appeals filed by  the Company and the said order deserves to be restored  by setting aside the order passed by the Revisional Court  as well as by the High Court. 9.              The learned counsel for the respondent- Company, on the other hand, submitted that the order  passed by the trial Court was totally wrong and hence  the Revisional Court and the High Court set it aside by  upholding the contention raised by the Company. It was  stated that though the Company was paying octroi under  Item No. 77 initially, it was convinced that the correct  item would be Item No. 71 and it was liable to pay octroi  at the rate of 0.5% thereunder. The Company, therefore,  corrected its mistake and started paying octroi at the rate  of 0.5% under Item No.71. The counsel also submitted  that the same question came up for consideration before  a competent Court of Law and the matter was decided in  earlier litigation in favour of the Company.  In Writ  Petition No. 2987 of 1990, the High Court, vide its order  dated July 16, 1990, held that the correct item which  would apply to the goods brought by the respondent- Company was Item No. 71. Obviously, therefore, the  Revisional Court as well as the High Court in the present  proceedings were right in relying on that decision and no  interference is called for.  It was also submitted that even  on merits in the present proceedings, the Revisional  Court decided the issue in favour of the Company.   10.             Having considered the rival contentions of the  parties, we are of the opinion that the view taken by the  Revisional Court as also by the High Court cannot be  faulted. The counsel for the parties drew our attention to  both the items i.e. Item No. 71 and Item No. 77 of the  Schedule to the Octroi Rules. Those Items read thus: Item No.71 : Iron and Steel

(i) to (xxx)            \005    \005            \005    \005

(xxxi) Hoops and strips;                                          (xxxii)         \005    \005            \005    \005

Item No. 77

Non-ferrous metals, that is to say brass,  copper, tin, aluminum, lead zinc, German  Silver, stainless steel their alloys, wires, wares,  sheets ingots and circles.

11.            At an earlier occasion also, the Corporation  sought to levy octroi by considering the goods in question  under Item No. 77.  It is no doubt true that between 1968  and 1974, the Company itself treated the goods imported  by it under Item No. 77 and paid octroi at the rate of 1%.   On going through the Octroi Rules, however, it realized  that the correct Item was 71 and not 77 and started  paying octroi at the rate of 0.5% from April, 1974.  The

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Corporation also accepted the amount paid by the  Company.  Only in 1979, additional bill was issued and  demand was raised.  The Company, therefore, filed an  appeal against the additional demand and Chief Judicial  Magistrate, Thane by an order dated November 20, 1986,  allowed the appeal and set aside the additional demand.   In that case, the Court observed that Item No. 77 related  to Non-ferrous matters whereas Item No. 71 applied to  Ferrous matters.  One R.B. Deb who was the Quality  Control Manager of the appellant-Company having  Master degree and sufficient knowledge in Physics,  Chemistry and Mathematics was examined as a witness  by the Company.  He stated that he was familiar with  chemistry of metals.  According to the Court, therefore,  he was an ’expert’.  Mr. Deb deposed that the Company  was manufacturing ’Safety Razor Blades’ from stainless  steel strips of certain specification.  He also stated that  stainless steel strip was steel having chromium content  of more than 12% and steel was a ferrous metal and its  chemical symbol was "Fe".  According to him, ferrous  metals were rich in iron, i.e. the principal constituent  was iron whereas non-ferrous metals were those without  content of iron.  He asserted that Company was  importing ferrous material in stainless strips.  According  to him, stainless strip was a species from the larger  group called Iron and Steel which was a genus.  If the  Item was covered under category of ferrous metal, octroi  duty chargeable would be as per Item No. 71 and not 77.   The Court, relying on his evidence, held that the  Company was right in treating the goods under Item 71  of the Schedule to the Octroi Rules and octroi duty  payable by it was proper.  As already referred to above,  Revisional Court confirmed the order passed by the Trial  Court and even Writ Petition was dismissed by the High  Court. 12.             In our opinion, the IIIrd Joint Civil Judge,  Senior Division, Thane was not right in passing the order  in the present proceedings and in observing that the  order passed by the Chief Judicial Magistrate, Thane in  earlier litigation had no binding effect and he could  decide the appeal independent of that decision.  The  Revisional Court as well as the High Court were,  therefore, right in setting aside the said order. 13.             Before the High Court as well as before us, it  was contended by the learned counsel for the  Corporation that in earlier proceedings, Criminal Writ  Petition was dismissed by the High Court in limine  without recording reasons and hence, the said decision  would not operate as res judicata nor it would debar the  Corporation from raising a point of law which arises in  the present proceedings. It was also submitted that in  matters relating to recovery of taxes, revenue, octroi, etc.  each year is an independent unit and a decision in one  year does not deprive the Revenue from claiming the  requisite amount of octroi from the assessee in other  years, if such demand is otherwise legal and lawful. 14.             So far as the proposition of law is concerned, it  is well-settled and needs no further discussion.  In  taxation-matters, the strict rule of res judicata as  envisaged by Section 11 of the Code of Civil Procedure,  1908 has no application.  As a general rule, each year’s  assessment is final only for that year and does not govern  later years, because it determines the tax for a particular  period.  It is, therefore, open to the Revenue/Taxing  Authority to consider the position of the assessee every

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year for the purpose of determining and computing the  liability to pay tax or octroi on that basis in subsequent  years.  A decision taken by the authorities in the previous  year would not estop or operate as res judicata for  subsequent year.  [vide Maharana Mills (P) Ltd. v. ITO,  1959 Supp (2) SCR 547 : AIR 1959 SC 881; Visheshwar  Singh v. CIT, (1961) 3 SCR 287; Instalment Supp (P) Ltd.  v. Union of India, (1962) 2 SCR 644; New Jehangir Vakil  Mills v. CIT, (1964) 2 SCR 971; Amalgamated Coalfields  Ltd. v. Janapada Sabha, 1963 Supp (1) SCR 172; Devilal  v. STO, (1965) 1 SCR 686; Udayan Chinubhai v. CIT,  (1967) 1 SCR 913; M.M. Ipoh v. CIT, (1968) 1 SCR 65;  Kapur Chand v. Tax Recovery Officer, (1969) 1 SCR 691;  CIT, W.B. v. Durga Prasad, AIR 1971 SC 2439;  Radhasoami Satsang v. CIT, (1992) 1 SCC 659 : AIR 1992  SC 377; Society of Medical Officers v. Hope, 1960 AC 55;  Broken Hill Proprietary Co. Ltd. v. Municipal Council,  1925 All ER 675 : 1926 AC 94 : 95 LJPC 33; Turner on  Res Judicata, 2nd Edn., para 219, p. 193]. 15.             In the leading case of Broken Hill Proprietory  Co. v. Municipal Council, 1926 AC 94 : 1925 All ER 672 :  95 LJPC 33, the Judicial Committee of the Privy Council  observed;          The decision of the High Court related to a  valuation and a liability to a tax in a previous  year, and no doubt as regards that year the  decision could not be disputed.  The present  case relates to a new situation, namely, the  valuation for a different year and the liability for  that year.  It is not ’Ieadem questio’, and  therefore, the principle of ’res judicata’ cannot  apply." (emphasis supplied)

16.             In Udayan Chinubhai v. Commissioner of  Income Tax, Gujarat, (1967) 1 SCR 913, this Court stated;  "It is true that an assessment year under the Income Tax  Act is a self-contained assessment period and a decision  in the assessment year does not ordinarily operate as res  judicata in respect of the matter decided in any  subsequent year, for the assessing officer is not a Court  and he is not precluded from arriving at a conclusion  inconsistent with his conclusion in another year.  It is  open to the Income Tax Officer, therefore, to depart from  his decision in subsequent year, since the assessment is  final and conclusive between the parties only in relation  to the assessment for the particular year for which it is  made.  A decision reached in one year would be a cogent  factor in the determination of a similar question in a  following year, but ordinarily there is no bar against the  investigation by the Income Tax Officer of the same facts  on which a decision in respect of an earlier year was  arrived at."   (emphasis supplied) 17.             In M. M. Ipah v. Commissioner of Income Tax,  Madras, (1968) 1 SCR 65, this Court again stated; "The  doctrine of res judicata does not apply so as to make a  decision on a question of fact or law in a proceeding for  assessment in one year binding in another year.  The  assessment and the facts found are conclusive only in  the year of assessment: the findings on question of fact  may be good and cogent evidence in subsequent years,  when the same question falls to be determined in another  year, but they are not binding and conclusive." 18.             In our opinion, however, it is necessary to  distinguish a decision on question which directly and  substantially arose in any dispute about the liability for a

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particular year, and question which arose incidentally or  collaterally.  If, for instance, the validity of a taxing  statute is impeached by an assessee who is called upon  to pay a tax for a particular year and the matter is taken  to a High Court or to this Court and it is held that the  taxing statute is valid, it may not be easy to hold that the  decision on this basic and material issue would not  operate as res judicata against the assessee in a  subsequent year. [vide Amalgamated Coalfields Ltd. v.  Janapada Sabha, 1963 Supp (1) SCR 172] 19.             Thus, in Udayan Chinubhai, when the Income  Tax Officer, Bombay recorded a finding that the original  Hindu Undivided Family of Sir Chinubhai had been  divided and ceased to exist, and the property had been  partitioned, it was not open to the Income Tax Officer,  Ahmedabad to revise or reconsider the previous order  passed by the Income Tax Officer, Bombay and to revive  the original family as if there was no partition and the  status of joint family continued to exist. 20.             The Court observed; "It is true that an  assessment year under the Income Tax Act is a self- contained assessment period and a decision in the  assessment year does not ordinarily operate as res  judicata in respect of the matter decided in any  subsequent year, for the assessing officer is not a Court  and he is not precluded from arriving at a conclusion  inconsistent with his conclusion in another year.  It is  open to the Income Tax Officer, therefore, to depart from  his decision in subsequent years, since the assessment is  final and conclusive between the parties only in relation  to the assessment for the particular year for which it is  made.  A decision reached in one year would be a cogent  factor in the determination of a similar question in a  following year, but ordinarily there is no bar against the  investigation by the Income Tax Officer of the same facts  on which a decision in respect of an earlier year was  arrived at. But this rule in our judgment, does not apply  in dealing with an order under S. 25-A(1).  Income from  property of a Hindu undivided family "hitherto" asserted  as undivided may be assessed separately if an order  under Section 25-A(1) had been passed.  When such an  order is made, the family ceases to be assessed as a  Hindu undivided family.  Thereafter that family cannot be  assessed in the status of a Hindi undivided family unless  the order is set aside by a competent authority.  Under  Cl. (3) of S. 25-A if no order has been made,  notwithstanding the severance of the joint family status,  the family continues to be liable to be assessed in the  status of a Hindu undivided family, but once an order has  been passed, the recognition of severance is granted by  the Income Tax Department and Cl. (3) of S. 25-A will have  no application."                (emphasis supplied) 21.             We are in agreement with the following  observations of Ranganath Misra, C.J. in Radhasoami  Satsang v. Commissioner of Income Tax, (1992) 1 SCC  659 : JT 1991 (4) SC 313;         "We are aware of the fact that strictly  speaking res judicata does not apply to income  tax proceedings.  Again, each assessment year  being a unit, what is decided in one year may  not apply in the following year but where a  fundamental aspect permeating through the  different assessment years has been found as  a fact one way or the other and parties have  allowed that position to be sustained by not

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challenging the order, it would not be at all  appropriate to allow the position to be changed  in a subsequent year."  (emphasis supplied)

22.             In the present case, in earlier litigation, the  Court considered the evidence of Mr. Debe, Quality  Control Manager who was described as ’expert’ on the  point and accepting his evidence, the Court held that the  goods imported by the Company was ferrous in nature  and not non-ferrous and the Company was right in  paying octroi under Item No. 71.  It was thus a  ’fundamental factor’ and the nature of goods imported by  the Company was directly and substantially in issue, on  the basis of which the decision was taken.  It would  indeed be very difficult to hold that such decision would  not continue to operate in subsequent years unless it is  shown that there are changed circumstances or the  goods imported by the Company in subsequent years was  different than the one which was imported earlier and in  respect of which decision had been arrived at by the  Court.  No such contention has been raised by the  Corporation nor any material has been placed on record.   We are, therefore, of the view that the Revisional Court as  well as the High Court were right in giving benefit of the  decision in earlier litigation to the respondent-Company.  23.             There is an additional factor also as to why the  Trial Court was wrong and Revisional Court and the High  Court were right in setting aside the order passed by the  Trial Court in the present proceedings.  The Revisional  Court in the present proceedings also considered the  evidence of two witnesses - Mr. R.K. Debe, Quality  Control Manager, and Mr. Arora \026 a Public Servant.  The  Revisional Court observed that they had ’scientific  knowledge’ and on the basis of their evidence, it held that  the goods imported by the Company was covered by Item  No. 71.  In the light of that finding also, we are of the  view that the Revisional Court was justified in holding  that the Company was right in paying 0.5% octroi.  The  impugned orders, hence, deserve no interference and the  appeals must be dismissed. 24.             For the foregoing reasons, all the appeals  deserve to be dismissed and are accordingly dismissed.