# A MAN MOHAN TULi v. MUNICIPAL CORPORATION OF DELHI & ORS

- **Citation:** [1981] 2 S.C.R. 894
- **Court:** Supreme Court of India
- **Decided:** 1981-02-18
- **Case number:** Civi,J Appeal Nos. 20042005 of 1980
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/a-man-mohan-tuli-v-municipal-corporation-of-delhi-ors-7977
- **Pages:** 16

## Headnote

894
.A
MAN MOHAN TULi
v.
MUNICIPAL CORPORATION OF DELHI & ORS.
February 18, 1981
lJ
[S. MURTAZA FAZAL ALI, A. D. KosHAL AND A. VARADARAJAN, JJ.I
c
·o
E
G
-H
Delhi Municipal Corporation Act, 1957, section 158 and rule 26 of the
Terminal Tax Rule frarned under the Act, interpretation of-Exigibility
of
Terminal Tax, explained.
Man Mohan Tuli, appellant in C.A. 2004/80, is the owner of a piece of
land situate on the Grand Trunk Road near the sixth n1ilestone as one goes
from Delhi to Ghaziabad.
Appellant Tuli has constructed various bui1dings
on his land for use as godowns and has rented them out to various transport
companies engaged in bringing goods from other States and
storing them
before their transhipment to Delhi and other States beyond Delhi. The trucks
carrying the goods for various destinations pass along the G .T. Road and move
into Tuli's land.
After the trucks enter the ln,nd, the goods are unloaded into
the godowns, sorted out and reloaded into the respective trucks meant
for
various destinations. Thereafter, the trucks move out of the land and, passing
through the Union Territory of Delhi after crossing the border line, proceed to
their destinations. The Municipal Corporation of Delhi by i~s Orders dated May
23, 1975 and July 7, 1975 directed that a Terminal Tax post be set up at
the entrance to Tuli's land in order to collect terminal tax on goods carried
into that land.
A writ was filed before the High Court by the owners of
transport companies as also by Tuli for quashing the orders of the Corporation
seeking to levy Terminal Tax on the goods which were not meant for Delhi
but for places beyond Delhi. The High Court held that the Corporation was
legally entitled to levy Terminal Tax at the point of territory of the Union
Territory of Delhi even though the goods were sorted out in the godown of
Tuli, resorted out and re-loaded since as they while passing through tlle
territory of Delhi undoubtedly entered the said territory.
Hence the appeal'\
by special leave by appellant Tuli and others,
Allowing the appeal in part, the Court
HELD : 1. It is well settled that taxing statutes must be strictly interpreted
giving every benefit of doubt to the tax-payer.
A Terminal Tax could be
levied only by the Corporation or the State which is the final destination of
the goods sent from any other area. A Terminal Tax signifies that there must
be a terminus for the journey of the goods.
Terminus means the point to
which main action tends, goal, end, finishing point, the point at which
some
thing comes to an end. [899 D, 901 B-D]
2.1. From a consideration of the decided cases of the Supreme Court, the
following propositions emerge :-
(i) Terminal tax and octroi are similar kinds of levies which are closely
interlinked with (a) destination of the goods (b) the user in the local area
•
..
•
..
M. M. TULi v. M.C.D.
895
-on arrival of the goods.
Where the goods merely pass through a local area
A
without being consumed therein the mere fact that the transport carrying the
.goods halt within the local area for transhipment or allied purposes would not
justify the levy of either the terminal tax or octroi duty. This is because tho
halting of the goods is only for an incidental purpose to effectuate tho journey
.of the goods to the final destination by unloading, sorting and reloading them
at a particular place. [803 A-Cl
(ii) There is a very thin margin of difference between a terminal tax. and
octroi. In the case of the former (terminal tax) the goods reach their final
destination and their entry into the area of destination immediately, attracts,
payment of terminal tax irrespective of their user.
In the case of octroi,
however, the tax is levied on goods for their use and consumption. [903 D-El
(iii) But at the same time, the goods while halting at a local area 1 should
leave for their destination within a reasonable time which may depend on
circumstances of each case and if the goods are kept within the area for such
a long and inde

## Text

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894
.A
MAN MOHAN TULi
v.
MUNICIPAL CORPORATION OF DELHI & ORS.
February 18, 1981
lJ
[S. MURTAZA FAZAL ALI, A. D. KosHAL AND A. VARADARAJAN, JJ.I
c
·o
E
G
-H
Delhi Municipal Corporation Act, 1957, section 158 and rule 26 of the
Terminal Tax Rule frarned under the Act, interpretation of-Exigibility
of
Terminal Tax, explained.
Man Mohan Tuli, appellant in C.A. 2004/80, is the owner of a piece of
land situate on the Grand Trunk Road near the sixth n1ilestone as one goes
from Delhi to Ghaziabad.
Appellant Tuli has constructed various bui1dings
on his land for use as godowns and has rented them out to various transport
companies engaged in bringing goods from other States and
storing them
before their transhipment to Delhi and other States beyond Delhi. The trucks
carrying the goods for various destinations pass along the G .T. Road and move
into Tuli's land.
After the trucks enter the ln,nd, the goods are unloaded into
the godowns, sorted out and reloaded into the respective trucks meant
for
various destinations. Thereafter, the trucks move out of the land and, passing
through the Union Territory of Delhi after crossing the border line, proceed to
their destinations. The Municipal Corporation of Delhi by i~s Orders dated May
23, 1975 and July 7, 1975 directed that a Terminal Tax post be set up at
the entrance to Tuli's land in order to collect terminal tax on goods carried
into that land.
A writ was filed before the High Court by the owners of
transport companies as also by Tuli for quashing the orders of the Corporation
seeking to levy Terminal Tax on the goods which were not meant for Delhi
but for places beyond Delhi. The High Court held that the Corporation was
legally entitled to levy Terminal Tax at the point of territory of the Union
Territory of Delhi even though the goods were sorted out in the godown of
Tuli, resorted out and re-loaded since as they while passing through tlle
territory of Delhi undoubtedly entered the said territory.
Hence the appeal'\
by special leave by appellant Tuli and others,
Allowing the appeal in part, the Court
HELD : 1. It is well settled that taxing statutes must be strictly interpreted
giving every benefit of doubt to the tax-payer.
A Terminal Tax could be
levied only by the Corporation or the State which is the final destination of
the goods sent from any other area. A Terminal Tax signifies that there must
be a terminus for the journey of the goods.
Terminus means the point to
which main action tends, goal, end, finishing point, the point at which
some
thing comes to an end. [899 D, 901 B-D]
2.1. From a consideration of the decided cases of the Supreme Court, the
following propositions emerge :-
(i) Terminal tax and octroi are similar kinds of levies which are closely
interlinked with (a) destination of the goods (b) the user in the local area
•
..
•
..
M. M. TULi v. M.C.D.
895
-on arrival of the goods.
Where the goods merely pass through a local area
A
without being consumed therein the mere fact that the transport carrying the
.goods halt within the local area for transhipment or allied purposes would not
justify the levy of either the terminal tax or octroi duty. This is because tho
halting of the goods is only for an incidental purpose to effectuate tho journey
.of the goods to the final destination by unloading, sorting and reloading them
at a particular place. [803 A-Cl
(ii) There is a very thin margin of difference between a terminal tax. and
octroi. In the case of the former (terminal tax) the goods reach their final
destination and their entry into the area of destination immediately, attracts,
payment of terminal tax irrespective of their user.
In the case of octroi,
however, the tax is levied on goods for their use and consumption. [903 D-El
(iii) But at the same time, the goods while halting at a local area 1 should
leave for their destination within a reasonable time which may depend on
circumstances of each case and if the goods are kept within the area for such
a long and indefinite period that the purpose of reaching the final destination
lying in a dicerent area is frustrated or defeated, they may be exigible to terminal tax. [903 E-FJ
B
c
D
(iv) \\'here the goods enter into a local area which is also the destination
-Of the goods either temporarily or otherwise, the terminal tax would be leviable.
For instance, if A consigns goods from Patna in Bihar to Delhi in the name
of X and X after having received the goods at Delhi rebooks or reloads the
same on a transport for Chandigarh in the name· of Y, terminal tax would be
Ieviablt~ by the Corporation at Delhi because the destination of the goods in
the first instance was Delhi and that by itself would attract the imposition
of terminal tax.
The fact that X rebooks them to Chandigarh Would not
make any difference because the act of rebooking by X at Delhi would constitute a fresh transaction by which the goods after having been carried into
Delhi are further exported to Chandigarh.
On the other hand, when there
is one continuous journey of the
goods from Patna to Chandigarh without
any break, the final destination would be Chandigarh even though the goods
may have to be halted in Delhi for the purpose of unloading, sorting and
E
F
!
reloading and may have to be kept in Delhi for a reasonable time.
In such
~~-a case terminal tax would not be exigible. [903 G-H, 904 A-CJ
Pun;ab Flour & General Mills v. Lahore CorpOraJion, A.I.R. 1947 F.C. 14;
The Central India Spinning & Weaving & Manufacturing Co. Ltd., The Empress
G
Mills, Nagpur v. The Municipal
Committee,
Wardha,
[1958]
SCR 1102;
Bangalore Woollen, Cotton & Silk Mills Co. Ltd, Bangalore v. Corporation
of the City of Bangalore, [1961] 3 SCR 707; Diamond Sugar Mills Ltd. & Anrv. The State of Uttar Pradesh, [1961] 3 S.C.R. 242; Burmah Shell Oil Storage &
•
Distributing Co. India Ltd. v. The Belgaum Borough Municipality, [1963] Supp.
2 SCR 216; Khyerbari Tea Co. Ltd. & Anr. v. The State of Assam, [1964] 5
SCR 975, followed.
Champlain Realty Co. v. Town of Brattleboro, 67 L Ed. U.S. 309, quoted
with approval.
H
A
B
896
SUPREME COURT REPORTS
[1981] 2 S.C.R •.
2.2. What would be a reasonable time for interpretation of the goods or
halting, in the instant case, at the godown of Tuli, will naturally depend upon
the special features or circumstances of each case, namely, the nature of the
goods, the tin1e taken in loading, sorting and unloading, the obstacles or diffi ..
culties which may be fa~ed by the transporters and similar other factors. Nor-
,mally, a time of two to three days or even a week should be sufficient to clear
the goods for its journey to the ultimate destination. It may sometimes happen
that goods may have to be kept in the godowns 1n the territory of Delhi for
circumstances beyond the control of the consignee or the consignor, for example, a garnishee order. In considering what is reasona.ble time these circumstances would have to be taken into consideration. [906 H, 907 A-C]
•
2.3. Rule 26 of the Terminal Tax Rules will have to be interpreted on tho
footing that seclion 178 of the Delhi Municipal Corporation Act, 1957
does
C
not contemplate levy of terminal tax for goods meant for destinations
other
thain. De1hi.
The v,rord "imn1ediately" appearing in Rule 26 has to be liberally
construed so as to imply a reasonable period and if the export is delayed the,
rules may apply if a reasonable explanation has been given. So far as
niles
regarding taking of passes, etc., a•t the barrier are concerned they would, of
course, apply but subject to the conditions under which terminal tax can be
imposed under section 178 of the Act \vhich is the main charging section. {907
~
D
C-EJ
E
F
Amtit Banaspati Co. Ltd. v. The. Union of India I.L.R. 1973(1) Delhi 237,
distinguished.
3.1. Section 178 of the Dehli Municipal Corporation Act, cannot be interpreted so as to justify imposition of ternllnal tax even on goods which merely
passed through the territory of Delhi, although their destination is not Delbi
but places beyond Delhi. [908 F-G]
3.2. I\iferely because the goods after having been unloaded in the gOOown of
appellant Tuli are sorted, reloaded in different trucks and thereafter pass through
the territory of Delhi, they do not become exigible to terminal tax. [908 G-H]
3.3. Rule 26 of the Terminal Tax cannot be interpreted so that exemption
could be granted only if the goods are exported immediately
which
means
within a very short time irrespective of any other consideration. Terminal tax
can br. leviable only if it is proved that the goods remained at the godown for
an indefinite and unexplained period which could not be said to be reasonable · ~ 1--.
in the circumstances. [908 H, 909 A-Bl
3.4. Whete the goods arc Ca-rried by trucks into the territory of Delhi and
G
unloaded there and are ah.o 1ncant for Delhi and soon thereafter may be rebooked by the receiver of the gocxls to some other place, terminal tax wou1d be
levirble because in this case there are two separate transa-ctions-(i) by which
the goods are meant for Delhi and (ii) by which after having reached and
having been unloaded at Delhi they are rebooked and reloaded for some other
p1ace and which therefore is a fresh and different transaction. In such a case,
terminal tax would be leviable at the entry point in the·territory of Delhi. [909
H
B-Cl
3.5. The direction given by the High Court to the Terminal Tax Officer to
fix a reasonable time for unloading, sorting and reloading the goods which are
' •
r·
r
•
-
,
-
"" '
M. M. TUU '" M.C.D. (Fazal Ali,!.)
897
meant for dif~ercnt destinations takin£ into consideration the quantity
of
the
A
goods. the ti1ne for unloading, sorting etc. aud for further reloading and transhipment r;hould be done within a tin1e to be fixed by a Tern1inal Tax. Officer
is correct. [909 E-FJ
CIVIL APPELLATE JURISDICTION :
Civi,J
Appeal Nos. 20042005 of 1980.
B
Appeals by Special Leave from the Judgment and Order dated
~
13-10-1978 of the Delhi High Court in LPA Nos. 73/77 and 103177.
Madan Bhatia and Sushi/ Kumar for the Appellant in both the
appeals.
R. B. Datar, Lalit Bhardwaj and Miss Madhu Mulchandani for Respondent Nos. 1-3.
P. R. Rao, S. R. Venkataraman, P. C. Kapur, R. C. Bhatia and S. L.
Sharma for Respondent ND. 5 in Civil Appeal No. 2004/80.
N. B. Si"ha and S. K. Sinha for Respondent No. 4.
The Judgment of the Court was delivered by
FAzAL Au, J. These appeals by special leave are directed against
a Division-Bench common judgment dated October 13, 1978 of the High
Court of Delhi by which the Letters Patent Appeals were allowed and
the impugned Orders dated May 23, 1975 and July 7, 1975 passed by
the Terminal Tax Officer, Municipal Corporation of Delhi were quashed.
The facts of the case lie within a very narrow compass and may
be summarised as follows.
Manmohan Tuli, appellant in C.A. No.
2004/80, is the owner of a piece of land situate on the Grand Trunk
Road near the sixth milestone as one goes from Delhi to Ghaziabad.
Appellant Tuli has constructed various buildings on his land for use
as godowns and has rented them out to various transport companies
._l_ ~.,ngagcd in bringing good from other States and storing them before their
transhipment to Delhi and other States beyond
Delhi.
The trucks
carrying the goods for various destinations pass along the G.T. Road
and move into Tuli's land.
It is not disputed that after the trucks enter
the land, the goods arc unloaded into the godowns, sorted out and reloaded into the respective trucks meant for various destinations. There-
•
'
•
•
after the trucks move out of the land and passing through the Union
Territory of Delhi after crossing the border line, proceed to their destinations. The Municipal Corporation of Delhi (hereinafter referred to as
the 'Corporation') by its Orders dated May 23, 1975 and July 7, 1975
(hereinafter referred to as the 'inpugned orders') directed that a Terminal Tax post be set up at the entrance to Tuli's land in order to collect
I0-214SCI/81
c
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E
F
G
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898
SUPREME COURT REPORTS
[1981] 2 S.C.R.
A
terminal tax on goods carried into that land The Ghaziabad Nagar
Palika also purported to levy terminal tax on such goods but this levy
was neither assailed before the High Court nor has been challenged
before us and is therefore left out of con~ideration. A writ was filed
before the High Court by the owners of transport compiinies as a.lso
by Tull for quashing the orders of the Corporation seeking kl levy terminal tax on the goods which were not meant for Delhi tut for places
beyond Delhi. Further details are not necessary for the decision of these
appeals and both the appeals (C.A. Nos. 2004 and 2005 of 1980) will
be disposed of by a common judgment.
B
The High Court vide the impugned judgment was of the opinion
C that even though the goods were stored in the godown of Tuli, sorted
out and reloaded but as they while passing through the territory of
Delhi undoubtedly entered the said territory, the Corporation was legally
entitled to levy terminal tax at the point of entry into the Union Territory of Delhi. The case of the appellant was that the goods were not
D
meant either to be used or consumed in Delhi nor was Delhi the final
destination of the goods. It was a different matter that as the goods
were to be sent to destination beyond Delhi the transport carrying the
goods had perforce to pass through the territory of Delhi. It was thus
contended that the goods were not carried into the territory of Delhi
but were merely carried through the territory of Delhi to other destinations which were beyond Delhi. It was argued that s. 178 of the Delhi
Municipal Corporation Act, 1957 (hereinafter referred to as the 'Act')
had in terms no application to the case and that therefore the terminal
tax imposed by the impugned orders was legally invalid.
E
The counsel for the respondent, however, submitted that even though
F
the goods may have been meant for other destinations but as they were
unloaded in the godown and reloaded in various trucks and actually
entered into the territory of Delhi, they were factually carried into the
•
Delhi territory and that was sufficient to empower the Corporation to.~.l.
levy the terminal tax. According to the argument of the counsel for ·
the Corporation, the question of destination was not at all germane for
G
the purpose of adjudicating the competency of the Corporation to levy
terminal tax at the point of entry into Delhi.
Thus, the entire question turns upon the interpretation of s. 178 of
the Act and some Rules framed under the Act. Relevant portion of
section 178 runs thus :
B
"178 (1). On and from the date of the establishment of the
Corporation under section 3, there shall be levied on a11 goods
carried by railway or road into the Union ·Territory of Delhi
•
-
•
-
•
M. M. TULi v. M.C.D. (Fazal Ali, J.)
from any place outside thereof, a terminal tax at the rates
specified in the Tenth Schedule."
(Emphasis supplied)
899
The crucial words which have to be interpreted are : 'goods carried by railway or road into the Union Territory of Delhi from any
place outside Delhi'. The contention of the appellant is than.the words
'goods carried into the Union Territory' clearly indicate that: the final
destination of the goods must be Delhi and by virtue of this fact, the
natural consequence would be that the goods should be carried from
other places either by rail or by road into the territory of Delhi.
This
argument was reinforced by the words 'terminal tax' used in s. 178
which imply that the terminus of the journey of the goods must be
Delhi and only in that event the Corporation would be competent to
levy a terminal tax.
This argument was sought to be rebutted by the
respoo.dents on the ground that the words 'carried into the Union
Territory of Delhi' should be interpreted independently and literally
so as to indicate that even if the goods passed
through Delhi, the
moment they entered into the territory of Delhi terminal tax became
exigible.
So far as. this aspect of the argument is concerned, we ar(1
unable to accept the same because it is well setlled that taxing statutes must be strictly interpreted giving every benefit of doubt to the tax .
payer.
Before, however, examining the
respective contentions
of the
parties it may be necessary to refer to the authorities dealing with the
history of terminal tax or octroi duty. To begin with, it is not disputed
that the pcwer to subject the goods either to octroi or to terminal tax
squarely falls within entries numbers 52
and 56 of
List II to the
Seventh Schedule of the Constitution.
In Punjab Flour & General
Mills v. Lahore Corporation(') the Court while drawing a distinction
between the type of taxes referred to as terminal taxes in Entry No. 58
_.~of List I of Schedule 7 to the Government of India Act, and those
described as cesses in Entry No. 49 of List II thereof observed as
follows :
• •
•
"There appears to us a definite distinction between the
type of taxes referred to as terminal truces in Enlry No. 58
of List I of Sch. 7 and the type of taxes referred to as cesses
on the entry of goods into a local area in Entry No. 49 of
List IL
The former taxes must be (a) terminal (b)
confined to goods and passengers
carried by railway or air.
They must be chargeable at a rail or air terminus and be
(!)_AIR 1947 F.C. 14.
A
B
c
D
E
F
G
H
A
B
c
900
SUPREME COURT REPORTS
[1981] 2 S.C.R.
referable to services (whether of
carriage
or otherwise)
rendered or to be rendered by some
rail or air transport
organisation.
The essential features of the cesses referred
to in Entry No. 49 of List II are on the other hand simply
(a) the entry of goods into a ddinite local area and (b)
the requirement that the goods should enler for the purpose
of consumption, use or sale therein. . . . The grounds of
taxation under the two entries are, as indicated above, radically differenl, and there is no case for suggesting that taxation under the one entry limits or interferes in any way with
taxation under the other."
In The Central India Spinning & Weaving & Manufacturing Co.
Ltd., The Empress
Mills, Nagpur
v.
The
Municipal Committee,
Wardha(') this Coort examined the entire matter
exhaustively
and
after giving the history of terminal tax or oclroi observed as follows :
"ll 'terminal' besides the above meaning has an addiD
tional meaning also and that meaning signifies the termini
or the jurisdictional limits of the municipal area even then
the construction to be placed on the term should be the one
that favours the tax-payer, in accordance with the principle
of construction of taxing statutes, which must be
strictly
construed and in case, of doubt must be construed against
E
the taxing authorities and doubt resolved in favour of the
tax-payer."
F
G
H
"The legislative history of this tax thus shows
that
octroi
was Jeviable on the entry of goods in a local area when the
goods were for consumption, use or sale
therein.
The
substituted tax was terminal tax on goods imported into or
exported from a local area and by rules this tax in the case
of Wardha Municipal Committee was imposed on certain
class of goods imported and on others exported by railway
or road."
"That by the substitution of tcrn1inal tax
on
gocxls
imported into a local area the nature of the tax had not been
altered from what it was when octroi was in force or when
instead of "terminal tax" octroi (\vithout refund) was substi~
tuted . . . . . . . Therefore terminal \ax on goods imported
or exported is similar in its incidence and is payable on
(t) [1958] S.C.R. 112
•
•
•
•
•
XI. M. TULi "' M.C.D. (Fo~al Ali, J.)
goods 011 their journey e11<ling within the rnunicipal limits or
comn1cncing thcreiron1 and not V\i'here the goods v.1ere 1nerely
in transit through the municipal limits and had their terminLIS eiscwhere."
90 I
A
'T!Jcrefore, according to
the
Federal
Court
'·terminal"
ll
has r~ferencc to the terminus of the railway or air, i.e., the
end of journey."
A close «nalysis of this decision, therefore clearly discloses that
a tern-iinal tax signified that there must be n tcrn1inus for the journey
of the goods.
Th·c word 'terminus' according lo Oxford
Dictionary
C
means-a point ~ituatcd at or forrning the end or extrcrnity of
son1e~
thing. situated at the end of a line of railway.
In other words, tenninus 111eans- the point to \Vhich main action tends, goali end, finishing
point, the point at which
something comes to an end.
In Corpus
Juris Vol. 62 at p. 729 the word 'terminal' in connection with transportation means the fixed beginning or ending point of a given run. It
D
would thus appear that a terminal tax could be levied only by the Corporation or the State which is the final destination of the goads
sent
from any other area.
A similar view was taken by a later
decisiou of this
Court in
Bangalore Woollen, Cotton & Silk Mill.1 Cu. Ltd. Bangalore v. Corporafio11 oi the Ci1y of Bangalore(') where Kapur, J., speaking for the
Court observed as follows :
"The history of these taxes therefore shows that in the
Devolut;on Rules under the Government oi India Act, 1915
octroi, terminal tax and taxes on professions and callings
were three distinct heads of taxation. . . Therefore, when
s. 142-A was added in the Government of India Act, 1935,
its operation was limited to entry 46 of List II and had no
reference to entry 49 which deals with cesses on entry of
goods.
The position under the Constitution is exactly the
samt and therefore neither s. 142-A of the Government of
India Act, 1935 nor Art. 276 has any effect on entry 49 in
the Government of India
Act, 1935 or entry 52 in the
Constitution."
In this case also a distinction between a terminal tax and octroi
was clcaily brought out.
In
Diamond Sugar Mills Ltd. & Anr. v.
E
G
•
The State oi Utwr Pradesh & Am'.(2) while defining a local area within
B
(!) [1961] 3 .>.C.R. 707.
(2) [1961] J S.C.R. 242.
902
SUPREME COURT REPORTS
[1981) 2 S.C.R.
A
the meaning of Entry 52 of List II of Seventh Schedule to the Constitution, the Court observed as follows :
"We are of opinion that the proper meaning to be attached
to the words 'local area' in Entry 52 of the Constitution, (when the area is a part of the State imposing the
B
law) is an area administered by a local body like a municipality, a district board, a local board, a union board, a
Panchayat or the like."
In Burmah Shell Oil Storage & Distributing Co. India Ltd. v. The
Belgaum Borough Municipality(') this Court again fully discussed the
matter and Hidayatullah, J., speaking for the Court stressed the essenC
tial distinction between octroi and terminal tax in
the following
D
E
words:
"Octrois and terminal taxes were different taxes though
they resembled in one respect, namely, that they were leviable
in respect of goods brought into a local area. While terminal
mxes were leviable on goods 'imported or exported' from the
Municipal limits denoting thereby that they were connected
with the traffic of goods, octrois, according to the legislative
practice then obtaining were, Jeviable in respect of goods
brought into a Municipal area for consumption or use or
sale.
~·~··
...
The history of these two taxes clearly shows that while
terminal taxes were a kind of octroi which were concerned only with the entry of goods in a local area irrespective
of whether they would be used there or not; octrois were ta.xes
on goods brought into the area for consumption, use or sale.
F
They were leviable in respect of goods put to some use or
other in the area but only if they were meant for such user."
...,. l ·
G
H
In Khyerbari Tea Co. Ltd. & Anr. v. The State of Assam(')
Gujendragadkar, J. speaking for the Court drew a very apt distinction
regarding the concept of import and observed as follows :-
"In that connection, the legislative history of the octroi
duty was examined and it was held that the concept of import requires that the goods which are brought into must mix
up with the mass of the property in the local area where the
. ·goods are alleged to have been imported. If the goods are
just carried and not mixed with the mass of the property in
the area through which they are carried, they cannot b~ said
(1) [1963] Supp. 2 S.C.R. 216.
(2) [1964] 5 S.C.R. 975.
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M. M. TULi v. M.C.D. (Fazal Ali, J.)
903
to have been imported into that area . . . . . . . . . . The word
A
"carried" is of much wider denotation, and it would be unreasonable to limit its scope by introducing considerations
which are relevant in dealing with the question of import."
Thus, from a consideration of the cases cited above, the following
prqpositions emerge :-
B
(1) Terminal tax and octroi are similar kinds of levies which
are closely interlinked with ( 1)
destination of the goods,
(2) the user in the local area on arrival of the goods.
Where the goods merely pass through a local area without
being consumed therein the mere fact that the transport
carrying the goods halt within the local area for transhipment or >allied purposes would not justify the levy of either
the terminal tax or octroi duty.
This is because the halting of the goods is only for an incidental purpose to
effectuate the journey of the goods to the final destination
by unloading, sorting and reloading them at a particular
place.
(2) There is a very thin margin of difference between a terminal _tax and octroi. In the case of the former (terminal
tax) the goods reach their final destination and their entry
into the area of destination immediately attracts payment
of terminal tax irrespective of their user. In the case of
octroi, however the fax is levied on goods for their nse
and consum1Ption.
( 3) But at the same time, the goods while halting at a local
area should leave for their destination within a reasonable
time which niay depend on circumstances of each case and
if the goods are kept within the area for such a long and
indefinite period that the purpose of reaching the final
destination lying in oa different area is frustrated or defeated, they may be exigible to terminal tax.
c
D
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( 4) Where the goods enter into a local area which is also the
destination of the goods either temporarily or otherwise,
G
the terminal tax would be leviable. For instance, if A
consigns goods from P.afna in Bihar to Delhi in the name
of X and X after having received the goods at Delhi rebooks or reloads the same on a transport for Chandigarh
in the name of Y, terminal tax would be leviable by the
Corporation at Delhi beC'ause the destination of the goods
H
in the first instance was Delhi and that by itself would
attract the imposition of terminal tax.
The fact that X
A
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SUPREME COURT REPORTS
[J 981] 2 S.C.R.
rebooks them to Chandigarh \VOuid not n1akc any difference because the act of rebooking by X at Delhi would
constitute a fresh transaction by \vhich the
goods
after
having been carried into Delhi
are further exported to
Chandigarh.
On the other hand, when there is one continuou~ journey of 1hc good~ fro1n Patna
to
Ch',-tndigarh
\Vithout any break. the final dc~tination v.could be Chandigarh even though the gocids lll<t:.r haYe to be
halted
in
Delhi for the purpose o'.' unloading. sorting a!1d reloading
and may have to he ke:pt in [)clhi for a reasonable time.
In such a case tcn11i11al tax \vould not he cxigiblc.
These principles arc also spelt out by the American law on the
subject \Vhich deals \l\·ith
intcr-'.--1~1tc tran~pllrt of goods.
In A1n.erican Jmispruclence (2d. Vol. 15. p. 689, para 49) the following statem•.:nt is niadc, which is spelt out fron1 various American decisions
including those of the U.S. Supreme Court :
"In the
determination
of whether a
transportation
of
persons or property constitutes interstate or intrastate con1merce, the essc"ntial character or unity of the movement
is the decisive factor.
While the intention of the shipper
or passenger is probab'.y the most important single factor
in determining whether transportation is interstate or intrastate
intention alone ha-s b;;:cn ~aid not to he a controlling
factor in making such determination.
Inter-state journeys
are to be measured by the commonly awcpted
sense of
the 1ransport.ati0n
concept ...... l"he parties
cannot, by
dcscriptiY2 tern1s
of co'ntract,
convert a local
business,
serving as an agency of a
transp~1rt~1tion con1pany. into·
an interstate con1mercc husiness, nor. conversely, may
a
through shipment be transformed into intrastate cornnu~rce
by separating the rate into its co1npone;it
parts,
charging
1ocal rates, and issuing Jocal \Vaybills''.
Similar observation:; are to be found in th.:: ~atnc volume of Anierican Jurisprudence (p. 697, para 56) which re:atc to the continuity
of t:ansit of goods and may be extracted !hus :
''The cruci;I question to be sctt!eu in determining \Vhcther
;_;ersonal
property
n1oving
111
intcr~tatc co1nmcrce
is
suhjcct to local taxation
l~
that
of
its
continuity of
trar.si t and this question IS to be dL'tc:rmin.:J by
vanous
L1ctors, an1ong which arc the intention nf the owner, the
co11trol he retains In change cl i:~ ti 11 a tio ii. the ugei:cy by
'
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\1. M. TULi v. M.C.D. (Fa;.a/ Aii, J.)
905
which the transit is eflcckd. and th•c occasion or purpose
A
of tht? interruption during v.-hich
th·~
~ax is sought to be
levied.
fntcnt, \\·hile not alone conclusive, is probably the
most l1nportant
single dct~rn1inant
of
contir:uous carriagl..'.
H a break in the interstate journey is caused
by the'
,:xi~c,1cies or convcnie11c~s of the c:hos~11 n1cans of
tran~
port:ition. consideration of the safety of the goous during
transit. or natural causes over which the taxpayer has no
con1rc'1. the continuity of the
transit rcn1ains uni111μaircd".
The tol:owing state-1ncnt of l~nv occurs 1n the s;1n1:.· \'olun1l' ( p::ra
57, p. 698) :-
"Ii during transit. property is
stored f,,, an indefinite
link lor other than natural causes or for lack of facilities
for immediate transportation, it is subject to state or lecal
laws, including inspection laws ...... On the other hand,
if the entry of goods into a warehouse is a convenient ink:rmediate step in the process of getti·ng them to their final
destination, they remain in interstate or foreign comn1ercc
until they reach those points".
In the case of Champlain Realty Co. v. Town of Brnt!/eboro(')
one important aspect of the matter has ken dealt
with, viz., the
fact that if the goods halt in an intermediate State whilst on their
journey to their destination for a Jong period due to circunistanccs
beyond the control of the own•er. whether or not the goods lose ',he
nature of th:; interstate transaction and could be free fron1 thl?
t,t~tte
taxation, \\'a:-; clearly highlighted by he- following
observations :-
"'Longs of puip \Vcod which have been plao2d in a river
to b2 floated info another state
are in
interstate co111mercc, so as to be free from state taxation, although, because of the high wat•er in a connecting river
into which
they \vill ultin1atcly pass. it is unsafe to permit thcn1 to enter
that river, and they are tcn1porarily he~d in a boon1 'near
the mouth of its tributary".
In the sa1nc case,
C.J. l'aft indicat12d
the various
a~pects of
_..
interruptions in the journey and the incidence thereof and observed
as follows :-
''The doubt arises whon there
journey, aml whe·n the property,
(1) 67 L Ed. US 309.
ar.:'. int•:rruption:-. in tlil:
in its
transp0rtatic.11, i.:;
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906
SUPREME COURT REPORTS
[1981] 2 S.C.R.
under the complete control of the owner during the passage
If the inrerruptions are only to promote the safe or convenient transit, then the continuity of the interstate trip is
qot broken.
Chief among these are
the intention of the owner, the
control he Petains to change destination,
the agency by
which the transit is effected, the actual
continuity of the
transportation, and the occasio'n
or purpose of the interruption during which the tax is sought to be levied".
In Voume 78 L Ed at p. 13 8 the test laid down was that if the
shipment was made in good faith to a destination and the interruption was not indefinite but reasonable the co'ntinuity of the journey
cannot be said to be broken. It was also pointed out that where the
interruption of the movement of commodities at an intermediate point
is not incidental to the transporation, the shipment loses the character of interstate commerce so as to be exigible to local taxation.
In
this connection, the following observations were made :
"If the shipment has been made in good
faith to a
destination the interruption is not indefinite, but is reasonable and solely in furtherance of the intended transportation of the shipment to its ultimate destination,
then the
continuity of the jonrney is not broken by the delay nor
by the mere power of the owner there to destroy its character as interstate commerce ....... any interruption
of the
movement of commodities at an inrermediate point between
origin and final destination that is
not incidental to the
transportation or the use of the means
of transportation
or, being so incidental, is used or extended for purposes of
the owner not incidental to the transport transportation or
the mea'ns used therefor, breaks the continuity
in transit
and subjects the shipment to local taxation at the point of
interruption".
We have laid special stress on tl1e circumstances under which the
terminal tax becomes leviable if the halt or interruption of the goods
at an intermediate point is for an indefinite and unexplained period.
The answer to the question as to what would be a reasonable
time for interruption of the goods or
h~lting in the instant case
at the godown of Tuli, will
naturally depend on
the
special features or circu1nstances of each cases, .viz., the nature of the goods,
\
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M. M. TULi v. M.C.D. (Fazal Ali,/.)
907
the time taken in loading, sorting and unloading, the obstacles
or difficulties which may
be faced by the transporters and
similar other factors.
Normally, a time of two to three days
or
even a week should be sufficient to clear the goods for its journey to
the ultimate destination. It may sometimes happen that goods may
have to be kept in th~ godowns in the territory of Delhi for circumstances beyond the control of the consignee or the consignor, e.g.,
wl)ile the goods are lying in a godown at Delhi a dispute
occurs
between the concerned parties as a result of which an injunction is
issued by a court restraining the transporters from moving the goods.
In considering what is reasonable time these circumstances
would
have to be taken into consideration.
It, was, however, argued before us that according to the
Terminal tax Ru1es framed under the Act, Rule 26 exempts goods
from terminal tax if the same are exported immediately
ahd are
declared to b~ intended for immediate export.
In view of the interpretation we have
placed on s. 178 it is obvious that the
word
'immediately' appearing in Rule 26 has to be liberally construed so
as to imply a reasonable period and if the export is delayed the rules
may apply if a reasonable explanation has been given.
So far as
rules regarding taking of passes, etc., at the barrier are concerned
they would, of course, apply but subject to the
conditions under
which terminal tax can be imposed under s. 178 of the Act which
is the main charging section.
The High Court appears to have placed some reliance on Amrit
Banaspati Co. Ltd. v. The Union of l11dia(') in coming to the conclusion that in the instant case the Corporation was legally entitled to
levy terminal tax.
With dTh~ re3pect to the Judges of the
High
Court who decided the Appeals, we would like to point out
that
the case just above referred to is clearly distinguishable from the
present appeals.
The most crucial fact in the Delhi decision was
that the goods were bei'ng carried into the Union Territe>ry of Delhi
for the purpose of sale at Delhi. Thus, the case proceeded on the
admitted position that the goods were carried from Ghaziabad
into
the Delhi territory for sale at Delhi.
The final destination of the
goods being Delhi, there can be no doubt that the Corporation was fully
entitled to levy terminal tax on such goods.
In this connection, the
High Courc observed as follows :-
"Th•c Petitioner-company was i'ncorporated
under the
companies Act, 1956, and it had its registered
office at
G. T. Road, Ghaziabad, in the State of Uttar Pradesh ....
(I) I.LR. 1973 (I) Delhi 237.
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908
SUPREME COURT REPORTS
[1981] 2 S.C.R.
It has a factory, intt"r oliu, at Ghaziabad for ntanufacturing
the said \lanaspati products.
In the course of its business,
lhe company carried <111d still carries its products by railway
and/or road into tlic Union -rcrrit~1ry of D1..":lhi from Ghaziabad for th., purpose of sa'.c al DJhi.
The words "shall be :evied on all goods carried by railway or road" i"n sub-section (I) show ckarly that the section
imposes terminal
tax on
the carriage or
moven1ent
of
goods fro1n outside the L'nicn rrcrritory of Delhi
into
the
said Territory.
In other \Vords, the taxable
event is the
carriage or movcn1cnt of goods into thi: Union "fcrritory of
Delhi".
The observations last •extructed must be nndcrstood
m the light
of the admitted facts in A twit Banaspati Company's case
(supra).
We are u·nable to accept that case as an authority for the proposition
that even if the final destination of the goods was not Delhi but as
the goods were carried through the territory ol' Delhi, they would still
be extgible to terminal tax.
fn the impugned
judgment the
High
Court, however, seems to have laid undue emphasis and special stress
on th•e fact that the goods were carried into the Union territory of
Delhi, the moment they passed through it even though the destinatio"n of the goods may be some other area.
This appeared, according to the High Court. the real purport
and intention of s.
178.
We are, however, unable to agree with this view which is patently
wrong and does not at all now from
the
plain
and
unambiguous
language of s. 178 of the Act nor docs s. 178 warrant such an i'ntcrpretation.
~fhus, our conclu~ions are as fo:Jcnvs :-
(1) The High Court was wrong in interpreting s. 178
of the Act so as to justify imposition of termiml tax
even on goods which
merely passed
through the
territory of Delhi, although their destination is i1ot
Delhi but places beyond Delhi.
(2) The High Court was wrong in holding that merely
b2causc the goods after having been unloaded
in
the godown of appellant Tuli arc sorted, reloaded in
different
trucks and thereafter
pass through
the
territory of Dc:hi,
they
become exigiblc
to t•erminal tax.
(3) The High Court \\as wron~ i"n interpreting Rule 26
literally and hr:!ding that cxcn1ption could be grant-
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M. M. TULi v. M.C.D. (Fa~al Ali, J.)
909
ed only if the goods are exported immediately which
means within a very short time irrespective
of any
other consideration.
In view of
our interpretation
of s. 178, Rule 26 must be interpreted in the light
of the object of s.