# MUNICIPAL COMMITfEE, KHURARI v. DHANNALAL SETHI & ORS

- **Citation:** [1969] 1 S.C.R. 166
- **Court:** Supreme Court of India
- **Decided:** 1968-04-30
- **Bench:** J. M. Shelat, K. S. Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/municipal-commitfee-khurari-v-dhannalal-sethi-ors-4363
- **Pages:** 6

## Headnote

l'tnt1al Provinces and Bt•ru1· ,\Junicipalitics Act, 1922-Rulrs made
providing for refund of octroi d111y on rxport of goods on which
duty
paid al the tilne of in1porr-R. 27, if Rives a right of refund--Procedure
prescribed in rr. 27 to 43 for ohtair1i11J! rc/1u1d not fol!ou1rd-Efjcct of.
'fhc fir:it anJ the second respondents purchased a
quantity of foodgrains from certain cultival\1rs 1,1,·ho h<1d
in1port~d them into the municipal
area of the appellant c·ornmi!lec and, at the time of in1portation.
had
paid octroi duty on those foodgrains.
·rhc first ant.'. the second
respondent-; exported the identical _goods out of the municipal areas and thereupon applied for refund of octroi Jut\·
paid
on the
(oOdJ.!rain'i.
The
appellant Committee refused to pav the refund
mainlv on the
l!TOund
that the r\'~pondents had fnilcd to ·proc..lucc the receipts' of duty p'aid on
the importation of the foodgrains.
An <!ppcat to the Additi0nal Deputy
Commissioner as \Veit as t~c revision :'lpplic;.ition to the BOard of Revenue
v,·erc hoth dismissed. but a v.Ti.;: pctitinn against these orders \Vas allowed
by the 1-Iigh Court v.·hich held that ari rxportcr was entitled under r. 27
to the refund of 7/Rth of the <lut\· paid on the goods cxporti:d.
Subse.
quently a Division Rench. in ~1ppeal. rcn1andcd thC case :o the Board for
dealing with certain other contention-. raised by the appellant and after
considering these. the Board ~:~t <1sidc the orders of the (:ommittcc and
~he DcputY Comn1issioncr and directed
payment of the refund.
The appellant Con1mittcc then fili.:d a \VTit petition
chal\cngin.~ the
order o[ the lloard hut this \\'as dismissed.
the High Court
holding,
inter aUa, that the Rule-; did not require a claimant who had exportcc.i
dutiable goods to produce receipt<; of payn1cnt of duty and that the
amount of refund i<> to he determined from the
quantity of food.grains
exported or from their value.
The Comn1ittec appealed by special lcavo
to this Court.
It was urged on its behalf that a person clain1ing refund
~·ould not be entitled to it unless he had follo\vcd the procedure pres~
cribcd by rr. 27 to 43, an<l tha.t this had not been done in .the present
ca.'i'C.
HELD : Dismissing the appca 1 :
Though the rules lay do\~·n ;l procedure \\'hich an appellant seekini!
refund has to follo\v, they do not provide at the same time that
an
applicant for refund who ~as !ailed r.o f?llO\V the procedure laid down
in rr. 35 to 39 would be d1scnt1tled to claim the refund.
In the absence
of such a provision. coupled with tht.! categorical language of r. 27 giving
a right to an
exporter of dutiable goods to claim 7/Sth of the <lmv
paid on such goods on their imporl. it becomes difficult to uphold the
denial by the appellant Committee of the
right of the first
anti
the
second respondents to such a refund. [ 171 E-G]
C1VIL APPELLATE JuRtSDICT!ON : Civil Appeal No. 545 of
1965.
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:MUNICIPAL CO:M:MITTEE v. DHANNALAL (She/at, J.)
167
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Appeal by special leave from the judgmen( and ord~r da~ed
December 18, 1961 of the Madhya Pradesh High Court m Misc.
Petition No. 247 of 1961.
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,M. S. Gupta and Y ashpal Singh, for the appellant.
S. K. Mehta and K. L. Mehta, for the respondents.

## Text

166
MUNICIPAL COMMITfEE, KHURARI
v.
DHANNALAL SETHI & ORS.
April 30, 1968
[J. M. SHELAT AND K. S. HEGDE, JJ.]
l'tnt1al Provinces and Bt•ru1· ,\Junicipalitics Act, 1922-Rulrs made
providing for refund of octroi d111y on rxport of goods on which
duty
paid al the tilne of in1porr-R. 27, if Rives a right of refund--Procedure
prescribed in rr. 27 to 43 for ohtair1i11J! rc/1u1d not fol!ou1rd-Efjcct of.
'fhc fir:it anJ the second respondents purchased a
quantity of foodgrains from certain cultival\1rs 1,1,·ho h<1d
in1port~d them into the municipal
area of the appellant c·ornmi!lec and, at the time of in1portation.
had
paid octroi duty on those foodgrains.
·rhc first ant.'. the second
respondent-; exported the identical _goods out of the municipal areas and thereupon applied for refund of octroi Jut\·
paid
on the
(oOdJ.!rain'i.
The
appellant Committee refused to pav the refund
mainlv on the
l!TOund
that the r\'~pondents had fnilcd to ·proc..lucc the receipts' of duty p'aid on
the importation of the foodgrains.
An <!ppcat to the Additi0nal Deputy
Commissioner as \Veit as t~c revision :'lpplic;.ition to the BOard of Revenue
v,·erc hoth dismissed. but a v.Ti.;: pctitinn against these orders \Vas allowed
by the 1-Iigh Court v.·hich held that ari rxportcr was entitled under r. 27
to the refund of 7/Rth of the <lut\· paid on the goods cxporti:d.
Subse.
quently a Division Rench. in ~1ppeal. rcn1andcd thC case :o the Board for
dealing with certain other contention-. raised by the appellant and after
considering these. the Board ~:~t <1sidc the orders of the (:ommittcc and
~he DcputY Comn1issioncr and directed
payment of the refund.
The appellant Con1mittcc then fili.:d a \VTit petition
chal\cngin.~ the
order o[ the lloard hut this \\'as dismissed.
the High Court
holding,
inter aUa, that the Rule-; did not require a claimant who had exportcc.i
dutiable goods to produce receipt<; of payn1cnt of duty and that the
amount of refund i<> to he determined from the
quantity of food.grains
exported or from their value.
The Comn1ittec appealed by special lcavo
to this Court.
It was urged on its behalf that a person clain1ing refund
~·ould not be entitled to it unless he had follo\vcd the procedure pres~
cribcd by rr. 27 to 43, an<l tha.t this had not been done in .the present
ca.'i'C.
HELD : Dismissing the appca 1 :
Though the rules lay do\~·n ;l procedure \\'hich an appellant seekini!
refund has to follo\v, they do not provide at the same time that
an
applicant for refund who ~as !ailed r.o f?llO\V the procedure laid down
in rr. 35 to 39 would be d1scnt1tled to claim the refund.
In the absence
of such a provision. coupled with tht.! categorical language of r. 27 giving
a right to an
exporter of dutiable goods to claim 7/Sth of the <lmv
paid on such goods on their imporl. it becomes difficult to uphold the
denial by the appellant Committee of the
right of the first
anti
the
second respondents to such a refund. [ 171 E-G]
C1VIL APPELLATE JuRtSDICT!ON : Civil Appeal No. 545 of
1965.
A
c
D
E
F
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G
H
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•
:MUNICIPAL CO:M:MITTEE v. DHANNALAL (She/at, J.)
167
A
Appeal by special leave from the judgmen( and ord~r da~ed
December 18, 1961 of the Madhya Pradesh High Court m Misc.
Petition No. 247 of 1961.
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,M. S. Gupta and Y ashpal Singh, for the appellant.
S. K. Mehta and K. L. Mehta, for the respondents.
The Judgment of the Court was delivered by
Shela!, J. The appellant Municipal Committee is for the vil·
!age Khurari, a notified area under the Central Provine.es and
Berar Municipalities Act, 1922. The Committee is entitled to
levy and collect under the said Act and under the Rules made
thereunder octroi duty inter alia on foodgrains brought into the
municipal limits for sale.
On March 8, 1954, respondents 1
and 2 applied for refund of octroi duty on the ground that they
had exported from the municipal area foodgrains of which parti·
culars were given in the schedule attached thereto. The appellant
Committee replied that they would not be entitled to the refund
unless they filed with their application 'the receipts of duty is·
sued by the Committee at the time when it was paid on the importation of the said foodgrains. It may be mentioned that it was
not the case of the Committee in the said reply that the said
goods were not exported by respondents 1 and 2 by rail or that
they were not the same goods which were imported into the area
and which were purchased by respondents 1 and 2 and on which
duty would be payable by the cultivators from whom respondents 1
and 2 had purchased the said foodgrains. The Committee simp1y
refused to pay the refund as the respondents failed to produce the
said receipts.
In the appeal filed by respondents 1 and 2 before
the Additional Deputy Commissioner, that officer held, on a con·
struction of rr. 27 and 34, that it would be the person who had
paid the duty when the goods were brought into the municipal
area who alone could claim the refund if the goods exported by,
him were the same on which the duty was paid.
The Board of
Revenue before whom respondents 1 and 2 filed a revision appli·
cation against the· Deputy Commissioner's said order held that
the word 'refund' in r. 27 meant that the person who had paid
the duty could alone be entitled to claim the refund and that res·
pondents 1 and 2 not being such persons could not apply for it.
On that ground alone the Board rejected the revision application.
Respondents 1 and 2 thereupon filed a writ petition in the High
Court of Madhya Pradesh for quashing the said orders of the
Deputy Commissioner and the Board of Revenue.
The admitted facts before the High Court were, (1) that respondents 1 and 2 had purchased the said foodgrains from certain
cultivators; and (2) that those cultivators had in fact paid octroi
168
SUPREME COURT REPORTS
[1969] J S.C.R.
duty when they brought the said foodgrains for sale within the
municipal area.
The contention of respondents 1 and 2 before
the High Court was that as persons who had exported the said
goods they were entitled to the refund of the duty paid by their
vendors, the said cultivators, and that the Board misconstrued
the rules and was in error in refusing the refund to them.
A
learned Single Judge of the High Court held that under r. 9(c) a
declaration had to be made if the goods were intended for consumption or use within the municipal area or if they were intended
for immediate export.
He observed that r. 9, however, did not
provide for any such. declaration if the goods brought into the
municipal area were intended for sale.
He then observed that
s. 27 dealt with refund of octroi on the exportation of dutiable
goods outside the municipal limits and the exporter thereunder was
entitled to a refund of 7 /8th of the duty paid on such goods. He
held that the duty having admittedly been paid on such goods by
the said cultivators and respondents 1 anp 2 having purchased
and exported those very goods, they were entitled to the refund.
On this basis he quashed the orders of the Deputy Commissioner
and the Board and allowed the writ petition.
In the Letters
Patent appeal filed by the appellant Committee, a division bench
of that High Court agreed with the Single Judge on his construction of r. 27 but as the Board had considered only one question,
namely, whether respondents 1 and 2 not having themselves paid
the duty were not entitled to claim the refund, remanded the
ca>e for dealing with the rest of the questions. On remand to the
Board, the Committee contended, (I) that respondents I and 2
had to establish that duty wa> paid on the said goods when
they were imported into the municipal area; and (2) that they
had also to produce the receipts of payment of such duty and
that without doing so they were not entitled to the refund. The
Board rejected the contention and held on the strength of rr. 42
and 43 of the said Rules that except in the case of cloth or goods
produced or manufactured within the municipal area, no proof
by the person claiming refund of duty paid on importation was
required and that such payment would be presumed in the case
of goods other than the two aforesaid kinds of goods.
The
Board further held that r. 27 also did not lay down that the
person who has exported the goods had to prove payment of octroi
on those goods when they entered the area. The Board on this
interpretation allowed the revision application of respondents 1
and 2 and set aside the orders of the Committee and the Deputy
Commissioner and directed payment of the refund. The Municipal Committee thereupon filed a writ petition in the High Court
for quashing the Board's order contending once again that no
octroi duty had been paid on the said foodgrains.
The High
Court rejected this contention in view of the admission made by
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MUNICIPAL COMMITTEE v. DHANNALAL (She/at, J.)
169
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the Committee before the Deputy Commissioner, the Board and
the High Court in earlier proceedings that the goods exported by
respondents 1 and 2 were duty paid. .The High Court he~d that
in view of those admissions the Committee could not reqmre res~
pondents 1 and '2 to produce the receipts to prove payment of the
duty, apart from the fact that the rules did not requir;- a claimant
B
who had exported dutiable goods to produce receipts of payment of duty. The High Court further held that it was clear from
rr. 28 and 29 that the amount of refund is to be determined from
the quantity of foodgrains exported or from their value ~·
therefore, even for determining the amount of refund production
of receipts by such a claimant was not necessary nor w~ su~h
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production required by rr. 42 and 43 except, as aforesaid, m
the case of two categories of goods, viz., cloth and articles pro·
duced or manufactured within the municipal area.
The High
Court held that that being the position and there being no dispute as to the fact that the goods in question were duty paid
and those very goods had been exported, there was nothing in
the rules which barred respondents 1 and 2 from recovering 7 /8th
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of the duty paid on those goods. The High Court dismissed the
writ petition. The Committee then filed a review petition before
the High Court on the ground that it had not considered in its
judgment its contention based on rr. 35 to 38 urged before it.
The contention was that compliance of those rules by respondents
1 and 2 was a condition precedent to their being entitled to the
E
refund. The High Court conceded in its judgment on the review
petition that the said point was urged before it but observed that
it did not deal with it as during the hearing of the writ petition
it was pointed out to the counsel for the Committee that there was
no substance in it. According to the High Court, rr. 35 tp 37
did not. require any compliance by respondents 1 and 2 as they
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dealt with matters to be done by the Octroi Superintendent and
the Muharrir at the exit post when an application for refund is
made by a person exporting the goods out of municipal limits
and that the fact that respondents 1 and 2 did not present the
challan at such exit post, did not debar them under the rules
from claiming the refund.
The review petition on this ground
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wa~,. therefore, rejected. Aggrieved by the dismissal of its writ
petition, the appellant Committee obtained special leave from this
Court and filed this appeal.
In view of the aforesaid decision of the Board and the High
<;ourt ~ the earlier stages of this litigation, most of the contentions raised by the Committee justifying its refusal to refund ha'Ve
H
by now been concluded. It cannot now be disputed (1) that respondents .1 and 2 had purchased foodgrains from the cultivators
who had 1_rnported them into the municipal area for sale; (2) that
those cultivators had at that time paid the duty on those foodIOSup. C. I./68-12
170
SUPREME COURT REPORTS
(1969J ! S.C.R.
grains; and (3) that respondents I and 2 had exported the identical goods by rail.
Counsel for the Committee, however, urged that the view
taken by the High Court wa~ erroneous and that if the rules
rcgarqing refund were read together, it would be clear that a
person claiming refund would not be entitled to it unless he ha~
followed the procedure thereunder prescribed. To appreciate this
contention it would be necessary to turn to those rules. The rules
dealing with refund of octroi arc rr. 27 to 43. Rule 27 provides
that on exportation of dutiable goods out~idc the municipal limits
an exporter shall be entitled to a refund equal to 7 /8th of the
duty paid on them at the time of their import. We do not detain
ourselves on the proviso to this rule as it is not relevant for the
purposes of this appeal. The object of r. 27 is clear, viz., that
in case of dutiable goods, the Conunittee ha~ to refund to the
person who has exported them 7 /8th of the duty paid thereon
at the time when they were brought into the municipal limits. The
rule docs not require such an exporter to produce receipts of
pa}mcnt of duty levied at the time of their entry. Obviously, the
Co11U11ittcc """ wrong in insisting upon respondents I and 2 to
produce receipts bdore they could be granted the refund, nor
could it justify ih demand that respondents I and 2 should prove
that duty had been paid on_ the said good> at the tim·c of their
entry as the rule docs not lay down any such obligation on the
·exporter. Rules 28 to 33 are not relevant and need not, therefore, be set out. Ruic 34 provides that an application for refund
is to be made in the prescribed form and that the exporter after
filling in the particulars has to present his application at the office
appointed for that purpose.
Rules 35 to 39 provide an elabo·
rate· procedure to be followed at the time of exportation. Rule 35
.provides that on receipt of an application for refund. the Octroi
Officer must satisfy himself that the goods brought for export agree
with those mentioned in the application and if satisfied, he must
prepare a challan showing the amount of refund and hand it over
to the exporter who then shall take the goods beyond the municipal limits.
Under r. 36, the exporter ha~ to present the challan
in which the refund amount is calculated at the exit post within
the time prescribed which shall not exceed twelve hours from the
examination of the goods under r. 35 to their exportation. Under
r. 37, the M11harrir has to check the goods at the exit post and
ascertain thanhe goods agreed with those mentioned in the challan and then issue a certificate to the exporter on which the refund
would be paid to him. Ruic 3 8 provides that where the goods
arc not presented at the out-post as provided by r. 35, the exporter may get them verified by the officer who would then make an
endorsement on the application and on such endorsement made the
exporter would get the refund.
Under r. 39 when goods are
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MUNICIPAL COMMITTEE v. DHANNALAL (She/at, I.)
171
exported by rail ·the exporter has to produce the railway receipt
as well as the refund challan bearing the certificate of the Muharrir
at the exit post.
It is clear from rr. 35 to 39 that they lay down the procedure
for claiming refund. Counsel for the Committee, theref~r~, appears to be right in his contention that an exporter desmng to
claim refund has to make his application at the time of exportation of the goods and in the manner prescribed in these roles.
It appears also that there is considerable force in his contention
that rr. 42 and 43 deal with only two categories of goods, viz.,
cloth and articles locally produced or manufactured and that r.
43 is confined to those two kinds of goods only and, therefore,
when it provides that no further proof of duty having been paid
on them is ·required, it means that no proof of such payment
other than the one mentioned in r. 42 would be needed in respect
of the said two categories of goods. In our view, r. 43 has to
be read in the context of r. 42 and must, therefore, be read to
mean that no further proof of payment other than the one mentioned in r. 42 would be required to respect of those two classes
of goods and, therefore, r. 43 does not apply to other kinds of
goods.
The reason is that if r. 43 is read in the manner in
which the High Court has read it, it would render rr. 35 to 39
totally nugatory, a construction which a court having to construe
these rules, would be loath to adopt.
It would seem, therefore, that these rules do provide a
procedure which an exporter wishing to claim refund has to follow.
But the question is whether m a case where an exporter .
has not done so, is he disentitled from claiming the refund ? The
real difficulty in the way of the appellant Committee is that though
the rules lay down a procedure which such an applicant has to
follow, they do not p~ovide at the same time that an applicant
for refund who has failed to follow the procedure laid down in
rr. 35 to 39 would be disentitled to claim the refund. In the
absence of. s.uch a wovision coupled with the categorical language
of r. 27 g1vmg a rtg.ht to an exporter of dutiable goods to claim
7 /Sth of the duty paid on such goods on their import it becomes
difficult to uphold the deriial by the appellant Com~ttee of the
right of respondents 1 and 2 to such a refund. We are, therefore.
of the ~pinion that in the prese_nt state of the rules, the appeal
must fail though for reasons different from those given by the
Board of Revenue and the High Court.
The appeal is dismissed with costs.
R.K.P.S.
Appeal dismissed.