Agrawal, C.J.
1. The validity of levy of octrolduty by the Puri Municipality on the purchase and despatch of marine fish and prawn is the question falling for decision in this case referred to a larger Bench.
2. Petitioner 1 is a registered association of fish merchants in the town of Puri and petitioner 2 is an individual. Both carry on business in fish and prawn. In course of their business, admittedly they purchase fish, both mariner and fresh-water, from vendors and fishermen within the limits of Puri Municipality and thereafter transport them mostly to their commission agents in Howrah for onward consumption. The opposite party Puri Muncipality, in exercise of its powers under Section 131(1)(kk) of the Orissa Municipal Act imposed octroi duty on fish and prawn either caught from the sea or brought from outside. Section 131(1)(kk) reads as follows : --
'131. Power to impose taxes. --(1) The municipal council may, from time to time, at a meeting convened expressly for the purpose, of which due notice shall have been given subject to the provisions of this Act impose within the limits of the municipality the following taxes and fees or any of them -
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(kk) an octroi on goods brought within the limits of a municipality for consumption, use or sale therein' (Underlining is mine)
Obviously, this power is derived from entry 52 of list-II of the 7th schedule of the Constitution relating to 'tax on the entries of goods into the local area for consumption, use or sale therein'. The Puri Municipality has also framed bye-laws in this regard which have been approved by the State Government. Bye-law No. 11 which is relevant reads as follows : --
'11. (1) Every person incharge of goods or articles subject to octroi shall as soon as they are brought within the octroi limits, take them to the nearest octroi check post if required by any octroi official to be dealt with in accordance with these bye-laws.
(2) If any goods or articles are brought within the limits by evading payment of octroi and is proved to the satisfaction of the Octroi Superintendent that the goods or articles are liable to payment of octroi and have been brought without payment of such octroi, the said Superintendent may after giving reasonable opportunity to the owner or person in charge by serving a notice on him make the necessary assessment and on, such assessment the owner or person in charge of goods or articles shall pay the octroi.
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(3) On the arrival of goods or articlessubject to octroi at a check post, the octroi official in charge of check post shall call upon the person in charge -
(1) To declare whether the goods or articles are intended -
(a) for consumption, use or sale within the limits,
(b) for immediate transport beyond such limits, or
(c) for temporary retention within such limits and eventual transport; and
(2) To give their weight and description and where octroi is leviable ad valorem the value, every person making a declaration as to the nature, quantity and value of goods liable to octroi brought by him shall be bound to make a true declaration concerning them to the best of the knowledge and belief.
Provided that the octroi official in charge of the check post shall presume that all the goods or articles that are brought within the limits are for use, consumption or sale until the person in custody of the goods or articles declares to the contrary.' (Underlinings are mine)
Bye-law No. 24 exempts goods from octroi duties which enter the municipal limits in course of transit, i.e., for immediate transport.
3. The grievance of the petitioners is that the opposite parties are collecting octroi on the fish sent by the members of petitioner 1 out of Puri Municipal limits in packed baskets at Puri Railway Station on the arbitrary valuation fixed by them, and thus they are transgressing the constitutional limitations as well as the authority derived under Section 131(1)(kk) of the Municipal Act by charging octroi 'on the exit of goods from the Puri Municipal limits.' In course of argument, it was stated by Mr. Misra, learned counsel for the petitioners, that procurement of fish and prawn is mostly done by the petitioners through their commission agents who collect them within the Municipal limits of Puri and then deliver them to the petitioners.
4. An exactly similar question had fallen for consideration before a Division Bench of this Court in I.T.C. Limited v. Puri Municipal Council, (1978) 46 Cut LT 387 : (1979 Tax LR NOC 51). There also the petitioners were procuring fish and prawn within the limits of Puri Municipality in similar manner and thereafter despatching them to outside places. Collection of octroi was being done at Atharanala check-post at the time of their outward journey. The action of the Municipality to charge octroi at the exit point was challenged, and on a consideration of a large number of authorities and the entire scheme of the Municipal Act and the ambit of the Bye-laws, it was held that the provision of octroi on goods is the point of entry and, therefore, imposition of octroi on the petitioners at the Atharanala check-post was not valid.
5. The present writ application was filed almost simultaneously with the above case which was decided long back in July, 1978. But in view of special leave being granted by the Supreme Court against the said judgment of this Court, and the matter happened to be pending in Civil Appeal No. 199/79, hearing of the present writ application was kept pending for a long time. Earlier, orders were passed to await the decision of the Supreme Court. But subsequently, by order dt. 14-9-82, it was observed that since 'this case is already five years old.......it would be appropriate to proceed with the case instead of awaiting for the Supreme Court decision'. The matter was, however, referred to a larger Bench so that the correctness of the earlier decision could also be re-examined. This is how the case was placed before the Full Bench and ultimately taken up for hearing several years after.
6. Learned counsel for the petitioners proceeded to argue the case on the same line which was adopted by the petitioners of the earlier case. Mr. G. Rath, learned counsel for Order Ps. 1 and 2, who had appeared on behalf of the Municipality on the earlier occasion, also followed suit, and obviously most of the decisions cited on the earlier occasion were again referred to us.
7. Before the Division Bench, learned counsel for the petitioners, after some argument, had given up the point of ultra vires of Section 131(1)(kk) of the Municipal Act, however, without abandoning the same. The main thrust of the argument was that the imposition of octroi was the event of entry into the municipal limits and, therefore, the demand made at the time of its despatch at -the outer check-post, which might be a point of entry as well, was illegal. As already indicated above, this Court firmly held that octroi could only be levied at the entry point, and rejected the stand of the Municipality on the authority of Khyerbari Tea Company's case, AIR 1964 SC 925. that the Municipality was entitled to follow the goods and recover the unpaid octroi from the person found in possession of the same.
8. It was submitted by Mr. Rath that on one side of the entire length of Puri Municipality, there is the sea and, therefore, it was very difficult for the Municipality to check the entry of the marine fish into the Municipal limits. Therefore, it could only be possible on the other side, at the Atharanala check post, where the Municipality is connected with the other parts of Orissa by road. He further submitted in the earlier case as well as in this case before us that the goods were brought within the limits of the. Municipality and were liable for octroi, and if it was found that the same had not been paid, then the person found in charge of the goods was liable to pay tax. Accordingly, at Atharanala check-post also, a lawful assessment could be made and octroi collected. This submission was rejected in the earlier case.
9. The opposite parties have supported the imposition of octroi in their counter-affidavit. The main stand taken in the counter-affidavit is that the petitioner and the other person were found to be in possession of fish and prawn brought from outside which was subject matter of sale transactions within the Puri Municipal limits and the 'person found in charge of such fish and prawn at the check-gates have only been called upon to pay octroi as these goods had not been subjected to realisation of the same at any earlier point of time and had escaped assessment, the eye-laws authorise the Council to realise tax from the persons found to be in possession of the goods which are liable for such payment and that the subsequent transaction does No. 1 exonerate the petitioner from paying octroi.'
10. I am tempted to repeat an illustration given by the Division Bench in the earlier judgment to repel this submission of Mr. Rath.
'Suppose a person brings ten quintals of fish into the municipal limits and sells the same to ten different persons, namely, one quintal to everyone. It is not the bounden duty of the purchaser to inquire whether octroi tax has been paid and these persons cannot be liable to pay octroi duty when they go out of the local limits. Supposing also, there are five different consecutive sales inside the local limits of the municipality by the aforesaid ten persons to hundred other persons, those hundred persons cannot be held liable to pay octroi tax at the exit check-post. It is not expected that the aforesaid hundred persons will inquire about payment of octroi duty and would be liable to pay octroi duty at the exit point.
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The municipality derives its powers from the State Legislature and the power of the State Legislature cannot go beyond Entry 52 of List II of the 7th Schedule of the Constitution. When the Constitution provides levy of tax on goods on entry into a local area, the State Legislature has power only to that extent and the municipality having framed its bye-laws in pursuance of Section 388(3) of the Act which definitely relates to time and mode of collection, the power of the municipality in framing its bye-laws is limited to that extent.'
11. Since the learned counsel for the petitioners had also made some argument regarding the vires of the imposition of the octroi tax as such, I propose to discuss this question at the first instance.
12. As noticed earlier, the source of power is contained in Entry No. 52 of List II of the 7th Sch., on the basis of which the State Legislature provided for imposition of octroi under the Orissa Municipal Act. Such provisions are also there in various other State Acts and the question had fallen for consideration before different High Courts including our own several times.
The question was raised before this Court long back in The Orissa Ceramic Industries Ltd. v. Executive Officer, Jharsuguda Municipality, AIR 1963 Orissa 171, where the vires of imposition was challenged on the ground of excessive delegation as also on the ground that the amount collected was not spent for the purposes mentioned in Section 117(1) of the Municipal Act.
The question was again raised in Sridhar Patnaik v. Keonjhar Garh Municipality, (1972) 1 Cut WR 105 and then in Bhaskar Textile Mills Ltd. v. Jharsuguda Municipality. ILR (1977) 2 Cut 48 : (1977) 1 Cut WR 182 : (1977 Tax LR 2177) where the challenge was made on the ground that the provision contravened Article 301 of the Constitution.
In BhaskarTextile Mills' case (supra) cotton was being brought into the Municipal limits not for sale but for processing the same into yarn and on this account it was contended that the import having been not for sale, octroi was not exigible. The plea was rejected on the ground that it was a case where the cotton was actually used by the mill and thus covered by the mischief of the provision. The petitioner being dissatisfied with the decision of this Court took the matter to the Supreme Court where the view of this Court was affirmed in AIR 1984 SC 583. In this case, the Supreme Court directly considered Section 131(1)(kk) and the bye-laws in question and approved that. In my considered opinion, therefore, now there is hardly any scope for much discussion of this part as it stands concluded by the aforesaid authoritative decision of the Supreme Court.
In the case of Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, AIR 1962 SC 1406, the Supreme Court was considering a State law of Rajasthan imposing certain tax on motor vehicles carrying passengers and goods within or through the State. The Court upheld the imposition holding that Article 301 could not be interpreted as contemplating only freedom from restriction against movement of goods in the course of trade across geographical barriers. The imposition was held to be of a character of remuneration or consideration charge in respect of an advantage sought and received.
In the case of G. K. Krishan v. State of Tamil Nadu, AIR 1975 SC 583, the Supreme Court was examining the question of imposition of tax on contract carriages under the Madras Motor Vehicles Taxation Act which is in pari materia with the Rajasthan Act. The Supreme Court took the same view as in Automobile Transport Ltd. v. State of Rajasthan, AIR 1962 SC 1406.
The view taken in the above authorities is that the imposition of octroi duty is in the nature of compensatory tax and that it was not necessary to establish the actual user of the collections made for the amenities. Be that as it may, no such case has also been made out by the municipality on this account, much less any material has been furnished to examine the mode and the manner of the expenditure of the amounts realised by the Municipality as octroi duty except by way of an additionalaffidavit filed in the year 1982.
13. I would now proceed to take up the main point urged by the learned counsel for the petitioners, namely, that no octroi could be charged in the hands of the latter at the stage of the despatch of the goods outside the Municipal limits.
As already said earlier, this was also a point canvassed in I.T.C. Ltd.'s case before this Court (1979 Tax LR NOC 51) (supra), and on consideration of a large number of authorities, it was firmly held that the point for collection of octroi means 'the event of the point of entry'. Entry No. 52 of List II also authorises 'taxes on the entry of goods'. The earlier decision of this Court, the correctness of which is also one of the points raised before this larger Bench, has taken into account a large number of decisions including that of the Supreme Court in coming to the said conclusion. I may notice again those decisions as well as the subsequent decisions before I come to my own conclusion. But before I proceed to consider the authorities, I would like to state that the stand of the opposite parties and their learned counsel Mr. Rath was not to contest this basic principle; all that they purport to contend is that in the event of an evasion of the octroi tax at the entry point, the same became recoverable at the subsequent stage in the hands of the 'person in charge' or the owner. In support of this stand, reliance has been placed upon the Khyerbari Tea Company's case (AIR 1964 SC 925) (supra). Bye-law No. 11(2) which is relevant reads as follows : --
'(2) If any goods or articles are brought within the limits by evading payment of octroi and it is proved to the satisfaction of the Octroi Superintendent that the goods or articles are liable to payment of octroi and have been brought without payment of such octroi, the said Superintendent may, after giving reasonable opportunity to the owner or person in charge by serving a notice on him, make the necessary assessment and on such assessment the owner or person in charge of goods or articles shall pay the octroi.
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It may be noticed that sufficient safeguard has been provided under Bye-law No. 11 for protecting the interest of the Municipality in regard to imposition and recovery of the octroi duty. A provision for issuing 'transit pass' is also made in Bye-law No. 24 in relation to the goods which enter the Municipal area in course of transit. The validity of these Bye-laws was also considered on the earlier occasion.
Section 388(3) of the Municipal Act empowers the Municipal Council to frame bye-laws with regard to the time and the mode of collection of the octroi only, and the bye-laws have provided for certain formalities to be performed by the person bringing goods into the Municipal limits and for payment of the duty thereon. I agree with the observations made in I.T.C. Ltd's case (1979 Tax LR NOC 51) (supra) that Bye-law No. 11(2) while speaking about 'evasion' in the absence of any finding of evasion and simply using it as a machinery of collection as a matter of convenience, such collection cannot be held to be valid in law. We have seen that in order to detect evasion, a procedure has been provided in Bye-law No. 11(2). And if, even for the sake of argument, it is assumed that realisation from the petitioners at the point of despatch of the goods at the railway station for their outward journey or their transit at the other check-posts is made, in the absence of the procedure adopted under this Bye-law, namely, giving of 'a reasonable opportunity to the owner or person in charge by serving a notice on him .........' (sic) to examine as to whether the goods have been already subjected to the payment of such octroi or not, the right to make necessary assessment arises. The imposition of octroi as a measure of recovery of the duty at the points of exit as a simple way of the substituted modality for the recovery at the entry points cannot be sustained.
14. The Supreme Court had the occasion to consider in detail somewhat similar questions in the case of Burmah-Shell Oil Storage and Distributing Co. of India Ltd. v. Borough Municipality, Belgaum, AIR 1963 SC 906. The Company had challenged the action of the Belgaum Municipality for charging octroi on its products brought inside the octroi limits for sale. The stand of the Company was that it was not liable to pay octroi on the goods sold by it through its dealers which were ultimately consumed outside the Municipal limits. This argument was repelled and it was held that 'it is sufficient if the goods are brought inside the area to be delivered to the ultimate consumer in that area because the taxable event is the entry of goods which are meant to reach an ultimate user and consumer in the area'. At the same time it was also held that the Company was not liable to such duty in respect of the goods which it brought into the local area and which were re-exported. The principle laid down in this decision has been followed in almost all the subsequent decisions and reiterated in Hiralal Thakorlal v. Broach Municipality, AIR 1976 SC 1446.
The case of Khandelwal Traders v. Akola Municipal Council, AIR 1985 Bom 218 was a case for refund of the octroi tax illegally collected on goods which were in transit from one octroi limit to another and neither consumed nor used within the municipal area. The relevant rule of the Municipal law was in similar terms as ours. There, the time limit for export out of the octroi limit, however, was six months from the date of their import into the area. In view of the fact that the consignments in question were found to have been only temporarily detained in the municipal octroi limits for export after following the prescribed procedure, the refund was allowed.
15. Mr. Misra also referred to a recent decision of the Supreme Court in Kamaljeet Singh v. Municipal Board, Pilkhwa, AIR 1987 SC 56. This was a case touching on the first question of vires. In this case, the question was as to whether the toll tax levied by a Municipal Board on the vehicles or stage carriages making use of National Highways could be treated as a compensatory tax and was liable to be struck down as ultra vires. He also referred to the case of Nagar Palika, Shivpuri v. Purushottamdas, 1971 Jab LJ 373 : (1971 Cri LJ 1253). It was an appeal against an order of acquittal in a criminal action by the Municipal Council of Shivpuri on the allegation of defrauding the Municipality by evading payment of octroi tax. The order of acquittal was maintained with the observations of A. P. Sen. J. (as he then was) that : --
'The taxable event therefore is the bringing of the goods within the municipal limit and that must be for the purpose of sale, use or consumption within such limits.'
16. As already seen earlier, the goods dealt in by the petitioners being in the nature of fish and prawn, it is very difficult to identify as to whether octroi has already been collected from them at the entry point or not. Nor such enquiry was made by the opposite parties as contemplated under Bye-law No. 11(2). The argument of Mr. Rath that in view of the difficulties experienced by the Municipal authorities on account of the vast expanse of the sea on one side of the Municipal limits, the Municipal Council finds it convenient to realise the octroi at the point of outlet cannot be sustained as the imposition completely violates the mandate of law.
17. I also do not find any substance in the submission that some kind of a lien is created over the goods like railway freight which can be recovered or realised from any subsequent owner or person in charge of the goods, because this is not only a mode of recovery but would be taxing altogether a different person who under the very frame of the Statute is not liable for the octroi unless it is established that it was he who was the importer of the goods and that the goods were brought inside the octroi limits at his instance. No material has been brought on record to establish all these facts. The Municipal authorities appear to have just taken recourse to the realisation of the octroi tax at the exit points as it is more convenient to them. I am afraid, this cannot be permitted in law.
18. In the result. I would allow this writ application and in agreement with the Division Bench decision of this Court (1978) 46 Cut LT 387 : (1979 Tax LR NOC 51) hold that the imposition and collection of octroi from the petitioners by opposite party No. 1 and its, officers at the time of booking of the goods at the railway station or at any point of exit being illegal cannot be upheld. The Municipal authorities must refund the tax, if any, collected in this regard from the petitioners.
In the circumstances, I would leave the parties to bear their own costs.
Misra, J.
18A. I agree.
Mohapatra, J.
18B. I have read the judgment of my Lord the Chief Justice and with respect agree with the ultimate result. I do not repeat facts. I would, however, state reasons of my own.
19. Mr. G. Rath, learned counsel appearing for opposite party 1, raised a preliminary point about maintainability of the writ petition by petitioner 1 on the ground that it is not a legal entity nor a juristic person and does not itself carry on the business in purchase and sale of fish and prawn. It is only an association of fish and prawn merchants and thus has no locus standi. He placed reliance on AIR 1962 SC 1044, Calcutta Gas Com. (Proprietary) Ltd. v. State of West Bengal, in which the question of locus standi in filing a writ petition under Article 226 of the Constitution was discussed in detail and it was held that unless a party has got a legal right to enforce which has been infringed, he cannot maintain a writ petition under Article 226 of the Constitution. Mr. Misra, learned counsel appearing for the petitioners, did not dispute the above facts and the principle of law. but pointed out that although petitioner No. 1 itself is not a fish and prawn merchant, yet petitioner 2 is a fish and prawn merchant who has a legal right which he felt had been infringed by opposite parties 1 and 2 and so he can maintain the writ petition under Article 226 of the Constitution. The legal right of petitioner 2 to maintain the writ petition was further not disputed by Mr. Rath. In view of the above facts, contentions and the principle of law, I am of the opinion that even though petitioner No. 1 has no legal right to maintain the writ petition under Article 226 of the Constitution, yet the preliminary objection has become academic in view of the fact that petitioner No. 2 who is a fish and prawn merchant has locus standi and can maintain the writ petition.
20. Mr. Misra urged that the provisions' of Section 131(1)(kk) of the Act are not compensatory in nature and, therefore, violative of Articles 301 and 304 of the Constitution imposing restrictions on the freedom of trade, commerce and intercourse. In support of his contention, he placed reliance on AIR 1987 SC 56, Kamaljeet Singh v. Municipal Board, Pilkhwa. Mr. Rath did not dispute the correctness of the law laid down in the aforesaid decision in view of the peculiar facts of the case, but placed reliance on three decisions of this Court reported in ILR (1963) Cut 543 : (AIR 1963 Orissa 171) Orissa Ceramic Industries Ltd. v. Executive Officer, Jharsuguda Municipality, (1977) 1 Cut WR 182 : (1977 Tax LR 2177) Bhaskar Textile Mills Ltd. v. Jharsuguda Municipality and (1978) 46 Cut LT 387 : (1979 Tax LR NOC 51) I.T.C. Limited v. Puri Municipal Council, as well as three other decisions of the Supreme Court reported in AIR 1962 SC 1406, Automobile Transport (Rajasthan) Ltd, etc. v. State of Rajasthan, AIR 1975 SC 583, G. K. Krishan etc. v. State of Tamil Nadu and AIR 1984 SC 583, Bhaskar Textile Mills Ltd. v. Jharsuguda Municipality, in support of his contention that levy of octroi by a municipal council is compensatory in nature and does not impose restrictions on the freedom of trade, commerce and intercourse guaranteed by Articles 301 and 304 of the Constitution.
In the case of Orissa Ceramic Industries Ltd. (AIR 1963 Orissa 171) (supra), levy of octroi by Jharsuguda Municipality was challenged and Section 131(1)(kk) of the Act was attacked on the ground that it was unconstitutional and ultra vires Article 304(b) of the Constitution. A Bench of this Court relying upon an earlier decision of the Supreme Court reported in AIR 1959 SC 586, Western India Theatres Ltd. v. Municipal Corpn., Poona, held that Section 131(1)(kk) of the Act was not unconstitutional and ultra vires Article 304(b) of the Constitution. Relying upon the dictum laid down in Automobile Transport (Rajasthan) Ltd. (supra), it was further held that taxes which are essentially regulatory or compensatory in nature cannot be held to impose any unreasonable restrictions on the freedom of trade, commerce and intercourse. A working test for deciding whether a tax is compensatory or not is to enquire whether the trades people are having the use of certain facilities for the better conduct of their business and paying not patently, much more than what is required for providing those facilities. It would be impossible to judge the compensatory nature of the tax by a meticulous test and in the nature of things that cannot be done. Judged by these principles there can be no doubt that an octroi duty levied by the municipality is essentially a compensatory tax. The municipality is required to provide certain amenities not only for the permanent residents within the municipality but also even for casual visitors who may on occasions enter the limits of the municipality. The entry of large quantities of goods within the municipality almost daily from outside necessarily creates innumerable problems such as provision of water-supply, lighting facilities, facilities for conservancy, sanitation, maintenance of good roads and markets, etc. These are all within the well defined purposes of a municipality and under Section 117 any tax collected must be only utilised for those purposes. Hence, if with a view to meet the extra expenditure involved in solving the problems created by the daily influx of people carrying goods within municipal limits, the municipality imposes an octroi duty with a view to increase its income, it must be held that such an octroi duty is essentially a compensatory tax. It is not necessary, for a tax to be compensatory, to show that the amount collected is actually used in providing facilities. But bearing in mind the fundamental limitation on the power of a municipality --not to expand its income for purposes other than making provisions for the convenience of the people residing either temporarily or permanently within municipal limits -- such octroi duty must be held to be essentially compensatory in nature. Hence, Article 304 did not apply and the impugned provision did not require either the previous sanction or the subsequent assent of the President. The constitutionality of Section 131(1)(kk) of the Act again came up for consideration before another Bench of this Court and in the decision reported in (1977) 1 Cut WR 182 : (1977 Tax LR 2177) (supra), this Court revjewcd the earlier decision and some other decisions of the Supreme Court and held that the aforesaid section is constitutional and did not violate Article 301 of the Constitution.
In the case of Automobile Transport (Rajasthan) Ltd. (supra), it was held that regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Article 301 and such measures need not comply with the requirements of the Proviso to Article 304(b) of the Constitution. In the case of G. K. Krishan etc. (supra), an identical view was taken. It was held that collections of toll or tax for the use of roads, bridges or aerodromes, etc. do not operate as barriers or hindrance to trade. For a tax to become a prohibited tax, it has to be a direct tax, the effect of which is to hinder the movement part of the trade. If the tax is compensatory or regulatory, it cannot operate as a restriction on the freedom of trade or commerce. In view of the facts of the particular case, it was held that tax imposed on contract carriages by the impugned notification was compensatory in character and could not, therefore, restrict the freedom of trade and commerce guaranteed by Article 301 and as such, need not comply with the provisions of Article 304(b) of the Constitution.
Bhaskar Textile Mills case (supra) was taken to the Supreme Court and it was challenged thatSection 131(1)(kk) of the Act violated Articles 14, 19(1)(g) and 301 of the Constitution and was liable to be struck down. In the decision reported in AIR 1984 SC 583 (supra), it was held that imposition of octroi duty under Section 131(1)(kk) of the Act for goods brought into the municipal limits for the purpose of use was not unreasonable and excessive, and did not violate any of the aforesaid Articles of the Constitution. The same view had also been taken in the case of I.T.C. Ltd. (supra).
In the case of Kamaljeet Singh (supra), the Municipal Board of Pilkhwa imposed toll tax on vehicles and other conveyances, animals and laden coolies though it did not provide facilities to the owners of vehicles like stage carriages etc. for making use of National Highway No. 24 and in fact, the township of Pilkhwa was off the National Highway and was quite at some distance. It was connected by a road and a part of the National Highway had been included within the municipal limits. In view of these peculiar facts when the Municipal Board did not compensate the persons for payment of toll tax, it was held that the toll tax levied by the Municipal Board could not be treated as compensatory tax and so it was struck down as imposing restrictions on freedom of trade, commerce and intercourse. It is, however, interesting to note that the dictum laid down by the Supreme Court in the case of Automobile Transport (Rajasthan) Ltd. (supra) was referred to and was not differed from.
21. Thus, on a review of the facts and the consistent view taken by the Supreme Court which had earlier been followed by this Court, I uphold the contention of Mr. Rath and hold that octroi duty imposed by opposite party No. I is compensatory in nature and in no way imposes any restrictions on the freedom of trade, commerce and intercourse and so it is not at all violative of Articles 301 and 304(b) or its Proviso of the Constitution. The contention of Mr. Misra, therefore, must be held to have no force.
22. The following facts are not disputed : The town of Puri is situate over a vast stretch of land along the Bay of Bengal and inland to the west. Along the sea shore live fishermen communities. Not very far from the town, is the Chilka lake. Further around are rivers, rivulets, Nalas and ponds. There are octroi check gates at many entry points either on roads or paths and at the sea shore. Every day huge quantities of marine fish and prawn are brought from the sea into the town. Sweet water fish and prawn in huge quantities are also brought into the town. From Chilka lake sizeable quantities of fish and prawn are also brought into the town. Some of the quantities of fish and prawns are sold in the daily markets for use and consumption by the local people. But huge quantities of fish and prawn are packed in baskets with ice and brought to the Puri Railway Station by fish merchants for despatch mostly to the Howrah Railway Station booked in their own names for sale through commission agents. At the octroi check gates, octroi is imposed at the time of entry as usual It has also been the practice of opposite party No. 1 to impose octroi on fish and prawn booked at Puri Railway Station for being despatched to Calcutta. Mr. Misra does not challenge i mposition of octroi at the points of entry, namely, check gates. His objection is confined to imposition of octroi at the exit point, namely, at the Puri Railway Station at the time of booking and despatch of the goods. Mr. Rath, on the other hand, urged that if the fish and prawn brought inside the municipal area have escaped imposition of octroi at the entry points, the goods can be followed up to the exit points for imposition of octroi. So the core question for consideration is whether fish and prawn can be subjected to imposition of octroi at the exit point at the time of booking and despatch at the Puri Railway Station.
23. Entry 52 of List II of the Seventh Schedule of the Constitution relates to 'Taxes on the entry of goods into a local area for consumption, use or sale therein'. On the authority of the said Entry, the State Legislature introduced Section 131(1)(kk) of the Act for collection of octroi. In exercise of the powers conferred under the aforesaid section, opposite party 1 framed Bye-laws for collection of octroi on goods brought within the limits of the municipal area for consumption, use or sale therein. The facts of the I.T.C. Limited's case (supra) were slightly different from the factsof the present case. Nevertheless, placing reliance on the observations made by the Supreme Court in the cases of Burmah-Shell Oil Storage and Distributing Co. of India Ltd., Belgaum v. Belgaum Borough Municipality, Belgaum, AIR 1963 SC 906 and Jothi Timber Mart v. Corpn. of Calicut, AIR 1970 SC 264, this Court opined that octroi on goods could be collected by opposite party 1 only at the point of entry into the municipal area which excludes imposition of octroi at the exit point. In the case of Burmah-Shell Oil Storage and Distributing Co. (supra), it was held as follows :
'In our opinion, the company was liable to pay octroi tax on goods brought into local area (a) to be consumed by itself or sold by it to consumers direct, and (b) for sale to dealers who in their turn sold the goods to consumers within the municipal area irrespective of whether such consumers bought them for use in the area or outside it. The company was, however, not liable to octroi in respect of goods which it brought into the local area and which were re-exported. But to enable the company to save itself from tax in that case it had to follow the procedure laid down by the rules for refund of taxes.'
In the case of Jothi Timber Mart (supra), it was held :
'Entry of goods within the local area for consumption, use or sale therein is made taxable by the State Legislature: authority to impose a general levy of tax on entry of goods into a local area is not conferred on the State Legislature by Item 52 of List II of the Schedule VII of the Constitution. The Municipality derives its power to tax from the State Legislature and can obviously not have authority more extensive than the authority of the State Legislature. If the State Legislature is competent to levy a tax only on the entry of goods for consumption, use or sale into a local area, the Municipality cannot under a legislation enacted in exercise of the power conferred by Item 52, List II have power to levy tax in respect of goods brought into the local area for purposes other than consumption, use or sale. The authority of the State Legislature itself being subject to a restriction in that behalf, Section 126 may reasonably be read as subject to the same limitations. When the power of the Legislature with limited authority is exercised in respect of a subject-matter, but words of wide and general import are used, it may reasonably be presumed that the Legislature was using the words in regard to that activity in respect of which it is competent to legislate and to no other; and that the Legislature did not intend to transgress the limits imposed by the Constitution : See In re Hindu Women's Right to Property Act, 1937, 1941 FCR 12 : (AIR 1941 FC 72). To interpret the expression 'brought into the city' used in Section 126(1) as meaning brought into the city for any purpose and without any limitations would, in our judgment, amount to attributing to the Legislature an intention to ignore the constitutional limitations. The expression 'brought into the city' in Section 126 was therefore rightly interpreted by the High Court as meaning brought into the municipal limits for purposes of consumption, use or sale and not for any other purpose.'
In another case reported in AIR 1976 SC 1446 Hiralal Thakorlal Dalai v. Broach Municipality the principle laid down in Burmah-Shell's case was reiterated and it was held :
'This Court categorically held that the Company was liable to pay octroi on goods brought into the local area (a) to be consumed by itself or sold by it to consumers direct, and (b) for sale to dealers who in their turn sold the goods to consumers within the Municipal area irrespective of whether such consumers bought them for use in the area or outside it, but it was 'not liable to octroi in respect of goods which it brought into the local area and which were re-exported'.'
24. The principle laid down by the Supreme Court in several decisions is to the effect that octroi is imposable at the time of entry of the goods into the municipal area for consumption, use or sale therein. This Court in the case of I.T.C. Ltd. (1979 Tax LR NOC 51) (supra), strictly followed the above principle and therefore in my opinion its correctness cannot be disputed.
25. On review of the decisions laying down the principle relating to imposition of octroi by local authorities on goods brought within the municipal area and in the facts of this case, I formulate my opinion as follows :
Octroi can be collected by opposite party No. 1 at the time of entry of goods, such as fish and prawn, into the Puri Municipal area brought by fish-catchers, fishermen and fish vendors. Octroi on goods, such as fish and prawn, cannot be collected at the exit point of the municipal area, If there is escapement of collection of octroi at the entry point of goods and the same have changed hands for consumption and use or have been sold, the goods cannot be followed for collection of octroi from those persons who did not effect entry of the goods within the municipal area. In order to check escapement of octroi, opposite party 1 is competent to take suitable measures at entry points. The fish merchants such as petitioner 2, who purchase fish and prawn brought by fish-catchers, fishermen and fish vendors into the Puri Municipal area for the purpose of export to places outside it, cannot be liable to pay octroi at the point of exit.
26. In view of the conclusion I have arrived at, the writ petition succeeds. A writ may accordingly issue. Parties to bear their own costs.