Burmah Shell Oil Storage and Distributing Co. India Ltd. vs The Belgaum Borough Municipality

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No 431/1961

Decision Date: 16 November 1962

Coram: M. Hidayatullah, S.K. Das, J.L. Kapur, A.K. Sarkar, Raghubar Dayal

In the matter titled Burmah Shell Oil Storage and Distributing Co. India Ltd. versus The Belgaum Borough Municipality, the judgment was delivered on 16 November 1962 by a bench of the Supreme Court of India composed of Justice M. Hidayatullah, Justice S. K. Das, Justice J. L. Kapur, Justice A. K. Sarkar, Justice Raghubar Dayal and Justice A. K. Dayal. The case citation appears as 1963 AIR 906 and 1963 SCR Supl. (2) 216, with subsequent references recorded in various law reports. The principal issue before the Court concerned the levy of octroi, a local tax imposed by the Belgaum Municipality, on petroleum products brought into the municipal limits by the appellant company.

The appellant, Burmah Shell Oil Storage and Distributing Co. India Ltd., is engaged in the manufacture of petrol and other petroleum products at refineries located outside the octroi boundary of Belgaum Municipality. After production, the company transports these goods into the municipal area for several purposes. The Court identified four distinct categories of such goods. First, there are goods that the company itself consumes after bringing them into the octroi zone. Second, there are goods that the company sells, either directly or through its dealers, to customers who subsequently use those goods within the municipal limits. Third, there are goods that the company or its dealers sell to buyers inside the city, but those buyers later consume the products outside the municipal boundary. Fourth, there are goods dispatched by the company from its depot inside the octroi limits to locations beyond the municipality, where they are purchased and used by parties other than the company.

The appellant filed a writ petition in the High Court seeking an order that would prohibit the municipality from imposing octroi on the company’s petroleum products brought into the municipal area for sale. The High Court dismissed the petition, prompting the appellant to approach this Court by way of a certificate under Article 133(i)(b) of the Constitution. During oral arguments, the respondents agreed that a refund would be granted for those items that the appellant had actually sent out of the octroi limits, and the appellant conceded that it was liable to pay octroi on the goods it consumed itself. Consequently, this Court was required to adjudicate only on the remaining two categories of goods described above.

After considering the arguments and the statutory provision concerning octroi, the Court held that the appellant was required to pay octroi on petroleum products that were brought into the municipal area for two purposes: first, where the goods were intended for consumption by the company itself, and second, where the goods were sold by the company, either directly or through its dealers, to consumers located within the municipality, regardless of whether those consumers later used the goods inside or outside the municipal limits. The Court further concluded that the company was not liable to octroi on goods that were imported into the municipal area and subsequently re‑exported beyond the limits. This distinction rested on the interpretation of the term “consumption” in its ordinary sense, meaning the use or exhaustion of an article, and the recognition that octroi is a tax on goods brought into a locality for consumption, use, or sale, distinct from a terminal tax which applies to goods imported or exported through municipal boundaries.

In this case the Court explained that the Company was required to pay octroi on any goods it brought into the local municipal area for either its own consumption or for sale to dealers, regardless of whether the ultimate consumers purchased those goods for use inside the area or for use outside it. The Court further held that the Company was not liable to pay octroi on goods that it introduced into the local area but subsequently re‑exported beyond the municipal limits. The Court then clarified the meaning of the word “consumption.” In its ordinary sense, consumption denotes the act of using an article in a manner that destroys, wastes, or uses up that article. However, the Court noted that in certain legal contexts the term can be given a broader interpretation, and it is not essential that the commodity be physically destroyed or exhausted by the act of consumption. The Court compared octroi with terminal tax, observing that both taxes are imposed on goods that enter a local area, yet they differ substantially in other respects. Terminal taxes are levied on goods that are “imported or exported” across municipal boundaries and are therefore linked to the movement of goods, whereas octroi is imposed on goods that are brought into the municipal area for consumption, use, or sale. Historically, terminal taxes originated as a form of octroi that concerned solely the entry of goods into a local area without regard to their subsequent use, while octroi traditionally targeted goods brought into the area specifically for consumption, use, or sale and only when those goods were intended for a user within the area. Another distinction highlighted by the Court is that a system of refund exists for octroi but no such mechanism is provided under terminal tax. The Court relied upon the authorities in Burmah Shell Oil and Dist. Co. v. Manmad Municipality, A.I.R. 1958 Bombay 43; The State of Bombay v. The United Motors (India) Ltd., [1953] S.C.R. 1069; and Anwar Khan Mahboob Co. v. The State of Bombay, [1961] 1 S.C.R. 709. The judgment was an appeal under civil appellate jurisdiction, identified as Civil Appeal No. 431/1961, filed against the judgment and order dated 31 May 1960 of the High Court of Mysore in Writ Petition No. 94 of 1959. Counsel for the appellant included the Attorney‑General of India and other learned advocates, while counsel for the respondent also appeared. The appeal was heard on 16 November 1962, and the judgment was delivered by Justice Hidayatullah. The appeal was entertained by way of a certificate under Article 133(1)(b) of the Constitution, contesting the High Court’s dismissal of the Company’s petition filed under Article 226 of the Constitution, which sought a writ or writs to restrain the Belgaum Borough Municipality from imposing octroi on the Company’s petroleum products that were brought inside the octroi limits for sale. The Company, which manufactures petrol and other petroleum products in refineries located outside the octroi limits, brings those products into the municipal area either for its own use or for distribution through its dealers and licensees, as well as for direct sales to government, local bodies, and large private entities.

The Company manufactures petroleum products in refineries that are located outside the octroi limits of the Belgaum Municipality, and it brings those products into the municipal area either for its own use or consumption or for sale to its dealers and licensees, who in turn sell the products to other purchasers. In addition, the Company directly supplies its products to the Government, both civil and military, as well as to local authorities and large private enterprises. The Company maintains a Divisional Office and a Depot within Belgaum, and the petition that was presented before the High Court was filed by the Divisional Manager who is responsible for that area. In the ordinary course of its business, the Company appoints dealers and licensees; the standard agreements that govern the relationship between the Company and such dealers and licensees have been exhibited as part of the record. According to the Company's own classification, the goods that it brings within the octroi limits fall into four distinct categories. The first category comprises goods that are consumed by the Company itself. The second category consists of goods that are sold by the Company, either through its dealers or by the Company directly, and that are then consumed within the octroi limits by persons other than the Company. The third category includes goods that are sold by the Company, again either through dealers or directly, inside the octroi limits to other persons, but that are subsequently taken out of the octroi limits and consumed elsewhere. The fourth category encompasses goods that are dispatched from the Company's depot located inside the octroi limits to points outside the municipality, where they are purchased and consumed by persons other than the Company. The appeal under consideration addresses a three‑year period that began on 22 October 1955 and ended on the corresponding date in 1958. During that interval, octroi duty was levied on all goods brought within the octroi limits of the Municipality, irrespective of their ultimate destination, in accordance with the four categories enumerated above, and the total amount of duty collected amounted to Rs 1,40,544.51. The Company asserted before the High Court that it was not liable to pay octroi on any category other than the first, a contention that was rejected; however, the Municipality agreed to provide a refund consistent with the rules applicable to the fourth category. Before examining the parties’ respective contentions, it is necessary to outline briefly the scheme of taxation under the Bombay Municipal Boroughs Act, 1925, which governs the Belgaum Municipality, together with the by‑laws and rules that the Municipality has framed for the levy of octroi within its limits. The Municipality derives its power to impose taxes from section 73 of that Act, which, subject to any general or special orders that the State Government may issue and to the provisions of sections 75 and 76, permits a municipality to impose, among other taxes, an octroi on animals or goods or both brought within the octroi limits for consumption, use or sale therein. The words “use or sale” were substituted for the earlier wording “or use” by an amendment enacted on 5 May 1954.

In the Bombay Municipal Boroughs Act the amendment enacted by the Bombay Act 35 of 1954 introduced the word “sale” into the description of the octroi that the Municipality could levy on animals or goods. Before that year the phrase referred only to “use” and did not contain “sale”. Sections 75 and 76 of the Act prescribed the procedure that the Municipality must follow before imposing any tax. It was unnecessary to reproduce the full text of those sections; it was enough to state that the Municipality first passed a resolution at a general meeting, selected one of the taxes listed in section 73, and then approved rules prepared under clause (j) of section 58. Those rules identified the classes of persons or property that would be liable, any exemptions to be granted, the amount or rate of the tax, and any remission or refund that might be allowed together with the conditions for such exemption, remission or refund. The rules could also cover other matters, but those were not material to the present discussion. After the resolution was passed, the Municipality published the rules together with a notice that informed all persons who might be affected. Any inhabitant of the municipal borough who objected to the tax, its amount or rate, or to the classes of persons or property that were to be made liable, or to any proposed exemption, could lodge an objection within one month. The Municipality then examined each objection, recorded its opinion on them, and forwarded the notice, the objections, its opinion, and the rules—amended if necessary—to the State Government. Section 76 authorised the State Government to either refuse to sanction the submitted rules or to sanction them with or without further modification. Finally, under section 77 the rules were re‑published with the Government’s sanction, and the tax became effective from the date specified in the newly published rules.

Section 58, which had been cited earlier, empowered the Municipality to make rules that were not inconsistent with the Act. Clause (j) of that section read: “(j) prescribing the taxes to be levied in the municipal borough for municipal purposes, the circumstances in which exemption will be allowed, the conditions on which and the extent to which remission will be granted, and the system on which refunds will be allowed and paid, in respect of such taxes; the limits of the charges or payments to be fixed.......................”. Additionally, section 61(1) gave the Municipality the authority to make by‑laws for a variety of purposes, and clause (n) of that subsection specifically authorised the fixing of octroi limits and stations, the exhibition of octroi tables, and the regulation—subject to any general or special orders that the State Government might issue—of the system by which refunds would be made when the animals or goods on which octroi had been paid, or articles manufactured wholly or in part from such animals or goods, were again exported, or when the custody or storage of such animals or goods was declared not to be intended for consumption, use or sale within the municipal borough. The clause also permitted the prescription of a limitation period after which no claim for refund of octroi would be entertained, and set a minimum amount for any claim for refund to be entertained.

The Court explained that the legislation authorized the municipal authority to make rules concerning the custody or storage of animals or goods that were declared not to be intended for consumption, use or sale within the municipal borough, and also to prescribe a limitation period after which no claim for a refund of octroi would be entertained, together with a minimum amount for which any refund claim could be made. Section 60 required the municipality to follow, as far as practicable, the same procedure that applied to the suspension, modification or abolition of any tax and to the suspension, alteration or reduction of any rule that prescribed a tax.

In 1925 the municipality framed a set of rules and by‑laws before it became a borough municipality. Those rules were designated as “The Belgaum Municipality Octroi Rules and By‑laws” and they continued in force by virtue of section 5(b) of the Borough Act. Prior to the amendment of the Boroughs Act in 1954, rule 4(1) of those Octroi Rules and By‑laws provided that, subject to the exemptions and the provisions expressly specified thereafter, a tax on all goods described in Schedule A annexed to the rules would be payable to the municipality at the rates specified in that schedule on the importation of such goods.

When the Act was amended in 1954, the word “sale” was inserted into the description of octroi. The municipality, however, did not re‑frame the rules and by‑laws, nor did it follow the procedure prescribed in section 76 read with section 58 to impose octroi on animals and goods that were sold within the octroi limits. Consequently, rule 4(1) continued to operate in the same form as before the amendment.

The Company, which had paid octroi on all of its products brought within the octroi limits of the Belgaum municipality before the amendment, began a correspondence after the amendment. In that correspondence the Company argued that, because the law had been newly amended to include the word “sale” in the description of octroi, the rules and by‑laws should have been re‑framed and the procedure under section 76 read with section 58(j) should have been observed. The Company contended that, since the requisite procedural steps were not taken, the municipality could not levy tax on goods that were merely sold but not consumed within the octroi limits.

During the same exchange the Company did not dispute the general levy of octroi on goods that were brought within the octroi limits for consumption, use or sale. Instead, it asserted that octroi paid on goods that were subsequently sent out of the limits should be refundable. The municipality indicated that it was prepared to grant such refunds, subject to the applicable rules. Even before the matter reached the High Court, the municipal counsel stated that if any of the Company’s goods were actually dispatched outside the octroi limits, the municipality would grant a refund on proof of such export. The municipality maintained that position at the present stage.

The Company further submitted before this Court that it was liable to pay octroi only on goods that it consumed itself. Accordingly, the dispute was narrowed to the question of refunds on goods exported from the limits and the liability for octroi on goods consumed by the Company itself, that is, the second and third categories of the matter.

The Attorney General for the Company argued that the terms “consumption or use” must be read in contrast with the term “sale.” He said that the word “sale” introduces a person other than the one who brings the goods or animals into the municipal limits, and because the expression “consumption or use” is not qualified to indicate that it may apply to any person, it must refer specifically to consumption or use by the very person who brings the goods or animals inside the limits. To support this view he cited entry number 49 of the second list of the Government of India Act, 1935, Schedule VII, which states: “Cesses on the entry of goods into a local area for consumption, use or sale,” and also cited entry number 52 of the State List in the Constitution, which reads: “Taxes on the entry of goods into a local area for consumption use or sale therein.” He pointed out that these constitutional provisions show that octroi could be levied on goods or animals brought into a local area for (a) consumption, (b) use, or (c) sale, and that before the amendment the Boroughs Act had retained only the first two categories, leaving out the third, namely sale. Consequently, he maintained that the tax was payable only when the goods or animals were brought for consumption or use by the person who brought them in, and not when they were brought for sale and later consumed or used by the purchaser or anyone else. He conceded that after the amendment the tax was intended to be collected also on goods brought for sale, but he emphasized that the procedures required by sections 75, 76 and 77 had not been complied with as mandated by section 60 of the Boroughs Act, rendering the imposition of octroi on goods and animals brought in for sale ineffective. He characterized this situation as the creation of a new tax, which should be imposed according to the specified provisions, and he relied on the decision in Burmah Shell Oil Storage and Distribution Co. v. Manmad Municipality. He also noted that the Boroughs Act defined octroi in section 2(12) as including a “terminal tax.” Clause (v) of section 73(1) mentioned terminal tax separately, while section 61(1)(0) gave the authority to fix limits for terminal tax and to determine stations and related matters. The proviso to section 73(1) was highlighted as material, stating that, except as provided in clause (xiv), no such tax could be levied in boroughs where octroi had not been imposed before 6 July 1917. Clause (xiv) allowed the municipality to impose any other tax that the State Legislature was empowered to impose under the Constitution. The entries from the Legislative Lists cited from the Government of India Act, 1935 and the present Constitution, together with the definition of octroi, were therefore central to the argument.

The Court noted that the proposition that octroi includes a terminal tax required clarification. It observed that the meaning of the term octroi depends on the context in which it is used and that the definition should not be stretched so as to expand the scope of octroi beyond its original sense. Nevertheless, the Court explained that the underlying purpose of the broader definition reveals the true character of octroi as found in section 73 (1) (iv). The Court then traced the legislative history, stating that the Boroughs Act was enacted in 1925 and superseded the earlier Act of 1901, and therefore the Boroughs Act preceded the Government of India Act, 1935. Under section 80A (3) (a) of the Government of India Act, the Governor‑General‑in‑Council framed rules on 16 December 1920, which became known as the Scheduled‑Tax Rules. Schedule II of those rules, as reported in A. I.R. 1958 Bom, 43, dealt with taxes that could be levied for the benefit of local authorities and listed, among other items, “7. Octroi” and “8. A terminal tax on goods imported into, or exported from a local area, save where such tax is first imposed in a local area in which octroi was not levied on or before 6 July 1917.” The Court pointed out that entry 8 was later amended on 24 January 1924, replacing a previous wording that read “A terminal tax on goods imported into a local area in which an octroi was levied on or before 6 July 1917.” The Court observed that the tax in question was termed “octroi” and that the statutes gave no further description of the tax. It then explained the etymology of the word octroi, derived from the French “octroyer” meaning “to grant,” and originally signifying an import, a toll, or a town duty imposed on goods brought into a town. Initially octrois were collected at ports, but because they proved productive, towns began to collect them by setting octroi limits, and the taxes became known as “town duties.” The Court cited authorities indicating that octrois were levied not only on imports but also on exports, referring to Beuhler’s Public Finance (3rd ed.) p. 426, and noted that Grice, in National and Local Finance p. 303, described them as “ingate tolls” collected at toll gates or barriers. While ordinarily octrois were applied to goods intended for consumption, Seligman’s Encyclopaedia of Social Sciences, Volume IX p. 570, described octrois without any reference to consumption or use. The Court quoted the encyclopaedia’s description: “As compared with the facilities of the National Government the possibilities of raising revenue by local bodies are quite limited. All forms of indirect taxation are practically closed to local authorities. They are unable to levy customs duties, although they may collect the so‑called octrois, that is, duties levied on goods entering town.” The Court observed that the Government of India Act named octroi but did not define it, and that the Constitution, following the 1935 Act, avoided the word “octroi” and instead provided a description. In the Boroughs Act, the definition of octroi expressly includes terminal tax. Finally, the Court cited the Indian Statutory Commission’s explanation that terminal tax, in Indian fiscal terminology, formerly referred to a tax levied at railway stations and collected by the railway administration on all goods.

The report indicated that terminal tax was collected on goods that were imported or exported from a railway station and, in some municipalities, it was also levied on passengers. According to the report, a committee appointed in 1908 recommended that terminal tax replace octroi in many municipalities, initially in the United Provinces and subsequently in other areas. At first, the Government of India opposed this substitution. Octroi had been imposed on goods that entered a local area for the purpose of consumption, use or sale and was classified as an indirect tax, whereas terminal taxes were considered direct taxes. However, on 6 July 1917 the Government of India passed a resolution overturning its earlier stance and holding that the change did not convert an indirect tax into a direct tax. The resolution recognized that terminal taxes were similar in nature to octroi but were not identical. The principal differences were that the Terminal Tax Rules did not provide for any system of refunds, and, as noted by Findlay Shiffas, terminal taxes were sometimes described as “octroi without refunds.” In contrast, octroi could be levied only when the goods were brought in for sale, use or consumption. After the adoption of the Scheduled‑tax Rules, the collection of terminal tax was limited to those areas where octroi had been levied on or before 6 July 1917. Most municipal statutes permitted the levy of terminal taxes only in localities where octroi was not imposed. The Taxation Enquiry Commission observed that octroi required a specific condition for liability: the goods had to enter the area and be intended for consumption, use or sale within that area. This condition was usually satisfied either by granting an exemption at the time of entry to goods that merely passed through the area, regardless of whether they exited immediately or after some time, or by providing a refund of the tax after the goods had been taken out. Consequently, exemptions and refunds were the distinguishing characteristics of the octroi system. Although octroi and terminal taxes were different, they shared the common feature of being levied on goods brought into a local area. Terminal taxes, however, were payable on goods that were imported or exported from the municipal limits, indicating a connection with the movement of goods, whereas octroi, according to the legislative practice of the period, applied only to goods brought into a municipal area for consumption, use or sale. It was not essential to cite the municipal Acts that pre‑dated 1935, but a reference to those Acts would clearly demonstrate the type of tax that was intended as octroi. When the Government of India Act 1935 was enacted, terminal taxes were placed under a central subject in entry 58 of List I, which read: “58. Terminal taxes on goods or passengers carried by railway or air.” At that time Sir Walter Leyton suggested that both octroi and terminal taxes should be provincial subjects and that it might be possible to merge the two.

The Joint Committee, contrary to earlier suggestions, advised that terminal taxes should be separated from octrois and placed in the central list, while the proceeds from those terminal taxes were to be shared among the provinces. In assigning octrois to the provinces, the Committee deliberately omitted the term “octrois” because terminal taxes can also be described as a form of octroi; instead, it used the description found in entry No. 49, which reads “Cesses on the entry of goods into a local area for consumption, use or sal.” This approach was later reproduced in the Constitution, with the notable change that the entry concerning terminal taxes now states “terminal taxes on goods and passengers carried by railway, sea or air,” and the word “taxes” replaced the earlier word “cesses” in the entry relating to octrois. The historical development of these two taxes demonstrates that terminal taxes, although resembling octroi, were concerned solely with the entry of goods into a local area irrespective of any subsequent use, whereas octrois were levied on goods brought into the area specifically for consumption, use or sale. Such taxes were only applicable to goods intended for use within the area and not to goods merely passing through.

The Government of India Act, in its Scheduled Tax Rules, used the term “octrois” to confer authority to levy taxes in the well‑understood sense of taxing the entry of goods into a local area for consumption, use or sale. The Boroughs Act of 1925 referred only to “consumption and use,” and from the time of its enactment no party contested that goods brought in for sale were liable to octroi; all importers appeared to pay the tax without objection. It was not until 1954, when the legislature amended the Municipal Act to align the description of octroi with the Constitution by adding the word “sale,” that affected parties raised disputes, even though many of them had previously paid the tax when the word “sale” was absent. While the conduct of taxpayers does not determine the meaning of the words “consumption” or “use,” their behavior illustrates the conventional understanding of the terms. “Consumption,” in its primary sense, denotes the act of using an article in a way that destroys, wastes, or exhausts it, yet in legal contexts the term can have a broader meaning that does not require the commodity’s destruction. The word “consumption” appears in the explanation to sub‑Article 1 of Article 286 of the Constitution, and this Court, in State of Bombay v. United Motors (India) Ltd., explained that the expression “for the purpose of consumption in that State” must be read as referring not merely to the immediate importer or purchaser but to the ultimate distribution to consumers throughout the State.

In the Court’s view, the phrase “of consumption in that State” had to be understood as referring not only to the individual importer or purchaser but also as covering the eventual distribution of the goods to consumers in general throughout the State. The Court explained that the person who first brought the goods into a local area did not have to be the one who actually consumed them. The act of consumption could be delayed or could be performed by another person, but as long as the goods were brought into the local area for the purpose of consumption, irrespective of who actually used them, the requirements of the Boroughs Act were satisfied and octroi became payable. The Court noted that the word “consumption” was joined by the word “use,” and that certain articles might be put to use without being “used up” in the process. For example, a motor‑car brought into an area for use was not exhausted in the same way as food items. Accordingly, the two expressions “use” and “consumption” together signified the introduction of goods and animals into the locality not with a view to removing them again, but with a view to retaining them either for use without being exhausted or for consumption that destroys, wastes or uses them up. In that context, the Court held that “consumption” must be given a broader meaning than merely the act of consuming in the ordinary sense. The Court then referred to a recent decision in M/s Anwarkhan Mahboob Co. v. The State of Bombay, where it had observed that it was unnecessary and even unwise to attempt an exhaustive definition of the word “consumption” as used in the explanation to Article 286 of the Constitution. It explained that the everyday understanding of consumption involved eating, drinking or smoking. People were said to consume bread, fish, meat, vegetables when they ate them; they consumed tea, coffee, water or wine when they drank; and they consumed cigars, cigarettes or bidis when they smoked. The Court further explained that economists described the creation of wealth as the creation of “utilities,” and that consumption consisted in taking advantage of the commodities and services produced, i.e., in their utilization. For each commodity, there was ordinarily a final act of consumption, although some commodities could have more than one type of final consumption. For instance, grapes could be finally consumed by eating them as fruit or by drinking wine made from them. Moreover, the final act of consumption could in some cases be spread over a long period, as with books, furniture or paintings. The Court observed that it was possible for one consumer to perform part of the final act of consumption and for another person—such as a heir, a successor‑in‑interest, a transferee or even someone who had acquired possession by wrongful means—to perform the remaining portion of the final act of consumption.

In this passage the Court observed that the final act of consumption of a commodity could be performed not only by the original consumer but also by an heir, a successor‑in‑interest, a transferee, or even a person who obtained possession by wrongful means. Nevertheless, the Court cautioned that the existence of a final act of consumption should not cause one to forget that before reaching that stage a commodity usually passes through several stages of production, each of which may involve one or more intermediate acts of consumption. Because the Constitution did not restrict the meaning of the word “consumption” to the final act alone, the Court held that the framers intended the term to include any ordinary usage that is commonly described as consumption of the particular commodity.

Turning to the trade of the company, the Court found it evident that the company brought goods into the municipal area for three purposes. First, the goods were brought in for the company’s own consumption, which fell within the term “octroi” as described in the statute. Second, the goods were brought in for re‑export, either directly by the company or through dealers outside the area; the municipality itself admitted that such re‑export entitled the company to a refund of the tax. Third, the goods were brought in for sale either directly to consumers or to dealers who would distribute the goods within the area to ultimate consumers. The Court explained that as long as the goods entered the area for sale to an ultimate consumer, it made no difference that the consumer might later take the goods out of the area for consumption elsewhere. For example, a motorist who purchased petrol inside the municipal limits and then drove outside the limits had bought the petrol in the area for the purpose of consumption, and a person who stored petrol for later sale kept it for consumption within the area. The term “therein” therefore did not require that the entire act of consumption occur within the municipal boundaries; it was sufficient that the goods were brought inside the area to be delivered to an ultimate user or consumer in that area, because the taxable event was the entry of goods intended to reach an ultimate user in the area. Even if the ultimate consumer never actually used the goods—such as a motorist who bought a tin of oil and left it on a shelf—the goods were still deemed to have been brought in for consumption when a person brought them either for personal use or to place them in the hands of others in the area who would use or consume them. In this process the act of sale was merely the means of putting the goods in the way of use or consumption; it represented an earlier stage, with the ultimate destination of the goods being their use or consumption.

The Court observed that a sale by the individual who introduced the goods into the local area did not exempt that individual from octroi liability when the goods were brought for consumption or use. The Court explained that the earlier description of octroi did not expressly mention sales. Nevertheless, the Court held that a sale of goods brought into the municipality was implied, provided the goods were not re‑exported and were purchased for use or consumption by buyers within the area. The Court further observed that the expansions made in the Government of India Act 1935 and in the Constitution did not add to the fundamental concept of octroi as previously explained. That concept, the Court said, embraced the act of bringing goods into a local area so that the goods could remain there for eventual consumption or use. The Court noted that when the Government of India Act 1935 was enacted, the term “octroi” was deliberately omitted and a description was inserted to avoid the type of dispute now before the Court. In the Court’s view, even without that descriptive wording, the tax applied to goods brought for “consumption, use or sale.” The Court explained that the term “octroi” was also avoided because terminal taxes constituted a form of octroi and the two categories were intended to be allocated to separate legislatures. The Court concluded that even without the word “sale” in the Boroughs Act, the same rule applied when goods were sold within the municipality to a consumer who intended to use or consume them. The Court added that the rule also covered goods resold to others for the purpose of use or consumption within the municipal area. The Court observed that the tax could not be validly imposed when the goods were re‑exported out of the municipality. The Court further noted that the municipality had agreed to refund the tax on those re‑exported goods because they were not used or consumed within the municipal limits. The Court held that it was unnecessary for the municipality to follow the procedural steps for imposing the tax after the amendment of the relevant section. The Court added that the tax’s nature, incidence and rate had not been altered by the amendment. The Court concluded that the company was liable to pay octroi tax on goods brought into the municipality when the company consumed the goods itself or sold them directly to consumers. The Court also held that the company was liable for tax on goods sold to dealers who subsequently sold them to consumers within the municipal area. The Court added that this liability applied irrespective of whether those consumers used the goods inside or outside the municipal area. The Court stated that the company was not liable for octroi on goods that it brought into the municipality and then re‑exported. The Court further required the company to follow the prescribed refund procedure in order to obtain relief from tax on such re‑exported goods. For these reasons, the Court dismissed the appeal, ordered the appellant to bear costs, and entered a final order that the appeal was dismissed.