Writ Petition No.9718 of 2012,Writ Petition No.289 of 2014,Writ Petition No.10110 of 2012,Civil Application No.6092 of 2013,Civil Application No.5493 of 2013

14th October, 2014.

Petitioner Counsel: Mr. P.M. SHAH, Sr. Adv. i/b. Mr. S.P. SHAH
Respondent Counsel: Mr. G.K. NAIK-THIGLE, Mr. L.D. VAKIL, Mr. R.N. DHORDE, Sr. Adv. i/b. Mr. A.M. KARAD, Mr. D.R. KALE

Cases Cited:
Balkrushna Vora Vs. Poona Municipal Corporation, (1963) Mh.L.J. 325 [Para 17]
Jet Airways (India) Ltd., Mumbai and Anr. Vs. Municipal Corporation of Gr. Mumbai and Ors., 2012(3) ALL MR 678=2012(3) Mh.L.J. 841 [Para 17]
Wandleside National Conductors Ltd. Vs. Municipal Corporation for the City of Pune and Ors., 1989 Mh.L.J. 755 [Para 18]
Sargam Foods Pvt. Ltd. and Anr. Vs. State of Maharashtra and Ors., 2010(6) ALL MR 202=2010(6) Bom.C.R. 465 [Para 18]
M/s. Anwarkhan Mahboob Co. Vs. The State of Bombay and Ors., AIR 1961 SC 213 [Para 20]
Kathiawar Industries Ltd. Vs. Jaffrabad Municipality, (1979) 4 SCC 56 [Para 20]

JUDGMENT

JUDGMENT :- Rule. Rule made returnable forthwith. With consent of the parties, all the petitions are heard finally.

2. All the present Writ Petitions raise a common question regarding the scope and applicability of exemption from payment of Local Body Tax (for short "L.B.T.") as provided by Sub Rule 6 of Rule 28 of the Bombay Provincial Municipal Corporations (Local Body Tax) Rules, 2010 (for short "the Rules") and inter-alia, the objection of the respondent - Aurangabad Municipal Corporation on the maintainability of the present Writ Petitions on its claim that equally efficacious alternate remedy is available to the petitioners, as provided by section 406 of the Bombay Provincial Municipal Corporations Act, 1949 (for short "the Act").

3. Wockhardt Ltd. (petitioner in Writ Petition no. 9718 of 2012) manufactures and exports certain medicines. It is a 100% export oriented unit situated at M.I.D.C. Chikalthana, Aurangabad. It imports raw material within the territorial limits of the respondent Municipal Corporation and after process, manufactures various tablets like Azithromycin - 250 mg etc. It is sent abroad through the Custom Invoice of M/s. Wockhardt Ltd., Ankaleshwar (Gujarat State). Its registered Office is at Bandra (East), Mumbai.

4. Garware Polyester Ltd. (petitioner in Writ Petition no. 10110 of 2010) is having its unit in M.I.D.C. Area, Chikalthana, Aurangabad. It is engaged in manufacture of various types of polyester films for domestic consumption as well as for export. For the said purpose, it also imports certain raw material and after process, the final product is sent out either for domestic consumption or for export out of India.

5. Lupin Ltd. (petitioner in Writ Petition no. 289 of 2014) is also engaged in manufacture of medicine formulation from its plant situated in M.I.D.C. Area, Chikalthana, Aurangabad. It also imports certain raw material and, thereafter, the finished pharmaceutical products are exported abroad.

6. Petitioner - Wockhardt Ltd. earlier made a representation to the respondent for exemption from levy of the L.B.T. as per the provisions of Sub Rule 4 of Rule 28 of the Rules. The respondent observed that the said Rules will not be applicable. Thereafter, a representation was made seeking exemption as per the provisions of Sub Rule 6 of Rule 28 of the Rules. The same was turned down. Aggrieved by the same, earlier Writ Petition no.148 of 2012 was filed. The order of the respondent was set aside by this Court and the respondent was directed to pass fresh order in the light of the provisions of Sub Rule 6 of Rule 28 of the Rules. Again after hearing, the representation of the petitioner was overruled by the respondent. In the circumstances, next of the Writ Petition bearing Writ Petition no. 4239 of 2012 was filed. Once again, this Court has directed to decide the issue, as directed in the earlier Writ Petition. In the circumstances, on third occasion, the impugned order came to be passed on 17/11/2012.

It is the case of the petitioner that the respondent and more particularly, the Commissioner has again and again resorted to the provisions of Sub Rule 4 of Rule 28 of the Rules, instead of taking recourse to the provisions of Sub Rule 6 of Rule 28 of the Rules and, therefore, the present Writ Petition is filed.

7. In the case of Garware Polyester Ltd. (Writ Petition no. 10110 of 2012), the petitioner's similar representation was rejected by the Deputy Commissioner of the respondent on 03/11/2012 on the similar grounds.

8. In Writ Petition no. 289 of 2014, the petitioner - Lupin Ltd. has challenged two separate demand notices issued by the Deputy Commissioner. The objection raised to these two demand notices was rejected by respondent no.3 - Deputy Commissioner. In the circumstances, the appeal is preferred before the Commissioner, which is pending.

9. In view of the amendment of the year 2009 to the Act, in place of octroi, for certain Municipal Corporations, the provision empowering levying and collection of the L.B.T. is provided for. Accordingly, the Aurangabad Municipal Corporation has been notified to be the Corporation which is empowered to levy the L.B.T. in the manner as provided by the Rules. The Rules of 2010 are framed by the Government of Maharashtra, as provided by section 152(T)(2) of the Act, which inter-alia provides for exemption from payment of the L.B.T. Rule 28 of the Rules is material to decide the present controversy. It reads as under:-

"28. Exemption in certain cases. - (1) No local body tax shall be levied on the goods imported into the City by State or Central Government, on production of a certificate from an officer empowered by the Government concerned in this behalf, certifying that the goods so imported belong to the State Government and are imported for public purpose and are not used or intended to be used for the purpose of earning profit.

(2) No local body tax shall be levied on the goods imported into the limits of the City on behalf of, or on account of State or Central Government, on production of a certificate from an officer empowered by the Government concerned in this behalf, within a period of six months from the date of importation, certifying that the goods so imported belong to the Government and are imported for public purpose and are not used or intended to be used for the purposes of earning profit.

(3) If any goods held by a dealer or a person in the City are moved outside the City for carrying out the process enumerated in the Explanation to this rule, and are re-imported without effecting any change in condition or appearance, as also the ownership of the goods, the value of the goods moved out, shall be allowed to be deducted from the total value of processed goods reimported and local body tax shall be leviable only on the value added i.e. processing charges, transfer charges, etc:

Provided that, the goods are reimported within a period of six months from the date of export outside the City and the dealer furnishes the information of such export in the returns for the relevant periods.

(4) If any dealer in the City imports any goods from any place outside the city for carrying out any of the processes enumerated in the explanation under this rule, on job work basis and proves to the satisfaction of the Commissioner that the goods processed have been exported within a period of six months from their importation, to the same person outside the City and there had been no change in the ownership and in the form of the goods at the time of export, no local body tax shall be levied subject to the following conditions, namely:-

(i) that dealer shows the value of such goods in the return of the relevant period;

(ii) the dealer pays security deposit, as a guarantee, as may be determined by the Commissioner in this behalf. However, a dealer importing the goods for processing on regular basis, may make a deposit as standing deposit as may be fixed by the Commissioner from time to time.

Explanation - For the purpose of sub-rules (3) and (4) processing shall include-

(i) grinding, dyeing, bleaching, painting, finishing, stentering, embroidering, doubling, twisting, metallising and electroplating;

(ii) building and mounting of bodies over chassis of vehicles of all kinds and shall also include such other processes as may be approved by the Commissioner, from time to time.

The decision of the Commissioner in this respect, shall be final.

(5) When any goods held in the City are sold and exported outside the City are received back due to rejection of goods by the purchaser, no local body tax shall be levied on such goods, provided that the goods are received back in the City within a period of six months from the date of their export and the dealer proves to the satisfaction of the Commissioner that the sale of such goods was disclosed in the return of the relevant period.

(6) The register dealer who is exporting the goods outside the territory of India, shall be exempt from the levy of the Local Body Tax in respect of the value of the goods used for the purpose of such export."

10. While earlier, Wockhardt Ltd. - petitioner in Writ Petition no. 9718 of 2012 has claimed exemption as per the provisions of Sub Rule 4 of Rule 28 of the Rules and had foregone the same after its rejection, it has now sought the exemption, as detailed supra, under the provisions of Sub Rule 6 of Rule 28 of the Rules.

11. The representation of the said petitioner was rejected by the respondent no.3 - the Commissioner by the impugned speaking order on the following counts:-

(i) The documents produced by the petitioner would show that the Development Commissioner of Kandla has granted the exemption from payment of custom duty to Ankaleshwar unit of the petitioner Wockhardt Ltd., being in special economic zone while the M.I.D.C. area of the Chikalthana, Aurangabad is not declared as the Special Economic Zone.

(ii) The raw material imported by the petitioner is processed and the finished products are prepared while some part of the product is sold for domestic consumption within India.

Further, certain observations regarding the custom invoices in the name of Wockhardt Ltd., Ankaleshwar (Gujarat State) and M/s. Wockhardt Ltd., Bandra (East) Mumbai were made and it was declared that the present petitioner is not eligible for seeking exemption under Sub Rule 6 of the Rule 28 of the Rules.

12. During arguments, it is gathered that the registered office of the petitioner is at Bandra (East), Mumbai while it has one unit within the Special Economic Zone at Ankaleshwar (Gujarat State) and while filling the ARE-1 form, the custom invoice is made in the name of the Ankaleshwar unit by the petitioner.

13. During the pendency of the present Writ Petitions, on the direction issued by this Court vide its order dated 29/4/2014, the learned A.G.P. as well as the respondent / Municipal Corporation have filed their additional affidavits regarding the fact, as to whether the various Municipal Corporations within the State of Maharashtra grants exemption from L.B.T. even after processing raw material and then exporting the same outside the territory of India. The said affidavits would show that the Municipal Corporation where some registered dealers are situated and export the goods outside of India, the exemption is granted to them. The State Government has filed the affidavit stating that the rule itself is self-explanatory.

14. During hearing, while Mr. P.M. Shah, learned Senior Counsel as well as the learned counsel for the petitioners in respective writ petitions submitted that in view of the provisions of Sub Rule (6) of Rule 28 of the Rules, the respondent Municipal Corporation will have to grant exemption and the present writ petitions are maintainable, Mr. R.N. Dhorde, learned senior counsel instructed by Mr. A.M. Karad for the respondent-Municipal Corporation submitted that the petitioners have an equally efficacious remedy to file an appeal under section 406(1) of the Act. Mr. Dhorde further submitted that as the raw material is processed and then the finished product is exported, no exemption can be granted. Mr. Dhorde, in the alternative submitted that the L.B.T. has to be paid on the entry of the goods within the Corporation limits and, therefore, the petitioners will have to first pay the tax and then claim refund, if any.

15. Upon hearing both sides, in my view, the present writ petitions are maintainable and in view of the provisions of Sub Rule 6 of Rule 28 of the Rules, the present petitioners will be entitled for claiming exemption from payment of the L.B.T. in respect of the value of the goods used for the purpose of such export for the reasons to follow.

R E A S O N S

16. History of filing of the earlier writ petitions and the orders therein, as detailed supra, would show that the issue is being agitated and re-agitated between the parties time and again in this Court. Besides this, Rule 31 of the Rules provide as under:-

"31. Determination of disputed questions.- (1) If any question arises, otherwise than in any proceedings before a Court, or before the Commissioner has commenced assessment or reassessment of a dealer of a person, under rule 33 or 34, whether for the purpose of these rules, any local body tax is payable in respect of any import of particular goods into the City, or, if local body tax is payable, the rate thereof, the Commissioner may, on an application made to him by a dealer or a person in this behalf, make an order determining such question."

Section 406(6) of the Act is as under :-

"406. Appeals when and to whom to lie.

(1) Subject to the provisions hereinafter contained, appeals against any rateable value or the capital value, as the case may be or tax fixed or charged under this Act shall be heard and determined by the judge.

(2) No such appeal shall been entertained unless -

(a) it is brought within fifteen days after the accrual of the cause of complaint;

(b) in the case of an appeal against a rateable value or a capital value, as the case may be a complaint has previously been made to the Commissioner as provided under this Act and such complaint has been disposed of;

(c) in the case of an appeal against any tax including interest and penalty imposed in respect of which provision exists under this Act for complaint to be made to the Commissioner against the demand, such complaint has previously been made and disposed of;

(d) in the case of an appeal against any amendment made in the assessment book for property taxes during the official year, a complaint has been made by the person aggrieved within twenty one days after he first received notice of such amendment, and his complaint has been disposed of;

(e) in the case of an appeal a tax, or in the case of an appeal made against a rateable value or the capital value, as the case may be the amount of the disputed tax claimed from the appellant or the amount of the tax chargeable on the basis of the disputed rateable value, or the capital value, as the case may be upto the date of filing, the appeal has been deposited by the appellant with the Commissioner.

(2A) Where the appeal is not filed in accordance with the provisions of clauses (a) to (e) of sub-section (2), it shall be liable to be summarily dismissed.

(3) In the case of any appeal entertained by the Judge, but not heard by him, before the date of commencement of the Maharashtra Municipal Corporations (Amendment) Act, 1975, the Judge shall not hear and decide such appeal, unless the amount of the disputed tax claimed from the appellant, or the amount of the tax chargeable on the basis of the disputed rateable value, as the case may be, upto the date of filing the appeal has been deposited by the appellant with the Commissioner, within thirty days from the date of publication of a general notice by the Commissioner in this behalf in the local newspapers. The Commissioner shall simultaneously serve on each such appellant a notice under sections 473 and 474 and other relevant provisions of this Act for intimating the amount to be deposited by the appellant with him.

(4) As far as possible, within fifteen days from the expiry of the period of thirty days prescribed under sub-section (3), the Commissioner shall intimate to the Judge the names and other particulars of the appellants who have deposited with him the required amount within the prescribed period and the names and other particulars of the appellants who have not deposited with him such amount within such period. On receipt of such intimation, the Judge shall summarily dismiss the appeal of any appellant who has not deposited the required amount with the Commissioner within the prescribed period.

(5) In the case of any appeal, which may have been entertained by the Judge before the date of commencement of the Act aforesaid or which may be entertained by him on and after the said date, the Judge shall not here and decide such appeal, unless the amount of the tax claimed by each of the bills, which may have been issued since the entertainment of the appeal, is also deposited, from time to time, with the Commissioner in the first month of the half year to which the respective bill relates. In case of default by the appellant at any time before the appeal is decided, on getting an intimation to that effect from the Commissioner, the Judge shall summarily dismiss the appeal,

(6) An appeal against the demand notice in respect of levy of cess under Chapter XIA or the Local Body Tax under Chapter XIB shall lie,-

(i) to the Deputy Commissioner, when the demand notice is raised by the Cess Officer or any other officer, not being the Deputy Commissioner;

(ii) to the Commissioner, when the demand notice is raised by the Deputy Commissioner.

(7) The appeal under sub-section (6) shall be filed within fifteen days from the date of the demand notice.

(8) No appeal under sub-section (6) shall be entertained by the Deputy Commissioner or, as the case maybe, the Commissioner unless the amount of the disputed tax claimed from the appellant has been deposited by the appellant with the Commissioner."

17. Mr. P.M. Shah, learned senior counsel submitted that the reading of the provisions of section 406(6) of the Act together with Rule 31 of the Rules would show that if issue would be as to whether the L.B.T. is payable in respect of any import of particular goods into the city, then as per the provisions of Rule 31 of the Rules, the Commissioner has to pass an order determining such question on an application made to him by the dealer while the provisions of section 406(1) would be applicable to tax "fixed or charged". It was further submitted that Rule 31 of the Rules is a stand alone provision. There is no specific statutory mechanism provided in the Act to challenge the validity of the order passed by the Commissioner under this Rule. Further, relying on the ratio of "Balkrushna Vora Vs. Poona Municipal Corporation" (1963) Mh.L.J. 325 (Division Bench), it was submitted that if the legality of the tax which is sought to be levied, looking into the general scheme of the Act, by the words "tax fixed and charged" what is meant was the exact amount or quantum of the tax and not the legality of the same can be challenged as per the provisions of sub-section 1 of section 406 of the Act. It was further submitted that even if there is an equally efficacious remedy, there is no absolute bar and, therefore, taking into consideration the history that the parties are litigating the same issue time and again in this Court, the present writ petitions can very well be entertained. He relied over the ratio of various cases including "Jet Airways (India) Ltd., Mumbai and another V. Municipal Corporation of Gr. Mumbai and others" 2012(3) Mh.L.J. 841 : [2012(3) ALL MR 678]"

18. On the other hand, Mr. R.N. Dhorde, learned senior counsel instructed by Mr. A.M. Karad for the respondent - Municipal Corporation submitted that in the case of "Wandleside National Conductors Ltd. V. Municipal Corporation for the City of Pune and others" 1989 Mh.L.J. 755, the High Court has ultimately declared that the writ petition was not maintainable as alternate remedy was available. Even the competence of levy of tax is challenged, still then, the provisions of section 406 of the Act is held to be an equally efficacious remedy in the case of "Sargam Foods Pvt. Ltd. and anr. V. State of Maharashtra and ors." 2010(6) Bom.C.R. 465 : [2010(6) ALL MR 202].

19. Upon hearing both the sides, in my view, the provisions of Rule 31 of the Rules is a stand alone provision. Further when the legality of the levying of the L.B.T. is challenged, this Court has time and again entertained the writ petitions and directed the Commissioner to decide the issue by taking into consideration the provisions of Sub Rule 6 of Rule 28 of the Rules. In the circumstances, the present writ petitions are maintainable.

20. As regards the merit of the case, the argument of Mr. R.N. Dhorde is two fold. He submitted that once the goods are imported for consumption, use or sale, then as per the provisions of section 31-A of section 2 of the Act, the importer will have to pay the L.B.T. Relying on the similar provisions regarding octroi as found in the Act and the authorities thereupon, Mr. Dhorde further expounded the argument to the effect as to what is meant by sale, consumption and use. The tobacco brought for cleaning was held to be consumption in "M/s. Anwarkhan Mahboob Co. V. The State of Bombay and others" AIR 1961 S.C. 213. Crushing of uncrushed salt was also held as consumption in "Kathiawar Industries Ltd. V. Jaffrabad Municipality" (1979) 4 SCC 56.

21. Mr. Shah, learned senior counsel does not dispute the principle. According to him, the present petitioner would have been liable to pay the L.B.T. as the raw material is processed but for the provisions of Sub Rule 6 of Rule 28 of the Rules. He submitted that the exemption of payment from the L.B.T. itself means that L.B.T. was required to be paid, however, exemption from payment is granted if after use or consumption, i.e. after process, the goods are exported out of India.

22. It would be worthwhile to reproduce Sub Rule 6 of Rule 28 of the Rules, which runs as under:-

"28. Exemption in certain cases -

...

(6) The register dealer who is exporting the goods outside the territory of India, shall be exempt from the levy of the Local Body Tax in respect of the value of the goods used for the purpose of such export." (Emphasis supplied)

The provision, as is explained by the State Government in its additional affidavit is self-explanatory. It exempts levy of the L.B.T. in respect of the value of the goods "used for the purposes of such export." In the circumstances, the Municipal Corporation will have to grant exemption from payment of L.B.T. in respect of the value of such goods which are used for the purposes of the export.

23. Mr. Dhorde, learned Senior counsel in the alternative submitted that the petitioners would be first required to pay the L.B.T. on the goods imported and, thereafter, claim the refund in view of the exemption. He therefore submitted that the petitioners would be required to deposit the amount. In the writ petition of the present petitioners, we are not concerned with the manner and mechanism of deposit or refund etc. of the L.B.T. Reading of the rules would show that the registered dealer is required to pay the L.B.T. etc. on or before 10th day of the month next following the month to which such payment relates. Thereafter, he has to furnish six monthly and annual returns in form No. E-I and E-II by showing the deductions, inter-alia, for exemption under Rule 28 of the Rules. Even the Commissioner is empowered under Rule 29(3) of the Rules to specify different periods and dates for different dealers or classes of registered dealers etc. for the purposes of furnishing of returns. There is a mechanism for deciding the dispute regarding the assessment.

24. In the circumstances, the following order:-

I) All the Writ Petitions are allowed without any order as to costs.

II) In Writ Petition no.9718 of 2012, the impugned order dated 17/11/2012 passed by respondent no.3 - the Commissioner, Aurangabad is hereby quashed and set aside.

III) In Writ Petition no. 289 of 2014, the impugned orders dated 22nd February, 2012 and dated 16th December, 2013 passed by respondent no.3 - the Deputy Commissioner, Aurangabad respectively are hereby quashed and set aside.

IV) In Writ Petition no.10110 of 2012, the impugned order dated 03/11/2012 passed by the respondent no.2 - the Deputy Commissioner, Aurangabad is hereby quashed and set aside.

V) It is hereby held that the goods imported in the Municipal Corporation area by the petitioners in all these writ petitions shall be exempted from the levy or collection of the Local Body Tax in respect of the value of the goods used for the purpose of export outside the territory of India in the manner and as provided by the Bombay Provincial Municipal Corporations Act, 1949, the Bombay Provincial Municipal Corporation (Local Body Tax) Rules and the Orders specified thereunder time to time.

VI) Rule in each of the Writ Petitions is therefore made absolute in the above terms.

VII) Consequently, Civil Application No. 6092 of 2013 stands disposed of.

25. After pronouncement of the judgment, Mr. Thigale submits that during the pendency of the present petitions, interim payments were made by the respective writ petitioners in view of the interim directions issued by this Court.

26. In the circumstances, refund, if any, may be pressed by the petitioners after a period of six (6) weeks.

27. In view of the above order, Civil Application No.5493 of 2013 also stands disposed of.

Ordered accordingly.