Case Summary
| Citation | The Empress Mills, Nagpur v. The Municipal Committee, Wardha 1958 SCR 1102: AIR 1958 SC 341 |
| Keywords | section 66 of C.P. Berar Municipalities Act, strict rule of interpretation, terminal tax |
| Facts | The Empress Mills, located in Nagpur, transported bales of cotton from Yeotmal to their mills in Nagpur by road. The vehicles carrying these goods passed through the limits of the Wardha Municipality without unloading or reloading the cargo. Additionally, the vehicles did not stop in Wardha for any purpose other than to transit. The Municipal Committee of Wardha, acting under Section 66(1)(o) of the C.P. & Berar Municipalities Act, 1922, imposed a terminal tax on these goods, claiming they were being “exported” from the Wardha Municipality. The Empress Mills challenged this tax, seeking a refund, and argued that goods that only pass through municipal limits should not be subject to terminal tax. |
| Issues | Whether goods in transit, merely passing through the limits of a municipality without being unloaded, reloaded, sold, consumed, or used within those limits, were liable to the terminal tax on goods “imported into or exported from” the municipality under Section 66(1)(o) of the C.P. & Berar Municipalities Act, 1922? |
| Contentions | |
| Law Points | The Court interpreted the phrase “exported from” in Section 66(1)(o) to mean more than just “taking out.” It implies the removal of goods that have become an integral part of the local property. Goods in transit, which are brought into the area solely for the purpose of being transported out, do not fall under this definition. The Court discussed the nature of a terminal tax, stating that it is levied on goods transported by railway or road that either terminate within or commence from the taxing area. This tax is linked to the movement of goods into or out of a local area. The Court made a distinction between terminal tax and octroi. Octroi is charged on goods brought within municipal limits for consumption, use, or sale within that area. In contrast, terminal tax relates specifically to the movement of goods into or out of a local area. The goods in transit did not benefit from any municipal services in Wardha, nor did their movement impose any particular burden on the municipality that would warrant the application of a terminal tax. Ultimately, the Court concluded that the legislative intent behind Section 66(1)(o) was not to tax goods that were merely passing through the municipal area without any connection to the local economy or consumption. |
| Judgement | The Supreme Court set aside the decision of the High Court (which had held the tax to be validly imposed) and directed the Municipal Committee, Wardha, to refund the amount of terminal tax collected from the Empress Mills. |
| Ratio Decidendi & Case Authority |
Full Case Details
J. L. KAPUR, J. – This is an appeal by Special Leave against a judgment and order of the High Court of Judicature at Nagpur dated February 14, 1950 and the question for decision turns upon the construction of Section 66(1)(o) of the C.P. & Berar Municipalities Act (Act II of 1922) which in this judgment will be termed “the Act”.
2. A short recital of the facts of the case will suffice for its decision. The appellant is a company which has its spinning and weaving mills at Yeotmal. The appellant’s bales of cotton are transported from Yeotmal to Nagpur by road and vehicles carrying them past through the limits of Wardha Municipality. The goods being in transit, the vehicles carrying them do no more than use the road which traverses the municipal limits of Wardha and is a PWD road. The goods are neither unloaded nor reloaded at Wardha but are merely carried across through the municipal area. The Municipal Committee purporting to act under Section 66(l)(o) of the Act and Rule 1 of the rules made thereunder collected Rs 240 as terminal tax on these goods on the ground that they were exported by the appellant from the limits of the Municipality of Wardha. The appellant thereupon claimed a refund of this sum. On refusal by the Municipality the appellant took an appeal to the Deputy Commissioner, Wardha which was sent for disposal to the Sub-Divisional Officer, who, on March 11, 1946, referred the following two of questions under Section 83(2) of the Act to the High Court for its opinion:
(1) Whether goods passing through the limits of Wardha Municipality by road despatched from Yeotmal to their destination at Nagpur without being unloaded or reloaded at Wardha are liable for an export terminal tax?
(2) Whether the respondent Municipal Committee is not liable to refund the export terminal tax collected on such goods?
(3) The reference in the first instance came up for hearing before Sheode, J., who referred the matter to a Division Bench and the Division Bench in turn referred it to a Full Bench. The High Court after referring to a number of decided cases was of the opinion that the tax had been validly imposed and the appellant was therefore not entitled to a refund.
(4) The powers of the Municipality to impose, assess and collect taxes are set out in Chapter 9 of the Act and Section 66(1) enumerates the taxes which may be imposed. Clause (d) of sub-section (1) deals with tolls; clause (e) with octroi and clause (o) with terminal tax. The sub-section provides:
“66. (1) A committee may, from time to time, and subject to the provisions of this Chapter, impose in the whole or in any part of the municipality any of the following taxes for the purposes of this Act, namely:
(d) a toll on vehicles and animals used as aforesaid entering the limits of the municipality, and on boats moored within those limits:
(e) an octroi on animals or goods brought within the limits of the municipality for sale, consumption or use within those limits;
(o) a terminal tax on goods or animals imported into or exported from the limits of a municipality;
Provided that a terminal tax under this clause and an octroi under clause (e) shall not be in force in any municipality at the same time….”
Rule I of the Terminal Tax Rules made under the Act relates to exports and Rule 2 to imports. They provide:
(1) On the following goods exported by rail or road a terminal tax shall be levied at the rate noted against each; at 2 as. per maund of 40 seers; Cotton….
(2) On the following goods imported by rail or road a terminal tax shall be levied at the rate noted against each.”
Then follows the Schedule.
5. The High Court was of the opinion that
“The words ‘export’ and ‘import’ have no special meaning. They bear the ordinary dictionary meaning, which has been the foundation for the decisions to which I have referred in the opening portion of my opinion. These words mean only ‘taking out of and bringing into’.”
The appellant’s contention is that the words “imported into or exported from” do not merely mean “to bring into” or to carry out of or away from but also have reference to and imply the termination or the commencement of the journey of the goods sought to be taxed and therefore goods in transit which are transported across the limits of a Municipal Committee are neither imported into the municipal limits nor exported therefrom. It is also contended that even if the words ‘imported into or exported from’ are used merely to mean “to bring into” or “to carry out of or away from” the qualifying of the tax by the adjective “terminal” is indicative of the terminus ad quem or terminus a quo of the journey of the goods and excludes the goods in transit. The respondent on the other hand submits that the tax is leviable merely on the entry of the goods into the municipal limits or on their exit therefrom and the word “terminal” has reference to the termini of the jurisdictional limits of the municipality and not to the journey of the goods. The efficacy of the relative contentions of the parties therefore requires the determination of the construction to be placed on the really important words of which are “terminal tax”, “imported into or exported from” and the “limits of the Municipality.” In construing these words of the statute if there are two possible interpretations then effect is to be given to the one that favours the citizen and not the one that imposes a burden on him.
6. “Import” is derived from the Latin word importare which means “to bring in” and ‘export’ from the Latin word exportare which means to carry out but these words are not to be interpreted only according to their literal derivations. Lexicologically they do not have any reference to goods in ‘transit’ a word derived from transire, bearing a meaning similar to transport i.e. to go across. The dictionary meaning of the words ‘import’ and ‘export’ is not restricted to their derivative meaning but bear other connotations also. According to Webster’s International Dictionary the word “import” means to bring in from a foreign or external source; to introduce from without; especially to bring (wares or merchandise) into a place or country from a foreign country in the transactions of commerce; opposed to export.
8. The word “transit” in the Oxford Dictionary means the action or fact of passing across or through; passage or journey from one place or point to another; the massage or carriage of persons or goods from one place to another; it also means to pass across or through (something)
to traverse, to cross. Even according to the ordinary meaning of the words which is relied upon by the respondent, goods which are in transit or are being transported can hardly be called goods “imported into or exported from” because they are neither being exported nor imported but are merely goods carried across a particular stretch of territory or across a particular area with the object of being transported to their ultimate destination which in the instant case was Nagpar.
17. The respondent also relied on Muller v. Baldwin [(1874) 9 QB 457], where it was held that “coals exported from the Port” must be taken to have been used in its ordinary meaning of “carried out of the Port” and therefore included coals taken out of the port in a steamer as “bunker coals” that is, coals taken on board for the purpose of consumption on the voyage. The argument that the term “exported” must receive a qualified interpretation and that it means taken for the purpose of trade only was rejected. Lush, J., said at p. 461:
“There is nothing in the language of the Act to shew that the word ‘exported’ was used in any other than its ordinary sense …. Construing the words of the Act upon this principle, we feel bound to hold that coals carried away from the port, not on a temporary excursion, as in a tug or pleasure-boat, which intends to return with more or less of the coals on board, and which may be regarded as always constructively within the port, but taken away for the purpose of being wholly consumed beyond the limits of the port, are coals ‘exported’ within the meaning of the Act.”
18. Now three things clearly emerge from that Muller case; (1) that the word “export” was not applied to coals in transit because the coals were taken from the port and started journey from there and would be included in the phrase “taken out” of the port, and (2) that temporary taking out was not “export” as was held in Maganlal Bhagwandas v. Ahmedabad Municipality; (3) that the test is the intention with which the goods were brought in or taken out.
19. It was urged that in accordance with the current authority of the different courts of India, a different interpretation should not be placed on the words of the section but this argument is of little avail in a case where the decision has not been acquiesced in for long or the authorities are not absolutely unanimous. Moreover it is not a case of disturbing the course of construction which has continued unchallenged for such a length of time as to acquire the sanction of continued decisions over a very long period and there is therefore no principle which will preclude this court from correcting the error.
20. In another case Wilson v. Robertson [(1855) 24 LJ QB 185] under the statute the duty was imposed on all goods “imported into or exported from Berwick harbour” which extended down the Tweed to the sea but no part of it extended above the bridge. Goods were brought up the river in a sea-going vessel which having first used rings and posts put up by the Harbour Commissioners in order to moor while lowering the masts, passed through Berwick Bridge, and unloaded her cargo about two hundred yards above the bridge and beyond the limits of the harbour. It was held that goods were not “imported into” the harbour so as to make any dues payable in respect of them. The argument raised there was that as there was no harbour down the Tweed except Berwick and though the goods were actually unloaded above the Berwick bridge and out of the limits of the harbour it was substantially imported into the harbour. The vessel in that case was obliged to stop before passing the bridge and avail herself of the benefits
of the machinery and works provided by the Commissioners and that was part of the means used towards the unloading of the vessel and it was argued that this would amount to import. Lord Cambell, C.J., said:
“The argument on behalf of the plaintiff would be very pertinent if addressed to a Committee of the House of Commons in favour of making the harbour dues payable in such a case as the present. We can, however, look only to what the legislature has enacted, in order to see whether this burthen is cast upon the defendants. The dues are only to be paid upon goods imported into the harbour of Berwick, the limits of which are defined by the Act, and which does not extend above the bridge. Now, has this iron been so imported? It is admitted that, if it had been carried through the bridge to a port higher up the river, no dues would have been payable; and the plaintiff’s counsel by that admits himself out of court….”
These observations support the submissions against the meaning of “export” or “import” being merely taking out of or bringing into.
21. Mersey Docks and Harbour Board v. Twigge [(1898) 67 LJ QB 604] was a case of goods shipped from a foreign port under a through bill of lading to Liverpool, landed in London and sent from there to Liverpool in another ship and it was held that such goods were imported into Liverpool from ports beyond the seas and not from London. The transit began at Singapore and ended at Liverpool and was not broken by the transhipment in London.
22. By giving to the words “imported into or exported from” their derivative meaning without any reference to the ordinary connotation of these words as used in the commercial sense, the decided cases in India have ascribed too general a meaning to these words which it appears from the setting, context and history of the clause was not intended. The effect of the construction of “import” or “export” in the manner insisted upon by the respondent would make rail-borne goods passing through a railway station within the limits of a Municipality liable to the imposition of the tax on their arrival at the railway station or departure therefrom or both which would not only lead to inconvenience but confusion, and would also result in inordinate delays and unbearable burden on trade both inter-State and intra-State. It is hardly likely that that was the intention of the legislature. Such an interpretation would lead to absurdity which has, according to the rules of interpretation, to be avoided.
23. Chief Justice Marshall dealing with the word “importation” said in Brown v. State of Maryland [(1827) 12 Wheat 419, 442]:
“The practice of most commercial nations conforms to this idea. Duties, according to that practice, are charged on those articles only which are intended for sale or consumption in the country. Thus sea-stores, goods imported and re-exported in the same vessel, goods landed and carried over land for the purpose of being re-exported from some other port, goods forced in by stress of weather, and landed, but not for sale are exempted from the payment of duties. The whole course of legislation on the subject shows that in the opinion of the legislature the right to sell is connected with the payment of the duties.”
Continuing the learned Chief Justice at p. 447 observed: “Sale is the object of importation, and is an essential ingredient of that intercourse, of which importation constitutes a part. It is as essential an ingredient, as indispensable to the existence of the entire thing, then, as importation itself….”
This supports the contention raised that “import” is not merely the bringing into but comprises something more i.e. “incorporating and mixing up of the goods imported with the mass of the property” in the local area. The concept of “import” as implying something brought for the purpose of sale or being kept is supported by the observations of Kelly, C.B. in Harvey v. Mayor and Corporation of Lyme Regis [(1869) 4 Ex 260, 262]. There the claim for a toll was made under the Harbour Act and the words for construction were “goods landed or shipped within the same cobb or harbour.” Construing these words Kelly, C.B. said:
“The ordinary meaning and purport of the words is perfectly clear, namely, that tolls are to be paid on goods substantially imported; that is, in fact, carried into the port for the purpose of the town and neighbourhood.”
24. Similarly the word “export” has reference to taking out of goods which had become part and parcel of the mass of the property of the local area and will not apply to goods in transit i.e. brought into the area for the purpose of being transported out of it. If the intention was to tax such goods then the word used should have been “re-exported” which means to export (imported goods) again; Re-exportation means the exportation of imported goods.
25. Even assuming that the words “imported into” or “exported from” could be restricted only to their derivative meaning and thus construed to mean only “brought into or taken out or away from” this general meaning it was submitted by the appellant is qualified by the use of the prefix “terminal” used adjectively with the word “tax”, which makes it necessary to determine the meaning of the term “terminal tax”. And the question then arises does it have reference to the jurisdictional limits of the Municipality or to the ultimate termination or the commencement of the journey of the goods as the case may be. In dealing with this the High Court said:
“It remains to consider what is signified by the word ‘terminal’. It is obvious that it could refer either to the termini of the goods or the termini of the Municipality. It is clear to me that the word ‘terminal’ refers not to the destination or origin of the goods but to the termini of the Municipal limits. Digby, J., pointed out that it refers to the traffic rather than the origin of the goods.”
According to the Oxford Dictionary “terminal” means end, boundary; situated at or forming the end or extremity of something; situated at the end of a line of railway; forming or belonging to, a railway terminus.
26. “Terminus” means the point to which motion or action tends, goal, end, finishing point; sometimes that from which it starts; starting point. An end; extremity; the point at which something comes to an end.
27. In Corpus Juris, Vol. 62 it is stated at p. 729 that “terminal” in connection with transportation means inter alia “the fixed beginning or ending point of a given run”.
28. If “terminal” besides the above meaning has an additional meaning also and that meaning signifies the termini or the jurisdictional limits of the municipal area even then the
construction to be placed on the term should be the one that favours the tax-payer, in accordance with the principle of construction of taxing statutes, which must be strictly construed and in case of doubt must be construed against the Taxing Authorities and doubt resolved in favour of the tax-payer. In Crawford on Statutory Constructions in para 257, at p. 504 the following passage pertaining to construction of taxing statutes taken from Bedford v. Johnson [102 Colo 203, 78 Pac (2) 373(Q)] is quoted:
“Statutes levying taxes or duties upon citizens will not be extended by implication beyond the clear import of the language used, nor will their operation be enlarged so as to embrace matters not specifically pointed out, although standing upon a close analogy, and all questions of doubt will be resolved against the government and in favour of the citizen, and because burdens are not to be imposed beyond what the statute expressly imparts.”
In that case the court refused to regard automobile parking lots as falling within the scope of a statute which imposed a tax on general warehouse storage establishments. On this principle the word “terminal” must in the context be construed as having reference to terminus and has to be read to connote the idea of the end of something connected with motion and not that of an intermediate stage of a journey.
34. We are, therefore, of the opinion that the terminal tax under Section 66(1)(o) is not leviable on goods which are in transit and are only carried across the limits of the Municipality, and would therefore allow this appeal, reverse the decision of the Nagpur High Court. The appellant will have its costs in this Court and in the High Court.
