Failure To Furnish Certified Octroi Exemption Form; Importer Not Ineligible For Refund Of Octroi Under Section 194(2) Of MMC Act: Bombay High Court

The Bench of Acting Chief Justice S. V. Gangapurwala and Justice Arif S. Doctor held that production of a duly certified octroi exemption form is not a substantive requirement but merely a procedural requirement to enable an eligible party to claim refund of Octroi under Section 194(2), on imports made in pursuance of a specified contract executed with the Government.

The petitioner- Hyprecision Hydraulik, entered into a Contract with the Weapons Department (Indian Navy). A work order was issued to the petitioner, specifying the spare parts to be imported and supplied by the petitioner to the Indian Navy. An octroi exemption certificate was also issued by the Ministry of Defence, making reference to the work order issued to the petitioner, certifying that the items listed in the work order would be exempted from octroi duty.

Subsequently, the petitioner imported certain goods, as covered under the work order, and made payment of octroi duty. Thereafter, the Weapons Department issued a "Goods Receiving Certificate", certifying that the goods imported by the petitioner as per the said work order had become the property of the Government.

The petitioner filed a claim under Section 194(2) of the Mumbai Municipal Corporation Act, 1888 (MMC Act) with the Deputy Assessor & Collector (Octroi), seeking refund of the octroi duty paid, which was rejected. Against this, the petitioner filed a writ petition before the Bombay High Court

Section 194(2) of the MMC Act provides for refund of octroi duty paid on an article imported under a written declaration signed by the importer, specifying that the imports have been made for fulfilling a specified contract with the Government or for the use of the Government.

Further, as per Section 194(2), the octroi duty shall be refunded within six months of importation, on production of a certificate signed by an officer empowered by the Government, certifying that the articles imported have become the property of Government and that they are used or intended to be used solely for a public purpose and not for purposes of profit.

The petitioner Hyprecision Hydraulik submitted before the High Court that the Deputy Assessor & Collector (Octroi) had reject the petitioner's claim for refund on the ground that the petitioner was unable to produce the declaration duly certified by the Octroi Inspector.

The petitioner added that the Custom House Agent (CHA) engaged by the petitioner to clear the consignment imported by it, had erroneously not mentioned Section 194(2) of the MMC Act when filing in the details of the requisite Form-B. Therefore, the petitioner was unable to process and produce the declaration duly certified by the Octroi Inspector.

The petitioner argued that the requirement of producing an octroi exemption certificate, duly certified by the Octroi Inspector, was merely a procedural requirement; thus, failure to produce the same cannot be a ground to deny the petitioner the benefit of refund. It added that since the conditions stipulated under Section 194 (2) of the MMC Act were fully complied with, the petitioner was eligible for refund of the octroi duty.

The revenue department, while contending that exemption provisions must be strictly construed, argued that since the petitioner failed to furnish a declaration duly certified by the Octroi Inspector, it was ineligible for refund of octroi duty.

The Court noted that Section 194(2) of the MMC Act does not provide for an exemption of octroi duty at the threshold, i.e., at the time of import. Further, Section 194(2) entitles a person or entity to claim a refund of octroi duty, provided that such a person or entity is eligible.

The Court observed that there are only two substantive requirements specified under Section 194(2), to determine the eligibility for refund of octroi duty. Firstly, a written declaration signed by the importer, specifying that the imports have been made for fulfilling a specified contract with the Government or for the use of the Government. Secondly, production of a certificate signed by an officer empowered by the Government, certifying that the articles imported have become the property of Government.

While noting that the petitioner had complied with both the requirements as specified in Section 194(2), the High Court ruled that Section 194(2) does not require the production of a declaration duly certified by the Octroi Inspector so as to determine the eligibility for refund of octroi.

The Court added that the requirement, if any, to produce any such declaration duly certified by the Octroi Inspector, is merely a procedural requirement to enable an eligible party to claim refund under Section 194(2) of the MMC Act.

"We say "if any" because nothing was shown to us by the Respondents either from the provisions of the MMC Act or the relevant octroi rules which mandated the requirement of declaration duly certified by the Octroi Inspector. In any event we find that even assuming that the MMC Act or the octroi rules provide/mandate for such declaration duly certified by the Octroi Inspector we find that the failure to provide such declaration would not by itself render the Petitioner ineligible for a refund of octroi. Once the Petitioner has established its eligibility by complying with the provisions of section 194 (2) of the MMC Act the Octroi Inspector would be duty-bound in law to issue/certify such declaration to the Petitioner", the Court said.

Thus, the bench reiterated that the production of a duly certified octroi exemption form is not a substantive requirement of Section 194 (2) and thus, the petitioner's failure to furnish the same would not render it ineligible for refund.

Holding that the petitioner was eligible for a refund of octroi duty, the Court allowed the writ petition.

Case Title: Hyprecision Hydraulik versus State of Maharashtra & Ors.

Dated: 21.12.2022 (Bombay High Court)

Counsel for the Petitioner: Mr. Bharat Raichandani a/w Mr. Rishabh Jain i/by UBR Legal

Counsel for the Respondent: Mr. Anoop Patil a/w Smt. Pooja Yadav i/by Mr. Sunil Sonawane for BMC; Mr. Amit Shastri (AGP) a/w Mr. Himanshu Takke (AGP) for State.

Citation: 2022 LiveLaw (Bom) 515  

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