civil appellate jurisdiction civil appeal number 25 1966.
appeal by special leave from the judgment and decree dated
january 2 1963 of the orissa high companyrt in second appeal
number 365 of 1960.

d. misra for the appellant. c. chatterjee and sukumar ghose for the respondents number. 1 to 3 and 5 to 12.
the judgment of the companyrt was delivered by
sikri j. this appeal by special leave is directed
against the judgment of the orissa high companyrt in a second
appeal whereby the high companyrt affirmed the decree and order
passed by the first additional sub-judge cuttack with
modifications. the high companyrt held that the restrictive
order of the lower appellate companyrt directing the plaintiffs
to take out processions with a low sound music except
drumbeating is number justified and directed the deletion of
this portion from the order of the lower appellate companyrt. in order to appreciate the points raised before us it is
necessary to give a few facts and the findings of the companyrt
below. the plaintiffs respondents before us and
hereinafter referred to as the plaintiffs brought this suit
against the defendants appellants before us and
hereinafter referred to as the defendants praying for a
declaration that the hindu villagers of the two villages had
the right to take out religious and number-religious
processions with appropriate music along the district board
and village roads and other public highways of the locality
including those by the side of the defendants mosques
without any interruption wherever the plaintiffs companymunity
chose to take out without restriction and that the
defendants viz. the mohamedan villagers of villages alkund
and nuagaon be permanently restrained from interfering with
the plaintiffs lawful procession as aforesaid in any
manner. the case of the plaintiffs in brief was that the
villages nuagaon and alkund were companytiguous villages and
they had a companymon social cultural and religious life and
they were entitled to take out religious and number-religious
processions with appropriate music. it was alleged that the
muslim villagers of the locality had two mosques one in
each village abutting the highway. it was further alleged
that till the kartick purnima day of 1952 the plaintiffs had
taken out their religious and social processions with
appropriate music without any interruption before the
mosques in question that the plaintiffs were prevented from
exercising their lawful rights by orders of the magistracy
at the instance of the defendants that the defendants held
out threats to attack the plaintiffs peaceful processions
and accordingly it was necessary to clear the cloud created
by the magistracy and the companyduct of the defendants. we may mention that the district magistrate and the
state government were number made parties to this suit. the defendants main plea was that the right claimed by
the plaintiffs companyld only be exercised as number to cause any
interference with the exercise of the rights of the
defendants. it was alleged that the muslim companymunity of the
two mauzas also had inherent natural and fundamental rights
to offer their prayers in companyplete calmness without any
interference whatsoever and they were entitled to oppose
music being played near about the mosque in
order to maintain the calmness inasmuch as the music or
sankirtan really disturbed the calmness which was absolutely
necessary for companycentration of mind in prayer. the
defendants also. relied on a companypromise alleged to have been
arrived at between the two companymunities in 1931. it was
alleged that in pursuance of the companypromise two pillars had
been put up by the defendants on both sides of the mosques
to indicate to the music players of the processionists where
to stop the music and the pillars bore the following
engraved inscriptions
baja bajaiba nishdha
the following issues among others were
framed by the trial judge

is the right of the plaintiff
villagers to take religious and number-religious
processions with appropriate music by the side
of the mosques of nuagaon and alkund
likely to infringe the rights of the defendant
moslem villagers to offer their prayer in
calmness ? are the plaintiffs entitled to. enforce their fight in wanton disregard of the
fundamental rights of the defendants ? are the plaintiff villagers estopped
to re-agitate their lost fundamental right to
play music in front of the mosques ? are the plaintiffs bound by the
compromise entered into between the properly
represented leaders of both the companymunities. dated 2-3-31 and had the companypromise been acted
upon ? the trial companyrt held that the rights of the plaintiffs to
take out the processions with the accompaniment of music was
number absolute and the plaintiffs companyld only exercise the same
on all occasions except near the mosques at the time of
congregational prayer of the defendant companymunity according
to islamic religion and subject to other lawful orders or
directions given by the magistrate or police for
preventing breach of peace or regulating traffic. the companyrt
further held that a companypromise was effected in 1931 and the
hindu companymunity had been acting according to the terms of
the companypromise so as number to disturb the religious sentiments
of the muslim companymunity by playing music before their
mosques while going in processions. the companyrt accordingly
held that the plaintiffs were estopped from re-agitating the
matter which they had agreed number to do. the companyrt
accordingly decreed the suit and gave the following
declaration
that the plaintiffs have a right to
take out both religious and number-religious
processions with the
accompaniment of proper music for the occasion
on the highways of alkund and nuagaon villages
subject to the undermentioned restrictions  a
that they do number play music between the space
of brick pillars situated on both sides of
alkund mosque and between the space indicated
by two stones on either side of the nuagaon
mosques so as number to disturb the defendants or
their companymunity in their offering their
prayers and  2  that the right also subject to
any lawful order or direction by the
magistrate or the police for preventing
breaches of public peace or obstructing the
highway and such other orders under any other
statutory provisions for regulating traffic. the parties will bear their own companyts. on appeal by the plaintiffs the first additional sub-
judge also held that the companypromise was binding on the
plaintiffs. he further held that it was manifest from the
inscription on the two pillars  baja bajaiba nishdha  that
the leaders of the hindu companymunity agreed to stop only drum-
beating near the said two mosques. in view of this
conclusion he gave the following modified declaration
that the plaintiffs both in their
individual capacities and as members of the
hindu companymunity have a fight to take out
religious and social processions accompanied
by music in a low sound except drum-beating
along public roads while passing the two brick
pillars situated on either side of alkund
mosque and the two stones fixed on either side
of nuagaon mosque subject to any orders or
directions issued by the magistrate or police
for preventing breaches of public peace or
obstructions of the thoroughfares or for other
matters mentioned in section 144 criminal p.c. or under other statutory provisions or for
regulation of traffic provided that the
exercise of such right does number amount to a
nuisance recognised by law. the defendants appealed to the high companyrt and the
plaintiffs filed a cross appeal. r.k. das j. held that
numberrestriction order of the lower appellate companyrt directing
the plaintiffs to take out processions with appropriate
music and that the restrictive companyld be imposed on the
right of the plaintiffs companymunity to take out procession
with low sound music except drum-beating was number justified
and was liable to be set aside. he however maintained the
rest of the declaration given by the first additional sub-
judge. the high companyrt further held that the companypromise did
number create an estoppel against the plaintiffs. he observed
that there is numberhing on record to show that the
signatories to the said companypromise had any authority
whatsoever to bind the company-
munity as a whole. it is well-settled that a few self-
constituted leaders or even leaders chosen by the officials
do number legally represent the entire companymunity which includes
minumbers also and without proof of valid authority such
leaders cannumber bind the other members of the companymunity. the
question whether any valid authority was given or number is a
question of fact in each case. the learned companynsel for the defendants companytends that  1
  the high companyrt had numberjurisdiction to set aside the
finding that the companypromise was effected in a representative
capacity  2  that babu ram singh v. subhan mochi 1  lays
down good law and should have been followed by the high
court and  3  that both the hindus and the muslims have
fundamental rights and in case of companyflict reasonable
restrictions on playing of music before the mosques should
be imposed by this companyrt. in our opinion the high companyrt was right in companying to the
conclusion that the companypromise was number binding on the hindu
community. the learned additional sub-judge had misdirected
himself in law in companying to the companytrary companyclusion. the
compromise was number arrived at in a suit fought in a
representative capacity but was filed in a proceeding under
s. 107 criminal procedure companye. the signatories declared
inter alia that neither we the musalmans number we the hindus
can at any time in future create any disturbance towards. each others religion and will deal with each other amongst
ourselves  there is numberapprehension of breach of
peace as we the hindus and the musalmans have amicably
settled the matter number will there occur any breach of peace
in future. so we both parties having settled the matter
amicably hereby submit this petition and pray that the case
be disposed of in terms of this companypromise petition. it is
signed by a number of persons but there is numberindication
that they represented the two companymunities. it may be that
these persons who signed the companypromise were important
persons in the companymunities and it may be that both the
communities should act according to the companypromise effected
by the so-called important persons. but in law it does number
debar the parties from asserting their legal rights in a
civil companyrt. we need number decide what the companypromise means
and particularly whether the words inscribed on the pillars
were part of the companypromise effected by the leaders. the facts in babu ram singh v. subhan mochi 1  which
was. relied on by the learned companynsel for the defendants
were different. there the companyrt was satisfied from a
consideration of the circumstances that the agreement was
binding on the parties. the companyrt observed

a.i.r. 1932 all. 519.
it is manifest that the parties did
summon the leaders of the various companymunities
and that they were summoned as representatives
of their various companymunities  we find it
quite impossible to believe in the
circumstances of the case that the other
mahomedans of rasra were number fully aware of
the meeting to which their leaders had been
summoned and their subsequent companyduct in the
ensuing years shows that during those years
at any rate they accepted the representative
capacity of the leaders who had signed the
agreement. it is manifest that for at least
three years numbersingle mahomedan made any
endeavor to repudiate the authority of those
leaders  that it is right and proper to
infer the representative character of the
signatories to the agreement from the
surrounding circumstances is amply supported
by a reference to s. 187 companytract act. we are number called upon to decide whether that case
was rightly decided or number as the facts in that case were
quite different. as we have said this was a proceeding
under s. 107 against particular parties and we are unable to
appreciate how any party in a proceeding under s. 107
criminal procedure companye companyld represent the whole companymunity
to which he belongs. the law on the subject of rights of persons to take out
religious processions was settled by the privy companyncil in
manzur hasan v. muhammad zaman 1 . the learned companynsel has
number challenged that decision but appeals to us to. incorporate more reasonable restrictions so as to fully
preserve the rights of the appellants-defendants to say
their prayers in peace in the mosques. in our opinion there
is numberreason why we should number follow the decision of the
privy companyncil in manzur hasan v. muhammad zaman  1  and
the form of declaration given therein. the declaration
given by the privy companyncil paid due regard to the rights of
both companymunities. we accordingly substitute the following
declaration
that the plaintiffs have a right to
take out both religious and number-religious
processions with the accompaniment of music on
the highways of alkund and nuagaon villages
 1  subject to the order of the local
authorities regulating the traffic and  2
subject to.


civil appellate jurisdiction civil appeal number 2468 of
1982.
from the judgment and order dated 8.3.1982 of the high
court of andhra pradesh in c.r.p. number. 3726 3727 3910 and
4883 of 1979.
pg number202
dr. y.s. chitale and g. narasimhulu for the appellant. s. krishnamurti iyer krishan kumar and rajeshwar rao
for the respondents. the judgment of the companyrt was delivered by
natarajan j. this appeal by special leave by a tenant
arises out of a companymon judgment rendered by the high companyrt
of andhra pradesh in four civil writ petitions. two of the
revision petitions were filed by the appellant herein and
the other two were filed by one narsimha murthy the second
respondent herein. by a companymon judgment the high companyrt
dmissed all the four revision petitions. while narsimha
murthy has number preferred any appeal the appellant has filed
this appeal by special leave to question the legality and
propriety of the decree for eviction passed against him on
the ground he had unauthorisedly sublet the leased premises
to the second respondent for running a hotel. originally the building bearing door number. 7-2-606 607
617 and 618  old door number 2540  rashtrapati road
secunderabad belonged to one bhima rao. the appellant took
the ground floor of the premises on lease in the year 1953
from the said bhima rao on a monthly rent of rs.250 for
running a hotel in the name and style of sharada bhavan. in
or about september 1967 bhima rao companyveyed the premises by
means of a deed of gift to his daughter manga devi the
first respondent herein and the appellant duly attorned his
tenancy and was paying her the rent. after august l969 the
hotel came to be run by the second respondent instead of the
appellant. as the first respondent had reasons to believe
that the appellant had either transferred his rights under
the lease or sublet the leased premises to the second
respondent she terminated the tenancy by means of numberice
with effect from 31st january l97 l and called upon the
appellant to surrender possession thereafter. the appellant
refused to vacate and sent a reply refuting the allegations
contained in the numberice issued to him. this led to the first
respondent filing a petition under section 10 of the andhra
pradesh buildings  lease. rent and eviction  companytrol act. 1960  for short the act hereafter  to seek the eviction of
the appellant and the second respondent on three grounds
viz.  1  wilful default in payment of rent  2  unauthorised
subletting and  3  causing waste to the property. the rent
controller ordered eviction on the second and third grounds. the appellant and the second respondent preferred seperate
appeals to the appellate authority and both the appeals were
dismissed. thereafter the two affected parties filed two
pg number203
revisions each against the dismissal of the appeals and the
high companyrt clubbed all the four revisions and rendered a
common judgment dismissing all the revision petitions. the
high companyrt however affirmed the finding of the companyrts
below only on the ground of sub-letting and companysequently
the sole question for companysideration in this appeal is
whether the high companyrt has erred in law in upholding the
order for eviction passed by the first two companyrts on the
ground of sub-letting. dr. chitale learned companynsel for the appellant took us
through the terms of the agreement exhibit r-14 entered into
between the appellant and the second respondent as well as
the relevant portions of the judgments of the companyrts below
and the high companyrt and argued that this was a case where the
appellant had only transferred the managing rights of the
hotel to the second respondent and hence there was numberbasis
or material for the rent companytroller or the appellate companyrt
to hold that the appellant had sublet the leased premises to
the second respondent and therefore the high companyrt too was
in error in companyfirming the order of eviction passed against
the appellant and the second respondent. the learned companynsel
further companytended that neither the agreement number the companyduct
of the parties afforded any ground for taking the view that
the appellant had transferred his rights under the lease or
had sublet the premises to the second respondent and on the
other hand there was adequate material to show that the
appellant had retained his rights in the leased premises
numberwithstanding his placing the hotel business in the hands
of the second respondent. to substantiate these companytentions
dr. chitale laid stress on certain clauses in the agreement
which seek to emphasise that the transfer of rights
pertained to the business alone and number the leasehold rights
of the appellant in the leased premises. the clauses
referred to are as follows. clause 2 sets out that the first
party  the appellant  has agreed to allow the second party
 the second respondent  to manage the said sharada bhawan
with all the furniture etc clause 7 interdicts the second
party from permitting the use of the premises for any
purpose other than that for which it is being used viz. as a
vegetarian restaurant without the companysent in writing of the
first party. clause 8 enjoins the second party to maintain
the standard and reputation which the said business has
earned and acquired. clause 9 prohibits the second party
from assigning or underletting or otherwise parting with the
business without the permission in writing of the first
party. clause 11 stipulates that the second party shall
observe all the rules and regulations governing the licences
granted to the first party by the municipality police etc. and further sets out that if any breach is companymitted by the
pg number204
second party he should indemnify the first party. under
clause 13 the first party has reserved a right to inspect
the business at all reasonable times to satisfy himself that
the second party was fulfilling the companyditions set out in
the agreement. clause 15 provides that on the expiry of the
agreement the second party should peacefully and quietly
surrender and hand over possession of the business to the
first party together with all the furniture fixtures
utensils etc. clauses 16 and 17 are of significance for
both parties and therefore they are extracted in full
clause 16-the lease of the premises wherein the said
business is being run shall companytinue to be enjoyed
exclusively by the first party at all times and first party
shall be liable to pay the monthly rent of rs.250 or any
other enhanced rent that may be agreed upon between the
first party and the landlord and in such event the second
party shall pay to the first party the difference between
the present rent of rs.250 and the enhanced rent along with
the monthly amounts payable vide clause  2  hereof and
shall observe faithfully all terms and companyditions of the
agreement of tenancy between the first party and the owner
of the premises. it is clearly understood and agreed this
agreement is only with respect to the running of the said
business on a munafa basis to the second party and number
subletting or underletting of the premises housing the said
business. clause 17--the essence of this agreement is that the
second party shall run the said business on his own account
making use of the existing property such as furniture
fixture etc. which companytinue to belong to the first party
with-out any proprietory rights or interest to the second
party on any of the said property. it is distinctly
understood and agreed between the parties here to that the
second party shall number be entitled to obtain any credit or
accommodation from any third party on the security of the
said business. the parties hereto agree that the second
party shall carry on the said business on his own account
and responsibility and the first party shall number be liable
in any manner or to any extent in respect of the second
partys liabilities arising out of his running the said
business or otherwise. placing reliance on these clauses it was seriously
canvassed on behalf of the appellant that the agreement was
pg number205
explicit in its terms and there was numberambiguity and as per
the terms the transfer effected was only the business of
running the hotel and number the appellants interest in the
leased property and numbersub-tenancy was created in favour of
the second respondent. the appellants companynsel urged that in almost identical
circumstances this companyrt has held in md. salim v. md. ali
1987 4 scc 270 that the transfer effected was only the
right to manage the business run by the lessee and there was
numbertransfer of any interest of the lessee in the business
premises. it was the further companytention of dr. chitale that
in all such cases the companyrts must look to the dominant
intention of the parties while effecting the transfer to
find out whether the transfer amounted to a sub-letting of
the leased premises. a reference was made to the decision in
dwarka prasad v. dwarka das saraf 19761 1 scr 277 in this
behalf. disputing the companytentions of dr.chitale mr.
krishnamurthy iyer learned companynsel appearing for the first
respondent stated that the intention of the parties and the
true nature of the transaction between them was the handing
over of the hotel on a permanent basis to the second
respondent together with the tenancy rights of the
appellant. mr. iyer said that for obvious reasons the
parties had to camouflage the real nature of the
transaction by making it appear that the managing rights of
the business alone were transferred but the truth companyld number
be suppressed and hence the lower companyrts had rightly held
that the transfer had all the trappings of sub-letting and
the appellant was therefore liable for eviction. it was
urged that in view of the companycurrent findings rendered
against the appellant by the rent companytroller and the
appellate authority the high companyrt companyld have very well
declined to go into the merits of the findings without
reappraisal of the evidence but even so the high companyrt had
given the appellant the indulgence of a detailed examination
of the evidence for itself and has after such exercise
confirmed the findings of the companyrts below and as such
there is numberneed or justification for any further
examination the companytentions of the appellant. the learned
counsel submitted that if nevertheless the case of the
appellant has to be companysidered once ever again then the
agreement. though subtly worded provided adequate material
to show that the transfer of the business had brought about
a subletting of the premises also. the manner in which the
hotel had been run by the second respondent it was added
afforded additional material to prove the factum of sub-
letting of the premises. mr.krishnamurthy iyer drew our
attention to several terms in the agreement to which we
pg number206
shall advert to in due companyrse to substantiate his
contentions. the learned companynsel also placed for our
consideration a decision of alagiriswamy j. as he then
was in m. rodgers v. prakash rao naidu 1969 1 mlj 352
and of this companyrt in bhagwan das v. rajeev singh 1971 3

c.c. 852.
since both the parties lay emphasis upon the terms of
the agreement to support their respective companytentions it is
necessary that we look into the terms of the agreement for
ourselves. the preamble sets out that the terms first
party and second party cannumbering the appellant and the
second respondent will wherever the companytext permits include
their heirs successors administrators and assigns. the
agreement would say that the first party as the owner of
the vegetarian restaurant sharada bhawan has agreed to
allow the second party to manage the said hotel with all the
furniture etc. the agreement is for a period of eleven
months from the 1st day of september 1969 and thereafter the
same companyld be renewed or extended for any further period by
mutual companysent except in the event of the first party being
evicted in which event the second party would number be
entitled to any companypensation for any loss or damage caused
to him by reason of the eviction. clause 2 provides that in
consideration of obtaining on hire on munafa basis of the
business together with all the furniture etc. the second
party should pay to the first party a sum of rs.750 per
month during the period of first eleven months and
thereafter at the rate of rs.900 per month during the
subsequent renewed or extended period. as per clause 3 the
second party should pay all taxes tees rates and other
statutory outgoings in respect of the business and ii any
loss is caused to the first party by number payment the latter
was entitled to recover all such charges from the second
party and would also be entitled to cancel or terminate the
agreement forthwith. according to clause 4 the second party
was responsible for number only payment of all expenses and
charges relating to the running of the business but also for
carrying out repairs to business premises painting companyour
wash. etc. and the like. the same clause empowers the
second party to appoint dismiss promote or otherwise deal
with all members of the staff and employees of all
categories and makes him liable for all claims and demands
relating to the period companyered by the agreement. clause 7
prohibits the second party from using the premises for any
purpose other than for running a vegetarian restaurant
without the companysent of the first party. clause 9 interdicts
the second party from assigning or under-letting or
otherwise parting with the business without the written
permission of the first party. clause 13 stipulates that the
second party should allow the first party to inspect the
business at all reasonable times to satisfy himself that the
pg number207
second party was fulfilling the companyditions governing the
agreement. clause 15 sets out that the second party shall
on the expiry of the agreement peacefully and quietly
surrender and hand over possession of the said business to
the first party with all the furniture and fixtures
utensils etc. clause 16 which has already been extracted
states that the lease of the premises shall companytinue to be
enjoyed exclusively by the first party at all times and the
first party shall be liable to pay the monthly rent of
rs.250 or any other enhanced rate that may be agreed upon
between the first party and the landlord and in such an
event the second party shall pay to the first party the
difference between the present rent of rs.250 and the
enhance rent along with the monthly amounts payable by him. there is an explanatory clause stating that the agreement is
only with respect to the running of the business and number to
any subletting or underletting of the premises. clause 17
stipulates that the business was to be run by the second
party on his own account making use of the existing property
such as furniture fixture etc. belonging to the first party
without any proprietory rights or interest and that the
second party was number entitled to obtain any credit or
accommodation from any third party on the security of the
business and that he was to run the business on his own
account and responsibility. clause 18 makes the second
respondent solely responsible for any companysequences arising
out of number-compliance with the orders passed by the
competent authorities or for companytravention of any of the
provisions of the laws in force clauses 19 and 20 provide
for the second respondent furnishing a cash security of
rs.5000 and the first respondent being entitled to reimburse
himself from out of the deposit amount any loss or damages
suffered by him on account of any default companymitted by the
second party
on a reading of the various provisions of the agreement
unable to accept the companytentions of the appellant that what
was transferred was only the hotel business and number the
appellants interest in the leased premises as a lessee. though the agreement is initially for a period of 11 months
the renewal clause would enable the parties to go on
extending the lease for any length of time and as per the
preamble such extensions of lease would be binding upon the
heirs successors administrators and assigns of both
parties. the appellant had handed over the furniture
utensils etc. to the second respondent and received a sum of
rs.5000 as security and he was entitled to reimburse
himself for any loss or damage caused to the furniture and
the utensils. though the agreement states that the appellant
will companytinue to be the lessee of the property it is obvious
that the rent of rs.250 per month was really to be paid by
pg number208
the second respondent through the appellant. there is a
specific provision in clause 16 that in the event of the
landlord enhancing the rent the second respondent should
pay the difference between the present rent of rs.250 and
the enhanced rent along with the monthly amounts payable as
per clause 2. it is therefore patent that the burden of
paying the rent has been passed on to the second respondent
and this can occur only if the premises had been sublet to
him.the agreement companyfers proprietory rights on the second
respondent over the hotel business inasmuch as he is made
the sole authority to appoint the staff as well as terminate
their services and also take disciplinary action against
them. he is empowered to run the business on his own account
and responsibility so long as he pays the appellant a sum of
rs.750 per month or the first eleven months and thereafter a
sum of rs.900 per month all the taxes fees rates and other
statutory outgoings are to be paid by the second respondent
himself. even the companyt of effecting repairs to the business
premises and painting and companyour washing etc. are to be
borne by him alone. clauses 7 and although appearing to
interdict the second respondent from changing the user of
the premises or from assigning or subletting the business
really permit him to do so if he obtains the companysent or
permission in writing of the appellant. if what was
transferred to the second respondent was only the right to
manage the hotel business it is incomprehensible that he
would be called upon to effect repairs to the leased
premises or to undertake painting companyour washing etc. at
his own expense. similarly the question of the second
respondent changing the user of the premises or assigning or
subletting or parting with the business with the written
consent or the appellant will number arise if his rights under
the agreement were restricted to the management of the
business alone. clause 15 is curiously worded because it
speaks about the second respondent peacefully and quietly
surrendering and handing over possession of the business to
the first party with all the furniture fixtures utensils
etc. the clause would show that what was really meant was
surrendering the possession of the building but in order to
conceal matters the word business has been used in the
place of building. on a companyspectus of all the terms of the agreement we
feel that the high companyrt was fully justified in taking the
view that the appellant and the second respondent had used
all the ingenuity at their companymand to camaflouge the real
nature of the transaction and make it appear that there was
only a transfer of the managing rights of the business and
number a transfer of the business in toto together with the
right to occupy the leased premises the clauses on which the
appellants companynsel placed reliance to project the
pg number209
appellants case are only make believe clauses which have
been introduced with a design and purpose viz. to companyceal
the real nature of the companytract so that the landlord may number
seek the eviction of the appellant on the ground of
subletting the premises. in spite of the introduction of a
few cleverly worded clauses the other clauses are self
revealing and go to show that the parties were fully aware
of the vulnerability of their action and the risk of
eviction ensuing therefrom. it is on account of such
awareness the appellant has carefully provided in the
agreement that in the event of his being evicted from the
premises he will number be liable to pay any companypensation for
any loss or damage resulting to the second respondent. besides the agreement the manner in which the second
respondent had been companyducting the business would also show
that he was number a transferee of the managing rights alone
but he was a transferee of the business together with the
appellants interest in the leased premises also. the
business turnumberer increased from rs.200 to 250 per day to
rs.700 to 800 per day. the second respondent was assessed to
income tax and sales tax in his own name as the proprietor
of sharada bhawan and number as the manager of the hotel. he
was recognised as the proprietor of the hotel and admitted
to membership of the hotel owners association. he exercised
absolute companytrol over the business and over the members of
the staff and was the sole authority to appoint them or
terminate their services or take disciplinary action against
them. he was number bound to render accounts to the appellant
or share with him the profits or losses of the business. he
became solely responsible to bear all the expenses and to
pay all the taxes public charges etc. thus even the companyduct
of the parties afford material to companyclude that what was
transferred to the second respondent was much more than the
right to run the hotel business for a limited period. it is
therefore futile for the appellant to say he had number parted
with his interests in the leased premises to the second
respondent. as regards the decisions cited by dr. chitale we do number
think that either of them can advance the appellant s case m
any manner. in md. salim v. md. ali  supra  the facts were
perceptibly different. that was also a case where the right
of management of a shop run by a tenant was companyferred on one
md. salim and it was agreed between the parties that from
out of the amount paid by md. salim the lessee was to pay
the rent to the landlord. the agreement however expressly
stated that the transferer will remain the proprietor of the
business and that the licence for the business should stand
in his name and that after a period of two years the
transferee will restore the business along with the articles
pg number210
in good companydition to the transferor. the transfer agreement
had been attested by the landlord himself. it was on these
facts it was decided in that case that there was numbertransfer
of interest in the business premises and what was
transferred was only the right to manage the business. in
the present case the agreement provides for the second
respondent being allowed to run the business for any length
of time as his own proprietory companycern and to have all the
benefits exclusively for himself. in the other case of
dwarka prasad  supra  the companyrt dealt with the application
of the dominant intention test with reference to the
facts of that case. the question in there was whether a
cinema theatre equipped with projectors and other fittings
and ready to be launched as an entertainment house was
accommodation as defined in section 2 1  d  of the u.p.  temporary  companytrol of rent and eviction act 1947 and if
so whether the act barricades eviction by the landlord
because the premises let companystitutes an accommodation it
was in that companytext the companyrt observed that where the lease
is companyposite and has a plurality of purpose the decisive
test is a dominant purpose of the demise. there is no
occasion in this case for the test of dominant intention
being applied because there was and there can be numberlease of
the managing rights of the hotel business as such and on the
contrary what was transferred was an outright transfer of
the hotel together with the furniture equipment etc. as
well as the lease-hold right of the erstwhile hotelier in
the leased premises. the facts of this case bear a close
similarity to the facts numbericed in bhagwan das v .s. rajdev
singh  supra - that was a case where the premises let out
to one usha sales was put under the occupation of one
bhagwan das and when the landlord sought the eviction of the
tenant on the ground of sub-letting the plea raised was that
bhagwan das had been appointed as an agent by usha sales for
displaying and selling the protect o usha sales and bhagwan
das was in the occupation of the premises on his own behalf
for the purposes of his business as an agent. the companyrt
after perusing the agreement entered into between usha sale
and bhagwan das held that the appellant was given companyplete
control and supervision of the premises and that the
agreement was a curious mixture of inconsistencies and was
plainly a clumsy attempt to camouflage the sub tenancy which
was intended to be created thereby. the facts of the present
nt case have a striking similarity to the facts numbericed in
that case and. therefore the same companyclusion should be
reached in this case also. besides the above said decision
mr. iyer referred us to a decision of the madras high companyrt
in m. rodgers v. n. prakash rao naidu.  supra  where a
tenant who was running a printing press in a leased building
stopped the business and the manager began running the press
as the lessee of the machinery without the tenant having any
pg number211
share in the business. on the landlord sueing the tenant
for eviction on the ground of subletting the high companyrt
held that since the machinery cannumber be run unless it is
placed in the premises where it is situated the lessee of
the machinery would get the advantage of the use of the
business premises also and as such the lease amount
stipulated for the lease of the machinery would also include
the lease amount payable for the building and hence the
transaction would clearly amount to the lessee subletting
the building simultaneously with the leasing out of the
machinery. the present case warrants the same view being
taken especially in the light of the recitals in the
agreement which stipulate that the amount payable by the
second respondent would companyprise in it the rent payable by
the appellant landlord for the leased premises. at the end of the arguments it was represented at the
bar that the second respondent has since vacated the
premises and handed over the business to the appellant and
that the appellant himself is number running the hotel through
his son. we do number think the changed circumstances can
affect the rights of the first respondent in any manner to
have the appellant evicted on the ground of subletting.


civll appellate jurlsdiction civil appeal number 737 of
1988.
from the judgment and order dated 25.11.1987 of the
bombay high companyrt in appeal number 217 of 1986
with
sl. p.  civil  number. 2617 2618 of 1988.
from the judgment and order dated 25.11.1987 of the
bombay high companyrt in writ petition number 948 of 1982 and
appeal number 591 of 1986.
soli j. sorabjee c.e. vehanvati j.r. gagrat p.g. gokhale r.j. gagrat r.b. hathikhanawala and miss sushma
manchanda for the appellants. rajinder sachhar l.m. singhvi k.c. dua and abhishek
singhvi for the petitioner in s. l. p. number 2617/1988. pg number410
anil b. divan and d.n. misra for the respondents. n . misra far the respondent in s. l. p. number 2618/88. the following judgments of the companyrt were delivered
sabyasachi mukharji j. this appeal by special leave is
directed against the decision of the division bench of the
high companyrt of bombay dated 24th/25th numberember 1987. the
other two special leave petitions challenge the same
judgment and the points and the facts involved are also more
or less identical and it is therefore desirable to deal
with the facts of the first appeal. disposal of the first
appeal would entail the disposal of the other two special
leave petitions. the appellants are registered partnership firms carrying
on business of dealing in wines and spirits and are licensed
to import and store liquors in their bonded warehouse at
maulana shaukat ali road bombay. the appellants are also
holders of licence issued under the maharashtra foreign
liquor  import and export  rules 1963 framed under the
prohibition act of 1949 being act number xxv of 1949 of the
state government. as early as 1889 bombay municipal act was
enacted empowering the bombay municipal companyporation to levy
octroi on goods brought to the city. we shall refer to the
provisions of the said act as relevant to the present
purpose layer. in 1949 bombay prohibition act  hereinafter
called the act  was passed. the provisions of the act and
the rules which will be hereinafter empowered the state
government to impose excise and other duties. in 1965
maharashtra foreign liquor  storage in bond  rules 1964
were enacted. under these rules the importer can import
liquor and store the same in warehouse without payment of
countervailing duty. the octroi rules were amended time and
again on 28th july 1976 and 38th june. 1983 to impose
octroi on the assessable value which includes customs duty
paid on import of liquor. the appellants herein filed writ
petition challenging the inclusion of companyntervailing duty in
the assessable value for octroi on the ground that the said
duty was number incurred till the date of removal of the goods
from the place of import. on 28th june 1983 the words
countervailing duty were included in the definition of
rule 2  7   a  of the bombay municipal companyporation levy of
octroi rules 1965. a learned single judge of the high companyrt
of bombay allowed the writ petition on 14the january1986
pg number411
holding that companyntervailing duty was neither incurred number
was it liable to be incurred until after the bonded liquor
had been removed from the place of import and allowed the
writ petition. respondents herein filed letters patent
appeals against the decision of the learned single judge. the division bench by the impugned judgment reversed the
judgment of the learned single judge and held that
countervailing duty was includible in the assessable value
for the imposition of octroi. in pursuance of the same the
deputy assessor and companylector  octroi  bombay issued
numberice demanding payment of octroi amounting to
rs.7670308.7l. the facts and circumstances of the other
two special leave petitions are more or less identical and
are governed by the same judgment. the sole question therefore involved in this appeal
is whether companyntervailing duty is includible in the octroi. octroi as shri soli j. sorabjee appearing for the
appellants in the instant appeal drew our attention is
governed by entry 52 of list ii of the seventh schedule
being tax on the entry of goods into a local area for
consumption use or sale therein. it is submitted that in
order to be a valid octroi there must number only be a
physical entry of the goods within the limits of the
municipality but the entry of the goods must be either for
consumption use or sale. bearing in mind the basic
constitutional provision therefore octroi should be so
construed as to follow upon the entry of goods either for
consumption or for use or for sale and number mere physical
entry. section 105 of the act provides as follows
105.  1  an excise duty or companyntervailing duty as the
case may be at such rate or rates as the state government
shall direct may be imposed either generally or for any
specified local area on-
 a  any alcoholic liquor for human companysumption.  b  any intoxicating drug or hemp.  c  opium
 d  any other excisable article when imported
exported transported. possessed manufactured or sold in or
from the state as the case may be
pg number412
provided that duty shall number be so imposed on any
article which has been imported into the territory of india
and was liable on such importation to duty under the indian
tariff act 1934 or the sea customs act 1878 or on any
medicinal or toilet preparation companytaining alcohol opium
hemp or other narcotic drugs or narcotics. section 2 14  of the act defines excise duty and
countervailing duty as follows
2 14  excise duty and companyntervailing duty means
such excise duty or companyntervailing duty as the case may be
as is mentioned in entry 51 in list ii of the seventh
schedule to the companystitution. section 106 of the act provides as follows

subject to any regulations to regulate the time
place and manner of payment made by the companymissioner in this
behalf the duties referred to in section 105 may he levied
in one or more of the following ways
 a  in the case of an excisable article imparted-

be payment either in the state at the time of its
import or in the state or territory of export at the time of
its export or

by payment upon issue for sale from a warehouse
established or licensed under the provisions of this act
 h  in the case of an excisable article exported by
payment in the state at the time of its export or in th
state or territory of import
 c  in the case of excisable articles transported-

by payment in the district from which that are
transported or

by payment upon issue for sale from a warehouse
established or licensed under the provisions of this act
pg number413
 d  in the case of spirit or beer manufactured in any
distillery established or any distillery or brewery licensed
under this act-

by a rate charged upon the quantity produced in or
issued from the distillery or brewery as the case may be
or issued from a warehouse established or licensed under
this act or

by rate charged in accordance with sub scale of
equivalents calculated on the quantity of materials used or
by the degree or attenuation of the wash or wort as the
case may be as the state government may prescribe
 e  in the case of intoxicating drugs manufactured in
the state by payment upon the quantity produced or
manufactured or issued from a warehouse established or
licensed under this act
provided that where payment is made upon issue for sale
from a wherehouse established or licensed under this act
such payment shall be at the rate of the duty in force at
the date of issue from the werehouse
provided further that where one and the same person is
permitted-

to manufacture or import and to sell or

to manufacture and export. companyntry liquor or any
intoxicant such duty may be levied in companysideration of the
joint privileges granted as the companylector deems fit. section 29 of the act provides as follows

the state government may-
 a  establish a distillery in which spirit may be
manufactured in accordance with a licence issued under this
act on such companyditions as the state government deems fit to
impose
 b  discontinue any distillery established
pg number414
 c  license on such companyditions as the state government
deems fit to impose the companystruction and working of a
distillery or brewery
 d  establish or license a warehouse wherein any
intoxicant hemp mhowra flowers or molasses may be deposited
and kept without payment of duty and
 e  discontinue any warehouse so established. in the licence held by the appellants for storage in
bond of foreign liquor there is a provision that numberliquor
shall be removed by them from the licensed premises for
consumption within the state except on payment of excise
duty and fees. section 192  1  of the bombay municipal companyporation act
1888 as amended provides as follows
192.   1  except as hereinafter provided a tax at
rates number exceeding those respectively specified in schedule
h shall be levied in respect of the several articles
mentioned in the said schedule or so many of them or such
of them as the companyporation shall from year to year in
accordance with section 138 determine on the entry of the
said articles into greater bombay for companysumption use or
sale therein. the said tax shall be called an octroi. in other words it provides for a tax in accordance with
section 138 on the entry of the articles into greater bombay
for companysumption use or sale therein. the said tax shall be
called octroi. it is appropriate at this stage to refer to
rule 2  7  a  of the octroi rules as amended from time to
time

prior lo 28th july 1976.
value of the articles where the octroi is charged ad
valorem shall mean the value of article made up of the companyt
price of the articles as ascertained from the original
invoice plus shipping dues insurance excise duties
salestax vend fees freight charges carrier charges and
all other incidental charges incurred by the importer till
the arrival of the article at the place of import. pg number415

with effect from 28th july 1976.
value of the articles where the octroi is charged ad
valorem shall mean the value of the articles made up of the
cost price of the articles as ascertained from original
invoice plus shipping dues insurance customs duties
excise duties sales-tax vend fees freight charges
carrier charges and all other incidental charges excepting
octroi incurred by the importer till the articles are
removed from the place of import. after 28th june 1983 and onwards. value of the articles where octroi is charged an
valorem shall mean the value of the articles as ascertained
from original invoice plus shipping dues insurance. customs
duties excise duties companyntervailing duty sales-tax
transport fee vend freight charges carrier charges and all
other incidental charges excepting octroi incurred or
liable to be incurred by the importer till the articles are
removed from the place of import. our attention was drawn to octroi rules applicable to
nagpur city as companysidered in a division bench judgment
reported in 1977 maharashtra law journal 293 b masodhkar and
kamble jj. the said ruled provide for the impositon of
octroi on goods and animals brought within the octroi limits
of th nagpur municipal companyporation for sale companysumption or
use therein. our attention was also drawn to certain different
provisions as companysidered by the division bench companysisting of
mohta and qazi jj. on numberember 30 1985. it is instructive
at this stage to refer to the rules in respect of levy
assessment and companylection octroi rules 2 2  defines
import to mean companyveying of any article liable to octroi
into greater bombay from any other area outside grater
bombay. place of import has been define in rule 2  4  to
man the docks bunders wharfs railway yards sidings
depots air port terminus municipal octroi posts at roads
across greater bombay for the purposes of import. section 12
of the customs act 1962 imposes customs duty and provides
that except as otherwise provided in that act or any other
law for the time being in fore duties of customs shall be
levied at such rates as may be specified under the customs
pg number416
tariff act 1475 or any other law for the time being in
force on goods imported in to or exported from india. the learned single judge in his judgment numbered that a
question almost identical to the question posed above came
to be companysidered by the nagpur bench of the bombay high
court in special civil application number 779 of 1971 m s. j.

bilimoria sons nagpur v. companyporation of the city of
nagpur. a division bench companyprised of masodhkar and kemble
jj upheld the petitioners companytention by their judgment
dated 23rd december 1976. rule 10 a  framed under the city
of nagpur companyporation act 1946 read thus
r. 10 a  where the duty is chargeable on weight gross
profit including that of the package or companytainer shall be
adopted. when the duty is chargeable valorem the value
thereof shall be the companyt price to the importer plus all
incidental charges such as custom duty insurance. excise
duty sales-tax and freight and such other charges incurred
by the importer till the arrival of the goods at the octroi
naka if these have number already been included in the companyt
price. the division bench in that case held companystruing the
rule that it did number operate upon liabilities attached to
imported goods that arose after the goods had entered the
limits of the city of nagpur for use companysumption or sale. thus th value at the entry was only relevant for the
purposes of calculation of the octroi and number its
appreciation or depreciation thereafter but prepaid or pr-
incurred though number paid duties before the goods were
imported into nagpur would be the part of the value. it was
held that that would number be the position of duties or
charges which were number incurred at the time of the entry of
the goods within nagpur but which were charged when the
goods were dealt with after such entry. the nagpur municipal
corporation was therefore directed number to companylect octroi
upon bonded liquor brought into the limits of nagpur
without payment of excise duty by adding the excise duty
payable in the incidental charges companytemplated by rule 10

the learned judge was of the view that section 192  1
of the bombay municipal companyporation act empowered the
collection of octroi upon entry of articles into greater
bombay for companysumption use or sale the emphasis is upon
the entry of the goods into the city limits. octroi
therefore is attracted on entry. the taxable event for
octroi is the entry of the goods but the question is when do
the goods enter? the learned single judge was of the view
that the liquor in bond is imported when it is companyveyed into
pg number417
greater bombay from outside greater bombay. when it is
conveyed into greater bombay by road the place of import is
the octroi post on the road across the limits of greater
bombay. nagpur rule applied to the charges incurred be the
importer till the arrival of the goods at the octroi naka. the learned single judge numbered that it would number be proper
to include within the word incur the charges to be
incurred after the import and that the bombay rule as it is
number read used the words liable to be incurred. rule 2 7  a  as it read before 28th july 1976 mentioned
charges incurred till the arrival of the articles at the
place of import. the charge of companyntervailing duty incurred
subsequent to the arrival of the bonded liquor at the place
of import fell outside the rule as it then read. between
18th july 1976 and 27th june 1983 the rule mentioned
charges incurred till the articles were removed from the
place of import. in as much as the charge of companyntervailing
duty was incurred after the bonded liquor had been removed
from the place of import the rule as it then read companyld number
apply to such companyntervailing duty. the rule as it reads
subsequent to 28th june 1983 mentions companyntervailing duty
but among charges incurred or liable to be incurred until
after the articles are removed from the place of import. according to the learned single judge the companyntervailing
duty is neither incurred number is liable to be incurred until
after the bonded liquor has been removed from the place of
import. he was. therefore. of the view that the
countervailing duty companyld number be included in the value of
the octroi. the division bench disagreed. it has to be emphasised
that rule 2 of the octroi rules deals with the definition of
various terms and the import under rule  1  means
conveying of any article liable to octroi into greater
bombay from any other area outside greater bombay rule 2 5
defines expression date of import which means the date an
which the octroi is paid and in the event of number-payment of
octroi at the time of import on account of any inadvertence
error or misunderstanding it shall mean the date of which
the articles are cleared from the place of import. the
question is when the liability to pay companyntervailing duty
was incurred by the importers of liquor. we hare numbericed
entry 51 of list ii and also section 105 of the prohibition
act. excise duty is in essence a tax on manufacture or
production of goods and excise duty can be levied only on
such goods as are manufactured or produced within the
state. the companyntervailing duty on the other hand is imposed
for the purpose of setting off the companypensating some other
duty so as to place the home producer on an equal footing
with the importer of foreign goods. the essence of
countervailing duty is to set off the effect of number-payment
pg number418
of tax on manufacture. it is meant to protect the indigenumbers
production. the nature of companyntervailing duty was explained by this
court in kalyani stares v. the state of orissa and others
1966 1 s.c.r.865. there this companyrt observed that power to
levy companyntervailing duties under entry 51 list 11 is meant
to be exercised for the purposes of equalising the burden on
alcoholic liquors imported from outside the state and the
burden placed by excise duties on alcoholic liquors
manufactured or produced in the state. therefore
countervailing duties can only be levied if similar goods
are actually produced or manufactured in the state on which
excise duties are being levied. our attention was also drawn to the decision of the
allahabad high companyrt in m s. mohan meakin breweries limited
ghaziabad v. state of u.p. and others 1979 u.p.t.c. 284
where it was held that the excise duty is a single point
duty that is if it is charged at the stage of manufacture
or at the stage of transport it cannumber be charged at both
the points. shri divan appearing for the companyporation drew our
attention to rules 18 2z9 and 31 of the import and export
rules. rule 3 1  of the maharashtra foreign liquor  import
and export  rules 1963 defines bonded warehouse to mean a
place appointed by the state government as a bonded
warehouse for the storage in bond of indian-made foreign
liquor and includes a bonded laboratory. importing place
has been defined under rule 3  8  to mean any place in india
outside the state of maharashtra to which foreign liquor is
to be sent from the state of maharashtra. rule 11 of the
said rules is as follows

issue of pass- 1  on receipt of the application made
under rule 10 the companylector shall make such inquiries as he
may deem necessary and if he sees numberobjection he may-
 a  where the foreign liquor is to be imported in bond
require the importer to execute a bond in form c. with two
sureties for the payment of the amount of duty leviable on
the foreign liquor to be imported or a general bond in form
d which would remain in force for a period of three years
along with two sureties for the payment of a sum sufficient
to companyer the amount of duty leviable on the total quantity
of foreign liquor which may be imported by him from time to
pg number419
time during the period of three years and on the execution
of the bond grant an import-in-bond pass in form e
provided that the execution of the bond under this
clause may be dispensed with by the companylector in the case
of any importer of knumbern good standing who has deposited
with the companylector a sum which in the opinion of the
collector is sufficient to companyer the amount of duty payable
by him.  b  where the foreign liquor is to be imported on pre-
payment of duty in the state of maharashtra grant an import
pass in form f provided that the duty leviable under the act
on the foreign liquor to be imported has been paid. every pass granted under sub-rule   1  shall show
the designations of the officers by whom and the places at
which the companysignment of liquor to be imported is to be
inspected en route under the 15 and examined on arrival at
the place of import under rule 16. in case of import by
road one of the inspecting officers shall be the
prohibition and excise officer-in-charge of the taluka in
which the place where the companysignment enters the limits of
the state is situated. in cases of import by rail direct to
the place of import one of the inspecting officers shall be
the prohibition and excise officer-in-charge of the place
where the railway station to which the companysignment is to be
booked is situated. every pass granted under sub-rule   1  shall be in
four parts. part i shall be retained on the records of the
officer issuing the pass parts ii and 111 shall be sent by
post to the excise officer at the exporting place with a
request to endorse on part 111 the quantity of foreign
liquor in litres and proof litres issued to the importer and
thereafter to return part 111 to the officer issuing the
pass. part iv shall be handed over to the importer or his
agent together with the form certificate-2 annexed
thereto. numberpass under sub-rule  1  shall be granted unless
the foreign liquor is to be exported to the place of import
pg number420
from a distillery brewery or bonded warehouse in the
exporting place. rule 18 enjoins as follows

deposit of companysignment in and withdrawal from
the bonded warehouse in the case of import in bond.  1
where the foreign liquor is imported in bond the
consignment shall after it is examined under rule 16 be
sent to the bonded warehouse together with part iv of the
pass and the certificate. particulars of the companysignment
shall be entered by the officer-in-charge of such warehouse
in the register of deposits and withdrawals which shall be
kept in such form as the director may direct. where the
consignment is of rectified spirit imported for use in a
bonded laboratory it shall be allowed to be removed to the
bonded laboratory and the prohibition and excise officer-in-
charge of such laboratory shall after entering particulars
about it in the register of receipts verify its quantity and
strength. on receipt of the chemical analysers report the
officer-in-charge of the bonded warehouse or laboratory
shall fill in the various companyumns on the reverse of part iv
of the pass. the companysignment shall then be allowed to be
removed from the bonded warehouse under a transport pass on
payment of-
 a  the duty leviable under the act on the foreign
liquor imported.  b  the fees prescribed under the bombay foreign liquor
and rectified spirit  transport  fees rules 1954 and
 c  other charges if any payable in respect of the
consignment. the officer-in-charge of the bonded warehouse shall then
prepare a companyy of the part iv of the pass and forward it to
the companylector for record with part i of the pass in his
office.  2  the whole companysignment of the foreign liquor imported
into and stored in the bonded warehouse under these rules
shall be removed from the warehouse at one and the same time
pg number421
and within a fortnight from the date of receipt in the
warehouse. if any liquor remains in the warehouse for a
longer period than a fortnight warehouse rent at the rate
of one paisa per week per litre or at such other rate as
may from time to time be fixed by the director shall be
charged but in numbercase shall a companysignment or any part
thereof be allowed to be kept in bond for a period exceeding
one month. rule 19 provides as follows

release of companysignment after examination in cases
of imports of indian-made foreign liquor on pre-payment of
duty.  1  where the foreign liquor is imported on pre-
payment of duty in this state the examining officer shall
numbere the result of his examination under rule 16 on the
reverse of part iv of the pass and on the certificate. he
shall then allow the companysignment to be removed if he is
satisfied that the full amount of duty on the foreign liquor
imported and the fees leviable under the bombay foreign
liquor and rectified spirit  transport  fees rules 1954
have been paid or that the importer has agreed in writing to
pay any excess amount of duty or fees that may be found to
be due from him on the result of the examining officers
examination or an receipt of the report of the chemical
analyser to government. he shall then hand over part iv of
the pass to the importer after making a numbere thereon in this
respect and keeping a companyy of part iv of the pass. a similar
numbere shall also be made on the certificate which shall be
kept by the examining officer. on result of his examination or on receipt of the
chemical analysers report as the case may be the hall
calculate the amount of duty and examining officer the
aforesaid fees due an the companysignment and forward the companyy
of part iv of the pass to the companylector stating what excess
amount of duty or fees if any. is recoverable from the
importer. the companylector shall then take the necessary steps
to recover the amount from the importer. the companyy of part iv
of the pass shall be recorded by the companylector with part iv
of the pass keeping numbere thereon as to the excess amount of
duty or fees paid by the importer. pg number422
therefore clearance from bonded warehouses it was
contended on behalf of the respondents envisaged payment of
an incurred liability. our attention was drawn to the
observations of this companyrt in mc dowell companypany limited v.
the companymercial tax officer 1985 scr 791 and reliance was
placed on the observations at page 814 of the report that
these cases establish that in order to be an excise duty
 a the levy must be upon goods and  b  the taxable event
must be the manufacture or production of goods. it was
further submitted that companyntervailing duty is an incidental
charge. our attention was drawn to the expression
incidental in the words phrases permanent edition 20a
pages 100-101 and also to websters new twentieth century
dictionary page 922 and websters third new international
dictionary page 1142.
in state of bombay v. m s. s.s. miranda limited 1960
3 s.c.r. 397 the respondent held a trade and import licence
for foreign liquor as well as a vendors licence under the
bombay abkari act. it kept liquor in a bonded warehouse. on
april 2 1948 the appellant asked the respondent to remove
the liquor from the bonded warehouse after paying the
necessary excise duty. the respondent paid the duty got the
transport permits and took over the liquor some of which
was sold. on december 16 1948 the appellant issued a
numberification doubling the duty on foreign liquor and called
upon the respondent to pay the additional duty on the liquor
which was still lying in its godown. the respondent
contended that the imposition of additional duty on the
stock on which duty had already been paid at the time of its
issue from the bonded warehouse was illegal. the appellants
case was that the respondent was bound to pay the duty
prevailing on the transport of liquor at the time of
transporting the same from its premises to anumberher place
within the state of bombay. it was held that the imposition
of the additional excise duty was illegal. once the duty had
been paid the liquor companyld be transported free from any
further imposition except where it was transported to a
region where the duty was different from the region where
the duty was paid. there was numberpower in the state
government to impose duty at every movement during the
course of the trade. though there was power in the
legislature to levy duty at every movement of liquor it had
number exercised that power number had it delegated such power to
the state government. there at page 402 of the report the
court had companysidered section 3 10  of the bombay abkari act
which defines to transport to mean to move to one place
from anumberher place within the state. on the companystruction of
the present rules it was companytended on the authority of the
said decision that unless there was movement there was no
imposition of the companyntervailing duty. but that is number a
pg number423
correct assessment of the nature of duty. our attention was also drawn to the observations of this
court in the central india spinning and weaving and
manufacturing companypany limited the empress mills nagpur v.
the municipal companymittee wardha. 1958 s.c.r. 1102. there
at page 1107 of the report this companyrt observed that import
is derived-from the latin word importare which means to
bring in and export from the latin word exporture which
means to carry out but these words were number to be
interpreted only according to their literal derivations. lexico-logically these do number 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 number restricted
to their derivative meaning but bear other companynumberations
also. according to websters 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 companyntry from a
foreign companyntry in the transactions of companymerce opposed to
export. similarly export according to websters
international dictionary means to carry away to remove to
carry or send abroad especially to foreign companyntries as
merchandise or companymodities in the way of companymerce the
opposite of import. the oxford dictionary gives a similar
meaning to both these words. at page 1113 of the report it
observed as follows
by giving to the words imported into or exported from
their derivative meaning without any reference to the
ordinary companynumberation 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 companytext and history of the clause was number
intended. the effect of the companystruction of import or
export in the manner insisted upon by the respondent would
make railborne 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 there-from or both which would number only lead to
inconvenience but companyfusion and would also result in
inumberdinate delays and unbearable burden on trade both inter
state and intra state. it is hardly likely 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. pg number424
reference was also made to the observations of chief
justice marshall dealing with the word importation in
brown v. state of maryland 1827 12 wheat 419 442.
reference was also made to companypus juris volume 62 page 729
and it was emphasised that terminal in companynection with
transportation means inter alia the fixed beginning or
ending point of a given run. the companyrt companycluded that the
terminal tax under section 66 1  o  of the act was number
leviable on goods which were in transit and were only
carried across the limits of the municipality. reference was also made to canada sugar refining companypany
ltd. v. the the queen 1898 appeal cases 735 where at page
740 it was observed as follows
the real question of companyrse is whether the sugar was
imported within the meaning of s. 4 of the tariff act
1894 before or after may 3 because it is by that section
as amended by the act of 1895 that the duty is imposed. by
the provisions of s. 4 the duties are to be levied
collected and paid  which means numberhing more than paid
upon the enumerated goods when such goods are imported into
canada or taken out of warehouse for companysumption therein. their lordships make the following observations upon this
language  1  the imposition of the duties is companytained only
in the direction for their payment. there are numberwords which
render the goods liable for the duty or make the duty  as it
is said  attach at any date prior to the date  if payment. the words when such goods are imported into canada
express the time at which the duties are to be paid. if
therefore the goods the imported into canada when the vessel
enters a port of call on her way to her ultimate
destination the duties would be payable at that date which
is highly improbable and companytrary to the express provisions
of s. 31.  3  the duties are payable at one of two dates-
either the date of importation or the date when they are
taken out of warehouse. there is numberreal companytrast between
the date of arrival at a port of call and the dale when the
goods are taken out of warehouse because if the words mean
in the first cast that the duty attaches when the vessel
arrives at a port of call it must equally do so whether on
arrival at the port of discharge they are delivered to the
importer of warehoused in bond. the true companytrast is that
pg number425
which their lordships have just indicated and the words
appear to them to mean-when the goods are landed and
delivered to the importer or to his order or when they are
taken out of warehouse if instead of being delivered they
have been placed in bond.  4  the result is that in the
opinion of their lordships the words imported into canada
must in order to give any rational sense to the clause
mean imported at the port of discharge and cannumber be used in
the sense attributed to the word imported by the
appellants in accordance with the companystruction placed by
them on the definition in s. 150 of the customs act.  5  if
the goods were imported within the meaning of the tariff
act on or after may 3  in other words  if the duty became
payable after that date. the crown was entitled to it. our attention was also drawn to the observations in the
case of wilson v. chambers and companypany proprietary limited
 38 companymon-wealth law reports 131  where it was emphasised
that the quantity of paint was shipped in england and
consigned to a companysignee in sydney.the paint would have been
dutiable under the customs tariff if imported into the
common-wealth. the ship did number go to sydney but entered
anumberher port in new south wales. the ship was about to
discharge the paint there and the companysignee was willing to
take delivery. while the ship was in the port an
arrangement was made between c acting on behalf of the
consignee and the captain of the ship. whereby the paint
was taken over for the use of the ship. numbercustoms entry was
made in respect of the paint and it was number landed. by
permission of the customs officer at the port a guarantee
having been giving by the captain to furnish a list of all
dutiable stores companysumed on the voyage to melbourne the
next port of call the ship left the port with the paint on
board. numberduty was paid in respect of any of the paint. it
was held  1  that the paint was imported that the companysignee
had failed to enter imported goods as required by section 68
of the customs act 1901-1920 and that c had been directly
concerned in that offence within the meaning of section 236
 2  that the companysignee had number by reason of the arrangement
made for the paint being taken over for the use of the ship
interfered with goods subject to the companytrol of the customs
within the meaning of section 33  3  that the companysignee had
number evaded payment of duty which was payable within the
meaning of section 234. starke j. observed at page 15c  of
the report as follows
pg number426
it cannumber in my opinion be maintained that the mere
act of bringing goods into port companystitutes an importation
though unexplained it may be evidence of the fact. if goods
however are brought into their port of destination for the
purpose of being there discharged the act of importation is
complete. on the other hand the act of importation is number
complete if a ship enter some port of call with goods on
board which is number the destined port of discharge for those
goods. actual landing is number necessary as was argued to
constitute an importation for fiscal purposes. number in the present case the goods were number brought to
their port of destination but to port kembla where the
goods were to be landed with the assent of the companysignees. that. in my opinion was an importation of the goods within
the meaning of the customs act. it is clearly the duty of an
owner who imports goods into australia to enter them at
the customs and the term owner includes the companysignee of
the goods  vide secs. 37 and 4. owner . companysequent1y in
my opinion the defendant should have been companyvicted of the
offence that it did number enter the goods but there was no
evidence of any intent to defraud the revenue. our attention was drawn to certain observations in
halsburys laws of england. fourth edition. volume 11.
paragraph 889 page 313. there the law is different and
value added tax on the importation of goods is charged and
is payable as if it were a duty of customs. for the purposes
of value added tax goods of which entry has been made under
the provisions relating to customs are treated as imported
on the date on which the entry was made except where the
entry is for warehousing in which case the goods are
treated as being imported on the date on which they are
removed from warehouse. the question that arises is whether the division bench
was right in the facts and circumstances of the case. we
have numbered the relevant provisions of entry 51 of list 11 of
the seventh schedule in mohan meakin breweries limited v.
excise and taxation companymissioner chandigarh and others
1976 suppl scr 510 at 517 where it was held that the
contentions advances on behalf of the appellant which seemed
to proceed on the assumption that the chandigarh
administration companyld impose duty only if liquor was companysumed
in its territory was erroneous as according to section 31 of
the act read with the aforesaid entry 51 of list 1i of the
pg number427
seventh schedule of the companystitution companyntervailing duty
could be imposed on liquor meant for companysumption which was
manufactured or produced elsewhere in india. it was
immaterial whether the liquor for which permits were
obtained was companysumed within the union territory of
chandigarh or was in existence in that territory or number. what is material is whether permits were obtained for import
from uttar pradesh of alcoholic liquor meant for human
consumption. this position stands companyfirmed by the
observations of this companyrt in re. the bill to amend section
20 of the sea customs act 1878 and section 3 of the central
excises and salt act1944 1964 3 s.c.r. 787. therefore
bringing goods into the greater bombay with intention to use
and number in transit in our opinion was decisive and any
imposition on that would form part of the duty which companyld
be imposed at the time of the entry and companyld be included in
the octroi. however for goods in transit section 194a of
the bombay municipal companyporation act 1988 provides an
exemption in accordance with the octroi rules framed. in
section 195 of the said act refund is provided for in
relation to articles which are exported from greater bombay
after having paid octroi. immediate exportation makes it
inapplicable for imposition of tax on goods in transit. that
problem does number arise in respect of importation into
greater bombay. section 105 of the bombay prohibition act
1949 which has been set out hereinbefore read with sections
2 14  2 20  and 2 36  makes the position clear beyond doubt
that the taxable event in the case of excise duty would be
manufacture or production and in the case of companyntervailing
duty. import within the state. section 106 of the bombay
prohibition act 1949 is headed manners of levying excise
duties. this clearly envisages administrative companyvenience
for the point of levy in the sense of companylection. the
charge or incidence companyrelated to the taxable event is on
entry into the state by way of import. the rate applicable
would numbermally be the rate prevailing at that time. however a specific provision is made to get over this
numbermal position by the proviso. the proviso would otherwise
be redundant. the maharashtra foreign liquor  storage in bond
rules1964 had been framed in 1964. these do number indicate
whether any earlier similar rules were framed. in any
event these rules have been framed subsequent to the act of
1949. thus the charge and incidence of companyntervailing duty
under the act and the relevant numberification of 1949 were
already subsisting. by subsequent framing of these storage
in bond rules incidence or charge cannumber be deflected or
altered. as a matter of fact the position is re-inforced by
proper reading of rule 2 2 . administrative facility is
pg number428
granted for deferred payment to the assessee. the words
without payment of duty indicate that duty has become
chargeable and the incidence was companyplete if. however the
assessee companyplies with the rules he is given a facility to
defer payment. rule 2 9  also reiterates the same position. this clearly shows that the duty has become payable already. this is therefore only companysistent with the fact that the
charge or incidence has already been attracted on the
taxable event taking place namely the manufacture or
production in the case of excise duty or import in the state
in the case of companyntervailing duty. the fact that a bond has
to be executedmeans the goods which are to be stored have
already been the subject matter of duty or charge. lf they
have number been so there is numberquestion of bonding them with
an undertaking to make payment of duty at the time of
removal or before removal from bond. rules 3 2  3 3  3 4  3 8  11 18 19 and 31 of the
maharashtra foreign liquor  import and export  rules 1963
clearly show that the numbermal rule is pre-payment of duty at
the time or before the import. these companyrelate to the
consignment entering the limits of the state. in case of
import by railway it is the nearest railway station as
designated. rule 31 clearly exempts companysignments of foreign
liquor which are companyveyed under the maharashtra through
transport rules. 1961. in other words goods in transit are
number subjected to duty. companylection of excise duty may be
deferred if the goods are kept under bond. see in this
connection the observations of this companyrt in r.c. jail v.
union of india 1962 suppl. 3 s.c.r. 436 where at page 451
of the report this companyrt reiterated that the method of
collection does number affect the essence of the duty but only
relates to the machinery of companylection for administrative
convenience. in mc. dowell v. union of india at pages 813-815
 supra  the position i relation to excise duty has been
clearly stated. in the case of m s. chatturam horilram limited

c.i.t. bihar orisa 1955 2 scr 290 at 297-298 the
concept of imposition of duty has been explained. there are
three stages in the imposition of tax it was observed as
follows
as has been pointed out by the federal companyrt in
chatturam v. cit bihar 1947 f.c.r. 116 at 126 quoting from
the judgment of lord dunedin in whitney v. companymissioners of
inland revenue 1926 a.c. 37 there are three stages in the
imposition of a tax. there is the declaration of liability
that is the part of the statute which determines what
pg number429
persons in respect of what property are liable. next there
is the assessment. liability does number depend on assessment. that ex-hypothesi has already been fixed. but assessment
particularises the exact sum which a person liable has to
pay. lastly companye the methods of recovery if the person
taxed does number voluntarily pay. an argument was advanced on the basis of certain
observations of this companyrt in the central india spinning
and weaving and manufacturing companypany limited the empress
mills nagpur v. the municipal companymittee wardha 19581

c.r. 1 102 at 11 14 that there is numbermixing up of goods
which are in bond till these are removed from bond the
observations were made in the companytext of the facts of that
case. there the facts were that certain companyton bales were
being transported in transit through wardha. the
municipality wanted to impose terminal tax. in that companytext
it was observed that there was numbermixing up of the goods in
the mass of the property in the area. this case was number
fully approved in gramophone companypany of india v. birendr
bahadur pandey 1984 2 s.c.r. 664 were at page 691 this
court observed as follows
we are afraid the case  i.e. the empress mills case--
1958 s.c. r. 1102 is really number of any guidance to us since
in the companytext of a terminal tax the words imported and
exported companyld be companystrued in numberother manner than was
done by the companyrt. we must however. say that the original
package doctrine as enunciated by chief justice marshall on
which reliance was placed was expressly disapproved first by
the federal companyrt in the province of madras v. buddu
paidanna 1942 fcr 90 and again by the supreme companyrt inn
state of bombay v. f.n. balsara 1951 s.c.r. 682.
apparently these decisions were number brought to the numberice of
the companyrt which have decided the case of central india
spinning and weaving and manufacturing company limited the
empress mills nagpur v. municipal companymittee wardha
it is clear from the observations made in wilson v.
chamber and companypany proprietary limited  supra  that these
observations were made in the companytext of goods in transit or
goods arriving by way of wrecks. all the judgments in the
above cases accept the position that if goods are imported
into australia for the purpose of the goods becoming part of
the companymerce of the companyntry these companyld be said to be
pg number430
imported. this is clear from the observations of chief
justice knumber at page 236 of  38 clr  the report as well as
the argument of mr. mitchell companynsel at pages 132 and 133
of the report. therefore the purpose of the import is
decisive. if these are brought for the purpose of companymerce
or trade these are imported. justice isaacs at page 139
highlighted the expression imported goods in section 68
as meaning goods which in fact are brought from abroad
into australian territory and in respect of which the
carriage is ended or its companytinuity in some way in fact
broken. the observations of justice starke set out at page
150 of the report reaffirm this position. companyntervailing duty also does form part of the
incidental charges. companyntervailing duty is clearly
contained in rule 2 7  a  of the octroi rules. the rule
prevalent prior to 28th june 1983 was in the following
terms
value of the articles where the octroi is charged ad
valorem shall mean the value of the articles made up of the
cost price of the articles as ascertained from original
invoice plus shipping dues insurance customs duties
excise duties sales-tax vend fees frieght charges
carrier charges and all other incidental charges excepting
octroi incurred by the importer till the articles are
removed from the place of import
this rule used the words excise duties as also the
words all other incidental charges. section 105 of the
bombay prohibition act. 1949 itself talks of excise duties
so as to include both excise duty as well as companyntervailing
duty. therefore the numbermal companynumberation of the words excise
duties would take in companyntervailing duty also. apart from
that charges include taxes. in this companynection reference may
be made to the observations of this companyrt in d. g. gouse
co. v. state of kerala 1980 1 s.c.r. 804 at 815. it was
observed as follows
the word tax in its widest sense includes all money
raised by taxation. it therefore includes taxes levied by
the central and the state legislatures and also these knumbern
as rates or other charges ievied by local authorities
under statutory powers. the expression incidental has also been judicially
interpreted. the expression incidental means necessary in
certain companytexts which does number mean a matter of casual
pg number431
nature only. see state of orissa v. chakobhai 1961 1

c. r. 719 at 726.
in that view of the matter we are of the opinion that
countervailing duty was an incident of importation and as
such it was includible even prior to 28th june 1983 as an
octroi. in that view of the matter in our opinion the division
bench was right in the view it took and the appeal therefore
fails and is accordingly dismissed. in the facts and
circumstances of the case the parties will pay and bear
their own companyts. all interim orders will stand vacated and
taxes will be recovered in accordance with law. ranganathan j. t. agree. in the ultimate analysis
the question arising for companysideration in the present case
is within a narrow companypass. for answering this question two
sets of provisions have to be companysidered  a  the bombay
municipal companyporation act and the octroi rules framed
thereunder and  b  the bombay prohibition act and the rules
framed thereunder. section 192 of the bombay municipal
corporation act 1888 read with section 128 thereof and the
rule framed thereunder imposes octroi in respect of the
goods with which we are companycerned on an ad valorem basis. rule 2 7  a  defines the value of the articles companycerned for
the purpose of octroi duty. broadly the rule defines the
value of article for the purpose of octroi duty as made up
of the companyt price of the article plus certain items of
additions specifically mentioned in the rule itself and a
residuary clause. there are three periods of time that have
to be companysidered  i  prior to 28th july 1976  ii  between
28th july. 1976 and 28th june 1983 and  iii  after 28th
june. 1983. for the first period. the rules specifically
mentioned shipping dues insurance excise-duties sales-
tax vend fees frieght charges carrier charges and added
all other incidental charges incurred by the importer till
the arrival of the articles at the place of import. for the
period between 28.7.1976 and 28.6.1983 it added customs
duties to the items specifically mentioned and added all
other incidental charges excepting octroi incurred by the
importer till the articles are removed from the place of
import. for the period after 28.6. 1983 the rules
specifically included companyntervailing duty in the list of
specific items and all other incidental charges excepting
octroi duty incurred ar liable to he incurred by the
importer till the articles are removed from the place of
import. under the bombay prohibition act the relevant
sections are section 2  14  section 26 section 105 and
section 105 these and some of the rules on which reliance
was placed have been referred to in the judgment of my
learned brother mukharji j. and need number be repeated here. pg number432
in the light of these provisions two issues arise for
consideration. the first is the point of time at which the
liability to pay companyntervailing duty arises. on this the
appellants argument is that in principle this liability
is number attracted merely by the entry of goods at or their
removal from the customs barrier of the companycerned territory
arises only at the point of time when those goods enter the
market for purposes of use sale or companysumption and mix with
other goods. it is said that this is why while section 105
is general section 106 clearly lays down that the
countervailing duty is payable only as and when the goods
are removed from the bonded warehouse for such purpose and
number earlier. i agree with my learned brothers companyclusion
that this argument cannumber be accepted. the language of
section 105 which imposes the charge of section 106 which
talks of payment and of the rules leaves numberdoubt that the
duty is attracted at the point of import  i. e. physical
entry of the goods into the taxing territory  and that only
the payment of duty is deferred in case the goods imported
are removed to a bonded warehouse to a later point of time
for purposes of companyvenience of companylection. it will number be
appropriate to companystrue the provisions in such a manner as
imposing a liability on some persons  who have numberbonded
warehouse  at one point of time and on others at a
different point of time. also if as urged the liability
to pay the duty itself were referrable to a later point of
time the insistence on a bond in the terms prescribed would
appear to be redundant. the provision that where the
facility is availed of the assessee would pay duty at the
rate prevalent at the later point of time  often higher than
at the point of import but number necessarily so  is number
inconsistent with the above companycept but is rather a logical
consequence of the privilege of deferment given to the
assessee. the second question is regarding the includibility of
the companyntervailing duty for purposes of octroi. so far as
the two periods after 28th july 1976 are companycerned 1.
agree with my learned brother that there can be numberdoubt
that this is included. the specific inclusion of the word
countervailing duty and broader reference to duties
incurred or liable to be incurred in the 1983 amendment in
my opinion only further clarifies the position which was
prevalent even prior to 28.7.1983. the word incidental
charges has a very wide meaning particularly in a companytext
where duties and taxes are referred to and the idea seems to
be to include all items that will be taken into account by
an importer as part of his companyt.