1. The dispute in these cases relates to the levy of Dharat under Section 77 (2) read with Section 284 of the Municipal Act. Whereas. Section 77 provides for the power of Municipal Council to impose taxes within the municipal area, Section 284 provides for the power of the Govt. to impose similar taxes in respect of any areas declared to be notified area under Section 283 of the Act. Under Clause (ii) of Sub-section (2) of Section 77 the Municipal Council is authorised to impose octroi on the animals and goods brought within the octroi limits, for consumption, use or sale therein. The Notified AreaCommittee, R. S. Pura has been authorised by the Govt. 'of lavy a tax called 'Dharat' resembling 'Octroi' on animals and goods brought within the notified area limits for consumption, use or sale therein.
2. The petitioners are the owners of the rice mills situate within the limits of Notified area R. S. Pura. In the course of their business, the petitioners purchase paddy and bring it inside the notified area limits for the purpose of converting it into rice in their respective mills. They forward the resultant rice for sale to Jammu. The Notified Area Committee, R. S. Pura recovers Dharat on the paddy so brought by the petitioners inside the notified area. The petitioners have challenged the recovery on the ground that it is impermissible under the Municipal Act. The relevant part of Section 77 of the Act reads:--
'(2) The Council may, with the previous sanction of the Government, impose:
(i) a tax on entertainments in a Municipality.
(ii) an octroi on animals or goods or both brought within the octroi limits for consumption or use therein, or a terminal tax on goods imported or exported from the terminal tax limits:
Provided that a terminal tax and an octroi shall not be in force in any Municipality at the same time, and,
(iii) any other tax.'
3. For the petitioners, it has been contended that the paddy and rice are the same and that the petitioners cannot be said to have used or consumed paddy by merely subjecting it to the process of dehusking at their mills and as such, no Dharat is leviable on the paddy brought by the petitioners inside the notified area with the object of debusking it at their mills and sending the resultant rice for sale to Jammu. In support of this contention, reliance has been placed on the decision of the Supreme Court in the case of Hira Lal Thakorlal Dalai v. Broach Municipality (AIR 1976 SC 1446). In that case, the controversy concerned goods which were 'imported' within the octroi limits of the Municipality but came to be 'exported' therefrom. The court relying on its earlier decision in Burma Shell case (AIR 1963 SC 906) opined that such goods were not liable to levy of octroi duty. In Burma Shell case it was held that the expressions 'consumption'' and 'use' together 'connote the bringing in of goods and animals not with a view to taking them out again but with a view to their retention either for use without using them UP or for consumption in a manner which destroys wastes, or uses them up.'
4. The question inevitably arises whether it can be said that the petitioners consume the paddy when they convert it into rice by merely subjecting it to the process of dehusking at their mills. This was exactly the question that arose in the case of State of Karnataka v R. Raghurama Shetty (AIR 1981 SC 1206). In that case, the respondents were the owners of the rice mills in the State of Karnataka and, were registered dealers under the Karnataka Sales Tax Act, 1957. In the course of their business, they purchased paddy and after milling the paddy soldthe resultant rice. During the assessment years the respondents purchased paddy from agriculturists who were not liable to pay the sale tax. The Assessing Authority under the Act levied an the respondents in each of these cases purchase tax on the purchase turnover of the property under Section 6 (i) of the Act, which was in the following terms:
'6. Levy of purchase tax under certain circumstances.-- Subject to the provisions of Sub-section (5) of Section 5 every dealer who in the course of his business purchases any taxable goods in circumstances in which no tax under Section 5 is leviable on the sale price of such goods, and,
(i) either consumes such goods in the manufacture of other goods, few sale or otherwise or disposes of such goods in any manner other than by way of sale in the State or,
(ii) shall be liable to pay tax on the purchase price of such goods at the same rate at which it would have been leviable on the sale price of such goods under Section 5.'
The respondents challenged the validity of the assessment. Their contention was that the paddy and the rice being the same, it could not be said that they had manufactured 'other goods' out of paddy and hence Section 6 (i) was not attracted. The contention was accepted by the High Court. On appeal, their Lordships of the Supreme Court expressed a contrary view and held that the paddy and rice wore two distinct commodities. Their Lordships further observed (at p. 1208):--
'There is no merit in the submission made on behalf of the Assesses that they had not consumed paddy when they produced rice from it by merely carrying out the process of dehusking at their mills. Consumption in the true economic sense does not mean only use of goods in the production of consumers goods or final utilization of consumers' goods by consumers involving activities like eating of food, drinking of beverages wearing of clothes or using an auto-mobile by its owner for domestic purposes. A manufacturer also consumes commodities which are ordinarily called raw materials when he produces semifinished goods which have to undergo further process of production before they can be transformed into consumers'goods. At every such intermediate stage of production, some utility or value is added to goods which are used as raw materials and at every stage the raw materials are consumed.'
It necessarily follows that the petitioners must be deemed to consume paddy once they subject it to the process of dehusking at their mills and produce rice from it and as such they will foe liable to pay Dharat on the paddy brought inside the limits of the notified area, R. S. Para, for dehusking at their respective mills, irrespective of the fact whether the resultant rice is intented to be sold within or outside the limits of notified area. Consequently the petitioners cannot escape the liability merely because the rice produced from the paddy dehusked at their mills inside the notified area is forwarded for sale to Jammu. The argument to the contrary must fail.
5. The result therefore, is that these writ petitions fail. They are dismissed accordingly. The interim order is hereby vacated in each of these cases. The respondent Committee shall be at liberty to recover the arrears of tax falling due under such order from the respective petitioner or his surety or both.
6. There shall be no order as to costs.
7. I agree.