The Central India Spinning & Weaving & Manufacturing Co. v. Municipal Committee, Wardha

Core point: Goods that only pass through a municipality on a public road, without unloading or reloading there, cannot be charged terminal tax. They are simply in transit.

The Supreme Court held that the cotton bales moving from Yeotmal to Nagpur via a road through Wardha did not enter Wardha for import or export purposes. So, Wardha’s terminal tax demand was unlawful, and the assessee was entitled to relief.

1. Can terminal tax be levied on goods that only pass through Wardha’s limits, with no unloading or reloading in Wardha?
2. Is the Municipal Committee liable to refund the tax collected on such through-traffic goods?

• Favour the taxpayer: If a tax law allows two reasonable meanings, choose the one that helps the citizen, not the one that adds burden.
• Limit broad words: Wide words in a statute are read in line with the Act’s purpose; they do not stretch beyond the object of the law.

The Supreme Court ruled that no terminal tax was chargeable. The goods never truly entered Wardha for import/export purposes; they were only in transit. The Court set aside the High Court’s view and granted relief to the company.

• Meaning of “imported into” / “exported from”: These terms require more than mere entry/exit. Goods must integrate with the local mass of goods.
• Transit goods: Articles only passing through a municipal area are not liable to terminal tax.
• Interpretation: Between two fair readings of a tax statute, the one favouring the taxpayer prevails.

This ruling protects through-traffic—transporters using public roads to cross a town—from casual municipal levies. It keeps trade routes open and costs predictable.

• Mere passage ≠ import/export.
• Transit goods are outside terminal tax net.
• Broad words are cut to fit the Act’s purpose.
• Doubt in tax law goes to the citizen.
• Refund follows when levy lacks authority.

Mnemonic: “Pass-Through, No-Tax, Mix-Matters” (PNM).

1. Pass-Through: Goods only cross the town.
2. No-Tax: Transit is not taxable.
3. Mix-Matters: Tax only if goods mix with local stock.

Terminal Tax

A levy on goods when they enter or leave a municipal area as part of trade.

Transit Goods

Goods only passing through an area without stopping for trade.

Integration (Mixing)

Goods becoming part of the local market stock.