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2012 Supreme(Kar) 345
High Court of Karnataka
D.V. SHYLENDRA KUMAR & B. MANOHAR
State Bank of Karnataka
Versus
M/s. R.K. Powergen Pvt Ltd & Others
C.R.P. No.147 of 2011 C/w C.R.P. Nos.295 & 333 of 2010, 294 & 338 of 2010, 235 & 289 of 2010, 293 & 334-337 of 2010, 292 & 308-309 of 2010, 165 & 166-167 of 2011
Decided on : 28-06-2012
For the Appellant: Smt S. Sujatha, AGA.
For the Respondents:T.N. Keshavamurthy, Advocate.
Headnote:
The Karnataka Appellate Tribunal erred in allowing the assessee's appeals for assessment years 2001-02, 2002-03, 2003-04, 2004-05, and 2005-06, holding that the assessee was not liable to pay tax under the Karnataka Tax on Entry of Goods Act 1979 ("the Act") for goods such as twist drills, cutters, reamers, taps, etc. which the assessee had caused entry into the local area for use, consumption, or sale. The Supreme Court had affirmed the Tribunal's decision in the assessee's case for the assessment year 2000-01, holding that the assessee was liable to pay tax under the Act. The Tribunal erred in relying on the Supreme Court's decision in Commissioner of Sales Tax v. Rewa Coal Fields Ltd., and Another, which was not relevant to the present case. The Tribunal also erred in holding that the subject goods were consumables and therefore not accessories/parts of machines, as the Supreme Court had held in Annapoorna Carbon Industries Company v. State of Andhra Pradesh that consumables could also be accessories/parts of machines. The Tribunal's decision was perverse and not sustainable in law.
Fact of the Case:
The assessee, a company engaged in the manufacture and sale of machines and machine tools, caused entry of goods such as twist drills, cutters, reamers, taps, etc. into the local area by way of stock transfers from its manufacturing place/Head Office to its branches within the local area for sale and consumption. The assessee claimed that the goods were not liable to tax under the Act as they were consumables and therefore not accessories/parts of machines. The Assessing Authority and the First Appellate Authority held that the goods were liable to tax as they were goods covered under Entry-52 of Schedule - I to the Act. The Tribunal allowed the assessee's appeals, holding that the goods were consumables and therefore not accessories/parts of machines.
Finding of the Court:
The Tribunal erred in allowing the assessee's appeals for assessment years 2001-02, 2002-03, 2003-04, 2004-05, and 2005-06, holding that the assessee was not liable to pay tax under the Act for goods such as twist drills, cutters, reamers, taps, etc. which the assessee had caused entry into the local area for use, consumption, or sale. The Supreme Court had affirmed the Tribunal's decision in the assessee's case for the assessment year 2000-01, holding that the assessee was liable to pay tax under the Act. The Tribunal erred in relying on the Supreme Court's decision in Commissioner of Sales Tax v. Rewa Coal Fields Ltd., and Another, which was not relevant to the present case. The Tribunal also erred in holding that the subject goods were consumables and therefore not accessories/parts of machines, as the Supreme Court had held in Annapoorna Carbon Industries Company v. State of Andhra Pradesh that consumables could also be accessories/parts of machines. The Tribunal's decision was perverse and not sustainable in law.
Issues: Whether the Tribunal was justified in allowing the assessee's appeals for assessment years 2001-02, 2002-03, 2003-04, 2004-05, and 2005-06, holding that the assessee was not liable to pay tax under the Act for goods such as twist drills, cutters, reamers, taps, etc. which the assessee had caused entry into the local area for use, consumption, or sale.
Ratio Decidendi: The Tribunal erred in allowing the assessee's appeals for assessment years 2001-02, 2002-03, 2003-04, 2004-05, and 2005-06, holding that the assessee was not liable to pay tax under the Act for goods such as twist drills, cutters, reamers, taps, etc. which the assessee had caused entry into the local area for use, consumption, or sale. The Supreme Court had affirmed the Tribunal's decision in the assessee's case for the assessment year 2000-01, holding that the assessee was liable to pay tax under the Act. The Tribunal erred in relying on the Supreme Court's decision in Commissioner of Sales Tax v. Rewa Coal Fields Ltd., and Another, which was not relevant to the present case. The Tribunal also erred in holding that the subject goods were consumables and therefore not accessories/parts of machines, as the Supreme Court had held in Annapoorna Carbon Industries Company v. State of Andhra Pradesh that consumables could also be accessories/parts of machines. The Tribunal's decision was perverse and not sustainable in law.
Final Decision: The revision petitions are allowed, the order passed by the Tribunal is set aside and the order of the Assuring Authority as affirmed by the Appellate Authority is restored.
RE: CRP.NO.293/2010 c/w CRP Nos.334-337/2010
1. State of Karnataka is in revision before us under Section 15-A of the Karnataka Tax on Entry of Goods Act 1979 (‘the Act’ for brevity) questioning the correctness and legality of the order passed by the Karnataka Appellate Tribunal, Bangalore on 29-03-2012 in STA Nos.1614-1618/2008.
2. Under the impugned order by the Tribunal had allowed the appeals of the assessee and had opined that the respondent-assessee has no tax liability in respect of the goods such as twist drills, cutters, reamers, taps etc which the assessee had caused entry into the local area for use, consumption or sale. Tribunal so opined and reversed the orders of the Assessing Authority and the First Appellate Authority, who had taken the view that these goods brought into the local area by the assessee for use, consumption or sale, attract the tax as goods covered under Entry-52 of the I Schedule to the Act. Five appeals before the Tribunal related to the assessment years 2001-02, 2002-03, 2003,04, 2004-05 and 2005-06. This court at the time of admission of these revision petitions had formulated the following questions of law for examination, which arise out of the order of the Tribunal questioning the correctness or otherwise are required to be examined:
(i) Whether the Tribunal was justified in allowing the appeal of the respondent particularly in the facts and circumstances of the case?
(ii) Whether the Tribunal is right in holding that the part and accessories are consumable contrary to the view taken by the Honorable Supreme Court in the case of Addison & Co.?
3. The assessee is a Company, engaged in manufacture and sale of machines and machine tools. It has its manufacturing Unit at Chennai and causes entry of the subject goods into local area by way of stock transfers from its manufacturing place/Head Office to its branches within the local area for sale and consumption.
4. It appears, the question of taxability of these goods as goods covered under Entry-52 of Schedule - I to the Act had been the bone of contention between the assessee and the revenue almost ever since the Act has been legislated and it also transpires that the assessee had experienced fluctuating fortunes in these matters and while the assessee was quite successful in avoiding liability if any under the Act for the assessment years prior to 2000-01. The question of taxability or otherwise of the very goods of the assessee under the provisions of the Act had engaged the attention of this Court in CRP No.457/2006, a like revision petition for the assessment year 2000-01. But that revision petition was at the instance of the assessee as it transpires that the Tribunal had opined that the assessee was liable to pay tax under the provisions of the Act. This revision petition was disposed of by this Court in terms of the order dated 14th September 2007 reported in 14 VST 182 affirming the view taken by the Tribunal and dismissing the revision petition filed by the assessee.
5. In doing so, this court had an occasion to examine in some detail the meaning and scope of the words "Parts and Accessories" thereof to all kinds of machinery and had referred to and relied upon the judgments of the Honorable Supreme Court rendered in the case of ANNAPOORNA CARBON INDUSTRIES COMPANY versus STATE OF ANDHRA PRADESH reported in 37 STC 378 and also in the case of MEHRA BROTHERS versus JOINT COMMISSIONER OF INCOME TAX reported in 80 STC 233.
6. Judgment of this Court in the case of the assessee for the assessment year 2000-01 was the subject matter of other appeals before the Honorable Supreme Court and granting leave to the assessee against the judgment of this court, it was numbered as Civil Appeal No.1311/2009 and the revision petition came to be dismissed in terms of the order dated 26th February 2009 and reported in [(2009)23 VST 5 (SC)].
7. However, while the view that subject tools are in the nature of accessories to machines and therefo
