Entry tax on diesel continues at the notified rate despite use as a raw material or input in manufacturing.

Diesel brought into a local area remained liable to entry tax where the charging notification covered scheduled goods at the notified rate, and its use as a raw material for generating electricity did not by itself create an exemption. The later amended notification also made clear that goods specified in the earlier notification would continue to bear the notified rate even when brought in as raw materials, component parts or inputs. On that construction, diesel stayed taxable at four per cent notwithstanding its use in manufacture, and the contrary view treating it as exempt was incorrect.

---

---

Issues: (i) Whether diesel brought into the local area was exempt from entry tax merely because it was used as a raw material for generating electrical energy. (ii) Whether Notification No. FD 37 CET 2000(5) dated 31 March 2000 required diesel specified in Notification No. FD 37 CET 2000(3) dated 31 March 2000 to be taxed at the notified rate even when brought in as raw materials, component parts or inputs.

Issue (i): Whether diesel brought into the local area was exempt from entry tax merely because it was used as a raw material for generating electrical energy.

Analysis: Section 3(1) of the Karnataka Tax on Entry of Goods Act, 1979 empowered the State to levy entry tax on scheduled goods at the rate notified by it. For the relevant assessment year, diesel was covered by the notification prescribing tax at the rate of four per cent. The Court held that the assessee's use of diesel for generating electricity for manufacture did not take the goods out of the charging notification, and the Tribunal had incorrectly treated the diesel as of the levy on the footing that it was used as a raw material.

Conclusion: The diesel was not exempt from entry tax on the ground that it was used as a raw material, and the Tribunal's contrary view was unsustainable.

Issue (ii): Whether Notification No. FD 37 CET 2000(5) dated 31 March 2000 required diesel specified in Notification No. FD 37 CET 2000(3) dated 31 March 2000 to be taxed at the notified rate even when brought in as raw materials, component parts or inputs.

Analysis: The amended notification expressly provided that goods specified in Notification No. FD 37 CET 2000(3) were to bear the rate fixed in that notification notwithstanding that they were brought into the local area as raw materials, component parts and inputs. On that plain language, diesel continued to attract tax at four per cent, and the Tribunal erred in ignoring the overriding effect of the later notification.

Conclusion: The later notification governed the levy and diesel remained taxable at the notified rate notwithstanding its use as raw material or input.

Final Conclusion: The revision succeeded, the assessee did not obtain exemption from entry tax on diesel, and the Tribunal's relief on that item was set aside.

Ratio Decidendi: Where a taxing notification expressly applies its notified rate to specified goods notwithstanding their entry as raw materials, component parts or inputs, the goods remain taxable at that rate and cannot be excluded by characterising their end use in manufacture.

---