TaxTMI 
TaxTMI 
2016 (9) TMI 409
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.... covered by the said Explanation would entitle them to pay entry tax at the rate of 1% and not 2%. In these appeals, we are concerned with three assessment years 1994-1995, 1995-1996 and 1996-1997. 2. The question that arises for decision in this appeal is whether "packing materials" which enter the local area for consumption therein, that is for packing tea that is manufactured by the appellant, can be said to be raw material, components, or inputs used in the manufacture of tea. In order to answer this question, it is necessary to first set out the relevant provisions of the Karnataka Entry Tax Act. They are as follows: "2. Definitions.- (A) In this Act, unless the context otherwise requires,- (4a) goods means all kinds of moveable property (other than newspapers, actionable claims, stocks and shares and securities) and includes livestock; (7) "Schedule" means a schedule appended to this Act; (8) "tax" means tax leviable under this Act; (8a) 'Value of the goods' shall mean the purchase value of such goods that is to say, the purchase price at which a dealer has purchased the goods inclusive of charges borne by him as cost of transpo....
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....boxes, folding cartons, paper bags, carrier bags and card board boxes, corrugated board boxes and the like. (ii) tin plate containers (cans, tins and boxes) tin sheets, aluminium foil, aluminium tubes, collapsible tubes, aluminium or steel drums, barrels and crates and the like ; (iii) plastic, poly-vinyl chloride and polyethylene films bottles, pots, jars, boxes, crates, cans, carboys, drums, bags and cushion materials and the like ; (iv) wooden boxes, crates, casks and containers and the like; (v) gunny bags, bardan (including batars), hessian cloth, and the like ; (vi) glass bottles, jars and carboys and the like ; (vii) laminated pacing materials such as bitumanised paper and hessian based paper and the like; 80. Raw materials component parts and inputs which are used in the manufacture of an intermediate or finished product." 3. Under Section 11A of the Act, a Notification dated 31.3.1993, exempting raw materials, component parts, and inputs entering a local area for use in the manufacture of an intermediate or finished product, was promulgated. It reads as under: "Entry tax on raw materials, etc. for u....
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....ification whichever is later. Explanation - (1) For the purpose of this notification "a new industrial unit" shall have the same meaning assigned to it in Notification No. FD 239 CSL 90(1) dated 19th June, 1991, issued under Section 8-A of the Karnataka Sales Tax Act, 1957. (2) The provisions of the notification shall not apply to a unit to which the provisions of Notification No. FD 239 CSL 90(1) dated 19th June, 1991 issued under Section 8-A of the Karnataka Salex Tax Act, 1957 shall not apply. (3) The procedure specified in Notification No. FD 239 CSL 90(1), dated 19th June, 1991 issued under Section 8-A of the Karnataka Sales Tax Act, 1957 for claiming exemption under that notification shall mutates mutandis apply to a industrial unit claiming exemption under this notification." 4. By a notification dated 31.3.1994, various goods which entered a local area were charged at different rates of entry tax. This notification was struck down by the High Court as violating Article 301 of the Constitution, and hence, the State Government came out with notification dated 23.9.1998 to cure the defects pointed out by the High Court, and was for the period date....
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....oods as may be notified by the State Government from time to time. Explanation II - If any of the goods liable to tax under this Act are brought into a local area for use or consumption as raw materials, component parts and inputs in the manufacture of an intermediate or finished product, the tax payable on such goods shall be at the rate of one percent." 5. All the authorities under the Entry Tax Act i.e. the Assessing Authority, the First Appellate Authority and the Karnataka Appellate Tribunal have held that packing material cannot be regarded as raw material, component parts or inputs used in the manufacture of finished goods and, therefore, in the context of the Entry Tax Act read with Schedule I, such packing material is neither exempt nor chargeable at the rate of 1% on a true construction of the aforesaid notifications of 1993 and 1998. The High Court in turn has dismissed the revision petitions filed under the statute by the assessee following their own judgment in Nestle India Ltd. v. State of Karnataka, a Division Bench judgment of the Karnataka High Court dated 22.3.2006. This is how the appellants have come before us in the present civil appeals. 6. Shri....
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....st important and that decisions relatable to the Central Excise Act and to Sales Tax statutes would not therefore apply. His primary argument was that Schedule I of the Entry Tax Act itself made a clear distinction between packing materials, on the one hand, and raw materials, component parts and inputs, on the other, the Schedule making it clear that they were distinct and separate goods. He further adverted to the definition of the expression "goods" contained in the Entry Tax Act and argued that unlike in the Central Excise Act and in Sales Tax statutes, goods need not be marketable, the definition confining goods to "movable property" without more. He also argued that adverting to Section 5A of the Karnataka Sales Tax Act would be of no help in the facts of the present case inasmuch as we are not concerned with "industrial inputs" but inputs as understood by the Entry Tax Act read with Schedule I. According to him all the judgments cited by the appellants were distinguishable in that none of them pertain to any entry tax statute but were all under the Central Excise Act or Sales Tax statutes. 8. Having heard learned counsel for the parties, it is important to go back to a fe....
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.... reading of this definition that marketability does not appear to be a sine qua non for something to qualify as "goods" under the Entry Tax Act, unlike the Central Excise Act, and this basic fact will have to be kept in view while dealing with some of the judgments that have been cited before us. This is for the reason that anything that is tangible, without more, and enters a local area for consumption, sale or use therein is taxable, the taxable event being 'entry' and not 'manufacture' of goods, which, as has been noticed hereinabove, brings in the concept of marketability in the context of a duty of excise, which is absent in the context of entry tax. We might also add that Section 2(A)(8a) wherein the "value of the goods" is defined, also makes a distinction between "goods" as such, and "packing material", making it clear that charges borne by a dealer as cost of packing would have to be included in the "value of goods". In the context of the Entry Tax Act, the difference between 'goods' used in the manufacture of goods and "packing material" is also brought out by Schedule I. Packing materials are separately defined in Entry 66. On the other hand, raw materials, component par....
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....t clear that in no case can packing materials be said to be raw materials, component parts or inputs used in the manufacture of finished goods. For this reason alone we find it difficult to construe the notification dated 23.9.1998 in the manner suggested by the appellants. 13. Even otherwise, there is no such Explanation II contained in the exemption notification dated 31.3.1993. This being the case, if we were to accept the case of the appellants, they would be liable to tax at the rate of 1% under the 1998 notification but would not be exempt under the 1993 notification, thus rendering the same packing material liable to tax at the rate of 2% in the case of the Dharwad unit and 1% in the case of all other units. This would lead to an anomalous situation which can best be avoided by not accepting the argument on behalf of the appellants. 14. Equally, the argument based on Section 5A of the Karnataka Sales Tax Act is fallacious in that it is only for the purpose of "industrial inputs" that packing materials are included, and forms a separate scheme of taxation under the Sales Tax statute. We cannot accede to the argument that de hors the context of the Entry Tax Act, we shou....
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....omotive Co. Ltd. (TELCO) v. State of Bihar, (1994) 6 SCC 479, this Court had to deal with a notification issued by the State of Bihar in the context of sales tax. The expression "raw material" and "input" was used in the notification. This Court held, following J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. S.T.O., (1965) 1 SCR 900, that the expression "in the manufacture of goods" would normally encompass the entire process carried on by the dealer of converting raw materials into finished products. The precise question before this Court was whether products finished in themselves, such as tyres, tubes, batteries, etc., when purchased by the appellant for use in the manufacture of vehicles, could be said to be inputs. This Court held that as a vehicle cannot be operative without tyres, tubes, and batteries, obviously they were inputs in the sense of the dictionary meaning of what is "put in". Both the fact situation and the ratio of this judgment are far removed from the facts in the present case inasmuch as it is nobody's case that without the packing material manufactured tea cannot be said to exist as a finished product, it being "moveable property" and therefore "goods" unde....