Karnataka High Court
Assistant Commissioner Of Commercial ... vs Mysore Industrial Supplies on 20 June, 1996
Equivalent citations: ILR1996KAR3000
Author: H.N. Narayan
Bench: H.N. Narayan
JUDGMENT
1. These appeals are filed by the Assistant Commissioner of Commercial Taxes-cum-Entry Tax as also the Commissioner of Commercial Taxes, Karnataka, Bangalore, against the judgment of a learned single Judge dated July 23, 1992 in Writ Petition No. 4878 of 1988 and connected cases. The question involved in these appeals is as to whether "ball-bearings" would come within the purview of entry 7 of the Schedule to the Karnataka Tax on Entry of Goods Act as amended by Act 38 of 1984 with retrospective effect from April 1, 1982. Assessment years in question are from 1982-83 to 1986-87.
2. The writ petitioners in these cases are dealers in machinery parts and in the course of their business, they import ball-bearings into local area and thereafter sell the same. The appellants levied taxes on ball-bearings under the Act holding that it is covered by entry 7 of the Schedule to the Act. In making assessment as above, the assessing authorities have relied on a circular issued by the Commissioner and on a letter sent by the Ministry of Industry to the Secretary, Merchants' Association. The clarification issued by the Commissioner is to the effect that the ball-bearings are taxable at the rate of 2 per cent from April 1, 1982 under entry 7 of the Schedule as accessories to "industrial machinery" on its entry into local area irrespective of their use. Relying on the order of the Commissioner mentioned above, ball-bearings have been assessed to tax under the Act.
3. The case of the writ petitioners was that, ball-bearing would not fall within entry 7 as they are not industrial machinery or parts or accessories thereof. They contended that the ball-bearings, though could be characterised as parts or accessories or part of machinery, they could not be treated as industrial machinery nor parts or accessories thereof and accordingly, it is outside the purview of entry 7 of the Schedule to the Act.
4. On the other hand, it was contended by the State that the ball-bearings would come within the purview of entry 7 of the Act as they are parts or accessories of industrial machinery and accordingly assessable to tax.
5. The learned singe Judge came to the conclusion that the ball-bearings are not used in industry alone. It is used in ordinary household appliances and vehicles and even toys. The learned Judge further held that it may be possible that such appliances would be used even in industrial machinery but it cannot be said that it is in general use in industrial machinery so as to attract tax under the Act. Relying on a decision of this Court in Assistant Commissioner of Entry tax (Assessment-I) v. Mysore Sale Corporation [1992] 84 STC 461, wherein, a question arose as to whether sewing machines can be brought to tax under this entry. In that case, this Court held that, merely because such sewing machine is capable of being used in industrial unit, for the purpose of the Act, it does not attract tax under entry 7 as it is capable of being used for other purpose as well and it could not be definitely said that the said articles are generally used in industrial machinery alone. Following that decision, the learned singe Judge held that, ball-bearings would not come within the purview of entry 7 of the Act and accordingly allowed the writ petitions, quashed the clarification issued by the Commissioner as also the assessment orders made in each of these cases. The authorities under the Act have come up in appeal against the above decision.
6. The learned Government Advocate contended that the learned single Judge was not justified in entertaining the writ petitions. As the petitioners in these cases had an effective alternate remedy of moving the authorities under the Act by way of appeal, this Court should not have entertained the writ petitions. We are not inclined to accept this contention. It has to be noted that this objection was not raised before the learned single Judge. The matter was contested on merits. Even in the writ appeals, no grounds are taken to the effect that the learned single Judge should not have entertained the writ petitions on the ground that there is a remedy to the petitioners by moving the higher authorities under the Act itself by way of appeal. In that view of the matter, we are not inclined to accept the contention of the learned Government Pleader for the first time at the appellate stage when the point was not raised before the learned single Judge.
7. That apart, the statutory authority, viz., Commissioner of Commercial Taxes, Karnataka, by his letter dated November 23, 1987 has issued a clarification to the following effect :
"Ball-bearings are taxable at the rate of 2 per cent from April 1, 1982 under entry 7 of the Schedule as accessories to 'industrial machinery' on its entry into local area irrespective of their use."
The Commissioner is entitled to pass such clarificatory orders in exercise of his powers under section 12(6) and (7) of the Act. When the statutory authorities, in exercise of the statutory powers make clarificatory orders, the subordinate officers will normally follow the above clarification and filing of an appeal before the statutory authorities will be an exercise in futility. In these circumstances and especially in the light of the circular mentioned above, no purpose will be served by filing a statutory appeal and accordingly, writ petitioners were justified in moving this Court under article 226 of the Constitution of India challenging the assessment orders. [See Filterco v. Commissioner of Sale Tax, Madhya Pradesh ].
8. The question that arises for consideration is as to whether "ball-bearing" would come within the ambit of entry 7 to the Schedule to the Karnataka Tax on Entry of Goods Act. Entry 7 as introduced by the Act 38 of 1994 with retrospective effect reads as follows :
"Industrial machinery and parts and accessories thereof."
The charging section in the Act is section 3 of the Act which provides that a tax shall be levied and collected on entry of any goods specified in the First Schedule into the local area for consumption, use or sale therein, at such rates not exceeding 5 per cent of the value of the goods as may be specified by the State Government by a notification.
9. A reading of the charging section makes it clear that the taxable event for the imposition of the tax under the Act is the entry of goods within the local area and that the nature and type of the goods at the point of entry is the relevant factor to determine the rate of duty. It is immaterial as to how the goods are used thereafter.
10. Interpreting section 12 of the Customs Act, 1962, which provides for levy of customs duty on goods imported into or exported from India, their Lordships of the Supreme Court in Dunlop India Ltd. and Madras Rubber Factory Ltd. v. Union of India (1983) ELT 1566 (SC); AIR 1977 SC 597 in paragraphs 30 and 31, observed as follows :
"30. The relevant taxing event is the importing into or exporting from India. Condition of the article at the time of importing is a material factor for the purpose of classification as to under what head, duty will be leviable. The reason given by the authority that V.P. latex when coagulated as solid rubber cannot be commercially used as an economic proposition, as even admitted by the appellants, is an extraneous consideration in dealing with the matter. We are, therefore, not required to consider the history and chemistry of synthetic rubber and V.P. latex as a component of SBR with regard to which extensive arguments were addressed by both sides by quoting from different texts and authorities.
31. It is well-established that in interpreting the meaning of words in a taxing statute, the acceptation of a particular word by the Trade and its popular meaning should commend itself to the authority."
11. In Nagar Mahapalika, Bareilly v. State of U.P. [1988] 70 STC 97, considering the nature of octroi, the Supreme Court observed as follows :
"We must reiterate that we are concerned with a duty which is imposed at the time of entry and not how it is used thereafter. The taxable event for the imposition of octroi is the entry and the nature and type of the goods at the point of entry is the relevant factor."
12. Again their Lordships of the Supreme Court in Nat Steel Equipment Pvt. Ltd. v. Collector of Central Excise [1988] 69 STC 58, interpreting the term "domestic electrical appliances" and accepting interpretation given by the Gujarat High Court, observed as follows :
"We agree that it is not necessary to be a domestic electrical appliance that it must be actually used in the home or the house. It must be of a kind which is generally used for household purposes. It appears to us that the types of items concerned in this appeal are generally used for household purposes and that is sufficiently good test for classification in the light of the explanation to tariff item No. 33C."
13. These decisions of the Supreme Court were considered by a Division Bench of this Court in Assistant Commissioner of Entry Tax v, Mysore Sales Corporation , in which, a question arose as to whether sewing machines could be subjected to tax under the very same entry, viz., entry 7 with which we are concerned. In this case, following the above referred two Supreme Court decisions, this Court came to the conclusion that it is the nature of the goods at the time of entry that is material and that it is not the subsequent use that is material for the purpose of exigibility to tax under the Act. It was further held as follows :
"Thus, we hold that use of a particular sewing machine either for a garment factory or for domestic purpose will not have any bearing with regard to a taxable event. From this point of view we fully agree with the learned single Judge and hold that the sewing machines are not exigible to levy of entry tax as industrial machinery under entry 7."
14. It has to be noted that in the above case, sewing machines were being used in garment factory which is an industrial machinery. Inspite of that, their Lordships held that, mere fact that the sewing machines are being used as part of industrial machinery also will not bring it within the ambit of entry 7 of the Act.
15. From the aforesaid decision of the Supreme Court and of this Court, it is clear that for the exigibility of tax under the Act, it is the condition and nature of the goods at the time of entry into local area that is material. The subsequent use to which a particular goods is put to is also immaterial. In determining whether a particular item would come within the item or not, it has to be seen as to how in the common parlance the traders understand the nature of a particular goods as to whether it is an industrial machinery or not. It is in this background that we have to consider as to whether the ball-bearing would come within entry 7, viz., "Industrial machinery or parts or accessories thereof".
16. The learned single Judge has elaborately dealt with the nature and functions of a ball-bearing and has ultimately come to conclusion as follows :
"It cannot be said by the nature of the machineries or their use that they are used in industry alone. It is used in ordinary household appliances and vehicles or even toys. Wherever there is any machinery part engaged in motion which results in friction, the contraption of ball-bearing is adopted. It is certainly possible that such appliances could be used even in industrial machinery but it cannot be said that it is generally used in industrial machinery so as to attract tax under the Act."
17. We entirely agree with the conclusions reached by the learned Judge. It may be true that ball-bearings may be used as parts or accessories of industrial machinery also, but it is used in every type of machinery, toys and even in other contrivances. In common parlance, ball-bearing is not understood as part or accessory of an industrial machinery, though, no doubt, it may be a part or accessory of a machinery. By the mere use of ball-bearing in industrial machinery by itself cannot bring it within the ambit of entry 7 referred to above. In that view of the matter, we entirely agree with conclusion reached by the learned single Judge that ball-bearings are not exigible to entry tax under entry 7 of the Schedule to the Act.
18. Learned Government Pleader placed considerable reliance to Explanation III added by Karnataka Act 18 of 1989 and contended that ball-bearing would come within the purview of entry 7 : The Explanation reads :
"'Industrial machinery' for the purpose of entry 7 of the Schedule shall mean such machinery which are generally used by an industrial unit whether or not such unit is a factory as defined under the Factories Act, 1948, for manufacturing or processing of goods and includes earth moving machinery and such other machinery used for mining, building, construction (including laying of roads), fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property."
19. On a reading of Explanation, it is clear that it only amplifies the scope of an industrial machinery and does not deal with parts or accessories to a machinery. Even by the Explanation, it cannot be said that ball-bearing is an industrial machinery nor can it be said that, it is an accessory to the industrial machinery. Accordingly, there is no force in this contention as well.
20. It was lastly contended by the learned Government Pleader that, even according to the assessee's own saying they sold ball-bearings to industrial establishments which itself would indicate that it is an accessory to the industrial machinery. We are not inclined to accept this argument. We have already held that the subsequent user of a commodity is not a determinative factor to decide the exigibility of tax under the Entry Tax Act. Thus, the subsequent use to which ball-bearing is put to is immaterial to decide the exigibility to tax, but it is the general nature of goods that is material.
21. It was held by the supreme Court in Dunlop India Ltd. and Madras Rubber Factory Ltd. v. Union of India (1983) ELT 1566 (SC); AIR 1977 SC 597 as follows :
"There is, however, no estoppel in law against a party in a taxation matter. In order to clear the goods for the customs, the appellants' agents may have given the classification in accordance with the wishes of the authorities or they may even be under some misapprehension."
In the light of the above principle laid down by the Supreme Court, the mere fact that the appellants conceded that certain ball-bearings were sold to industrial machinery by itself is not a ground to hold that they would come within entry 7. On the materials discussed above, we have no hesitation to hold that he learned single Judge was right in holding that ball-bearing would not come within the purview of entry 7 of the Schedule to the Karnataka Tax on Entry of Goods Act.
In view of what is stated above, we do not find any ground to interfere with the judgment of learned singe Judge ad accordingly, these appeals are dismissed.
22. Appeals dismissed.