Karnataka High Court
M/S Rane vs State on 6 July, 2018
Bench: Vineet Kothari, S.Sujatha
1/15
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 6TH DAY OF JULY 2018
PRESENT
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
AND
THE HON'BLE Mrs.JUSTICE S.SUJATHA
C.R.P.No.315/2016 & C.R.P.Nos.424-426/2017
C/W
C.R.P.No.102/2018 & C.R.P.Nos.196-197/2018
In CRP No.315/2016 & CRP Nos.424-426/2017
Between:
M/s. Rane (Madras) Ltd.,
No.78/84, Hootagalli Industrial area,
Mysore-571186, Represented by its
Chairman L.Ganesh.
...Petitioner
(By Mr. M.Thirumalesh, Advocate)
And:
State of Karnataka
By the Commissioner of
Commercial Taxes
Vanijya Therige Karyalaya,
Gandhinagar, Bangalore-560009.
...Respondent
These CRPs are filed under Section 15(A) of
Karnataka Tax on Entry of Goods Act 1979., against the
Date of Order 06-07-2018,
CRP Nos.315/2016 & 424-426/2017
& connected matter
M/s. Rane (Madras) Ltd., Vs.
State of Karnataka & Another
2/15
judgment dated 29.05.2015 passed in STA.No.1692 to
1695/2013 on the file of the Karnataka Appellate Tribunal
at Bangalore., dismissing the appeals in STA.Nos.1693 and
1695/2013 and allowing the appeals in STA.Nos.1692 and
1694/2013 filed against the order dated 23.03.2013
passed in KTEG.AP.No.13/12-13 on the file of the Joint
Commissioner of Commercial Taxes, (Appeals), Mysore
Division, Mysore.
In CRP No.102/2018 & CRP Nos.196-197/2018
Between:
M/s. Rane (Madras) Ltd.,
No.78/84, Hootagalli Industrial area,
Mysore-570018, Represented by its
Senior Manager-Finance,Mr. K.Ishwar Hegde,
Aged about 54 years, S/o. Mr.Krishna Hegde S.
...Petitioner
(By Mr. M.Thirumalesh, Advocate)
And:
Deputy Commissioner of Commercial
Taxes (VAT) (Audit-1)
Sheshadri Building, Diwans Road,
Mysore-570024.
...Respondent
These CRPs are filed under Section 15(A) of
Karnataka Tax on Entry of Goods Act 1979, against the
judgment dated 28.04.2017 passed in STA.Nos.1736,
1738 and 1740 of 2012 on the file of the District Judge,
Member, KAT, Bengaluru dismissing the appeal by
upholding the orders passed by lower authorities.
These CRPs coming on for orders, this day
Dr. VINEET KOTHARI J. delivered the following:-
Date of Order 06-07-2018,
CRP Nos.315/2016 & 424-426/2017
& connected matter
M/s. Rane (Madras) Ltd., Vs.
State of Karnataka & Another
3/15
ORDER
Mr. M. Thirumalesh, Adv., for Petitioner-Assessee The assessee-M/s Rane (Madras) Limited has filed these Revision Petitions under Section 15A of the Karnataka Tax on Entry of Goods Act, 1979 (hereinafter for short referred to as "the KTEG Act") raising a question of law arising from the order of the learned Karnataka Appellate Tribunal, Bengaluru, dated 28.4.2017 (facts illustratively taken from CRP Nos. 102 & 196-197/2018) whereby the learned Tribunal held that the "machine tools" like drill bits, reamers, cutting tools, taps and dies, etc., brought by the assessee within the local limits were exigible to entry tax under the provisions of the KTEG Act under Entry 52 of First Schedule to the said Act which read as under:-
"52. Machinery (all kinds) and parts and accessories thereof but excluding agricultural machinery".
Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 4/15
2. The relevant reasons recorded by the learned Tribunal in the impugned order are quoted below for ready reference : -
"9.Point No.1: (i) It is an undisputed fact that the appellant has caused entry of cutting tools like reamers, cutters, dies, milling tools, drilling tools, taps, etc., into the local area for the purposes of use, consumption or sale therein, both from outside the state and within the State. The AA in the course of verification of books of account has noticed that the appellant has not declared the purchases of cutting tools like reamers, cutters, drill bits, inserts, etc., which are scheduled goods caused entry into the local area by filing returns in Form-3 nor has paid the entry tax thereon even though the said goods fall under Entry No.52 of the First Schedule to the KTEG Act and are notified goods in terms of Sl.No.7 of the Notification No.FD 11 CET 2002 dated 30.3.2002. Therefore, the AA has issued proposition notices proposing to levy entry tax on the purchases of schedule goods caused entry into Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 5/15 the local area. After considering the objections filed, the AA concluded the assessment orders under Section 5(4) of the KTEG Act and also levied interest under Section 7(2) of the KTEG Act.
(ii) The FAA while partly allowing the appeal petitions filed by the appellant against the above assessment orders passed and interest levied by the AA for the assessment years under appeal has recorded detailed findings on the contentions canvassed by the appellant. In the appeal order at page 5 FAA has referred to various judgments rendered on the subject-
matter by Hon'ble High Court of Karnataka and also by this Tribunal. The observations of the Hon'ble High Court of Karnataka made in the case of M/s.R.K.Powergen Pvt. Ltd., and others reported in (2012) 56 VST 193 have also been brought on record wherein it is observed that the Hon'ble High Court has dealt with all the contentions now put forth in these appeals by the appellant. Upon consideration of all the contentions canvassed before them the Hon'ble High Court has come to the conclusion that the goods under dispute fall under Sl.No.7 of the Table contained in the Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 6/15 Notification No.FD 11 CET 2002 dated 30.3.2002. When this judgment was carried before the Hon'ble Supreme Court, the Apex Court has dismissed the SLP filed by M/s.R.K.Powergen. Therefore, findings of AA insofar as the levy of entry tax on the purchases of cutting tools is upheld by FAA cannot be interfered with at this stage as one of the Bench of this Tribunal in the very case of the appellant for the earlier assessment years has clearly held that the goods under dispute are liable to entry tax. Hence, we do not find any further reasoning be recorded on this issue at this stage. Thus, we answer this issue against the appellant and in favour of revenue.
3. The Tribunal has relied upon a Division Bench judgment of this Court for returning the said findings in the case of State of Karnataka vs R.K.Powergen Private Limited, Hiriyur reported in 2012 (74) Kar.L.J.279 in which a Division Bench of this Court clearly held that these items of machine tools even though called as "consumable tools" since they get consumed or worn Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 7/15 out in the process of cutting of granite, they would fall within Entry 52 of the First Schedule of KTEG Act as "parts and accessories of machinery" and therefore were liable to be taxed under the said provisions of the KTEG Act. The relevant extract of the said judgment is quoted below for ready reference : -
"64. Apart from these aspects, we find that on occasion for interpreting the scope of en entry and its validity etc., arise either in the context of the validity of the very enactment or in the context of the question having directly arising for examining the scope of an entry and by way of interpretation. We find a question of this nature had not arisen directly for interpreting the entry as to the scope and examination in fact was not on such premise, but on the converse premise viz., that a particular product was in the nature of consumable and therefore it does not fit into Entry 52 of first schedule to the Act. In our considered opinion, such cannot be the kind of examination for understanding the scope of Entry 52 of first schedule to the Act. Even Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 8/15 otherwise this entry is not very complicated and it only says that machinery of all kinds and parts and accessory thereof excluding agricultural machinery. An entry of this nature, obviously, includes all machinery, parts and accessories thereof, excepting that agricultural machinery do not come within the scope of this entry. In fact, all kinds of mechanical appliances, whether small or big, capable of use by itself or in combination etc., are all within the scope of this entry, as the entry is in general terms. Therefore, understanding of the words 'parts and accessory' goes with the understanding of the word 'machinery'.
65. Several illustrations even as can be understood from the decisions and authorities cited at the Bar indicates a particular goods is sometimes part of one machinery and can be an accessory to another machinery and there are many parts which are consumable and there are many consumables which are not necessarily parts. All parts may not be consumable and all consumables may not be parts. It is, therefore, hazardous to lay down Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 9/15 any straightjacket formula for understanding or interpreting scope of the words 'part and accessory' to machinery and examination can only be in that context.
66. It is also evident from a reading of the above judgments that mere fact that a goods or product appears to be consumable does not necessarily mean being a part or accessory. It is, therefore, we reject the argument that mere fact that the goods/products of the assessee can happen to be a consumable by itself cannot take it out of the taxability under Entry 52 of first schedule to the Act, as even otherwise it is a part or accessory to a machinery.
67. Though Sri Suryanarayan, learned counsel for the assessee has urged that the assessing officer had described the product as a consumable tool, but that by itself does not absolve the assessee of the liability, as the assessee's effort rested with an attempt to show that the tool is consumable and therefore within the scope of Entry 52 of first schedule to the Act. A tool in a given situation can also Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 10/15 be part, and otherwise it can even be an accessory. It may be one consumed in the course of the application of the tool with the machinery or become useless over a period after use. These are all, in our considered opinion, not a determinative test for holding that it is not a part or an accessory.
68. There is no denial in all these cases that the particular product with which the assessee is dealing is one which has been used in combination with other machinery part and has no use of by itself. It obviously amounts that it becomes a tool for the working of another machinery or an accessory because of the enhanced utility of another machinery or machinery with which in combination with its use enhanced or even that it can be such a tool without which the main machinery may even become disfunctional, as in the case of a drilling machine, which is not of much use without a drilling bit. In a situation of such nature, drilling machine or drilling bit or blade or any other such accessory may even assume the role of being a part of the main machinery. It is, therefore, we are of the opinion that Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 11/15 there cannot be a generalization or an examination de hors the particular product in combination with the machinery with which makes use of the goods or product.
69. Tribunal having reversed the finding of the assessing officer and the first appellate authority to hold that the item is not taxable, is not a judgment which can be sustained. It is, therefore, we are unable to accept the submissions on behalf of the assessee and in the result, these revision petitions are also allowed, order of the tribunal set aside by answering the question accordingly and the order passed by the assessing officer, affirmed by the first appellate authority, is restored."
4. Learned counsel for the petitioner-assessee however seeks to urge a new argument before this Court to the effect that these items of goods brought by the assessee within the local limits would not be taxable because Second Schedule to the KTEG Act exempts vide Entry 24 " iron and steel as defined under Section 14 of the Central Sales Act, 1956" (for short hereinafter Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 12/15 referred to as "the CST Act"). Further he drew our attention to the provisions of Section 14 of the CST Act. Sub-item (ix) of Clause (iv) of Section 14 of the CST Act reads, "(ix) tools, alloy and special steels of any of the above categories".
He submitted that the "machines tools" specified above like drill bits, reamers, cutting tools, etc., would fall under the aforesaid clause (ix) of Section 14 read with Section 24 of the Second Schedule of the KTEG Act, the entry tax cannot be imposed on the import of these items within the local area.
5. Having heard the learned counsel for the assessee, we are satisfied that the said argument is of little help and avail to the petitioner-assessee for two reasons. (i) That this argument in the present form was neither raised before the authorities below nor has been dealt with by the learned Tribunal. Therefore, the question Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 13/15 of law purportedly raised on the anvil of this argument does not arise from the order of the Tribunal. (ii) Even if we were to consider this aspect of the matter, we are not impressed with the said argument. The items specified above clearly fall within the ambit and scope of Entry 52 of the First Schedule to the KTEG Act and that issue is no longer is res integra and stands concluded by the Division Bench judgment of this Court quoted above which has been affirmed by the Supreme Court by the dismissal of the SLP as referred to in para 9 (ii) of the Tribunal's order quoted above.
6. The word "tools" employed in Sub-item (ix) of Clause (iv) of Section 14 of the CST Act as is sought to be argued by the learned counsel for the assessee actually is a broad and generic term and read with other words employed in Section 14 (ix) of the CST Act includes tools, alloy and special steels of any of the above categories referred to in the previous clause of Section 14 of the Act. The items in question which are imported and brought Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 14/15 within the local area by the assessee are not those types of tools. In our considered opinion, the matter stands concluded by the Division Bench judgment of this Court which has been affirmed by the Hon'ble Supreme Court as said above.
7. The learned counsel for the assessee also relied upon the judgment of the Madhya Pradesh High Court in the case of Commissioner of Sales Tax, M.P. vs National Lock Stores reported in 1996 (101) STC 83, in which the Division Bench of Madhya Pradesh High Court dealt with the question whether "screwdrivers, saws, pickaxes, etc.," are covered by the expression "tools" occurring in item (ix) of Section 14 of the CST Act and the Court there held that such items fell under the definition of "tools".
8. The said judgment relied upon by the learned counsel for the assessee is distinguishable on facts, as we are not concerned with the items or commodities involved Date of Order 06-07-2018, CRP Nos.315/2016 & 424-426/2017 & connected matter M/s. Rane (Madras) Ltd., Vs. State of Karnataka & Another 15/15 in that case before Madhya Pradesh High Court and therefore the said judgment cited at Bar is of little help to the petitioner-assessee and is distinguishable on facts.
9. Therefore, we are satisfied that there is no merit in these Revision Petitions filed by the assessee as no question of law arises for our consideration. The same are liable to be dismissed and accordingly are hereby dismissed. No costs.
Copy of this order be sent to the Respondent Department.
Sd/-
JUDGE Sd/-
JUDGE Ckl List No.1, Sl.Nos. 1 & 3.