By C. B. Thakar,Advocate, G. G. Goyal,Janak Vaghani, Chartered Accountants
Entry Tax – Exemption – Packing material is used For Packing of Tea
-Not Raw material – Not Exempt When Only Raw material is Exempt – Section 11a
of The Karnataka Tax on Entry of goods act, 1979.
Facts
The appellant is a public limited
company, having a tea manufacturing unit at dharwad (Karnataka) and various
other units which also manufacture tea. The tea manufactured by the appellant
is of three types, namely, packet tea, tea in tea bags, and quick brewing black
tea. The appellant claimed that its dharwad unit, as opposed to the other units
manufacturing tea, is a new unit and is, therefore, exempt altogether from
payment of entry tax on packing material of tea under a notification dated
31.3.1993 issued u/s. 11A of the Karnataka tax on entry of Goods act, 1979. Insofar
as the other units are concerned, it is the case of the appellant they are
covered by Explanation II to a Notification dated 23.9.1998 issued u/s.3 of the
said act, and “packing material” being covered by the said explanation would
entitle them to pay entry tax at the rate of 1% and not 2%. 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 notifications of
1993 and 1998. The High Court in turn also dismissed the revision petitions
filed under the statute by the assessee. the question that arises for decision
in appeal before SC was 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 for the purpose of either of exemption or liable to lower rate of tax of
1% instead of 2%.
Held
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 material, component
parts and inputs, which are used in the
manufacture of an
intermediate or finished
product, are separately and distinctively given in entry 80 thereof. The
context of the entry tax act therefore is clear. When raw material, component
parts and inputs are spoken of, obviously they refer to material, components
and things which go into the finished product, namely, tea in the present case,
and cannot be extended to cover packing material of the said tea which is
separately provided for by the aforesaid entry 66. The notification dated
23.9.1998 issued u/s. 3 uses identical language as that contained in entries 66
and 80 of Schedule I to the Entry Tax Act. Equally, notification dated
31.3.1993 is an exemption notification issued u/s. 11A which also uses the
identical language of Entry 8 of Schedule I. Thus, notification cannot be read
to include “packing material” as “raw material, component parts or
inputs used in the manufacture”
of tea. Accordingly, the SC dismissed the appeal filed by the appellant and
judgment of High Court was affirmed.
