2009 (2) TMI 456 - SC - VAT and Sales Tax

Whether the subject tools are in the nature of accessories to machines and therefore liable to entry tax? Held that - Appeal dismissed. What was argued before us was that lathe and drilling machines are non-functional without the subject tools whereas in the above paras before the authorities below the assessee submitted that lathe and drilling machines can function without the subject tools. We may also note that the assessee has not led evidence before the adjudicating authority to show whether the lathe and drilling machines were non-functional in the absence of the subject tools.

Summary

Issues:
1. Interpretation of whether subject tools are accessories to machines and liable to entry tax.

Analysis:
The central issue in this civil appeal before the Supreme Court was to determine whether the subject tools are in the nature of accessories to machines and thus subject to entry tax. The appellant argued that the tools are consumables and cannot be considered parts of the machine or accessories. It was contended that machines like lathe and drilling machines are non-functional without these tools, which are rendered useless after a certain number of uses. The Department, on the other hand, argued that the tools are part of the machine or at least accessories, and the test of an item being consumable is irrelevant in interpreting the relevant entry.

The Court examined entry 52 of the First Schedule to the Karnataka Tax on Entry of Goods Act, 1979, which includes machinery and parts and accessories thereof, excluding agricultural machinery. The appellant had consistently argued that without the subject tools, the lathe and drilling machines are non-functional. However, the Court noted discrepancies in the appellant's submissions, as they had previously stated that the machines could function without the tools. Moreover, the appellant failed to provide evidence to show the non-functionality of the machines in the absence of these tools.

Ultimately, the Court found no infirmity in the judgments of the High Court and the Tribunal, upholding that the subject tools are indeed accessories to the machines. The civil appeal was dismissed concerning the assessment year 2000-01. However, the Court allowed the appellant to raise the contention that the subject tools are consumables and not accessories or parts of the machine in future cases. The authorities were directed to consider such contentions in accordance with the law, independent of the observations made in the present judgment, allowing both parties to present all necessary arguments for resolving the dispute.

In conclusion, the Court dismissed the civil appeal without any costs, maintaining that the subject tools are accessories to the machines for the purpose of entry tax. The judgment emphasized the importance of establishing a proper foundation in tax matters and clarified the scope for future contentions regarding the classification of tools as consumables or accessories/parts of machines.