1988 (4) TMI 410 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Conformity of the proposed levy with the charging section 3 of the Karnataka Entry Tax Act.
2. Interpretation of the terms "use", "consumption", and "sale".
3. The petitioner's status as a "dealer" under the Act.
4. Competence of the State Legislature to levy entry tax on industrial machinery.

Issue-Wise Detailed Analysis:

1. Conformity of the Proposed Levy with the Charging Section 3 of the Karnataka Entry Tax Act:
The petitioner challenged the proposition notices on the grounds that the proposed levy was not in conformity with the charging section 3 of the Karnataka Entry Tax Act. The argument was that the machinery was brought for use in the workshop and was not meant for consumption, use, or sale in the local area. The petitioner relied on the Supreme Court's decision in S.M. Ram Lal & Company v. Secretary to Government of Punjab, arguing that the machinery was installed for repairs and reconditioning and did not amount to use or consumption within the local area to attract the levy of entry tax.

2. Interpretation of the Terms "Use", "Consumption", and "Sale":
The State argued that the terms "use", "consumption", and "sale" had been interpreted by the Supreme Court in Burmah-Shell case (AIR 1963 SC 906), and the meaning given to "use" under the Bombay Municipal Act should apply to the Entry Tax Act. The Supreme Court in Ram Lal's case had interpreted "use" in the context of octroi on wool, stating that the goods must cease to exist in their original form to attract the levy. However, the Supreme Court in Burmah-Shell case held that "use" need not always be understood as "used-up" and could include putting goods in the way of others for use or consumption.

3. The Petitioner's Status as a "Dealer" Under the Act:
The petitioner argued that they were not a "dealer" as defined by section 2(4) of the Act, as they did not carry on the business of buying or selling industrial machinery. The petitioner cited the Supreme Court decision in State of Gujarat v. Raipur Manufacturing Co. Ltd. to support this contention. However, the State argued that the definition of "dealer" included those who buy or receive scheduled goods for their own use in the course of business. The Supreme Court in Abdul Bakshi's case held that a person who consumes a commodity bought by him in the course of his trade is a dealer.

4. Competence of the State Legislature to Levy Entry Tax on Industrial Machinery:
The petitioner sought to declare and strike down item No. 7 of the Schedule to the Entry Tax Act as beyond the competence of the State Legislature. However, the court found that the industrial machinery, being one of the scheduled goods, was exigible to levy under the Karnataka Entry Tax Act.

Conclusion:
The court concluded that the proposed levy was in conformity with the charging section 3 of the Karnataka Entry Tax Act. The interpretation of "use", "consumption", and "sale" as explained by the Supreme Court in Burmah-Shell case should prevail. The petitioner was considered a "dealer" under the Act based on the Supreme Court's decision in Abdul Bakshi's case. The industrial machinery was subject to entry tax, and the writ petitions were dismissed.