1991 (2) TMI 364 - HC - VAT and Sales Tax

Issues Involved:
1. Scope of Entry 2 in the Schedule to the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979.
2. Taxability of raw beedies.
3. Definition and classification of "goods" under the Act.
4. Applicability of the residuary entry in the Schedule for raw materials or inputs.
5. Taxability of packing material/container referred to as "bardhan".
6. Refund of amounts paid during the pendency of the writ petitions.
7. Taxability of the entry of beedi leaves under entry 16B of the Schedule.

Issue-Wise Detailed Analysis:

1. Scope of Entry 2 in the Schedule to the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979:
The primary issue was whether raw beedies fall under Entry 2 of the Schedule, which pertains to "tobacco products like beedies." The court concluded that raw beedies are not beedies or "like tobacco products" as referred to in Entry 2. The court emphasized that "beedi" is understood in common parlance as a finished product, and raw beedies, being unfit for smoking and not marketed, do not meet this definition.

2. Taxability of Raw Beedies:
The court found that raw beedies are not taxable under Entry 2 of the Schedule. It was noted that raw beedies, which are in a semi-finished state and not fit for consumption, cannot be equated with finished beedies. The court rejected the Revenue's contention that raw beedies are taxable under this entry, stating that they do not have the same characteristics as finished beedies.

3. Definition and Classification of "Goods" Under the Act:
The court discussed the concept of "goods" and whether raw beedies qualify as goods under the Act. It was noted that while "goods" is broadly defined, for the purposes of entry tax, the goods must be understood in their common parlance. The court held that raw beedies, being unfit for consumption and not marketed, do not meet the criteria of "goods" as intended by the Act.

4. Applicability of the Residuary Entry in the Schedule for Raw Materials or Inputs:
The court addressed the argument that raw beedies could fall under the residuary entry for raw materials or inputs. The court did not entertain this contention as it was not the basis of the assessing authorities' decision. The court left it open for the Revenue to initiate fresh proceedings under this entry if applicable.

5. Taxability of Packing Material/Container Referred to as "Bardhan":
The court ruled that "bardhan" (gunny bags) are exempt from tax under the Act. Therefore, the assessment orders levying taxes on the entry of bardhan were set aside.

6. Refund of Amounts Paid During the Pendency of the Writ Petitions:
The court ordered that the amounts paid by the petitioners during the pendency of the writ petitions should be refunded by the respondents within three months.

7. Taxability of the Entry of Beedi Leaves Under Entry 16B of the Schedule:
The court noted that several contentions were raised regarding the taxability of beedi leaves under Entry 16B. The court directed the assessing authorities to consider these contentions and decide the issue, as it involves factual aspects that are best addressed by the authorities.

Conclusion:
The writ petitions were allowed, and the impugned assessment orders levying taxes on the entry of raw beedies and bardhan were set aside. The respondents were directed to refund the amounts paid during the pendency of the writ petitions within three months. The court also directed the assessing authorities to consider the taxability of beedi leaves under Entry 16B in light of the contentions raised by the petitioners.

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