1990 (11) TMI 394 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Legitimacy of the levy of entry tax on industrial machinery.
2. Interpretation of the terms "consumption", "use", and "sale" under the Act.
3. Definition and applicability of the term "dealer" under the Act.

Issue-wise Detailed Analysis:

1. Legitimacy of the levy of entry tax on industrial machinery:
The appellant challenged the levy of entry tax on industrial machinery brought into the local area for job work, arguing that the machinery was not meant for "consumption, use, or sale" within the local area as per Section 3 of the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979. The Assistant Entry Tax Officer had issued proposition notices for the years ending Deepavali, 1984, 1985, and 1986, proposing to levy entry tax on industrial machinery.

2. Interpretation of the terms "consumption", "use", and "sale" under the Act:
The appellant contended that the term "use" should mean "used up" and not merely "put to use". They relied on the Supreme Court decision in Ram Lal & Company v. Secretary to Government of Punjab, which interpreted "use" in the context of octroi as implying that the commodity ceases to exist in its original form. The court referred to other Supreme Court decisions in Burmah-Shell Oil Storage and Distributing Company of India Ltd. v. Belgaum Borough Municipality and Kathiawar Industries Ltd. v. Jaffrabad Municipality, which provided a broader interpretation of "use" and "consumption", indicating that these terms do not necessarily imply that the commodity must be destroyed or used up.

3. Definition and applicability of the term "dealer" under the Act:
The appellant argued that they were not a "dealer" as defined under Section 2(4) of the Act, and hence, Section 29, which exempts non-dealers from the Act, should apply. They cited the Supreme Court decision in State of Gujarat v. Raipur Manufacturing Co. Ltd., which emphasized the need for an intention to carry on the business of selling goods to be considered a dealer. The court, however, referred to Section 4(1) of the Act, which mandates registration for dealers who buy or receive scheduled goods, and the decision in State of Andhra Pradesh v. Abdul Bakshi & Bros., which supported the broader interpretation that the appellant could be considered a dealer if the machinery was used in a business context.

Judgment Summary:
The court agreed with the learned single Judge's interpretation that the term "use" need not always be understood as "used up". It upheld the broader interpretation of "consumption", "use", and "sale" as laid down in the Burmah-Shell and Anwarkhan Mehboob Co. cases. The court also dismissed the appellant's argument regarding the definition of "dealer", affirming that the appellant was liable to pay entry tax under the Act. Consequently, the appeal was dismissed, and the levy of entry tax on industrial machinery was upheld.

Appeal dismissed.