1996 (1) TMI 388 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of item 16-B of the Schedule to the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979.
2. Levy of tax on furnace oil under entry 11 of the Schedule to the Act.
3. Imposition of penalties by the assessing authorities.

Detailed Analysis:

1. Validity of Item 16-B:
The respondent initially challenged the constitutional validity of item 16-B of the Schedule to the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979. However, this contention was not pressed during the hearing before the learned single Judge. Consequently, the primary issue that remained for determination was the levy of tax on furnace oil under entry 11 of the Schedule to the Act.

2. Levy of Tax on Furnace Oil:
The core issue was whether furnace oil was liable to tax under entry 11 of the Schedule. Entry 11 reads: "All petroleum products, that is to say,-petrol, diesel, crude oil, lubricating oil, transformer oil, brake clutch fluid, bitumen (asphalt) tar and others but excluding LPG, kerosene and naphtha for use in the manufacture of fertilisers." The learned single Judge held that the list of products under entry 11 was exhaustive and since furnace oil was not specifically mentioned, it was not liable to tax. However, the appellants contended that the expression "all petroleum products" was generic and inclusive of furnace oil.

Upon review, it was determined that the scheduled goods listed in entry 11 were illustrative and not exhaustive. The expressions "all petroleum products" and "others" indicated that the legislature intended to include a broader category of petroleum products, not limited to those explicitly mentioned. The court concluded that furnace oil fell within the ambit of "all petroleum products" and was therefore subject to tax under entry 11.

3. Imposition of Penalties:
The learned single Judge had quashed the penalties imposed by the assessing authorities, reasoning that the constitutional validity of entry 16-B, though not pressed at the hearing, had undergone alterations on three occasions. The appellants argued that this was an error, as the penalties were levied in accordance with section 5 of the Act, which allows for penalties if returns are found to be incorrect or incomplete.

The court found merit in the appellants' contention, stating that the changes to entry 16-B were not sufficient grounds to set aside the penalties. The penalties were imposed as per the statutory provisions, and the respondent's challenge to the vires of the entry was not pursued during the hearing. Consequently, the order of the learned single Judge quashing the penalties was set aside. The respondent was advised to file appeals against the penalties before the appellate authority, with assurance from the government advocate that such appeals would be entertained and disposed of on merits without objections on the ground of limitation.

Conclusion:
The appeals were allowed, and the judgment dated January 28, 1992, by the learned single Judge was set aside. The writ petitions were dismissed, and the respondent-company was directed to pay the costs to the appellants throughout. The court affirmed that furnace oil was liable to tax under entry 11 of the Schedule and upheld the penalties imposed by the assessing authorities.