2000 (10) TMI 944 - HC - VAT and Sales Tax

Summary

Issues: Assessment of entry tax on chemical fertilizers mixed to produce NPK mixture under Karnataka Tax on Entry of Goods Act, 1979.

Analysis:
1. Assessment of Entry Tax: The respondent, engaged in mixing and selling fertilizers, faced entry tax assessment on the raw materials used to produce NPK mixture. The assessing authority subjected the value of raw materials to entry tax at a rate of 1 per cent under specific items of the KTEG Act.

2. Appeals and Rejections: The respondent contested the assessment, arguing that chemical fertilizers and NPK mixture are the same commodity, and there is no manufacturing involved in producing the mixture. The first appellate authority rejected this argument, relying on a Supreme Court decision that distinguished between fertilizers and fertilizer mixtures.

3. Karnataka Appellate Tribunal Decision: The respondent appealed to the Karnataka Appellate Tribunal, which allowed the appeals, stating that no new commodity is manufactured by mixing different fertilizers to produce NPK mixture. The Tribunal held that without manufacturing a new product, entry tax cannot be levied on the fertilizers brought into the local area.

4. Revenue's Contention: The Revenue filed revision petitions, arguing that the Tribunal should have followed the Supreme Court decision that considered fertilizer mixtures as distinct from individual fertilizers. The Revenue claimed that mixing fertilizers constitutes manufacturing a new product, justifying entry tax imposition.

5. Legal Precedents: The judgment discussed the Supreme Court's decision in Shaw Wallace's case, which addressed the distinction between individual chemical fertilizers and fertilizer mixtures. Additionally, the principles established in Chowgule's case regarding the definition of manufacturing were applied to the current scenario.

6. Final Decision: The Court agreed with the Tribunal's finding that no manufacturing occurs by mixing different chemical fertilizers to produce NPK mixture. Consequently, the entry of chemical fertilizers for this purpose cannot be subjected to entry tax under the relevant provisions of the KTEG Act.

7. Conclusion: The revision petitions were dismissed, and each party was directed to bear their own costs. The judgment emphasized that the mixing and blending of different chemical fertilizers to produce NPK mixture do not constitute manufacturing, thereby precluding the imposition of entry tax on the raw materials involved in the process.