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2004 (3) TMI 719 - HC - VAT and Sales TaxKarnataka Entry Tax Act, 1979 ( the Act ) - Purchases non-ferrous metal scrap from outside the State and causes their entry into local area for being used in the manufacture of rods and wires - Whether the appellant, having voluntarily filed returns and paid entry tax, could challenge the levy and collection of entry tax by filing appeals - HELD THAT - The Supreme Court in Hindustan Aluminium Corporation Ltd. 1981 (7) TMI 81 - SUPREME COURT , held that what is used for manufacture of products/fabricated forms is to be treated as metal , whereas the fabricated forms/products made of metal are not metal . This is exactly what we have held in this case. The further question whether scrap is to be treated as metal in primary form or metal in fabricated form was not considered. The decision in Hindustan Aluminium Corporation Ltd., therefore does not assist the Revenue to contend that non-ferrous metal scrap is not non-ferrous metal for the purpose of entry 29-A of the Act. Keeping in view the aforesaid principles of interpretation, we will consider the meaning of words all non-ferrous metal in entry 29-A of the Second Schedule to the Entry Tax Act. Pristine metal is metal . Plates, bars, wires, flats of a metal, used for manufacture or fabrication of metal products, being refined forms of metal itself are metal . Scrap which is melted to produce metal which is used to produce metal products is also metal . But a fabricated product of metal is not a metal . Therefore the words non-ferrous metal refers to any metal (other than iron and its alloys) which is used or intended to be used as a raw material for the manufacture or fabrication of any metal product. When bars, wires, flats, plates are used in manufacture of metal products, bits, pieces, shavings, fragments are generated as waste. Such metal scrap is purchased by the appellant from outside the State and brought into the State for the purpose of melting it and produce rods, wires, etc. Such metal scrap will therefore be metal. Therefore non-ferrous metal scrap intended to be melted to produce metal or metal product is also nonferrous metal falling under entry 29-A of the Second Schedule to the Act, exempt from entry tax. If the contention of the State is accepted, it would result in metal scrap being treated as a finished product . Scrap by no stretch of imagination can be termed as a finished product . It is metal . The appellant does not dispute the fact that it had voluntarily filed a return offering the value of non-ferrous metal scrap brought by it into the local area to entry tax or that it had paid the entry tax on the said value or that the assessing authority had accepted the said return and passed the assessment orders. But the question is whether the said action on the part of the appellant bars the appellant from challenging the order of assessment in appeal when once it realises that the goods in question were exempt from tax. The second question therefore has to be answered in the affirmative in favour of the assessee. Conclusion The revisional authority's order was unjustified, and the appellate authority's order exempting the turnover from entry tax was restored. The appeals were allowed, and parties were directed to bear their respective costs.
Issues Involved:
1. Whether non-ferrous metal scrap falls under entry 29-A of the Second Schedule to the Karnataka Entry Tax Act, 1979. 2. Whether the appellant, having voluntarily filed returns and paid entry tax, could challenge the levy and collection of entry tax by filing appeals. Summary: Re: Point No. (i): The appellant, a manufacturer of non-ferrous metal rods and wires, purchased non-ferrous metal scrap from outside the State and paid entry tax for the assessment years 1995-96 and 1996-97. The appellant later contended that due to amendments effective from April 1, 1995, non-ferrous metal scrap was exempt from entry tax as per entry 29-A of the Second Schedule to the Karnataka Entry Tax Act, 1979. The appellate authority accepted this contention and exempted the turnover from tax. However, the Additional Commissioner of Commercial Taxes, exercising suo motu revision power u/s 15(2) of the Act, set aside the appellate authority's order and restored the assessing authority's order. The court examined the term "non-ferrous metal" and concluded that it includes scrap intended to be melted to produce metal or metal products. The court referred to several precedents, including *Porritts & Spencer (Asia) Ltd. v. State of Haryana* and *Hindustan Aluminium Corporation Ltd. v. State of Uttar Pradesh*, to interpret the term in its popular sense and contextually. The court held that non-ferrous metal scrap is "non-ferrous metal" falling under entry 29-A of the Second Schedule, exempt from entry tax. Re: Point No. (ii): The appellant's voluntary filing of returns and payment of entry tax does not bar it from challenging the assessment order in appeal upon realizing that the goods were exempt from tax. The court referred to the decision in *Narsepalli Oil Mills v. State of Mysore*, which held that an assessee is not estopped from preferring an appeal and showing that the sales are not exigible to tax, even if the return was voluntarily submitted and accepted by the assessing authority. Conclusion: The revisional authority's order was unjustified, and the appellate authority's order exempting the turnover from entry tax was restored. The appeals were allowed, and parties were directed to bear their respective costs.
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