2005 (10) TMI 522 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of entry tax on imported industrial machinery, non-disclosure of turnover, rejection of returns, levy of entry tax, wilful non-disclosure, first appellate authority's decision, revisional authority's decision, interpretation of "machinery (all kinds)", applicability of entry tax on sewing machines.

Analysis:
The appellant, a private limited company engaged in manufacturing readymade garments, imported industrial sewing machines without disclosing them in annual returns, leading to a dispute over the levy of entry tax. The assessing authority rejected the returns and levied entry tax under the KTEG Act. The first appellate authority accepted the appellant's contentions, set aside the order, and remanded the matter. The revisional authority initiated proceedings, considering the definition of "machinery (all kinds)" and the retrospective notification levying entry tax. The revisional authority upheld the levy, emphasizing that sewing machines fall under the definition of machinery and attracting a 2% tax rate.

The petitioner raised two key contentions: the industrial unit's location in a KIADB allotted plot exempting it from entry tax, and whether sewing machines qualify as industrial machinery for entry tax purposes. The court rejected the first contention based on the Widia (India) Ltd. case, establishing that industrial areas remain part of the local area for entry tax purposes. Regarding the second contention, the court analyzed the Mysore Sales Corporation case, where it was held that sewing machines are not industrial machinery for entry tax. However, the court considered the State Government's retrospective notification defining machinery (all kinds) and concluded that sewing machines fall under this definition, justifying the levy of entry tax.

The court's decision was based on the interpretation of "machinery" as per dictionaries and legal precedents, highlighting that sewing machines meet the criteria for machinery under the notification. The revisional authority's decision to uphold the levy of entry tax on sewing machines was deemed correct, as it aligned with the retrospective notification and the definition of machinery. Consequently, the revision petition was rejected, affirming the levy of entry tax on sewing machines imported by the appellant for manufacturing activities.