2005 (11) TMI 458 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the levy of tax under the provisions of the Entry Tax Act is an "annual tax."
2. Whether the exemption notification issued under the Act in the middle or end of the year, without an effective date mentioned, should be applied for the entire financial year.

Detailed Analysis:

Issue I: Whether the levy of tax under the provisions of the Entry Tax Act is an "annual tax."

The court examined the nature of the tax under the Karnataka Tax on Entry of Goods Act, 1979 (KTEG Act). The object of the Act is to levy tax on the entry of specified goods into local areas for consumption, use, or sale. Section 3 is the charging provision, authorizing the levy and collection of tax on the entry of goods into local areas. The court noted that the tax is assessed and paid based on monthly returns and annual returns. The court concluded that the taxable event under the Act is the entry of scheduled goods into local areas, known as a "transaction tax." The quantification of tax payable is done monthly and annually. Therefore, the court held that the levy under the Entry Tax Act is not an annual tax but a transaction tax.

Issue II: Whether the exemption notification issued under the Act in the middle or end of the year, without an effective date mentioned, should be applied for the entire financial year.

The court analyzed the corrigendum issued by the State Government on July 27, 2000, which provided an exemption from payment of entry tax on machinery/equipment costing more than Rs. 25 lakhs. The court noted that the corrigendum did not specify an effective date. The court referred to the meaning of "corrigendum" as a correction or rectification of a mistake, which dates back to the original notification. However, in this case, the court found that the corrigendum was not correcting a clerical mistake but was granting a new exemption. The court held that since no effective date was mentioned, the exemption should be presumed to be prospective, effective from the date of the corrigendum.

The court distinguished the case from the Supreme Court's decision in Mathra Parshad and Sons v. State of Punjab [1962] 13 STC 180, where the tax was deemed a yearly tax, and the exemption applied for the whole year. The court noted that the Entry Tax Act is different, and the Act allows for prospective or retrospective exemption notifications. The court also referred to decisions from other High Courts, supporting the view that exemption notifications without an effective date are prospective.

The court concluded that the exemption granted by the corrigendum should be effective from the date of issuance, July 27, 2000, and not from the beginning of the financial year. Therefore, the Tribunal was justified in rejecting the appeal filed by the assessee for the assessment year 2000-2001.

Conclusion:
The court confirmed the Tribunal's order and rejected the revision petition filed by the petitioner-company. The levy under the Entry Tax Act is not an annual tax but a transaction tax, and the exemption notification issued in the middle of the year without an effective date is prospective, effective from the date of issuance.