2007 (11) TMI 571 - HC - VAT and Sales Tax

Entry of goods to the local area - Whether the authorities were right in holding that the petitioner had caused entry of chassis on behalf of the K.S.R.T.C. and liable to pay entry tax for causing the entry of chassis into local area, wherein in fact, the petitioner had not caused the entry of chassis into the local area? - Held that - If the petitioner has not done anything except building the body on the chassis supplied by the K.S.R.T.C. within its premises, we are of the opinion that sub-section (2) of section 3 of the Act and the Explanation thereto does not attract the petitioner to pay tax since it has not caused any entry of goods to the local area. The authorities by misappreciation of the facts of the case, have wrongly called upon the petitioner to pay the tax. In the circumstances, we answer the question of law raised in this petition in favour of the assessee

Summary

Issues:
Interpretation of the Karnataka Tax on Entry of Goods Act, 1979 regarding liability to pay entry tax for goods brought into a local area on behalf of another party.

Analysis:
The petitioner, engaged in building bus bodies on chassis supplied by customers, was asked by the Deputy Commissioner of Commercial Taxes to pay taxes for the assessment year 1995-96 under the Karnataka Tax on Entry of Goods Act, 1979. The authorities contended that the petitioner caused the entry of goods into the local area by building bus bodies on chassis supplied by a customer, the Karnataka State Road Transport Corporation (K.S.R.T.C.). The Joint Commissioner and the Karnataka Appellate Tribunal upheld this decision, leading to the filing of a revision petition by the assessee.

The key question raised in the petition was whether the petitioner indeed caused the entry of the chassis into the local area on behalf of the K.S.R.T.C. The petitioner argued that it did not cause any entry of goods into the local area as the chassis were brought to its workshop by the K.S.R.T.C. for body construction, and the buses were taken by the K.S.R.T.C. after completion. The petitioner contended that the authorities misinterpreted the facts and wrongly demanded the entry tax payment.

The Additional Government Advocate argued that, as per the provisions of the Karnataka Tax on Entry of Goods Act, 1979, the petitioner, acting as a dealer on behalf of the K.S.R.T.C., caused the entry of goods into the local area and was thus liable to pay the tax. However, the court noted that the petitioner did not bring the chassis into the local area for its use or for the benefit of the K.S.R.T.C. The court emphasized that the petitioner's actions did not constitute causing the entry of goods into the local area, as the chassis were supplied by the K.S.R.T.C. and the petitioner only built the bodies on them within its premises.

After a thorough analysis, the court concluded that the petitioner was not liable to pay the entry tax as it did not cause the entry of goods into the local area. The court ruled in favor of the assessee, setting aside the orders of the assessing officer, Joint Commissioner of Commercial Taxes, and the Karnataka Appellate Tribunal. The petitioner was granted the right to seek a refund if any tax amount was paid.