2009 (8) TMI 1087 - HC - VAT and Sales Tax

Entitlement to the benefit of Explanation II to the notification - Held that - No benefit as claimed by the appellant can be extended. The assessment order was right and the Additional Commissioner has rightly restored it, set aside the order passed by the appellate authority. While it is true that Explanation II makes a deviation in so far as the rate of tax leviable on entry of goods covered by that Explanation is caused by a dealer and consequentially the tax liability under the Act, it makes a difference only in the case of such raw material consumed in the manufacture of tobacco products and liquor and not in respect of PCC cement poles. Explanation II does not in any way alter the liability of the dealer in terms of the rate as stipulated in the main Table. Appeal dismissed.

Summary

Issues:
1. Interpretation of Explanation II to the notification regarding entry tax liability.
2. Claim of exemption based on Finance Minister's assurance and subsequent notification.
3. Effect of subsequent notification on tax liability for the relevant period.
4. Applicability of Explanation II to the manufacture of cement poles.
5. Assessment order validity and restoration by the Additional Commissioner.

Interpretation of Explanation II to the notification regarding entry tax liability:
The appellant, a registered dealer under the Karnataka Tax on Entry of Goods Act, 1979, purchased cement for manufacturing cement poles, causing entry of goods into a local area. The assessing officer determined tax liability at five percent under entry 10 of the Act. The appellant claimed exemption under Explanation II to the notification, which specified tax rates for goods used as raw material in manufacturing tobacco and liquor. The appellate authority initially favored the appellant's claim, but the revisional authority revised the order, holding the appellant liable for tax. The court found no basis to extend the claimed benefit under Explanation II, upholding the assessment order and the Additional Commissioner's decision.

Claim of exemption based on Finance Minister's assurance and subsequent notification:
The appellant argued that the Finance Minister's assurance in a budget speech, followed by a notification deleting cement from the taxable items, should exempt the appellant from entry tax liability. However, the court noted that the assurance and notification postdated the relevant assessment period. The court emphasized that statutory provisions govern tax liabilities, and subsequent notifications do not retroactively alter tax obligations. The court dismissed the appellant's argument, affirming the validity of the assessment order.

Effect of subsequent notification on tax liability for the relevant period:
The court clarified that even if an item is later omitted from the taxable list through a notification, the liability for tax remains until the date of the notification. The court underscored that statutory provisions dictate tax obligations, regardless of assurances or subsequent actions by authorities. Therefore, the appellant was not entitled to exemption based on post-assessment notifications.

Applicability of Explanation II to the manufacture of cement poles:
The court highlighted that Explanation II only deviates in tax rates for raw materials used in tobacco and liquor production, not for cement poles. The appellant's argument for extending the benefit of Explanation II to cement pole manufacturing was rejected, emphasizing that the main Table's tax rates applied to the appellant's situation.

Assessment order validity and restoration by the Additional Commissioner:
The court concluded that the assessment order was correct, and the Additional Commissioner rightly restored it, overturning the appellate authority's decision. The court dismissed the appeals related to entry tax liability, affirming the tax liability determined by the assessing officer and the revisional authority.

In summary, the court upheld the tax liability assessment under the Act, rejected claims for exemption based on subsequent notifications and the Finance Minister's assurances, and clarified the limited scope of Explanation II in relation to tax rates for different raw materials.