2011 (4) TMI 1255 - HC - VAT and Sales Tax

Portion of the order passed by the revisional authority under section 15(2) of the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979 taking the benefit of exemption of entry tax on diesel generator set purchased by the assessee challenged Held that - As the appellate authority has carefully considered the matter, looked into the notification, relied on a judgment of this court and has correctly held that the assessee is entitled to exemption. The view taken by the revisional authority is too technical, contrary to the material on record and defeats the very purpose behind the issue of the notification. The benefit granted by the State to a new entrepreneur by way of exemption from payment of entry tax cannot be denied by placing such literal interpretation in so far as the procedure prescribed, ignoring the main notification which grants such exemption. In that view of the matter, the order passed by the revisional authority is illegal and cannot be sustained and is liable to be set aside. Hence, Appeal is allowed. The impugned order is hereby set aside. The order of the appellate authority is restored

Summary

Issues:
Challenge to order under section 15(2) of Karnataka Tax on Entry of Goods Act, 1979 regarding exemption of entry tax on diesel generator set.

Analysis:
The appellant, a medium scale unit, challenged an order by the revisional authority under section 15(2) of the Act regarding entry tax exemption on a diesel generator set. The unit was eligible for entry tax exemption on plant and machinery/equipment as per a certificate issued by the Joint Director, District Industries Centre. The appellant reported the purchase of a DG set in their returns, but the certificate did not specifically mention DG sets for exemption. A proposition notice was issued to impose entry tax on the DG set, which was contested by the appellant. The appellate authority ruled in favor of the appellant, citing exemption notification and a judgment, and deleted the tax and penalty. However, the Additional Commissioner of Commercial Taxes set aside this decision, stating DG sets were not mentioned in the certificate and not classifiable for exemption.

The appellant argued that DG sets fall under "plant and machinery" and are exempt from entry tax as per the notification. The notification exempts entry tax on production machinery directly involved in the production process for new industrial units. The appellant contended that since the DG set was necessary for production and fell under machinery, they were entitled to exemption. The revisional authority's decision was deemed contrary to the notification and the law, requiring it to be overturned.

The notification specified exemption conditions for entry of production machinery into a local area by new industrial units. The procedure for seeking exemption required specific documents, including details of fixed assets like machinery and equipment. The appellant's contention was that since the DG set was part of the machinery required for production and fell under the exemption criteria, they should not be liable for entry tax. The appellate authority's decision was seen as correct, emphasizing that literal interpretation by the revisional authority was technical and against the purpose of the notification. The State's benefit of exemption from entry tax for new entrepreneurs should not be denied due to procedural technicalities, leading to the order by the revisional authority being deemed illegal and set aside.

In conclusion, the appeal was allowed, the impugned order was set aside, and the order of the appellate authority was restored. Each party was directed to bear its own costs, and a related stay application was dismissed as infructuous.