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2012 (9) TMI 895 - HC - VAT and Sales TaxTax on diesel - Held that - In the instant case, the assessee caused entry of diesel into local area, which is the scheduled goods as per entry 67 of the First Schedule to the Act. The assessee is manufacturing cement. The assessee has caused entry of diesel for generating electrical energy and for running the earthmovers for shifting the limestone to the respondent s factory from the adjoining quarries. In the instant case, as per the Notification No. FD 34 CET 98(1) dated March 31, 1998 and No. FD 79 CET 98(1) dated May 14, 1998 notwithstanding the goods which are brought into the local area as raw materials, component parts or input, the assessee is liable to pay tax at the rate of four per cent. Hence, the judgments relied upon by the respondent are not applicable for the present case and the order passed by the Appellate Tribunal cannot be sustained. The substantial questions of law framed in this revision petition are held in favour of the Revenue. Accordingly, Appeal is allowed. The order passed by the Karnataka Appellate Tribunal is set aside insofar as deduction of entry tax in respect of diesel is concerned.
Issues involved:
1. Interpretation of government notifications regarding entry tax on diesel and furnace oil. 2. Determination of whether diesel and furnace oil used as raw materials for generating electrical energy are exempt from entry tax. 3. Assessment of liability to pay entry tax on specific goods under relevant notifications. 4. Application of legal precedents in determining tax liability on raw materials. Analysis: Issue 1: Interpretation of government notifications The case involves a dispute over the interpretation of various government notifications issued under the Karnataka Tax on Entry of Goods Act. The notifications specified the rates of entry tax on diesel and furnace oil brought into the local area for consumption, use, or sale. The notifications were crucial in determining the tax liability of the assessee for the assessment year 2000-01. Issue 2: Exemption of diesel and furnace oil from entry tax The main contention revolved around whether diesel and furnace oil, used as raw materials for generating electrical energy in the manufacturing process, were exempt from entry tax. The Appellate Tribunal held that diesel used for generating electrical energy was not subject to entry tax, while imposing a tax on diesel used for running earthmovers. The Tribunal also ruled that furnace oil was liable for entry tax at the rate of four per cent. Issue 3: Liability to pay entry tax on specific goods The State Government argued that the Appellate Tribunal misinterpreted the notifications and legal precedents, leading to an incorrect conclusion that the assessee was not liable to pay entry tax on diesel. The Government emphasized the specific rates and conditions mentioned in the notifications, asserting that even if goods were brought in as raw materials, the tax was still applicable. Issue 4: Application of legal precedents Both parties relied on legal precedents, including judgments from the Allahabad High Court and the Supreme Court, to support their arguments. The respondent contended that diesel and furnace oil should be considered raw materials exempt from entry tax based on previous court decisions. However, the State Government argued that the judgments cited were not applicable to the facts of the case and sought to set aside the Appellate Tribunal's decision. In conclusion, the High Court allowed the appeal filed by the State Government, setting aside the Appellate Tribunal's decision regarding the deduction of entry tax on diesel. The Court held that the notifications clearly specified the tax rates for goods brought in as raw materials, regardless of their use in the manufacturing process. The Court found that the legal precedents cited were not relevant to the case, affirming the State Government's position on the liability to pay entry tax on diesel.
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