2012 (12) TMI 963 - HC - VAT and Sales Tax

Entry tax on raw material, i.e., glass shell, glass panel, glass funnel and neck tube at the rate of one per cent - whether be treated to be covered by entry 49 of Schedule II of the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 ? - levy of interest under section 13 of the Entry Tax Act read with section 26(4)(a) of the Vanijya Kar Adhiniyam, 1994 Held that - Keeping in view the language employed in the respective entry and the undisputed fact that the items in question are made of glass and that they are not parts or accessories of television but are used as raw material for manufacturing of parts and accessories of television, we are of the view that the items in question are covered by entry 42 of Schedule II to the Entry Tax Act. Under the said provision, the interest has been levied on delay in payment of tax. Since a submission has been made that the said interest is relatable to the difference on the rate of tax claimed by the petitioner under entry 42 of the Entry Tax Act and rate of tax levied by the assessing authority under entry 49 of the Entry Tax Act, and since this court has held that entry 42 is applicable, therefore, the interest levied by the assessing authority to that extent cannot be upheld. W.P. allowed - matter is remitted back to the assessing authority for fresh assessment

Summary

Issues:
Classification of goods for entry tax under the Entry Tax Act - Whether glass parts used for manufacturing television tubes are covered under entry 42 or entry 49 of Schedule II.

Analysis:
The petitioner challenged an order levying entry tax on glass parts used in manufacturing television tubes. The petitioner argued that the glass parts should be taxed at 0.5% under entry 42 of Schedule II, covering goods made of glass and glassware. On the other hand, the respondents contended that the glass parts should be taxed at 1% under entry 49, considering them as parts and accessories of television.

The High Court examined the manufacturing process of television tubes involving the glass parts. It noted that the glass parts were used as raw material in the manufacturing process and were not directly used as parts or accessories of television. The Court emphasized that the classification of goods for tax purposes should be based on the statutory fiscal entry and the basic character, function, and use of the goods.

The Court held that the glass parts fell under entry 42 as goods made of glass and glassware, as they were not expressly excluded from this entry. The Court rejected the contention that the glass parts should be classified under entry 49 as parts and accessories of television, emphasizing that they were raw materials for manufacturing parts of television.

Regarding the levy of interest on the tax amount, the Court ruled that since the glass parts were classified under entry 42, the interest levied based on the difference in tax rates could not be upheld. Therefore, the Court set aside the assessment order and the revisional order, remitting the matter back to the assessing authority for fresh assessment in accordance with the Court's observations.

In conclusion, the writ petitions were allowed to the extent that the glass parts were classified under entry 42 of Schedule II for entry tax purposes, and the interest levied was deemed inapplicable based on the revised classification.