2021 (7) TMI 329 - HC - VAT and Sales Tax

Levy of Entry tax - unmanufactured tobacco in sealed container - covered under Entry-5 ii of the Notification dated 30.03.2002 in No.FD.11.CET.2002 I as amended by the subsequent Notification dated 01.10.2013 in No. FD.208.CSL.2013 III or otherwise? - Whether the first respondent is justified in clarifying that the unmanufactured tobacco is brought into the local area in sealed container and is covered under Entry 5(ii) of the aforesaid notifications and therefore, is liable for tax under section 3(1) of the KTEG Act? - HELD THAT - All the references are qua the registered dealer (or dealer liable to be registered or the dealer) and the point of entry into the local area, and there is no reference to point of sale in section 3 of the KTEG Act. The place of business is defined to be the place where dealer is doing business and the value of goods is the purchase price at which the dealer purchases the goods. There is no reference to retail price or retail place of business. Thus, it is obvious on a plain reading of these provisions that the legislature intended the point of entry into the local area as the taxable event for the purposes of levy of entry tax and not the point of sale. If the intendment of the legislature, as is obvious from the provisions of the KTEG Act, is to stipulate entry of goods into the local area as the taxable event, this Court cannot opine that the taxable event must be the point of consumption, use or sale because goods are packed differently for wholesale and retail purposes. The fact that the unmanufactured tobacco is sold in retail in paper pouches that are just folded and the folds are kept in place by a loosely glued label would be of no consequence. As already observed, at the point-of-entry into the local area, the unmanufactured tobacco was in a sealed container - the first respondent is justified in clarifying that the unmanufactured tobacco is brought into the local area in a sealed container and is covered under Entry 5 (ii) of the aforesaid notifications and therefore, is liable for tax under section 3 (1) of the KTEG Act. Whether, the second respondent, in exercise of the jurisdiction conferred under section 17(5) of the KTEG Act, by the impugned order/s dated 17.08.2020 could have rectified the assessment orders dated 12.04.2019 issued for the assessment years 2014-15, 2015-16 and 2016-17 and levied entry tax as per the demand? - HELD THAT? - The treating of the unmanufactured tobacco brought into the concerned local area by the petitioner in the assessment orders dated 12.04.2019 as Non-assessable excluding the relevant turn over from the assessment, undeniably, would be prejudicial to public revenue in the light of the terms of the amendment Notification dated 01.10.2013 and the provisions of Section 3(1) of the KTEG Act. The unmanufactured tobacco brought into the local area by the petitioner is treated as Non-assessable only because of the interim orders of this Court in the aforementioned writ petitions filed by the petitioner impugning the amendment Notification dated 01.10.2013, and it is also subject to the condition that such assessment orders would be reopened after the final decision in the writ petitions. The petitioner s grievance is that the impugned rectification orders are consequent to the impugned Clarification order dated 29.6.2020, and if the rectification orders are consequent to a judgment or order by the Court, the petitioner cannot, and in fact, does not have a grievance - the second question is also answered against the petitioner concluding that in the facts and circumstances of this case, the second respondent, is justified in exercising the jurisdiction conferred under section 17(5) of the KTEG Act and rectifying the assessment orders dated 12.04.2019 issued for the assessment years 2014-15, 2015-16 and 2016-17. Petition dismissed.

Summary

Issues Involved:

1. Whether the unmanufactured tobacco brought into the local area is in a "sealed container" and thus subject to entry tax under Entry 5(ii) of the Notification dated 30.03.2002 as amended by the Notification dated 01.10.2013.
2. Whether the second respondent was justified in rectifying the assessment orders dated 12.04.2019 for the assessment years 2014-15, 2015-16, and 2016-17 under section 17(5) of the KTEG Act.

Issue-wise Detailed Analysis:

Issue 1: Sealed Container and Entry Tax

The petitioner challenged the clarification order dated 29.06.2020 issued by the Commissioner of Commercial Taxes, which stated that the unmanufactured tobacco imported into Tumkur was in a "sealed container" and thus subject to entry tax at 5% under Entry 5(ii) of the Notification dated 30.03.2002 as amended by the Notification dated 01.10.2013. The petitioner argued that the tobacco was packed in retail paper pouches, which were not sealed containers, and thus should not be subject to entry tax. The court examined the definition of "sealed container" and the nature of the packaging at the point of entry into the local area. It was found that the unmanufactured tobacco was packed in wholesale packs within high-density polyethylene bags, which were stitched and required cutting to open. The court concluded that the packaging at the point of entry constituted a "sealed container" and upheld the clarification order, making the unmanufactured tobacco subject to entry tax.

Issue 2: Rectification of Assessment Orders

The petitioner also challenged the rectification orders dated 17.08.2020, arguing that they were issued based on the clarification order and thus were without jurisdiction. The court noted that the original assessment orders dated 12.04.2019 treated the unmanufactured tobacco as "Non-Assessable" due to an interim stay on the amendment Notification dated 01.10.2013. Following the dismissal of the writ petitions challenging the amendment Notification, the second respondent issued a proposition notice on 17.12.2019 to rectify the assessment orders. The court found that the rectification proceedings were initiated immediately after the writ petitions' dismissal and were deferred only due to the pending clarification application. The court concluded that the rectification orders were justified and not solely based on the clarification order, thus upholding the rectification orders.

Conclusion:

The court rejected the writ petition, affirming that the unmanufactured tobacco was brought into the local area in a "sealed container" and was liable for entry tax. It also upheld the rectification of the assessment orders, finding them justified and within the jurisdiction of the second respondent.