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TMI Blog2005 (11) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... mption of sales tax (KST and CST) on the sale of finished goods for a period of 9 (nine) years, or, deferment of sales tax on sale of finished goods for a period of 11 (eleven) years from the date of commencement of commercial production, subject to a limit of 80 per cent of the value of fixed assets created for the expansion. (b) For purchase of capital goods/equipments costing Rs. 1 crore or above. In each case made by the company during the construction phase of the project, the KST exemption is given as under: 'Purchase tax exemption from the tax payable under the Karnataka Sales Tax Act, 1957, by a recognised dealer in Karnataka, on the sale of capital goods/equipment costing more than Rs. 1 crore in each individual purchase invoice in respect of the new industrial unit'. Subsequently, the State Government has issued another Government Order No.CI 22 SPI 97 dated September 5, 1998 modifying the earlier Government Order No.CI 22 SPI 97 dated February 26, 1997 for their proposed new industrial unit for manufacture of pozzuolana portland cement at its industrial unit at Wadi, Gulbarga District. The Government Order dated September 5, 1998 is as under: Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der portion of the G.O. No. CI 22 SPI 97 dated 5th September, 1998 vide para 1 of page 2, the following words shall be substituted and read as: The exemption of sales tax payable on purchase of machinery/ equipments costing more than Rs. 25 lakhs in each individual purchase invoice purchased from the registered dealers in Karnataka. In the order portion of the G.O. dated 5th September, 1998, after the Sl. No. (b), the following words shall be inserted and read as: (c) Exemption from payment of entry tax on machinery/equipment of more than Rs. 25 lakhs in each invoice. (d) Exemption from payment of turnover tax on the sale of finished goods for a period of 9 years or deferment for a period of 11 years subject to the condition that the maximum cap of 100 per cent of investment in the fixed assets includes both sales tax and turnover tax. All other terms and conditions indicated in the G.O. dated February 26, 1997 remain unaltered. By order and in the name of the Governor of Karnataka Sd/- (T. Premanarasimaiah) Under Secretary to Government (ID) Commerce and Industries Department. In the annual returns filed under the provisions of the KTEG Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled under section 15A of the KTEG Act, being aggrieved by the same. The assessee-company has raised the following questions of law said to be arising out of the orders passed by the Karnataka Appellate Tribunal in STA No.110 of 2004 dated February 28, 2005 for our consideration and decision. They are: I. Whether the Karnataka Appellate Tribunal was right in law in holding that the entry tax is a monthly tax and not yearly tax? II. Whether the Karnataka Appellate Tribunal was right in holding G.O. No. CI 22 SPI 97 dated July 27, 2000 was operative only from July 27, 2000 and not from April 1, 2000, i.e., the beginning of the financial year? The matter is posted for admission. By consent of the learned counsel for the parties to the lis, the matter is taken up for final hearing. Sri Sarangan, learned Senior Counsel for the assessee-company would submit that the Government Order No.CI 22 SPI 97 dated September 5, 1998 read with corrigendum No.CI 22 SPI 97 dated July 27, 2000, contemplates exemption from payment of entry tax on machinery and equipment including cranes and earth-moving equipment during the expansion phase of petitioner-company's cement plant at Wadi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el will be made by us at the appropriate stage. In our view, after hearing the learned counsel, two issues would arise in this revision petition for our consideration and determination. They are: I. Whether the levy of tax under the provisions of the Entry Tax Act is annual tax ? and II. Whether the exemption notification issued under the Act in the middle or fag end of the year and if no effective date is mentioned in the notification, whether it should be applied for the entire financial year while computing the tax liability under the provisions of the Entry Tax Act? Before we consider the contentions canvassed by the learned counsel, it would be useful to remind ourselves the pertinent observations made by the apex court, while explaining the concept of doctrine of law of precedents in the case of Bharat Petroleum Corporation Ltd. v. N.R. Vairamani [2004] 8 SCC 579; AIR 2004 SC 4778. In the said decision, the court has stated: 9. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of courts are neither to be read as Euclid' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emptation to decide cases (as said by Cardozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is not at all decisive. . . . Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it.' Now coming to the issues, which we have formulated ourselves for our determination, the object of the Act and some of the relevant provisions which have bearing on the issue require to be noticed. The object of the Act is to provide for the levy of tax on entry of specified goods into local areas for consumption, use or sale therein. Section 2(8) of the Act defines tax to mean tax leviable under the Act. Section 2(8a) of the Act defines the meaning of the expression value of the goods to mean, the purchase value of such goods, that is to say, the purchase price at which a dealer has purchased the goods inclusive of charges borne by him as cost o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 5 of the Act mandates that before any dealer submits any return under sub-section (1), he shall in the prescribed manner pay in advance the full amount of tax payable by him on the basis of such return as reduced by any tax already paid under section 7 of the Act and shall furnish along with the return satisfactory proof of the payment of such tax. Sub-section (3) of section 5 of the Act says that, if the assessing authority is satisfied that any return submitted under sub-section (1) is correct and complete, he shall assess the dealer on the basis of such return. Sub-section (4) of section 5 of the Act provides for best judgment assessment and sub-section (5) of section 5 of the Act provides for levy of penalty when an assessment is made under sub-section (4) for the reasons mentioned therein. Sub-section (6) of section 5 of the Act puts an embargo on the assessing authority that he shall not make any assessment under section 5 of the Act for any year after a period of three years from the date on which return under section 5 of the Act for that year is submitted by the dealer. The other sub-sections are not relevant for the purpose of this case. Section 7 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year commencing on the 1st day of April. As a result, the dealers are required to submit returns not only for every completed month after 1st of April, but also submit the return of the turnover for the year, such year being reckoned from the 1st of April. Section 3 of the Act is the charging provision. It provides for taxable event attracting the levy, the taxable person on whom the levy is imposed and who is obliged to pay tax, the rate at which tax could be imposed by the State Government by issuing notification either prospectively or retrospectively and lastly, the measure or value to which the rate will be applied for computing the tax liability. The charging provision empowers the State Government to levy and collect tax on entry of scheduled goods into local area for consumption, use or sale therein. Under the scheme of entry tax, a dealer is required to send every month to the assessing authority, a statement containing the particular of total value of goods liable to tax during the preceding month and pay tax in advance. This requirement is in addition to and complementary to the provisions of section 5 of the Act, under which every dealer shall submit its annual re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea in such year had been received in the previous year. The previous year as the expression denotes is previous to the assessment year, i.e., it is the year immediately preceding the assessment. Therefore, tax is assessed and paid in the next succeeding year upon the results of the year before. Alternatively, it can be said that the liability to the entry tax arises the moment a registered dealer or dealer liable to get himself registered under the Act causes entry of scheduled goods into local area for the purpose of consumption, use or sale therein, although that liability cannot be enforced till the completion of assessment proceedings. The entry tax is levied monthly as well as after the expiry of assessment year. It only means it is quantified at the end of the month and after the expiry of the preceding year and collected accordingly and therefore, in our view, it cannot be said that the levy under the provision of entry tax is yearly or annual tax. Now coming to the second issue, reference to the corrigendum issued by the State Government dated July 27, 2000 once again is necessary. In the Government Order dated 5th September, 1998, the State Government while granting in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted connotes that whatever is inserted, it is done from the date it is inserted, unless a specific date is mentioned giving effect to the inserted provision from the date earlier to the date of insertion. Therefore, the exemption granted for the first time by inserting the exemption to the earlier Government Order requires to be given effect only from the date of insertion and not from earlier date. However, Sri Sarangan, learned Senior Counsel would argue, that since the notification is issued in the middle of the year, it has to be given effect from the commencement of the financial year. Strong reliance is placed for this proposition on the decision of the Supreme Court in the case of Mathra Parshad and Sons v. State of Punjab [1962] 13 STC 180. The dicta of the court is: The exemption thus must operate either from the date of the notification or from the commencement of the financial year. Here, the nature of the tax, as disclosed in sections 4 and 5, is decisive. In section 5, the tax is made leviable 'on the taxable turnover every year of a dealer'. The divisions of the year and the taxable turnover into different parts are to make easy the collection of tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the beginning of the financial year?' In determining that question, the majority reached the conclusion that the tax is a yearly tax. It was observed: 'Here, the nature of the tax, as disclosed in sections 4 and 5 is decisive. In section 5, the tax is made leviable on the taxable turnover every year of a dealer.' It is because of this scheme of taxation that it was held: 'If the tax is yearly and is to be paid on the taxable turnover of a dealer, then the exemption, whenever it comes in, in the year for which the tax is payable, would exempt sales of those goods throughout the year. . . .' In this context it is relevant to note that Kapur, J., who wrote a dissenting judgment, noted the argument advanced: 'The argument was that it was a yearly tax on the turnover and not that every year a tax was to be levied on the taxable turnover, i.e., aggregate of the sales made during a given period.' This contention was rejected by the learned Judge in the following observation: 'I am unable to agree that the effect of the collocation of the words in section 5 and particularly of the words shall be levied on the taxable turnover eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pradesh High Court in the case of State of Andhra Pradesh v. VBC Exports Ltd. [1996] 103 STC 532. In the said decision, the court has observed that sales tax is a yearly tax and the turnover of the whole year is liable to be taxed, the exemption granted during the course of the year would enure to the benefit of the dealer for the whole year. For the purpose of exemption, the assessment cannot be split into different periods . Proceeding further, the court has observed that since there was nothing in the Andhra Pradesh General Sales Tax Act, 1957, which prohibited grant of exemption under section 9 of the Act for the whole of the year of assessment and no date from which Notification G.O. Ms. No. 116 dated February 8, 1989, would be operative was specified in the notification, the notification would exempt the turnover for the whole year commencing from 1st of April and ending with 31st of March . We do not intend to comment on the aforesaid decision. Suffice to say that in the said decision the court has not taken note of the decision of the Full Bench of the Andhra Pradesh High Court in the case of State of Andhra Pradesh v. Murali Cafe [1971] 28 STC 399. Our attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinate legislative functions cannot make a rule, regulation or bye-law which can operate with retrospective effect. Infact, a similar question of law came up for consideration before a learned single Judge of the Kerala High Court in the case of Silical Metallurgic Limited v. State of Kerala [1999] 115 STC 304. The court after referring to the Interpretation of statutes by learned author Vepa P. Sarathi has observed: 6. The next point urged by the learned counsel is that the notification has to be given retrospective operation since the notification has come during the financial year and the entry tax is on the taxable turnover of the financial year. Non-mentioning of the goods, its tax and its commencement will have to be decided considering the entire year. Such an argument cannot be countenanced. Entry tax is payable on entry of goods into local areas which has been defined under section 2(d). According to this section, 'entry of goods into a local area' with all its grammatical variations and cognate expressions, means entry of goods into a local area from any place outside the State for use or sale therein. The charging section 3 provides that tax shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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