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TMI Blog2012 (9) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... ld electrical energy. Hence, diesel cannot be treated as raw material or component part or an input used in the manufacture of some other goods. Hence, we find that there is no infirmity or irregularity in the order passed by the Karnataka Appellate Tribunal confirming the order passed by the assessing authority. With regard to the second question, the assessing authority has not noticed the notification dated March 31, 1998 wherein it was specifically mentioned that the raw materials, component parts and input which are used in the manufacturing of intermediate and finished products other than those specified in the Second Schedule is at the rate of one per cent. The assessing authority as well as the Karnataka Appellate Tribunal has not considered the said notification. Hence, the order passed by the assessing authority is required to be modified and the tax has to be levied on hexane at the rate of one per cent. Revision partly allowed. - CRP No. 310 of 2008 - - - Dated:- 4-9-2012 - SREEDHAR RAO K. AND MANOHAR B., JJ. For the Appellant : T.N. Keshavamurthy For the Respondent : Smt. S. Sujatha, Additional Government Advocate, ORDER:- The order of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f entry tax for the assessment years 1998-99 and 1999-2000 preferred appeals in STA Nos. 554-555 of 2002, before the Joint Commissioner of Commercial Taxes (hereinafter referred to as the first appellate authority ). The first appellate authority by its order dated February 2, 2002 allowed the appeals in part and deleted the entry tax on high speed diesel holding that the diesel constitutes a raw material/input, which has been used to generate electrical energy in the manufacture of intermediate or finished products and also reduced the penalty imposed on the assessee. However, no order has been passed insofar as hexane is concerned. Being aggrieved by the levy of entry tax on the value of hexane and levy of penalty for both the assessment years in question, the assessee preferred second appeals before the Karnataka Appellate Tribunal. The State Government being aggrieved by the order of the first appellate authority setting aside the assessment order in respect of diesel for the assessment years 1998-99 and 1999-2000 preferred S.T. Cross Appeals Nos. 299-300 of 2007 before the Karnataka Appellate Tribunal. 4. The Karnataka Appellate Tribunal after considering the matter in det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the order passed by the Karnataka Appellate Tribunal setting aside the order passed by the first appellate authority insofar as assessment of entry tax is contrary to law. He further contended that no tax can be levied on the entry of raw materials/inputs brought into the local area which in turn is used for production or manufacturing of any goods which was listed in the Second Schedule under the KTEG Act. Since the diesel is being used for generating the electricity, it falls under the Second Schedule. The diesel cannot be subjected to entry tax, which is used as raw material/input by the assessee. 7. Further hexane is not listed in the First Schedule and in the relevant Government notification dated March 31, 1998, wherein petroleum products are mentioned by various descriptions and the hexane is not described specifically in the scheduled entry. Hence, hexane cannot be subjected to the entry tax at the rate of two per cent. Hexane is normally used as a chemical in the solvent extraction process and it has to be treated as only chemical and not as petroleum product. Even if it is treated as not chemical, the tax can be imposed at the rate of one per cent as raw materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmity or irregularity in the order passed by the Karnataka Appellate Tribunal and sought for dismissal of the revision petition. 9. We have carefully considered the arguments addressed by the parties and perused the orders impugned. 10. It is not in dispute that the revision petitioner caused entry of diesel as well as hexane for use as raw material/input in generation of electrical energy for their generation sets and for extraction of solvent oil from the oil-cake. The revision petitioner has not filed its returns for the assessment years 1998-99 and 1999-2000. During the course of inspection by the Assistant Commissioners of Commercial Taxes (Intelligence) they noticed that the petitioner has purchased HSD as well as hexane without paying any entry tax. Section 3(1) of the KTEG Act provides for levy or collection of tax on entry of any goods specified in the First Schedule into local area for consumption, use or sale therein, at such rate not exceeding five per cent of the value of the goods as may be specified retrospectively or prospectively by the State Government by its notification. The State of Karnataka in exercise of its power under section 3(1) of the KTEG Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and liable to be taxed at the rate of two per cent. No scientific study appears to be made with regard to hexane, which is being used as input in the extraction of solvent oil. In view of judgment of the honourable Supreme Court reported in [1990] 77 STC 282 (SC) (Collector of Central Excise v. Ballarpur Industries Ltd.), at paragraph 5 it has held that hexane has to be treated as chemical used as a raw material in extraction of the oil. The assessing authority has not noticed the notification dated March 31, 1998 wherein it was specifically mentioned that the raw materials, component parts and input which are used in the manufacturing of intermediate and finished products other than those specified in the Second Schedule is at the rate of one per cent. The assessing authority as well as the Karnataka Appellate Tribunal has not considered the said notification. Hence, the order passed by the assessing authority is required to be modified and the tax has to be levied on hexane at the rate of one per cent. 12. The Division Bench of this court in CRP No. 1250 of 2004 and other connected matters (Nestle India Limited v. State of Karnataka) has clearly held that the nature of the go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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