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TMI Blog2006 (3) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified under Entry 80 of the First Schedule to the Act, and not as packing materials under Entry 66 of the First Schedule to the Act? 3. The assessee M/s. Nestle India Ltd. Mysore Road, Bangalore is a public limited company involved in the manufacture and sale of instant coffee powder, chocolates, confectionery, etc. and is also a registered dealer under the provisions of the Karnataka Tax on Entry of Goods, 1979 (in short, referred to as KTEG Act ). The assessee has sales depots at Bangalore and Mangalore and manufacturing units at Nanjanged, Mysore District, for manufacture if instant coffee and Puttur, South Canara, for manufacture of confectionery and chocolates. In the course of their business and manufacturing activity, the assessee has purchased and caused the entry of scheduled goods like machinery and spares, raw materials, packing materials etc. into the local area for use therein. In the process of manufacture of the finished products, the assessee has used aluminium foils laminates, tins, jars, etc. In the course of the assessment proceedings for the assessment years 1992-1993 to 1998-1999, the case of the assessee was that the packing materials purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the question of law raised requires to be reframed and therefore, it is framed as under: Whether the aluminium foils, display outer, duplex, jars, poly-coated paper, poly bags etc. should be subjected to tax under Entry 66 of the First Schedule to the KTEG Act, which speaks of packing materials or as component parts or inputs liable to tax at 1% under Entry 80 of the First schedule to the Act? 6. In the memorandum of revision petitions, the assessee has stated that the goods could be categorized under different heads of raw materials which actually go into and get converted as components parts which may figure in the same or slightly modified form in the finished product or inputs by implication not in the nature of raw materials or component parts but still figuring in the finished product will have to be considered as inputs. It is further stated Inputs have not been defined under the KTEG Act, 1979 and therefore, in terms of Sec. 2(B) of the KTEG Act, the words and expression used in this Act, but not defined shall have the meaning assigned to terms in the Karnataka Sales Tax Act, 1957 ( KST Act for short). Lastly, Sec.-A of the KST Act deals with industrials In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from other raw materials which go into the finished products and therefore, though packing materials are used in the process of manufacture, they cannot be treated as raw materials so as to levy tax at 1% under Entry 80 of the First Schedule to the KTEG Act. They also observe in their order that, the goods like aluminium foils, polythene films, laminated materials etc. are used as packing materials only and these goods are not consumed in the manufacture of end products and therefore, they are liable to be classified under Entry 66 of the First Schedule to the KTEG Act. The Tribunal also observes in its order that the provisions of Sec.5-A of the KST Act has no relevance for deciding the point if issue, for the reason, the said provision deals with the levy of tax at concessional rate as provided therein on industrial inputs and the scheme of taxation under Sales Tax provision in different from the scheme of taxation in respect of inputs and packing materials under the KTEG Act, 1979. 8. The contention of the learned Senior Counsel Sri K.P. Kumar, for the asseessee/petitioner is that having regard to the nature of the integrated manufacturing operation employed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bond Lipton India Ltd Vs. State of Karnataka [1998] 109 STC 265 and the decision of this Court in the case of Lingaraj Poly Seeds Vs. Additional Entry Tax Officer and Another- [1998] 109 STC 516. 9. Per contra, Sri Anand, learned Government Advocate support the findings and the conclusions reached by the authorities under the Act. The learned Govt. Advocate in aid of his submissions relies on the observation made by the Apex Court in the case of TATA Engineering and Locomotive Company Ltd. Vs. State of Bihar and Another [1994] 6 SCC 479 and also the observations made by the Apex Court in the case of M/s Star Paper Mills Ltd. vs. Collector of Central Excise AIR 1989 SC 2066. 10. For determining the question of law as re-framed by us, the basic features of the provisions of the KTEG Act requires to be noticed. The preamble of the Act speaks of the purpose and object of the Act. It is an Act to provide for the levy of tax entry of goods into local areas for consumption, use or sale therein. Sec.2 of the Act is the definition clause, Sec. 2(4) of the Act defines the meaning of the expression dealer . The definition is wide and infact is inclusive defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike; (vi) glass bottles, jars and carboys and the like; (vii) laminated packing materials, such as bituminized paper and hessian based paper and the like 13. Entry 80 of the First Schedule to the Act speaks of raw materials, component parts and inputs. The said Entry reads as under: Entry 80: Raw materials, component parts and inputs which are used in the manufacture of an intermediate or a finished product. 14. The Schedule to the At forms part of the Act and must be reads along with it. There is functional difference between the body of a statute on the one hand and the Schedule, which is attached thereto on the other hand. The Sections in the Act are enacting provisions. In contrast, the Schedule in an Act merely sets down thing and objects and contains their names and descriptions. The schedule does not enact anything. The entries therein derive their substance only from the relevant Sections in the body of the Act and the items enumerated in the Schedules can have no evocative function. They can neither enlarge nor cut down the meaning or article or things specifically named in the list. Any particular term used to specify an item of goods on which tax is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yet again the Supreme Court in the case of Mukesh Kumar Agarwal and Company Vs. State of Madhya Pradesh 68 STC 324 , has observed that the user test is logical, but is again inconclusive. The particular use to which an article can be applied in the hands of a special consumer is not determinative of the nature of the goods . 20. Keeping in view this well settled legal principals, let us once again refer to the purpose and object of the Act as stated in the preamble of the Act makes it clear, that it is an Act to provide for levy of tax on entry of goods into local area for consumption, use or sale therein. The charging Section of the Act provides for levy and collection of tax on the entry of the scheduled goods into the local area. What is material under this Act is the entry of scheduled goods into the local area or in the alternative, the nature of the goods at the time of entry is alone material and not the use for which it is put at a later stage. At this stage, reference can be made to the decision of the Apex Court in the case of Nagara Mahapalika Vs. State of Uttar Pradesh [1998] 70 STC 97 , wherein it is stated that the taxable event for the purpose of imposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional rate of tax, provided it was in manufacturing or processing of goods. Reading of the notification in any other manner would not be in harmony with the Section. Although the Government restricted the levy of the special rate of tax to raw materials, the notification having been issued under Section 13(1)(b) the benefit would extend to every raw materials, used in the manufacture of goods. In other words, the concessional rate was available not only to raw materials but such raw materials as was used in the manufacture of goods . 23. In the present case, it is not the case of the assessee that the aluminium foils, jars, poly bags, etc., are raw materials and therefore, we need not pay more attention to the meaning of the word raw material that finds a place in Entry 80 of the First Schedule to the Act. It is their specific case that the items on which they are asked to pay tax at 2% under the Act, are firstly component parts which are used in the manufacture of finished products; in the alternative, it is input which are used in the manufacturer of finished products. 24. The word components parts is not defined in the Act. Accordingly, ordinary parlance meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a case where the dealer was carrying on the business of manufacture and sale of paper. The dealer claimed exemption from payment of excise on the paper core on the basis of exemption notification issued, on the plea, that in the manufacture of paper, the dealer uses paper cores. The notification on the basis of which exemption was claimed by the dealer provided that the Central Government thereby exempts all excisable goods (hereinafter referred to as the said goods ), on which the duty of excise is leviable and in the manufacture of which any goods falling under item No. 68 of the First Schedule to the Central Excise and Salt Act, 1944 have been used, as raw materials or components parts (hereinafter referred to as the inputs ) from so much of the duty of excise laviable thereon as is equivalent to the duty of excise already paid on the input . The question before the Court was whether the paper cores constituted component parts; within the meaning of the notification entitling it to the exemption granted by the said notification? The Apex Court while answering this specific legal issue has observed: In the manufacture of paper rolls delivered to the customers for use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be cut in sheets but in that case it would at best provide more convenience to such manufacture but for that reasons paper core will not become a constituent part of paper manufactured in sheets. 28. In view of the aforesaid legal principals, it can be safely said that in common parlance, components are items or parts, which are used in the manufacture of the final product and without which the final product cannot be conceived of. In view of this settled legal principals, the commodities which we are considering in these petitions cannot be constructed as component parts of the final finished products namely, instant coffee and the chocolates, etc. We will elaborate on this a little later. 29. The learned Senior Counsel would contend that, if the items in question are not component parts, they could be still classified as inputs in the manufacture of finished products. The word input is again not defined in the Act and therefore, reference can be made to its dictionary meaning, which only says what is put in , enter , enter system . Therefore, the input should be that raw material, which is put in the manufacture or use of the goods. 30. In the instant ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the items under consideration cannot be classified as inputs in the manufacture of either the instant coffee or confectioneries. 31. Sri K.P. Kumar, learned Senior Counsel fairly submits that the items under considerations, even if they do not answer the description of inputs that finds a place in Entry 80 of the First Schedule to the Act, they could be still component parts which are used in the manufacture of an intermediate or finished product. The Act, as we have already noticed, does not define either the meaning of the expression component parts or manufacture . However, Sec. 2(B) of the KTEG Act, provides that the words and expression used in the KTEG Act, have the same meaning assigned to them in the KST Act, 1957. Even this Act does not define the meaning of the expression manufacture . The Supreme Court in the case of Aspin Wall and Company Vs. Commissioner of Income Tax [2002] 125 STC 101 has observed that in the absence of a definition in the statute, the word manufacture has to be given a meaning as is understood in common parlance; it is to be understood as meaning the production of articles for use from raw or prepared materials by giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts by learned Senior Counsel would not assist the assessee in any manner whatsoever. Sec-5A of the KST Act deals with levy of tax at concessional rate as provided therein on industrial input. The scheme of taxation under the provision of KST Act is different from the schedule of taxation in respect of inputs and packing materials under the KTEG Act, 1979. The meaning of the expression used therein cannot be imported to understand the meaning of the words and expression used in KTEG Act. Sec. 2(B) of the KTEG Act only says that the words and expression used in KTEG Act, but not defined shall have the same meaning as defined in the KST At. It does not mean that the words and expression used for the purpose of granting concessional rate of tax in a particular provision under the Act can be used for the purpose of ascertaining the meaning of words under KTEG Act. 34. Lastly, we come the decision on which reliance was placed by learned Senior Counsel in support of the submissions made at the time of hearing of the petitions. Firstly, the learned Senior Counsel has placed reliance on the observations made by the Gujarat High Court in the case of Mercury Pharmaceuticals Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the definition under Sec. 2(f) oo the Central Excise Act, the Supreme Court has observed that manufacture is the processor activity which brings into existence new, identifiable and distinct goods. Goods are identifiable articles known in the market as goods and marketed or marketable in the market as such. Anything requires to make the goods marketable, must from part of the manufacture and any raw material or any materials used for the same would be a component part for the end product. 36. In our view, even this decision would not assist the petitioner s learned Senior Counsel, since the subject matter was under the provisions of the Central Excise Act, which provides for definition of manufacture which would include any process incidental or ancillary to the completion of a manufactured products and secondly, the levy under the Act is on the goods manufactured unlike in the present case. 37. The learned Senior Counsel also made reference to the decision of this Court in the case of Brooke Bond India Ltd. Vs. State of Karnataka -109 STC 265. The question before the Court was whether the blending and packing tea would amount to manufacture ? The facts and the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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