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TMI Blog2016 (9) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... mely, tea in the present case, and cannot be extended to cover packing materials of the said tea which is separately provided for by the aforesaid Entry 66 - appeal dimsissed - decided against appellant. - Civil Appeal No. 4003 of 2007 - - - Dated:- 2-9-2016 - A. K. Sikri And R. F. Nariman, JJ. JUDGMENT R. F. Nariman, J. 1. The appellant is a public limited company having a tea manufacturing unit at Dharwad and various other units which also manufacture tea. The tea manufactured by the appellant is of three types, namely, packet tea, tea in tea bags, and quick brewing black tea. It is claimed that the Dharwad Unit, as opposed to the other units manufacturing tea, is a new unit and is, therefore, exempt altogether from payment of entry tax on packing material of tea under a notification dated 31.3.1993 issued under Section 11A of the Karnataka Tax on Entry of Goods Act, 1979 (hereinafter referred to as the Karnataka Entry Tax Act ). Insofar as the other units are concerned, it is the case of the appellant they are covered by Explanation II to a Notification dated 23.9.1998 issued under Section 3 of the said Act, and packing material being covered by the said Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) by any specified class of persons or class of dealers or in respect of any goods or class of goods; or (ii) on entry of all or any goods or class of goods into any specified local area. (2) The State Government may, by notification cancel or vary any notification issued under sub-section (1). (3) Where any restriction or condition specified under sub-section (1) is contravened or is not observed by a dealer or a declaration furnished under the said sub-section is found to be wrong, then such dealer shall be liable to pay by way of penalty an amount equal to twice the difference between the tax payable at the rates specified by or under the Act and the tax paid at the rates specified under the notification on the value of such goods in respect of which such contravention or non-observance has taken place or a wrong declaration is furnished: Provided that before taking action under the sub-section the dealer shall be given a reasonable opportunity of being heard. FIRST SCHEDULE (See Section 3 (1)) 66. Packing materials namely :- (i) fibre board cases, paper boxes, folding cartons, paper bags, carrier bags and card board boxes, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder No. CI/138 SPC/90, dated 27.9.1990 4 years from the date of commencement of commercial production or 4 years from the date of commencement of this notification whichever is later. 2 Tiny/small/medium and large scale industrial units Situated in Zone-IV specified in annexure I to Government Order No. CI/138/SPC/90, dated 27.9.1990 5 years from the date of commencement of commercial production or 5 years from the date of commencement of this notification whichever is later. 3 Tiny/small scale/ Medium and large scale industrial units in the thrust sector as defined in annexure-II to G.O. No. CI.138/SPC/90, dated 27.9.1990 Situated in Zone-III specified in annexure I to Government Order No. CI/138/SPC/90, dated 27.9.1990 5 years from the date of commencement of commercial production OR 5 years from the date of commencement of this notification whichever is later. 4 Tiny/small scale/ Medium and large scale industrial units in the thrust sector as defined in Annexure II to G. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Packing material namely: (i) Fibre board cases, paper boxes, Folding cartons, paper bags, carrier bags and card board boxes, corrugated board boxes and the like; 2% (ii) Tin plate containers (cans, tins and boxes), tin sheets, aluminium foil, aluminium tubes, collapsible tubes, aluminium or steel drums, barrels and crates and the like: 2% (iii) Plastic, polyvinyl chloride and polyethylene firms, bottles, pots, jars, boxes, crates, cans, carboys, drums, bags and cushion materials and the like; 2% (iv) Wooden boxes, crates, casks and containers and the like; 2% (v) Gunny bags, bardan (including batars) hessian cloth and the like; 2% (vi) Glass bottles, jars and carboys and the like; 2% (vii) Laminated packing materials, such as bluminised paper and hessian-based paper and the like; 2% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that even though packing material may be covered under item 3 of the said Notification, yet, as it is an input in the manufacture of the finished product tea, it would be covered by Explanation II, and therefore would be taxable at the rate of 1% and not 2%. They further argued that words and expressions that are not defined under the Entry Tax Act but which are defined in the Karnataka Sales Tax Act, 1957 would have to be borrowed for the purpose of the Entry Tax Act. In this regard, in particular, they relied upon Section 5A of the Karnataka Sales Tax Act, and in particular Explanation I to the aforesaid Section which defined industrial inputs as meaning either a component part or raw material or packing materials , and argued that packing material has been recognized as an input under the Karnataka Sales Tax Act, and should be so recognized under the Entry Tax Act read with the two notifications aforesaid. They also cited a large number of judgments of this Court and of the High Court to buttress their submission that packing material would certainly come within the expression input and would therefore be covered by the aforesaid two notifications. Shri Kavin Gulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say- *** (12) goods includes all materials, commodities and articles; Each of these three expressions has been defined in Shorter Oxford English Dictionary as follows: Materials .-the matter of which a thing is or may be made; the constituent parts of something. Commodities .-a thing of use or value; a thing that is an object of trade; a thing one deals in or makes use of. Articles .-a particular item of business. Although the definition of goods is an inclusive one, it is clear that materials, commodities and articles spoken of in the definition take colour from one another. In order to be goods it is clear that they should be known to the market as materials, commodities and articles that are capable of being sold. In the basic judgment which has been referred to in every excise case for conceptual clarity, namely, Union of India v. Delhi Cloth General Mills Co. Ltd. [(1977) 1 ELT 199 : AIR 1963 SC 791 : 1963 Supp (1) SCR 586] , this Court held that for excise duty to be char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. The notification dated 23.9.1998 issued under Section 3 uses identical language as that contained in Entries 66 and 80 of Schedule I to the Entry Tax Act. Equally, notification dated 31.3.1993 is an exemption notification issued under Section 11A which also uses the identical language of Entry 80 of Schedule I. This being the case, it is clear that neither notification can be read to include packing material as raw materials, component parts or inputs used in the manufacture of tea. 11. This brings us to an argument made by learned counsel for the appellants on the correct construction of Explanation II to the notification dated 23.9.1998. 12. What has first to be seen is that packing material, and raw materials, component parts and inputs are separately provided for under the Schedule to the Act. The same is also true of the aforesaid Notification. Packing material is contained in Entry 3 of the table whereas raw materials, component parts and inputs are contained in Entry 4. The rate at which they are taxed is also different packing materials at 2%, whereas raw materials, components parts and inputs are taxed at 1%. This being so, the reason for inclusion of E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as execution of a works contract and not as a sale. This Court held on the facts in that case that packing material was part of the process of re-drying tobacco as it was necessary to pack it in a waterproof material to protect it from heat and humidity, so as to store tobacco for a sufficiently long period to avoid fermentation, and to make the tobacco mature for use in cigarettes, cigars, etc. The context of the judgment is entirely different from the facts contained in the present case and would thus have no relevance. Learned counsel for the appellants tried to draw succour from this judgment stating that the idea of packing tea is also to keep out moisture. While that may be so, that single fact cannot lead to a conclusion that would drive a coach and four through the scheme of the Entry Tax Act. 16. Brooke Bond Lipton India Ltd. v. State of Karnataka, 109 STC 265, was cited next. This is a High Court judgment under the Karnataka Sales Tax Act, in which it was stated that packaging led to value addition for the purpose of excise and sales tax, and that it was a possible view that packaged blended tea produced in the industrial unit of the appellant is a manufactured prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it was not necessary for manufacture of paper sheets. This case would have no application to the facts of the present case. It is obvious that packing material used to pack a product complete in itself, cannot possibly be included in the word component as it is not a constituent part of manufactured tea. 19. Three other judgments under the Central Excise Act were cited. The first of them, CCE v. M/s. Eastend Paper Industries Ltd., (1989) 4 SCC 244, was concerned with the marketability aspect of central excise which, as has been held by us above, would not apply in the context of the Entry Tax Act. In that judgment, paper wrapping was held to be essential to make the concerned goods marketable. The second of these judgments CCE v. Ballarpur Industries Limited, (1989) 4 SCC 566, again concerned a completely different fact situation. The question in that case was whether an admitted input, Sodium Sulphate, in the manufacture of paper, would not be construed to be a raw material only by reason that in the course of chemical reactions Sodium Sulphate is consumed and burnt up. This Court held that consumption and burning up would make no difference, as an input need not always ..... X X X X Extracts X X X X X X X X Extracts X X X X
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