2012 (11) TMI 1043 - HC - VAT and Sales Tax

Entry tax - purchase and import of certain items such as scratch cards telecom parts CDot telephone material S.M.P.S. S.B.M. tower parts antenna B.T.S. etc. - Held that - As per the Notification No. KA-NI-22283/XI-9(81)/ 91-U.P. Ord.-21-99-Order-99 it is mentioned that the entry tax on goods is leviable on Machinery and spare parts of machinery valuing ten lacs or more . In the instant case the value of the telephone exchange and other equipments is more than a crore where a individual machinery cannot function independently. So the value of entire goods will have to be taken for the purpose as all the equipments and machinery will have to work together. Individual item has no separate utility. Hence the value of the goods during the assessment year under consideration is more than ten lacs and is subject to entry tax. Revision dismissed.

Summary

Issues:
- Interpretation of entry tax on machinery and spare parts
- Applicability of entry tax on items purchased for providing services
- Consideration of total value for entry tax calculation
- Definition of machinery for entry tax purposes

Interpretation of entry tax on machinery and spare parts:
The case involved revisions filed against an order passed by the Commercial Taxes Tribunal regarding the levy of entry tax on machinery and spare parts. The Notification specified that entry tax is applicable on "Machinery and spare parts of machinery valuing ten lacs or more." The dispute arose as the revisionist argued that the items purchased, though totaling over Rs. 1 crore, consisted of individual items valued at less than Rs. 10,000 each. The revisionist contended that since they were not engaged in trade or manufacture but in providing telephone services, the materials purchased were not covered under the definition of machinery for entry tax purposes.

Applicability of entry tax on items purchased for providing services:
The revisionist's counsel argued that the materials purchased for providing telephone services did not fall under the category of "machinery or its parts" liable for entry tax. They emphasized that certain items could not be considered machinery and that the lower authorities had erred in rejecting the claim. The revisionist contended that as the individual items were valued at less than Rs. 10 lakhs, no entry tax should be levied on them.

Consideration of total value for entry tax calculation:
The Tribunal upheld the levy of entry tax, considering the total value of all equipment and machinery purchased, amounting to over Rs. 1 crore. The Tribunal reasoned that since the machinery and equipment needed to work together as a whole for the telephone services, the total value had to be taken into account for assessing the entry tax. Individual items were deemed to have no separate utility, justifying the levy based on the cumulative value.

Definition of machinery for entry tax purposes:
In justifying the levy of entry tax, the Department's counsel referred to a previous case defining machinery broadly to include electronic equipment for communication purposes. They argued that the term machinery encompassed a wide range of equipment, including electronic devices. Since the entry tax list did not specifically mention electronic goods, they fell under the general category of machinery and its parts, making them subject to entry tax.

In conclusion, the High Court upheld the Tribunal's decision to levy a two percent entry tax on the machinery and equipment purchased by the revisionist for providing telephone services. The Court found that the total value of the goods exceeded Rs. 10 lakhs and, therefore, fell within the ambit of the entry tax notification. The revisions were dismissed, affirming the Tribunal's order and the levy of entry tax on the revisionist.