TMI Blog1988 (4) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... formity with the charging section 3 of the Karnataka Entry Tax Act (the Act). The argument is that the machinery was brought by the petitioner for use in its workshop and was not meant for consumption, use or sale in the local area. The tax is sought to be levied under entry 7 of the Schedule to the Act. That entry reads thus: "Industrial machinery and parts and accessories thereof." The further argument is that the said machinery was installed for effecting repairs and reconditioning of the machinery brought by the customers to its workshop, and, that therefore the said activity does not amount to use or consumption of those goods within the local area, to attract the levy of entry tax. The petitioner's prayer in the writ petition is, therefore, to declare and strike down item No. 7 to the Schedule to the Entry Tax Act which seeks to levy of entry tax on industrial machinery, as beyond the competence of the State Legislature. In support of this contention the learned counsel for the petitioner has relied upon a decision of the Supreme Court in S.M. Ram Lal Company v. Secretary to Government of Punjab (Civil Appeal No. 869 of 1966) disposed of on 3rd April, 1969. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case adduced by the parties on the question whether entry of the wool belonging to the appellants into the limits of the Notified Area Committee, was with the object of converting it into a different commercial commodity. The Supreme Court, therefore, remanded the matter to the High Court to make a fresh order in the light of the evidence to be produced by the parties in that behalf. The learned counsel for the petitioner has, however, placed strong reliance on the observations made by the Supreme Court in the course of its order as to the connotation of the expression, "use". The excerpt from the judgment, which is referred by the learned counsel is produced below: "It is common ground that the goods brought within the Notified Area Committee of Faridabad were not brought for consumption or sale. It was argued, however, that the goods were brought into the Notified Area Committee for use, and on that account octroi was leviable. The expression 'use' is not defined in the Act. In its ordinary meaning the word 'use' as a noun, is the act of employing a thing; putting into action or service; employing for or applying to a given purpose. But the word 'use' occurs in entry 52, Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncrushed salt within the municipal limits for the purpose of crushing and converting it into crushed salt. Since the uncrushed salt brought into the municipal limits was used-up by the dealer in the course of his business of crushing salt, it was held that the company was liable to pay octroi on the uncrushed salt so brought by the dealer for crushing. The Supreme Court in Kathiawar Industries Ltd. v. Jaffrabad Municipality AIR 1979 SC 1721 arising out of the Gujarat High Court decision reported in AIR 1969 Guj 344 upheld the decision of the Gujarat High Court, and it was held that octroi was leviable on the uncrushed salt which was brought to the octroi area and crushed and the activity resulted in both consumption and use of the uncrushed salt by the dealer. The Supreme Court referred, in this context, to the decision in Burmah-Shell case AIR 1963 SC 906 in support of the reasoning that the word "consumption" must be understood depending upon the context as "using up". The Supreme Court referred to its earlier decision in Anwarkhan Mehboob Co. v. State of Bombay [1960] 11 STC 698; AIR 1961 SC 213. It is necessary to refer to Anwarkhan's case [1960] 11 STC 698 (SC) AIR 1961 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g is adopted for the purpose of Entry Tax Act also. "Dealer", under section 2(k) of the K.S.T. Act means, "any person who carries on the business of buying, selling, supplying or distributing the goods............................." The argument of Sri Srinivasan is that the petitioner in these cases does not carry on business of buying or selling of the industrial machinery, which he brings within the local area, for his own use, in his workshop and that therefore, he cannot be treated as a dealer under the Entry Tax Act. If the petitioner is not a dealer, the learned counsel submits, he is entitled to exemption under section 28 of the Act which provides for exemption from the applicability of the Act to persons who are not dealers in scheduled goods. It is, therefore, argued that the levy proposed in respect of industrial machinery is contrary to the charging section and section 28 of the Act. In support of this contention the learned counsel cited the decision in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1 (SC). While dealing with the definition of "dealer" in the Bombay Sales Tax Act, Justice Shah (as he then was) held, that in order to come within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Burmah-Shell case AIR 1963 SC 906, the Supreme Court was dealing with the interpretation of the terms "consumption ", "use", or "sale" appearing in section 73(1)(iv) of the Bombay Municipal Boroughs Act. Explaining the different shades of meaning of "consumption and use" in that context, the Supreme Court held that the goods must be regarded as having been brought for purposes of consumption when a person brings them either for his own use or consumption or to put them in the way of others in the area, who are to use and consume. In the light of this interpretation, their Lordships further held that the act of sale is also an act in the process of consumption, i.e., the sale is merely putting the goods in the way of use or consumption. Hidayatullah, J., (as he then was), who rendered the judgment in that case examined the connotation of the expression, "consumption, use or sale" in the light of entry 52, List II of the Seventh Schedule to the Constitution. The contention of the appellant before the Supreme Court, namely, the Burmah-Shell Oil Company, who had a depot in Belgaum for distribution of petroleum and its products was, that the goods brought by the company inside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reach the ultimate user or consumer in the area; (ii) the goods must be regarded as having been brought in for purposes of consumption when a person brings them either for his own use or consumption, or to put them in the way of others in the area, who are to use and consume." "Consumption" as explained by the Supreme Court in Anwarkhan's case [1960] 11 STC 698; AIR 1961 SC 213 consists in the act of taking such advantage of the commodities and services produced as constituting the utilisation thereof. Relying upon these decisions, Sri Dattu has argued that the petition must fail on the first point, namely, as to the interpretation of the charging section and the levy of entry tax on the industrial machinery and has justified the show-cause notice issued in these cases as valid. Replying to the arguments of the learned counsel for the petitioner on the second point, namely, that the petitioner cannot be treated as a dealer for the purpose of the Act and is not liable to be taxed on the machinery brought within the local area for his own use, Sri Dattu has argued that this contention has to be rejected in view of the scheme of the Act and its object and in the light of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumes a commodity bought by him in the course of his trade, or use in manufacturing another commodity for sale, would be regarded as a dealer. The legislature has not made sale of the very article bought by a person a condition for treating him as a dealer: the definition merely requires that the buying of the commodity mentioned in rule 5(2) must be in the course of business, i.e., must be for sale or use with a view to make profit out of the integrated activity of buying and disposal. The commodity may itself be converted into another salable commodity, or it may be used as an ingredient or in aid of a manufacturing process leading to the production of such salable commodity." The other decision relied upon by the learned Government Pleader is that of Salar Jung Sugar Mills v. State of Mysore [1972] 29 STC 246 (SC); AIR 1972 SC 87. Dealing with the definition of "dealer" in the K.S.T. Act the Supreme Court held (See: para 45), that the purchase of sugarcane which was meant for manufacture of sugar and not for resale, was exigible to purchase tax. The Supreme Court ruled that "if a person carried on business of buying or selling a commodity it is not necessary that he should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expression, "consumption", "use" or "sale" as explained by the Supreme Court in the above-mentioned cases should prevail and should govern the interpretation of these terms used in the Karnataka Entry Tax Act also. To sum up, in the light of the ratio laid down by the Supreme Court in the above-mentioned decisions, the term, "use " need not always be understood as "used-up". (iii) the decisions of the Supreme Court in Raipur Manufacturing Company [1967] 19 STC 1 and the Director of Supplies and Disposals [1967] 20 STC 398 only laid down and explained when an activity can be construed as business and in both the cases the said conclusion was based on the particular facts. Those decisions, therefore, do not help in deciding the question that arises for decision in these cases nor do they support the petitioner's contentions. (iv) so far as the second point as to the definition of "dealer" is concerned, the contention of the petitioner has to be rejected in view of what was stated by the Supreme Court in Abdul Bakshi's case [1964] 15 STC 644; AIR 1965 SC 531, wherein it was held, a commodity may be used as an ingredient or in aid of manufacturing process leading to the product ..... 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