TMI Blog2021 (7) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, it is obvious on a plain reading of these provisions that the legislature intended the point of entry into the local area as the taxable event for the purposes of levy of entry tax and not the point of sale. If the intendment of the legislature, as is obvious from the provisions of the KTEG Act, is to stipulate entry of goods into the local area as the taxable event, this Court cannot opine that the taxable event must be the point of consumption, use or sale because goods are packed differently for wholesale and retail purposes. The fact that the unmanufactured tobacco is sold in retail in paper pouches that are just folded and the folds are kept in place by a loosely glued label would be of no consequence. As already observed, at the point-of-entry into the local area, the unmanufactured tobacco was in a sealed container - the first respondent is justified in clarifying that the unmanufactured tobacco is brought into the local area in a sealed container and is covered under Entry 5 (ii) of the aforesaid notifications and therefore, is liable for tax under section 3 (1) of the KTEG Act. Whether, the second respondent, in exercise of the jurisdiction conferred under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarifying that the unmanufactured tobacco imported into the local area of Tumkur ('the local area') by the petitioner from M/s. Fasttrack Packers Private Limited, Sangamner, Maharashtra is unmanufactured tobacco in sealed container and therefore the product is covered under Entry-5[ii] of the Notification dated 30.03.2002 in No.FD.11.CET.2002[I] [hereinafter referred to as Notification dated 30.03.2002 ] and amended by the subsequent Notification dated 01.10.2013 in No. FD.208.CSL.2013[III] [hereinafter referred to as the amended Notification dated 1.10.2013 ]. Consequentially, the first respondent has also opined that the petitioner will be liable to pay entry tax at the rate of 5% on the entry into the local area for consumption, use or sale therein. The petitioner has further challenged the consequential Rectification Orders dated 17.08.2020 [Annexures-L, L1 and L2] under Sections 17[5], 5-B and 20-B of the KTEG Act for the taxable periods 2014-15, 2015-16 and 2016-17 levying entry tax at the rate of 5% and penalty with interest as per the computation mentioned in these Rectification Orders. The petitioner has also sought for declaration that the unmanufactured toba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition notice dated 17.12.2019 under Sections 17, 5B and 20B of the KTEG Act. In response to such proposition notice dated 17.12.2019, the petitioner filed responses dated 30.12.2019 and 31.12 2019 stating, amongst others, that it had applied for clarification with the first respondent under Section 12(7) of the KTEG Act and the proceedings must be kept in abeyance until the disposal of such application. The petitioner also filed representations for deferring the scheduled personal hearing. 4. The second respondent issued the Endorsement dated 18.01.2020 stating the authorities could initiate proceedings under Section 17(5) of the KTEG Act for rectifying the apparent mistake in treating the unmanufactured tobacco as Non assessable . The assessment proceedings were concluded by order dated 12.04.2019 subject to reopening of assessment based on the final judgment in WP No. 55380-81/2013, and the failure to mention the provision as section 17(5) of the KTEG Act in the proposition notice dated 17.12.2019 was an inadvertent error, and such notice must be noted as initiated under sections 17(5), 5-B and 20-B of the KTEG Act. 5. The petitioner, after the Endorsement dated 18.01.202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, the first respondent in the impugned clarification order dated 29.06.2020 has opined that the goods purchased by the petitioner from M/s Fasttrack Packers Private Limited is unmanufactured tobacco, and the relevant part in the first respondent s order reads as under: 16.5 There is no evidence on record to show that anything is added to the product and it is only tobacco leaves powder which is packed. The label in the packet also shows the contents as unmanufactured tobacco . In the absence of any evidence to the contrary, it may be held that the product is unmanufactured tobacco going by the applicant s contention as recorded in the judgment of the Hon ble High Court of Karnataka in the case of the applicant. 9. Further, there is no dispute about the manner in which the unmanufactured tobacco is packed and received by the petitioner. The unmanufactured tobacco, which is beaten and sieved, are packed in retail paper pouches with each such pouch containing about 16 gms, and 20 of these retail paper pouches are packed in wholesale packs of coarse glued paper packets. These wholesale packs will have to be, even as described on the wholesale packs, cut open using scisso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. State of Karnataka 1992 84 STC 534 (Kar), and the decision of the Hon ble Supreme Court in Balakrishna Hatcheries v. Clarification and Advance Ruling Authority (2006) 148 STC 137 (SC) in support of this opinion. The first respondent s conclusion in this regard in the impugned clarification order dated 29.06.2020 (Annexure-F) reads as under: 18. The instant case is verified in the background of the above judgments and it is found that the applicant is using a paper cover as container and puts the unmanufactured tobacco into it. He folds the paper cover in such a fashion that the contents do not spill. Later he pastes a label containing the brand name and other contents on the paper fold. Further, it is seen that these individual packets are put into bulk containers which consists of 10 pouches and on the container, it is clearly seen that the same needs to be cut to access the contents. It is clear that the contents can be accessed only after breaking open the containers by cutting the cover and tearing of the label and hence should be treated as in sealed containers . It should also be noted that the applicant is bringing the goods in bulk containers which needs to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the enunciation in Burmah Shell Oil Storage and Distributing Co. of India Ltd ibid that the taxable event is the entry of goods which are meant to reach an ultimate user or consumer in such local area. Therefore, neither of the twin conditions i.e. entry of the goods mentioned in the First Schedule of the KTEG Act into a local area nor for the consumption, use or sale of such goods can be ignored. 16. Sri. K. P. Kumar further submits that because of these twin requirements, though it is generally understood that for Octroi/entry tax the taxable event is the entry of goods into a local area, given the provisions of section 3(1) of the KTEG Act and Entry 5 (ii) of the Notification dated 30.03.2002 as amended by the amendment Notification dated 01.10.2013, the test to apply is the nature and type of the container at the point of consumption, use or sale. For these purposes, if only the nature and type of the container at the point of entry into the local area is considered, the nature of the goods and the nature of the container at the point of consumption, use or sale (the second condition) is ignored, and this would be in violation of the statutory provisions. 17. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Entry Tax (Assessment--I) and another v. Mysore Sales Corporation ILR 1991 Kar 3717 as also 84 STC 461 and the Assistant Commissioner of Commercial Taxes - Entry Tax Officer (Assessment- 1), Bangalore and another v. Mysore Industrial Supplies ILR 1996 Kar 3000 as also 106 STC 586 in support of his canvass that the taxable event for the imposition of tax under the KTEG Act is the entry of the goods into the local area and the nature and type of the goods at the point of entry is the relevant factor in determining the tax and not how the goods are used thereafter. 20. Sri. Hema Kumar elaborates that this proposition should also apply on deciding the taxability of unmanufactured tobacco brought into a local area, and only because unmanufactured tobacco in a sealed container becomes taxable in terms of Entry 5 (ii) of the Notification dated 30.03.2002/ amendment Notification dated 01.10.2013, it would not be permissible in law, by an erroneous reading of the settled proposition, to shift the taxable event. The acceptance of the argument on behalf the petitioner would tantamount to shifting the taxable event to the petitioner s advantage contrary to the settled prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. Only if this Court opines that the nature of the package of the unmanufactured tobacco at the time of sale would be decisive, then the question whether the retail pouches were in sealed containers would arise for consideration. 25. It is said the province of a judge is to declare the law and not to give it (judicis estjus dicere, non dare), and for that purpose, the provisions in the statutes, even in tax statutes, when they are plain and unambiguous must be applied as they stand to give true effect to the intendment of the legislature, a proposition expounded by the Constitutional Bench in Commissioner of Customs (import), Mumbai vs Dilip Kumar and Company and others (2018) 9 SCC 1. The Hon'ble Supreme Court had held as follows: 21. The well settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the courts are bound to give effect to the said meaning irrespective of consequences. If the words in the statute are plain and unambiguous it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the legislature. 22. In Kanai Lal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State Government of Karnataka] who brings or causes to be brought into a local area the goods whether on his own account or on account of his principal or any other person or who takes delivery or is entitled to take delivery of such goods on its entry into a local area. Explanation .- Where the goods are taken delivery of on its entry into a local area or brought into a local area by a person other than a dealer, the dealer who takes delivery of the goods from such person shall be deemed to have brought or caused to have brought the goods into the local area. (3) Notwithstanding anything contained in sub-section (1) or subsection (2), no tax shall be levied on and collected from a dealer who brings or causes to be brought into a local area any goods,- (i) in respect of which tax has been paid or has become payable in any other local area under subsection (1), or (ii) other than Gutkha] in respect of which tax has been paid or has become payable under section 4- B of the Karnataka Tax on Luxuries Act, 1979 (Karnataka Act 22 of 1979). (4) The provisions of sub-sections (3) shall not apply unless the dealer preferring claim under the said subsection fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aler for any year as if, the aggregate value of the goods brought or caused to be brought into local area in such year had been received as in the previous year. 27. It is obvious from these provisions that the legislature intends levy and collection of entry tax under section 3(1) of the KTEG Act on goods specified in the First Schedule when such goods are brought into the local area; of course, for consumption, use or sale in such local area. The legislature imposes liability to pay entry tax, under all circumstances, on a registered dealer or dealer liable to get himself registered under the Act. Even when the goods are taken delivery of on its entry into local area or being brought into a local area by a person other than a dealer, the dealer who takes delivery of the goods from such person is made liable by deeming that such dealer has caused the entry of goods into the local area. All the references are qua the registered dealer (or dealer liable to be registered or the dealer) and the point of entry into the local area, and there is no reference to point of sale in section 3 of the KTEG Act. The place of business is defined to be the place where dealer is doing busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be of no consequence. As already observed, at the point-of-entry into the local area, the unmanufactured tobacco was in a sealed container. As such, the first question is answered holding that the first respondent is justified in clarifying that the unmanufactured tobacco is brought into the local area in a sealed container and is covered under Entry 5 (ii) of the aforesaid notifications and therefore, is liable for tax under section 3 (1) of the KTEG Act. Question No. 2: 30. Sri K. P. Kumar, submits that under section 17(5) of the KTEG Act, an assessment or reassessment order can be rectified, but subject to certain conditions mentioned therein, when such orders are found to be erroneous i.e., prejudicial to the interest of the public revenue by a judgment or an order of a court notwithstanding anything contained in the KTEG Act. However, in the present case the impugned rectification orders dated 17.08.2020 (Annexure is-L, L1 and L2) have been issued because of the clarification order as per Annexure-F issued by the second respondent in exercise of the jurisdiction under section 12(7) of the KTEG Act. As such, these impugned rectification orders are without jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re conditionally closed because of the interim orders granted by this Court in WP No. 55380- 55381/2013 and there writ petitions are presently dismissed upholding the validity of the notification. Therefore, it becomes necessary to rectify the assessment orders. But the rectification proceedings are deferred until the conclusion of the clarification proceedings on 29.06.2020 in the light of the petitioner s response that when a senior officer is seized of a relevant question in clarification proceedings, it would not be proper for the second respondent to rectify the assessment orders. The details of the proposition notice and the subsequent correspondences have been captured in the impugned rectification orders. 33. The treating of the unmanufactured tobacco brought into the concerned local area by the petitioner in the assessment orders dated 12.04.2019 as Non-assessable excluding the relevant turn over from the assessment, undeniably, would be prejudicial to public revenue in the light of the terms of the amendment Notification dated 01.10.2013 and the provisions of Section 3(1) of the KTEG Act. The unmanufactured tobacco brought into the local area by the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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