M/S Addison &
Co.Ltd. Vs. State Of Karnataka Rep by Commr Com.Tax [2009] INSC 426 (26
February 2009)
Judgment
CIVIL APPELLATE
JURISDICTION CIVIL APPEAL NO. 1311 OF 2009 (Arising out of S.L.P.(C)
No.5190/2008) M/s Addison & Co. Ltd. ...Appellant(s) Versus State of
Karnataka rep. by Commr., Com.Taxes ...Respondent(s) ORDER Leave granted.
The short question
which arises for determination in this Civil Appeal is:
Whether the subject
tools are in the nature of accessories to machines and, therefore, liable to
entry tax? The main submission of the appellant before us was that the said
tools are consumables and, therefore, they cannot be part(s) of the machine nor
can they be termed as "accessories". It was submitted that machines
like lathe machines and drilling machines are not capable of performing any
functions without the subject tools. Before us, it was further submitted that
the subject tools are rendered useless after they are used for certain number
of times. It is also pointed out that in the past, prior to Assessment Year
2000-2001, the Department has accepted that the test of whether the subject
tools constituted consumables was applied by the Department as the relevant
test in interpreting Entry 52 of the First Schedule to the Karnataka Tax on
Entry of Goods Act, 1979.
On the other hand, it
is argued on behalf of the Department that the subject tools are part of the
machine and that, in any event, they are accessories. It is also contended that
the test of an item being consumable is not relevant in interpreting the said
Entry 52.
We quote herein-below
Entry 52 of the First Schedule to the 1979 Act:
"52. Machinery
(all kinds) and parts and accessories thereof but excluding agricultural
machinery."
On going through the
pleadings, particularly at pages 51, 59 and 105 of the S.L.P. paper book, we
find that all throughout it was argued before the Authorities below, in this
case, that without subject tools the lathe and drilling machines are non-
functional.
As repeatedly stated
in our earlier judgments, in matters of interpretation of taxing laws, this
Court must first find out whether a proper foundation is established by the
assessee/Department before the adjudicating authority. This test has not been
complied with by the assessee in the present case. For example, assessee has
stated at page 59 of the S.L.P. paper book that "the subject tools cannot
be termed as parts of the machine since the machine can very well function
without the said tools, though the machine may not be in a position to carry
out the specific jobs for which these tools would be necessary. It is further
stated that the subject tools are necessary for a machine to carry out specific
jobs but that fact would not make them parts of the machine."
As stated, what was
argued before us was that lathe and drilling machines are non-functional
without subject tools whereas in the above paras before the Authorities below,
the assessee submitted that lathe and drilling machines can function without
the subject tools. We may also note that the assessee has not led evidence
before the adjudicating authority to show whether the lathe and drilling
machines were non-functional in the absence of the subject tools.
For the aforestated
reasons, we find no infirmity in the impugned judgment of the High Court and
the Tribunal and, accordingly, we dismiss this Civil Appeal which, as stated
above, relates to Assessment Year 2000-2001.
Be that as it may, we
are of the view that it would be open to the assessee herein to raise the
contention as to whether the subject tools are consumables and not
accessories/parts of machine in an appropriate case(s). The reason being that
Authorities need to decide as to what distinguishes a consumable from an
accessory.
If the assessee
raises such a contention as is raised before us in this Appeal, the authority
shall consider the contention in accordance with law, uninfluenced by the
observations made in the impugned judgment of the High Court and the Tribunal
in this case. We also make it clear that in such an event, it would be open to
the assessee herein and to the Department to raise all such contentions which
are necessary for deciding this dispute, including the contentions mentioned
hereinabove.
Subject to above,
Civil Appeal is dismissed. No order as to costs.
...................J.
(S.H. KAPADIA)
...................J.
(AFTAB ALAM)
New
Delhi,
February
26, 2009.
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