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2014 DIGILAW 653 (KAR)

State of Karnataka v. R. Venkatareddy

2014-07-10

B.MANOHAR, N.KUMAR

body2014
JUDGMENT 1. The State has preferred this revision petition challenging the order passed by the Karnataka Appellate Tribunal, which has held that L & T case 752 Vibratory Compactor is a motor vehicle and therefore not liable to tax under the provisions of the Karnataka Tax on Entry of Goods Act, 1979 (for short, hereinafter referred to as K.T.E.G. Act). 2. The assessee is a Contractor engaged in the business of civil construction work and registered as a dealer under the provisions of the Karnataka Value Added Tax Act, 2003 and also under the K.T.E.G. Act, 1979. In relation to the assessment year 2006-07, the Assessing Authority concluded the assessment under the Entry Tax Act and levied tax on the purchase of L & T 752 Vibratory Compactor (for short, hereinafter referred to as the Compactor). Against the said order of assessment, the assessee preferred an appeal before the Joint Commissioner of Commercial Tax (Appeals), Davanagere Division, Davanagere who dismissed the said appeal on the ground that the assessee has not produced any documents in support of his claim that the said compactor is a motor vehicle, is registered under the Motor Vehicles Act, 1988. Aggrieved by the said orders, the assessee preferred a second appeal before the Karnataka Appellate Tribunal (for short, KAT). At the time of arguments, the assessee did not produce any evidence showing that the Compactor is registered under the Motor Vehicles Act but only produced the purchase bill. The KAT relying on the judgment of the Apex Court held that the Compactor is a motor vehicle and not a machine as contended by the Revenue and therefore, it is not liable to tax under the K.T.E.G. Act. Aggrieved by the said order, the present revision petition is filed. 3. The learned Government Advocate assailing the impugned order contended that this Court in the case of M/s. L & T Case Equipments Private Limited vs. Commissioner of Commercial Taxes, STRP No. 30 of 2010 and other connected matters decided on 10th August, 2012 and in the case of M/s. Ingersoll Rand (India) Limited vs. Commissioner of Commercial Taxes in STRP Nos. 21 of 2010 and other connected matters decided on 10th August, 2012 has categorically held that the Vibratory Compactor is an earth moving machinery and therefore, it is not a motor vehicle. 21 of 2010 and other connected matters decided on 10th August, 2012 has categorically held that the Vibratory Compactor is an earth moving machinery and therefore, it is not a motor vehicle. Ignoring the said judgments, the Tribunal committed serious error in holding it to the contrary. She also submitted that even till this date, the assessee has not produced the Certificate of Registration as a Motor Vehicle and therefore, it is not open to them to contend that it is not a machinery and a motor vehicle. Therefore, she submits that the impugned order requires to be set aside. 4. Per contra, the learned counsel appearing for the assessee submits, the two decisions on which reliance is placed were rendered under the Karnataka Sales Tax Act, 1957 where the question which arose for consideration was, whether the Vibratory Compactor falls within Entry 1 (i)(a) or Entry 1(iii)(a) of Part 'M' of second schedule to Karnataka Sales Tax Act, 1957 ( for short, hereinafter referred to as the KST Act) where both the entries related to machinery and the only difference is in the percentage of the tax liability. In the K.T.E.G. Act, the word motor vehicle has been defined and as the Compactor satisfies the definition of the motor vehicle under the Act. The aforesaid judgments cannot be invoked to decide the dispute under the K.T.E.G. Act. In support of their contention, he also relied on the judgment of the Apex Court in the case of Bose Abraham vs. State of Kerala and another, Sales Tax Cases 121 page 615. 5. In the light of the aforesaid facts and the rival contentions, the question of law that arises for consideration in this revision petition is:- Whether L & T 752 Vibratory Compactor is a motor vehicle or a machinery and therefore, liable to tax under the K.T.E.G. Act? 6. The facts are not in dispute. Therefore, we have to see whether the case on hand is covered by the two judgments referred to by the Revenue, which are rendered by the Division Bench of this Court. 7. The Karnataka Sales Tax Act, Second Schedule, Part M, Entry -1 dealt with machinery as under: (i)(a) Earth movers, such as dumpers, dippers, bulldozers and the like. (iii)(a) Machinery (all kinds) and parts and accessories thereof except those falling under other items of this entry and those specified elsewhere. 8. 7. The Karnataka Sales Tax Act, Second Schedule, Part M, Entry -1 dealt with machinery as under: (i)(a) Earth movers, such as dumpers, dippers, bulldozers and the like. (iii)(a) Machinery (all kinds) and parts and accessories thereof except those falling under other items of this entry and those specified elsewhere. 8. The question which arose for consideration in those two judgments is, whether the Vibratory Compactor falls under Part M(1)(i)(a) or Part M(1)(iii)(a)? 9. In that context, it was held in the M/s. L & T Case Equipments Private Limited as under: "7. On going through the submissions made at the Bar, we do not find any good reason to reject the contention of the petitioner. Because, the vibratory compactor does the function of putting waste vertically into the ground. Counsel for the petitioner has produced copy of the notification dated 31.03.1993 under KST Act. In the said notification, the vibratory compactor has been classified as earth moving equipment. However, it is the contention of the respondent that the said notification has been withdrawn. It is to be noted that withdrawing of the notification would be of no consequence, when it was the stand of the Government in the notification dated 31.03.1993 that vibratory compactor has been classified as earth moving machine. Therefore, it is the understanding of the Government that vibratory compactor is an earth moving machinery. In fact, in the said notification the vibratory compactor is shown in brackets to make it specific that it is in the category of earth moving machinery. In that view, it is untenable for the respondent to contend that vibratory compactors are not earth moving machineries. The understanding of the Government with regard to the vibrating compactor as earth moving machinery and issuing notification to that effect would be binding on the Government because the notification has statutory force and now the Respondent cannot argue contrary to the stand taken in the notification. In that view of the matter, the question of law is answered in favour of the assessee. Accordingly, the petitions are allowed." Similar view was also taken in the case of M/s. Ingersoll Rand (India) Limited vs. Commissioner of Commercial Taxes. 10. From the aforesaid judgments, it is clear that in the Karnataka Sales Tax Act and in the Notifications referred to therein earth movers includes dumpers, dippers, bulldozers and the like. Accordingly, the petitions are allowed." Similar view was also taken in the case of M/s. Ingersoll Rand (India) Limited vs. Commissioner of Commercial Taxes. 10. From the aforesaid judgments, it is clear that in the Karnataka Sales Tax Act and in the Notifications referred to therein earth movers includes dumpers, dippers, bulldozers and the like. In the Notification, it has been classified as earth moving equipment. Therefore, it falls under Entry 1(i)(a) Part M of Second Schedule. Entry 1(iii)(a) dealt with machineries (all kinds) and parts and accessories thereof except those falling under others items of this entry and those specified elsewhere. Therefore, when Entry 1(i)(a) specifically dealt with bulldozers, which is the popular name of the Vibratory Compactor coupled with the fact, a Notification has been issued on 30.03.2002 by the Government classifying Vibratory Compactor as earth moving machinery, this Court held that Compactor is a machinery and not a motor vehicle. 11. The present case is under the K.T.E.G. Act. It was contended, if under the Karnataka Sales Tax Act, it is held to be a machinery, under the K.T.E.G. Act, it cannot be held to be a motor vehicle. 12. Section 2(B) of the K.T.E.G. Act reads as under: "Words and expressions used in this Act, but not defined, shall have the meaning assigned to them in the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957). In other words, if the words and expressions are defined under the K.T.E.G. Act, the definition given under the Karnataka Sales Tax Act stands excluded." 13. Chapter II of the K.T.E.G. Act deals with the levy of tax. Section 3 is the charging provision. It states, there shall be levied and collected a tax on (entry of any goods specified in the First Schedule) into a local area for consumption, use or sale therein, at the rates prescribed in the Notification issued by the Government. Chapter II-A contains definitions. Section 4-A(d) defines a motor vehicle, which reads as under: Motor Vehicle means a motor vehicle as defined in clause (28) of Section 2 of the Motor Vehicles Act, 1988." 14. Therefore, we have to look into the Motor Vehicles Act, 1988 to understand the meaning of motor vehicles as defined under Section 4-A(d). 15. Chapter II-A contains definitions. Section 4-A(d) defines a motor vehicle, which reads as under: Motor Vehicle means a motor vehicle as defined in clause (28) of Section 2 of the Motor Vehicles Act, 1988." 14. Therefore, we have to look into the Motor Vehicles Act, 1988 to understand the meaning of motor vehicles as defined under Section 4-A(d). 15. Section 2(28) of the Motor Vehicles Act, 1988 defines motor vehicle or vehicle as under: Motor Vehicle or vehicle means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding (twenty five cubic centimeters). 16. Section 2(16) defines heavy goods vehicle as under: "Heavy goods vehicle means any goods carriage the gross vehicle weight of which, or a tractor or a road-roller the unladen weight of either of which, exceeds 12,000 kilograms." 17. Under the Scheme of K.T.E.G. Act, Chapter II deals with levy of tax. Section 3 is the charging Section. It provides that, the tax shall be levied on entry of any goods specified in the First Schedule into a local area for consumption, use or sale therein. Chapter-IIA deals with levy of tax on motor vehicles exclusively. Section 4-A is the definition Section which defines what a 'motor vehicle' is under Section 4-A(d). Section 4-B is the charging Section in so far as motor vehicles are concerned. It starts with a non-obstante clause. It provides that, notwithstanding anything contained in Section 3, there shall be levied and collected a tax on the purchase value of a motor vehicle on entry of which is effected into a local area for use or sale therein and which is liable for registration or assignment of a new registration mark in the State under the Motor Vehicles Act, 1988. The rate at which tax is levied on such motor vehicle is at the rate specified in the notification to be issued. The rate at which tax is levied on such motor vehicle is at the rate specified in the notification to be issued. Notification No. F.D. 03 CET 2006, Bangalore, dated 31.03.2006 issued under Section 4-B reads as under: S. No. Category of Motor Vehicles Rate of Tax 9 Earth movers, such as 12.5% upto Dumpers, Dippers, 04.08.2005 Bulldozers and the like and 4% adopted for use on road. with effect from 05th August, 2005. 18. The aforesaid Notification empowers the State Government to levy and collect tax under the Act on earth movers such as dumpers, dippers, bulldozers and the like and adopted for use on road. Therefore, Section 4-B deals with levy of tax on motor vehicles. Section 3 deals with levy of tax on all goods except the goods covered under Section 4-B. From the aforesaid Notification, it is clear, the understanding of the Government is that tax is leviable under Section 4-B, on all earth movers, dippers and bulldozers and the like and not under Section 3. The Revenue relies on the Notification No. F.D. 11 CET 2002(1) dated 30th March, 2002 where the tax is levied under Section 3 of the KST Act on machinery (all kinds and parts and accessories thereof but excluding agricultural machinery. If we read these two Notifications, keeping side by side, the understanding of the State is earth movers, dumpers, dippers, bulldozers and the like and adopted for uses on road do not fall within the meaning of the word machinery (all kinds). 19. The Apex Court had an occasion to consider this question arising under the provisions of the Kerala Tax on Entry of Motor Vehicles into Local Areas Act, 1994, where it is held as under: "6. Section 2(j) of the Act defines motor vehicle to mean a motor vehicle as defined in Section 2(28) of the Motor Vehicles Act, 1988 (Central Act 59 of 1988). Subject to the provisions of the Act, section 3 of the Act enables the levy and collection of tax on the entry of any motor vehicle into local area for use or sale therein which is liable for registration in the State under the Motor Vehicles Act at such rate as may be fixed by the Government. Subject to the provisions of the Act, section 3 of the Act enables the levy and collection of tax on the entry of any motor vehicle into local area for use or sale therein which is liable for registration in the State under the Motor Vehicles Act at such rate as may be fixed by the Government. Therefore, in order to attract tax under the provisions of Section 3 of the Act, a motor vehicle must have entered into a local area for use or sale therein and secondly which is liable for registration under the Motor Vehicles Act. 7. We hold that the excavators and road rollers are motor vehicles for the purpose of the Motor Vehicles Act and they are registered under that Act. The High Court has noticed the admission of the appellants that the excavators and road rollers are suitable for use on roads. However, the contention put forth now is that they are intended for use in the enclosed premises. Merely because a motor vehicle is put to a specific use such as being confined to an enclose premises, will not render the same to be a different kind of vehicle. Hence, in our view, the High Court has correctly decided the matter and the impugned order does not call for any interference by us. However, the question whether any motor vehicle has entered into a local area to attract tax under the Entry Tax Act or any concession given under the local Sales Tax Act will have to be dealt with in the course of assessment arising under the Entry Tax Act. 20. From the aforesaid reasoning, it is clear, in order to attract tax under the provisions of Section 4-B of the K.T.E.G. Act, a motor vehicle must have entered into a local area for use or sale therein and consequently, it is liable for registration under the Motor Vehicles Act. If the vehicle is not registered under the Motor Vehicles Act that would not take away the vehicle outside the purview of Section 4-B. The question is whether it is a machinery or a motor vehicle under the Scheme of the Act? In the Notifications issued, it is clear, for the purpose of the Karnataka Sales Tax Act, Compactor is treated as a machinery and not a motor vehicle as contended by the Revenue. In the Notifications issued, it is clear, for the purpose of the Karnataka Sales Tax Act, Compactor is treated as a machinery and not a motor vehicle as contended by the Revenue. The aforesaid two judgments relied on by the Revenue has no application to the case arising under the K.T.E.G. Act as the motor vehicle has been specifically defined under the K.T.E.G. Act and the provisions of the Karnataka Sales Tax Act and the description of the entries therein have no application while deciding the case under the K.T.E.G. Act. Therefore, the contention of the Revenue that the motor vehicle is not registered, it cannot be treated as motor vehicle and has to be treated as machinery is without any substance. For the aforesaid reasons, the substantial question of law is answered in favour of the assessee and against the Revenue. We do not see any infirmities in the order passed by the Tribunal, which calls for interference. Hence, revision is dismissed. No costs.