Nectar Beverages (Private) Limited, Dharwad vs State of Karnataka

R. Gururajan, J.-The appellant is a dealer registered under the Karnataka Tax on Entry of Goods Act, 1979 (for short, the ''Act''). It is engaged in the activities of manufacturing and sale of aerated water and soft drinks. In the course of its business, the appellant has caused entry of raw materials, machinery, furnace oil and crown caps, among others, for use in the manufacture of soft drinks. The Additional Deputy Commissioner of Commercial Taxes (Assessments), Dharwad, for the assessment years 1993-94 to 1996-97, passed orders of assessment on 18-12-1999 and for the assessment year 1997-98, passed another assessment order on 5-7-2000, under Section 5(4) of the Act, subjecting to tax the causing of entry of crown caps into the appellant''s unit, treating the same as packing materials. Penalty was also levied. Aggrieved by the same, the appellant filed an appeal. The Appellate Authority accepted the case of the appellant and set aside the order of the Assessing Authority. Therefore, the Revisional Authority by exercising revisional power, issued a notice on 19-2-2003 in the matter of revising the order of the Appellate Authority. The reply was obtained. Thereafter, an order was passed in terms of the impugned order. In the impugned order, the Revisional Authority set aside the order of the Appellate Authority and confirmed the order of assessment passed by the Additional Deputy Commissioner of Commercial Taxes, Dharwad. It is in these circumstances, the appellant is before this Court in this appeal.

The following questions of law are framed for consideration:

Whether on the facts and in the circumstances of appellant''s case, the Revisional Authority was right in law in revising the order dated 2-2-2001 passed by the First Appellate Authority in KTEG.Ap.Nos. 63, 64, 68 and 65 of 1999-2000 and KTEG.Ap.No. 44 of 2000-01 especially when the said order was neither erroneous nor prejudicial to the interests of the revenue?

Whether on the facts and in the circumstances of the appellant''s case, can it be held that ''crown caps'', fall within any of the description of the goods as enumerated under Entry 66 of the First Schedule appended to the Karnataka Entry Tax Act, 1979, as notifications stood during the assessment years in question?

Sri R.V. Prasad, learned Counsel for the appellant would invite our attention to a detailed order passed by the Appellate Authority to show that it was neither erroneous nor prejudicial to the interests of the revenue for the Revisional Authority to have invoked the extraordinary revisional power conferred under Section 15(2) of the Act. Even on merits also, crown cap cannot fall within the meaning of packing materials, in terms of entries available in statute. He further elaborates his contention by relying on a subsequent order passed by the Karnataka Appellate Tribunal, in the case of United Breweries Limited, Bangalore v State of Karnataka, 2000(49) Kar. L.J. 321 (Tri.) (DB), to contend that the Tribunal has accepted that crown caps do not come within the meaning of packing materials in terms of the entry. The said order according to him is accepted by the department. He would also say that the Government has taken cognizance of this order and has issued notification to amend the entries with effect from the year 2001.

4.Per contra, Smt. S. Sujatha, learned Government Advocate, submits that crown caps would fall certainly within the meaning of ''packing materials'', in terms of the entry. She therefore says that Revisional Authority is right in setting aside the order of the Appellate Authority.

After hearing the arguments of the learned Counsel, we have carefully perused the material on record. The Assessing Authority has chosen to hold that crown cap is a packing material for the purpose of levy of tax. The same was challenged before the Appellate Authority. The Appellate Authority by a detailed order and in the light of the judgment of this Court, has set aside the order of levy of penalty and allowed the appeal. The Revisional Authority has chosen to set aside that order.

Admittedly, revision power is available only in the event of an order being erroneous and prejudicial to the interest of the revenue. A careful reading of the appellate order would show that after considering several aspects of the matter, the Appellate Authority has passed the impugned order. In fact, the Appellate Authority has chosen to follow the judgment of this Court while holding so. In the circumstances, we are satisfied that the Revisional Authority could not have interfered with the order of the Appellate Authority as that order is neither erroneous nor prejudicial to the interest of the revenue and it is in the light of the judgment of this Court.

Coming to the merits of the case, we see that the Assessing Officer has chosen to tax crown caps in the impugned order. The Appellate Authority has chosen to notice Entry 66 at page 59. The said entry reads as under:

"66. Packing materials, namely.-

(a) fibre board cases, paper boxes, folding cartons, paper bags, carrier bags and cardboard boxes, corrugated board boxes and the like;

(b) tin plate containers (cans, tins and boxes), tin sheets, aluminium foil, aluminium tubes, collapsible tubes, aluminium or steel drums, barrels and crates and the like;

(c) plastic, poly-vinyl chloride and polyethylene films, bottles, pots, jars, boxes, crates, cans, carboys, drums, bags and cushion materials and the like;

(d) wooden boxes, crates, casks and containers and the like;

(e) gunny bags, bardon (including batars), hessian cloth and the like;

(f) glass bottles, jars and carboys and the like;

(g) laminated packing materials, such as bituminized paper and hessian based paper and the like...".

A careful reading of the said entry would show that Legislature in its wisdom has chosen to use the word ''namely'', after the words ''packing materials''. It is also seen that there is no specific inclusion of crown cap in the Schedule of the Act. In the circumstances, judgment of this Court in the case of Maharashtra Hybrid Seeds Company Limited, Bangalore v State of Karnataka, 1999(47) Kar. L.J. 205 (HC) (DB), has been noticed by the Appellate Authority. At this stage, it is useful to refer to the said judgment for the purpose of considering the case on merit. This Court in the said judgment, while considering the very issue of packing material, held in paragraphs 11 to 13, which reads as under:

"Para 11. Normally speaking, the Courts while giving a meaning to an item contained in the Schedule give it the meaning which the makers of the Schedule intended by grouping various articles in a particular group considering them in a generic sense. On a reading of Entry 16-A and its analysis, it is evident that the Legislature did not intend to tax all packing materials. Intention is to tax certain items made out of specified materials enumerated in clauses (i) to (vi). By putting the word "namely", after the words "packing materials" in the heading of Entry 16-A, the Legislature intends to specify the packing materials made out of a particular commodity to be taxed under the Act. Clause (i) deals with packing materials made out of paper; (ii) with tin and other metals; (iii) from plastic; (iv) with wood; (v) from jute fibre; and (vi) with glass.

In this case, we are concerned with the packing materials made out of jute and not any other material. Under clause (v) the packing materials made out of jute have been brought to tax. There are three items in entry (v): (a) gunny bags; (b) barden (including batars); and (c) hessian cloth. Counsel for the parties are agreed that gunny bags and bardens (including batars) is made out of jute. "Hessian" as per shorter Oxford Dictionary means "strong, coarse cloth of hemp or jute; sack-cloth". In the same dictionary "hemp" means "plant from which coarse fibre are obtained for the manufacture of rope and cloth". Thus all the three entries in clause (v) relate to fibre made out of jute. After these entries, the Legislature has added the words "and the like". Similarly, in all other clauses as well, the words "and the like" have been added at the end of entries. The words "and the like" will have to go with the description of the items in the clause and would not include an item which is not conceived in the entry. In clause (v), the intention is to subject to tax the packing materials made out of jute only and not out of any other material like cloth, polythene, etc. Jute is the basic fibre and the packing materials made out of jute only are subjected to tax. The expression "and the like" would require to be considered "ejusdem generis". The genesis or the class of items envisaged by the preceding words not being exhaustive of the genesis or the class, the Legislature has conceived the words "and the like" so as to bring in any other item of the same class or genesis. In Entry 16-A, broadly speaking, the packing materials of different metals and materials have been mentioned and the reference to the words "and the like" will have to go separately with the description in each item and would not go beyond that to any other item not conceived in such each sub item. The reference in Entry 16-A(v) is with reference to gunny bags, bardan (including batars), hessian cloth and the words "and the like" extending the principle of ejusdem generis would not conceive cotton cloth bags within that group to subject the petitioner to entry tax.

The Tribunal was not justified in law to hold that the reference of words in Entry 16-A "namely" and "and the like" will have the meaning "such as" to conceive the entry to be illustrative. In our view, entry in itself is exhaustive which does not permit the inclusion of any other material which is not enumerated. Bags made out of plastic have been subjected to tax under clause (iii) and not clause (v). There is a fallacy in the argument of Mr. Mallya, Government Advocate that the intention of the Legislature is to tax the packing materials made out of fibre obtained by cultivation like jute, cotton or hemp. Cotton is not a fibre obtained from a plant. Cotton is a flower on a plant. Cloth can be made out of cotton, synthetic or silk and the like. If we accept the argument that the bags made out of cloth are taxable, then, the respondents have to put to tax the bags made out of cloth and not out of cotton as cloth can be made out of cotton, silk, synthetic and the like which does not seem to be the intention of the Legislature".

This judgment has been notified by the Appellate Authority and this judgment squarely covers the case on hand. Here the Revisional Authority has committed a patent legal error, particularly in the light of the judgment of this Court in the identical circumstances. We accept the argument of the learned Counsel Sri R.V. Prasad that the Revisional Authority has committed a legal error in answering questions of law. In the circumstances, we answer the questions of law in favour of the assessee and against the revenue.

There is one more reason to hold so, in this order. Sri Prasad, learned Counsel, would rightly points out to us that in the case of U.B. Limited, the Tribunal has chosen to accept similar contentions regarding levy of entry tax. The said order is subsequent to the order of the Revisional Authority. After the order of the Tribunal, we see from the notification dated 31-3-2001 that the Legislature has chosen to provide specific entry with regard to crown caps in terms of the notification. This additional material of subsequent notification would also support the contention of the learned Counsel Sri Prasad.

In the circumstances, the appeal is allowed. The order of the Revisional Authority is set aside. The questions of law are answered in favour of the assessee and against the revenue. Ordered accordingly. No costs.