FALCON TYRES LTD Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) The appellant is a public limited company and a dealer registered under the Karnataka Tax on Entry of Goods Act, 1979 (hereinafter referred to as "the Entry Tax Act"). It is engaged in the manufacture of tyres of two wheeler motor vehicles. Appellant is located in Metagalli in Mysore and Metagalli is a local area within the definition of Local area in Section 2(A)(5) of the Entry Tax Act. The main input in the manufacture of tyres is rubber which the appellant procures from the neighbouring State of Kerala.

(2.) Sub-section (1) of section 3 of Entry Tax Act prescribes that there shall be levied and collected tax on entry of any goods specified in the First Schedule into a local area for consumption, use or sale therein, at such rates not exceeding 5% of the value of the goods, as may be specified retrospectively or prospectively, by the State Government by issuance of Notifications. Section 2 of the Entry Tax Act defines the various expressions used in the Act. The expression Agriculture produce or horticulture produce is defined in section 2(A)(1). In substance, it includes all agriculture or horticulture produce excluding tea, coffee, rubber, cashew, cardamom, pepper and cotton and such agricultural or horticultural produce which has been subjected to any physical, chemical or other process for being made fit for consumption except merely cleaning, grading, sorting or drying. Sub-section (6) of Section 3 provides for total exemption from entry tax on the goods specified in the Second Schedule to the Entry Tax Act. The exemption Schedule, i.e., Second Schedule in Sl. No. 2, specifies agricultural produce including tea, coffee and cotton (whether ginned or unginned) as exempt from the Entry Tax.

(3.) Appellant claimed exemption from entry tax before the assessing authority on the value of rubber brought into the local area for the assessment year 1996-97 in terms of the definition of agricultural produce or horticultural produce read with Sl. No. 2 of the Second Schedule to the Entry Tax Act. The assessing authority held that rubber is not one of the agricultural produce included in Sl. No. 2 in the Second Schedule and consequently, disallowed the claim. Appellant contested the assessment order before the first appellate authority, i.e., Joint Commissioner of Commercial Taxes (Appeals) Bangalore City Division. The first appellate authority held that rubber purchased by the appellant from outside the State of Karnataka was subjected to treatment by sulphuric acide and smoke to make it into sheets and therefore such rubber sheets do not fit the definition of agricultural produce under Section 2(A)(1) of the Entry Tax Act. The first appellate authority held that Sl. No. 2 of Second Schedule to the Act also clearly excluded rubber from the purview of agricultural produce. Consequently, the appeal was dismissed.