RANGANATHA INDUSTRIES Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) IN this appeal filed under Section 16 of the Karnataka Tax on Entry of Goods Act, 1979 (hereinafter referred to as 'the Act"), the appellant has called in question the correctness of the order dated 27th June 1994, passed by the Joint Commissioner of Commercial Taxes (Administration), Gulbarga Division, Gulbarga.

(2.) THE facts in brief can be stated as hereunder: the appellant (hereinafter referred to as 'the assessee') - is a proprietary concern and is a registered dealer under the provisions of the Act and it is engaged in the activity of extracting oil from rice bran. During the year 1987-88 and 1988-89, the assessee caused entry of rice bran into the Raichur local area from outside. The assessing authority by means of its order dated 29th May 1991, granted exemption from the payment of tax under the Act on the entry of rice bran brought into the local area by the assessee taking the view that the same did not constitute raw material for the purpose of Entry 16-B of the Schedule given to the Act. To come to the said conclusion, the assessing authority relied upon the order passed by the Joint Commissioner of Commercial Taxes (Legal), Bangalore, wherein the Joint Commissioner of Commercial Taxes under similar circumstances in the case of M/s HABIB OIL MILLS, SRIRANGAPATNA, had taken the view that when the goods like oil cake and rice bran are brought into the local area and oil extracted there from, the activity should be treated only as one of processing and not manufacturing; and therefore, it will not come within the ambit of Entry 16-B of the Schedule. However, in the impugned order the Joint Commissioner of Commercial Taxes took the view that the rice bran brought within the local area is liable for payment of tax as the assessee has admittedly used the rice bran for the purpose of extraction of oil out of the rice-bran. As noticed by us earlier, the said order is called in question by the assessee in this appeal

(3.) SRI R. V. Prasad, learned Counsel appearing for the appellant challenging the correctness of the impugned order made three submissions. Firstly, he submitted that the rice bran brought within the local area cannot be considered as a raw material for the purpose of extraction of oil as according to him the extraction of oil out of the rice bran involves only processing activity and not a manufacturing activity. In this connection, he drew our attention to Section 3 of the Act which is the charging Section and relied upon the decisions of the Supreme Court in the case of Commissioner Of C. Ex. , Chandigarh Vs Markfe, Vanaspati and Allied Indus 2003 (153) E. L. T. 491 (S. C); In The Case Of M/s Saraswati Sugar Mills Vs. Haryana State Board and Others AIR 1992 SC 224 ). In The Case Of Chowgule and Co. Pvt. Ltd. and Another Vs. Union Of India and Others 47 STC 124, and in the case of Union Of India Vs Ahmedabad Electricity Co. Ltd. and Others 134 STC 24. Secondly, he contended that rice bran and de-oiled rice bran having been held as one and the same in the case of The State Of Karnataka and Others Vs Oil Seeds Oil Trade And Industry's Association In Karnataka (Regd.) Writ Appeal No. 3069 of 1998 and Writ Appeal Nos. 3223 to 3242/99 and also in the Circular dated 21st November 1987, in CLR. CR. No. 1109/87-88 issued by the Commissioner of Commercial Taxes wherein he had also taken the view that the rice bran and de-oiled rice bran are one and the same, the Commissioner should have taken the view that there was no manufacturing activity involved and therefore, the entry of the rice bran within the local area caused by the assessee, is not liable to be taxed under the Act. Finally, he submitted that since the assessing authority in the light of the decision rendered by the Joint Commissioner who was subsequently re-designated as Additional Commissioner in view of the amendment made to the Act by means of Act No. 5 of 1993 with effect from 9th November 1992, the Joint Commissioner who had passed the impugned order could not have exercised his revisional power under Section 15 of the Act, firstly for the reason that the assessing authority had followed the order passed by the Additional Commissioner who is higher in rank to the Joint Commissioner and secondly for the reason, since the assessing authority has followed the order of the Additional Commissioner, the order passed by assessing authority cannot be considered as one prejudicial to the interest of the revenue. In other words, it is the submission of the learned counsel that if a subordinate authority like the assessing authority follows the order passed by the appellate or a higher authority, the said order cannot be said to be an erroneous order and prejudicial to the interest of the revenue. In support of this submission, he relied upon the decision of the Division Bench of the Calcutta High Court in the case of Russell Properties Pvt. Ltd. , Vs. A. Chowdhury, Addl. Commissioner Of Income Tax, West Bengal and Others 109 ITR 229.