ARYA BHAVAN Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) A rather ticklish question of law has been raised by the appellants in these two appeals which requires in our considered view, a decision within the scope and context of the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act as contra-distinguished from the view taken by the courts from time to time in relation to several other enactments. The controversy centres around the question as to whether the appellants, who basically run restaurants in the city of Bangalore, but who are famous for some of their specialised preparations mainly sweets and other edible items, can be regarded as a manufacturing unit within the meaning of entry No. 16-B of the Act. For the purpose of convenience, we have extracted entry No. 16-B along with the explanations which read as follows :

(2.) By virtue of these provisions, what is sought to be taxed is the inputs used in the manufacturing of an intermediate or finished product when brought into the local areas by an industrial unit which in turn by virtue of the explanation is construed to mean a manufacturing unit. The appellants' basic contention is that the activity carried on by them regardless of the scale on which it is carried out effectively consists of a process of producing various edible items and that consequently, it cannot be treated on par with a manufacturing unit. The submission is that viewed from any angle, the activity is no different virtually from one of cooking in so far as it is an amalgamation of the various ingredients and merely because it is done on a bigger scale and provided to customers, that it would not change the complexion of the process. The appellants therefore contend that under no circumstances can entry No. 16-B be made applicable to their business and that they are therefore entitled to be totally excluded from the operation of the Act. As indicated by us earlier, the next point of law that arises is as to whether within the provisions of law that we have extracted above, the appellants can be construed to be a manufacturing unit or an industrial unit within the connotation of the provisions.

(3.) The appellants' learned advocate quite apart from pointing out to the court in his submission that the activity carried on by his clients is no different to the normal processes that are carried out in every home, except that these are done on a larger and commercial basis and are provided to customers has made a strong appeal to the court that these aspects of the matter be duly taken cognizance of and that the department's equation of their business with a manufacturing unit or an industrial unit should be disallowed. The controversy had arisen because the assessing officer took the view, as far as the appellants are concerned that they do not qualify for payment of tax whereas the Commissioner of Commercial Taxes exercising his revisional powers under section 15 of the Act, after hearing the appellants passed orders in respect of two assessment years, holding that the exemption was wrongly granted and that the appellants are liable to be assessed. It is against these orders that the present appeals have been directed.