ADDISON CO LTD Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) THIS revision petition is filed by the assessee questioning the correctness of the order dated 31-8-2005 passed in STA No. 2375/2004 in dismissing the appeal and confirming the order of the assessing Authority by framing the following three questions of law and urging various grounds in support of the same and prayed to answer the questions of law in favour of the assessee:

(2.) THE brief facts are stated in this order for the purpose of appreciating the rival legal contentions urged by the learned Sr. counsel and AGA for the parties with a view to answer the questions of law raised in this revision petition. The assessee is engaged in the manufacture of Engineer's Cutting Tools like twist drills, reamers, cutters, taps etc. (small tools or cutting tools for short ). Its factory is located in Madras with sales offices in some cities including Bangalore. The assessee gets goods on stock transfer for sale in Karnataka. According to the assessee the goods are commercially understood as consumable by their very nature as they need frequent replacement due to wear and tear and breakage and their life is very short and the goods are used for turning out specific jobs like drilling a hole or enlarging an existing hole or to give a specific shape or form to any metal etc. These are independent finished goods by themselves and depending upon the requirement or nature of the job a particular tool has to be temporarily fixed to a machine so that the machine turns out the required job with the aid of the tool fixed. These tools are commercially regarded as consumables and normally charged off at the point of issue and not taken to stores or stock account. The petitioner's regular customers are BEML, GTRE, NGEF, mico, MEI, BFW and others who have regarded the tools as consumables. 2a. The respondent in relation to the past assessment years 1982-83 to 1996-97 has not considered these goods as machinery parts or accessories in order to levy entry-tax. But after due consideration, the respondent, in the course of assessment held that the small machine tools dealt by the assessee are not parts and accessories of machinery and not liable to entry-tax. Therefore, the assessee has not effected any purchases of scheduled goods liable to tax under the KTEG Act. It is further stated that the Commissioner of Commercial taxes clarified through its circulars with regard to the above factual position. It is the further case of the assessee that contrary to the assessment orders passed by various assessing Officers for the years 1982-83 and 1996-97, the Assessing Officer proposed to record the goods of the assessee as machinery parts or accessories and levied tax at 2% under the provisions of the KTEG Act, which was objected by the assessee by producing aforesaid earlier assessment orders, the same was not taken into consideration by them at the time of passing assessment order. Aggrieved by the said order, the assessee filed appeals before the Joint Commissioner of commercial Taxes (Appeals) which was dismissed by order dated 21-7-2004. Therefore, it had filed second appeal before the karnataka Appellate Tribunal ('kat for short)in STA No. 2375/2004. The said appeal was dismissed by the KAT by its order dated 31-8-2005. It is its case that the Tribunal after discussing the legal contentions raised in appeals, the finding of the assessing Officer and the First Appellate Authority who have held that the tools in question are parts of machinery falling under Entry 52 of 1 Schedule of KTEG Act. The Tribunal passed the judgment dated 13-8-2002 in Appeal nos. 1258 and 1259/2001, against the common order dated 25-9-2001 passed by Joint commissioner of Commercial Taxes (Appeals), bangalore City Division No. 1, in KTEG appeal Nos. 16 and 23/2001-2002 by confirming the assessment orders for the years 1997-98 and 1998-99 dated 3-4-2001 and 9-4-2001 by the Deputy Commissioner of Commercial taxes (Assessments-14) placing reliance upon Entry No. 1 (III) (e) of part M of II schedule of KST Act, which defined as parts of machinery and the same would be the meaning for the purpose of the Entry 52 of 1 schedule of the KTEG Act. He further stated that the description of the goods given in the schedules grouping the same goods in one entry with special entries could not be held as definition of goods. Therefore, the Tribunal held that the machinery tools are specifically covered by sub-entry (III) (e) of Entry no. 1 of Part M of II Schedule of KST Act and not covered by sub-entry (III) (a) itself. There was no necessity to cover them under another special entry. It is further contended by the learned Sr. counsel that the revenue accepted the aforesaid legal position for 15 years. Therefore, there was no logic much less merit to depart from the practice by the Revenue, particularly when there is no change in the legal position or classification of goods. Further, the Tribunal in the above judgment in respect of earlier assessment orders has distinguished the terms "consumables" and "parts and accessories" while answering the legal contention raised in the aforesaid appeals of the assessee and held that the tools in question are independent finished goods and having regard to the nature of the tools and use for specific purpose, it has rightly held that they are consumables and not parts of machinery as per Entry No. 52 of the KTEG Act and therefore, they are not liable to pay entry tax to the department. 2b. It is further contended that, that being the legal position, again the Assessing Officer for the assessment years 2000-01 proposed to refer the same goods as machinery parts and levied tax at 2%. The petitioner filed their objection statements to the proposed Entry Tax on 27-9-2002 vide its letter dated 26-9-2002 raising the aforesaid legal contentions and they requested the respondent not to levy the entry tax in respect of the goods in question and requested to drop the proceedings. It is the case of the assessee that despite the order of the Tribunal and objections filed by the assessee, the Assessing Officer, without application of mind confirmed the proposal for levy of tax by 2% in respect of the goods vide its order 31-10-2002 for the assessment year 2000-01. The same is contrary to the law and practice adopted by the Revenue for a long number of years. Therefore, it had filed an appeal before the Joint Commissioner of Appeals. He has also affirmed the order without referring to the Tribunal's earlier order vide its order dated 21-7-2004 by dismissing the appeal, which order was challenged by the petitioner before the Tribunal. The Tribunal by passing the impugned order choose to differ from its earlier order which is contrary to regulation 54 (a) (i) of the Karnataka Appellate tribunal Regulations, 1079 (hereinafter referred to as the 'regulations') without referring the Appeal to the Larger Bench as required under the aforesaid Regulation, if, the same co-ordination Bench has intended to differ with its earlier decision on the same point. Therefore, aggrieved, by the said order, the present revision is filed by the petitioner framing the aforesaid question of law.

(3.) IN support of the said legal questions of law, learned senior counsel Mr. K. P. Kumar placed reliance upon the following decisions in support of the question of law framed in this petition and contended that if it is settled position of law, that if a position or practice which has been adopted by the revenue for a long number of years, the revenue cannot be permitted to detract from it, more so when there is no change in the legal position and classification of goods : 1. 138 STC Vol 134 2004, (2003 AIR Kant HCR 1435)in the case of Pioneer Enterprises v. Joint Commissioner of Commercial Taxes (Appeals ). 2. 2001 (50) Kar LJ 92 (SC) in the case of commercial Tax Officer (Intelligence) No. IV, enforcement Wing, Hyderabad v. Ki-Hi-Tech secure Print Limited. 3. (2007) 289 ITR 318 : (2005 Tax LR 535) (Delhi) in the case of Commissioner of wealth-Tax v. Allied Finance Private Limited.