G.C. Bharuka, J.
1. The present appeal filed under Section 16 of the Karnataka Tax on Entry of Goods Act, 1979 (in short, 'the Entry Tax Act') is directed against the order dated April 26, 1997 (annexure A) passed by the Additional Commissioner of Commercial Taxes, Davanageri. By the said order, which has been passed by invoking suo motu revisional jurisdiction under Section 15(2) of the said Act, the claim of the appellant for exemption from entry tax has been rejected.
2. Since during the course of arguments, a question of law, having far reaching consequences based on interpretation of the Notification No. FD II GET 93(III), dated March 31, 1993 (annexure D) issued under Section 11A of the Entry Tax Act regarding grant of exemption from entry tax in respect of sale of finished products of pre-existing industrial units which had made investment on expansion, cropped up, therefore, in order to ensure uniformity in application of the provision of the said notification, we called upon the Commissioner of Commercial Taxes or any responsible officer authorised by him to place on record the views of the department on the said aspect.
3. Accordingly, the Joint Commissioner of Commercial Taxes (Legal) has filed affidavit/statement on the said aspect on November 28, 1997. Thereafter, we have heard Mr. Subramaniyam, learned counsel for the appellant and Mrs. Vidya, learned High Court Government Pleader, for the respondent.
4. There is no dispute about the foundational facts. The appellant-company is registered as a small-scale industry. Its industrial unit is located in an industrial area at Bidar. It is engaged in the manufacture of Analgin (and additional product sulphametha xazole). It appears that it had made investment worth Rs. 11.30 lakhs in acquiring additional fixed assets for expansion of its industrial activities. According to the appellant, by virtue of the certificate No. DIG BDR/FM/EI/STE. 93-94 dated February 17, 1994 (annexure G) issued by the General Manager of the District Industries Centre, Bidar, it became entitled for 100 per cent tax exemption from tax payable under the Karnataka Sales Tax Act, 1957 (in short, 'the KST Act') in terms of the Notification No. FD 239 CSL 90(I), dated June 19, 1991 subject to the ceiling prescribed therein for a period of five years.
5. The appellant-company, by relying on the certificate granted by the Industries Department, claimed exemption of tax payable under the Entry Tax Act as well on entry of raw materials, etc., into the local area which were intended to be used in the manufacture of its finished products. The said claim of exemption was based on the above impugned notification dated March 31, 1993 (annexure D).
6. The notification in question reads thus :
'Notification No. III, Bangalore, dated March 31, 1993, Karnataka Gazette, dated 31st March, 1993.
In exercise of the powers conferred by Section 11A of the Karnataka Tax on Entry of Goods Act, 1979 (Karnataka Act 27 of 1979), the Government of Karnataka being of the opinion that it is necessary in the public interest so to do, hereby exempts with effect from the first day of April, 1993 the tax payable under the said Act on the entry of raw materials, component parts and inputs and machinery and its parts into a local area for use in the manufacture of an intermediate or finished product by the new industrial units mentioned in column (2) of the Table below located in the zones specified in column (3) and for the period mentioned in column (4) thereof :
TABLE
Sl.Type of industryNo.
Locationof the industry
Periodof exemption
1. .....................
2. Tiny/small/mediumand large scale industrial units
Situatedin zone-IV specified in annexure I to Government Order No. CI/138/SPC/ 90dated 27-9-1990.
5years from the date of commencement of commercial production or 5 years fromthe date of commencement of this notification whichever is later.
3. .....................
4. .....................
Explanation.--(1) For the purpose of this notification a 'new industrial unit' shall have the same meaning assigned to it in Notification No. FD 239 CSL 90(1), dated 19th June, 1991, issued under Section 8A of the Karnataka Sales Tax Act, 1957.
(2) The provisions of this notification shall not apply to a unit to which the provisions of Notification No. FD 239 CSL 90(1), dated 19th June, 1991, issued under Section 8A, of the Karnataka Sales Tax Act, 1957 shall not apply.
(3) The procedure specified in Notification No. FD 239 CSL 90(1), dated 19th June, 1991 issued under Section 8A of the Karnataka Sales Tax Act, 1957 for claiming exemption under that notification shall mutatis mutandis apply to an industrial unit claiming exemption under this notification.'
7. It may be noticed here that the Notification No. FD 239 CSL 90(I) dated June 19, 1991 was issued by the State Government under Section 8A of the Karnataka Sales Tax Act, 1957. This notification provides for grant of exemption of sales tax to the industrial units on the goods produced and sold by them under two situations, namely :
(i) if the industry is a 'new industrial unit' within the meaning of Clause (b) of the explanation I appended to the said notification, and,
(ii) if the existing industrial units have made investments after October 1, 1990 for its expansion or diversification or modernisation subject to the conditions and ceiling prescribed under explanation II to the said notification.
8. It will be proper to reproduce Explanations I and II of the above sales tax exemption notification which are as follows :
'Notification No. FD 239 CSL 90(I), Bangalore dated June 19, 1991
S.O. 1371, Karnataka Gazette, dated June 21, 1991............
Explanation I.--(a) For the purpose of this notification :
(i) A 'tiny industrial unit' or 'small-scale industrial unit' or 'medium-scale industrial unit' or 'large scale industrial unit' means a unit which is registered as such with the Director of Industries and Commerce or the Ministry of Industries, Government of India.
(ii) A khadi and village industrial unit as defined under the Karnataka Khadi and Village Industries Act, 1956 from time to time.
(b) A 'new industrial unit' means any of the units described in Clause (a) above, which are certified to be eligible for exemption under this notification, by the authorities mentioned in Clauses (a) and (b), para (1) under 'procedure' below.
Explanation II.--Exemption from tax under this notification shall also be available to an existing tiny/small-scale industry/medium/large scale industrial unit, registered as such with the Director of Industries and Commerce, with respect to investments made by such a unit after 1st October, 1990 for its expansion, or diversification or modernisation subject to the following conditions :
(a) the amount of tax exemptions shall be limited to the amounts spent as investments for expansion/diversification/modernisation and the period of exemption shall be that which corresponds to the Sl. No. of the table which applies to the unit in question except where an investment is made by an existing unit to set up another separate unit situated in different premises for producing an entirely new and different product, such investment will be treated as a new unit and not a diversification or expansion.
(b) The Director of Industries and Commerce or his authorised nominee shall certify the amounts spent on investment for expansion/diversification/ modernisation.
(c) for the purpose of calculating the amount of tax exemptions, the amounts of tax exempted under this notification and Notification No. CI 138/SPC/90, dated 27th September, 1990, shall be included.
(d) for purpose of calculating the commencement of the period of tax exemption, the date of completion of expansion/diversification/modernisation, certified as such by the Director of Industries and Commerce or his authorised nominee shall be accepted.
Explanation III...............'
9. A comparative study of the two notifications referred to above being dated March 31, 1993 (annexure D) issued under the provisions of the Entry Tax Act and dated June 19, 1991 (annexure 'E') issued under the provisions of the KST Act makes it amply clear that so far as the grant of exemption from entry tax to industrial units is concerned the same has been made available only to the new industrial units as defined under Explanation I to the notification issued under the KST Act. The notification issued under the Entry Tax Act does not provide for grant of any exemption in respect of the existing units making investments after October 1, 1990 for its expansion/diversification/modernisation.
10. No doubt for the purpose of ascertaining the claim of exemption from entry tax, the procedure provided for the said purpose under the Sales Tax Act has been adopted by making a specific provision under Explanation III of annexure D but that is merely a procedural aspect without having any direct bearing on the substantive right of claiming exemption. The Joint Commissioner of Commercial Taxes (Legal) in his affidavit at para 7, has also expressed that the department has also formed the same view. Para 7 of the said affidavit reads thus :
'A reading of explanation I of the notification issued under the KTEG Act dated March 31, 1993 would go to show that the intention of the notification is only to exempt a new industrial unit and not the existing industrial unit. As if at all the intention was to exempt even the existing units, either the notification would have provided an explanation as is done under the KST Act or it would have been specifically stated in the notification dated March 31, 1993 that Explanation II of the notification dated June 19, 1991 issued under the KST Act shall be made applicable even to the notification issued under the KTEG Act. Under these circumstances, I submit that it cannot be said that the exemption is available under the notification dated March 31, 1993 even to the existing units for its expansion/diversification/modernisation.'
11. Now, once again reverting to the facts of the present case, as noticed above, the appellant-company was admittedly not a 'new industrial unit' for the purpose of the exemption notification referred to above. It had only made investment in acquiring additional fixed assets for expansion of its industrial activities after October 1, 1990. Therefore, as discussed above, though the appellant-company might have been entitled to exemption from sales tax as per Section 8A of the KST Act under the notification dated June 19, 1991 (annexure E), but it was not entitled to any exemption under the entry tax exemption notification dated March 31, 1993 on entry of raw materials, components, parts, inputs or machineries into the local area. Nonetheless, though the assessing officer had held that the appellant-company was liable for paying entry tax amounting to Rs. 3,97,635 but the appellate authority by relying on the Explanation II to the sales tax exemption notification, set aside the said order by taking a view that the exemption is available to the existing industrial units/ undertakings as well for expansion/diversification/modernisation to the extent of investment made by them. However, the appellate order was set aside by the Additional Commissioner of Commercial Taxes by the impugned order by taking the view that since the appellant-company had already availed the exemption of sales tax under the KST and CST up to the maximum limit of 11,30,000 therefore, it was not entitled to any further exemption under the Entry Tax Act.
12. As discussed above, though the ultimate order passed by the revisional authority, the same has to be upheld but the reason given by him for the same is not only untenable but is foundationally misconceived. There was no occasion to employ the concept of sales tax exemption for grant of exemption of entry tax to the existing units since under the notification at annexure D such exemption was not at all available.
13. For the reasons discussed above, the appeal is dismissed with costs assessed at Rs. 1,500.