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Judgment
The petitioner is aggrieved by the notice proposing prosecution under Section 21 of the Karnataka Tax on Entry of Goods Act, 1979.
Arguments of the learned Counsel on both sides have been heard. The language of notice as under.-
"Please take notice that during the year 1990-91, your sales turnover up to end of November 1990 has been Rs. 71,68,249.00. You are engaged in the manufacture of Batteries etc., in-your manufacturing unit located within the Municipal Limits of Bijapur City. You are liable to pay tax on the packing materials and the raw materials and inputs used, under Section 3 of the Karnataka Tax on Entry of Goods Act, 1979. The total value of raw materials, inputs, packing materials up to 12-2-1991 comes to Rs. 69,86,942/-. Adding inward expenses of about 10%, the turnover liable for payment of entry tax comes to Rs. 76,85,636/-. The entry tax payable at 2% comes to Rs. 1,53,712-72.
By not paying entry tax on the inputs and the packing materials, you have committed offence punishable under Section 21 of the Karnataka Tax on Entry of Goods Act, 1979.
Before launching prosecution, you are hereby given an opportunity of getting the offences compounded departmentally by appearing either in person or through duly authorised representative at my office at Bijapur on 18-3-1991 at 11.00 a.m. bringing demand draft for the said amount, failing which further action deemed fit will be taken, which please note".
Section 21 provides the action to be taken by the Magistrate. It is submitted by the learned Counsel for the petitioner that the petitioner is an Export Oriented Unit and is not liable for payment of any tax.
I have considered over the matter. There are different provisions for summary assessment, provisional assessment and final assessment. The action of prosecution can be taken separately. But before taking such action, there must be a finding for evasion of tax. In the notice, which has been issued to the petitioner, he has been directed to bring the demand draft in respect of the entry tax for getting the offences compounded departmentally. It would have been proper that the liability of the petitioner should have been determined and if there was any liability and it was found that the action of the petitioner was such for the prosecution could have been launched under Section 21 of the Act then in the assessment proceeding that observation could have been made. Straightaway issuing the notice for submitting the demand draft is not proper, but it is only a threat to an assessee. In these circumstances, Annexure-C is quashed. The respondents would, however, be free to proceed for assessment or any other action they are entitled to take in accordance with law.