Prakash Industries Ltd. vs Assistant Commissioner of Commercial Tax and Others

Prakash Shrivastava, J.—This order will also govern the disposal of W.P. No. 3223/2006 which also involve the same issue on the same fact situation. For convenience facts have been noted from W.P. No. 364/2004.

This writ petition has been filed by the petitioner challenging the order dated 3.11.2003 passed by the Revisional Authority dismissing the revision and affirming the order of assessment dated 22.12.2002, by which the entry tax has been levied on raw material i.e. Glass Shell, Glass Panel, Glass Funnel and Neck Tube at the rate of 1% treating them to be covered by Entry 49 of Schedule II of M.P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 (for short "Entry Tax Act").

The matter relates to the assessment year 1999-2000. The petitioner during the relevant time, was running an undertaking at Pithampur, District Dhar for manufacture of black & white television picture tubes and computer monitor tubes. The petitioner had affected entry of the Glass Shell, Glass Panel, Glass Funnel and Neck Tube into the local area for the said manufacturing activity and claimed the items in question to be covered under Entry 42 of Schedule II of the Entry Tax Act and taxable @ 0.5%. The Assessing Authority had passed the order of assessment dated 22.12.2002 levying entry tax @ 1% on the said item and also charging interest u/s 13 read with Section 26(4)(a) of the M.P. Commercial Tax Act, 1994. The revision petition preferred by the petitioner against the assessment order has been rejected by the Revisional Authority vide order dated 3.11 .2003.

Learned counsel appearing for the petitioner has submitted that the items in question are the goods made of glass and glassware, therefore, they are covered under Entry 42 of Schedule II of the Entry Tax Act @ 0.5%.

As against this, learned counsel for the respondents has submitted that the items in question are parts and accessories of television, therefore, they are covered under Entry 49 of Schedule II and taxable @ 1%.

We have heard the learned counsel for the parties and perused the record.

In the present case petitioner had affected the entry of the items in question for the purpose of manufacturing the black & white picture tubes used in T.V. and Computer monitors. The manufacturing process disclosed by the petitioner indicates that these glass parts are used in the manufacture of picture tubes. The Panel, Funnel and Neck are joined together by neck sealing and panel sealing machine and then baked at 500 degree centigrade for 3 hours. The neck tube is cut into small lengths from the neck. The sealing of neck, panel and funnel are done in the bulb sealing plant to form a glass shell which is the basic input to the tube plant. The washing of the glass shell is done chemically; thereafter the coating of phosphor, lacquer and aluminum is done one after the other to form the screen of the picture tube. These coated shells are then baked at 400 degree centigrade for 3 hours to provide strength to the coating. The baked and coated shells are fitted with electron gun and valuated. While evaluation the thermal cycle treatment is also given to the shells. The shells are heated up to 450 degree centigrade and evacuated for 1.5 hours. After evaluation the glass envelop is mechanically sealed for the lifetime. The getter flashing, sparking and aging are done for making the picture tubes operational.

The petitioner is placing reliance upon Entry 42 of Schedule II of the Entry Tax Act, which reads as under

As against this, learned counsel appearing for the respondents has placed reliance upon Entry 49 of Schedule II which reads as under:-

In the present case it is not in dispute that the items in question are glass parts which are used by the petitioner for manufacture of Television tube. The Entry 42 covers "goods made of glass and glass ware". Undisputedly the Glass Panel, Glass Funnel, Neck Tube and Glass Shell are goods made of glass. Entry 42 is much wider which includes all goods made of glass and glass ware excluding only glass chimneys of hurrican lanterns and kerosene lamps. The items in question are not covered by the exclusion clause.

Learned counsel appearing for the respondents has placed reliance upon Entry 49 by submitting that the items in question are covered within the meaning of parts and accessories of television. Such a submission cannot be accepted since Glass Panel, Glass Funnel, Neck Tubing and Glass Shells are not directly used in the television as its parts or accessories but they are used as a raw material for manufacturing picture tube, which is a part of television. The items in question are neither parts nor accessories of television but they are raw material for manufacturing parts of television. A raw material used for manufacturing a part or accessory can not itself held to be a part or accessory of the main item.

It is the settled position in law that the process of manufacture of a product and the end use to which it is put cannot necessarily be determinative of the classification of that product under the fiscal schedule but more important is whether the broad description of the article fits in with the expression used in the Tariff. For purpose of classification of a product the relevant factors, inter alia, are statutory fiscal entry and the basic character, function and use of the goods. When a commodity falls within a tariff entry by virtue of the purpose for which it is put to, the end use to which the product is put to, can not determine the classification of that product. [See: Indian Aluminium Cables Ltd. Vs. Union of India and Others, & (2006) 9 STJ 292 (SC) Commissioner of Central Excise, Delhi Vs. Carrier Aircon Ltd.]

In the present matter, the Revisional Authority has proceeded on the erroneous premises that the items in question are covered under Entry 49 since they are manufactured for being finally used in Television and generally these items are not used for any purpose other than in the manufacture of television. The Revisional Authority has also committed an error in construing Entry 42 by holding that only crockery and chinaware are covered under this entry, ignoring that it is a much wider entry which includes all the goods made of glass and glass ware not expressly excluded.

Keeping in view the language employed in the respective entry and the undisputed fact that the items in question are made of glass and that they are not parts or accessories of television but are used as raw material for manufacturing of parts and accessories of television, we are of the view that the items in question are covered by Entry 42 of Schedule II of the Entry Tax Act.

The next question is about levy of interest u/s 13 of the Entry Tax Act read with Section 26(4)(a) of the Vanijya Kar Adhiniyam, 1994. Under the said provision, the interest has been levied on delay in payment of tax. Since a submission has been made that the said interest is relatable to the difference on the rate of tax claimed by the petitioner under Entry 42 of the Entry Tax Act and rate of tax levied by the Assessing Authority under Entry 49 of the Entry Tax Act, and since this Court has held that Entry 42 is applicable, therefore, the interest levied by the Assessing Authority to that extent cannot be upheld.

Keeping in view the aforesaid aspect of the matter, the order of assessment dated 20.12.2002 and the revisional order dated 3.11.2003 are set aside and the matter is remitted back to the Assessing Authority for fresh assessment and calculation of liability in accordance with law, keeping in view the observations made above. The writ petitions are allowed to the extent indicated above.