IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1311 OF 2009
(Arising out of S.L.P.(C) No.5190/2008)
M/s Addison & Co. Ltd. ...Appellant(s)
Versus
State of Karnataka rep. by Commr., Com.Taxes ...Respondent(s)
ORDER
Leave granted.
The short question which arises for determination in this Civil Appeal is:
Whether the subject tools are in the nature of accessories to machines and, therefore,
liable to entry tax?
The main submission of the appellant before us was that the said tools are
consumables and, therefore, they cannot be part(s) of the machine nor can they be
termed as “accessories”. It was submitted that machines like lathe machines and
drilling machines are not capable of performing any functions without the subject
tools. Before us, it was further submitted that the subject tools are rendered useless
after they are used for certain number of times. It is also pointed out that in the past,
prior to Assessment Year 2000-2001, the Department has accepted that the test of
whether the subject tools constituted consumables was applied by the Department as
the relevant test in interpreting Entry 52 of the First Schedule to the Karnataka Tax
on Entry of Goods Act, 1979.
On the other hand, it is argued on behalf of the Department that the subject
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tools are part of the machine and that, in any event, they are accessories. It is also
contended that the test of an item being consumable is not relevant in interpreting the
said Entry 52.
We quote herein-below Entry 52 of the First Schedule to the 1979 Act:
“52. Machinery (all kinds) and parts and accessories
thereof but excluding agricultural machinery.”
On going through the pleadings, particularly at pages 51, 59 and 105 of the
S.L.P. paper book, we find that all throughout it was argued before the Authorities
below, in this case, that without subject tools the lathe and drilling machines are non-
functional.
As repeatedly stated in our earlier judgments, in matters of interpretation
of taxing laws, this Court must first find out whether a proper foundation is
established by the assessee/Department before the adjudicating authority. This test
has not been complied with by the assessee in the present case. For example, assessee
has stated at page 59 of the S.L.P. paper book that “the subject tools cannot be
termed as parts of the machine since the machine can very well function without the
said tools, though the machine may not be in a position to carry out the specific jobs
for which these tools would be necessary. It is further stated that the subject tools are
necessary for a machine to carry out specific jobs but that fact would not make them
parts of the machine.”
As stated, what was argued before us was that lathe and drilling machines
are non-functional without subject tools whereas in the above paras before the
Authorities below, the assessee submitted that lathe and drilling machines can
function without the subject tools. We may also note that the assessee has not led
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evidence before the adjudicating authority to show whether the lathe and drilling
machines were non-functional in the absence of the subject tools.
For the aforestated reasons, we find no infirmity in the impugned judgment
of the High Court and the Tribunal and, accordingly, we dismiss this Civil Appeal
which, as stated above, relates to Assessment Year 2000-2001.
Be that as it may, we are of the view that it would be open to the assessee
herein to raise the contention as to whether the subject tools are consumables and not
accessories/parts of machine in an appropriate case(s). The reason being that
Authorities need to decide as to what distinguishes a consumable from an accessory.
If the assessee raises such a contention as is raised before us in this Appeal, the
authority shall consider the contention in accordance with law, uninfluenced by the
observations made in the impugned judgment of the High Court and the Tribunal in
this case. We also make it clear that in such an event, it would be open to the assessee
herein and to the Department to raise all such contentions which are necessary for
deciding this dispute, including the contentions mentioned hereinabove.
Subject to above, Civil Appeal is dismissed. No order as to costs.
……………….J.
(S.H. KAPADIA)
……………….J.
(AFTAB ALAM)
New Delhi,
February 26, 2009.
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