ORDER
N. Ananda, J.
Page 0307
1. Rajashree Cement is before us in this appeal. Petitioner is a company engaged in the manufacture of cement in Gulbarga District. Assessment for the year 1998-99 came to be concluded in terms of as order dtd 6-1-2001. It was subsequently revised in terms of a subsequent order dtd 3-3-2001. In the subsequent order the assessing authority rejected the claim of exemption claimed by the petitioner with regard to the purchase of polypropelene bags (PP Bags) as classifiable under Entry 70 based on the earlier orders passed by two co-ordinate benches of the tribunal and levied tax under the provisions of the Karnataka Tax on Entry of Goods Act (for short ‘The Entry Tax Act’) at the rate of 2% stating that the goods caused entry into the local area by the petitioner are classifiable under Entry Page 0308 66 of the I Schedule, as packing materials. Aggrieved by the said order, appeals were filed before the appellate authority. The appellate authority confirmed the findings of the assessing authority. Aggrieved by the same, a further appeal was filed before the tribunal. The tribunal rejected the case. Petitioner has also claimed that the petitioner is liable to pay only 2% on Light Diesel Oil and not 5% despite the notification issued by the Government. That contention also stood rejected. The assessing officer levied penalty and the penalty is confirmed by the Appellate Commissioner and the tribunal. It is in these circumstances, petitioner is before us raising the following questions of law;
1. Whether the tribunal was right in law in confirming the order dtd 28-10-2003 of the JJCT (appeals), Bangalore City Division-I, Bangalore, levying entry tax on the purchase of polypropylene bags as packing materials for the year 1998-99?
2. Whether the Karnataka Appellate Tribunal was right in confirming the order dtd 28-10-2003 of the JCCT (appeals), Bangalore City Division-I, Bangalore, levying entry tax on light diesel oil at the enhanced rate of tax under the provisions of the KTEG Act?
3. Whether the Karnataka Appellate Tribunal was right in confirming the order dtd 28-10-2003 of the JCCT (appeals), Bangalore City Division I, Bangalore, levying penalty on the petitioner under Section (5) and (3) of the KTEG Act?
2. Heard the learned Counsel for the parties.
3. Learned Counsel for the petitioner would contend that the subsequent entry 70 is applicable in so far as PP Bags and not entry 66(iii) as held by the authorities. He would further argue that despite a notification issued by the Government, the petitioner is liable to pay 2% in the light of the notification dtd 31-3-1998 issued by the Government. He would also say that levy of penalty is unsustainable. Per contra, learned Counsel for the revenue would support the order. She would also say that PP Bags are nothing but packing material and it falls under Entry 66 (iii) of the Act. She wants the impugned order to be confirmed.
4. In so far as Light Diesel Oil is concerned, she would refer to the subsequent notification omitting diesel and according to her in the light of deletion of diesel, light diesel oil is also liable to be taxed at 5% and not at 2%. She justifies the levy of penalty.
5. After hearing, we have carefully perused the material on record.
Re. Question No. 1 (levy of tax on PP Bags)
6. It is no doubt true that the bags are used as packing material. There are two entries available for the purpose of levy of tax. Entry 66(iii) would read as under;
66 – Packing materials namely:
(iii) Plastic, poly vinyl chloride and poly ethylene films, bottles, pots, jars, boxes, crates, cans, carboys, drums, bags and cushion materials and the like;
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Entry 70 would read as under;
70 – Plastic sheets, granules and articles made from all kinds and all forms of plastic including articles made of polypropelene, polyesterene and the like materials
6.1 Admittedly the facts of the case would show that the bags are made of Polypropelene and polyesterene. In the case on hand, all the three authorities have only noticed Section 66(iii) for the purpose of levy of tax. Whereas in our view, Entry 70 would be a specific entry dealing with the said material and Entry 70 is also very wide as we see from the very entry itself. A careful reading of entry 70 would show that PP Bags as rightly argued by the learned Counsel for the assessee, would fall under Entry 70 and not under Entry 66(iii) of the Act. We therefore accept the first question and answer the same in favour of the assessee. The argument of the Government is not sustainable. The tribunal also on an earlier occasion had chosen to answer a similar question in terms of a finding in STA No. 68-71/2001 and STA 1776/2003 30-10-2002. The tribunal seems to have been swayed away by the judgment of the Rajasthan High Court without properly noticing the factual aspect involved in the case on hand.
6.2 Smt Sujatha, learned AGA would invite our attention to a Division Bench judgment of this Court reported in 2000 48 KLJ 154. A careful reading of the said judgment would show that the said judgment is hot applicable to the facts of this case. In that case the court was considering packing material under Entry 16-A of the Act. Whereas in the case on hand, a specific entry is available to the petitioner. In these circumstances, we are of the view that the judgment cited by the Government is of no assistance to the Government.
Re. Question No. l. – levy of tax on LDO at the enhanced rate of tax.
7. The material on record would reveal that the State Government has chosen to issue a notification dated 31-3-1998. In the said notification, several items have been mentioned as we see from the notification dtd 31-3-1998. Sl. No. 1(1)(ii) reads as under;
Petroleum products: that is to say; petrol, diesel, lubricating oil, transformer oil, brake or clutch fluid, bitumen (asphalt), Tar and others but excluding aviation fuel, liquefied petroleum gas (LPG) , Kerosene and Naptha for use in the manufacture of fertilisers.
7.2 According to the petitioner, the petitioner is liable to pay tax at 2%. The case of the authorities is that in the light of the subsequent notification dtd 14-5-1998, the rate of tax would be 5% and not 2%. We have seen the notification dtd 31-3-1998 and also the subsequent notification dtd 14-5-1998, it is nobody’s case that LDO is not a petroleum product. The same is admitted even before us. Hence it squarely falls under Sl. No. (1) (ii) and levy of tax is at 2% as rightly argued by the learned Counsel. The subsequent notification only omits diesel. As we see, the deletion of diesel does not automatically result in enhancement of tax of another petroleum product. If the said argument is accepted all the petroleum products to be charged at 5%. We are not prepared to accept the said argument of the Government. The tribunal in our view has committed Page 0310 a legal error in enhancing the tax on the basis of the notification dtd. 14-5-1998. As we mentioned earlier, what is omitted is only diesel and that by itself would not result in enhancing the tax on all the petroleum products as sought to be argued.
7.3 At this stage, we must notice a judgment of this Court cited by the learned Counsel for the Government reported in (1990) 77 STC 149. The said judgment if read as a whole would show that in the said case the court was dealing with a different entry altogether. In these circumstances, the said judgment is of no assistance to the Government.
Re. Question No. 3. (lavy of penalty)
8. We see that the assessing authority has levied penalty on the ground that the assessee has not disclosed these two items i.e., PP Bags LDO, for the purpose of taxation. The material on record would reveal that the assessee has chosen to contest both items on sustainable grounds in terms of our finding in this order. In these circumstances, it cannot be said that the assessee has committed any default warranting any penalty in terms of the findings of the assessing authority and the Commissioner, confirmed by the tribunal. Here-again we find substance in the argument of the learned Counsel for the assessee and the levy of penalty is wholly uncalled for in the light of the facts narrated in the appeal memo. We accept his submission. Levy of penalty confirmed by the tribunal also requires to be set aside and we do so in the case on hand.
9. In the result, this appeal is accepted and all the three questions are answered in favour of the assesses and against the Government.
Ordered accordingly. No costs.