h^ HIGH COURT OF CHHAmSGARH AT BILASPUR TAX CASE No. 29/2008 .& . • . • TAX CASE No. 30/2008 & TAX CASE No. 31 /2008 ^ BETWEEN APPLICANTS M/s Raymond Cement Works, Bilaspur Versus RESPONDENT Com'missioner of Sales Tax, Madhya Pradesh. DB;- HON'BLE SHRI I.M. QUDDUSI & HON'BLE SHRIN.K. AGARWAL. JJ PRESENT:- Shri Ashish Shrivastava, Adv. for the appUcants. Shri Vinay Harit, Dy. Advocate General for the State/respondent. ORAL ORDER (28-7-2010) ,< • ' • .' 1. FoUowing questions of law were referred to this Court in these three taxcases :- i. Whefher iinder fhe facts and circumstances-of the case, the gunny bags imported froin outside the State were taxable under the Entry Tax Act when they were used for packing of cement sold outside theState? ii. Whether imder the facts and cu'cumstances ofthe case, the purchase of spare parts of plant and niachinery are Uable to Entry Tax as incidental goods under clause2(bb) ofthe Entry Tax Act ? •< 2. Brief facts of ttie case are that the applicants/ M/s, Raymond Cement Works, Bilaspur, a registered riew industrial unit, unported gunny bags from outside the State. They utiUzed thein in packing of cement which was sold outside the State. NM ai31 ^Sf^SvS&^ ^ -rt^^u ^ y ^ '^ j^ ^^siSS^,!^ ji BP^ te!«ti-CTC'lfsr .^. The contention of the a.pplj.cants was that fhe gunny bags were not consumed in the State and therefore, no entry tax is payable on them. This cbntention has been rejected -by the Assessmg Authority, whieh was also affimied by the Appellate Authority i.e. the Appellate Deputy Coirtm.ission.er. ' 3. The Tribi.thal in second appeals filed by the applicants also rejected the above plea and held that under the Entry Tax Act, the tax Iiability arises when. fhe material is entered "for cpnsz.unption or use therein". When the beigs were used for'' packing of cement, the requirements of Sectibn 3(l)(b) are • satisfied. 4. Anpther ppint raised by the appUcants was that the spare parts of the plant and machinery as also the plant and machineiy themselves are exempted from fhe Entiy Tax as only the incidental goods can be taxed. The applicants cpntended fhat the goods were nofesUicidental. Tfae plea was not acfiepted by the Assessing, Autlipoty arid was also disaUowed by fhe first appeUate Court. In the Second appeals1' befpre the Tribunal, the contention of the applicants was fhat the plant and Eaachinery arid fheir spare parts were not taxable as they are not incidental goods. The Tribunal held that while plant and machinery are npt incidental goods, the spare parts are neither fixed assets nor Gapital goods nor capital assets. They are in fhe elass of 'incident goods' as defined under the Eritry TaxAct. 5. Shri Ashish Shrivastava, learried counsel for 'fhe applicants would submit thatlspare parts of the plant and m.achinery' cannot be termed as ''incidental goods" inasmuch as they are infegral parts of plant and machinery; therefore, they are also fixed assets or capital goods and no tax can be levied upon it. He would further contend that gunny bags nsed inpacking of ceraenf and send outside the State is exenipted uiider proviso (y) to Section 3(l)(b) of theAct therefore, the applieants have been UlegaUy taxed in above referred two heads. ."y^ 'x:1 Mra^'l ^^•' 6. ShriVinay Harit, leamed Dy. Advocate General appearing for the respondent/State woiild contend that the plant and machinery can certainly be said to be fixed assets or capital goods as they have to be piu-cha^ed before the business^of manufacturing. Without plant and machinery; no manufactunng unit can conunence its 'business of manufacture. Therefore, by necessary implication, their entry into local area wUl not be in the course 6f business but fhe same position is not with the spare parts. Thespare parts are used in the course ofbusiness and, therefore, are taxable. He would furfher contend that gunny bags have been used as packing material. Packuig material is covered linder Section 3(l)(b) ofthe Act, and therefore, is also taxable. f'.'' :f' 7. We have heard leamedcounsel for fhe parties and perused therecord. 8. Before proceedmg further, it is necessary to peruse the provisions ofSection 3(l)(b) of the CommercialTaxAct,which was prevailing at the relevant time as the matter pertains to theyearfrom 1982 to 1985:- "3(1) There shall be levied an entiy tax- (a) XXX xxx (b) on the entry in the course of business of a dealer 6f goods speciSed in Schedi.tle III, intQ each local areafor consumption or use ofsuchgoods as "raw material or incident goods or as packing material or in the execution pf works contracts but not forsale therein and such tax shall be paid by every dealer liable to tax under the Sales Tax Act who has effected entry ofsuch goods." - 9. The definition of mcidental goods is provided in Section 2(b)[b), which reads thus:- . .--'-at. '^^^^Si'^ '.'^ \^v' 'f2(bb):- ''mcidentajgoods" means goods other than raw ma.terial and packing material for use by a dealer in the raanufactyrer pr processing of goodsor in inming or in the generation pr distribution of electricity or any other form ofpbwer. 10. There is a distinction between the plantand machinery, and spare parts. So far as plant and raachihery are concemed, they are certainly fixed assets. Without plant and machinery no nianufacturing unit can coiamence its production. But' onc:e the process of manufacture commences, the spare parts ofthe planf and machinery are required regularly to meet its wear and tear and thus its eritry jnto the local areawould be in the coiirse of business and is covered under the definition of uicidental goods. ll.So far as gunny bags used as packing niaterial is concemed, proviso (v) to Section 3((l)(b) offheAct, accordlng to which, in respect of goods specified in Schedyle II; which are afterentry into a local area sold outside the Sfate or in the course Qf inter-State trade or commerce or in the course of export out of the territoiy of India are not Uable for levy ofEntiy Tax, has to be read alongwith explanatiQn (b) which reads thus:- ' "in respect of packing inaterial, "sale" shall mean the sale of packing inaterial as such'and shall not include its sale along with the goods packed or contained therein. A conibiried reading of the above prpvision, would reveal that sale of packing material as s'Cich and not its sale along, with the goods packed or cpntained therein, if sold outside the Sfate or in the CQi.u-se of inter-State trade or commerce or in the course pf export out of the territory of India would be termed as sale so as to bring the above packmg material within the purview of proviso (v). Here m the insfant ease, gunny bags have been used for packing of ceinent andcement faas been sold out of the State and as Such, it cannot be tenned as sale of packing inaterial and it can only be termed as used as packing material and therefore is Uable for S;t;^iS^K!;^§^£;-SF;i!s^:a <i .^'. ..^ '<"»••' taxation under SectiQn 3(l)(b) and benefit of proviso (v) to Section 3(l)(b) oftheAetis not ayailable to the assessee. l2.In view of above discussion, our answer to the questions referred by the Board of Revenue is in affirmative and against the applicants-company. •I l3.The reference is answered and disposed of accordingly. •SA'.'- 1. Sl Sd/- N. K. Agarwal Judge Judge !T. •<'•' '.!•'•'••'. •"•' it ,