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)

O R D E R

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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