TMI Blog2013 (8) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... r High Court on a similar provision, it had to be treated with due respect. Following the Judgement of State of U.P. vs. Indian Hume Pipe Co. Ltd. [1977 (3) TMI 116 - SUPREME COURT OF INDIA] - The circular issued by the Commissioner though stated to be without jurisdiction, the circular having been issued by the highest officer in the department, the assessing officers, who were subordinate officers cannot be expected to take a different view and therefore, no useful or fruitful purpose would be served in directing the petitioners to avail the remedy under the Act and therefore, these writ petitions questioning the classification of the goods are held to be maintainable before this Court on account of the reasons recorded. Classification of Entries - Whether the Court should dwell into the question as to whether ink jet cartridges and toner cartridges are accessories to printer and whether they would fall within Entry 22 & 24 of serial No.68 in Part B of First Schedule of the Act attracting 4% VAT, as such question, essentially being a issue relating to classification of goods - Held that:- The term accessories was used in the schedule to describe goods which may have been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assification of Part C of the First Schedule to the VAT Act by giving effect to the order passed by the Commissioner of Commercial Tax, dated 18.04.2007. 4. By our order dated 25.06.2013, we have segregated the two batch of cases with request to counsels to advance arguments separately in each batch, to be heard and decided separately. 5. Accordingly, we have first taken up for consideration the writ petition filed for issuance of writ of Mandamus with the aforementioned prayer. 6. In all these cases, the petitioners are manufacturers and successive dealers, who have effected sales and re-sales of Ink Jet Cartridges and toner cartridges used in ink jet printers and laser printers. At the request of the learned Senior counsel appearing for the petitioners, we have taken W.P.No.25124 of 2009, as a lead case, which is a manufacturer/seller of Cartridges. 7. The petitioners would contend that all State Governments have agreed to tax Information Technology Products (IT Products) to VAT at the rate of 4% (presently raised to 5%) and all states are taxing IT Products, namely, Ink Jet Cartridge as "accessory" or "part" of printer, which is a "peripheral". It is stated that Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of tax is 4% under entry No.68 in Part B of the First Schedule. It is submitted that printer is a peripheral and a cartridge is an accessory or a part of the printer and therefore, the terms should be interpreted as ordinarily understood and attributed to these words by people usually conversant with and dealing in such goods. Reliance was placed on the decision of the Hon'ble Supreme Court in State of U.P. vs. Kores, (India) Limited (SC) [ 1977 (39) STC 8]. Further to explain the meaning of the word accessory, reliance was placed on the decision of the Hon'ble Supreme Court in Annapurna Carbon Industries Co., vs. State of A.P [(1976) 37 STC 378]. 9. The learned Senior counsel placed reliance on the decision of the Division Bench of the Delhi High Court in Commissioner of Trade and Taxes vs. Symphony Enterprises Ors., [2007 INDLAW DEL 1301], wherein it was held that toners and cartridges are part and accessories of goods as mentioned in the relevant entry in the Delhi Value Added Tax Act, 2004. Much reliance was placed on the decision of the Division Bench of the Gwahati High Court filed by the petitioner in the lead case before us, Hewlett Packard India Sales (Pvt) Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Commercial Taxes stating that the goods have to be classified under the residuary entry, it would be a futile exercise to go before the assessing authority and this Court can consider the issue in these writ petitions. 12. We have heard the submissions of learned Senior counsel Mr.Aravind P.Dattar, who also reiterated the submissions. 13. The learned Additional Advocate General appearing for the respondents submitted that printers will not come under the classification of Information Technology Products, which are covered in serial No.68 of Part B of First Schedule. By relying upon the meaning of the words 'Information Technology' as given in P.Ramanatha Aiyar, Advanced Law Lexicon, it is submitted that unless the product stores, retrieves and transfer information, it would not fall within the meaning of Information Technology Product and therefore, it is submitted that the petitioners cannot fall back on serial No.68 in Part B of First Schedule. Reference was also made to the information available in Wikipedia on Information Technology and it is submitted that printers would not fall within the meaning of the Information Technology. It is submitted that the information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts made by manufacturers, successive dealers and the Manufacturers Association for Information Technology, New Delhi. In the said clarification, dated 21.05.2007, it has been stated that ink jet cartridges and toner cartridges are taxable at 12.5% of Part C to the First Schedule to the VAT Act w.e.f., 01.01.2007. 17. The enforcement group of the respondent department appears to have visited the premises of one such dealer and recorded statement from them stating that the rate of tax adopted at 4% in the monthly return is incorrect instead of adopting 12.5% and have also collected a compounding fee of Rs.2,000/-. Pursuant thereto, the said dealer was issued recovery notice demanding the differential tax to be paid immediately, failing which the dealer was informed that destraint action would be initiated. As against the collection of compounding fee, the said dealer preferred a revision to the Joint Commissioner under the VAT Act. The revisional authority by order dated 20.04.2009, rejected the revision petition and held that the levy of compounding fee was correct. To arrive at such a conclusion, the revisional authority had taken umbrage under the circular issued by the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince the Guwahati High Court has taken a view, which is according to us also otherwise correct, there is no reason for us to take a different view. 20. As noticed above, this Court held that in view of a clarification issued by the Commissioner of Commercial Tax, no fruitful purpose would be served by directing the appellant therein to go for an assessment and for that reason not to entertain the writ petition. It was further observed that in tax matters, when there is a Division Bench judgment of another High Court on similar provision, which according to the said Division Bench was a correct view, it is all the more a reason not to relegate the party to a procedure of assessment. 21. As noticed by us, when one of the dealer was imposed a compounding fee on the ground that he had adopted 4% as rate of tax instead of 12.5%, he preferred a revision petition before the statutory revisional authority. It appears that the said dealer raised a contention before the revisional authority that the goods are chargeable to 4% tax under serial No.68 of Part B, as the goods fall under the category parts and accessories of computer system and peripherals . Further, it was contended that a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate officers cannot be expected to take a different view and therefore, no useful or fruitful purpose would be served in directing the petitioners to avail the remedy under the Act and therefore, these writ petitions questioning the classification of the goods are held to be maintainable before this Court on account of the reasons recorded above. This conclusion of ours is fortified by the decision of the Hon'ble Supreme Court in State of U.P. vs. Indian Hume Pipe Co. Ltd., ([1977] 39 STC 355). Question No.(ii) 24. Having held that the writ petitions are maintainable, it has to be decided as to what would be the appropriate entry under which ink jet cartridges and toner cartridges are to be classified. 25. The petitioner in the lead case before us had been confronted with an identical problem under the Delhi Value Added Tax Act and the question of taxability of ink cartridges and toner cartridges used in ink jet printers and laser jet printers was subject matter in issue. The petitioner/assessee subjected themselves to the proceedings under the Delhi VAT Act and the goods were charged to tax at the rate of 12.5% treating the cartridges as unsettled goods, neither parts nor ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of Gauhati High Court in the decision of HP India Sales Limited vs. State of Assam, [2012 56 VST 472] accepted the case of the petitioner/assessee and answered the question as framed in favour of the assessee. At this stage, it would be beneficial to refer to the operative portion of the judgment and order:- 12. The learned counsel for the Revenue submitted that in Part A of the Second Schedule, entry 50 provides for "printing ink excluding toner and cartridges" and thus expression toner and cartridges has been expressly used wherever so intended and on that ground the goods in question should be treated as falling the residue entry. 13. After due consideration, we are of the view that the question has to be answered in favour of the assessee. The items in question are integral part of printer which undisputedly is covered by entry 3. Thus, we are in agreement with the view taken by the Delhi High Court. Principle laid down in judgments of the honourable Supreme Court about interpretation of "accessory" also lends support to the contention of the assessee. 14. As regards the contention raised on behalf of the Revenue that toners and cartridges have been specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1), in the case of goods specified in Part B or Part C of the First Schedule, the tax under the VAT Act shall be payable by a dealer on every sale made by him within the state at the rates specified therein. Proviso to sub-section (2) provides that all spare parts, components and accessories of such goods shall also be taxed at the same rate as that of the goods if such spare parts, components and accessories are not specifically enumerated in the First Schedule and made liable to tax under that schedule. Sub-section 3 of Section 3 states that the tax payable under sub-section (2) by a registered dealer shall be reduced, in the manner prescribed, to the extent of tax paid on his purchase of goods specified in Part-B or Part-C of the First Schedule, inside the state, to the registered dealer, who sold the goods to him. Thus, sub-section (1) and (2) of Section 3 are the charging provisions. 32. The First schedule to the Act specifies the rate of tax for the goods described therein. The First Schedule consist of three parts, namely, Part A: goods which are taxable at the rate of 1%, Part B: goods, which are taxable at the rate of 5% and Part C: the goods which are taxable at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% of the cases monitors and printers are not supplied along with the computer sold by the respondents. Thus, it cannot be concluded that respondents sell their computer as a unit which include a monitor and a printer. As a monitor and printer are not essential parts of the computer their value cannot be included in the value of computer. We, however, clarify that situation may be different where a manufacture sells a computer with a monitor and a printer as a unit. 35. In the light of the above decision of the Hon'ble Supreme Court, printer has to be treated as a peripheral to a computer system. In terms of Entry 22 in serial No.68 of Part B of First Schedule Computer Systems and Peripherals are chargeable to 5% tax. In terms of Entry 24 of serial No.68 Parts and Accessories of Computer Systems and Peripherals also attract tax at 5%. The product in question in these cases are ink jet cartridges and toner cartridges. Undoubtedly, ink jet cartridges and toner cartridges are parts and accessories of a printer, which has been held to be a peripheral to a computer system by the Hon'ble Supreme Court. Therefore, those parts and accessories of a printer should also attract the same rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gy Products as notified by the Government. Therefore, the Information Technology Products which have been notified by the Government shall fall under serial No.68. If we are to accept the submission of the learned Additional Advocate General, then several of the products notified under serial No.68 do not answer the definition of Information Technology as given in the Law Lexicon. By way of illustration, the following products also find place in serial No.68, namely, micro phones, multimedia speakers, LCD Panels, LED Panels, Electronic Calculators, Switches and uninterrupted power supply. Therefore, while interpreting the scope of serial No.68 of Part B, it has to be noted that it is not sufficient for a product to be an Information Technology Product to fall within the entries in serial No.68, but the requirement being it should be notified by the Government to be an Information Technology Product to fall under serial No.68 of Part B. Therefore, the plea raised in this regard is misconceived. 39. As noticed above, the Delhi High Court in the case of Symphony Enterprises, referred supra, has rendered a clear finding that toners and cartridges are parts and accessories to computer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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