TMI Blog2015 (2) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... e first schedule, the Supreme Court came to hold that the goods imported, namely, multi-functional machines, serve as input and output device of ADPM (computer) and therefore, classifiable under Heading 8471.60 of the Act. The Authority for Clarification and Advance Ruling placing reliance on the notification issued by the Government of India, Information Technology Department in G.O.No.3, CT & R (B1) Department, dated 1st January, 2007, interpreted Entry 68 Part B item No.22 and came to hold that multi-function device is an office machine connected to a computer and it acts as a combination of one or more devices, namely, fax, photocopier (xerox), printer and scanner. - The fact that the goods in question work in conjunction with a computer, personal, mini, mainframes and laptops of analog and digital varieties is not in dispute. It is also not in dispute that this equipment is an input and output device. The printer and the scanner of different kinds fall within the definition of "peripheral". If it is a standalone photocopier machine or fax machine, then the Department would have a case and counter. Photocopying is not the primary function of the equipment in question, as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he definition of 'peripheral' would be entitled to such a benefit. We find that 'router', from the nature of its use in conjunction with the computer as has been defined by the Appellate Deputy Commissioner and the Tribunal based on relevant computer related dictionary and data, is a peripheral of a computer. It is also held by the Tribunal that 'router' is a computer network device that transmits data from one area to another and expands the capabilities of the computer, hence, it does not form part of core computer architecture. Therefore, we find that the Appellate Deputy Commissioner as well as the Tribunal are justified in holding that the goods sold by the assessee, namely, router, is a computer peripheral, falls under Serial No.22, Entry 68 of Part B of I Schedule of TNVAT Act, 2006. Goods in question partake the character of "peripheral" of a computer and therefore, it is classifiable under Entry 18(i) of Part B of Schedule I of TNGST Act. - Decided in favour of assessee. - Tax Case (Revision) Nos. 94 to 96 of 2014 - - - Dated:- 10-12-2014 - R. Sudhakar And R. Karuppiah, JJ. For the Petitioner : Mr Krishna Srinivas M/s S Ramasubramanian Associates For t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) because the said Entry did not explicitly mention digital printers, other printers or printers of all kinds? I. Whether the Tribunal was correct in holding that the Disputed Printers should be classified under Schedule I, Part C, Entry 13(i) and not Schedule I, Part B, Entry 18(i) after holding that the Disputed Printers were admittedly multi functional printers with additional functions of copying and faxing? J. Whether the Tribunal erred in classifying the Disputed Printers under Schedule I, Part C, Entry 13(i) without refuting the appellant's contention that the Disputed Printers were laser printers (which fall under Schedule I, Part B, Entry 18(i) with additional copying and faxing features which were completely dependent on the laser printing components for functioning? K. Whether the Tribunal erred in classifying the Disputed Printers under Schedule I, Part C, Entry 13(i) without granting the appellant any opportunity to address such an issue as the said entry was not even relied on by the Department in its earlier orders, demands or notices and consequently whether the impugned order should be set aside on the ground of violation of the principles of nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning and faxing are added features to this machine and, therefore, image runner is taxable at 12%. 2.4. At this juncture, we are constrained to state with deep concern that the Assessing Officer has not thought it fit to specify under which Entry the goods would fall. At the outset, we would like to take a serious view of the matter, as orders passed by the Original Authorities without application of mind as to which entry the goods would fall will lead to unnecessary litigation at various levels. Therefore, we direct the Commissioner of Commercial Taxes to issue a circular emphasizing that a detailed order should be passed by the Original Authority on all aspects of the matter contested by the assessee, including an indication under what provision of law the order is passed; which provision of law is applicable to the facts of the case, and the provision of law for appeal, if any, should form part of the order, be it original order or appellate order. 2.5. However, as understood by the Tribunal, the Original Authority appears to have classified the goods under Schedule I, Part D, Entry 14(iv) or Schedule I, Part D, Entry 40 of the Tamil Nadu General Sales Tax Act, where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or computers. 2.8. It was further contended before the Tribunal that image runner series printers are optimized only when they are networked through a Local-Area-Network (LAN) for computers, which means several individual computers are linked to these printers and the print command from each one of the computers is given to this peripheral machine for the purpose of high speed printing with better quality. It, therefore, partakes the character of peripheral to computers. 2.9. It was the further plea of the assessee before the Tribunal that Schedule I Part B Entry 18(i) of the TNGST Act is not exhaustive or restricted to the goods mentioned therein. The word 'like' in the Entry makes it clear that computer peripherals include printers of various types together with scanners etc. and hence, the goods in question would fall under Schedule I Part B Entry 18(i) of the Tamil Nadu General Sales Tax Act. 2.10. The Tribunal came to hold that the functions of Image Runner, such as xerox and photo copying, fax machine are clearly mentioned in Part D Entry 14(iv) of the first Schedule to TNGST Act, even though the features of these goods fall under different entries. The Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry C-13(i) of 1st Schedule, it is mentioned that Electronic items not specified elsewhere which is taxable at 10% from 27.3.2002. This residuary entry is relating to electronic goods. In our case, the assesment years are after 2004. So, the image runner is classified under C-13(i) of 1st Schedule not under D-40 of 1st Schedule residuary entry for all goods. Accordingly, the image runner is taxable at 10% under entry C-13(i) of 1st Schedule. As far as the issue of levy of penalty is concerned, the Tribunal deleted the penalty. 2.13. Assailing the said order, the present revisions are filed raising the questions of law, referred supra. 3.1. The learned counsel for the assessee relied upon a decision of the Supreme Court in Xerox India ltd. V. Commissioner of Customs, Mumbai, 2010 (260) ELT 161 (SC) and pleaded that when the predominant function of image runner is printing documents, along with add on features like scanner, copier, etc., and the machine acts as an input and output device, it would fall under Schedule I, Part B, Entry 18(i) of TNGST Act. 3.2. Placing reliance on a decision of the Authority for Clarification and Advance Ruling dated 02.9.2014 in ACAAR No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 8479 (residuary heading). The importer was unsuccessful before the Original Authority, First Appellate Authority and before the Tribunal. Therefore, the importer went before the Supreme Court. 7.2. The sum and substance of the issue that arose for consideration before the Supreme Court is as follows: 3) To put it broadly, the controversy between the appellants and the Revenue is with regard to the classification of Xerox Regal 5799, Xerox Work Centre XD100 and Xerox Work Centre XD155df which, according to the appellants, are Multi-Functional Machines performing the functions of printers, fax machine, copier and/or scanner and therefore, requires to be classified as Printers in Automatic Inter Processing Machine (ADD) under Chapter Heading 8471.60 and the view of the authorities under the Act and the Tribunal is that the aforesaid machines require to be classified under Chapter Heading 8479.89 (Residual Heading). 7.3. The importer therein primarily contended that the predominant function of the machine is printing documents along with scanner, which is an input and output device and therefore the classification sought for by the importer was correct. After discussing v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hapter note 5(B), as it is to be used principally in ADPM, it is connectable to the Central Processing Unit, and it is able to accept data in a form (codes or signals) which can be used by the system. Further, there would be no application of chapter note 5(E) as correctly pointed out by the learned counsel for the appellants, as the Multi-Functional Machines are presented independently. Moreover, since predominant components are relating to printing function, chapter note 5 (D) also becomes relevant which includes printers under heading 84.71. We are also satisfied with the contention of the appellants that based on the nature of the functions they perform, the Multi- Functional Machines would serve as input and output devices of an ADPM (computer) and thus serve as unit of an ADPM, which on a reading of chapter note 5(C), clearly classifies them as falling under heading 84.71.60 of the Act. 8.1. Likewise, it is also useful to refer the factual backdrop and the decision of the Authority for Clarification and Advance Ruling dated 02.9.2014 in ACAAR No.122/2013-14 (Acts Cell - II 6691/2014). In that case, the assessee sought clarification on the rate of tax on digital multi-func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FP (Multi Function Product/Printer/Peripehral), multifunctional, all-in-one (AIO), or Multifunction Device (MFD), is also an office machine connected to a computer which incorporates the functionality of multiple devices in one, so as to have a smaller footprint in a small business or office setting or to provide centralized document management/ distribution/ production in a large-office setting. A typical MFP may act as a combination of some or all of the following devices, viz., E-mail, Fax, Photocopier (Xerox), Printer Scanner. The products, viz., Digital Multi Function Devices of several brands such as Canon, Sharp, and Konica Minolta, imported and marketed by are connectible to the computers to print, scan and copy, facsimile and fax the documents. As per the details available in the brochure furnished along with the application by the applicant-firm of the imported multifunction devices, it is found that they are predominantly usable, stands connected to the computers to perform the tasks for the performance of which the machines are so designed and programmed. 8.3. In such view of the matter, the Authority for Clarification and Advance Ruling held as follows: 6.6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fax machine, then the Department would have a case and counter. Photocopying is not the primary function of the equipment in question, as it works in conjunction with the computer. The distinction is evident from the reading of Entry 18(i) of Part B of Schedule I and Entry 14(iv) of Part D of Schedule I of the TNGST Act. Peripherals in relation to computer personal, mini, mainframes and laptops of analog and digital varieties would fall under Entry 18(i) of Part B of Schedule I, whereas Electronic instruments including cash registers, tabulating and calculating machines, electronic duplicating machines, reprographic copiers including duplicators, xerox and photo copying machines and any other electronic apparatus for obtaining duplicate copies fall under Entry 14(iv) of Part D of Schedule I. 12. At this juncture, it would be apt to refer to some of the observations made by the Delhi High Court in Ricoh India Limited v. Commissioner, (STA.No.6 of 2010, dated 4.5.2012), which read as under: 16. The question, therefore, which is raised and has to be answered, is whether the multi functional machines or printers are computer peripherals or not? The term peripheral has not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstrued the classification of goods by splitting the functions of the multifunction machine. What is relevant is the nature of the equipment and its predominant use. In this case, the Image Runner is an equipment, which is an input and output device that works in conjunction with the computer and also has got scanning facility for the very same function of input and output device and therefore, it is clearly a peripheral . 16. The clarification of the Authority for Clarification and Advance Ruling in terms of Section 48-A(3) of the TNVAT Act, 2006 is also binding on the Department. Though the classification issue is under TNVAT regime, there cannot be any ambiguity. If Entry 18(i) Part B of Schedule I of TNGST Act provides specific entry, there is no need to fall back on the residuary entry. 17. The above said view of this Court is fortified by a decision of the Supreme Court in CCE v. Wockhardt Life Sciences Ltd., (2012) 5 SCC 585, wherein it has been held as under: 36. Moreover, the functional utility and predominant or primary usage of the commodity which is being classified must be taken into account, apart from the understanding in common parlance. [See O.K. Play ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t according to the definition quoted by the State Representative from Microsoft Dictionary in his written arguments computer peripherals means as follows: 'A peripheral is a device that is connected to a host computer, but not part of it. It expands the host's capabilities but does not form part of the core computer architecture. It is often, but not always, partially or completely dependent on the host. A peripheral is generally defined as any auxiliary device such as a computer mouse, keyboard, hard drive, etc., that connects to and works with the computer in some way. Other examples of peripherals are expansion cards. Graphics cards, computer printers, image scanners, tape drives, microphones, loudspeakers, webcams and digital cameras'. At the same time, it is also relevant to note that according to section 2(j) of the Information Technologies Act 2000, computer network means as follows: (j) 'Computer network' means the interconnection of one or more computer through - (i) the use of satellite, microwave, terrestrial line or other communication media; and (ii) terminals or a complex consisting of two or more interconnected computers whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l computer peripherals have not been defined in Serial No.22 of Entry 68 of Part B of I Schedule to TNVAT Act, 2006. Therefore, whatever goods, which are falling within the definition of 'peripheral' would be entitled to such a benefit. We find that 'router', from the nature of its use in conjunction with the computer as has been defined by the Appellate Deputy Commissioner and the Tribunal based on relevant computer related dictionary and data, is a peripheral of a computer. It is also held by the Tribunal that 'router' is a computer network device that transmits data from one area to another and expands the capabilities of the computer, hence, it does not form part of core computer architecture. Therefore, we find that the Appellate Deputy Commissioner as well as the Tribunal are justified in holding that the goods sold by the assessee, namely, router, is a computer peripheral, falls under Serial No.22, Entry 68 of Part B of I Schedule of TNVAT Act, 2006. 19. In the present case also, we find that the goods in question partake the character of peripheral of a computer and therefore, it is classifiable under Entry 18(i) of Part B of Schedule I of TNGST ..... X X X X Extracts X X X X X X X X Extracts X X X X
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