Allahabad High Court
M/S Prarthana Infinite Lucknow ... vs Commissioner Commercial Taxes U.P. ... on 22 March, 2022
Author: Sangeeta Chandra
Bench: Sangeeta Chandra
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH ?A.F.R. Court No. - 5 Case :- SALES/TRADE TAX REVISION No. - 109 of 2014 Revisionist :- M/S Prarthana Infinite Lucknow Thru.Prop.Alok Kr. Dalmia Opposite Party :- Commissioner Commercial Taxes U.P. Lucknow Counsel for Revisionist :- Sunil Sharma Counsel for Opposite Party :- C.S.C. Hon'ble Mrs. Sangeeta Chandra,J.
(Oral) (1) Heard Shri Sunil Sharma, for the revisionist and Shri Sanjay Sarin, appearing on behalf of the State respondent.
(2) This Revision has been filed against the order dated 05.07.2014 passed by the learned Commercial Tax Tribunal, Bench-III, Lucknow.
(3) The facts in brief as stated by the learned counsel for the revisionist are that the revisionist is a Firm Trading in Photocopies, Printers, Cartridges, Toners and Spares and is registered in the office of the Dy. Commissioner, Commercial Tax, with TIN No.09352304188 under the U.P. Value Added Tax Act, 2008. The Firm has been depositing tax regularly every month. The revisionist having deposited admitted tax alongwith return disclosing sale of Printer under VAT Act as a Computer peripheral admitting 4% tax deposited under Entry 22 of the Schedule which reads as:- "22 -Computer System and Peripherals Electronic Diaries for the Assessment year 2008-09.
(4) The Assessing Authority by its order dated 29.02.2012 assessed the revisionists sale of Multifunctional Printers @ 12% created a dispute of Rs.7,23,387/-. The revisionist had admitted tax @ 4% but the Assessing Authority assessed the sale of Multifunctional Printer under Residuary Entry and therefore taxed it at rates meant for unclassified items under Schedule @ 12.5%.
(5) Learned counsel for the revisionist has argued that a Printer is a specifically designed device only for printing and is admittedly a Computer peripheral. With the advancement of technology, most of such Printers also performed the functions of Scanning, E-Mailing, Faxing and Copying. However such Printers are bought mainly for the purpose of printing and are attached to Computers and they cannot perform their main function without the help of a Computer, therefore, they have to be treated as a Computer peripheral and taxed @ 4%. The Assessing Authority however, concentrated on other functions performed by Multifunctional Printer and treated it as an unclassified item.
(6) The order of the Assessing Authority was challenged by filing an Appeal No.589 of 2012. The said Appeal was dismissed by the Additional Commissioner on 03.07.2013.
(7) Feeling aggrieved the revisionist filed a Second Appeal before the learned Commercial Tax Tribunal, Bench-III, Lucknow, namely Second Appeal No.399 of 2013. During the pendency of the Appeal the Tribunal had stayed 80% of the disputed amount, the revisionist had deposited the remaining 20% before it.
(8) During the pendency of the Second Appeal, the Commissioner in the exercise of powers under Section 59 of the Act passed an order on 05.03.2014 on an application of M/s Neoterric Infomatic Private Limited holding that the primary work of a Multifunctional Printer is that of printing which cannot be performed without the Computer. In common parlance, the Multifunctional Printer is also known as Printer and it should be taxed @ 4% under Schedule-2 Part-B Entry no.22 of the U.P. VAT Act, 2008. Despite such order being passed by the Commissioner and the Revisionist and other Traders being now taxed @ 4% regarding the sale of Multifunctional Printer as Computer peripheral, for the Assessment year 2008-09 with Tribunal did not extend the benefit and rejected the Second Appeal by its order dated 05.07.2014.
(9) It has been argued that such judgment of the Tribunal has been passed contrary to the decision of the Supreme Court in the case of M/s Xerox India Limited Vs. Commissioner of Customs, Mumbai reported in (2010) 14 SCC 430.
(10) Learned counsel for the revisionist has pointed out the questions of law framed in this Revision and the order passed initially by this Court on 09.10.2014 where this Court has admitted the Revision on Question No.2 as framed in the Memo of the Revision. Since after dismissal of the Second Appeal the revisionist had already deposited 20% of the disputed tax liability, the Court did not find it appropriate to pass any order on such tax liability but directed that the Tribunal orders shall remain stayed.
The Question No.2 as framed by the Revisionist is as follows:-
"..............Whether the Commercial Tax Tribunal was justified in not giving the benefit/parity of judgment pronounced by the Hon'ble Apex Court in the case of Xerox India Ltd. thereafter?"
(11) Learned counsel appearing for the State respondents has referred to counter affidavit filed by them wherein it has been stated that the original assessment order for the Assessment year 2008-09 was passed on 27.02.2012 and on Multifunctional Device tax was assessed @ 12.5% but the revisionist only admitted tax @ 5% treating the said multifunctional devices as a Computer peripheral. On 08.08.2008, in the case of M/s Neoterric Infomatic Private Limited, the Commissioner Commercial Tax had decided the tax-ability of Multifunctional Device @ 12.5% as an unclassified item, therefore, the First Appellate Authority on the basis of the order dated 08.08.2008 passed by the Commissioner in the case of Neoterric Infomatic Pvt. Ltd. rejected the First Appeal of the revisionist. Neoterric had challenged the order dated 08.08.2008 passed by the Commissioner in Commercial Tax Tribunal and the Tribunal by its order dated 06.06.2013 had remanded the matter to the Commissioner for reconsideration. After remand the Commissioner Commercial Tax, reclassified Multifunctional Device relying upon a decision of the Supreme Court in the case of M/s Xerox India Limited Vs. Commissioner of Customs, Mumbai (supra) under the Category of Computer peripheral under Schedule-II Part-B at sl.no.22 holding taxability @ 4% + 1% Additional tax by an order dated 05.03.2014.
(12) Since the invoice produced by the Revisionist before the Tribunal by the revisionist showed Multifunctional Printer as Multifunctional Device, the Tribunal did not provide the benefit of the order dated 05.03.2014 of the Commissioner and confirmed the order passed by the Assessing Authority and the First Appellate Authority.
(13) It has also been stated in the said counter affidavit that in the case of the Revisionist for Assessment year 2010-11 the First Appellate Authority had cancelled the Assessment order and remanded the matter to the Assessing Authority by its order dated 01.12.2015. The Assessing Authority being satisfied that the case in hand was of a Multifunctional Device/Multifunctional Printer and came under the Category of Computer peripheral had accordingly taxed it @5% by the Assessment order dated 01.12.2015.
(14) Similarly, for the Assessment year 2011-12, by an assessment order dated 02.02.2015 tax has been levied @ 12.5% + 1% Additional Tax and on Appeal the matter was remanded. After remand the Assessing Authority had treated it as a Computer peripheral. Same is the case for Assessment Year 2012-13, wherein the Assessing Authority has treated the Printer in question as Multifunctional Device and taxed it @ 4% + 1% Additional Tax i.e. 5% by its Assessment order dated 02.03.2016.
(15) This Court has perused the impugned order it is apparent from a perusal of the order of the Tribunal that the Tribunal had not given the benefit of the judgment rendered in M/s Xerox India Limited Vs. Commissioner of Customs, Mumbai (supra) and not treated Multifunctional Printer as a Computer peripheral only because the manufacturer in the case before the Supreme Court had given Certificates with regard to its Printers and various models thereof saying that parts of all such Multifunctional Devices were used to the extent of 75% to 85% for the purpose of printing. The Revisionist had not given any such factual basis for the Tribunal to extend the benefit of judgment rendered in M/s Xerox India Limited Vs. Commissioner of Customs, Mumbai (supra) to it also.
(16) Learned counsel for the Revisionist has pointed out that in the supplementary affidavit filed by it, it has annexed a copy of the Certificate issued by the manufacturer on 28.02.2015 namely Sharp Business India Limited wherein it had acknowledged that their Multifunctional Devices are used as Printers, Scanners and Copiers and more than 75% of the parts are used in making a Computer printer. Rest of the other 25% parts are used in making it as a Computer Scanner and Copier.
(17) Such Certificates admittedly was not before the Tribunal. However this is not only the ground on which the Tribunal has rejected the Second Appeal. It has referred also to Dictionaries like Longman's Dictionary of Contemporary English and considered the definition of "peripherals" and observed that a piece of equipment such as a Visual Display Unit or a Central Processing Unit which is connected to a Computer help in the use of Computer. Similarly, in Readers Digest Dictionary "peripheral" has been treated as an item of Hardware, such as Modem that is not specifically part of the CPU, but used for the purpose of a Computer. The Tribunal has found that a Multifunctional Printer does Printing, Scanning, E-Mailing, Faxing, Photocopy etc. which functions are mostly performed by it independently of the Computer, therefore, it could not be said to be a Computer peripheral like the Visual Display Unit or Modem or such other things which are connected inseparably to a Computer.
(18) Since this Revision has been admitted by this Court on the substantial question "whether the judgment in M/s Xerox India Limited Vs. Commissioner of Customs, Mumbai (supra) should have been considered as settling the issue and whether a Tribunal was wrong in not giving its benefit to the revisionist?" This Court has considered the judgment rendered in M/s Xerox India Limited Vs. Commissioner of Customs, Mumbai (supra). It related to Classification under Customs Tariff Act, 1975. The appellants were engaged in a Trading of high technology reproduction and duplicating machines, Printers and multifunctional machines capable of discharging a number of functions. The appellants imported certain machines namely Xerox Regal 5799, Xerox WorkCenter XD100 and Xerox WorkCenter XD155df respectively and sought classification of these imported machines as Computer peripherals. Such machines being used for as Printers, Faxing Machine, Copiers or Scanners, the Customs Authorities classified them as Automatic Inter-Processing Machine used independently of the Computer under the Residuary heading. The Customs Authorities were of the view that Digital Printers were an Automatic Data Processing Unit as such the same were being considered as the unit of Automatic Data Processing Machine. For a peripheral, it should be able to work only with a Computer. The moment it is able to perform independently of a Computer, its claim to be a unit of the computer ceased to hold good. Merely working in conjunction with a computer did not bestow upon it the status of a unit of the computer as a peripheral Machine. Since Digital printer was not classifiable under any specific heading, the same required to be classified under residual heading. It also observed that the Machine is capable of functioning as a stand-alone digital copier, even without a computer and therefore, in terms of Note 5 (E) to Chapter 84 of the Act, the imported machine could not be classified under Heading 84.71. The Appellate Authority while deciding the appeal filed by the appellant has concurred with the finding and conclusion reached by the Deputy Commissioner of Customs.
(19) The appellants were before the Supreme Court explaining the function performed by Printers which work alongwith side a computer. The printing is carried out by the Computers giving command in the form of Digital signals which is transmitted through wires, converted into a readable language, and then printed. The counsel for the Appellants had gone on to explain the function of a Scanner, which converts documents into digital signals for storage in the Computer. In this way , the Scanner and Printer serve as input and output devices for the Computer. Similarly, when it was functioning as a Copier it served as a combined Scanner/Printer. He further explained the purpose of a Digital Scanner, which copies a document and sends it to the Central Processing Unit of the Computer; independently. The Copier can also print on its own after scanning. Thus, according to the learned counsel, a Copier served as a combined Scanner-cum-Printer. The learned counsel submitted that the multifunctional machines (which included Printer, Scanner and Copier) are not automatic data-processing machines (in short ADPM) they served as input and output devices of an ADPM (Computer) and thus they would fall under Sub-Heading 8471.60.
(20) In M/s Xerox India (supra) learned counsel arguing on behalf of the Customs Authorities had pointed out that the machines in question were not Printers simplicitor attached to a Computer but are capable of performing a number of functions independently and no single function could be said to be predominant. The Supreme Court considered the Customs Act and the General Rules for interpretation of the Schedule-II attached to the Act, more specifically, it dealt with the goods/machinery which had to be classified by reference to such component as gave them their essential character or on the basis of function and what was their major function. In Paragraph-17 of M/s Xerox India (supra) the Supreme Court referred to the Certificate of the manufacturer which clearly showed that the printing function emerges as the main function giving the Multifunctional Machine its essential character. It was used mainly for printing and was attached to the Central Processing Unit and was able to accept Data in the form of Codes and Signals, which could then be used by its system for printing.
(21) Since the predominant components all related to printing function, the Supreme Court was satisfied that the appellants were rightly claiming the benefit on the basis of nature of function that the machines performed and the basis of nature of components. The Court thereafter, gave the appellants the benefit of classification of such imported Multifunctional Machines serving as output device of a Computer as Computer Peripheral.
(22) Keeping in mind the law settled by the Hon'ble Supreme Court in the case of M/s Xerox India Limited Vs. Commissioner of Customs, Mumbai (supra), this Court finds that the Revisionist is an Authorized Dealer of a Printer manufacturer by the name of Sharp Computer Systems, and although their Printers are multifunctional in nature their components are mainly used for the purpose of printing and their main character is that of a Printer, therefore, the Revision deserves to be allowed.
(23) The Tribunal committed factual and legal error in treating the multifunctional printers sold by the revisionist as falling in the Residuary category and not giving the benefit of judgment rendered by the Supreme Court in the case of M/s Xerox India Limited Vs. Commissioner of Customs, Mumbai (supra). The order of the Tribunal is hence, set aside.
(24) The Revision is allowed.
(25) The amount of tax is required to be determined afresh, therefore, a copy of this decision shall be sent to the Tribunal for afresh determination of the amount of tax payable by the revisionist.
(26) From the facts as mentioned in the affidavit filed in support of the stay application and the supplementary affidavit, it is evident that only for the Assessment year 2008-09, there was a disputed tax liability and in rest of the years either Assessing Authority or Appellate Authority had accepted the contention of the Revisionist.
(27) The Tribunal shall pass necessary orders taking into account the observations made hereinabove within a period of three months from the date a certified copy of this order is produced before it.
Order Date :- 22.3.2022 PAL