Madras High Court
M/S.Canon India (P) Ltd vs State Of Tamil Nadu on 10 December, 2014
Bench: R.Sudhakar, R.Karuppiah
In the High Court of Judicature at Madras Dated: 10.12.2014 Coram: The Hon'ble MR.JUSTICE R.SUDHAKAR and The Hon'ble Mr.JUSTICE R.KARUPPIAH Tax Case (Revision) Nos.94 to 96 of 2014 M/s.Canon India (P) Ltd., 312, Village Road, Nungambakkam, Chennai - 34. .... Petitioner in the above T.Cs Vs. State of Tamil Nadu represented by the Dy. Commercial Tax Officer, Office of the Commercial Tax Officer, Valluvarkottam Assessment Circle, Chennai .... Respondent in the above T.Cs PRAYER: Petitions under Section 38 of the Tamil Nadu General Sales Tax Act against the order dated 30.4.2014 made in T.A.Nos.164, 177 and 178 of 2010 on the file of the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Chennai for the assessment years 2004-05 and 2005-06. For Petitioner : Mr.Krishna Srinivas for M/s.S.Ramasubramanian and Associates For Respondent : Mr.A.N.R.Jayaprathap Special Government Pleader (T) C O M M O N O R D E R
(Made by R.SUDHAKAR,J.) The above Tax Case (Revisions) are filed by the assessee as against the order of the Tamil Nadu Sales Tax Appellate Tribunal raising the following substantial questions of law:
"A. Whether the multi-function network printers sold by the Appellant under the Canon product "Image Runner" are to be classified under Schedule I, Part B, Entry 18(i) taxable at 2% (10% without C Form) (as contended by the Appellant) or under Schedule I, Part C, Entry 13(i) taxable at 4% (12% without C form) (as held by the Sales Tax Appellate Tribunal)?
B. Whether Schedule I, part B, Entry 18(i) includes printers which are capable of additional subsidiary functions such as scanning, copying and/or faxing or is restricted to the types of printers mentioned after the word "like" in the said Entry?
C. Whether any qualifications, conditions or restrictions are to be read into the meaning of the word "printers" used in Schedule I, Part B, Entry 18(i) so as to limit the entry only to particular kinds of printers or the usage of the word "printers" in the said Entry would include every species thereof?
D. Whether the "printers" mentioned in Schedule I, Part B, Entry 18(i) would include only those printers which are exclusively used for printing or would also include all types of printers including those with additional subsidiary functions such as copying, scanning or faxing?
E. Whether the use of the word "like" after "printers" in Schedule I, Part B, Entry 18(i) is merely descriptive and illustrative or exhaustive?
F. Whether the Tribunal was correct in holding that the Disputed Printers will not fall within the ambit of Schedule I, Part B, Entry 18(i) because the said Printers were capable of performing "additional functions" of copying and faxing?
G. Whether the Tribunal erred in not considering the judgment of the Supreme Court in Xerox India Limited vs. Commissioner of Customs, Mumbai 2010 (260) ELT 161 (SC) where the Apex Court held that multi function machines, similar to the Disputed Printers in this case, which have printing as the predominant/primary function with additional features are to be considered as printers only?
H. Whether the Tribunal was correct in holding that the Disputed Printers cannot be classified under Schedule I, Part B, Entry 18(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 natural justice?
L. Whether the Tribunal erred in not classifying the Disputed Printers under Schedule I, Part B, Entry 18(i) without refuting the appellant's contention that digital/laser printing was the predominant and primary function of the Disputed Printers?
M. Whether the Tribunal erred in not considering the various judgments and other contentions advanced by the appellant as well as the supplier certificates submitted by the appellant (in view of judgment of the Supreme Court in Xerox India Limited vs. Commissioner of Customs, Mumbai 2010 (260) ELT 161 (SC)) on the correct classification of the Disputed Printers?
N. Whether the Tribunal was correct in not setting aside the demand for CST in connection with the turnover of Rs.45,967/- altogether when the appellant had clearly established that the C Forms had been furnished for this turnover and instead confirming the remand order of the lower authority in this regard?
O. Whether the Tribunal was correct in not setting aside the levy of penalty to the tune of Rs.42,033/- and instead confirming the remand order of the lower authority in this regard?"
2.1. The brief facts of the case are as under: The assessment in the above cases relates to the assessment years 2004-2005 and 2005-2006. The assessee is a dealer in computer peripherals, image runner, fax machines, toner, photocopier machine and its spares and consumables, etc. 2.2. For the relevant assessment years, the assessee claimed that the Image Runners (Multifunction network printers) would fall under Schedule I, Part B Entry 18(i) at 4%. The relevant entry is referred to hereunder:
Schedule I, Part B, Entry 18(i) at 4% Computers, personal, mini, mainframes and laptops of analog and digital varieties including automatic teller machines, their hardware and peripherals like modem and speakers, key board, monitor, mouse, CPU, floppies of all sizes cartridge tape drives, CD ROM drives, DAT drives, hard disks, printers like dot matrix, ink jet and laser, line, line-matrix, scanners, multimedia kits, plotters, computer consumables including DAT tapes, print ribbons, printer cartridges and cartridge tapes and computer cleaning kits'."
2.3. The Assessing Officer did not accept the above said plea, and held that the image runner sold by the assessee can act as copier machine and other functions like printing, scanning 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 tax liability appears to be almost identical, even though the nomenclature differs. For better clarity, the relevant entries are extracted hereunder:
"Schedule I Part D, Entry 14(iv) 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, whether reduced, enlarged or the same size as the originals, electronic teleprinters and fax machines of all kinds and electronic typewriters, indexing, card punching, franking, addressing machines, one record units - 4% with C form and 12% without C form Schedule I Part D, Entry 40 All other goods not specified elsewhere in any of the Schedules - 4% with C form and 12% without C form 2.6. Aggrieved by the order of the Assessing Officer, the assessee went before the Appellate Assistant Commissioner, who held that the goods would fall under Schedule I, Part D, Entry 40 of the Tamil Nadu General Sales Tax Act. Not satisfied by the order of the First Appellate Authority, the assessee appealed to the Tamil Nadu Sales Tax Appellate Tribunal.
2.7. The contention of the assessee before the Authorities below, more particularly before the Tribunal, which is based on oral and written submissions, is that the main function of Image Runner Advance - Canon model is the execution of high capacity office network laser printing, apart from regular scanning, faxing and copying. This equipment caters to the need of office, which requires primarily network, laser printing with the combined benefit of scanning, fax and copying. The primary and predominant function of this equipment is printing. The digital laser printing technology, which is the hallmark of these printers, ensures greater speed quality, consistency and product life. The assessee submitted that the predominant function of the Image Runner printer is printing documents. The print commands are given from a computer in the form of digital signals, transmitted through wires converted in the form of readable language by the printer and then printed. The scanner of image runner converts documents into digital signals, data and transmits the same through network for storage on a computer. Hence, the scanner and printer serve as an input output device/peripheral for 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 Tribunal observed that Image Runner can work as a printer and scanner with computer and the other functions can be done without computer. The Tribunal recorded a finding that Image Runner is not specifically mentioned in any of the Entry and relied upon a clarification of the Commissioner of Commercial Taxes dated 13.5.2000, which reads as follows:
D.Dis.Acts Cell II/6543/2000 dated 13.5.2000 Multi functional machine containing laser printer, photo copier, scanner and fax machine ( 4 in 1 machine) falls under entry No.55 in Part-C of the First Schedule taxable at 8% w.e.f. 23.1.2000 Entry C.55 of 1st Schedule Electronics systems, apparatus, appliances and other electronic goods (other than those specified elsewhere in this Schedule) but including electronic indexing, card punching, franking, addressing machine, one record units and other electronic goods. - 8% 2.11. The Tribunal also relied upon another circular of the Commissioner of Commercial Taxes dated 27.10.2003, which reads as follows:
The Commissioner of Commercial Taxes also issued another circular in this nature of goods in Acts Cell-II/89210/2002 dated 27.10.2003 (available in Assessment Year 2002-2003 File Page No.357).
Printer with add on features of scanning and copying and faxing.
Classified under Entry 14(iv) in Part-D of 1st Schedule. If the above product is imported origin then it is taxable at 20% under 80 of 11th Schedule to the TNGST Act. - 4% with C form and 12% without C form 2.12. After considering all these aspects, the Tribunal came to the conclusion that in view of the contradictions, it decided to fix the image runner under Entry C-13(i) of First Schedule. The said Entry reads as follows:
"Schedule I, Part C, Entry 13(i) Electronic goods not specified elsewhere - 4% with C form and 12% without C form"
The reasoning of the Tribunal in this regard is extracted hereunder:
From the above two clarifications, it is learnt that both clarifications contradicting each other. So from the function of the disputed goods and clarifications of the Commissioner of Commercial Taxes, it is very clear that the image runner is to be classified under residuary entry. But, the image runner is electronic goods. The clarifications issued by the Commissioner also classified under residuary entry as electronic goods and not specified elsewhere. Now, on seeing the entry 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.122/2013-14 (Acts Cell - II 6691/2014), the learned counsel for the assessee pleaded that Image Runner is an office machine connected to a computer and it acts on combination of one or more functions and they are predominantly usable when connected to computers to perform the tasks for the performance of which the machines are so designed and programmed.
3.3. The learned counsel appearing for the assessee submitted that Entry 68 (22)(a) of Part B of Schedule I to TNVAT Act, 2006 is akin to Entry 18(i) of Part B of Schedule I of the Tamil General Sales Tax Act and therefore, the image runner, which partakes the character of "peripheral" to the computer and the multi-function device should be correctly classified.
4. Per contra, Mr.A.R.Jayapratap, learned Special Government Pleader pleaded that in view of the inconsistency in the stand taken by the Assessing Officer, Appellate Assistant Commissioner, the Appellate Tribunal and the reasoning given by the Authority for Clarification and Advance Ruling, the matter may be remanded to the Original Authority for passing a detailed and speaking order after considering all the issues. He also vehemently contended that some of the functions of image runner would not fall under Entry 18(i) of Part B of Schedule I and, therefore, the goods in question fall under residuary entry.
5. We have heard the learned counsel for the petitioner and the learned Standing Counsel appearing for the respondent and perused the order passed by the Tribunal and the authorities below.
6. Even though several questions of law have been raised by the petitioner for consideration, the learned counsel on either side concur that the core issue around which the entire case revolves is: Whether the Image Runners (Multi-function Network Printers) sold by the assessee are to be classified under Schedule I, Part B, Entry 18(i) as claimed by the assessee or under Schedule I, Part C, Entry 13(i) as held by the Tribunal? 7.1. Before adverting to the merits of the case, it is apposite to refer to the decision of the Supreme Court in Xerox India ltd. case, referred supra. In that case, the assessee's claim was that the import of multi-functional machines capable of discharging number of functions would fall under sub-heading 8471.60 of the Act, whereas the Department of Customs classified the said imported machines under chapter heading 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 various heads under which the classification was contested and placing reliance on Note 5 of Chapter 84 and Rules relating to General Rules of interpretation of the 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. Emphasis was laid on the predominant use of the instrument and the Supreme Court allowed the appeal of the importer holding as follows:
10) In order to determine the classification of the Multi Functional Machines, it is necessary to look into some relevant provisions. Rule 3(a) of the General Rules for the Interpretation of the First Schedule (which along with the Second Schedule specifies the rates at which duties of customs shall be levied under the Customs Act) provides:
'The heading which provides the most specific description shall be preferred to headings providing a more general description...'
11) Further, Rule 3(b) of the same reads as follows:
'Mixtures, composite goods consisting of different materials or made up of different components,and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
12) In addition, Note 3 of Section XVI (which includes both Chapter 84 and Chapter 85) reads as follows:
'Unless the context otherwise requires, composite machines consisting of two or more machines Supreme Today With All High Courts Page 5 of 6 fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function.'
13) It is not in dispute that the Multi-Functional Machines in question, Xerox Regal 5799 has about 85% of the its total parts and components along with manufacturing cost allocated to printing, as does 74% of the Xerox XD155df model. This clearly shows that the printing function emerges as the principal function and gives the Multi-Functional Machines its essential character. Having such a nature, it also clearly meets the three-fold requirement of chapter 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-function devices. The factual backdrop and the plea of the assessee in that case are as under:
"4.1. The applicant-firm has stated that they are importing Digital Multi Function Devices of several brands, viz., Cannon, Sharp, and Konica Minolta, which are connectible to the computers to print, scan and copy, facsimile and fax the documents. These Digital Multi Function Devices are commonly referred to be the computer Peripherals, basically designed to connect with the computers so as to perform the functions like printing, scanning, copying the documents and besides faxing the documents. The applicant-firm has furnished the brochures of the Multifunction Devices; it deals with, revealing technical specifications and also literature relating to its functional applications. The applicant-firm has also furnished along with the application the Bills of Entry for home consumption, revealing its Customs Tariff Classification under the code 8443.3100. Besides, the Partner representing the applicant-firm has placed reliance on the decisions rendered by the Hon'ble High Court of Madras in the case of Canon India Limited and Others vs. State of Tamil Nadu and Others reported in 2013-VIL-53-MAD and Hon'ble Supreme Court in the case of XEROX India Limited vs. Commisioner of Customs, Mumbai reported in 2010(260) E.L.T. 161 (S.C.), wherein it has been adjudged that the Multifunction Devices are peripherals to the computer system. The Partner of the applicant-firm has finally pleaded that the structural and functional features of the digital Multifunction Devices may be considered as that the Computer peripheral, classifiable as an Information Technology Product liable to VAT at the rate of 5% under Entry 68 of Part-B of the First Schedule to the Act."
8.2. 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. In paragraph 6.3, the Authority for Clarification and Advance Ruling discussed about the details of the multi-function machine, which read as follows:
"6.3 A MFP (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. From the above, it is very much clear that the Multifunction Devices (old & used), imported and marketed by the applicant-firm are construed as being the "peripheral" to computer as within the scope and meaning of the expression, "peripherals"employed in the description under Serial No.22(a) in the list of Information Technology Products" notified by the Government vide Notification No.II(1)/CTR/(a-6)/2007 in G.O.No.3, CT & R (B1) Department dated 1st January 2007 or the purpose of Entry in serial No.68 of Part-B of the First Schedule to the TNVAT Act, 2006. Therefore, the imported Multifunction Devices (old and used) of different brands and different models would attract the liability to VAT on sales inside the State at the rate of 5% as being an Information Technology Product under Entry 68(22)(a) of Part-B of first Schedule to the Act, 2006."
9. Coming to the case on hand, assuming that the other interpretation given by the lower authorities is not accepted, on a conspectus of the issue raised by the petitioner and the orders passed by the authorities below, we find that the issue that has to be decided is whether image runner multifunction network printer is a "peripheral" of a computer or such other device having different functional capability which would fall under other entries as contended by the Department. It is seen from the order of the Authorities below that the technical details of the Image Runner have already been submitted before the lower authorities.
10. The first issue that the petitioner has been canvassing is the predominant use of the goods in question. It is the specific plea of the petitioner before the Original Authority as well as before the first Appellate Authority that the image runner is predominantly a multifunction network printer and it performs other functions like scanning, fax, documents storage and copying. Besides the facility of network printing, the add on features of scanning, fax, photocopying make the goods a multi-function device.
11. 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 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 been defined in the VAT Act and, therefore, has to be given its natural and common sense meaning. A computer mainly consists of Central Processing Unit, which cannot operate and function without peripherals like monitor, keyboard, printer etc. Some of the peripherals may be mounted or housed in the computer cabinet itself like Hard Disc, CD ROM, Mic etc. Sometime peripherals can be separate and have to be attached to the Central Processing Unit. The term peripheral has been defined in Oxford Dictionary to mean as under:-
'(of a device) able to be attached to and used with computer, though not an integral part of it'
17. A multi functional machine can be a computer peripheral, if its principal or sole purpose is to be attached and function as a computer ancillary. A multi functional machine will be and qualify as a computer peripheral when its main/predominant purpose is to scan documents, load data or work as an input devise of the computer or work as an output device to take printouts etc. from the computer. At the same time, there can be photocopiers, whose main purpose is to copy or act as a duplicating machine to make copies of documents. Incidentally, they may also be used as a printer. This would require elucidation and examination of factual matrix in each case and the machine in question on case to case basis. (emphasis supplied)
13. In the case on hand, on considering the functions of the Image Runner in the light of the decisions, referred supra, we are of the firm view that the goods in question are "peripherals" and the function of printing of documents based on a command given by the computer in the form of digital signals transmitted through networking device, namely, Local Area Network (LAN), makes it ample clear that it serves as an input and output device and therefore, it would partake the character of the "peripheral, which includes printer and scanner.
14. We, therefore, have no hesitation to hold that the goods in question are "peripherals" to a computer working in conjunction with the computer. There is no question of classifying the goods under residual entry or under Entry 14(iv) of Part D or Entry 40 of Part D of Schedule I of the TNGST Act.
15. We are not inclined to accept the reasoning given by the Assessing Officer or that of the Appellate Assistant Commissioner and the Tribunal, which have totally misconstrued 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 (India) Ltd. v. CCE, (2005) 2 SCC 460, Alpine Industries v. CCE, (2003) 3 SCC 111, Sujanil Chemo Industries v. CCE & Customs, (2005) 4 SCC 189, ICPA Health Products (P) Ltd. v. CCE, (2004) 4 SCC 481, Puma Ayurvedic Herbal, (2006) 3 SCC 266, Ishaan Research Lab (P) Ltd., (2008) 13 SCC 349 and CCE v. Uni Products India Ltd., (2009) 9 SCC 295].
37. A commodity cannot be classified in a residuary entry, in the presence of a specific entry, even if such specific entry requires the product to be understood in the technical sense (see Akbar Badrudin Giwani v. Collector of Customs, (1990) 2 SCC 203 and Commr. of Customs v. G.C.Jain, (2011) 12 SCC 713). A residuary entry can be taken refuge of only in the absence of a specific entry; that is to say, the latter will always prevail over the former [see CCE v. Jayant Oil Mills (P) Ltd., (1989) 3 SCC 343, HPL Chemicals Ltd. v. CCE, (2006) 5 SCC 208, Western India Plywoods Ltd. v. Collector of Customs, (2005) 12 SCC 731 and CCE v. Carrier Aircon Ltd., (2006) 5 SCC 596. (emphasis supplied)
18. On Entry 68 Part B of Schedule I in relation to TNVAT Act 2006, while dealing with the issue of interpretation of a "peripheral", this Court in T.C.(R) No.36 of 2014 by order dated 01.09.2014 sustained the order of the Tribunal, as to what constitute "peripheral", holding as follows:
5. Aggrieved by the order of the Appellate Deputy Commissioner, the Revenue has preferred an appeal before the Tamil Nadu Sales Tax Appellate Tribunal. The Tribunal held that router is a network device that forwards data from one network to another and it is used for transmitting computer data from one area to another. The Tribunal relied upon the Microsoft Dictionary to define the word 'computer peripheral'. It has been clearly held by the Tribunal that based on the definition, a computer peripheral was often, but not partially or completely dependent on the host and it expands the capability of the computer, but it did not form part of the core computer architecture. Further, the Tribunal while upholding the order of the Appellate Deputy Commissioner, held as follows:
'7. It is not in dispute the 'Router' is a network device that forwards packet from one network to another. On the other hand, it can be said that it is a network device for transmitting computer data from one area to another. It is relevant to note that 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 or not the interconnection is continuously maintained.
As per the definition above, a computer peripheral is often, but not always, partially or completely dependent on the host and it expands the capability of the computer but it does not form part of the core computer architecture. Therefore, a computer peripheral need not be a device or an accessory attached to the computer or computer system. From the above, it is obvious that a "Router" is a computer network device that transmits data from one area to another for the use through computer systems. On the other hand, it is clear that the "Router" expands the capability of the computer but does not form part of the core computer architecture. In the circumstances, it is held that a 'Router" is a device coming under computer peripherals as Information Technologies product. Sl.No.22 of the Entry 68 includes computer system, peripherals parts and also electronic diaries. The lists of Information Technology products mentioned in Entry 68, has not specifically mentioned the word "Router", but it is a part coming under computer peripherals and parts. The judgments relied by the learned counsel for the respondent are also not of much help in this regard and are directly applicable to the facts of the case. In the above circumstances, it is held that the finding of the first appellate authority that "Router" is nothing but a computer peripheral which is eligible for concessional rate of 4% is sustainable and it does not require any interference. The State appeal lacks merits and is liable to be dismissed and the point is answered accordingly."
9. We find that the definition 'peripheral', as has been concluded by the Appellate Deputy Commissioner as well as by the Tribunal, is clearly an ancillary device of a computer, similar to that of key board, floppy disk or hard drive, which enables the transmission of data from one computer to another or one area to another. The definition of the term 'peripheral' as per the dictionary meaning is as follows:
"lying at the outside or away from the central part; outer; external"
10. It is not in dispute that 'router' is a device falling outside the main part, namely, computer and it is partially or completely dependent on the host and expands the capabilities of the computer and it does not form part of the core architecture. What are all 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 Act.
20. For the foregoing reasons, we allow these revisions by answering the core issue formulated for consideration in these Revisions in favour of the assessee and against the Revenue. Consequently, the order of the Tribunal stands set aside. No costs.
(R.S.J.) (R.K.J.) 10.12.2014 Index : Yes Internet : Yes Note to Registry:
Mark a copy of this order to the Commissioner of Commercial Taxes for complying with the direction given in paragraph 2.4 of this order.
sl/sasi To
1. The Assistant Registrar, Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Chennai.
2. The Appellate Assistant Commissioner (CT)-III (FAC), Chennai.
3. The Dy. Commercial Tax Officer, Office of the Commercial Tax Officer, Valluvarkottam Assessment Circle, Chennai.
R.SUDHAKAR,J.
AND R.KARUPPIAH,J.
sl/sasi Tax Case (Revision) Nos.94 to 96 of 2014 10.12.2014