2010 (2) TMI 1113 - HC - VAT and Sales Tax

High Court upholds exemption on commission; affirms PCOM classification as electronic goods

The High Court partially allowed the appeal, upholding the exemption granted by the first appellate authority regarding the commission received by the ... Whether, on the facts and in the circumstances of the appellant's case, can it be held that second revisional authority was right in law in setting aside the exemption granted by the first appellate authority on a turnover in a sum of ₹ 17,26,225, which turnover related to commission received by the appellant, especially when there was no proposal to the said effect in the show-cause notice dated December 9, 2004 issued by the second revisional authority under section 22A(2) of the Act? Whether, on the facts and in the circumstances of the appellant's case, can it be held that the second revisional authority was right in law in holding that PCOM were taxable as 'electronic goods' falling under entry No. 4 of Part E of the Second Schedule appended to the Act and not as 'computer of all kinds' falling under entry 20(i) of Part C of the Second Schedule appended to the Act? Held that:- Without considering the actual point that had arisen for the consideration the Commissioner of Commercial Taxes, Bangalore, has set aside the order passed by the Joint Commissioner of Commercial Taxes, Bangalore in regard to commission earned by the assessee by selling the goods on commission basis. As it is an apparent error on the face of the record, we have to answer question No. 1 in favour of the assessee. Since the Commissioner has followed the judgment in Diebold Systems Pvt. Ltd. [2005 (1) TMI 652 - KARNATAKA HIGH COURT] the facts of this case are similar to the facts involved in the aforesaid case, we have to answer the question No. 2 against the assessee and in favour of the Revenue. Appeal allowed in part Issues:1. Exemption granted by the first appellate authority on a turnover related to commission received by the appellant.2. Classification of PCOM as 'electronic goods' or 'computer of all kinds.'Issue 1:The appellant, a registered dealer under the Karnataka Sales Tax Act, appealed against the tax levied on public call office machines as electronic goods. The Joint Commissioner of Commercial Taxes allowed the appeal, treating the machines as computers and exempting the commission received by the appellant. Subsequently, the Commissioner initiated suo motu revision, setting aside the previous orders and classifying the goods as electronic goods. The High Court found that the Commissioner erred in not considering the actual point raised under section 22A of the KST Act, leading to the restoration of the orders in favor of the assessee.Issue 2:The second issue revolved around the classification of PCOM as either 'electronic goods' or 'computer of all kinds.' The Commissioner, relying on a previous judgment, concluded that the machines sold by the appellant were not computers or computer peripherals but were equivalent to automated teller machines. The High Court, after examining the facts and the previous ruling, upheld the classification of PCOM as electronic goods, in line with the judgment cited. Consequently, the second issue was answered against the assessee and in favor of the Revenue.In conclusion, the High Court partially allowed the appeal, holding in favor of the assessee on the first issue regarding the exemption granted by the first appellate authority. However, the classification of PCOM as electronic goods, not computers, was upheld. The orders of the Joint Commissioner of Commercial Taxes and the Additional Commissioner of Commercial Taxes were restored concerning the commission earned by the assessee. The clarification was provided that the relief granted to the assessee by the Joint Commissioner was restored, except for the classification of goods as not computers or computer peripherals.