2012 (6) TMI 603 - HC - VAT and Sales Tax

Classification of multi-functional printers for tax: Court clarifies dominant purpose determining taxability

Ricoh India Ltd. Versus Commissioner

Ricoh India Ltd. Versus Commissioner - [2012] 52 VST 49 (Del) Issues Involved:1. Applicable VAT rate on multi-functional printers/machines and their spares and consumables during the period 1st April 2005 to 31st March 2007.2. Interpretation of Entry No. 41A of the third schedule of the Delhi Value Added Tax Act, 2004.3. Classification of multi-functional printers/machines under HSN code 8471.60.29.4. Applicability of Central Excise Tariff Act, 1985 for VAT classification.5. Dominant purpose doctrine for classification of multi-functional machines.Issue-Wise Detailed Analysis:1. Applicable VAT rate on multi-functional printers/machines and their spares and consumables during the period 1st April 2005 to 31st March 2007:The primary question for adjudication was whether multi-functional printers/machines and their spares and consumables were taxable under Entry No. 41A of the third schedule of the Delhi Value Added Tax Act, 2004 at 4% or under the residuary head at 12.5%. The tribunal upheld the Commissioner's finding that these products are taxable under the residuary head at 12.5%.2. Interpretation of Entry No. 41A of the third schedule of the Delhi Value Added Tax Act, 2004:During the relevant period, Entry No. 41A underwent multiple amendments. Initially, it included 'IT products notified by the Ministry of IT,' including 'computer systems and peripherals.' Post 30th November 2005, it referred to 'Information Technology products' as per the Central Excise Tariff Act, 1985. The court examined whether multi-functional machines could be classified under this entry.3. Classification of multi-functional printers/machines under HSN code 8471.60.29:The court noted that multi-functional machines were classified under HSN code 8471.60.29 ('Other') in the Central Excise Tariff Act, 1985. The court referred to the Supreme Court's decision in Xerox India Ltd. v. Commissioner of Customs, which held that multi-functional machines performing predominantly as printers should be classified under 8471.60. The court found that the multi-functional machines in question would fall under the residuary sub-heading 8471.60.29 ('Other').4. Applicability of Central Excise Tariff Act, 1985 for VAT classification:The court analyzed the notes in the VAT Act concerning the interpretation of entries in relation to the Central Excise Tariff Act, 1985. Note (1) applied the rules of interpretation from the Central Excise Tariff Act. Note (2) clarified that if descriptions in the VAT Act differed from those in the Central Excise Tariff Act, the VAT Act's description would prevail. Note (4) stated that goods classified under 'other' in the Central Excise Tariff Act would fall under the residuary provision in the VAT Act.5. Dominant purpose doctrine for classification of multi-functional machines:The court applied the dominant purpose doctrine to determine whether multi-functional machines were computer peripherals. If a machine's principal purpose was to function as an input or output device for a computer, it would qualify as a computer peripheral under Entry 41A. If the machine's primary purpose was photocopying or duplicating, it would not qualify under Entry 41A and would be taxed at the higher rate.Conclusion:The court held that the multi-functional machines in question did not fall under Entry 41A of the third schedule of the VAT Act and were taxable under the residuary head at 12.5%. The dominant purpose of the machine determined its classification. The court emphasized the need for factual examination of each machine to establish its principal purpose. The appeal was partly allowed, and the tribunal's order was set aside to the extent it contradicted the court's observations. The matter could be re-examined during assessment/appellate proceedings.