2013 (8) TMI 569 - HC - VAT and Sales Tax

Court rules ink & toner cartridges as printer parts, taxed at 5% under VAT Act. Precedents & common parlance key.

Canon India Private Limited Versus State of Tamil Nadu Through Secretary, Ministry of Education and Commercial Taxes, Commercial Taxes Department

The court allowed the writ petitions, determining that ink jet cartridges and toner cartridges are parts and accessories of printers, thus should be taxed ... Maintainability of Writ Petitions - Classification of f Ink Jet Cartridges and toner cartridges used in ink jet printers and laser printers. - Circular issued by the Commissioner - accessories or not - Held that:- The Order passed by the revisional authority was an illustration to demonstrate that the authorities under the Act will not and cannot bypass the circular/clarification issued by the Commissioner of the Commercial Taxes department, who was the highest authority of the department - Filterco & another vs. Commissioner of Sales Tax [1986 (2) TMI 58 - SUPREME COURT OF INDIA ]. Once a clarification was given by the Commissioner of Commercial Taxes, that will bind the subordinate assessing authorities and one cannot expect a different order from the assessing officers - no fruitful purpose would be served by directing the assesse to go for an assessment and for that reason, not to entertain the writ petition - when there was a Division Bench judgment of another High Court on a similar provision, it had to be treated with due respect. Following the Judgement of State of U.P. vs. Indian Hume Pipe Co. Ltd. [1977 (3) TMI 116 - SUPREME COURT OF INDIA] - The circular issued by the Commissioner though stated to be without jurisdiction, the circular having been issued by the highest officer in the department, the assessing officers, who were subordinate officers cannot be expected to take a different view and therefore, no useful or fruitful purpose would be served in directing the petitioners to avail the remedy under the Act and therefore, these writ petitions questioning the classification of the goods are held to be maintainable before this Court on account of the reasons recorded. Classification of Entries - Whether the Court should dwell into the question as to whether ink jet cartridges and toner cartridges are accessories to printer and whether they would fall within Entry 22 & 24 of serial No.68 in Part B of First Schedule of the Act attracting 4% VAT, as such question, essentially being a issue relating to classification of goods - Held that:- The term accessories was used in the schedule to describe goods which may have been manufactured for use as an aid or addition - ink jet cartridges and toner cartridges were parts and accessories of printer which is a peripheral to a computer system and would be covered under Entry Nos.22 & 24 of serial No.68, Part B of First Schedule to the TNVAT Act - Filterco & another vs. Commissioner of Sales Tax [1986 (2) TMI 58 - SUPREME COURT OF INDIA. The items in question were integral part of printer which undisputedly is covered by entry 3 – a fiscal entry was to be given a common sense meaning as understood by persons dealing with such goods and not any technical meaning – Decided in favor of assesse. Issues Involved:1. Constitutionality and enforceability of Section 19(1) of the VAT Act.2. Classification of Ink Jet Cartridges and Toner Cartridges under the VAT Act.3. Jurisdiction of the High Court to entertain writ petitions without availing statutory remedies.Issue-wise Detailed Analysis:1. Constitutionality and Enforceability of Section 19(1) of the VAT Act:The petitioners challenged Section 19(1) of the VAT Act, arguing that the prescribed period for claiming Input Tax Credit (ITC) was inconsistent with the charging sections (3(2) and 3(3)) and the general scheme of the Act, infringing Articles 14 and 19(1)(g) of the Constitution. The court did not delve deeply into this issue in the provided judgment text, focusing instead on the classification and jurisdictional matters.2. Classification of Ink Jet Cartridges and Toner Cartridges:The primary issue was whether ink jet cartridges and toner cartridges should be taxed at 4% (later 5%) as 'accessories' or 'parts' of printers under Entry 22 and 24 of Serial No.68, Part B of the First Schedule to the VAT Act, or at 12.5% under the residuary classification in Part C.The petitioners argued that:- These cartridges are integral parts of printers, essential for their functioning, and should be taxed as accessories or parts of computer peripherals.- The revenue's reliance on the residuary entry was arbitrary and irrational, especially given the historical context under the Tamil Nadu General Sales Tax Act, 1959, where both printers and cartridges were taxed at 4%.- Various judicial precedents, including decisions by the Delhi High Court and Gauhati High Court, supported the classification of cartridges as accessories or parts of printers.The court agreed with the petitioners, noting:- Printers are peripherals to computer systems, and cartridges are parts and accessories of printers.- The classification of goods should be understood in common parlance, as held by the Supreme Court in related cases.- The Delhi and Gauhati High Courts had already ruled that cartridges are integral parts of printers, attracting a lower rate of tax.3. Jurisdiction of the High Court to Entertain Writ Petitions:The court considered whether it should entertain the writ petitions given the availability of statutory remedies under the VAT Act. The petitioners contended that:- The clarifications issued by the Commissioner of Commercial Taxes were binding on subordinate authorities, making it futile to pursue statutory remedies.- Precedents from the Supreme Court and other High Courts supported the view that writ petitions could be entertained when a clarification by the highest tax authority leaves no room for different interpretations by lower authorities.The court held:- The writ petitions were maintainable because the clarifications issued by the Commissioner left no room for a different view by assessing officers.- The absence of an enabling power to issue such clarifications at the time they were issued further justified the court's intervention.Conclusion:The court allowed the writ petitions, holding that ink jet cartridges and toner cartridges are parts and accessories of printers, which are peripherals to computer systems, and should be taxed at 5% under Entry Nos.22 & 24 of Serial No.68, Part B of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006. The court emphasized that the classification should be understood in common parlance and supported by judicial precedents, rejecting the revenue's reliance on the residuary entry. The writ petitions were deemed maintainable due to the binding nature of the Commissioner's clarifications on subordinate authorities.