2017 (1) TMI 1622 - AAR - VAT and Sales Tax

Classification of 'Back Bag,' 'Tablet,' and 'Adopter' under MVAT Act, 2002 Residuary Entry E-1

In Re : Data Care Corporation

The ruling determined that 'Back Bag,' 'Tablet,' and 'Adopter' are classified under the residuary entry E-1 of the MVAT Act, 2002, and are subject to VAT ... Rate of tax - Classification of goods - Back Bag - Tablet - Adopter - whether the goods find place in the entries of other schedules (A, B, C or D) or would fall under residuary entry? Held that:- The 'back pack' is used for conveyance of laptop during journey. The Laptop is packed in cartoon box and delivered to customers. The customer, as per requirement purchases back bag and uses for conveyance during journey. Hence, it is not packing material as such prescribed under charging section to levy tax under section 7 of MVAT Act, 2002. The product is not covered by the schedule entry as claimed by the applicant and it falls under residuary entry, E-1, and thus liable to VAT at the rate of 13.5%. The 'Tablet' is a thin, flat mobile instrument with a touch screen display, which is usually in color, processing circuitry, and a rechargeable battery in a single device. Tablets often come equipped with sensors, including digital cameras, a microphone, and an accelerometer, so that images on screens are always displayed upright. The CETH No.84713090 being covered by CET Heading as others for 'Tablet' is not found in IT Products' Notification, hence, is not covered by S/E C-56. The product covered by Excise Heading Tariff item No.87413090 is not a part of Notification issued for the purpose exemption of tax. The product 'Tablet' is not covered by any schedule entry and it falls under residuary entry, E-1and liable to VAT at the rate of 13.5% - Similarly, the product viz. 'Adopter' having CETH No. 85044090 is not a part of Notification issued by State Government for the purpose of schedule entry C-56. The product is not covered by any schedule entry and it falls under residuary entry, E-1and liable to VAT at the rate of 13.5%. Prospective effect - Held that:- The Commissioner or, as the case may be, the Advance Ruling Authority, may direct that the Advance Ruling shall not affect the liability of the applicant or, if the circumstances so warrant of any other person similarly situated, as respects any sale or purchase effected prior to the Advance Ruling - It is settled principle that the issue of prospective effect is to be considered on fact and circumstances of each case separately. There is no straight jacket formula to say that prospective effect is to be given in typical circumstances. The applicant cannot prove existence of circumstances which warrant us to use the discretionary power. In fact use of such discretionary powers in the absence of compelling circumstances would be detrimental to legitimate government revenue and would wipe out the legitimate tax liability - we do not allow the use of prospective effect as a tool to protect or to wipe of legitimate tax liability - the pray for granting prospective effect to this order is hereby rejected. Ruling:- The commodities, namely 'Back Bag', 'Adopter' and 'Tablet' do not find place in the entries of other schedules (A, B, C or D). Hence, they are covered by residuary entry, E-1 of MVAT Act, 2002 and are liable to VAT at the rate of 13.5 per cent as provided in said Schedule From time to time. The pray to grant prospective effect to this order is rejected. Issues Involved:1. Rate of VAT on 'Back Bag'2. Rate of VAT on 'Tablet'3. Rate of VAT on 'Adopter'4. Prospective effect of the Advance RulingDetailed Analysis:1. Rate of VAT on 'Back Bag':The applicant argued that the 'back bag' should be considered as packing material and taxed at the same rate as laptops under Section 7 of the MVAT Act, 2002. However, the ruling clarified that the 'back bag' is not used as packing material but for carrying laptops during travel. Therefore, it does not meet the criteria under Section 7. The 'back bag' falls under the Excise Heading 4202 99 00, which is not covered by the relevant Schedule Entry, thus falling under the residuary entry E-1 and liable to tax at 13.5%.2. Rate of VAT on 'Tablet':The applicant contended that 'Tablets' should be taxed at a lower rate under Schedule Entry C-56 as IT products. The ruling examined the State Government Notification and Central Excise Tariff Heading 8471 30 90, which describes 'Tablets' as 'Other digital automatic data processing machines.' The Notification specifies goods for exemption, and the term 'namely' restricts the scope to listed goods only. The 'Tablet' under CETH 8471 30 90 is not included in the Notification, thus not covered by Schedule Entry C-56. Consequently, 'Tablets' fall under the residuary entry E-1 and are liable to tax at 13.5%.3. Rate of VAT on 'Adopter':The applicant argued that 'Adopters' are essential parts of laptops and should be taxed at a lower rate. The ruling clarified that 'Adopters' are classified under CETH 8504 40 90 as electrical transformers and converters, not as units of automatic data processing machines. The product 'Adopter' is not covered by the Notification issued for Schedule Entry C-56. Therefore, 'Adopters' fall under the residuary entry E-1 and are liable to tax at 13.5%.4. Prospective Effect of the Advance Ruling:The applicant requested prospective effect for the Advance Ruling if the tax rate was determined to be higher. The ruling referred to Section 55(9) of the MVAT Act, which allows for prospective effect in certain circumstances. However, it was determined that there was no ambiguity in the Notification, and the applicant failed to establish compelling circumstances to warrant prospective effect. The ruling emphasized that the discretionary power must be exercised judiciously and not to defeat the law or render its provisions meaningless. Therefore, the request for prospective effect was rejected.Conclusion:- 'Back Bag,' 'Tablet,' and 'Adopter' are covered by the residuary entry E-1 of the MVAT Act, 2002, and are liable to VAT at the rate of 13.5%.- The request for prospective effect to the Advance Ruling was rejected.