TaxTMI 
TaxTMI 
2005 (1) TMI 652
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....led an application before the Advance Ruling Authority in form 54 as provided under rule 27-E(1) of the Karnataka Sales Tax Rules, 1957 ("the rules", for short), seeking clarification on the rate of tax applicable under the Act on sale of Automated Teller Machines. 2. In response to the notice of hearing issued by the Advance Ruling Authority, Sri Mohan Mudkavi, learned Chartered Accountant along with the Vice-President of the Company had appeared before the Authority and represented the facts and also had produced the literature and description of the ATMs. The basic submission that was made was, ATM is a combination of a computer and it runs on a processor and the purpose for which it is put to use, is to dispense with cash and therefore, had requested the Authority to classify ATMs as goods falling under entry No. 20 of Part "C" of the Second Schedule to the Act and not electronic goods falling under entry No. 4 of Part "E" of the Second Schedule to the Act. 3. The Advance Ruling Authority (majority view) after referring to the dictionary meaning of the word "Automated Teller Machines" and the product literature produced by the appellant-company, by their order No. CLR.CR.....
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....h as RAM, drives, key board, monitor, mouse, etc., and also software. In common parlance or popular sense, ATM is a Teller Machine (that is, which disburses cash, issues statement of account, etc.) which is automated with the aid of computer, computer peripherals, software and other devices. Technically as contended by the dealer it can be held to be a computer terminal. However, going by the principles of common parlance as applicable to interpretation of entries under the KST Act, it cannot be classified as computer terminal for the purpose of the KST Act when it is not specifically included in the entry relating to computer terminals. The honourable Supreme Court in the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. G.S. Pai & Co. reported in [1980] 45 STC 58 has held that 'while interpreting entries in sales tax legislation, the words used in the entry must be construed not in any technical sense nor from the scientific point of view but as understood in common parlance'. Similar view has been taken by the honourable Supreme Court and High Courts in many other cases." 7. Aggrieved by the aforesaid order passed by the Commission....
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.... Five per cent (iii) Computer consumables, namely- stationery, floppy disks, CD ROMs, DAT tapes, printer ribbons, printer cartridges and cartridge tapes. 1-4-1998 to 31-12-1999 1-1-2000 to 31-3-2002 1-4-2002 to 31-5-2003 From 1-6-2003 Four per cent Eight per cent Four per cent Five per cent (iv) Computer cleaning kit 1-4-1999 to 31-12-1999 1-1-2000 to 31-3-2002 1-4-2002 to 31-5-2003 From 1-6-2003 Four per cent Eight per cent Four per cent Five per cent (v) Computer software 1-4-2001 to 31-5-2003 From 1-6-2003 Four per cent Five per cent". 11. Entry No. 4 of Part "E" of the Second Schedule to the Act as amended by Karnataka Act 5 of 1996 with effect from April 1, 1996 reads as under: "Entry No. 4: Electronic goods and parts and accessories thereof other than those falling under any other entry of this Schedule. (The basic rate of tax for the relevant assessment year was 12 per cent)." 12. The primary question that requires to be considered and decided in this appeal is the rate of tax applicable on the sale of "Automated Teller Machines" under the KST Act, 1957? Alternatively, whethe....
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....ome times on the side of the road. They are used by bank's customers to make cash withdrawals and check their account balances at any time without the need of human teller. Many ATMs also allow people to deposit cash or cheques, transfer money between their bank accounts or even buy postage stamps. ATM's are known by a wide variety of names. Some of which are more common in certain countries than others. Examples include Automated Teller Machine, Automated Banking Machine, Bank Box, Cash Box, Cash dispenser, Cash Point, Hole in the Wall, Mac Machine Mini Bank, Mac Machine, Robotic Teller, Tele Banco, Ugly Teller, etc. 17. The book on computers, concepts and applications for users by Robert C. Nikenson has explained the configuration and its uses in the day-to-day affairs by banks, stores, etc. According to the learned author, an ATM is not a computer by itself. It is connected to a computer that performs the tasks requested by the person using the ATM. The computer is connected electronically to many ATMs that may be located some distance from the computer. 18. In so far as its use is concerned, the learned author says that when you use an ATM, you are using a compute....
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....nners to read the bar codes on packages and automatic teller machines in banks. 22. Having noticed what is ATM and its use, and computer terminals, we intend to refer to the observations made by the apex Court and the manner in which Schedule to the entries under the statute requires to be interpreted in fiscal laws, since the revising authority has held while accepting that the ATMs are technically can be held to be "computer terminal", however, by common parlance, it cannot be classified as computer terminal for the purpose of the Act. The Supreme Court in the case of Tata Consultancy Services v. State of Andhra Pradesh [2004] 137 STC 620; AIR 2004 SCW 6583 has observed (para 61 in AIR SCW; para 63 in STC): "61. We, in this case, are not concerned with the technical meaning of computer and computer programme as in a fiscal statute plain meaning rule is applied. [See Partington v. Attorney-General (1869) LR 4 HL 100, page 122]. 62. In interpreting an expression used in a legal sense, the courts are required to ascertain the precise connotation which it possesses in law. 63. It is furthermore trite that a court should not be overzealous in searc....
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....horities. In aid of his submissions, the learned Senior Counsel relies on the observations made by the Gujarat High Court in the case of Commissioner of Income-tax v. Arvind Jewellers [2003] 259 ITR 502 and the observations made by the Punjab and Haryana High Court in the case of Commissioner of Income-tax v. Max India Ltd. [2004] 268 ITR 128. 25. Sri Anand, learned Government Advocate, would contend that ATMs are electronic goods, may be operated with the assistance of computer technology and in the common parlance theory, they cannot be construed as computers or their terminals. The learned Government Advocate has produced before us voluminous literature on computers, only to demonstrate that ATMs by no stretch of imagination could be construed either as computers or as computer terminals and the Advance Ruling Authority was not justified in answering the clarification sought for by the appellant, that, ATMs are "computer terminals" and they can be fit into one of the subentries under entry No. 20, Part "C" of the Second Schedule to the Act. In his view, the revisional authority was justified in concluding that ATMs are electronic goods. 26. Now the question that wou....
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.... things and objects and contains their names and descriptions. The expressions in the Schedule have no evocative function. They can neither enlarge nor cut down the meanings of articles or things specifically named in the list. Therefore, the enlarged definition of "computers" in the Information Technology Act cannot be made use of for interpreting an entry under fiscal legislation. 30. Entry 20 of Part "C" of the Second Schedule to the Act firstly speaks of computers of all kinds, namely, main frame, mini, personal, micro computers, and the like and their parts. The question of law raised by the appellant before us is whether ATM is a computer and as such squarely falls under entry No. 20(i), Part "C" of the Second Schedule to the Act, though the Advance Ruling Authority on the request made by the appellant for clarification has opined, that ATMs are "terminals" and would fall under entry No. 20(ii)(b) of Part "C" of the Second Schedule to the Act. Sri K.P. Kumar, learned Senior Counsel, would submit that ATMs are "computers" in view of the words like "namely" and "and the like" in the entry immediately after naming the commodity, i.e., computer of all kinds. In aid of his subm....
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....he items included under that entry. In the present case, since ATM is not a computer by itself, it would not fall under entry No. 20(i) of Part "C" of the Second Schedule to the Act. 32. The Advance Ruling Authority (majority view) has classified ATMs as "terminals" falling under entry No. 20(ii)(b) of Part "C" of the Second Schedule to the Act, since ATM machine is also understood as computer terminal in the commercial world. This view of the Advance Ruling Authority was not strongly supported by the learned Senior Counsel, and a passing remark was made, that if it does not fall under entry No. 20(i) of Part "C" of the Second Schedule to the Act, it can be brought under "terminal" as envisaged under entry No. 20(ii)(b) of Part "C" of the Second Schedule to the Act. 33. Entry 20(ii) of Part "C" of the Second Schedule to the Act speaks of "peripherals". The entry is as under: (ii) Peripherals, that is to say,- (a) All kinds of printers and their parts, namely, Dot matrix, ink jet, laser, line, line matrix and the like. (b) Terminals, scanners, multi-media kits, plotters, modem and their parts. Immediately after the expression "peripherals", the Le....
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....try of the Second Schedule to the Act. 35. The word "electronic" has been defined by Mcgraw-Hill in Dictionary of Scientific and Technical Terms (Second Edition), as pertaining to electron devices or to circuits or systems utilising electron devices, including electron tubes, magnetic amplifiers, transistors and other devices that do the work of electron tubes. The word "electron" has been defined as a stable elementary particle with an indivisible charge of negative electricity, found in all atoms and acting as a carrier of electricity in solids. 36. With this background, let us come back to the findings and the conclusions reached by the revisional authority to hold that ATMs cannot be considered as "computer terminals" but can be considered only as "electronic goods". The revisional authority had issued a notice dated September 2, 2003 under section 22-A of the Act, proposing to revise the order passed by the Advance Ruling Authority and further proposing to classify ATMs as electronic goods, and liable to tax at a higher rate, on the ground that the Advance Ruling Authority has erroneously classified ATM as computer and the same has caused prejudice to the interest....
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.... specifically included in the entry relating to computer terminals. 38. The Supreme Court in several of its judgments has laid down the rule of interpretation for articles of daily use and commonly traded items, which are mentioned in the taxing statutes. The rule is that if there is no definition in the Statute, we should follow for tax purposes the definition not of the dictionaries or of technical books but of commercial parlance, i.e., the popular meaning. The intention of Legislature is, that in taxing statutes, when terms are used of common usage, it is the common man's understanding of the articles which prevails over the technical man's concept. The place of scientific definition based on technical books, technical literature, dictionaries, etc., is relevant. When the goods are technical, there is no market and so, no market parlance. At the same time, if the goods are not technical, the definition in the market parlance would apply. It only means, that if the goods are technical, common parlance or commercial parlance would not apply. Therefore, in our opinion, the revisional authority is firstly justified in observing that though technically goods in question m....