TaxTMI 
TaxTMI 
2018 (12) TMI 1162
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....g substantial questions of law:- "(a) Whether multi function printers are classifiable under Entry 84.71 of the Notification No. VAT-1505/CR116/Taxation-1 dated 1st April, 2005 (issued under Entry C56 of the Maharashtra Value Added Tax Act, 2002) as "input units" or "output units"? (b) Whether multi function printers are classifiable under Entry 84.71 of the Notification No. VAT-1505/CR116/Taxation-1 dated 1st April, 2005 (issued under Entry C56 of the Maharashtra Value Added Tax Act, 2002) as "automatic data processing machine" or units thereof or as other units of automatic data processing machine? (c) Whether multi function printers are classifiable under Entry 84.71 of the Notification No. VAT-1505/CR116/Taxation-1 dated 1st April, 2005 (issued under Entry C56 of the Maharashtra Value Added Tax Act, 2002) as "laser jet printers? (e) Whether the parts, spares, drums etc. of Multi function printers are classifiable under Entry 84.73 of the Notification No. VAT-1505/CR-116/Taxation-1 dated 1st April, 2005 (issued under Entry C-56 of the Maharashtra Value Added Tax Act, 2002)?" 4. At the outset, the appellant proposes six questions as substantial questions of law, bu....
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....n by the appellant from the customers at the time of leasing of multi-functional printers would be includible in the sale price for the purpose of discharging the liability to pay MVAT. A copy of this order is at Exhibit 'E' to the petition. 11. Being aggrieved by the order dated 12th December, 2011, the appellant moved an appeal before the MSTT being VAT Appeal No.30 of 2012. The MSTT, by its order dated 26th September, 2017 upheld the DDQ Order dated 12th December, 2011. The appellant thereafter filed a Rectification Application No.77 of 2012, which was dismissed by the MSTT on 9th January, 2018. 12. The claim of the appellant is that the products in question are essentially printers. They are capable of accepting and processing data in a wide range of operating systems and application programs of receiving data input from multiple sources and of printing data output on a self-contained printing unit. The other functions are that multi-functional printers incorporate significant data processing features (such as an internet web page from which the printers can be programmed and operated from remote locations over a computer network), electronic mail (e-mail) management serv....
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....e above functions involve printing except in the case of scanning. In the case of copying and faxing the output, which is the document received as fax or the document which is to be copied, is printed using the same cartridge which is used for printing a document from the computer. Therefore, if the printer cartridge is removed then only scanning alone can be done. 13. In conclusion, a multi-functional printer is sold and marketed as a printer with additional capacities such as copying, fax and scanning. Any person, while making a purchase of this article, understands it to be a printer with some incidental and additional capability. In commercial parlance, the understanding is that a printer with supplementary capabilities and functions has been sold. The buyer, instead of requiring to invest in four separate machines, viz printer, scanner, fax and copier, can obtain all these capabilities by purchasing a multi-functional printer. 14. The essential argument of the appellant has been that such printers are classifiable under Entry 84.71 of the Notification dated 1st April, 2005 as input unit or output unit. It is submitted that Entry A.2.1 of the Schedule to the MVAT Act enum....
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.... automatic data processing units. 17. It is submitted that the appellant places reliance on Note 1 of the IT Products Notification to interpret the meaning of the above phrases in the light of the explanatory notes issued by the Customs Co-operation Council, Brussels. 18. In any case, the above is supported by the decision of Hon'ble Supreme Court in the case of Reckitt Benckiser (India) Limited vs. CCT (2008 15 VST 10(SC) , wherein it has been held that when the entries under the VAT Schedule are aligned to Customs Tariff, which, in turn, is aligned with HSN, then, reference can be made to HSN for the purposes of classification under the VAT Schedule. 19. It is strongly emphasized that the appellant is not placing reliance on Note 2 of the IT products notification to contend that the classification adopted by the appellant under Customs and Central Excise would be applicable to VAT as well. This is not the contention of the appellant. This was the very error in the impugned order of the tribunal. Rather the appellant is merely relying on Note 1 to refer and place reliance on the terms defined in the HSN Explanatory Notes. 20. Finally, Mr. Sridharan contends that as wit....
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....than strong case vide Grounds A, B & C of the appeal that the multifunctional printers sold by the appellant are classifiable under Entry 84.71 of the IT products notification. Given so, the benefit of interpretation must be given to the appellant. 26. Mr. Sridharan also submits that the refundable security received by the appellants from the customers in lease transactions cannot be part of the sales price for the purpose of taxation. In that regard, it is submitted that it is the case of the Department that the refundable security collected by the appellant from its customers, when it leases out printers to its customers, is includible in the sale price for the purposes of discharging VAT on the said lease on account of Explanation III to Section 2(25) of the MVAT Act. 27. It is submitted that on an interpretation of Explanation III, the refundable security collected by the appellant would be outside its scope. The refundable security collected by the appellant is in the nature of an indemnity in case any damage or theft or other harm is caused to the leased printer by the customer. In such a case, the security is forfeited to compensate for the damage incurred by the appel....
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.... the product in question. It is, therefore, submitted that the appeal be dismissed. 32. It is argued that in the appellant's own case, the High Court at Delhi in a decision in Sales Tax Appeal No. 6 of 2010, decided on 4th May, 2012 and construing a similar entry, has held that the multi-functional machines/printers will not fall under a specific sub-heading, but would fall under the subject heading, namely, 84.71 i.e. "others". It is in these circumstances that it is urged that this appeal be dismissed. 33. At the outset, we have clarified that questions (d) and (f) at page 8 of the paper book are not pressed. They are kept open for a decision in an appropriate case. It is clear from the above narrated facts and circumstances of the case that the question before the tribunal was whether the multi-functional printers would attract the rate of tax at 12.5%. In that regard, it would be relevant to take note of the application under section 56 of the MVAT Act, made by the appellant before the Commissioner of Sales Tax, Maharashtra. It was urged that this company is engaged in the business of sales and maintenance of digital products having computer interface and connectivity. It....
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....s as under:- "C-56 - IT products as maybe notified by the State Government from time to time." 36. The notification dated 1st April, 2005, copy of which is at pages 108 to 111 of the paper book, referable to this Entry C-56, reads as under:- NOTIFICATION MAHARASHTRA VALUE ADDED TAX ACT, 2002 No.VAT-1505/CR-116/Taxation-1. - In exercise of the powers conferred by entry 56 of the Schedule 'C' appended to the Maharashtra Value Added Tax Act, 2002 (MAH.IX of 2005), the Government of Maharashtra hereby specifies the following goods, more particularly described in the Schedule appended hereto, to be the Information Technology products for the purposes of the said entry, namely : Schedule Information Technology products covered from time to time, under the headings, or sub-headings as the case may be, of the Central Excise Tariff Act, 1985 (5 of 1986) Serial No. Central Excise Tariff Heading Description (1) (2) (3) 1 84.69 Automatic Typewriter and word processing machines, Word Processing machines. 2 84.70 Electronic calculator capable of operations without an external source of electrical power and pocket size data recording, repro....
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....egraphy, modems, multiplexes / statistical multiplexes routers, X-25 pads, modems, High Bit Rate digital Subscriber Line System (HDSL) Digital loop carrier system (DLS), synchronous digital hierarchy (SDH), ISDN Terminals Subscriber End Equipment, ISDN Terminal Adapters and parts of the equipments covered by this heading. 10 85.18 Microphones, multimedia speakers, headphones, earphones and combined microphones/speaker sets and their parts. 11 85.20 Telephone answering machines. 12 85.22 Parts of telephone answering machines. 13 85.23 Magnetic tape for recording sound, audio magnetic tape, video magnetic tape, magnetic disc, hard disc pack, floppy disc or diskettes, rewritable magneto optical disc including mini disc, CD recordable, cards incorporating a magnetic stripe, mattresses for the production of records, prepared record blanks, cartridge tape, blank video cassettes, 3/4" U-matic and 1" video cassettes/tape 1/2" video cassettes suitable to work with betacam / betacam SP/M-II S-VHS/Digital S type VCR, 8mm video tapes / cassettes in finished form, 6.35 mm (1/4") digital video cassettes and DV tapes suitable to work with digital video camera, ....
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....ption is different in any manner from the corresponding description in the Central Excise Tariff Act, 1985, then only those commodities described as aforesaid will be covered by the scope of this notification and other commodities though covered by the corresponding description in the Central Excise Tariff will not be covered by the scope of this notification. Note.-(3) Subject to Note 2, for the purpose of any entry contained in this notification, where the description against any heading or, as the case may be, sub-heading, matches fully with the corresponding description in the Central Excise Tariff, then all the commodities covered for the purposes of the said tariff under that heading or sub-heading will be covered by the scope of this notification. Note.-(4) Where the description against any heading or subheading is shown as "other", then the interpretation as provided in Note 2 shall apply. By order and in the name of the Governor of Maharashtra, SUDHAKAR JAMODE, Deputy Secretary to Government. 37. A bare perusal of this notification would reveal that the Government of Maharashtra specified the goods in the Schedule to be IT products for the purpose of the ....
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.... of the IT products notification. The tribunal came to the conclusion that the notification dated 1st April, 2005 does not enlist the products falling under the heading "others" and that is how the appellant's product is not covered under Entry 56 of Schedule 'C' of the MVAT Act. It may be a IT product, but not notified for the purpose of reduced rate of tax. 38. The tribunal placed very strong reliance on the judgment of the Delhi High Court in the appellant's own case. There, the argument was that an application for advance ruling was made before the Commissioner under section 84 of the Delhi Value Added Tax Act, 2004. The tribunal upheld the finding of the Commissioner that multi-functional printers/copiers/scanners having HSN Code No. 8471.60.29 and sales of spares and consumables of the above products having HSN Code No.8473.30.99 during the period 1st April, 2005 to 31st March, 2007, are taxable under the residuary head and, therefore, attract VAT at 12.5% and are not falling under Entry 41A of the Third Schedule to the Act and therefore, are not taxable at 4%. Paragraphs 2 to 8 of the judgment of the Delhi High Court read as under:- 2 The substantial question of law, o....
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....classified goods that attract tax at 12.5 per cent. In case the goods in question are covered by entry 41A of the Third Schedule to the VAT Act, the tax payable is at four per cent, otherwise, the tax is payable at 12.5 per cent. 6 During the relevant period, entry 41A of the Third Schedule has undergone three amendments. During the period April 1, 2005 to August 7, 2005, entries 41 and 41A were as under: Entry No. Description 41 IT products including computers, telephone and parts thereof, teleprinter and wireless equipment and parts thereof. 41A IT products notified by the Ministry of IT as specified below : (i to xxii) ... (xxiii) computer systems and peripherals, electronic diaries...." 7 During the period August 8, 2005 to November 29, 2005, entry Nos.41 and 41A were as under: Entry No. Description 41 Computers, telephone and parts thereof, telephone and wireless equipments and parts thereof..... 41A IT products notified by the Ministry of IT as specified below: (i to xxii)..... (xxiii) Computer systems and peripherals, electronic diaries. ...." 8 Entries 41 and 41A underwent substantial changes with effect from Novem....
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.... this notification and other commodities though covered by the corresponding description in the Central excise tariff will not be covered by the scope of this notification. Note.-(3) Subject to Note (2), for the purpose of any entry contained in this notification, where the description against any heading or, as the case may be, sub-heading, matches fully with the corresponding description in the Central Excise Tariff, then all the commodities covered for the purpose of the said tariff under that heading or subheading will be covered by the scope of this notification. Note.-(4) Where the description against any heading or sub-heading is shown as 'other', then, the interpretation as provided in Note 2 shall apply." 39. The Delhi High Court was of the view that the multifunctional machines in the case of Xerox India Limited vs. Commissioner of Customs, Mumbai (2010) 14 SCC 430, which were principally performing the function of a printer, should be classified under the Head 84.71.60 and they could not be classified under the residuary heading 84.79.89 for the purpose of taxation under the Customs Act, 1962. The judgment of the Hon'ble Supreme Court in the case of Xerox India ....
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....made. This becomes clear when we read Note (3). The said note stipulates that when description of any heading or sub-heading in the Act matches with the corresponding description in the Central Excise Tariff Act, 1985, then, all commodities covered for the purpose of the said tariff under the Central Excise Tariff Act, 1985, would be covered under the scope of the notification. Note (3) also clarifies that the term "notification" is not with reference to the four notes, but the notification issued under the VAT Act. The reason is obvious that any gods not covered by the notification would fall outside the scope of Schedule III and would not be taxable at 4-5 per cent, but at 12.5 per cent. The aforesaid interpretation, gains strength and merits acceptance when we refer and interpret Note (4). Note (4) states that if the commodity of goods falls under the heading or sub-heading "other" in the Central Excise Tariff Act, 1985, then interpretation stipulated in Note (2) would apply. In other words, the goods would be covered by the residuary provision and taxable accordingly. The word "heading" in Note (4) is superfluous as the word "other" never appears in the heading, but can be a su....
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....Note 4 to the notification under the Delhi Value Added Tax Act, 2004 with reference to Entry 41A specifically states that it would not apply in case the goods falling under sub-heading "others" in the Central Excise Tariff Act, 1985. Hence, the other issue was not required to be considered. 41. In our case, the tribunal followed the Delhi High Court judgment and dismissed the VAT Appeal. A similar note, as is referred in the Delhi High Court judgment, is also found in the notification dated 1st April, 2005 and it says that where the description against any heading or sub-heading is shown as "other", then the interpretation as provided in Note 2 shall apply. Thus, when any commodities are described in heading or as the case may be sub-heading and the aforesaid description is different in any manner from the corresponding description in the Central Excise Tariff Act, 1985, then only those commodities described as aforesaid will be covered by the scope of this notification and other commodities though covered by the corresponding description in the Central Excise Tariff will not be covered by the scope of this notification. 42. To our mind, this interpretation of the tribunal be....
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....reement with Mr.Sridharan and accepting his argument would mean we ignore and brush aside the notification dated 1st April, 2005. It may be that multifunctional printers are classifiable under Entry 84.71 of the IT products notification as automatic data processing machine or units thereof or as other units of automatic data processing units, but insofar as the subject notification is concerned, they have not been included. It may be that the multi-functional printers of the appellant cannot be operated independently, but are designed to operate in conjunction with an automatic data processing machine such as a computer. It may be that it is connected to central processing unit of the automatic data processing machine via a cable to accept data from the same and deliver data in a form usable by the system. Once the controversy is to be decided on the touchstone of the MVAT Act and the Schedule Entry thereto and the notification referred therein, then, function and usage of the multi-functional printers can hardly be of any assistance. 44. The judgments relied upon by Mr.Sridharan are clearly distinguishable. In the case of Xerox India Limited (supra), the issue raised before the....