TaxTMI 
TaxTMI 
2023 (6) TMI 57
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.... IN STR NOs. 182-187/2017 "Whether the LAN Connection Cable (CAT-5, CAT-6) is taxable under S. No. 3 or 24 of Part A of Entry No. 65 of Schedule-IV or at General Rate as per Schedule-V appended to the Rajasthan Value Added Tax Act, 2003 (for short "RVAT Act")?" In STRs 75-80/2018, STRs 4-6/2019, STRs 9- 10/2019, and STR 30/2019: "(i) Whether the ld. Tax Board was correct in law in holding that the networking products such as Routers, Switches, Hubs, LAN Cards and LAN cables etc. sold by the petitioner are not computer peripherals hence was taxable @ 12.5% / 14% and not @ 4% / 5%. (ii) Whether the ld. Tax Board was correct in law while dismissing the appeal in restricting its findings/reasons only to the extent of CAT-5 and CAT-6 cables and not giving any findings/reasons whatsoever in respect of networking products such as Routers, Switches, Hubs, LAN Cards sold by the petitioner?" 2. Since the common question of classification of 'CAT-5 / CAT-6 cable' is involved in all these STRs, with the consent of the parties, all these STRs were heard together. 3. Learned counsels for the petitioner-assessee submits that the petitioner/companies were eng....
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....judicating authorities have given an extremely restrictive meaning to the term 'computer peripherals' to only include input and output devices, which is contrary to the judgments of this Court in the case of M/s Kores (India) Limited & Ors. vs. The Assistant Commissioner (S.B. STR No. 24/2015 decided on 19.02.2016), M/s Sharp Business Systems (India) Ltd. vs. The Assistant Commissioner (S.B. STR No. 185/2016 decided on 26.05.2017); judgments of Madras High Court in the case of State of Tamil Nadu vs. CMC Limited reported in [(2014) 75 VST 413 (Mad.)], Canon India Pvt. Ltd. vs. State of Tamil Nadu reported in [(2015) 80 VST 483 (Mad.)] and judgment of Delhi High Court in the case of Ricoh India Limited vs. Commissioner reported in [(2012) 52 VST 49 (Delhi)]. 3.3) The third submission of learned counsels for the petitioner-assessee is that it is an established cannon of classification that a specific entry would override a general entry. Reliance in this regard is placed on Apex Court judgments of Commissioner of Commercial Tax, U.P. vs. A.R. Thermosets (Pvt.) Ltd. reported in (2016) 16 SCC 122, State of Maharashtra vs. Bradma of India Ltd. reported in [(2005) 140 STC 17 (SC)], Hi....
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....der to see what is the proper interpretation to be put upon the earlier legislation when the earlier legislation is found to be obscure or ambiguous or capable of more than one interpretation. Reliance in this regard is placed on Apex Court judgments of Pappu Sweets and Biscuits vs. Commissioner of Trade Tax U.P Lucknow reported in [(1998) 111 STC 425 (SC)], and V.M. Salgaocar and Bros. Pvt. Ltd. vs. Commissioner of Income Tax reported in (2000) 5 SCC 373. 3.6) Learned counsel for the petitioner-assessee have also relied upon the IT & ITES Policy of 2007, introduced by the State of Rajasthan, wherein as per para 2.11.2, VAT on all IT products was rationalised at the minimum rate of 4%. Similarly, learned counsels for the petitioner-assessee have also relied on Chief Minister's finance speech made while introducing State Budget for the year 2013-14. The relevant part of the budget speech is reproduced as under: Relying upon the above, learned counsels for the petitionerassessee contends that the intention of the Government was always to impose VAT @ 4% / 5%. It is further contended that the Government acknowledged the difficulties faced by different assessee who were dealing w....
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....icted the definition of computer peripherals to those hardware apparatus whose usage is confined to operation of computer only. Learned counsel for the revenue further submits that the judgments relied upon by the petitioner-assessee (supra), on the definition of computer peripheral, has been rightly distinguished by the learned Tax Board as the article under consideration in those cases were some sort of hardware equipment, whereas the present case pertains to classification of networking cables which can also be used independently of the computer for various other purposes. 5. Heard the arguments advanced by both the sides, scanned the record of the STRs and considered the judgments cited at Bar. 6. The lis in question pertains to classification of CAT-5 and/or CAT-6 cables for the purpose of determining the applicable rate of tax as per the RVAT Act. According to the petitioner assessee, the CAT-5 / CAT-6 cable would fall under Entry 3 or Entry 24 read with Entry 28 of Part-A of Schedule IV to the RVAT Act, whereas as per Revenue, the CAT-5 / CAT-6 cable would fall under the residuary entry of Schedule V to the RVAT Act. The relevant entries, as amended from time to time, ....
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....ed in the residuary entry which attracted tax at the rate of 12.5% / 14%. The learned Tax Board upheld the levy of tax and interest but set aside the penalty. As per settled position of law, a specific entry would always trump a general entry and the burden would always be on the Revenue to prove that the goods in question would have to fall in general entry as opposed to the specific entry. From the perusal of the order(s) of the Tax Board, it appears that the decision of the learned Tax Board was based on the following factors: a) that the networking cables are not integral/essential to the functioning of a computer; b) that networking cables are not hardware equipment or apparatuses, which are generally considered as computer peripherals/computer accessories; c) that the networking cables are not exclusively used with computer as they have different applications independent of computers. 8. The word 'computer system' and 'peripheral' is not defined anywhere in the RVAT Act. At this juncture, it would be apt to consider the way in which it has been interpreted by different Courts. In the case of M/s Kores (India) Limited (supra), Coordinate Bench of ....
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.... in the contention raised by the learned counsels for the Revenue, that the word peripherals has to be construed narrowly to limit and include only accessories like, mouse, webcam or keyboard, as computer peripherals, to be taxed @ 4% under the said entry, and not to include therein the Multi Functional Devices" Further, in the case of M/s Sharp Business (India) Ltd. (supra), Co-ordinate Bench of this Court observed as under:- "15. On perusal of the above and taking into consideration the entry 7, in my view, the "FM" would certainly can be said to be covered under entry 7 of Schedule-IV reproduced hereinbefore. It is a case where "FM" as noticed hereinbefore becomes operative only when there is a telephone line/connection and unless and until there is a telephone line/connection, "FM" does not operate. Therefore, it has been held to be falling in the entry 7 of Schedule-IV of the RVAT Act, and I concur with the reasoning of this court (supra). Merely because "FM" specifically has not been included in entry 7, is no reason to infer that it will fall in Schedule-V. Once the claim of the assessee is that it fall under entry 7 Schedule- IV, then the revenue has to bring ma....
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.... as before the first appellate authority that the image runner is predominantly a multi-function network printer and it performs other functions like scanning, fax, documents storage and copying. Besides the facility of network printing, the add on features of scanning, fax, photocopying make the goods a multi-function device. 10. The fact that the goods in question work in conjunction with a computer, personal, mini, mainframes and laptops of analog and digital varieties is not in dispute. It is also not in dispute that this equipment is an input and output device. The printer and the scanner of different kinds fall within the definition of "peripheral". If it is a standalone photocopier machine or fax machine, then the Department would have a case and counter. Photocopying is not the primary function of the equipment in question, as it works in conjunction with the computer. The distinction is evident from the reading of entry 18(i) of Part B of Schedule I and entry 14(iv) of Part D of Schedule I of the TNGST Act. Peripherals in relation to computer personal, mini, mainframes and laptops of analog and digital varieties would fall under entry 18(i) of Part B of Schedule I....
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....o expand the capabilities of computer system. 10. The goods in question, i.e. CAT-5/CAT-6 cable, are admittedly used to connect the computer to a network as their primary function is high speed data transmission. They are essential for wired connection of a computer to a local network or to the Internet. The Revenue contends to keep the definition of 'peripheral' limited to those items that are essential to keeping the computer operational, but the Revenue has failed to consider the meaning of the word 'operational' in its different contexts. For many end users, in this day and age, it is a necessity to be able to connect their computer to a network so as to make their computer 'operational' for their usage. The connection to external network may be to local area network (LAN) or wide area network (WAN) and it may be wired or wireless. But even if it is wireless, it would have to be with aid of another device. Be that as it may, merely because the connection can also be established wirelessly would not preclude the networking cables from being included in the broad definition of 'peripheral' as they are also used with computer system to connect the computer to a network. 11. ....
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....arned counsels for the petitioner- assessee, it is a settled position of law that subsequent legislation can be looked at in order to see what is the proper interpretation to be put upon the earlier legislation when the earlier legislation is found to be obscure or ambiguous. A bare perusal of the subsequent amendment would reveal that the State Government had itself considered networking items and networking cables within the specific entries numbering 3 and 24 of Part-A of Schedule IV to the RVAT Act. A bare perusal of the text of the Hon'ble Chief Minister's speech, as reproduced above, would also reveal that the amendment was brought to remove ambiguity/difficulty in taxation and was thus an amendment in the nature of a clarification and thus having a beneficial purpose and hence would also have retrospective application as well. Reliance in this regard can be placed on Apex Court judgment of Suchitra Components Ltd. (supra) and Kerala State Industrial Development Corporation Ltd. (supra), as cited by learned counsels for the petitioner-assessee. 13.4) In the case of petitioner/Rashi Peripheral Pvt. Ltd., the Tax Board has imposed additional differential tax and interest on ....