2008 (6) TMI 539 - HC - VAT and Sales Tax

Public Call Office (PCO) monitors for use in telephone booths is an electronic equipment and not a computer - Classifiable under Entry 55 and not under Entry 56 of First Schedule to Kerala General Sales Tax Act, 1963.

Summary

Issues Involved:
1. Classification of PCO Monitors under KGST Act.
2. Applicability of tax rate under Entry 55 or Entry 56 of the First Schedule to KGST Act.
3. Interpretation of the term "Computer" in the context of KGST Act.
4. Applicability of common parlance test and functionality test.

Detailed Analysis:

Issue 1: Classification of PCO Monitors under KGST Act
The primary issue revolves around whether PCO Monitors should be classified as computers under Entry 56 or as electronic equipment under Entry 55 of the First Schedule to the KGST Act. The Tribunal concluded that PCO Monitors are electronic equipment, not computers, and thus fall under Entry 55, attracting an 8% tax rate. The Tribunal's decision was based on the functionality and the limited tasks performed by PCO Monitors, distinguishing them from computers that can perform a wide range of tasks.

Issue 2: Applicability of tax rate under Entry 55 or Entry 56 of the First Schedule to KGST Act
The petitioner argued that PCO Monitors should be taxed at 4% under Entry 56, which covers "Computers of all descriptions." However, the Tribunal and the High Court upheld that PCO Monitors are electronic systems, taxable at 8% under Entry 55. The court emphasized that PCO Monitors, while performing computational tasks, are limited to telephony-related functions and cannot be programmed for other tasks like a computer.

Issue 3: Interpretation of the term "Computer" in the context of KGST Act
The term "Computer" is not defined in the KGST Act, necessitating the application of the common parlance test. The court referred to the dictionary definition of a computer and concluded that a computer is a programmable machine capable of performing a wide range of tasks. In contrast, PCO Monitors are designed for specific telephony-related tasks, thus not fitting the description of a computer.

Issue 4: Applicability of common parlance test and functionality test
The court applied the common parlance test, which considers how goods are understood in trade and by customers. It also applied the functionality test, which evaluates the tasks a device can perform. The court concluded that PCO Monitors, despite being microprocessor-based, perform limited functions related to telephony and do not have the versatility of a computer. Therefore, they cannot be classified as computers under Entry 56.

Conclusion:
The High Court upheld the Tribunal's decision that PCO Monitors are electronic equipment, not computers, and thus fall under Entry 55, attracting an 8% tax rate. The court dismissed the revision petitions, affirming the classification and tax rate determined by the assessing authority and the Tribunal. All pending interlocutory applications were also dismissed.