2009 (3) TMI 937 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of entry 83(60) of the Third Schedule to the KVAT Act regarding "Machinery for photography" and the classification of products sold by the appellant as photographic machinery.

In this judgment by the Kerala High Court, the appellant, a dealer in photographic equipments, appealed against an order issued by the Commissioner of Commercial Taxes under section 94 of the Kerala Value Added Tax Act, 2003. The appellant sought clarification on whether the "mini lab with it's accessories" sold by them falls under the category of "machinery for photography" as per entry 83(60) of the Third Schedule to the KVAT Act. The Commissioner had ruled that the products sold by the appellant did not qualify as photographic machinery as they were not used for taking photographs, leading to the appeal.

The court analyzed the product description provided by the appellant, which included a computer system known as "digital minilab frontier 550" used for developing, enlarging, and printing photographs from exposed films and digital chips. It was undisputed that the machinery processed photographs using photographic paper loaded in the machine, with the computer controlling exposure timing. The Commissioner's interpretation considered machinery for photography as solely equipment used for capturing images, such as a camera. However, the court disagreed, stating that machinery for photography should encompass all equipment involved in the process of taking photographs, including developers, printers, or integrated units for developing and printing photos.

The court acknowledged the appellant's role in supplying equipment for setting up color photo developing labs and concluded that the products sold by the appellant for developing and printing photographs indeed fell under the category of machinery for photography. Nevertheless, the court noted that the inclusion of a computer and monitor as part of the machinery supplied by the appellant did not qualify as photographic machinery under entry 83(60) of the KVAT Act.

As a result, the court allowed the appeal partially, modifying the Commissioner's order to exclude the computer and monitor from the assessment under entry 83(60) of the Third Schedule to the KVAT Act. The court directed the assessing officer to separate the turnover of the computer and monitor from the turnover of photographic equipment for appropriate assessment, especially after the deletion of the entry from the Third Schedule with effect from January 1, 2006.