2010 (7) TMI 925 - HC - VAT and Sales Tax

Whether the smart card based automatic ticket vending machine ATVM purchased and sold by the petitioner is classifiable under computer systems and peripherals or any of the sub-entries falling under entry 69(22) of the Third Schedule to the Kerala Value Added Tax Act 2003 or whether it falls under the description vending machine falling under entry 32(16) of Notification S.R.O. No. 82 of 2006 Held that - We feel classification of same goods has to be uniform both at the hands of the manufacturer as well as at the hands of dealers to ensure smooth levy of tax under the VAT Scheme which entitles purchasing dealers for input-tax credit. If the assessing officers take divergent views clarification on rate of tax by the Commissioner under section 94 of the KVAT Act is the only solution and clarification in this case is not only desirable but is required because manufacturer is called upon to pay tax at four per cent by the very same Department and at the same time dealer is directed to pay tax at 12.5 per cent. Of course in this case it is stated that the manufacturer and the dealer are related persons. However in our view classification of the same goods under the KVAT Act has to be uniform at the hands of all dealers.

Summary

Issues: Classification of smart card based automatic ticket vending machine under Kerala Value Added Tax Act, 2003.

Analysis:
The primary issue in this judgment revolves around the classification of a smart card based automatic ticket vending machine (ATVM) under the Kerala Value Added Tax Act, 2003. The court deliberated on whether the ATVM should be classified under computer systems and peripherals, as contended by the petitioner, or as a vending machine, as held by the assessing officer and confirmed by the Tribunal. The petitioner argued that the machine is a computer system involved in data processing and ticket printing, citing the liberal wording of entry 69(22) covering all computer systems and peripherals. However, the Government Pleader asserted that the machine merely serves as a printer generating tickets, not involved in data processing like a computer system. The court considered the manufacturer's clearance of the item as a computer system under the Excise Department and the Kerala Value Added Tax Act, emphasizing the need for uniform classification to ensure smooth tax levy and input-tax credit for purchasing dealers.

The court highlighted the importance of uniform classification of goods under the Kerala Value Added Tax Act to prevent discrepancies in tax assessment, especially in cases involving related parties like the manufacturer and dealer in this instance. The judgment emphasized the necessity for clarification from the Commissioner under section 94 of the KVAT Act to resolve conflicting tax rates applied to the same goods by different authorities. The court allowed the revision petition, setting aside the Tribunal's orders and directing the Commissioner to issue clarification after hearing both the petitioner and the manufacturer. The judgment mandated the Commissioner to verify assessment records of both parties and provide a clear classification within two months, ensuring fresh assessment based on the clarified rate of tax within one month from the date of clarification.

In conclusion, the judgment focused on resolving the classification dispute surrounding the smart card based automatic ticket vending machine under the Kerala Value Added Tax Act, emphasizing the need for uniformity in classification to streamline tax assessment processes and uphold fairness in tax levies across different parties involved in the sale of the same goods.