2011 (8) TMI 1026 - HC - VAT and Sales Tax

Whether the mobile handset would fall under entry 1 of Schedule III or entry 49 of entry 53 of Schedule II of the 1976 Act so as to attract the levy of tax at the rate of one per cent under the Act? Held that - In view of the fact that a comparative modern device and equipment namely mobile handset was coming in vogue at the time when the M.P. Commercial Tax Act 1994 was enacted there is no difficulty in holding that general words used in entry 49 (wireless reception instruments and apparatus) would cover mobile handsets. In view of the preceding analysis we hold that mobile handsets are covered under entry 49 of Schedule II of the 1976 Act and excisable to levy for entry tax at the rate of one per cent. For the aforementioned reasons the contention raised by learned senior counsel that entries have to be given their common parlance meaning and therefore the mobile handsets cannot be treated as wireless reception instruments and apparatus does not deserve acceptance. Even assuming for the sake of argument that mobile handsets cannot be treated as wireless reception instruments and apparatus then also it would be covered under expression electronic and electrical goods under entry 53 of Schedule II of the Act and the rate of tax under both the entries is the same. Against assessee.

Summary

Issues:
Validity of circular dated January 27, 2007 and subsequent assessment orders challenging classification of mobile handsets for entry tax under the M.P. Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976.

Analysis:
The petitioner challenged the circular dated January 27, 2007, issued by the Commissioner, Commercial Tax, M.P., which classified mobile handsets as wireless reception instruments under entry 49 of Schedule II, subject to one percent tax. The petitioner, a dealer importing cellular phones, argued that mobile handsets should be categorized under entry 1 of Schedule III, exempt from entry tax. The assessing officer upheld the classification under entry 49, leading to a revision where the Additional Commissioner affirmed the decision.

The key issue was whether mobile handsets fall under entry 1 of Schedule III or entry 49 of Schedule II of the Act for tax purposes. The petitioner contended that mobile handsets are distinct from wireless reception instruments, requiring a SIM card for operation, and should be interpreted based on common parlance meaning. The respondent argued that entry 49 is broad enough to include mobile handsets or they could be classified under entry 53 as electronic goods, both attracting the same tax rate.

The court applied principles of statutory interpretation, noting that general words in statutes encompass new inventions and technological advancements. Citing precedents, the court held that modern devices like mobile handsets should be covered by entry 49 as wireless reception instruments, considering their functionality and evolution in the market. The court referenced a Supreme Court case regarding wireless services to support the classification of mobile handsets under entry 49.

Regarding the circular's validity, the court analyzed Section 70 of the M.P. VAT Act, 2002, emphasizing that the circular was not issued to resolve a tax rate dispute, as the rates under entry 49 and 53 were identical. Even if mobile handsets were not considered wireless reception instruments, they would still fall under electronic goods in entry 53, subject to the same tax rate. Consequently, the court dismissed the writ petition, finding no merit in the petitioner's arguments and ruling against them, with no costs imposed.