2018 (1) TMI 1252 - HC - VAT and Sales Tax

Classification of entries - computer consumables including DAT tapes, print ribbon, printer cartridge taps and computer cleaning ink - whether eligible for exemption from resale tax, as per G.O.Ms.No.82 dated 01.07.2002? - Held that - issue squarely covered by the decision in the case of Canon India Private Limited, New Delhi Vs. The State of Tamil Nadu Through Secretory, Ministry of Education and Commercial Taxes, Commercial Taxes Department, Secretariat, Chennai and others 2013 (8) TMI 569 - MADRAS HIGH COURT , where it was held that ink jet cartridges and toner cartridges are parts and accessories of printer which is a peripheral to a computer system and would be covered under Entry Nos.22 & 24 of serial No.68, Part B of First Schedule to the Tamil Nadu Value Added Tax Act, 2006 - revision allowed - decided in favor of assessee.

Summary

Issues Involved:
1. Justification of the tribunal's decision regarding the disputed turnover of ?8,09,97,739/-
2. Applicability of G.O.Ms.No.82 CT (B2) dated 01.07.2002 and notification No.II(2)/CT/568(f-8)/2002 dated 01.07.2002

Issue-wise Detailed Analysis:

1. Justification of the tribunal's decision regarding the disputed turnover of ?8,09,97,739/-:

The petitioner, a dealer in various office supplies, was initially granted a tax exemption on the sales turnover of toner cartridges and ink cartridges. However, the Assessing Officer later revoked this exemption, arguing that these items were not eligible for resale tax exemption under G.O.Ms.No.82 dated 01.07.2002. The petitioner contested this decision, leading to a series of appeals.

The first Appellate Authority sided with the petitioner, setting aside the tax levy and penalty imposed by the Assessing Officer. However, the Sales Tax Appellate Tribunal reversed this decision, restoring the original assessment. The core of the tribunal's justification was whether toner and ink cartridges qualify as "computer consumables" and if they fall under the exempted category as per the relevant government order.

The High Court referenced a decision in Canon India Private Limited vs. The State of Tamil Nadu, which clarified that ink jet cartridges and toner cartridges are parts and accessories of printers, which are peripherals to computer systems. The court concluded that these items should attract the same tax rate as computer peripherals, which is 5%, and not the higher rate as claimed by the revenue.

2. Applicability of G.O.Ms.No.82 CT (B2) dated 01.07.2002 and notification No.II(2)/CT/568(f-8)/2002 dated 01.07.2002:

The petitioner argued that the government notifications clearly exempted items falling under sub-item (i) of item 18, Part B of the First Schedule of the TNGST Act from the levy of tax under Section 3H. The High Court examined whether the tribunal correctly interpreted these notifications.

The court reiterated that the notifications did not make any distinction among computer parts and consumables. It was emphasized that the term "consumables" was not used in the VAT Act, and therefore, the classification should align with the statutory provisions and judicial precedents. The court found that the tribunal failed to properly appraise the contents of the relevant government orders and notifications, leading to an erroneous conclusion.

Conclusion:

The High Court concluded that the tribunal's decision was not justified. The court held that toner cartridges and ink cartridges are indeed parts and accessories of printers, which are peripherals to computer systems, and thus should be taxed at the rate applicable to computer peripherals. The substantial questions of law were answered in favor of the petitioner, and the Tax Case Revision was allowed, setting aside the tribunal's order.