2018 (11) TMI 562 - HC - VAT and Sales Tax

Classification of Ribbon Cartridge - Whether Ribbon Cartridge is not a part of computer printer, therefore, not a computer hardware as such not amenable to tax @ 4% instead it was taxable @ 10% as an unclassified item as it was an accessory of computer printer and not its part? Held that - This Court is of the view that the Tribunal has not considered the matter in the correct perspective and approach, thereby, rendering its judgment erroneous and liable to be interfered with. The matter requires reconsideration at the level of the Tribunal for the reasons, firstly, it is to be ascertained as to whether the Dot Matrix printer could be used without the ribbon cartridge as has been opined by the Assessing Authority without referring to any material before it - appeal allowed by way of remand.

Summary

Issues:
Interpretation of tax entry for computer hardware - Classification of ribbon cartridge as part of Dot Matrix printer for taxation purposes.

Analysis:
The judgment by the High Court of Allahabad pertains to the interpretation of a tax entry regarding computer hardware and the classification of a ribbon cartridge as part of a Dot Matrix printer for taxation purposes. The circular of the Commissioner Trade Tax dated 26.10.2001 clarifies that a Computer Printer is considered computer hardware for taxation under Entry 75(ii) of the Notification dated 13.12.2002. The main legal question in this case is whether the Tribunal was correct in determining that the Ribbon Cartridge is not a part of the computer printer, therefore taxable at 10% as an accessory rather than 4% as computer hardware.

The petitioner manufactures ribbon cartridges for Dot Matrix printers, and the dispute arises from whether the ribbon cartridge qualifies as part of the Dot Matrix printer for taxation at 4% or as an accessory at 10%. The Assessing Authority and the First Appellate Authority had differing views on this matter, leading to the current legal challenge. The petitioner argues that the ribbon cartridge is an essential part of the Dot Matrix printer, relying on legal precedents and expert opinions to support their claim.

The revisionist's counsel argues that the common parlance test should be applied to determine the classification of the ribbon cartridge, emphasizing that it is considered a part of the Dot Matrix printer in commercial practice. The counsel cites various legal decisions and expert reports to support the contention that the ribbon cartridge should be classified as part of the printer for taxation purposes.

On the other hand, the Additional Chief Standing Counsel for the State relies on a Supreme Court decision to argue that a typewriter ribbon was considered an accessory rather than a part of the typewriter. However, the counsel fails to provide satisfactory evidence to support the assertion that the Dot Matrix printer can function without the ribbon cartridge.

The High Court concludes that the matter requires reconsideration by the Tribunal to determine whether the Dot Matrix printer can operate without the ribbon cartridge and whether the cartridge is sold along with the printer. The Court finds that the Tribunal's judgment was erroneous and remands the case for further consideration, emphasizing the need for a comprehensive review based on the legal principles and evidence presented. The Tribunal is directed to expedite the proceedings and conclude the matter within six months.

In summary, the judgment highlights the importance of correctly classifying components for taxation purposes and underscores the need for a thorough examination of evidence and legal precedents in such matters.