2020 (4) TMI 36 - HC - VAT and Sales Tax

Classification of goods - rate of tax - H.P. Printer toner and cartridges - whether under the entry computer hardware, software and other computer consumable would include the toner and printer cartridge, which are used alongwith the computer printer? - HELD THAT - Undoubtedly, the printer is sold along with the 'Cartridge' and is included in the package containing the printer and therefore from the above fact it can be deduced that the printer includes a 'Cartridge' and are sold together. 'Cartridge' being a consumable item has to be periodically replaced/recharged with toner. This Court is of the considered view that toner cartridges are part of a printer and are liable to be taxed at the same rate as printer. It is the duty of the taxing authority, firstly to see that whether an item falls in any of the category mentioned in the schedule and only when such an item is not found falling in any of the schedule can the same be taxed in the ancillary clause - In the instant case toner cartridge being part of printer, which are sold alongwith printers have to be taxed at the same rate as the printers and not under the residuary provision. Revision allowed.

Summary

Issues:
Rate of tax on H.P. Printer toner and cartridges.

Analysis:
The revisionist, a company engaged in the business of stationary items, contested the rate of tax on H.P. toner and cartridges, arguing for a 4% tax rate instead of the 10% imposed by the Assessing Officer. The dispute centered on whether the toner and cartridges should be considered part of a computer printer or as accessories. The Tribunal ruled that the toner and cartridge are consumable goods, not parts of the printer, thus subject to a 10% tax rate. The revisionist argued that the Tribunal's decision was flawed, while the Standing Counsel defended the Tribunal's ruling, citing relevant provisions and case law.

The High Court examined whether toner and printer cartridges fall under the entry for computer hardware, software, and other consumables used with computer printers. To determine this, the Court assessed whether the cartridge is an essential component of a printer without which the printer cannot function properly. It was established that a printer cannot operate without a cartridge, making it an integral part of the printer's functionality.

Referring to a previous case involving Ribbon Cartridges, the Court applied the "common parlance test" to ascertain whether the toner and cartridges are part of the printer or accessories. The Court considered how the products are perceived by those in the industry, emphasizing that the cartridges are sold with the printer, indicating their integral nature to the printer's operation. Additionally, the Court referenced a judgment from the Madras High Court, which classified toners and cartridges as parts and accessories to computer systems, supporting the argument that such items should be taxed at the same rate as the main product.

Conclusively, the High Court determined that toner cartridges are indeed part of a printer and should be taxed at the same rate as printers, not under a separate provision. Consequently, the Court set aside the Tribunal's order, allowing the revision in favor of the company.