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2012 (6) TMI 603 - HC - VAT and Sales TaxDelhi Value Added Tax Act, 2004 - taxability of multi functional printers/copiers/scanners and their spares and consumables - Entry no. 41A of the third Schedule at 4% or under the residuary head @ 12.5% - Period of dispute 01.04.05 to 31.03.07 - Held that - In respect of the period prior to 30.11.2005, it is held that multi function machines may or may not be computer peripheral, depending upon the main purpose or function which the machine was designed and manufactured to perform. If the principal and predominant purpose was to act as a computer printer or scanner or as an input or output devise of the computer, the multi functional machine would qualify and fall under entry 41A clause XXIII. However, if the machine was designed and manufactured for some other primary purpose, then it would not be covered by Entry 41A clause XXIII. With regard to the period after 30.11.2005, it is held that the doctrine of dominant purpose of the multi functional machine will determine/decide whether it is an input or output unit of an automatic data processing machine. In case the principal or dominant purpose is to act as input or output unit, then it would qualify and will be covered by Entry 41A at Sr. No.3. However, in case multi functional machine is a duplicator or a photocopying machine, which incidentally can be used as a printer or a scanner etc., the said machine would not qualify and cannot be treated and regarded as input or output unit of automatic data processing machine and will be covered by the residuary tax rate - Decided partly in favor of assessee.
Issues Involved:
1. Applicable VAT rate on multi-functional printers/machines and their spares and consumables during the period 1st April 2005 to 31st March 2007. 2. Interpretation of Entry No. 41A of the third schedule of the Delhi Value Added Tax Act, 2004. 3. Classification of multi-functional printers/machines under HSN code 8471.60.29. 4. Applicability of Central Excise Tariff Act, 1985 for VAT classification. 5. Dominant purpose doctrine for classification of multi-functional machines. Issue-Wise Detailed Analysis: 1. Applicable VAT rate on multi-functional printers/machines and their spares and consumables during the period 1st April 2005 to 31st March 2007: The primary question for adjudication was whether multi-functional printers/machines and their spares and consumables were taxable under Entry No. 41A of the third schedule of the Delhi Value Added Tax Act, 2004 at 4% or under the residuary head at 12.5%. The tribunal upheld the Commissioner's finding that these products are taxable under the residuary head at 12.5%. 2. Interpretation of Entry No. 41A of the third schedule of the Delhi Value Added Tax Act, 2004: During the relevant period, Entry No. 41A underwent multiple amendments. Initially, it included "IT products notified by the Ministry of IT," including "computer systems and peripherals." Post 30th November 2005, it referred to "Information Technology products" as per the Central Excise Tariff Act, 1985. The court examined whether multi-functional machines could be classified under this entry. 3. Classification of multi-functional printers/machines under HSN code 8471.60.29: The court noted that multi-functional machines were classified under HSN code 8471.60.29 ("Other") in the Central Excise Tariff Act, 1985. The court referred to the Supreme Court's decision in Xerox India Ltd. v. Commissioner of Customs, which held that multi-functional machines performing predominantly as printers should be classified under 8471.60. The court found that the multi-functional machines in question would fall under the residuary sub-heading 8471.60.29 ("Other"). 4. Applicability of Central Excise Tariff Act, 1985 for VAT classification: The court analyzed the notes in the VAT Act concerning the interpretation of entries in relation to the Central Excise Tariff Act, 1985. Note (1) applied the rules of interpretation from the Central Excise Tariff Act. Note (2) clarified that if descriptions in the VAT Act differed from those in the Central Excise Tariff Act, the VAT Act's description would prevail. Note (4) stated that goods classified under "other" in the Central Excise Tariff Act would fall under the residuary provision in the VAT Act. 5. Dominant purpose doctrine for classification of multi-functional machines: The court applied the dominant purpose doctrine to determine whether multi-functional machines were computer peripherals. If a machine's principal purpose was to function as an input or output device for a computer, it would qualify as a computer peripheral under Entry 41A. If the machine's primary purpose was photocopying or duplicating, it would not qualify under Entry 41A and would be taxed at the higher rate. Conclusion: The court held that the multi-functional machines in question did not fall under Entry 41A of the third schedule of the VAT Act and were taxable under the residuary head at 12.5%. The dominant purpose of the machine determined its classification. The court emphasized the need for factual examination of each machine to establish its principal purpose. The appeal was partly allowed, and the tribunal's order was set aside to the extent it contradicted the court's observations. The matter could be re-examined during assessment/appellate proceedings.
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