2014 (9) TMI 566 - HC - VAT and Sales Tax

Classification under entry 8471 or entry 8470 - portable handheld ticketing machine - Whether portable hand held electronic ticketing machine is an IT produce and falls under heading and sub-heading No.8471 to be eligible for tax at 4% - Held that - it is clear that where a commodity is described against any heading or subheading, if the aforesaid description is different in any manner from the corresponding description in the Central Excise Tariff Act, 1985, then only those commodities described as aforesaid will be covered by the scope of this notification and other commodities though covered by the corresponding description in the Central Excise Tariff will not be covered by the scope of this notification. 8471 in the notification at Sl.No.4 is the replica of the description contained in the Central Excise Tariff Act at 8471. In the Central Excise Tariff Act, against the said description in the end they have used the words not elsewhere specified or included . Now 8471 under the Tariff act includes ticket issuing machines. Therefore, by virtue of the words used in 8471 not elsewhere specified or included , 8471 do not include ticket issuing machines. When ticket issuing machines are expressly mentioned in 8470 and in the notification issued on 31.3.2006 under the heading the Information Technology product 8470 is not included, the assessee is not entitled to the benefit of 4% tax. How the goods are understood in the commercial sense has to be taken into consideration for the purpose of classification of the goods and the scientific and technical meaning has no place. Therefore, when the goods involved is a portable handheld ticketing machine that is how the assessee has described the machine and that is how the customers have also understood it and in the Central Excise Tariff Act this ticket issuing machines are expressly included in Entry 8470, by any stretch of imagination, the Court cannot hold that it falls under 8471 especially when it specifically states that not elsewhere specified or included . The notification issued specified 8471 does not include this ticketing machine - Decided against assessee.

Summary

Issues:
1. Classification of handheld electronic ticketing machines under H.S.N. Code 8471 for tax purposes.

Analysis:
The judgment revolves around the classification of handheld electronic ticketing machines for tax purposes. The assessee, a partnership firm engaged in manufacturing and selling handheld electronic ticketing machines, claimed that their product falls under H.S.N. Code 8471, making it eligible for a 4% tax rate as an IT product. However, the assessing authority, appellate authority, and Tribunal disagreed, holding that the product does not fall under the specified category and should be taxed at 12.5%.

The core question before the court was whether the portable hand-held electronic ticketing machine qualifies as an IT product falling under heading and sub-heading No.8471 for taxation at 4%. The technical specifications of the machine were detailed, emphasizing its hardware components, software capabilities, and applications in electronic ticketing, among others. The assessee argued that the product should be classified as an IT product under Schedule-III Item No.53 for the benefit of a 4% tax rate.

The court analyzed the relevant notification dated 31.3.2006, which classified goods under specific headings and sub-headings from the Central Excise Tariff Act as IT products. The court compared the descriptions in the notification with those in the Tariff Act to determine the eligibility for the 4% tax rate. It was noted that while the product description in the Tariff Act included ticket-issuing machines under 8470, the specific mention of "not elsewhere specified or included" in 8471 excluded such machines. The judgment highlighted the commercial understanding of the product, as described by the assessee and customers, and emphasized the importance of commercial parlance in classification.

Ultimately, the court upheld the decisions of the lower authorities, concluding that the handheld ticketing machine did not fall under H.S.N. Code 8471 for a 4% tax rate. The judgment cited the principle of classification based on commercial understanding and marketability, supporting the tax assessment at 12.5%. Consequently, the revision petitions were dismissed, affirming the tax treatment of the product as per the prevailing classification under the Central Excise Tariff Act.