2015 (3) TMI 430 - HC - VAT and Sales Tax

Classification of goods - 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% or under sub-heading No 8470 attracted tax rate at 12.5% - Held that - Electronic ticketing machine is an IT product. - Schedule-III Item No.53 namely IT products including telecommunication equipments as would be notified are taxed at 4% and therefore, the assessee is entitled to the said benefit. - where a commodity is described against any heading or sub-heading, 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. The KSRTC invited tender for supply of ticketing machines with technical specifications detailing the hardware and software components. They called the said goods as portable handheld ticketing machine. As per Annexure-A the assessee is in the business of sale of ticketing machines. The Annexure- A which is issued by them reads that it is versatile bus ticketing machines from the pioneers of ticketing machines in India. Introduces compact and rugged hand held bus ticketing machines. Over 10,000/- machines in use in various State Road Transport Corporations including KSRTC, NEKRTC, NWKRTC AND BMTC in Karnataka and KSRTC, Kerala apart from various private organizations in India and Abroad. In the hind portions, they have given the specifications of the hardware. Therefore, in the light of the judgment of the Supreme Court 1990 (11) TMI 142 - SUPREME COURT OF INDIA , 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. This is precisely what the authorities have concurrently held. Therefore, we do not see any error in the orders passed by any of the authorities. Therefore, the finding is just and proper and in accordance with law. - Decided against assessee.

Summary

Issues:
1. Classification of portable hand held electronic ticketing machine under H.S.N. Code 8471 for tax purposes.

Analysis:
The case involves a partnership firm engaged in manufacturing and selling hand held electronic ticketing machines (ETMs) to Karnataka State Road Transport Corporation (KSRTC). The firm initially paid value-added tax at 12.5% but later claimed that the product falls under entry 8471 as an IT product, thus eligible for a 4% tax rate. The assessing authority reassessed and imposed tax at 12.5%, which was partly upheld by the appellate authority. The Tribunal rejected the claim, stating that the product is a ticket issuing machine and not covered under the relevant notifications for IT products. The main contention was whether the portable hand held electronic ticketing machine qualifies as an IT product under H.S.N. Code 8471 for taxation at 4%.

The appellant argued that the product is an IT product falling under entry 43 of the III Schedule, making it eligible for the 4% tax rate. On the other hand, the revenue contended that the product falls under entry 8470 in the Central Excise Tariff Act, not qualifying as an IT product for the 4% tax rate. The key question was whether the portable hand held electronic ticketing machine should be classified as an IT product under H.S.N. Code 8471 for taxation purposes at 4%.

The court examined the technical specifications and functions of the electronic ticketing machine, emphasizing its hardware components and applications such as electronic ticketing, micro-finance, and attendance management systems. The appellant relied on the notification dated 31.3.2006 classifying IT products under specific headings and sub-headings, particularly entry 8471. However, the court analyzed the explanations provided in the notification, highlighting that the description matching with the Central Excise Tariff Act determines the applicability of the notification. The court referenced the description of calculating machines and ticket-issuing machines under 8470 and 8471, emphasizing that ticket issuing machines are explicitly mentioned under 8470 but not under 8471.

Based on commercial understanding and the Supreme Court's precedent on classification principles, the court concluded that the portable hand held ticketing machine should be classified as a ticket issuing machine falling under entry 8470, not 8471. The court upheld the authorities' decisions, dismissing the revision petitions and ruling in favor of the revenue. The judgment emphasizes the importance of commercial interpretation in classifying goods for taxation purposes.

In conclusion, the court's detailed analysis focused on the technical specifications, commercial understanding, and relevant notifications to determine the classification of the portable hand held electronic ticketing machine for tax purposes. The judgment highlights the significance of aligning product descriptions with tariff classifications and commercial perceptions in resolving tax disputes effectively.