2023 (5) TMI 970 - HC - VAT and Sales Tax

Classification of goods sold - photo identity cards - to be classified under Entry 71 of Schedule III to the Karnataka Value Added Tax Act, 2003 or under the residuary category under Section 4(1)(b)(iii) of the Karnataka Value Added Tax Act, 2003? - only the specific goods mentioned under Entry 71 of Schedule III to the Karnataka Value Added Tax Act, 2003 merit classification under the said Entry as 'printed material' as well as 'stationery articles' or not? HELD THAT - The first part of Entry 71 of the Schedule III to the KVAT Act specifies printed materials other than books meant for reading. The Tariff item No. 49.01 of the CET Act includes other products of the printing industry - For the purpose of Chapter 49 of the CET Act, printed also means reproduced by means of a duplicating machine, produced under the control of a computer, embossed, photographed, photocopies, thermocopied or typewritten. It is relevant to note that, photo identity cards are also produced by using a computer, holograms are embossed, and photographs affixed. Therefore, a photo identity card falls within the definition of other products of printing industry under Tariff item No. 49.01 of the CET Act. The Parliament has excluded only certain items and Photo identity card is not one such excluded item. It is settled that if an item is cleared under a particular tariff, by the Central Excise Authority, the same is not disputable by the VAT Authorities - reference can be made to decision in the case of SAMSUNG INDIA ELECTRONICS PVT LTD VERSUS STATE OF GUJARAT 2020 (2) TMI 1247 - GUJARAT HIGH COURT . The principal contention urged by the Revenue that photo identity cards do not fall under the Entry 71 of Schedule III to the KVAT Act, is untenable because, the KVAT Authority is bound by the classification accepted by the Central Excise Authority - the photo identity cards fall under Entry 71 of Schedule III to the KVAT Act under the category of printed materials other than books meant for reading, and accordingly, taxable at 5%. The revision petition is allowed.

Summary

Issues involved:
The issues involved in this case are:
1) Classification of 'photo identity cards' under the Karnataka Value Added Tax Act, 2003.
2) Determining whether 'photo identity cards' fall under Entry 71 of Schedule III or under the residuary category of the Act.
3) Interpretation of the specific goods mentioned under Entry 71 of Schedule III to the Karnataka Value Added Tax Act, 2003.

Classification of 'Photo Identity Cards':
The petitioner, a registered dealer under the KVAT Act, is engaged in manufacturing and selling photo identity cards. The Deputy Commissioner of Commercial Taxes concluded that these cards do not fall under any specific entry of the KVAT Act and are taxable at 14% under a particular section. On appeal, the Joint Commissioner of Commercial Taxes and the Karnataka Appellate Tribunal upheld this decision. The petitioner argued that photo identity cards should be classified under Entry 71 of Schedule III as printed material, citing the process of manufacturing involving cutting plastic sheets, digital printing, and lamination. The petitioner referred to the Central Excise Tariff Act, where 'printed' includes various methods of reproduction. The court, after considering both sides, held that photo identity cards fall under Entry 71 of Schedule III and are taxable at 5%.

Interpretation of Relevant Tariff Entries:
The court examined Entry 71 of Schedule III of the KVAT Act, which includes 'printed materials other than books meant for reading' and specific stationery articles. The relevant Tariff Entry under the Central Excise Tariff Act covers products of the printing industry. The court noted that 'printed' in the context of the Central Excise Tariff Act includes various reproduction methods, which align with the manufacturing process of photo identity cards. The court also highlighted exclusions under the Tariff, none of which apply to photo identity cards. It was emphasized that the KVAT Authority must abide by the classification accepted by the Central Excise Authority.

Decision and Order:
The court allowed the revision petition, answering the substantial questions of law in favor of the Assessee and against the Revenue. The order passed by the Karnataka Appellate Tribunal confirming the Assessing Officer's decision was set aside. The court held that photo identity cards are classified under Entry 71 of Schedule III to the KVAT Act as printed materials, taxable at 5%. No costs were awarded in this matter.