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2023 (12) TMI 297 - HC - VAT and Sales TaxClassification of goods - home UPS which is marketed / advertised as meant for use in homes - to be classified under S.No. 68 of Part B of the First Schedule to the TNVAT Act which covers Information Technology products notified by the Government or not - HELD THAT - This Court finds that the impugned order has been made in perfunctory manner and thus liable to be set aside. However there is lack of clarity as to whether the product namely the UPS in question is capable of being used along with Information Technology products. The matters are remanded back to the assessing authority for the limited purpose of examining whether these UPS sold by the petitioner are capable of being used with Information Technology products. If it is found that it is capable, the assessing authority shall levy tax at 5% treating it as falling under S.No. 68 of Part B of the First Schedule to the TNVAT Act, though it is capable of multiple uses and some of such use being general in nature and not in relation to Computers / Information Technology. The above exercise shall be carried out after providing the petitioners an opportunity of hearing and the same shall be completed within a period of 8 weeks from the date of receipt of copy of this Order. Petition disposed off.
Issues Involved:
1. Classification of home UPS under the TNVAT Act. 2. Rejection of petitioner's classification by the respondent. 3. Grounds for challenging the impugned order. 4. Respondent's defense of the impugned order. 5. Court's findings and judgment. Summary: 1. Classification of home UPS under the TNVAT Act: The primary issue is whether home UPS marketed for use in homes can be classified under S.No. 68 of Part B of the First Schedule to the TNVAT Act, which covers Information Technology products notified by the Government. 2. Rejection of petitioner's classification by the respondent: The impugned order rejects the petitioner's classification of UPS under S.No. 68 Part B, instead classifying it under the residuary S.No. 69 Part C, thus liable to tax at 14.5%. The reasons include: - UPS used at homes does not aid the development of the IT industry. - The petitioner's brochure indicates the UPS is for home appliances. - The test report from Electronics Regional Test Laboratory North did not categorically classify the product as digital UPS. - The Principal Secretary's clarification dated 14.08.2015 laid down criteria not met by the petitioner's products. - The UPS sold by the petitioner does not meet the specifications of UPS attached to a computer as per G.O.Ms.No.3 dated 01.01.2007. 3. Grounds for challenging the impugned order: The petitioner challenges the impugned order on the following grounds: - S.No. 27 of G.O.Ms.No.3 covers Uninterrupted Power Supply without conditions regarding use, inbuilt battery, or output sine wave. - The test of exclusive use with IT products is unfounded. - The impugned order disregards the Test Report categorizing the product as digital UPS. - The sole difference between UPS and an inverter is the switching time, which the petitioner's product meets. 4. Respondent's defense of the impugned order: The respondent supports the impugned order with the following arguments: - The reliance on Canon India's judgment is misplaced as it dealt with a printer, not UPS. - The Test Report does not classify the product as digital UPS but only verifies the switching mode parameter. - The Commissioner's clarification dated 14.08.2015 sets conditions not met by the petitioner's products. - The petitioner's advertisement indicates the UPS is for home appliances, thus falling under S.No. 69 Part C. 5. Court's findings and judgment: The Court finds the impugned order suffers from several infirmities: - The attempt to add conditions to S.No. 68 Part B is untenable as fiscal statutes should be strictly construed. - The user test is inconclusive unless expressly provided. - Classification cannot be based on advertisement or label but on the product's nature and description in the schedule. - The impugned order disregards expert opinion relevant in classification matters. The Court sets aside the impugned order and remands the matter back to the assessing authority to examine whether the UPS sold by the petitioner can be used with IT products. If capable, the UPS should be taxed at 5% under S.No. 68 Part B, even if it has multiple uses. This exercise should be completed within 8 weeks, providing the petitioner an opportunity of hearing. The writ petition is disposed of on these terms with no costs. Consequently, connected miscellaneous petitions are closed.
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