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TMI Blog2005 (1) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... processor through what is called a four-wire, point to point, dedicated telephone line. The ATM does not have many parts. There is a card reader, which is what captures a person s account information that is stored on the magnetic strip located on the back of the ATM/debit card. This information is actually used by the host processor in routing the transaction to the appropriate bank. Then it has a key pad , which is used by the cardholder to tell the machine what type of transaction is needed. It has an electric eye that is used for cash dispensing mechanism. In addition to the eye, the ATM has a sensor that is capable of evaluating the thickness of each of the bills being dispensed. The Advance Ruling Authority (majority view) has classified ATMs as terminals falling under entry No. 20(ii)(b) of Part C of the Second Schedule to the Act, since ATM machine is also understood as computer terminal in the commercial world. This view of the Advance Ruling Authority was not strongly supported by the learned Senior Counsel, and a passing remark was made, that if it does not fall under entry No. 20(i) of Part C of the Second Schedule to the Act, it can be brought under terminal as envisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular, the Advance Ruling Authority constituted by the Commissioner of Commercial Taxes in exercise of his powers under section 4 of the Act, the appellant-company had filed an application before the Advance Ruling Authority in form 54 as provided under rule 27-E(1) of the Karnataka Sales Tax Rules, 1957 ( the rules , for short), seeking clarification on the rate of tax applicable under the Act on sale of Automated Teller Machines. 2. In response to the notice of hearing issued by the Advance Ruling Authority, Sri Mohan Mudkavi, learned Chartered Accountant along with the Vice-President of the Company had appeared before the Authority and represented the facts and also had produced the literature and description of the ATMs. The basic submission that was made was, ATM is a combination of a computer and it runs on a processor and the purpose for which it is put to use, is to dispense with cash and therefore, had requested the Authority to classify ATMs as goods falling under entry No. 20 of Part C of the Second Schedule to the Act and not electronic goods falling under entry No. 4 of Part E of the Second Schedule to the Act. 3. The Advance Ruling Authority (majority view) after r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler himself, ATM consists of apart from other things, computer (i.e., mother board with processor), computer peripherals such as RAM, drives, key board, monitor, mouse, etc., and also software. In common parlance or popular sense, ATM is a Teller Machine (that is, which disburses cash, issues statement of account, etc.) which is automated with the aid of computer, computer peripherals, software and other devices. Technically as contended by the dealer it can be held to be a computer terminal. However, going by the principles of common parlance as applicable to interpretation of entries under the KST Act, it cannot be classified as computer terminal for the purpose of the KST Act when it is not specifically included in the entry relating to computer terminals. The honourable Supreme Court in the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. G.S. Pai Co. reported in [1980] 45 STC 58 has held that 'while interpreting entries in sales tax legislation, the words used in the entry must be construed not in any technical sense nor from the scientific point of view but as understood in common parlance'. Similar view has been taken by the hono ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Computer consumables, namely stationery, floppy disks, CD ROMs, DAT tapes, printer ribbons, printer cartridges and cartridge tapes. 1-4-1998 to 31-12-1999 1-1-2000 to 31-3-2002 1-4-2002 to 31-5-2003 From 1-6-2003 Four per cent Eight per cent Four per cent Five per cent (iv) Computer cleaning kit 1-4-1999 to 31-12-1999 1-1-2000 to 31-3-2002 1-4-2002 to 31-5-2003 From 1-6-2003 Four per cent Eight per cent Four per cent Five per cent (v) Computer software 1-4-2001 to 31-5-2003 From 1-6-2003 Four per cent Five per cent . 11. Entry No. 4 of Part E of the Second Schedule to the Act as amended by Karnataka Act 5 of 1996 with effect from April 1, 1996 reads as under: Entry No. 4: Electronic goods and parts and accessories thereof other than those falling under any other entry of this Schedule. (The basic rate of tax for the relevant assessment year was 12 per cent). 12. The primary question that requires to be considered and decided in this appeal is the rate of tax applicable on the sale of Automated Teller Machines under the KST Act, 1957? Alternatively, whether the revising authority was justified in clarifying that ATM s would fall under entry No. 4 of Part E of the Second Schedule to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f human teller. Many ATMs also allow people to deposit cash or cheques, transfer money between their bank accounts or even buy postage stamps. ATM's are known by a wide variety of names. Some of which are more common in certain countries than others. Examples include Automated Teller Machine, Automated Banking Machine, Bank Box, Cash Box, Cash dispenser, Cash Point, Hole in the Wall, Mac Machine Mini Bank, Mac Machine, Robotic Teller, Tele Banco, Ugly Teller, etc. 17. The book on computers, concepts and applications for users by Robert C. Nikenson has explained the configuration and its uses in the day-to-day affairs by banks, stores, etc. According to the learned author, an ATM is not a computer by itself. It is connected to a computer that performs the tasks requested by the person using the ATM. The computer is connected electronically to many ATMs that may be located some distance from the computer. 18. In so far as its use is concerned, the learned author says that when you use an ATM, you are using a computer. When you insert your card and press keys on the ATM, you are entering input into the computer. The computer process the input to perform the banking transactions yo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e apex Court and the manner in which Schedule to the entries under the statute requires to be interpreted in fiscal laws, since the revising authority has held while accepting that the ATMs are technically can be held to be computer terminal , however, by common parlance, it cannot be classified as computer terminal for the purpose of the Act. The Supreme Court in the case of Tata Consultancy Services v. State of Andhra Pradesh [2004] 137 STC 620; AIR 2004 SCW 6583 has observed (para 61 in AIR SCW; para 63 in STC): 61. We, in this case, are not concerned with the technical meaning of computer and computer programme as in a fiscal statute plain meaning rule is applied. [See Partington v. Attorney-General (1869) LR 4 HL 100, page 122]. 62. In interpreting an expression used in a legal sense, the courts are required to ascertain the precise connotation which it possesses in law. 63. It is furthermore trite that a court should not be overzealous in searching ambiguities or obscurities in words which are plain. [See Inland Revenue Commissioners v. Rossminster Ltd. (1980) 1 All ER 80, page 90]. 64. It is now well-settled that when an expression is capable of more than one meaning, the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income-tax v. Max India Ltd. [2004] 268 ITR 128. 25. Sri Anand, learned Government Advocate, would contend that ATMs are electronic goods, may be operated with the assistance of computer technology and in the common parlance theory, they cannot be construed as computers or their terminals. The learned Government Advocate has produced before us voluminous literature on computers, only to demonstrate that ATMs by no stretch of imagination could be construed either as computers or as computer terminals and the Advance Ruling Authority was not justified in answering the clarification sought for by the appellant, that, ATMs are computer terminals and they can be fit into one of the subentries under entry No. 20, Part C of the Second Schedule to the Act. In his view, the revisional authority was justified in concluding that ATMs are electronic goods. 26. Now the question that would arise for consideration and decision in this appeal is, is an ATM a computer as contended by the learned Senior Counsel or a computer terminal as classified by the Advance Ruling Authority (majority view) in its order dated October 1, 2002? or is it electronic goods as classified by the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for interpreting an entry under fiscal legislation. 30. Entry 20 of Part C of the Second Schedule to the Act firstly speaks of computers of all kinds, namely, main frame, mini, personal, micro computers, and the like and their parts. The question of law raised by the appellant before us is whether ATM is a computer and as such squarely falls under entry No. 20(i), Part C of the Second Schedule to the Act, though the Advance Ruling Authority on the request made by the appellant for clarification has opined, that ATMs are terminals and would fall under entry No. 20(ii)(b) of Part C of the Second Schedule to the Act. Sri K.P. Kumar, learned Senior Counsel, would submit that ATMs are computers in view of the words like namely and and the like in the entry immediately after naming the commodity, i.e., computer of all kinds. In aid of his submission, the learned Senior Counsel has relied on the observations made by the Supreme Court in the case of Indian Aluminium Company Limited v. Assistant Commissioner of Commercial Taxes (Appeals) [2001] 121 STC 510. The case was under the provisions of the Entry Tax Act. The question before the court was whether furnace oil is not liable to tax und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nderstood as computer terminal in the commercial world. This view of the Advance Ruling Authority was not strongly supported by the learned Senior Counsel, and a passing remark was made, that if it does not fall under entry No. 20(i) of Part C of the Second Schedule to the Act, it can be brought under terminal as envisaged under entry No. 20(ii)(b) of Part C of the Second Schedule to the Act. 33. Entry 20(ii) of Part C of the Second Schedule to the Act speaks of peripherals . The entry is as under: (ii) Peripherals, that is to say, (a) All kinds of printers and their parts, namely, Dot matrix, ink jet, laser, line, line matrix and the like. (b) Terminals, scanners, multi-media kits, plotters, modem and their parts. Immediately after the expression peripherals , the Legislature has used the expressions that is to say, all kinds of printers and their parts and terminals, scanners, multi-media kits, plotters, modem and their parts . The expression that is to say is the commencement of ancillary clause, which explains the meaning of the principal clause. This expression is explained by the apex Court in the case of State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319 at page 323 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive electricity, found in all atoms and acting as a carrier of electricity in solids. 36. With this background, let us come back to the findings and the conclusions reached by the revisional authority to hold that ATMs cannot be considered as computer terminals but can be considered only as electronic goods . The revisional authority had issued a notice dated September 2, 2003 under section 22-A of the Act, proposing to revise the order passed by the Advance Ruling Authority and further proposing to classify ATMs as electronic goods, and liable to tax at a higher rate, on the ground that the Advance Ruling Authority has erroneously classified ATM as computer and the same has caused prejudice to the interest of the Revenue. A detailed reply had been filed by the appellant-company, after receipt of the show cause notice, justifying the findings and the conclusion reached by the Authority for Clarifications and Advance Rulings, and nowhere in the reply the appellant-company had conceded that ATM works on the principles of electronics and is commonly understood to be electronic goods. Why we have noticed the aforesaid statement is only because, the revisional authority while concluding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture is, that in taxing statutes, when terms are used of common usage, it is the common man's understanding of the articles which prevails over the technical man's concept. The place of scientific definition based on technical books, technical literature, dictionaries, etc., is relevant. When the goods are technical, there is no market and so, no market parlance. At the same time, if the goods are not technical, the definition in the market parlance would apply. It only means, that if the goods are technical, common parlance or commercial parlance would not apply. Therefore, in our opinion, the revisional authority is firstly justified in observing that though technically goods in question may fall within the meaning of the expression computer terminals , but in common parlance theory, they are not understood so. 39. An Automatic Teller Machine, in our view, is an electronic device, which allows a bank's customers to make cash withdrawals, and check their account balances at any time without the need of human teller, probably that most widely used means of electronic funds transfer . From the literature and the books on computers produced before us, we are of the view, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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