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TMI Blog2020 (2) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be classified under sub-heading 8525 50 at serial No.20 of the notification dated 1st August, 2009. On a perusal of the products falling under sub-heading 8525 50 at serial No.20, it is evident that such devices are in the nature of transmission apparatus which also have a reception apparatus, the principal function whereof is transmission of sound. Moreover, even according to the respondents, the product in question is a portable automatic data processing machine. Their only contention is that it also has a calling feature and can therefore be used as a mobile phone. Reference may be made to the decision of the Supreme Court in the case of Mauri Yeast India (P) Ltd. v. State of U.P., [2008 (4) TMI 101 - SUPREME COURT], on which reliance has been placed on behalf of the petitioner for the proposition that it is now a well-settled principle of law that in interpreting different entries, attempts shall be made to find out as to whether the same answers the description of the contents of the basic entry and only in the event it is not possible to do so, recourse to the residuary entry should be taken by way of last resort. Applying the above decision to the facts of the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UCHIT N SHETH FOR THE PETITIONER MS MAITHILI MEHTA, ASSISTANT GOVERNMENT PLEADER FOR THE RESPONDENT JUDGMENT ( PER : HONOURABLE MS.JUSTICE HARSHA DEVANI ) 1. By this petition under article 226 of the Constitution of India, the petitioner has challenged the order dated 23.2.2019 passed by the Deputy Commercial Tax Commissioner, Corporate Cell, under section 79 of the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as the GVAT Act ) imposing tax at the rate of 12.5% plus 2.5% additional tax on tablet computers with calling feature. 2. The petitioner, a private limited company, is engaged in the manufacture, import and sale of consumer electronic goods and is duly registered under the GVAT Act. One of the commodities manufactured, imported and sold by the petitioner are tablet computers, which as such are minicomputers of portable size which can be carried around with ease. They are meant to be substitutes for laptop computers. The tablet computers can process data, execute programs and connect to the internet via wireless network. Some such tablets have calling facility also. It is the case of the petitioner that such tablets are much larger in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 issued by the CBEC regarding interpretation of the very same entry in the context of the very same goods, viz., tablet computers with additional features such as calling facility. It was submitted that in view of such circular, there was no scope for any other interpretation and, therefore, request was made for classification of all tablet computers under Entry 4 of the notification issued under Entry 45 of Schedule II to the GVAT Act. It was further averred that classification which was being accepted for a number of years could not suddenly be sought to be revised without any change in facts or law or circumstances. However, on the very same day, that is, 31.12.2018, the assessing authority passed the impugned assessment order wherein it was held that since the tablet computers had calling feature they could also be used as mobile phones and, hence, they were not eligible for being classified under Entry 4 of the notification issued under Entry 45 of Schedule II to the GVAT Act. The assessing authority, accordingly, classified the goods under residuary Entry 87 of Schedule II to the GVAT Act. Upon receipt of the assessment order, the petitioner noticed that while the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has held that Tablet Computers are more appropriately classifiable in Heading No.8471, subheading 8471 30. It was submitted that the classification made by the CBEC for machines commercially referred to as Tablet Computers would be binding upon the assessing authority even under the GVAT Act, since the Government of Gujarat has adopted the classification as specified in the Central Excise Tariff Act. It was submitted that when the same question as was raised before the CBEC was raised under the GVAT Act in the context of the same excise entry incorporated in the notification issued under the GVAT Act, the assessing authority was bound to follow the circular issued by the CBEC, and the contrary view taken by the authority is wholly without jurisdiction. It was submitted that the binding effect of CBEC Circulars on the revenue authorities is well established as held by the Supreme Court in Paper Products Ltd. v. Commissioner of Central Excise, (1999) 7 SCC 84, wherein it has been held that circulars issued by the Board were binding on the Excise department. It was submitted that when the excise tariff has been incorporated into the notification under the GVAT Act, then the interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration is admirably stated by LORD ESHER, M.R. If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act as if they had been actually written in it with the pen, or printed in it. (p.233) Even though only particular sections of an earlier Act are incorporated into later, in construing the incorporated sections it may be at times necessary and permissible to refer to other parts of the earlier statute which are not incorporated. As was stated by LORD BLACKBURN: When a single section of an Act of Parliament is introduced into another Act. I think it must be read in the sense it bore in the original Act from which it was taken, and that consequently it is perfectly legitimate to refer to all the rest of that Act in order to ascertain what the sections meant, though those other sections are not incorporated in the new Act . 12. Once we have ascertained the object behind the legislation and held that the provisions of Section 205 quoted hereinabove stand bodily lifted and incorporated into the body of Section 115J of the Income-tax Act, all that we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Central Excise v. Wockhardt Life Sciences Ltd., (2012) 5 SCC 585, wherein the test of functional utility and primary usage has been approved. It was submitted that independently also, the tablet computers are classifiable under the entry for portable data processing machines and, therefore, also, the assessing authority has erred in demanding huge tax by classifying them under residuary Entry 87 of Schedule II to the GVAT Act. It was contended that it is well settled that specific entry should be preferred over residuary entry and residuary entry should be resorted to only as the last resort when a liberal interpretation of specific entry does not cover the goods in question. It was submitted that in the present case, there is a specific entry for portable automatic data processing machines and there is no other competing entry for tablet computers. It was submitted that under the circumstances, the classification of the goods in question under residuary entry 87 of Schedule II to the GVAT Act is wholly arbitrary, mechanical and illegal. 3.7 It was, accordingly, urged that the petition deserves to be allowed by setting aside the impugned assessment order and holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification dated 1.8.2009. It was submitted that considering the bifurcation made in the notification dated 1.8.2009 read with notification dated 1.4.2011, the product in question namely, tablet computers would not fall within Entry No.45 of Schedule II as an IT Product but would fall under Entry No.87 of Schedule II being the residuary entry attracting tax at the rate of 15%. In support of such submission, the learned Assistant Government Pleader placed reliance upon the decision of the Supreme Court in the case of Commissioner of Customs, Chennai v. Hewlett Packard India Sales (P) Ltd., (2007) 8 SCC 404, wherein the question that arose for determination was, whether operating system (software) which controls the working of the computer and which is preloaded in the laptop (notebook) is classifiable as a separate entity under CTH 85.24 at nil rate of duty or as an integral part of the laptop under CTH 84.71 at the appropriate rate of duty. The court was of the view that preloaded operating system recorded in HDD in the laptop (which was the item of import) forms an integral part of the laptop. What was imported was a laptop as a standalone item (unit). The court observed that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisputed fact that the tablet computer has a calling feature and, therefore, by way of amendment it is removed from Entry 20 of the notification dated 1.8.2009 and falls in the residuary entry clause. 4.4 Next, it was submitted that reliance placed by the petitioner on Circular No.20/2013-Customs dated 14th May, 2013 issued by the CBEC is misconceived, inasmuch as, such circular pertains to the Excise and Customs department and has no binding effect on the authorities under the GVAT Act. 4.5 Reliance was also placed upon the following averments made in the affidavit-in-reply filed on behalf of the respondents: 12. The said circular first and foremost pertains to the department of Central Excise and Customs which is merely a circular and hence, would not have a binding effect on the respondents herein. I further say and submit that it would be necessary for the Hon ble Court to consider that the petitioner herein in its product launching description has considered the product in question as a smart phone and has considered it as class of Mobile Device. The said products of different size are termed by the petitioner herein as an Android Smart Phone. Therefore, from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... averments made in the affidavit-in-reply, on which reliance has been placed by the learned Assistant Government Pleader, it was submitted that the present case does not involve classification of tablets and that the petitioner does not market the product in question as phablet and that no such allegation is even contained in the impugned order and, therefore, the definition of phablet or its classification is absolutely irrelevant for the purpose of the present petition. 5.2 It was submitted that there being a specific entry for portable digital data processing machine, the question of classifying the product under the residuary entry does not arise. When excise tariff headings are incorporated in the notification which refer to HSN Code, interpretation has to be made on the basis of amendments attached to such HSN Code by the excise authority and that in any case even if the common parlance test is applied, the tablet computers are popularly known as mini computers and not mobile phones, as sought to be alleged. 5.3 Dealing with the contention regarding the maintainability of the present petition, the learned counsel placed reliance upon the decision of this court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification dated 1st August 2009 issued under Entry 45 of Schedule II of the GVAT Act. Reliance was placed upon the CBEC Circular No.20/2013-Customs dated 14th May, 2013, whereby it has been clarified that Tablet Computers even if having a calling feature are to be classified under Chapter 8471 30 and not under Chapter Heading 8517. Reliance was placed upon an advance ruling under the Tamil Nadu Value Added Tax Act, 2006 in the context of i-pad which is also a tablet computer. Reliance was placed upon the common parlance test and it was contended that the functional utility and predominant or primary usage of the commodity which is being classified must be taken into account. Various decisions were cited in support of the contentions raised before the assessing authority. However, by the impugned order dated 31.12.2018 the assessing authority has held that the product in question falls under Entry 87 of Schedule II to the GVAT Act, namely, the residuary entry and hence, amenable to tax at the rate of 15%. 8. A perusal of the impugned order reveals that the assessing authority has referred to the contents of Heading 8471 and thereafter, observed that Tablet PC with Calling Fea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 7 provides that subject to the provisions of the Act, there shall be levied a tax on the turnover of sales of goods as specified in Schedule II or Schedule III at the rate set out against them in Schedule II or, as the case may be Schedule III. 13. Section 9 of the GVAT Act provides for Levy of purchase tax . Sub-section (1) thereof provides that where a dealer who is liable to pay tax under the Act purchases any taxable goods from a person who is not a registered dealer, then there shall be levied on such dealer a purchase tax on the turnover of such purchases at the rate set out against each of such goods in Schedule II or Schedule III of the Act. Schedule II to the GVAT Act bears the heading GOODS, THE SALES OR PURCHASE OF WHICH IS SUBJECT TO TAX AND THE RATE OF TAX . The entry at serial No.45 of Schedule II reads thus: 45 IT products as may be specified by the State Government by Notification in the Official Gazette Four paise in the rupee. 14. In exercise of powers conferred by Entry 45 of Schedule II to the GVAT Act, the State Government has issued a notification dated 1st August, 2009 specifying the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification dated 1st August, 2009 whereby in the table appended to the notification, in the entry at serial No.20, in the fifth column the words car telephone , transportable telephone cellular telephone came to be deleted. In view of the deletion of the above words from the notification dated 1st August, 2009, the stand of the respondents is that the product/goods in question are no longer IT products/goods falling under Entry 45 of Schedule II to the GVAT Act and are required to be classified under Entry 87 viz. the residuary entry and liable to value added tax at the rate of 12.5%. 18. As noticed earlier, vide the notification dated 1st August, 2009, the State Government has borrowed the Headings, Sub- Headings and Tariff items specifications of the IT Product/goods mentioned as specified in the Central Excise Tariff Act. Therefore, it may be germane to refer to the relevant provisions of the Central Excise Tariff Act. 19. A perusal of the Central Excise Tariff Act shows that both entries 8741 and 8525 fall under Section XVI namely, machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television image and sound r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by application of General Rules for Interpretation (GRI) of Import Tariff, 1 (Note 3 to Section XVI and Note 5(A) to Chapter 84) and 6. It is further observed that this decision is consistent with WCO HSC decision to classify certain machines commercially referable to as Tablet Computers in heading 8471, sub-heading 847130. 24. According to the petitioner, the above circular issued by the CBEC is binding upon the assessing authority; whereas according to the respondents, the circular is binding upon the authorities under the Customs Act and the Central Excise Act and is not binding upon them, namely the authorities under the GVAT Act. In this regard, it may be apposite to refer to the decision of the Supreme Court in Surana Steel (P) Ltd. v. CIT (supra), wherein it has been held thus: 11. Section 115-J explanation clause (iv), is a piece of legislation by incorporation. Dealing with the subject, Justice G.P. Singh states in Principles of Statutory Interpretation (7th Edn., 1999)- Incorporation of an earlier Act into a later Act is a legislative device adopted for the sake of convenience in order to avoid verbatim reproduction of the provisions of the earlier Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the GVAT Act cannot ignore the interpretation of the entries made by the CBEC on the specious plea that the directions of the CBEC are not binding upon them. The petitioners are therefore, wholly justified in invoking the writ jurisdiction of this court. 26. At this juncture it may be germane to refer to the decision of the Supreme Court in CCE v. Wood Craft Products Ltd. (supra), wherein the court has held thus: 4. Block board has not been expressly specified in any entry. The Revenue contends that block board is covered by the expression similar laminated wood in the heading Plywood, veneered panels and similar laminated wood of Heading No. 44.08 and, therefore, falls under the Sub-heading No. 4408.90 - other which is the residuary sub-heading. On the other hand, the manufacturers of block board contend that it is an article of wood and, therefore, falls under heading articles of wood not elsewhere specified of Heading No. 44.10, Sub-heading No. 4410.90 - other which is the residuary entry since it is not similar laminated wood . The basis of the rival contentions is that according to the manufacturers such an indication flows from the ISI Glossary of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The question is whether it can be so read even for the earlier periods particularly the first period before amendment of Chapter Note 5 to expressly include block board in the expression similar laminated wood . 12. It is significant, as expressly stated, in the Statement of Objects and Reasons, that the Central excise tariffs are based on the HSN and the internationally accepted nomenclature was taken into account to reduce disputes on account of tariff classification . Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the HSN. This being the expressly acknowledged basis of the structure of Central excise tariff in the Act and the tariff classification made therein, in case of any doubt the HSN is a safe guide for ascertaining the true meaning of any expression used in the Act. The ISI Glossary of Terms has a different purpose and, therefore, the specific purpose of tariff classification for which the internationally accepted nomenclature in HSN has been adopted, for enacting the Central Excise Tariff Act, 1985, must be preferred, in case of any difference between the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the excise tariff has been incorporated into the notification dated 1st August, 2009 issued in exercise of powers conferred by Entry 45 of Schedule II to the GVAT Act, then the interpretation of CBEC of such excise tariff is binding even on the authorities under the GVAT Act inasmuch as any other interpretation would defeat the very purpose of incorporation of the excise tariff in the notification issued under the GVAT Act. 29. Apart from the Circular dated 14th May, 2013 issued by the CBEC, on facts it may be noted that till the notification dated 1.4 2011 came to be issued, the classification of the product, namely, tablet computers, under entry 8471 30 was accepted by the respondent authorities. 30. As noticed earlier, according to the respondents, tablet computers with calling facility are required to be classified under sub-heading 8525 50 at serial No.20 of the notification dated 1st August, 2009. On a perusal of the products falling under sub-heading 8525 50 at serial No.20, it is evident that such devices are in the nature of transmission apparatus which also have a reception apparatus, the principal function whereof is transmission of sound. Moreover, even accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific heading cannot cover the goods in question. 34. In the above view of the matter, this court is of the considered opinion that tablet computer is not comparable with any of the three devices which came to be deleted from sub-heading 8525 50 vide notification dated 1st April, 2011, inasmuch as, it is neither a car telephone nor a transportable telephone nor a cellular telephone. Thus, the functions mentioned and relatable to calling functions, etc. are merely incidental and the same do not alter the basic feature of the goods in question namely, tablet computers, which even according to the respondents, are portable automatic data processing machines. Under the circumstances, the respondent assessing authority is not justified in holding that the product in question, namely, tablet computers would fall under Entry 87 of Schedule II to the GVAT Act, namely, the residuary entry. 35. Insofar as the decisions on which reliance has been placed by the learned Assistant Government Pleader are concerned, the decision of the Supreme Court in Commissioner of Customs, Banglore v. N.I. Systems (India) (P.) Ltd. (supra) would have no applicability to the facts of the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shows complete non-application of mind to the contentions raised on behalf of the petitioner and is, therefore, violative of the principles of natural justice. The Supreme Court in Steel Authority of India Ltd. v. Sales Tax Officer, Rourkela-I Circle, [2008] 16 VST 181 (SC) has reiterated that reason is the heartbeat of every conclusion. It introduces clarity in an order and without the same it becomes lifeless. In Whirlpool Corporation v. Registrar of Trade Marks, Mumbai, AIR 1999 SC 22, the Supreme Court has held that the alternative remedy has been consistently held by it not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for enforcement of any of the fundamental rights or where there has been a violation of the principles of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. The impugned order having been passed in breach of the principles of natural justice, the existence of an alternative remedy would not be a bar against entertaining a petition under article 226 of the Constitution. 37. Moreover, in the light of the above discussion, it is evident th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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