Allowed

State of Orissa v. M/S.Zenith Techno Engineers Pvt.Ltd.

Orissa HC10 Apr 2023STREV/45/2015

Case brief

AI extract

What is this about?

The High Court allowed a tax revision petition challenging the classification of multi-functional digital copiers. The Court held that under the commercial use test, such devices are known as 'copiers' and fall under Part-II of the tax schedule, rejecting the Tribunal's functional classification.

What did the court decide?

The impugned order of the Sales Tax Tribunal was set aside; the assessment order dated 31.05.2011 restoring the lower tax rate was restored.

State of Orissa Vs M/S.Zenith Techno Engineers Pvt.Ltd. — Service and Employment | Orissa HC (2023)

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AFR

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IN THE HIGH COURT OF ORISSA AT CUTTACK STREV No.45 of 2015

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(An application under Section 19 of the Odisha Entry Tax Act, 1999 read with Rule 24 of the Odisha Entry Tax Rules, 1999.)

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State of Odisha …. Petitioner
-versus-
M/s. Zenith Techno Engineers Pvt. Ltd. …. Opp. Party

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Advocates appeared in this case through Hybrid Mode :
For Petitioner : Mr.S.S.Padhi, ASC
(for C.T. & GST)
For Opp. Party : None
CORAM:
JUSTICE S.TALAPATRA
JUSTICE SAVITRI RATHO
…………………………………………………
Date of Judgment : 10.04.2023

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……………… …………………………………

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S.Talapatra, J. This matter is taken up through hybrid mode.

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2. Heard Mr. S.S. Padhi, learned Addl. Standing Counsel,

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for CT & GST appearing for the Petitioner. None appears for the Opposite Party (the assessee) despite due notice.

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3. By means of this petition, filed under Section 19 of the

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STREV No. 45 of 2015 Page 1 of 10

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Orissa Entry Tax Act, 1999 read with Rule 24 of the Orissa Entry

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Tax Rules, 1999, the Petitioner (the revenue) has challenged the order dated 30.09.2015 delivered in S.A. No. 92(ET) of 2013-14 by the Odisha Sales Tax Tribunal. The Sales Tax Tribunal has by way of affirmation has held by the said order that the multi-functional digital copier is exigible to the Entry Tax @ 1% as the said product is covered by Entry No. 70 of Part-I of the Orissa Entry Tax Rate

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Chart. It has been further observed that as per Entry No. 23 of Part-II of the said rate chart, the copier or the xerox machine is subject to

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levy of tax at the rate of 2%.

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It has been noted that the dealer [the Opposite Party herein] deals in multi-functional digital copiers which are used for various

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purposes, such as, printing, scanning, photo copying, fax, e-mail etc. The xerox machine and the copier cannot print. Thus, the item, dealt in by the dealer, comes under the broad category of the computer

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peripherals and such classification has been done after carrying out the functional test. That apart, it has been observed strangely that Multi-functional digital copiers are available in the computer showrooms. For that reason, it has been held that for taxing under the OET Act, the multi-functional digital copier will come under the

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STREV No.45 of 2015

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category, as specified in Entry No. 70 of Part-I which include

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computers, their spare parts, accessories, stationeries and

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consumable and computer softwares.

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4. After observing thus, the Sales Tax Tribunal by the order

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dated 30.03.2013 has refused to interfere with the order dated 10.01.2013 passed in the First Appeal No. AA-108111110000077. By the said order dated 10.01.2013, the First Appellate Authority had allowed the appeal of the Opposite Party under Section 16 of the Orissa Entry Tax Act, 1999 by returning the finding that multifunctional digital copiers may act as combination of devices viz. (a) printer, (b) scanner, (c) photo copier, (d) fax and (e) e-mail. Except the photo copier, the others are connectable to the Central Processing Unit (CPU) of the automatic data processing system and they are able to accept or deliver data in a form (codes or signals) which can be used by the system.

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5. Mr. S.S. Padhy, learned Addl. Standing Counsel, CT &

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GST who has appeared for the revision petitioner, has contended that the principal function of any multi- functional digital copier is printing/copying. The value of printing components of the machine is more than the value of the other components, if put together.

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Thus, it cannot be held to be a computer peripheral. Reference has

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STREV No.45 of 2015

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been made to a decision of the Division Bench of West Bengal Taxation Tribunal in Ricoh India Limited and Another Vrs. ACST,

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Public Relation Office and Others, (2008) 14 VST 491 (WBTT). The first Appellate Court having relied on the said decision has disagreed with the inference drawn by the Assessing Authority (under the OET Act) that the multi-functional digital copier is not xerox machine and as such, the duty or tax will be fixed under Entry

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70, Part-I of the schedule.

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provisions as made under Part-I and Part-II of the Schedule.

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Part-II of the Schedule Entry 23:Copier, Xerox Machine, Fax, VCR, VCP, VCD, DVD, Video Camera; or

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Part-I of the Schedule

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Entry 70: Computer, ITS Spare Parts, Accessories, Stationeries and Consumables and Computer Software.

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7. Mr. Padhi, learned Addl. Standing Counsel has contended

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that the order dated 30.09.2015 passed by the Orissa Sales Tax Tribunal is grossly erroneous for the simple reason that no functional test is required for determining the classification when the

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STREV No.45 of 2015

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Common Parlance Test also known also as the Commercial Use Test, is carried out to classify any product. In this regard, Mr. Padhi,

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learned Addl. Standing Counsel has placed his reliance on a decision of the Apex Court in G.S. Auto International Ltd. vs. Collector of

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Central Excise, Chandigarh : (2003) 2 SCC 371 , where the Apex Court has unequivocally held that a question relating to classification of the goods, as they were confronted with, in that case whether the goods or products will fall under Entries No. 52 or 68 under the First Schedule of the Central Excise Tariffs, 1944, can only be determined by the methods legally acceptable. On such determination only, it will be decided what duty or tax is exigible. The Apex Court has observed, in respect of the methods of identification and classification of the products, in G.S. Auto International Ltd. vs. Collector of Central Excise, Chandigarh : (2003) 2 SCC 371, as follows:

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“16. The question that needs to be adverted to is: whether the goods in question can appropriately be classified under Tariff Item 52 or not having been specified elsewhere, they fall under Tariff Item 68. In construing these items, what is the proper test to be applied? Is it the functional test or is it commercial identity test which would determine the issue? It seems to us that this question is no longer res Integra. It fell for consideration of this Court earlier and it was laid down that the true test for classification was the test of commercial identity and not the functional test. It needs to be ascertained as to how the goods in question are referred to in the market

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STREV No.45 of 2015

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by those who deal with them, be it for the purposes of selling, purchasing or otherwise.”

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Mr. Padhi, learned Addl. Standing Counsel has

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contended that there is no dispute that the product is a copier. To be precise, the product is the multi-functional digital copier. According

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to Mr. Padhi, learned Additional Standing Counsel, the classification as adopted in the assessment order dated 31.05.2011 should not have

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been faulted with. If by means of the commercial use test, the product is found to be in a particular class, that determination ought

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not have been interfered with. In the assessment order, the Sales Tax

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Officer, Bhubaneswar-1 Circle has observed that it is evident from the Registration Certificate under the OVAT Act and the CST Act that the dealer has been registered to deal in photocopiers, electric stabilizers including constant voltage transformers (CVT) and computer printers. At the time of applying for the Registration Certificate (RC), the dealer had revealed the main dealing items. The dealer had applied for photocopiers which are commonly known as Xerox machines. Thus, the dealer is supposed to deal only in xerox machines or copiers after their purchase from outside Odisha, on paying due entry tax. Payment of Entry Tax was made by the dealer at a lesser rate since the commencement of his business. For the said

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STREV No.45 of 2015

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reason, the dealer has been assessed to pay Entry Tax of Rs.3,46,160/- @ 2% on the landed cost of goods [the digital copiers] purchased from outside the State of Odisha. In addition thereto, the dealer (the Opposite Party) was held liable to pay the OET of Rs.62,329/- on the sale value of Rs.31,16,455/-. The said transaction had taken place outside the local area. Thus, the total OET has been assessed to be Rs.4,08,4897/-. The penalty of Rs.4,04,654/- has been imposed for evasion . As noted, on the import of copiers from outside the local area, the dealer was duty-bound to pay Rs.62,329/- on the turnover of Rs.31,16,455/-. Hence, the dealer had to satisfy the demand of Rs.4,08,489/-. Accordingly, the dealer was asked to pay the said amount. The dealer had paid 1% on classifying the product as the computer peripheral. There is no dispute that the dealer had deposited OET of Rs.2,06,162/- at 1%. On adjustment, he is now liable to pay the balance amount of Rs. 2,02,327/- along with

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penalty of Rs.4,04,654/- under Section 9C(5) of the Orissa Entry Tax Act. Thus, the assessee’s total liability of payment has been determined at Rs.6,06,981/-

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The dealer [the assessee] had challenged the said order of assessment in the first appeal. The first Appellate Authority has

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STREV No.45 of 2015

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interfered with and reversed the said order of assessment observing as under:

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“After giving allowance of Rs.3,78,233.00 towards sale inside the local area and Rs.41,81,180.03 towards local purchases TTO in this case is determined at Rs.2,06,11,979.39. Tax on @1% on Rs.2,04,24,475.39 and @2% on Rs.1,87,504.00 is calculated at Rs.2,07,994.83 against which the dealer is allowed deduction of Rs.2,05,015.00 towards ET deposited. The dealer is now assessed to Rs.2,979.83 or Rs.2,980.00. Besides, a penalty amounting to Rs.5,960.00 which is equal to twice the amount of tax due is also imposed u/s 9C 5 of the Act. Thus, tax and penalty together comes to Rs.8,940.00. Accordingly, the dealer is now found liable to pay tax and penalty amounting to Rs.8,940.00.”

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By the said order dated 10.01.2013, the demand has been reduced to Rs.8,940.00 by applying OET @1% from the sum of Rs.6,06,981 (the balance OET Rs.2,02,327+Penalty Rs.4,04,654) as assessed and determined by the Assessing Authority (Entry Tax), Bhubaneswar on applying OET @2%.

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8. We have already noted that the said order has been affirmed by the Sales Tax Tribunal by the impugned order dated 30.09.2015, Annexure-3 to the revision petition. We have scrutinized the materials which were considered both by the first Appellate Authority and the Sales Tax Tribunal to answer the substantial question of law as formulated by this court by the order dated 09.09.2016 which we reproduce below:

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STREV No.45 of 2015

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“For that the impugned order vide Annexure-3 is liable to be set aside inasmuch as the learned Odisha Sales Tax Tribunal committed gross error in arriving at the conclusion that “MULTIFUNCTIONAL DIGITAL COPIER” would not fall within the scope of Entry 23 of Part-II, but fall under 70 of Part-I of Schedule appended to the OET Act.”

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9. The main purpose of the multi-functional digital copier is

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to multiply the copies. The product identity is not under challenge. But both the Sales Tax Tribunal and the First Appellate Authority

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have classified the product as computer peripheral by the functional test. According to them, the digital copier cannot be treated as a copier as its image is generated through a computer. It is a unique proposition which defies the fundamentals relating to the process of multiplication by a digital copier.

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We find such classification is abrupt and in complete derogation of specific entry copier available in Entry 23, Part II. Hence, we are of the view that the classification as adopted by the Odisha Sales Tax Tribunal cannot be sustained as by the commercial use test, the product under reference is known as the copier. Accordingly, the impugned order is interfered with and set aside.

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10. In the result, the Revision Petition stands allowed.

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11. It is needless to say that the assessment order dated 31.05.2011 passed by the Assessing Authority (Entry Tax),

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STREV No.45 of 2015

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Bhubaneswar Annexure-1, to this writ petition, is restored. However, at the time of the recovery, the Sales Tax Officer may accommodate the dealer with instalments for payment of the due.

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12. There shall be no order as to costs.

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13. Urgent certified copy of this order be granted as per rules.

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………………………
(S. Talapatra, J)
.
Savitri Ratho, J. I agree.
……………………
(Savitri Ratho, J)
Orissa High Court, Cuttack
Dated 10 th April, 2023/Rati Ranjan/Sukanta

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STREV No.45 of 2015

State of Orissa v. M/S.Zenith Techno Engineers Pvt.Ltd.

Case brief

What is this about?

What did the court decide?

State of Orissa v. M/S.Zenith Techno Engineers Pvt.Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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