The doctrine of dominant purpose in determining the tax rate for multi functional printers/machines under the Delhi Value Added Tax Act, 2004.

SANJIV KHANNA, J.

1. Ricoh India Limited has preferred the present appeal under Section 81 of the Delhi Value Added Tax Act, 2004 (VAT, Act, for short) against the order dated 10th March, 2010 passed by the Appellate Tribunal, Value Added Tax, New Delhi (for short, the tribunal) in Appeal No.319/ATVAT/07-08. By the impugned order, the tribunal has affirmed the order dated 13th December, 2007, passed by the Commissioner, Department of Trade and Taxes, disposing of the application for advance ruling filed by the appellant under Section 84 of the VAT Act. The tribunal has upheld the finding of the Commissioner that multi functional printers/copiers/scanners having HSN code No.8471.60.29 and sales of spares and consumables of the above products having HSN code No. 8473.30.99 during the period 1st April, 2005 to 31st March, 2007 are taxable under the residuary head and, therefore, attract value added tax @ 12.5% and do not fall under Entry No. 41A of the third Schedule of the VAT Act and, therefore, are not taxable @ 4%.

2. The substantial question of law, on which we have heard learned counsel for the parties and which requires adjudication, is as under:-

“Whether the multi functional printers/machines and their spares and consumables, during the period 1st April, 2005 to 31st March, 2007, are taxable under Entry No. 41A of the third schedule of the Delhi Value Added Tax, 2004 or are taxable under the residuary head @ 12.5%?”

3. The appellant had filed an application under Section 84 of the VAT Act seeking advance ruling in respect of the applicable VAT rate on the multi functional printers/machines and their spares and consumables during the period 1st April, 2005 to 31st March, 2007 (hereinafter referred to as “the relevant period”). We may notice that the application and the question raised in the said application itself stated that the multi functional printers/copiers/scanners fall under the HSN code No.8471.60.29 and the spares and consumables fall under the HSN code No.8473.30.99. However, the declaration/statement ignores the controversy, whether the product(s) of the appellant are in fact “multi functional printers”, which fall within the aforesaid HSN Code. Another aspect/question raised is whether and to what extent the HSN Code is applicable as far as Entry No.41A to the third schedule of the VAT Act is concerned.

4. Sales Tax on interstate sale is levied by the Union Government under Entry No.92A of List I, while sales tax or Value Added Tax on intrastate transactions is a State subject and each State has power to legislate on the said subject and impose taxes on sale/purchase of goods other than the newspapers and is authorized under Entry No. 54 of List II of the Constitution.

5. There are four schedules to the VAT Act relating to the rate of tax. Schedule I consists of goods which are exempt from tax. There are three entries in the schedule II and the goods mentioned in said entries are taxable @ 1%. Goods mentioned in schedule III are taxable @ 4% (enhanced to 5% after 13.1.2010). There are 12 entries in Schedule IV and the goods mentioned in the said entries are taxable @ 20%. All other goods which are not classified and mentioned in the Schedules I to IV are taxable @ 12.5%. The main and principal dispute is whether the products sold by the appellant are covered by Entry No.41A of the third schedule of the VAT Act or are unclassified goods that attract tax @12.5%. In case the goods in question are covered by Entry No.41A of the third schedule of the VAT Act, the tax payable is @ 4%, otherwise, the tax is payable @ 12.5%.

6. During the relevant period, Entry No.41A of the third schedule has undergone three amendments. During the period 1st April, 2005 to 7th August, 2005, Entry Nos. 41 an 41A were as under:-

7. During the period 8th August, 2005 to 29th November, 2005, Entry Nos. 41 an 41A

8. Entry Nos. 41 and 41A underwent substantial changes with effect from 30th November, 2005 and thereafter duri