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2015 Supreme(Del) 1834
IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR & VIBHU BAKHRU, JJ.
SONY INDIA PVT. LTD. – Petitioner
Versus
COMMISSIONER OF TRADE & TAXES – Respondent
ST.APPL 29 & 31 of 2013
Decided On : 04-08-2015
Mr. Tarun Gulati, Advocate with Mr. Tushal Gupta, Mr. Kishore Kunal, Mr. Shashi Mathews, Advocates
Mr. Gautam Narayan, Addl. Standing counsel
The central legal point established in the judgment is the interpretation of the classification of Digital Still Image Video cameras (‘DSCs’) as IT products under the DVAT Act and the applicability of VAT rates for different periods.
Headnote:
DSCs - VAT Classification - DVAT Act, 2004 - Entry 41, 41A - Summary of the legal provisions and interpretations
Fact of the Case:
The case involved two appeals against a common order passed by the Appellate Tribunal (‘AT’), Value Added Tax (‘VAT’). The appeals concerned the sale of Digital Still Image Video cameras (‘DSCs’) by the Appellant under the Delhi Value Added Tax Act, 2004 (‘DVAT Act'). The dispute pertained to the rate of VAT payable by the Appellant on the sale of DSCs for three distinct periods: 1st April 2005 to 7th August 2005, 8th August 2005 to 29th November 2005, and 30th November 2005 to 31st December 2007.
Finding of the Court:
The Court found that for the period 1st April 2005 to 7th August 2005, DSCs could not be classified as IT products under Entry 41 of Schedule III to the DVAT Act. The Court also held that the Appellant was not entitled to the benefit of Section 86 of the DVAT Act for deemed determination by the Commissioner. However, the Court concluded that the Appellant's conduct did not warrant the levy of penalty, as it acted bona fide in charging tax at 4%. For the period 30th November 2005 to 31st December 2007, the Court held that DSCs were eligible for 4% VAT and not 12.5% VAT, and the demand of the differential tax, interest, and penalty was set aside.
Issues: The main issues revolved around the classification of DSCs as IT products under Entry 41 of Schedule III to the DVAT Act, the applicability of Section 86 for deemed determination by the Commissioner, and the levy of penalty and interest.
Ratio Decidendi: The Court's decision was based on the interpretation of the legal provisions under the DVAT Act, the Information Technology Agreement (‘ITA’) of the World Trade Organisation (‘WTO’), and the Central Excise Tariff Act, 1985. The Court also considered the legislative intent, the Empowered Committee's White Paper on VAT, and the uniform adoption of entries by several states to determine the classification of DSCs and the applicable VAT rates.
Final Decision: The Court upheld the determination of tax and interest for the period 1st April 2005 to 7th August 2005, but set aside the levy of penalty and the corresponding interest. For the period 30th November 2005 to 31st December 2007, the Court set aside the demand of the differential tax, interest, and penalty, and held that DSCs were eligible for 4% VAT.
S. Muralidhar, J.
1. These two appeals are directed against a common order dated 9th April 2013 passed by the Appellate Tribunal (‘AT’), Value Added Tax (‘VAT’). ST Appeal No. 31 of 2103 pertains to the period 1st April 2005 to 7th August 2005 and ST Appeal No. 29 of 2103 pertains to the period 30th November 2005 to 31st December 2007.
2. At the hearing of these appeals on 30th July 2013 (along with ST Appeal No.30 of 2013 which pertained to the period 8th August 2005 to 9th November 2005) the Court framed the following questions of law:
i) Whether the Tribunal was right in holding that Digital Still Image Video camera is not classified and covered by Entry No.41 or 41A (Description 15)?
ii) Whether the Tribunal was right in holding that there was deemed waiver of the application for pre-determination and if the Tribunal was wrong, effect thereof?
iii) Whether the Tribunal was justified in upholding levy of penalty and interest?
3. The Court by the said order observed that it was not inclined to stay the demand raised as it would examine whether digital still image video cameras (‘DSCs’) could be regarded as information technology products.
Background Facts
4. The Appellant is a registered dealer under the Delhi Value Added Tax Act, 2004 (‘DVAT Act') and is engaged in the sale of wide range of electronic items and information technology (‘IT’) products across India including Delhi. The appeals concerns the sale by the Appellant of DSCs which according to the Appellant operate on a software system and the pictures of which are processed by a computer system to which the DSCs can be attached through USB cable.
5. At the outset it requires to be noted that the dispute concerning the rate of VAT payable by the Appellant Assessee on the DSCs sold by it pertain to three distinct periods. The first is the period from 1st April 2005 to 7th August 2005. The second is the period from 8th August 2005 to 29th November 2005 and the third from 30th November 2005 to 31st December 2007.
6. As regards the period the period 8th August 2005 to 29th November 2005, the Appellant had filed ST Appeal No.30 of 2013. The said appeal was not pressed by the Appellant at the hearing since the Appellant adopted for the ‘Delhi Tax Compliance Achievement Scheme 2013’ and one of the contentions were availing of the benefit under the said scheme so that any appeal filed by the Assessee would have to be withdrawn. Accordingly, by order dated 9th July 2015, this Court dismissed ST Appeal No. 30 of 2013 as withdrawn. Consequently, the present judgment is in respect of ST Appeals 29 and 31 of 2013 pertaining to the periods 30th November 2005 to 31st December 2007 and 1st April 2005 to 7th August 2005 respectively.
The period 1st April to 7th August 2005
7. The facts relevant for the period between 1st April 2005 and 7th August 2005 (ST Appeal No. 31 /2013) are that the Appellant paid tax for the sale of DSCs @ 4%. The goods were covered under Entry 41 of Schedule III of DVAT Act. During the relevant period, Entries 41 and 41-A read as under:
| Entry No. | Description |
| 41 | IT Products including computers, telephone and parts thereof, tele printer and wireless equipment and parts thereof. |
| 41A | IT Products notified by the Ministry of IT as specified below: |
| Sr. No. | Description |
| (1) | (2) |
| (vii) | Transmission apparatus other than apparatus for radio or T.V. broadcasting |
8. According to the Appellant since at the relevant time the expression 'IT product' was not defined in the DVAT Act, the definition in the Information Technology Agreement (‘ITA’) of the World Trade Organisation (‘WTO’), to which India is a signatory, required to be referred to for ascertaining the definition. Under the ITA, the list of IT products includes DSCs under tariff heading 8525 40. It is stated in the Customs Tariff Act, 1975, as it was at the relevant time, th
