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IN THE HIGH COURT OF KERALA AT ERNAKULAM
DINESH KUMAR SINGH, J.
M/s. Professional Copier Services India Pvt. Ltd. – Petitioner
Versus
State of Kerala – Respondent
W.P. (C) No. 23630 of 2016, W.P. (C) Nos. 22343, 31902, 31955, 32003 of 2015
Decided On : 09-01-2024
Multi-Function Printer - Tax Classification Dispute - KVAT Act, 2003 - Entry 69(22)(c)(i) - Summary: The court considered the dispute over the tax classification of multi-function printers under Entry 69(22)(c)(i) of the KVAT Act, 2003. The court analyzed the classification adopted by the importer-seller and the re-sellers, and the applicability of penalty proceedings under Section 67(1) of the KVAT Act. The court held that the re-sellers could not be penalized for adopting the same classification as the importer-seller, and set aside the penalty orders.
Fact of the Case:
The petitioners, engaged in the sales of IT products, were involved in a tax classification dispute regarding multi-function printers under the KVAT Act, 2003. The Intelligence Officer imposed penalty proceedings on the premise of misclassification by the petitioners.
Finding of the Court:
The court found that the re-sellers could not be penalized for adopting the same classification as the importer-seller. The court set aside the penalty orders, considering the absence of wilful misclassification and the applicability of penalty proceedings under Section 67(1) of the KVAT Act.
Issues: The main issue revolved around the tax classification of multi-function printers and the imposition of penalty proceedings under Section 67(1) of the KVAT Act.
Ratio Decidendi: The court's decision was based on the principle that re-sellers could not be penalized for adopting the same classification as the importer-seller, and the absence of wilful misclassification to evade tax.
Final Decision: The court allowed the writ petitions and set aside the penalty orders imposed on the petitioners, as well as the importer-seller, without any order as to costs.
JUDGMENT :
DINESH KUMAR SINGH, J.
WP (C) Nos. 22343/2015 and 23630/2016
1. WP (C) No. 22343/2015 has been filed mainly seeking the following reliefs:
(ii) declare that the “Multi-Function Printer” traded by the petitioner, falls under Entry 69(22)(c)(i) of the 3rd Schedule to the KVAT Act, 2003, attracting tax @ 4%.
(iii) declare that the Amendment vide Kerala Finance Act, 2014, brought u/s. 55, taking away the two stages of appellate remedies and the right of revision on a substantial question of law before this Hon’ble Court, as unconstitutional, insofar as it deprives the assessees of the already accrued statutory rights in respect of the proceedings initiated prior to 1.4.2014.”
The main reliefs sought for in WP (C) No. 23630/2016 are as follows:
“(i) call for the records leading to Exhibits P7, P8 & P9 orders issued by the 3rd respondent and quash the same by the issuance of a writ of certiorari or such other writ, order or direction.
(ii) declare that the “Multi-Function Printer” traded by the petitioner, falls under Entry 69(22)(c)(i) of the 3rd Schedule to the KVAT Act, 2003, attracting tax @ 4%/5% as applicable in the respective year.”
2. The petitioners are Companies engaged in the business of sales of IT products. These writ petitions pertain to the assessment years 2011-12, 2012-13 and 2013-14. The petitioner in WP (C) No. 22343/2015 had purchased two models of machines ‘Task-Alfa 180’ and ‘Task-Alfa 220’ (hereinafter referred to as “machines” for short) from the importer-seller - M/s. Kyocera Mita India Pvt. Ltd. Ernakulam, presently Kyocera Documents Solutions India Pvt. Ltd. Ernakulam, which is the petitioner in WP (C) Nos.31955, 32003 and 31902 of 2015. In the case of the petitioner in WP (C) No. 23630/2016, the machine, ‘Task-Alfa 180’ was purchased from the very same importer-seller during the said period. These machines were classified under Entry 69 of the Third Schedule to the Kerala Value Added Tax Act, 2003 (“KVAT Act” for short).
3. The importer-seller classified the machines as ‘Digital Multifunctional Device’ with HSN Code 8443 3100 under the provisions of the Customs Act, 1962 and Customs Tariff Act, 1975. The petitioners/purchasers - re-sellers followed the same classification adopted by the importer-seller while re-selling the machines to their customers. The petitioners classified the machines under Entry 69(22)(c)(i) falling under the Third Schedule to the KVAT Act. The products under Entry 69(22)(c)(i) attract 5% VAT. The Intelligence Officer instituted penalty proceedings under Section 67 of the KVAT Act for the years 2011-12, 2012-13 and 2013-14, on the premise that there was wilful misclassification of the machines sold by the petitioners. The Intelligence Officer was of the view that the machines sold by the petitioners would come under serial No. 30 in the ‘list of goods taxable at 12.5%/13.5%/14.5%’ as opposed to the classification of the petitioners under Entry 69(22)(c)(i) falling under the Third Schedule to the KVAT Act. The Intelligence Officer passed Exts.P7 to P9 penalty orders for three years separately affirming imposition of penalty proposed in the show-cause notices issued to the petitioners in these two cases. These penalty orders are under challenge in WP (C) No. 23630/2016.
4. However, the petitioner in WP (C) No. 22343/2015 had challenged the aforesaid penalty orders issued against it before this Court by filing WP (C) No. 33728/2014(M), which was disposed of by a learned Single Judge of this Court vide Ext.P10 judgment dated 19.12.2014, by which the penalty orders in Exts.P7 to P9 issued against the petitioner in WP (C) No. 22343/2015 were set aside and the matter was remanded back to the Intelligence Officer for re-consideration, in the light of the observations of this Court in Chakkiath Brot
Penalties under Section 70B of the KVAT Act require clear evidence of commercial use of goods declared for personal use, which was not demonstrated in this case.
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