The Bombay High Court in the case of Ricoh India Ltd. v. State of Maharashtra held that the rate of tax applicable on the sale/lease of the multi-functional printers would be 12.5% as opposed to 4% claimed by the appellant.
The appellant is engaged in the business of importing and selling the electronic and Information Technology products such as printers, computers, projectors, etc. and is a registered dealer under the MVAT Act. The Commissioner of State Tax in its order held that the rate of tax applicable on the sale/lease of the multi-functional printers would be 12.5% as opposed to 4% claimed by the appellant. Furthermore, it was held that the rate of tax on parts, drums, etc. would be 12.5%. The appellant aggrieved by the order appealed before the Maharashtra State Tax Tribunal which has upheld the earlier order.
The issue before the High Court was whether the multifunction printers are classifiable as “input units” or “output units” or “automatic data processing machine” or units thereof or as other units of the automatic data processing machine.
The appellant contended that the products in question are multi-functional printers sold and marked as printers with additional capacities such as copying, fax and scanning. Any person, while making a purchase of this article, understands it to be a printer with some incidental and additional capacity. The buyer, instead of requiring to invest in four separate machines, viz. printer, scanner, fax and copier, can obtain all these capabilities by purchasing a multi-functional printer which according to the appellant is classifiable under Entry 84.71 of the Notification dated April 1st, 2005 as input or output unit. Relying upon the definition of terms ‘input unit’ and ‘output unit’ under the dictionaries of science and technology, it was submitted that the terms would have to be interpreted in their ordinary sense.
Furthermore, it is submitted that the product is an “automatic data processing machine” or units thereof or as other units of automatic data processing units. Reliance was placed on Note 1 of the IT Products Notification to interpret the meaning of the above phrases in the light of the explanatory notes issued by the Customs Co-operation Council, Brussels. It was predominantly submitted that in accordance with the dominant nature test, these products must be classified under the Entry satisfying their primary character which in this case is printing. Also, that specific entry must prevail over the residuary entry.
The Court after considering the submissions of both the parties, relying upon the earlier decisions, citing relevant paragraphs was of the view that the multi-functional machines or printers can be termed as computer peripheral if its principal or sole purpose is to be attached and function as a computer ancillary. A multi-functional machine will be and qualify as a computer peripheral when its main/predominant purpose is to scan documents, load data or work as an input device of the computer or work as an output device to take printouts from the computer. This would require elucidation and examination of the factual matrix in each case and the machine in question on the case to case basis.
The Court distinguished the facts of the case relied upon by the appellant where the issue If Xerox machines are multi-functional machines performing the functions of printer/fax machines, copier and/or scanner and therefore required to be classified as printers in automatic inter-processing machines under Chapter heading 8471.60, then, the issue is materially different than the one falling for our consideration.
Hence, the division bench comprising of Justices S.C. Dharmadhikari and B.P. Colabawalla answered the questions in favor of the revenue attracting a rate of duty at 12.5%.
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