Prayer in W.P No. 4042 of 2008: The Writ Petition filed under Article 226 of the Constitution of India for issue of Writ of Certiorarified Mandamus, to call for the records of the respondents culminating in the passing of the Clarification No. Lr. No. VAT Cell/434264/2007 (VCC No. 1392) dated November 19, 2007, passed by the respondent No. 2 as the Notices in TIN No. 33801501454, dated January 31, 2008 and February 5, 2008, passed by respondent No. 3 and quash the same and to further direct the respondents to assess the liability of sales tax on the sale of printer cartridges at the rate of 4% and not 12.5%.

Prayer in W.P No. 20301 of 2009: The Writ Petition filed under Article 226 of the Constitution of India for issue of Writ of Mandamus, to forbear the State of Tamil Nadu, and its officers and agents from recovering tax in excess of 4% on the sale of Inkjet Cartridges and Toner cartridges used in the Inkjet Printers/Laser printers in disregard of Item 24 of G.O.Ms No. 3 CT & R B1, dated 01.01.2007, notified under Serial No. 68 of Part-B of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006, by resorting to levy at 12.5% under the residuary classification of Part-C of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006 Prayer amended as per order dated 05.07.2013 in M.P No. 1 of 2013 i W.P No. 20301 of 2009.

Prayer in W.P Nos. 20303 to 20310 of 2009: The Writ Petition filed under Article 226 of the Constitution of India for issue of Writ of Mandamus, to forbear the State of Tamil Nadu, and its officers and agents from recovering tax in excess of 4% in disregard of Item 24 of G.O.Ms No. 3 CT & R B1, dated 01.01.2007, notified under Serial No. 68 of Part-B of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006, by resorting to levy at 12.5% under the residuary classification of Part-C of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006.

Prayer in W.P Nos. 25125 to 25132 of 2009: The Writ Petition filed under Article 226 of the Constitution of India for issue of Writ of Mandamus, to forbear the State of Tamil Nadu, and its officers and agents from recovering tax in excess of 4% in disregard of Item 24 of G.O.Ms No. 3 CT & R B1, dated 01.01.2007, notified under Serial No. 68 of Part-B of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006, (apart from the fact that parts of the main product attract the same rate as the main product as per proviso to Section 3(2)), by resorting to levy at 12.5% under the residuary classification of Part-C of the First Schedule to the Tamil Nadu Value Added Tax Act, by giving effect to the orders of the second respondent in letter No. VAT Cell/437/2007 dated 18.04.2007 (VCC 325) and such other orders.

Prayer in W.P Nos. 26280, 26282 to 26285 of 2009: The Writ Petition filed under Article 226 of the Constitution of India for issue of Writ of Mandamus, to forbear the State of Tamil Nadu, and its officers and agents R1, R2 & R3 from recovering tax in excess of 4% in disregard of Item 24 of G.O.Ms No. 3 CT & R B1, dated 01.01.2007, notified under Serial No. 68 of Part-B of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006, (apart from the fact that parts of the main product attract the same rate as the main product as per proviso to Section 3(2)), by resorting to levy at 12.5% under the residuary classification of Part-C of the First Schedule to the Tamil Nadu Value Added Tax Act, by giving effect to the orders of the second respondent in letter No. VAT Cell/437/2007 dated 18.04.2007 (VCC 325) and such other orders.

Prayer in W.P No. 10274 of 2011: The Writ Petition filed under Article 226 of the Constitution of India for issue of Writ of Mandamus, to forbear the State of Tamil Nadu, and its officers and agents from recovering tax in excess of 4% in disregard of Item 24 of G.O.Ms No. 3 CT & R B1, dated 01.01.2007, notified under Serial No. 68 of Part-B of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006, by resorting to levy at 12.5% under the residuary classification of Part-C of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006 (apart from the fact that parts of the main product attract the same rate as the main product as per proviso to Section 3(2)) by resorting to levy at 12.5% under the residuary classification of Part-C of the First Schedule to the Tamil Nadu Value Added Tax Act by giving effect to the orders of the Second Respondent in Letter No. VAT Cell./437/2007, dated 18.04.2007, (VCC 325).

COMMON ORDER

R. BANUMATHI, J. & T.S SIVAGNANAM, J.

These writ petitions arise under the Tamil Nadu Value Added Tax, 2006 (TN Act 31 of 2006) (hereinafter referred to as the VAT Act).

2. Broadly, there are two category of cases, one set of writ petitions filed for issuance of writ of Declaration that Section 19(1) of the VAT Act prescribing the period for claim of Input Tax Credit (ITC) is inconsistent with the charging Section 3(2) and Section 3(3) and the general scheme of the Act for filing return and annual assessment and reassessment embodied such as Section 22, 27(b), Section 29, the revisional power under Section 53 and to be declared unenforceable and irrational infringing Article 14 and 19(1)(g) of the Constitution of India insofar as setting out a condition as to time.

3. In the other set of writ petitions prayer has been made for issuance of writ of Mandamus to forbear the State of Tamil Nadu from recovering tax in excess of 4% in disregard of item 24 of G.O.Ms No. 3, CT & R (B1) department, dated 01.01.2007, notified under serial No. 68 of Part B of the First Schedule to the VAT Act, by resorting to levy at 12.5% under the residuary classification of Part C of the First Schedule to the VAT Act by giving effect to the order passed by the Commissioner of Commercial Tax, dated 18.04.2007

4. By our order dated 25.06.2013, we have segregated the two batch of cases with request to counsels to advance arguments separately in each batch, to be heard and decided separately.

5. Accordingly, we have first taken up for consideration the writ petition filed for issuance of writ of Mandamus with the aforementioned prayer.

6. In all these cases, the petitioners are manufacturers and successive dealers, who have effected sales and re-sales of Ink Jet Cartridges and toner cartridges used in ink jet printers and laser printers. At the request of the learned Senior counsel appearing for the petitioners, we have taken W.P No. 25124 of 2009, as a lead case, which is a manufacturer/seller of Cartridges.

7. The petitioners would contend that all State Governments have agreed to tax Information Technology Products (IT Products) to VAT at the rate of 4% (presently raised to 5%) and all states are taxing IT Products, namely, Ink Jet Cartridge as “accessory” or “part” of printer, which is a “peripheral”. It is stated that Section 3(2) read with serial No. 68 of Part B of First Schedule to the VAT Act deals with “Information Technology Products as notified by the Government”, where under the Government notified computer systems and peripheral and parts, and parts and accessories of computer systems as peripheral. The goods listed in Part B of the First Schedule to the VAT Act attracts tax at the rate of 4% and they are goods specified. It is stated that the revenue relies upon the residuary entry in Part C for unenumerated goods attracting tax at 14.5%. It is stated that the petitioner and various dealers buy and re-sell Ink Cartridges for laser printer as an accessory to laser printer and the revenue accepted that laser printer is within the entry “computer systems, peripherals and parts” and taxed as notified goods at 4% and the Commissioner of Commercial Taxes clarified that laser printers, cartridges, Ink jet cartridges to printers were taxable under the residuary Entry in Part C of the first schedule, when the petitioner and the successive dealers have all along sold the goods charging 4%, (presently 5%) VAT, under serial No. 68 of Part B of the First Schedule. It is further submitted that through out the State of Tamil Nadu completed assessment are reopened and residuary rate at 12.5% imposed on account of the circular/clarification of the Commissioner of Commercial Taxes. On account of the action of the revenue, the petitioners have been put to great prejudice.

8. It is submitted that cartridges are fitment to ink jet printers and laser printers and indispensable for the functioning of the printers and the cartridges is not merely an accessory as the typewriter ribbon is an accessory to a typewriter. Further, it is stated that resort to residuary entry is plainly arbitrary and irrational, when there is a specific entry in serial No. 68 of Part B of the First Schedule. It is further stated that even under the erstwhile Tamil Nadu General Sales Tax Act, 1959, (TNGST Act), both the printers and cartridges were charged at 4% under serial No. 18 of Part B of the First Schedule. Reliance was placed on the clarification issued by the Commissioner vide letter dated 28.06.2007, when a clarification was sought for as to the rate of tax for the items viz., central processing unit, monitor, key board, mouse, speaker, CD writer, computer printer, ink jet, laser, fax etc., it was clarified that the rate of tax is 4% under entry No. 68 in Part B of the First Schedule. It is submitted that printer is a peripheral and a cartridge is an accessory or a part of the printer and therefore, the terms should be interpreted as ordinarily understood and attributed to these words by people usually conversant with and dealing in such goods. Reliance was placed on the decision of the Hon'ble Supreme Court in State of U.P v. Kores, (India) Limited (SC) [1977 (39) STC 8]. Further to explain the meaning of the word accessory, reliance was placed on the decision of the Hon'ble Supreme Court in Annapurna Carbon Industries Co. v. State of A.P [(1976) 37 STC 378].

9. The learned Senior counsel placed reliance on the decision of the Division Bench of the Delhi High Court in Commissioner of Trade and Taxes v. Symphony Enterprises, [2007 INDLAW DEL 1301], wherein it was held that toners and cartridges are part and accessories of goods as mentioned in the relevant entry in the Delhi Value Added Tax Act, 2004. Much reliance was placed on the decision of the Division Bench of the Gwahati High Court filed by the petitioner in the lead case before us, Hewlett Packard India Sales (Pvt) Limited v. State of Assam [(2012) 56 VST 472 (Gauhati)], wherein it was held that cartridges are integral part of the printer attracting 5% tax. To support the contention that residuary entry cannot be invoked unless the department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff, reliance was placed on the decision of the Hon'ble Supreme Court in Bharat Forge and Press Industries (Pvt) Limited v. Collector of Central Excise (SC), [(1992) 84 STC 414 and the decision of the Hon'ble Supreme Court in Dunlop India Limited v. Union of India [1983 ELT 1566 (SC)]. Reference was also made to the advance ruling given by the Government of Andhra Pradesh dated 06.12.2005, clarifying ink jet and laser printer cartridge as an accessory of an ink jet and laser printer and liable to tax at 4%.

10. In response to a query raised by this Court as to why the petitioners should not avail the statutory remedy as provided under the Act in terms of Sections 51, 54, 58 etc., the learned Senior counsel submitted that once a clarification is issued by the Commissioner of Commercial Taxes, it will bind the subordinate assessing authority and it would be a futile exercise to go for a assessment, more so, when a Division Bench of another High Court on a similar provision held that these cartridges are accessories to printers and therefore, the petitioner would be justified in approaching this Court invoking its jurisdiction under Article 226 of the Constitution. In support of such contention and with regard to the effect of such circulars, reliance was placed on the decision of the First Bench of this Court in W.A No. 551 of 2009 [ v. ], dated 10.11.2009; State of Maharastra v. Bardma of India Limited [(2005) 140 STC 17 (SC)]; and Pizzeria Fast Foods v. Commissioner of Commercial Taxes, [(2005) 140 STC 97 (MAD)] and the decision of the Hon'ble Supreme Court in Filterco v. Commissioner of Sales Tax [(1986) 61 STC 318 (SC)].

11. On the above contentions, the learned Senior counsel submitted that the issue relating to classification of ink jet cartridges is no longer res integra and has been decided by two High Courts holdings, they are accessories to printers and in the light of the circular/clarification issued by the Commissioner of Commercial Taxes stating that the goods have to be classified under the residuary entry, it would be a futile exercise to go before the assessing authority and this Court can consider the issue in these writ petitions.

12. We have heard the submissions of learned Senior counsel Mr. Aravind P. Dattar, who also reiterated the submissions.

13. The learned Additional Advocate General appearing for the respondents submitted that printers will not come under the classification of Information Technology Products, which are covered in serial No. 68 of Part B of First Schedule. By relying upon the meaning of the words ‘Information Technology’ as given in P. Ramanatha Aiyar, Advanced Law Lexicon, it is submitted that unless the product stores, retrieves and transfer information, it would not fall within the meaning of Information Technology Product and therefore, it is submitted that the petitioners cannot fall back on serial No. 68 in Part B of First Schedule. Reference was also made to the information available in Wikipedia on Information Technology and it is submitted that printers would not fall within the meaning of the Information Technology. It is submitted that the information available in Wikipedia could be looked into for the purpose of gathering information as held by the Hon'ble Supreme Court in Ponds India Limited v. C.T.T, [(2008) 8 SCC 369]. By referring to the counter affidavit and the reply affidavit filed by the respondents, it is submitted that the computer can function or can be operated without a printer and when printer cannot be called as peripheral or a part or as accessory of computer, toner and ink cartridges cannot be classified to be falling under Entry 24 in serial No. 68 of Part B. It is further submitted that under the erstwhile TNGST Act both printers and cartridges were included in serial No. 18 of Part B of First Schedule, but under the VAT Act, the legislature has expressly excluded both printers and cartridges and therefore, the assessing authority correctly classified the goods as residuary item falling under Entry 69 of Part C of the First Schedule. The learned Additional Advocate General sought to distinguish the decisions of the Bombay High Court and the Gujarat High Court referred supra, by stating that the description of products under TNVAT Act is different and serial No. 68 deals with Information Technology Products and therefore, those decisions cannot be applied to the facts of the present case.

14. We have elaborately heard Mr. C. Natarajan, learned Senior counsel appearing for the petitioners and Mr. Arvind Pandian, learned Additional Advocate General for the respondents and given our anxious consideration to the submissions made and the materials placed on record.

15. On the facts stated above and the submissions made on either side, two questions arise for consideration:-

(i) Whether the writ petitions could be entertained and the petitioners be permitted to approach this Court without availing the remedy provided under the TNVAT Act?

(ii) Whether this Court should dwell into the question as to whether ink jet cartridges and toner cartridges are accessories to printer and whether they would fall within Entry 22 & 24 of serial No. 68 in Part B of First Schedule of the Act attracting 4% VAT, as such question, essentially being a issue relating to classification of goods?

Question No. (i)

16. From the facts narrated above, it is seen that Commissioner of Commercial Tax has issued series of clarifications relating to rate of tax for ink jet cartridges and toner cartridges based on requests made by manufacturers, successive dealers and the Manufacturers Association for Information Technology, New Delhi. In the said clarification, dated 21.05.2007, it has been stated that ink jet cartridges and toner cartridges are taxable at 12.5% of Part C to the First Schedule to the VAT Act w.e.f, 01.01.2007

17. The enforcement group of the respondent department appears to have visited the premises of one such dealer and recorded statement from them stating that the rate of tax adopted at 4% in the monthly return is incorrect instead of adopting 12.5% and have also collected a compounding fee of Rs. 2,000/-. Pursuant thereto, the said dealer was issued recovery notice demanding the differential tax to be paid immediately, failing which the dealer was informed that destraint action would be initiated. As against the collection of compounding fee, the said dealer preferred a revision to the Joint Commissioner under the VAT Act. The revisional authority by order dated 20.04.2009, rejected the revision petition and held that the levy of compounding fee was correct. To arrive at such a conclusion, the revisional authority had taken umbrage under the circular issued by the Commissioner of Commercial Tax clarifying that ink jet cartridges and toner cartridges are taxable at 12.5% of Part C to the First Schedule of the Act and not at 4% under serial No. 68 of Part B of First Schedule. The revisional authority did not adjudicate upon the classification issue raised by the said dealer.

18. Thus, the department appears to have taken a firm stand wholly based on the circular/clarification issued by the Commissioner of Commercial Taxes. In such circumstances should the petitioners be relegated to avail the remedy under the Act?

19. The Hon'ble Supreme Court in the case of Filterco (supra) considered the correctness of a decision of the High Court, which dismissed the writ petition without entering into the merits stating that there is a remedy available under the relevant enactment, namely, Madhya Pradesh General Sales Tax Act, 1958. Interfering with the decision of the High Court, the Hon'ble Supreme Court held that the High Court should have examined the matter on merits, as in the said case, there was an order passed by the Commissioner of Sales Tax, which was clearly binding on the assessing authority and by approaching the said authority, it would be a exercise in futility. Similar is the view taken by this Court in the case of Pizzeria Fast Foods, (referred supra). Several decisions to support such proposition were cited at the bar, which have been referred to supra and it may not be necessary to refer to all those decisions and it would suffice to refer the decision of the First Bench of this Court in W.A No. 551 of 2009, (supra) which arose out of a proceedings under the Tamil Nadu VAT Act.

8. In our view, as far as the present case is concerned, once a clarification is given by the Commissioner of Commercial Taxes, that will bind the subordinate assessing authorities and one cannot expect a different order from the assessing officers. In these circumstances, no fruitful purpose would be served by directing the appellant to go for an assessment and for that reason, not to entertain the writ petition. That apart, in the present case, for the very branded products, there is a well reasoned Division Bench judgment of another High Court. It is a settled proposition that in tax matters, when there is a Division Bench judgment of another High Court on a similar provision, it has to be treated with due respect and in the instant case, since the Guwahati High Court has taken a view, which is according to us also otherwise correct, there is no reason for us to take a different view.

20. As noticed above, this Court held that in view of a clarification issued by the Commissioner of Commercial Tax, no fruitful purpose would be served by directing the appellant therein to go for an assessment and for that reason not to entertain the writ petition. It was further observed that in tax matters, when there is a Division Bench judgment of another High Court on similar provision, which according to the said Division Bench was a correct view, it is all the more a reason not to relegate the party to a procedure of assessment.

21. As noticed by us, when one of the dealer was imposed a compounding fee on the ground that he had adopted 4% as rate of tax instead of 12.5%, he preferred a revision petition before the statutory revisional authority. It appears that the said dealer raised a contention before the revisional authority that the goods are chargeable to 4% tax under serial No. 68 of Part B, as the goods fall under the category “parts and accessories of computer system and peripherals”. Further, it was contended that a printer cannot function without the ink or toner cartridge and printing activity is carried out by the printers only in conjunction with ink cartridge or toner cartridge and hence, they are only parts of printers liable for tax at 4%. The revisional authority being wholly guided by the circular issued by the Commissioner of Commercial Taxes, dated 11.05.2007, rejected the contention of the dealer and observed that the ink cartridge and toner cartridge are taxable at 12.5% of Part C to First Schedule to the Act. The revisional authority did not adjudicate the question as regards classification and whether a printer was a peripheral and whether the ink cartridge was a part and accessory to a peripheral. This order passed by the revisional authority dated 20.04.2009 is an illustration to demonstrate that the authorities under the Act will not and cannot bypass the circular/clarification issued by the Commissioner of the Commercial Taxes department, who is the highest authority of the department.

22. That apart, as pointed out by the learned Senior counsel Mr. Aravind P. Dattar, at the time when the circular/clarification was issued, there was no enabling power under the VAT Act to issue such circulars or clarifications, which would bind the assessing authorities. The power to issue clarification and advance ruling was conferred on a State Level Authority comprising of the Commissioner of Commercial Taxes and two Additional Commissioners by insertion of Section 48A to the VAT Act by amendment Act 26 of 2011 w.e.f, 27.09.2011 Therefore, on the date when the clarification was issued based on which the petitioners are now called upon to pay tax at 14.5%, there was no enabling power to issue such clarifications. In fact, this issue was considered by a Division Bench of this Court in Texy One Private Limited v. The Principal Commissioner [(2012) 52 VST 377 Madras, wherein the Division Bench held that on the date when the circular was issued, the Commissioner did not have statutory powers to issue such circular and the net result is that the circular has no statutory force.

23. In the light of the above discussion and taking note of the decisions cited supra, in our view the circular issued by the Commissioner though stated to be without jurisdiction, the circular having been issued by the highest officer in the department, the assessing officers, who are subordinate officers cannot be expected to take a different view and therefore, no useful or fruitful purpose would be served in directing the petitioners to avail the remedy under the Act and therefore, these writ petitions questioning the classification of the goods are held to be maintainable before this Court on account of the reasons recorded above. This conclusion of ours is fortified by the decision of the Hon'ble Supreme Court in State of U.P v. Indian Hume Pipe Co. Ltd., ([1977] 39 STC 355).

Question No. (ii)

24. Having held that the writ petitions are maintainable, it has to be decided as to what would be the appropriate entry under which ink jet cartridges and toner cartridges are to be classified.

25. The petitioner in the lead case before us had been confronted with an identical problem under the Delhi Value Added Tax Act and the question of taxability of ink cartridges and toner cartridges used in ink jet printers and laser jet printers was subject matter in issue. The petitioner/assessee subjected themselves to the proceedings under the Delhi VAT Act and the goods were charged to tax at the rate of 12.5% treating the cartridges as unsettled goods, neither parts nor accessories to printers. The petitioner/assessee approached the Commissioner (Appeals) who confirmed the finding of the assessing authority, feeling aggrieved, they approached the High Court by filing a writ petition, which was allowed and the matter was remanded to the Commissioner. Once again the Commissioner held that the cartridges attract tax at 12.5% under the Delhi VAT Act. This was challenged before the Appellate Tribunal for Value Added Taxes, Delhi. The Tribunal accepted the case of the petitioner/assessee and observed that laser jet printers and ink jet printers are covered under chapter heading HSN 84.71, which finds place in entry No. 41-A (xxv), which reads as parts and accessories of HSN 84.69, 84.70 & 84.71 The Tribunal went on to examine the meaning of the words “parts and accessories”, which have not been specifically defined under the Delhi VAT Act. After considering the definition given in the dictionaries and examining the various decisions of the Hon'ble Supreme Court as to how entries in taxing statute are understood in common parlance especially in commercial circle held that the petitioner/assessee have proved that ink cartridges and toner cartridges are parts/accessories, rather essential parts of the respective printers and the printers become incomplete and incapable of functioning without the ink/toner cartridges and this is sufficient guide to show that ink cartridges and toner cartridges are parts of ink jet and laser jet printers. Accordingly, the appeal was allowed and the rate of tax was at fixed 4%. The revenue preferred appeal to the Delhi High Court, which was dismissed (in 2007 INDLAW, Delhi 1301) holding that toner and cartridges do not fall under entry 54 of the Third Schedule of Delhi VAT Act, as they are parts and accessories and the order of the appellate tribunal was confirmed.

26. The petitioner/assessee faced a similar problem under the Assam Value Added Tax Act and the Central Sales Tax Act, where an order of assessment was passed demanding higher rate of tax. Therefore, the petitioner/assessee filed writ petitions before the Gauhati High Court and the issue raised was whether ink jet cartridges and toner cartridges are covered by entry 4 of Part B of Second Schedule to Assam VAT Act attracting lesser rate of tax or whether they are covered by residuary entry in schedule V providing higher rate of tax.

27. The Division Bench of Gauhati High Court in the decision of HP India Sales Limited v. State of Assam, [2012 56 VST 472] accepted the case of the petitioner/assessee and answered the question as framed in favour of the assessee. At this stage, it would be beneficial to refer to the operative portion of the judgment and order:-

12. The learned counsel for the Revenue submitted that in Part A of the Second Schedule, entry 50 provides for “printing ink excluding toner and cartridges” and thus expression toner and cartridges has been expressly used wherever so intended and on that ground the goods in question should be treated as falling the residue entry.

13. After due consideration, we are of the view that the question has to be answered in favour of the assessee. The items in question are integral part of printer which undisputedly is covered by entry 3. Thus, we are in agreement with the view taken by the Delhi High Court. Principle laid down in judgments of the honourable Supreme Court about interpretation of “accessory” also lends support to the contention of the assessee.

14. As regards the contention raised on behalf of the Revenue that toners and cartridges have been specifically used in Part A, for exclusion from entry 50, and the same could not be impliedly included under entry 4 of Part B of the Second Schedule, we are of the view that scope of entry 4 of Part B of the Second Schedule is much wider. While exclusion may be considered necessary from printing ink in entry 50 of Part A (Part A deals with “general” goods), specific mention thereof may not be necessary in general and wide entry in entry 4 of Part B-parts and accessories of computer systems and peripherals (Part B deals with IT goods).

15. It is settled that a fiscal entry is to be given a common sense meaning as understood by persons dealing with such goods and not any technical meaning. (Filterco v. Commissioner of Sales Tax, Madhya Pradesh [1986] 61 STC 318 (SC) (Page 323); (1986) 2 SCC 103 para 12). Applying this test, ink of the printer has to be held to be its accessory, in absence of any compelling reason.

16. Accordingly, we answer the question in favour of the assessee and allow the writ petitions in above terms. The assessments may now be revised accordingly.

28. We are informed that no appeals have been preferred by the revenue against the decision of the Delhi High Court and the Gauhati High Court referred supra. Those judgments and orders have attained finality.

29. As has been held in the case of [Pepsi Co India Holdings (Pvt) Ltd., (supra) in tax matters, when there are two Division Bench judgment of other High Courts on a similar provision, which we also find to be the correct legal position and the said judgments having attained finality, we feel that there is no valid and justifiable reason brought forth before us to take a different view.

30. While, we are entirely in agreement with the decisions of the Delhi High Court and the Gauhati High Court referred above, we shall assign independent reasons with specific reference to the provisions in the Tamil Nadu VAT Act.

31. Section 3 of the Act deals with ‘Levy of taxes on sales of goods’. Sub-section (1) of Section 3 casts a mandate on every dealer, other than a casual trader or agent of a non-resident dealer, whose total turnover for a year is not less than rupees five lakhs and every casual trader or agent of a non-resident dealer, whatever be his total turnover, for a year, shall pay tax under the VAT Act. Sub-Section (2) of Section 3 states that subject to the provisions of sub-section (1), in the case of goods specified in Part B or Part C of the First Schedule, the tax under the VAT Act shall be payable by a dealer on every sale made by him within the state at the rates specified therein. Proviso to sub-section (2) provides that all spare parts, components and accessories of such goods shall also be taxed at the same rate as that of the goods if such spare parts, components and accessories are not specifically enumerated in the First Schedule and made liable to tax under that schedule. Sub-section 3 of Section 3 states that the tax payable under sub-section (2) by a registered dealer shall be reduced, in the manner prescribed, to the extent of tax paid on his purchase of goods specified in Part-B or Part-C of the First Schedule, inside the state, to the registered dealer, who sold the goods to him. Thus, sub-section (1) and (2) of Section 3 are the charging provisions.

32. The First schedule to the Act specifies the rate of tax for the goods described therein. The First Schedule consist of three parts, namely, Part A: goods which are taxable at the rate of 1%, Part B: goods, which are taxable at the rate of 5% and Part C: the goods which are taxable at the rate of 14.5%. Part B deals with goods, which are taxable at 5% (rate of tax increased from 4% to 5% from 12.07.2011). Serial No. 68 of Part B and Entries 22 and 24 would be relevant for the purpose of deciding the cases on hand.

Serial No. 68, Information Technology Products as notified by the Government

Entry 22 Computer Systems and Peripherals, Electronic diaries; (a) Computer systems, peripherals and parts (b) Electronic diaries

Entry 24 Parts and Accessories of goods mentioned in serial Nos. 21, 11, 22 and 27.

33. In terms of the above entries computer systems, peripherals and parts, and parts and accessories of computer systems, peripherals and parts attract 5% tax. Peripherals has not been defined under the Act.

34. In Commissioner of Central Excise, Mumbai v. CMS Computers Private Limited [2005-TIOL-57-SC-CX-LB], was an appeal against the judgment of the Tribunal wherein, the assessee was issued show cause notice by the department claiming that monitors and printers were parts of computers and required to be included in the value of computers and if such value to be included, the assessee was not entitled to the benefit of an exemption notification. The Hon'ble Supreme Court held that monitors or printers were peripheral items, which may be required along with a computer and is not an essential part of the computer and its value cannot be included in the value of computer. The operative portion of the judgment reads as follows:-

4. It appears to us that a monitor or a printer is not an essential part of the computer. It is a peripheral item which may be required along with a computer. We are unable to accept the submission that by virtue of Chapter Note 5 to Chapter 84 a monitor or printer becomes an essential part of a computer. By virtue of this Chapter Note a monitor and/or a printer may also be classifiable under the same tariff heading. However, merely because the tariff entry may also include a monitor or printer would not lead to the conclusion that a monitor or printer is an essential part of a computer. All that this Chapter Note indicates is that not only the computer but a monitor and a printer are also excisable products. But the monitor and/or printer will be excisable in the hands of their manufacturer. The respondents do not manufacture the monitor or the printer. On facts, it could not be disputed that in approximately 70% of the cases monitors and printers are not supplied along with the computer sold by the respondents. Thus, it cannot be concluded that respondents sell their computer as a unit which include a monitor and a printer. As a monitor and printer are not essential parts of the computer their value cannot be included in the value of computer. We, however, clarify that situation may be different where a manufacture sells a computer with a monitor and a printer as a unit.

35. In the light of the above decision of the Hon'ble Supreme Court, printer has to be treated as a peripheral to a computer system. In terms of Entry 22 in serial No. 68 of Part B of First Schedule Computer Systems and Peripherals are chargeable to 5% tax. In terms of Entry 24 of serial No. 68 Parts and Accessories of Computer Systems and Peripherals also attract tax at 5%. The product in question in these cases are ink jet cartridges and toner cartridges. Undoubtedly, ink jet cartridges and toner cartridges are parts and accessories of a printer, which has been held to be a peripheral to a computer system by the Hon'ble Supreme Court. Therefore, those parts and accessories of a printer should also attract the same rate of tax, namely, 5%. This conclusion is in consonance with the statutory provision, namely, proviso to sub-section (2) of Section 3. In terms of the said proviso all spare parts, components and accessories of such goods shall also be taxed at the same rate, as that of the goods if such spare parts, components and accessories are not specifically enumerated in the First Schedule and made liable to tax under that schedule.

36. Admittedly, ink jet cartridges and toner cartridges have not been specifically enumerated in serial No. 68 of Part B of the First Schedule. In such situation, the cartridges being parts and accessories of a peripherals, namely a printer, they should also be liable to tax at the same rate as that of the goods enumerated in Entry 22 and 24. It was contended by the respondent that the cartridges are consumables. On a careful perusal of the entries giving description of goods in Part B of First Schedule, we find that the term “consumables” has not been used in the VAT Act. Therefore, even if such term was used in the erstwhile TNGST Act, that can hardly be a reason to treat these cartridges as “consumables” under the VAT Act and resort to residuary entry No. 69 of schedule C, which deals with any other goods not specified in any of the schedules.

37. It has to be seen as to whether the department is right in claiming that the cartridges are chargeable to tax at 14.5% under the residuary Entry No. 69 of C. The Hon'ble Supreme Court in the case of Bharat Forge and Press Industries, (supra) considered the very question as to when the department can claim that goods are chargeable to duty as per a residuary entry. It was held that unless the department can establish that the goods in question can by no conceivable process of reasoning be brought under any of the tariff items then and then only they can resort to a residuary item. Therefore, in the instant case, the stand taken by the revenue that the rate of tax shall be as per the residuary Entry 69 is unacceptable.

38. It is the submission of the learned Additional Advocate General that serial No. 68 of Part B of First Schedule would not apply to printers as they are not Information Technology Products and the printer does not answer the definition of Information Technology as defined in the Law Lexicon and Wikipedia. It is to be noted that serial No. 68 of Part B deals with Information Technology Products as notified by the Government. Therefore, the Information Technology Products which have been notified by the Government shall fall under serial No. 68. If we are to accept the submission of the learned Additional Advocate General, then several of the products notified under serial No. 68 do not answer the definition of Information Technology as given in the Law Lexicon. By way of illustration, the following products also find place in serial No. 68, namely, micro phones, multimedia speakers, LCD Panels, LED Panels, Electronic Calculators, Switches and uninterrupted power supply. Therefore, while interpreting the scope of serial No. 68 of Part B, it has to be noted that it is not sufficient for a product to be an Information Technology Product to fall within the entries in serial No. 68, but the requirement being it should be notified by the Government to be an Information Technology Product to fall under serial No. 68 of Part B. Therefore, the plea raised in this regard is misconceived.

39. As noticed above, the Delhi High Court in the case of Symphony Enterprises, referred supra, has rendered a clear finding that toners and cartridges are parts and accessories to computer systems. The functioning of these cartridges was explained to us from which it appears that ink cartridge is a sophisticated Engineering design to provide and regulate back pressure, which is essential to perform its job of delivering the right amount of ink to the print-head nozzle and toner cartridge, which is fitted in laser jet printer generates laser beam which acts on the photo sensitive drum. Thus, the ink jet cartridge/toner cartridge is a part and accessory to a printer, which has been held to be a peripheral to a computer system.

40. In State of U.P v. Kores (India) Limited, [(1977) 39 STC 8] the question which arose for consideration is whether ribbon is an accessory or a part of the typewriter. It was held that the ribbon is an accessory and not a part of the typewriter unlike spool. The Hon'ble Supreme Court held that the description of the class of goods which are to be taxed under an Act have to be construed in the sense in which they are popularly understood by those who deal in them and who purchase and use them.

41. In Annapurna Carbon Industries Co. v. State of A.P [(1976) 37 STC 378] the question which arose for consideration is whether sales of arc-carbons known as cinema arc-carbons would fall under Entry No. 4 of First Schedule of the A.P, General Sales Tax Act, which entry covered cinematographic equipment, including cameras, projectors and sound recording and reproducing equipment, lenses, film and parts and accessories required for use therewith. While answering the question in favour of the assessee, the Hon'ble Supreme Court held as follows:-

We find that the term “accessories” is used in the schedule to describe goods which may have been manufactured for use as an aid or addition. A sense in which the word accessory is used is given in Webster's Third New International Dictionary as follows:

“An object or device that is not essential in itself but that adds to the beauty, convenience, or effectiveness of something else.”

Other meanings given there are: “supplementary or secondary to something of greater or primary importance”, “additional”, “any of several mechanical devices that assist in operating or controlling the tone resources of an organ”. “Accessories” are not necessarily confined to particular machines for which they may serve as aids. The same item may be an accessory of more than one kind of instrument.

42. After due consideration, we are of the view that the question has to be answered in favour of the petitioners/assesses and we hold that ink jet cartridges and toner cartridges are parts and accessories of printer which is a peripheral to a computer system and would be covered under Entry Nos. 22 & 24 of serial No. 68, Part B of First Schedule to the TNVAT Act.

43. In the result, the writ petitions are allowed holding that ink jet cartridges and toner cartridges are parts and accessories of printer which is a peripheral to a computer system and would be covered under Entry Nos. 22 & 24 of serial No. 68, Part B of First Schedule to the Tamil Nadu Value Added Tax Act, 2006. No costs. Consequently, connected miscellaneous petitions are closed.