C.P.D. Computer Peripheral Devices Pvt. Ltd. vs State of Karnataka

K.L. Manjunath, J.—Heard the counsel for the parties. At the time of admission, the question of law arises for consideration of this court are not framed. Therefore, we are of the opinion that the following substantial questions of law arises in this appeal:

(1) Whether, on the facts and in the circumstances of the appellant''s case, can it be held that second revisional authority was right in law in setting aside the exemption granted by the first appellate authority on a turnover in a sum of Rs. 17,26,225, which turnover related to commission received by the appellant, especially when there was no proposal to the said effect in the show-cause notice dated December 9, 2004 issued by the second revisional authority u/s 22A(2) of the Act?

(2) Whether, on the facts and in the circumstances of the appellant''s case, can it be held that the second revisional authority was right in law in holding that PCOM were taxable as "electronic goods" falling under entry No. 4 of Part E of the Second Schedule appended to the Act and not as "computer of all kinds" falling under entry 20(i) of Part C of the Second Schedule appended to the Act?

The facts leading to this case are as hereunder:

The appellant is a registered dealer under the provisions of the Karnataka Sales Tax Act, 1957 dealing with the purchase or sale of electronic goods, public call office machines, etc. For the assessment year 1999-2000 the Additional Deputy Commissioner of Commercial Taxes (Assessment 14), Bangalore, by his order dated November 30, 2001 passed an order holding that public call office machines are electronic machines. Accordingly, the order of assessment was completed by levying tax on the basis of turnover. Aggrieved by the same, the appellant filed an appeal before the Joint Commissioner of Commercial Taxes, Bangalore, who allowed the appeal treating it as a computers and allowed the commission received by the assessee for having sold the goods as a commission agent and set aside the penalty levied by the assessing officer. The Additional Commissioner of Commercial Taxes, exercising his powers u/s 22A(1) issued a notice as per annexure J dated December 9, 2004 and dropped the proceedings as per the order dated May 10, 2005. Thereafter, the Commissioner exercising his powers u/s 22A(2) of the Act initiated the suo motu revision and set aside the order passed by the Joint Commissioner of Commercial Taxes as well as the Additional Commissioner of Commercial Taxes, Bangalore and the order passed by the assessing officer has been restored holding that the goods sold by the assessee as a computer or computer peripherals and it is only an electronic goods. Being aggrieved by the order dated December 24, 2007 the present appeal is filed.

So far as the substantial question of law No. 1 is concerned, it is fairly conceded by the learned Government Advocate that the question that was raised u/s 22A of the KST Act by the Commissioner of Commercial Tax, was in regard to holding PCOM as computer by the Joint Commissioner of Commercial Tax and the Additional Commissioner of Commercial Taxes and show-cause notice was issued only in regard to nature of goods sold by the assessee. Therefore, we are of the opinion that without considering the actual point that had arisen for the consideration the Commissioner of Commercial Taxes, Bangalore, has set aside the order passed by the Joint Commissioner of Commercial Taxes, Bangalore in regard to commission earned by the assessee by selling the goods on commission basis. As it is an apparent error on the face of the record, we have to answer question No. 1 in favour of the assessee.

So far as second point in concerned, the learned Commissioner of Commercial Taxes, relying upon the judgment of this court in Diebold Systems Pvt. Ltd. Vs. The Commissioner of Commercial Taxes, has rightly come to the conclusion that the machines sold by the appellant cannot be termed as a computer by itself and also cannot be held to be a computer peripherals and it is only equivalent to automated teller machines.

We have examined the case of the parties on the merits and also the ruling of this court in Diebold Systems Pvt. Ltd. Vs. The Commissioner of Commercial Taxes, Since the Commissioner has followed the judgment in Diebold Systems Pvt. Ltd. Vs. The Commissioner of Commercial Taxes, the facts of this case are similar to the facts involved in the aforesaid case, we have to answer the question No. 2 against the assessee and in favour of the Revenue. Accordingly, we answer question No. 2.

In the result, the appeal is allowed in part. The question No. 1 is held in favour of the assessee. Accordingly, the order of the Commissioner dated December 24, 2007 is hereby modified by holding that the order passed by the joint Commissioner of Commercial Taxes and the Additional Commissioner of Commercial Taxes are to be restored in regard to the deletion of the commission earned by the assessee. It is also clarified that the order of the Commissioner of Commercial Taxes in setting aside the order of the Joint Commissioner of Commercial Taxes and Additional Commissioner of Commercial Taxes was held good only in regard to the relief granted to the assessee by the JCCT considering the goods sold by the assessee as not computer or a computer peripheral. The other relief granted to the assessee by the JCCT is restored.