M/S Sanwaria Taxpro Private Limited vs The Commissioner
2023 Latest Caselaw 6729 Raj/2

Rajasthan High Court

M/S Sanwaria Taxpro Private Limited vs The Commissioner on 14 December, 2023

Author: Sameer Jain

Bench: Sameer Jain

[2023:RJ-JP:24001]

        HIGH COURT OF JUDICATURE FOR RAJASTHAN
                    BENCH AT JAIPUR

           S.B. Sales Tax Revision / Reference No. 17/2022

M/s Shreepati Computers, T-4, Salasar Plaza, Indira Bazaar, Jaipur
Through Its Branch Manager Shri Mahendra Pareek, Son Of Shri
Dwarka Prasad Pareek, Aged 51 Yeras, Resident Of Flat No. 302, Balaji
Tower 1St, Vidhyadhar Nagar, Sikar Road, Jaipur.

                                                                       ----Petitioner

                                       Versus

The Assistant Commissioner, Commercial Taxes Department, Anti
Evasion Zone-1, Jaipur.

                                                                     ----Respondent

Connected With

S.B. Sales Tax Revision / Reference No. 114/2020

M/s Sanwaria Taxpro Private Limited, B-22, Ii Floor, Sudarshanpura Indl. Area, Jaipur

----Petitioner

Versus

The Commissioner, Commercial Taxes, Rajasthan, Kar Bhawan, Ambedkar Circle, Jaipur

----Respondent

S.B. Sales Tax Revision / Reference No. 115/2020

M/s Supertron Electronics Private Limited, 10, Ganesh Colony, Jln Marg, Jaipur.

----Petitioner

Versus

The Commissioner, Commercial Taxes, Rajasthan Kar Bhawan, Ambedkar Circle Jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 14/2022

M/s Shreepati Computers, T-4 Salasar Plaza, Indira Bazaar, Jaipur Through Its Branch Manager Shri Mahendra Pareek, Son Of Shri Dwarka Prasad Pareek, Aged 51 Years, Resident Of Flat No. 302, Balaji Tower 1St, Vidhydhar Nagar, Sikar Road, Jaipur.

----Petitioner

Versus

[2023:RJ-JP:24001] (2 of 23) [STR-17/2022]

The Assistant Commissioner, Commercial Taxes Department, Anti Evasion, Zone-1, Jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 18/2022

M/s Shreepati Computers, T-4, Salasar Plaza, Indira Bazaar, Jaipur Through Its Branch Manager Shri Mahendra Pareek, Son Of Shri Dwarka Prasad Pareek, Aged 51 Yeras, Resident Of Flat No. 302, Balaji Tower 1St, Vidhyadhar Nagar, Sikar Road, Jaipur.

----Petitioner

Versus

Assistant Commissioner, Anti Evasion Raj-Iii, Jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 19/2022

M/s Shreepati Computech Pvt. Limited, T-4, Salasar Plaza, Indira Bazaar, Jaipur Through Its Branch Manager Shri Mahendra Pareek, Son Of Shri Dwarka Prasad Pareek, Aged 51 Yeras, Resident Of Flat No. 302, Balaji Tower 1St, Vidhyadhar Nagar, Sikar Road, Jaipur.

----Petitioner

Versus

The Assistant Commissioner, Commercial Taxes Department, Anti Evasion Zone-1, Jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 20/2022

M/s Shreepati Computers, T-4, Salasar Plaza, Indira Bazaar, Jaipur Through Its Branch Manager Shri Mahendra Pareek, Son Of Shri Dwarka Prasad Pareek, Aged 51 Yeras, Resident Of Flat No. 302, Balaji Tower 1St, Vidhyadhar Nagar, Sikar Road, Jaipur.

----Petitioner

Versus

The Assistant Commissioner, Commercial Taxes Department, Anti Evasion Zone-1, Jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 21/2022

M/s Shreepati Computers, T-4, Salasar Plaza, Indira Bazaar, Jaipur Through Its Branch Manager Shri Mahendra Pareek, Son Of Shri Dwarka Prasad Pareek, Aged 51 Yeras, Resident Of Flat No. 302, Balaji

[2023:RJ-JP:24001] (3 of 23) [STR-17/2022]

Tower 1St, Vidhyadhar Nagar, Sikar Road, Jaipur.

----Petitioner

Versus

The Assistant Commissioner, Commercial Taxes Department, Anti Evasion Zone-1, Jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 156/2022

M/s Ingram Micro India Private Limited, 32-33, Sudershanpura Industrial Area, Jaipur Through Its Director Finance Rajat Kumar Samal.

----Petitioner

Versus

Assistant Commissioner, Anti Evasion, Zone I, Commercial Taxes Department,divisional Kar Bhawan, Jhalana Doongri, Jaipur. Now Assistant Commissioner, Circle A, Enforcement Wing, Rajasthan 2, Zone-I,jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 157/2022

M/s Ingram Micro India Private Limited, 32-33, Sudershanpura Industrial Area, Jaipur Through Its Director Finance Rajat Kumar Samal.

----Petitioner

Versus

Assistant Commissioner, Anti Evasion, Zone I, Commercial Taxes Department,divisional Kar Bhawan, Jhalana Doongri, Jaipur. Now Assistant Commissioner, Circle A, Enforcement Wing, Rajasthan 2, Zone-I,jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 158/2022

M/s Ingram Micro India Private Limited, 32-33, Sudershanpura Industrial Area, Jaipur Through Its Director Finance Rajat Kumar Samal.

----Petitioner

Versus

The Assistant Commissioner, Anti-Evasion, Zone-I, Commercial Taxes Department, Divisional Kar Bhawan, Jhalalna Doongri, Jaipur. Now

[2023:RJ-JP:24001] (4 of 23) [STR-17/2022]

Assistant Commissioner, Circle A, Enforcement Wing, Rajasthan 2, Zone I, Jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 1/2023

M/s Supertron Electronics Private Limited, 58, Dhuleshwar Bagh, C- Scheme, Jaipur.

----Petitioner

Versus

The Assistant Commissioner, Commercial Taxes, Zone-First, Zonal Kar Bhawan Jhalana Area, Jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 2/2023

M/s Supertron Electronics Private Limited, 58, Dhuleshwar Bagh, C- Scheme, Jaipur.

----Petitioner

Versus

The Assistant Commissioner, Commercial Taxes, Zone-First, Zonal Kar Bhawan Jhalana Area, Jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 3/2023

M/s Supertron Electronics Private Limited, 58, Dhuleshwar Bagh, C- Scheme, Jaipur.

----Petitioner

Versus

The Assistant Commissioner, Commercial Taxes, Zone-First, Zonal Kar Bhawan Jhalana Area, Jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 4/2023

M/s Supertron Electronics Private Limited, 58, Dhuleshwar Bagh, C- Scheme, Jaipur.

----Petitioner

Versus

The Assistant Commissioner, Commercial Taxes, Zone-First, Zonal Kar Bhawan Jhalana Area, Jaipur.

----Respondent

[2023:RJ-JP:24001] (5 of 23) [STR-17/2022]

S.B. Sales Tax Revision / Reference No. 5/2023

M/s Supertron Electronics Private Limited, 58, Dhuleshwar Bagh, C- Scheme, Jaipur.

----Petitioner

Versus

The Assistant Commissioner, Commercial Taxes, Zone-First, Zonal Kar Bhawan Jhalana Area, Jaipur.

----Respondent

S.B. Sales Tax Revision / Reference No. 6/2023

M/s Supertron Electronics Private Limited, 58, Dhuleshwar Bagh, C- Scheme, Jaipur.

----Petitioner

Versus

The Assistant Commissioner, Commercial Taxes, Zone-First, Zonal Kar Bhawan Jhalana Area, Jaipur.

----Respondent

For Petitioner(s) : Mr. Alkesh Sharma with Mr. Ayush Sharma, Mr.Vikram Kumar Gogra, Mr. Dinesh Kumar For Respondent(s) : Mr. Punit Singhvi with Mr. Ayush Singh, Mr. Tanmay Mangal and Mr. Ajay Singh Rathore Mr. Shantnu Jugtawat with Mr. Nagendra Singh Adha

HON'BLE MR. JUSTICE SAMEER JAIN Order

Reportable

Reserved on - 11/09/2023

Pronounced on - 14/12/2023

1. The present Sales Tax Revisions / References (for short

"STRs"), filed under Section 84 of the Rajasthan Value Added Tax

Act, 2003 (for short "RVAT Act"), were admitted on following

questions of law:

[2023:RJ-JP:24001] (6 of 23) [STR-17/2022]

In STR No. 14/2022 and in STR Nos. 17-21/2022:

"(a) Whether under the facts and circumstances of the present case, the Rajasthan Tax Board, Ajmer was justified in ignoring the fact that the assessment order passed by the respondent Assistant Commissioner under Section 25 of Rajasthan Value Added Tax Act, 2003 was passed merely on a change of opinion and there was no reason to believe that the petitioner has avoided or evaded tax or has not paid tax in accordance with law or has availed input tax credit wrongly?

(b) Whether under the facts and circumstances of the present case, the Rajasthan Tax Board, Ajmer was justified in ignoring/overlooking the fact that Memory Cards are IT products covered under Entry No.3 of Part A of Entry 65 of Schedule IV of the Rajasthan Value Added Tax Act, 2003 which provides for levy of VAT at the rate of 5 per cent on 'Computer system and peripherals, computer printers excluding multifunctional devices & electronic diaries'?"

In STR Nos. 114-115/2020 and in STR Nos. 1-6/2023:

"(a) Whether the 'Memory Cards' are not 'Prepared unrecorded media' as per entry no.10 of Schedule-IV of RVAT Act-2003 made available since introduction of RVAT in the State w.e.f. 1.4.2006?

(b) Whether the notification no.2016-187 dated 08.03.2016 is not clarificatory in nature of entry no.10 of Schedule-IV of RVAT Act-03?

(c) Whether the determination order of Commissioner is valid one after passing of nine (9) years?"

In STR Nos. 156-158/2023:

"(a) Whether under the facts and circumstances of the present case, the Rajasthan Tax Board, Ajmer was justified in holding that Memory Cards are not IT products covered under Entry No.10 of Part A of Entry 65 of Schedule IV of the Rajasthan Value Added Tax Act, 2003 which provides for levy of VAT at the rate of 5 percent on "Prepared unrecorded media for sound recording or similar recording of other phenomena including Compact Disc (CD) and Digital Versatile Disc (DVD)?

(b) Whether under the facts and circumstances of the present case, the Rajasthan Tax Board, Ajmer was justified in ignoring/overlooking the fact that alternatively

[2023:RJ-JP:24001] (7 of 23) [STR-17/2022]

Memory Cards are IT products covered under Entry No.3 of Part A of Entry 65 of Schedule IV of the Rajasthan Value Added Tax Act, 2003 which provides for levy of VAT at the rate of 5 percent on 'Computer system and peripherals, computer printers excluding multi-functional devices & electronic diaries'?"

2. Since common question of law of classification of

'memory cards' under the RVAT Act is involved in all these STRs,

with the consent of the parties, they were heard together and are

now being decided by way of this common order. STR No. 17/2022

is taken as lead file to peruse the facts.

SUBMISSIONS OF PETITIONER-ASSESSEE

3. Learned counsels for the petitioner-assessee submits

that the petitioner-assessee are engaged in trading of different

type of IT products including the goods in question, i.e. the

'memory cards'. The petitioner-assessee had, since beginning,

been effecting sale of the goods in question and charging tax @

5/5.5 percent by treating the goods in question to be classifiable

under Entry 10 of Part A of Schedule IV to the RVAT Act, which

read as "Prepared unrecorded media for sound recording or similar

recording of other phenomena including Compact Disc (CD) and

Digital Versatile Disc (DVD)". However, after a survey of the

business premises being conducted by the respondent-revenue on

08.10.2015, Show Cause Notice (for short "SCN") was issued to

the petitioner-assessee under Section 25/26 of RVAT Act as the

respondent-revenue had determined that the goods in question,

i.e. the memory cards, were not covered under any of the specific

entries and hence liable to be taxed at the residuary rate of

14/14.5 percent. Consequently, the assessment order dated

[2023:RJ-JP:24001] (8 of 23) [STR-17/2022]

15.12.2015 was passed wherein additional tax, interest and

penalty was imposed upon the petitioner-assessee. The Appellate

Authority, vide order dated 29.03.2016, upheld the levy of tax and

interest but set aside the penalty. The Tax Board, vide order dated

15.12.2021, had also maintained the levy of additional tax and

interest.

4. Learned counsels for the petitioner-assessee contends

that the petitioner-assessee was rightly classifying the goods in

question as 'I.T Products', as specified in Entry No. 65 of Schedule

IV to the RVAT Act and accordingly discharging its VAT liability by

treating the same as 'prepared unrecorded media', as classifiable

under Entry 10 of Part A of Schedule IV of the RVAT Act. Learned

counsels further contends that all the authorities below have erred

in law by classifying the goods in question under the residuary

head and not the specific head and therefore erroneously imposed

additional tax and interest upon the petitioner-assessee. In

support of their contention that memory cards would form part of

'I.T. Products', learned counsel for the petitioner-assessee made

the following submissions:

4.1. The first submission of learned counsels for the

petitioner-assessee is that the revenue has not discharged its

onus to prove that memory cards would not be included in the

specific entry of Entry 10 of Part A of Schedule IV to the RVAT Act.

It is submitted that neither any expert / technical opinion was

sought nor any evidence was brought on record to prove their

point. It is submitted that as per settled position of law, onus or

burden to show that a product falls within a particular tariff item is

[2023:RJ-JP:24001] (9 of 23) [STR-17/2022]

always on the revenue and since the revenue has failed to

discharge its onus, the reference ought to be allowed in the favour

of the petitioner-assessee. Reliance in this regard is placed on

Apex Court judgments of Union of India vs. M/s Garware

Nylons Ltd. reported in (1996) 10 SCC 413, Voltas Ltd. vs.

State of Gujarat reported in [(2015) 80 VST 12 (SC)],

Commissioner of Central Excise vs. Hindustan Lever Ltd.

reported in (2015) 10 SCC 742, Commissioner of Central

Excise, Calcutta vs. Sharma Chemical Works reported in

[(2003) 132 STC 251 (SC)], M/s Hindustan Poles

Corporation Limited vs. Commissioner of Central Excise

reported in [(2006) 145 STC 625 (SC)] and judgment of

Division Bench of this Court in the case of State of Rajasthan

and Ors. vs. Deys Medical Stores Ltd. and Ors. (DBCWP No.

2139/1999 decided on 27.07.2007) reported in (2008) 1

RLW 432.

4.2. The second submission of learned counsel for the

petitioner-assessee is that is that it is an established cannon of

classification that a specific entry would override a general entry.

Reliance in this regard is placed on Apex Court judgments of

Commissioner of Commercial Tax, U.P. vs. A.R. Thermosets

(Pvt.) Ltd. reported in (2016) 16 SCC 122, State of

Maharashtra vs. Bradma of India Ltd. reported in [(2005)

140 STC 17 (SC)], Hindustan Poles Corporation vs.

Commissioner of Central Excise, Calcutta reported in [(2006)

145 STC 625 (SC)], and Krishi Utpadan Mandi Samiti and

Ors. vs. Ved Ram reported in [2012 (277) ELT 299 (SC)]. It is

[2023:RJ-JP:24001] (10 of 23) [STR-17/2022]

contended that to merit classification in Entry No. 10 of Part A of

Schedule IV to the RVAT Act, the goods should be 'preprepared

unrecorded media' and the primary purpose of such good should

be for 'recording sound or similar recording or other phenomena'.

The term 'media' contained in Entry No. 10 of Part A of Schedule

IV to the RVAT Act, as per the Major Law Lexicon, is defined to

mean the material on which data is copied, written or recorded.

The memory cards traded by the petitioner-assessee are capable

of recording data, information, sound, as well as video and hence

memory cards qualify to be 'media', which are capable recording

sound and images.

4.3. The third submission of learned counsel for the

petitioner-assessee is that the Entry No. 10 of Part A of Schedule

IV to the RVAT Act is inclusive and not exhaustive. The 'inclusive

clause', specifies that various products such as Compact Disc (for

short "CD") and Digital Versatile Disc (for short "DVD") shall be

included in the said entry. It is submitted that the inclusive clause

cannot be interpreted to restrict the scope of entry to only CD or

DVD as the purpose of the inclusive clause is to include all such

products which are capable of 'sound recording or similar

recording of other phenomena', within the scope of the said entry.

4.4. The fourth submission of learned counsel for the

petitioner-assessee is that the Entry No. 10 of Part A of Schedule

IV to the RVAT Act cannot be restricted only to those 'media'

which are only capable of recording sound as the entry itself

contains 'similar recording of other phenomena'. It is further

submitted that even the specifically included items, i.e. CD and

[2023:RJ-JP:24001] (11 of 23) [STR-17/2022]

DVD, are capable of recording not just sound, but all other

phenomena as well and therefore there exists no reasonable

nexus to preclude memory cards from the specific entry.

4.5. The fifth submission of learned counsel for the

petitioner-assessee is that the impugned orders of the authorities

suffer from total non-application of mind. It is submitted that the

authorities below merely relied on the determination order dated

15.09.2015 passed by the Commissioner, Commercial Taxes

Rajasthan under Section 36 of RVAT Act in application filed by M/s.

Sanwariya Taxpro Pvt. Ltd. Jaipur and M/s Balaji Solutions Pvt.

Ltd. Jaipur wherein the Commissioner opined that since memory

card can be used for purposes other than those mentioned in the

entry and since the memory card can also be used in different

devices, the same has to taxed as per the residual rate. It is

contended that the determination order of the Commissioner is de

hors the settled position of law and bereft of valid reasoning. It is

contended that under taxing statues, the levy of tax on a

particular commodity is not based on its possible uses, rather the

tax is to be levied on basic characteristic of an item. If goods are

capable of multiple use, then primary use will have to be seen.

Reliance in this regard is placed on Apex Court judgments of

Annapurna Carbon Industries Co. vs. State of Andhra

Pradesh reported in (1976) 2 SCC 273, Union Carbide India

Ltd. vs. State of A.P. reported in 1995 Supp (2) SCC 267,

Krishi Utpadan Mandi Samiti and Ors. vs. Ved Ram reported

in (2012) 4 SCC 496 and judgments of Bombay High Court in

Commissioner of Sales Tax, Maharashtra State v. Shri Iron

[2023:RJ-JP:24001] (12 of 23) [STR-17/2022]

and Metal Works reported in 1995 SCC OnLine Bom 559 and

Kirloskar Pneumatic Co. Ltd. vs. State of Maharashtra

reported in 1984 SCC OnLine Bom 454. It is further contended

that conclusion reached by the Commissioner is not in consonance

with the reasoning adopted by the Commissioner himself as the

Commissioner at one hand opines that the memory card enhances

functionality of the computed and on the other hand concluded

that it cannot be classified as an I.T Product. Thus, the product in

question, i.e. memory card can also be classified under Entry 3 of

Part A of Schedule IV to the RVAT Act which read as "Computer

system and peripherals, computer printers excluding

multifunctional devices, and electronic diaries". It is submitted that

Part A of Schedule IV, which germinates from Entry No. 65 of

Schedule IV, lays out a comprehensive list of I.T. products, for

which a lower rate of tax is prescribed. It is submitted that

different I.T. products may get classified under one or more items

specified in Part A as entries in Part A are not water-tight or

mutually exclusive. This is more so when the product is capable of

being used in a fungible manner like in the case of memory cards.

Reliance is placed on Gauhati High Court judgment of Sterlite

Optical Technologies Ltd. Vs. Oil India Limited & Ors.

reported in [(2008) 14 VST 9 (Gauhati)], Madras High Court

judgments of State of Tamil Nadu vs. CMC Limited reported in

[(2014) 75 VST 413 (Mad.)], Canon India Pvt. Ltd. vs. State

of Tamil Nadu reported in [(2015) 80 VST 483 (Mad.)], and

judgment of this Court in Compuage Infocom Limited and Ors.

vs. The Assistant Commissioner, Rajasthan, Anti-Evasion-I

[2023:RJ-JP:24001] (13 of 23) [STR-17/2022]

and Ors. (S.B. STR No. 182/2017; decided on 30.05.2023;

Neutral Citation: 2023/RJJP/12108).

4.6. The sixth submission of learned counsels for the

petitioner-assessee is that by virtue of Notification No. 2016-187

dated 08.03.2016, there was an amendment in the RVAT Act and

the Entry No. 10 of Part A of Schedule IV to the RVAT Act was

substituted and the amended entry, which specifically included

'Memory Card', read as follows:

"Data storage and recording devices including Compact Disc (CD),

Digital Versatile Disc (DVD), Pen Drive, SD card, Memory Card,

etc."

It is contended that this amendment clearly establishes that the

goods in question were always I.T. products and continue to

remain so. It is contended that this since this amendment was

clarificatory in nature, the same would have retrospective effect as

per Apex Court judgment of Sree Sankaracharya University of

Sanskrit Vs. Dr. Manu reported in AIR 2023 SC 2645.

4.7. The seventh submission of learned counsels for the

petitioner-assessee is that reassessment cannot be made merely

on change of opinion. It is submitted that the petitioner-assessee

were classifying the goods in question under the specific entry for

nearly a decade and in this period regular assessment was done

by the respondent-revenue without any reservations whatsoever.

However, after a lapse of substantial period of time, merely on the

basis of opinion of the Commissioner, reassessment was made,

which is impermissible. Reliance in this regard is placed on Apex

Court judgments of State of U.P. v. Aryaverth Chawal Udyog

[2023:RJ-JP:24001] (14 of 23) [STR-17/2022]

reported in (2015) 17 SCC 324, Income Tax Officer, Calcutta

and Ors. vs. Lakhmani Mewal Das reported in (1976) 3 SCC

757, Calcutta Discount Company Limited vs. Income Tax

Officer reported in AIR 1961 SC 372, Deputy Commissioner

of Agricultural Income Tax and Sales Tax, Quilon vs.

Dhanalakshmi Vilas Cashew Co. reported in (1970) 3 SCC

273, State of Kerala vs. K.E. Nainan reported in (1970) 3 SCC

353, State of U.P. v. Samsung India Electronics (P) Ltd.

reported in 2023 SCC OnLine SC 866, and judgments of this

Court in Assistant Commissioner, Works Contract and

Leasing Tax-II, Jaipur vs. R.S. Electricals reported in [(2014)

69 VST 295 (Raj)], Bhilwara Synthetics Ltd. v. State of

Rajasthan reported in 2015 SCC OnLine Raj 8665, and Linde

India Limited vs. The Assistant Commissioner (S.B. STR No.

95/2022, decided on 11.09.2023; Neutral Citation:

2023/RJJP/19647).

SUBMISSIONS OF RESPONDENT-REVENUE

5. Per contra, supporting the concurrent findings of the

authorities below, learned counsels for the revenue submits that

no question of law worth consideration arises in the present STRs.

Learned counsel for the revenue submits that the specific entry

where the assessee was classifying the goods in question was

limited to media used for sound recording and other recording of

like nature. It is contended that the said entry is specific and

extended meaning cannot be given to the same to include data

storage devices. It is further submitted that data storage devices,

including memory cards, were only inserted in Part A of Schedule

[2023:RJ-JP:24001] (15 of 23) [STR-17/2022]

IV to the RVAT Act with effect from 08.03.2016 and the said

amendment was not stated to be retrospective in nature. Learned

counsel for the revenue submits that the notification dated

08.03.2016 was consciously silent on the retrospective application

of the amendment and as per settled position of law, an

amendment is always prospective in nature unless expressly

stated otherwise. Reliance in this regard is placed on Apex Court

judgment of Eureka Forbes Limited vs. State of Bihar and

Ors. reported in (2011) 15 SCC 149. On the issue of

reassessment, learned counsel for the revenue has relied on

judgment of Division Bench of this Court in Rajasthan Felts

Manufacturing Company v. State of Rajasthan reported in

[(1980) 45 STC 274 (Raj)]. Learned counsel for the revenue

has also relied on Chief Minister's finance speech made on

08.03.2016 while introducing State Budget for the year 2016-17

wherein it was specifically stated that the VAT leviable on SD

cards, memory cards, and pen drive, was being reduced from

14.5% to 5.5%. Learned counsel for the revenue has placed

reliance on judgment of this Court in Assistant Commissioner

vs. M/s Voltas Limited (S.B. STR No. 232/2020, decided on

30.11.2022) and Samsung India Electronics Private Limited

vs. State of Rajasthan & Ors. (S.B. CWP No. 18687/2015 &

other connected petitions, decided on 10.03.2017), to

submit that recourse to residual entry is permitted when the

goods in question are incapable of being placed in any specific

entry.

[2023:RJ-JP:24001] (16 of 23) [STR-17/2022]

ANALYSIS

6. Heard the arguments advanced by both the sides,

scanned the record of the STRs and considered the judgments

cited at Bar.

7. Since the issue in question is classification of memory

card under the RVAT Act, the relevant entries are reproduced as

under:

SCHEDULE IV [See Section 4] Goods taxable at 5.5% SI No. Description of Rate of Tax Conditions, if Goods % any 65 I.T. products as 5.5% specified in Part-A of this Schedule

SCHEDULE IV Part-A (See S. No. 65 of Schedule IV) Goods under Category of IT Products SI No. Description of Goods Rate of Tax % 3 "Computer system and 5.5% peripherals, networking items for LAN and WAN including wired and wireless switch, routers, modem, webcams, IP surveillance system, computer printers including multi functional devices and electronic diaries."

10 Prepared unrecorded media for 5.5% sound recording or similar recording of other phenomena including Compact Disc (CD) and Digital Versatile Disc (DVD)."

8. The primary contention of the petitioner-assessee is

that memory card is an I.T product classifiable in Entry 10 or

[2023:RJ-JP:24001] (17 of 23) [STR-17/2022]

Entry 3 of Part A of Schedule IV to the RVAT Act, whereas the

contention of the respondent-revenue is that the memory cards

are not covered in any specific entry and are thus liable to be

taxed at residuary rate as per Entry 78 of Schedule V to the RVAT

Act.

9. It is noted that the standard practice followed by the

petitioner-assessee, since inception, was classifying the goods in

question as 'I.T. products' taxable as per Entry 10 of Part A of

Schedule IV to the RVAT Act. The petitioner-assessee was

regularly filing the returns as required under law and the

jurisdictional assessing authority had accepted said classification

for several years. It was only after the survey, which was

conducted on 08.10.2015, that the opinion of the respondent-

revenue changed - after about 9 years - only on account of the

determination order dated 15.09.2015, passed under Section 36

of the RVAT Act by the Commissioner, Commercial Taxes

Rajasthan, and the long-accepted classification was abandoned.

On perusal of the impugned orders, it is apparent that the

authorities merely relied on the determination order while

adjudicating the claim of the petitioner-assessee.

10. Since the genesis of the entire controversy is the

determination order dated 15.09.2015, it is considered necessary

to adjudge the same, especially since the validity of the same is

also challenged in some of the STRs. It is also deemed necessary

to consider the context in which the application for determination

was filed by the assessee.

[2023:RJ-JP:24001] (18 of 23) [STR-17/2022]

10.1. Before 09.03.2015, 'cellular telephones' were covered

under Entry 12 of Schedule IV to the RVAT Act and 'parts and

accessories' thereof were covered under Entry 28 of Schedule IV

to the RVAT Act, both attracting tax @ 5%.

10.2. Vide notification dated 09.03.2015, the State

Government incorporated an Entry No. 18 for 'Cellular phones,

parts and accessories thereof' in Schedule VI to the RVAT Act with

specified rate of tax as 8%.

10.3. Some confusion arose with regard to taxability of

memory cards, as the same could be classified as both I.T

products or as accessories to cellphones. Accordingly, one of the

petitioner-assessee, filed an application for determination of rate

of tax on sale of memory cards. Consequently, the impugned

determination order dated 15.09.2015 was passed, the operative

portion of which is reproduced as under:

"O;ogkjh ds dFku dks lquk x;k ,oa QeZ dh rjQ ls izLrqr nLrkostksa dk voyksdu fd;k x;kA bl Øe esa jktLFkku ewY; ifjof)Zr dj vf/kfu;e] 2003 dh vuqlwph IV-A dh izfof"V la[;k 10 dk voyksdu fd;k x;kA tks fuEu izdkj ls vf/klwfpr gS%&

sound recording or similar recording of other phenomena including Compact Disc (CD) and Digital versatile Disc (DVD)

bl izdkj mDr izfof"V ls Li"V gS fd CD, DVD, Magnetic Tape cassette for sound recording bl izfof"V esa vkPNkfnr gksus ds dkj.k 5

izfr'kr dh nj ls dj ;ksX; gSA fdUrq Memory Card, (Micro S.D. & S.D. Card) video cassette mDr Js.kh esa 'kkfey ugha gSA blh izdkj Recorded

CD, Recorded DVD Hkh mijksDr Js.kh esa 'kkfey ugha gSA

[2023:RJ-JP:24001] (19 of 23) [STR-17/2022]

eSeksjh dkMZ@,l-Mh- dkMZ lHkh izdkj ds ysiVkWi] eksckbZy ,oa VscysV] dSejk rFkk fofM;ks xse bR;kfn esa vko';drk ds vuqlkj yxk;k tkrk gS rFkk bldk mi;ksx lkmUM fjdkWfMZx ds vykok Hkh lHkh izdkj ds MkVk bR;kfn dks laxzfgr djuk gS vkSj bl izdkj ;g lacaf/kr midj.k dh dk;kZRedrk (Functionalty) dks c<krk gSA vr% iz'ukxr eSeksjh dkMZ@,l-

Mh- dkMZ vius fofHkUu mi;ksxksa ds dkj.k mijksDr of.kZr izfof"V la[;k 10 esa vkPNkfnr ugha gksrk gSA blh izdkj eSeksjh dkMZ@,l-Mh- dkMZ dk fofHkUu midj.kksa esa vyx&vyx mi;ksfxrk gksus ds dkj.k vf/kfu;e dh vuqlwph IVA ds Øe la[lk 28(Parts and accessories...) esa vkPNkfnr ugha gSA vr% eSeksjh dkMZ@,l-Mh- dkMZ dk fHkUu&fHkUu midj.kksa es vyx&vyx mi;ksx gksus ds dj.k ;g ,d fof'k"V izdkj dk vkbZVe gS tks fd jktLFkku ewY; ifjof)Zr dj vf/kfu;e] 2003 dh vuqlwph I, II, III, IV, IV-A (1 ls 27 rd½ rFkk VI esa vf/klwfpr ugha gksus ds dj.k vuqlwph V dh izfof"V la[;k 78 ds rgr lkekU; dj nj 14-5 izfr'kr ls dj ;ksX; gSA blh izdkj fofM;ks dSlsV (Video cassette) jktLFkku ewY; ifjof)Zr dj vf/kfu;e] 2003 dh vuqlwph I, II, III, IV, IV-A (1 ls 27 rd½ rFkk VI esa vf/klwfpr ugha gksus ds dkj.k vuqlwph V dh izfof"V la[;k 78 ds rgr lkekU; dj nj 14-5 izfr'kr ls dj ;ksX; gSA vr% ;g vfHkfu/kkZfjr fd;k tkrk gS fd CD, DVD, Magnetic Tape cassette for sound recording jktLFkku ewY; ifjof)Zr dj vf/kfu;e] 2003 dh vuqlwph IV-A dh izfof"V la[;k 10 esa vkPNkfnr gksus ds dkj.k 5 izfr'kr dh nj ls dj ;ksX; gS rFkk eSeksjh dkMZ@,l-Mh- dkMZ (Memory Card, (Micro S.D. & S.D. Card) rFkk fofM;ks dSlsV (Video cassette) jktLFkku ewY; ifjof)Zr dj vf/kfu;e] 2003 vuqlwph V dh izfof"V la[;k 78 ds rgr lkekU; dj nj 14-5 izfr'kr ls dj ;ksX; gSA "

[2023:RJ-JP:24001] (20 of 23) [STR-17/2022]

11. As per settled position of law, a specific entry would

always trump a general entry and the burden would always be on

the Revenue to prove that the goods in question would have to fall

in residual entry as opposed to the specific entry. The

Commissioner opined that since the use of memory cards is not

restricted to recording sound and that since memory card can be

used in a variety of devices, to increase functionality, the same

cannot be said to be covered under any of the specific entries. A

bare perusal of the aforesaid determination would reveal that the

same is merely the opinion of the Commissioner and is not

supported by any cogent reasons and or technical/expert opinion.

It cannot be emphasized enough that in indirect tax matters, long

standing classification cannot be disturbed merely on personal

opinion/knowledge. The revenue has to discharge its burden to

prove that the change in classification is warranted and necessary

by adducing cogent and corroborating evidence. Mere assertion or

personal opinion, even of the Commissioner, without any

supporting evidence is of no use or value. Even if the reasoning of

the Commissioner is assumed to be correct, then also the goods in

question warrant classification as I.T products, as this Court, in

Compuage Infocon (supra) has held that even if the goods in

question can have different applications independent of computer,

the same would not preclude them from being considered

computer peripheral if they are also being used in computer

system to expand the capabilities of computer system. Be that as

it may, since the revenue has not discharged its burden to show

that the good in question, i.e. memory cards, which is

[2023:RJ-JP:24001] (21 of 23) [STR-17/2022]

undisputedly 'media' which can record 'sound' and other

phenomena, would not be covered under the specific entry of

either Entry No. 10 or Entry No.3 of Part A to Schedule IV to the

RVAT Act, the levy of additional tax and interest, merely on the

basis of determination order passed by the Commissioner, cannot

be sustained.

12. Even otherwise, the order(s) impugned of the learned

Tax Board and all the authorities below deserves to be quashed

and set aside for the following additional reasons:-

12.1. Because the reliance placed by all the authorities below

on the determination order dated 15.09.2015 is onerous. The

Appellate Authority and the Tax Board are discharging quasi-

judicial/judicial functions and no departmental circular, clarification

or determination order is binding on such bodies when exercising

quasi-judicial/judicial functions. Reliance in this regard can be

placed on Apex Court judgment of Orient Paper Mills Ltd. vs.

Union of India: AIR 1969 SC 48.

12.2. Because the notification dated 08.03.2016, which

incorporated memory card specifically in Entry 10 of Part A of

Schedule IV to the RVAT Act, though prospective in nature, clearly

demonstrates that the goods in question are I.T products and

therefore merit classification under Part A of Schedule IV to the

RVAT Act.

12.3. Because the Entry 10 of Part A of Schedule IV to the

RVAT Act is inclusive and illustrative and not exhaustive. The items

CD and DVD are merely listed as examples. The goods in

question, i.e. memory cards, are also 'prepared unrecorded media'

[2023:RJ-JP:24001] (22 of 23) [STR-17/2022]

which can be used for recording sound or other phenomena.

Merely because the memory cards are capable of recording other

types of data/phenomena, would not preclude them from being

included in this specific entry, especially when CD and DVD can

also be used to record all sort of data/phenomena other than

sound.

12.4. Because reassessment after substantial period of time

cannot be made merely on change of opinion. Reliance in this

regard can be placed on Apex Court judgments of State of UP vs.

Aryaverth Chawal Udyog (supra) and State of UP vs.

Samsung India Electronics (supra).

12.5. Because when there is ambiguity/doubt with regard to

taxability of an item, that too in the case of specific entry over

general entry, the interpretation beneficial to the taxpayer has to

be adopted, as per Apex Court judgments of Commissioner of

Trade Tax, U.P. vs. National Industrial Corporation Ltd.

reported in (2008) 15 SCC 259, Mahim Patram Private Ltd.

vs. Union of India reported in (2007) 3 SCC 668, Polestar

Electronic (Pvt.) Ltd. vs. Additional Commissioner, Sales

Tax and Ors. reported in (1978) 1 SCC 636 and Dunlop India

Ltd. and Madras Rubber Factory Ltd. vs. Union of India

(UOI) and Ors. reported in (1976) 2 SCC 241.

12.6. Because the case is of classification and interpretation

of taxing statute and not of avoidance or evasion of taxes,

therefore invoking of Section 25 and 26 of the RVAT Act was not

warranted. Further the judgment of Rajasthan Felts

Manufacturing Company (supra), relied upon by learned

[2023:RJ-JP:24001] (23 of 23) [STR-17/2022]

counsel for the revenue to support reassessment, was passed

under the erstwhile regime of Rajasthan Sales Tax Act, 1994, that

too under different facts, and therefore the same has no

application in the facts and circumstances of the present case.

RESULT

13. In view of the foregoing analysis, the question(s) of law

framed hereinabove have to be answered in favour of the

petitioner-assessee and against the Revenue.

14. Accordingly, all these STRs are allowed. The orders

impugned of the learned Tax Board and the authorities below are

quashed and set aside.

15. Pending application(s), if any, shall stand disposed of.

(SAMEER JAIN),J

ANIL SHARMA /419-435

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