MICROFX Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) The assessee has preferred these revision petitions challenging the order passed by the Tribunal holding that the claim of the assessee that their product falls under H.S.N. Code 8471 is not factually acceptable.

(2.) The assessee is a partnership firm registered as a permanent small scale industrial unit engaged in the business of manufacture and sale of handheld electronic ticketing machines(ETMs). The assessee has sold handheld electronic ticketing machines to KSRTC. For the period 2004-05 to 2006-07 they have paid value added tax at 12.5% because of the residuary entry as it does not fall under any of the schedules. However, they realized that the said product falls under entry 8471 as it is an I.T. product and therefore they paid 4% tax thereon. The assessing authority issued a proposition notice dated 14.12.2009 as he found discrepancies in the books of accounts in relation to the returns of turnover declared in VAT100 and CST and percentage of tax paid. The assessee replied. However, the assessing authority passed the order under Section 39 of the KVAT Act reassessing the returns filed by the petitioner and imposed tax at 12.5% for the assessing period 2005-06 to 2008-09. The assessing authority held that the product is hand held ticket issuing machine which does not fall either under entry of III Schedule to KVAT Act, 2003 or covered by any notifications issued under the KVAT Act for IT products. The assessee challenged the said order before the appellate authority. The appellate authority partly allowed the appeal but on the question of rate of tax it held that it has to be taxed under the residuary provision at 12.5% thus affirming the finding of the assessing authority. Against the said order, the assessee preferred an appeal to the Tribunal.

(3.) The learned counsel for the assessee assailing the impugned order contended that the product in question is electronic ticketing machine which is an IT product and it falls at Sl.No.4 in the notification dated 31.3.2006 issued including in entry 43 of the III Schedule. Therefore, the assessee is entitled to the benefit of 4% tax as the product in question falls within the III Schedule.