ACCEL FRONTLINE LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) The question raised in the connected revision petitions is whether the smart card based automatic ticket vending machine., hereinafter referred to as "ATVM", for short, purchased and sold by the petitioner is classifiable under computer systems and peripherals or any of the sub-entries falling under entry 69(22) of the Third Schedule to the Kerala Value Added Tax Act, 2003 or whether it falls under the description "vending machine" falling under entry 32(16) of Notification S. R. O. No. 82 of 2006 as held by the assessing officer and confirmed by the Tribunal after reversing the first appellate order, which was in favour of the petitioner.

(2.) We have heard counsel for the petitioner and Government Pleader for the respondent.

(3.) The machine is purchased and installed by Railways in the railway stations and other centres to enable the railway passengers to purchase ticket by use of smart cards without the assistance of any human agency. On insertion of the smart card and instruction given by the customer through the touch screen, the main server of the Railways to which the machine is linked, reads, processes, assesses the balance available in the smart card and authorizes issue of ticket to the destination sought by the customer. On receipt of the message from the Railways' main server, the ATVM prints ticket and makes it available to the customer. The case of the petitioner is that the machine is a computer system, which is also involved in the processing and printing of ticket. Counsel for the petitioner relied on the liberal way entry 69(22) is worded, which covers all computer systems and even peripherals, including printers. However, the Government Pleader submitted that data available in the card will be understood only through the Railways' main processor and only the Railways' system authorizes issue of ticket. He has also relied on the decision of the Karnataka High Court reported in Diebold Systems Pvt. Ltd. v. Commissioner of Commercial Taxes (Karnataka), Bangalore, 2006 144 STC 59which held that bank ATM is not a computer system, though after releasing cash, it also prints and delivers a statement on balance as in this case. Therefore, according to him, the petitioner's machine is not involved in data processing and at the maximum it serves as a printer generating the ticket for the customer and so much so, it is a vending machine. Counsel for the petitioner submitted that the machine itself is manufactured in a factory in Thiruvananthapuram by the petitioner's sister concern and it is cleared by paying excise duty at the rate applicable for computer system under entry 8471 of HSN code and so much so, the item falls squarely under the Third Schedule entry above referred relied on by the petitioner. The petitioner's further case is that the manufacturer's clearance of the item as a computer system is accepted by the Excise Department and the manufacturer is also assessed under the Kerala Value Added Tax Act at four per cent treating it as a computer system falling under entry 69(22) of the Third Schedule and the same is accepted by the Department. We notice that this aspect had not been considered by any of the authorities, including the Tribunal and it is only on our request the petitioner has furnished this information, which is very vital because, under the scheme of levy of tax under the KVAT Act, change of classification in a series of sales of same goods at the hands of different dealers is not permissible. We feel classification of same goods has to be uniform both at the hands of the manufacturer as well as at the hands of dealers to ensure smooth levy of tax under the VAT Scheme which entitles purchasing dealers for input-tax credit. If the assessing officers take divergent views, clarification on rate of tax by the Commissioner under section 94 of the KVAT Act is the only solution and clarification in this case is not only desirable but is required because, manufacturer is called upon to pay tax at four per cent by the very same Department and at the same time dealer is directed to pay tax at 12.5 per cent. Of course in this case it is stated that the manufacturer and the dealer are related persons. However, in our view, classification of the same goods under the KVAT Act has to be uniform at the hands of all dealers. We, therefore, allow this revision by setting aside the orders of the Tribunal and that of the lower authorities, including the assessing officer with direction to the Commissioner/authority concerned to issue clarification after hearing the petitioner and the manufacturer and after verifying the records pertaining to the assessment of both the parties. The petitioner will file an application for clarification along with a copy of this judgment before the Commissioner of Commercial Taxes, who, either by himself or through the competent authority, will clarify the rate of tax within two months after issuing notice to the manufacturer as well, whose address will be furnished by the petitioner. Fresh assessment will be issued based on the clarification by the authority, as stated above, within one month from the date of receipt of clarification.