Delhi Tribunal reverses Commissioner's orders on VAT
September, 26th 2006
The Court declared that ink cartridges and toner cartridges are the accessories and will attract four percent VAT and not 12.5 percent
Clarifying VAT misgivings over ink and toner cartridges, Delhi Tribunal Court in its landmark judgment has declared that ink cartridges and toner cartridges are the accessories and thus attract four percent VAT not 12.5 percent as asserted by VAT commissioner in earlier court pleadings. The court has clearly stated in its verdict that ink and toner cartridges are classified under third schedule of Delhi VAT under entry 41A(XXV) and should be levied VAT @ four percent.
It may be recalled that this matter of whether cartridges fall under the category of accessories (scheduled goods) or essential parts (unscheduled good) of a printer was taken up for hearing by Delhi High Court in response to the writ petition filed by CMDA (Computer Media Dealers Association) last year when the court nullified the order passed by one RK Verma, VAT Commissioner, Delhi, stating that printer cartridges attract value added tax of 12.5 percent. Subsequently, the VAT Commissioner was asked by the court to pass a new order taking into consideration related articles of the VAT schedule. Preceding this VAT Commissioner was of the view that cartridges are the unscheduled goods covered by section 4(1)(e) and should be levied 12.5 percent tax under the Delhi VAT Act.
Thereafter, the high court directed the matter to Tribunal Court for further hearings in which petitioners wanted determination about the taxation structure on cartridges. CMDA took up the matter when Ranvir Sahi of Symphony enterprises approached the association wanting assistance into the matter when he was guided by VAT Commissioner that 12.5 percent VAT should be paid on cartridges reversing his own earlier interpretation that consumables attract four percent tax.
Feeling jubilant over the victory of association's efforts in resolving VAT issue Puneet Singhal, President CMDA said, We are extremely glad that the courts verdict has come in our favor which is a big respite for channels community. We full fledged supported Sahi when he came to us for involvement in his quest to resolve the matter with the respective authority, despite the fact that he was not the member of CMDA. The courts judgment in this particular matter has strengthened government stance of giving special importance to IT trade and traders.
According to Balram Sanghal, CMDA's counsel in the matter courts decree has come exactly in time enabling channel partners to heave a sigh of relief. He said, In this particular case everything was based on facts and it was the learned VAT Commissioner who had to re-evaluate his stance. I am happy that I have been able to discharge my duties to the clients efficiently and fruitfully.
Three separate applicants namely Symphony enterprises, Computer Media Dealers Association and Hewlett Packard had filed applications under section 76 of the Delhi Value Added Tax Act, to clarify their beliefs on taxability of cartridges. However, the respondent (in this case VAT Commissioner) was resolute on his stand that there is a very narrow compass on whether cartridges should be treated as a part or an accessory of a printer and therefore should be levied VAT @12.5 percent.