ORDER
H.L. Dattu, C.J.
1. Since the assessee is common in both these revision petitions and since the legal issue involved is identical, these revision petitions are heard together and disposed of by this common judgment.
2. The petitioner is a dealer engaged in purchase and sale of public call office monitors, (hereinafter for the sake of brevity referred to as 'PCO Monitors') for use in telephone booths, for the assessment year 2000-01, the petitioner had filed annual returns conceding total and taxable turnover of Rs. 5,53,200.00 and Rs. 3,96,750.00 respectively. For the assessment year 2001 -02, in the returns filed, petitioner had conceded total and taxable turnover of Rs. 5,65,875.00 and Rs. 5,29,265.00 respectively. In the returns filed the petitioner had conceded liability to tax at the rate of 4% treating PCO Monitors as a type of computer falling under Entry 56 of the First Schedule to KGST Act.
3. Since the conceded turnover was less than Rs. 15,00,000/-the assessing authority has completed the assessments under Section 17(4) of the KGST Act, accepting the return filed, but levying tax at the rate of 8% on the sales turnover of 'PCO Monitor' treating it as an item falling under Entry 55 of First Schedule to KGST Act.
4. The appeals filed against the assessment orders passed for both the assessment years, were allowed by the First Appellate Authority following the earlier decision of the Appellate Authority, Additional Bench-I, Ernakulam in T.A. No. 159 of 2001, in which the Tribunal has held that PCO Monitor is also a type of computer, exigible to tax under Entry 56 of First Schedule to KGST Act and the rate of tax is 4%.
5. The Revenue being aggrieved by the orders passed by the Appellate Assistant Commissioner, Ernakulam in S.T.A. Nos. 1801 of 2002 and S.T.A. No. 2263 of 2003 for the assessment years 2000-01 and 2001 -02 respectively has filed Second Appeals before the Sales Tax Appellate Tribunal, Additional Benchn, Ernakulam in T.A. Nos. 413/04 and 414/04. The Tribunal, but its common judgment dated 2nd February, 2005, has allowed the Revenue's appeal and has concluded that 'PCO Monitor' is an electronic equipment and therefore, requires to be classified as an item falling under Entry 55 of First Schedule to KGST Act, taxable at the rate of 8% during the assessment years, 2000-01 and 2001-02. The findings and the conclusions of the Tribunal is as under:
The Tribunal found that its earlier decision in T.A. No. 159/2001 was misunderstood by the First Appellate Authority while passing Annexure n Order. The question which arose for consideration in TA No. 159/2001 was as to whether PCO Monitor will fall under 'Components and accessory of computers and sub-systems' mentioned in Schedule VIA-3.2 of SRO 870/99. The Tribunal in that case did not find that PCO Monitor is a type of computer, but only held that the item is included under component and accessories of computers and sub systems and therefore concessional rate is allowable under SRO 870/99. The Tribunal further found that as per the certificate produced by the assessee from the Assistant Professor, Department of Electronics Engineering, Government Engineering College, Thrissur, STD PCO Monitors are a type of computer controlled machine used in STD Booths for monitoring and billing of telephone calls and the said certificate does not certify that PCO Monitor is a computer. Therefore the Tribunal held that PCO Monitor is not a computer. The Tribunal further held that rate of tax applicable to PCO Monitor is 8% under entry 55 of 1st Schedule to the KGST Act. while deciding so, the Tribunal also relied on a clarification issued by the Commissioner of Commercial Taxes in which it was clarified that PCO Monitor was an electronic instrument and rate of tax applicable is 8%.
6. The assessee being aggrieved by the order passed by the Sales Tax Appellate Tribunal is before us in this tax revision case and has raised the following questions of law for our consideration and decision. They are:
(i) Entry 56 of 1st schedule to the KGST Act is relating to computers of all descriptions and the rate of tax is 4%. The term 'Computer' has not been defined in the KGST Act. Therefore, the meaning of the term has to be ascertained applying the principle of common parlance test. In Webster's New World Dictionary the meaning of the term computer is as follows:
Computer - a person or thing that computes, specif., an electronic machine that performs rapid, often complex calculations or compiles, correlates and selects data.
What is performed by PCO Monitor is exactly the same function as is given in the dictionary meaning. Therefore, is the Tribunal justified in law in holding that PCO Monitor will not fall under the entry 56 'Computer of all descriptions' in the 1st Schedule to the KGST Act?
(ii) The certificate issued by the Assistant Professor, Department of Electronic Engineering, Government Engineering College, Thrissur states that PCO monitor is a computer controlled machine. Therefore, it is clear that the function of PCO Monitor is performed on account of the computer installed in it and the outer body is only an accessory to the computer. Applying the test of predominancy and functional character, is the Tribunal justified in law in holding that a PCO Monitor is not a type of computer?
(iii) PCO Monitor has all the qualities of a computer. It performs rapid calculation, it compiles and selects data as any other computer. Therefore, its function is exactly that of a computer. Functional test being a well accepted test in identifying a product, is the Tribunal justified in law in holding that PCO Monitor is not a type of computer?
(iv) Entry 56 of the 1st Schedule to the KGST Act is not merely 'Computer' but it is 'Computer of all descriptions'. That being so, is the Tribunal justified in holding that PCO Monitor used in telephone booths is not a type of computer and will not fall under Entry 56?
7. Sri. V.P. Sukumar, learned Counsel for the assessee, would contend that PCO Monitor is a type of computer and since Entry 56 of First Schedule to KGST Act specifically deals with 'Computers of all descriptions' the Tribunal was not justified in coming to the conclusion that PCO Monitor is an electronic equipment and therefore comes under Entry 55 of First Schedule to KGST Act taxable at the rate of 8%. The learned Counsel would further submit that since the certificate issued by the Head of the Department of Information Technology, School of Engineering, Cochin University of Science and Technology, Kochi shows that PCO Monitor will come under the definition of Computer of all description or computer based system, in the absence of contrary materials produced by the Revenue, the same requires to be accepted and a finding requires to be given by this Court that PCO Monitor is a type of computer and fits into description of Computer of all kinds that finds a place in Entry 56 of First Schedule. In aid of his submission, the learned Counsel relies on the decision of the Apex Court in the case of State of U.P. v. Indian Hume Pipe Co. Ltd. : (1977)2SCC724 . Lastly, the learned Counsel would submit, that, it is well settled, that if there are two entries - one general and the other special, the special entry should be applied for the purpose of levying tax. The learned Counsel draws our attention to the observation made by Full Bench of this Court in the case of Kevi Hardware v. State of Kerala 2003 (2) KLT 776 (FB).
8. Sri. Vinod Chandran, learned Counsel for the Revenue, while justifying the conclusion reached by the Tribunal, draws our attention to the observations made by the Karnataka High Court in the case of Die Bold Systems Pvt. Ltd. v. Commissioner of Commercial Taxes (2006) 1444 STC 59 (Kar) and Siemens Ltd. v. Commercial Tax Officer (Int) and Ors. (1999) 115 STC 35 (Kar).
9. In order to resolve the controversy between the parties, we need to know firstly what is 'PCO Monitor' and how it works
10. A Public Call Office is a telephone facility located in public place. In India, manned and automated (coin operated pay phone) versions of the service are in existence. There are two types of PCO, landline and wireless. Wireless PCO uses two kinds of technology, CDMA and GSM. The CDMA - Code Division Multiple Access is a channel access method utilised by various radio communication technologies. The GSM - Global System for Mobile Communication is a cellular network and is the most popular standard for Mobile Phones. To ensure accurate metering, PCO Monitor are used. They are also called 'Call Charges Indicators'. The pulses are given on telephone line every time the subscriber meter in the telephone exchange is incremented. Telephone call charge indicator uses these pulses to increment the chargeable units.
11. The PCO Monitor is also known as 'Phone Booth Call Meter', 'Telephone Call Meter' or 'Phone Call Calculator'. It is equipped with LCD Screen with Remote Display Units which can make the clients monitor their call details. It is designed to function on a standard telephone line configuration with pay phone tariff pulses. It enables the user to determine exactly how many falls were made and the total amount for respective calls. This electronic device is connected between telephone line and the telephone set to monitor phone calls. The micro controller's ability to store and run unique programs makes it extremely versatile. For instance, one can program a micro controller to make decisions, perform functions based on predetermined situation and selections. The micro controller's ability to perform maths and logic functions allows it to mimic sophisticated logic and electronic circuits. Mirco controllers are responsible for the 'intelligence' in most smart devices on the consumer market. Micro controllers differs from micro processor in many ways. First and the most important is its functionality. In order to use a micro processor, other components such as memory or components for receiving and sending data must be added to it. In short, that means, Micro processor is the very heart of the Computer. On the other hand, Micro controller is designed to be all of that in one. No other external components are needed to its application because all necessary peripherals are already built into it.
11. The next issue that needs to be answered is, whether 'PCO Monitor' is an Electronic System or whether it fits into the description of computer of all kinds
12. The difference between a computer and electronic equipment apparatus is as under:
A device that computes, especially a programmable electronic machine that performs high-speed mathematical or logical operations or that assembles, stores, correlates, or otherwise processes information is a computer.
A computer is a programmable machine that performs high-speed processing of numbers, as well as of text, graphics, symbols, and sound. All computers contain a central processing unit that interprets and executes instructions; input devices, such as a keyboard and a mouse, through which data and commands enter the computer; memory that enables the computer to store programs and data; and output devices, such as printers and display screens, that show the results after the computer has processed data.
Computers can perform complex and repetitive procedures quickly, precisely and reliably and can quickly store and retrieve large amounts of data.
A computer differs from a PCO device or a simpler computing device like a calculator in that the computer is a multi-functional device that can perform more than a subject of tasks. Unlike a calculator or PCO Monitor, a computer is able to store a program and retrieve information from its memory.
For example, a calculator takes input from a keypad and performs some computation and displays it. A calculator operators on a subset of computational tasks that are limited to mathematical operating like additional and subtractions. A computer, on the other hand, can perform a whole gamut of tasks and can be programmed to perform more than subset of functions.
Public Call Office Monitor is a microprocessor based equipment connected to telephone instrument. It continuously monitors the telephone line. A PCO device displays the number that is being dialled, monitors the call length, does statistical calculations for the call and prints the total cost of call. Again, a PCO device does a subset of tasks in the entire realm of computing abilities.
The subset of tasks that a PCO device can perform, therefore, is restricted to telephony related tasks. A PCO device cannot be programmed to perform other tasks of computing like processing a document, play a movie, or predict the weather.
A computer, depending on its processing power can be programmed to perform these several generic tasks. An electronic device like a calculator or PCO Monitor cannot be programmed to do anything other than the specific task it is designed for.
Therefore, even though both a PCO Monitor and a computer perform computation tasks, the PCO Monitor is limited to the number of functions it can perform.
13. Keeping in view the essential difference between a PCO Monitor and a computer, let us come back to the fact situation. The assessing authority has completed the assessment for the assessment years in question treating PCO Monitors as an electronic system/apparatus, though a claim was made by the assessee to treat it as a type of computer taxable at 4% under Entry 56 of the First Schedule to the Statute, the assessing authority has assessed it as falling under Entry 55 of First Schedule to KGST Act taxable at 8%. The Appellate Tribunal has confirmed the findings of the assessing authority. Now, in order to appreciate the submissions of the learned counsels, it would be useful to extract the relevant entries as it existed during the relevant assessment years. They are as under:
SI. No. Description of Goods Point of levy Rate of Taxapplicable55. Electronic Systems, instruments, apparatus andappliances other than those At the point of firstspecified elsewhere in this sale in the State by a 8schedule and spareparts dealer liable to taxand accessories thereof. under Section 556. Computers of alldescriptions -do- 4
14. Entry 55 of First Schedule to KGST Act, speaks of Electronic Systems, instruments, apparatus and appliances other than those specified elsewhere in the Schedule. The spare parts and accessories of the electronic system is also included under this entry for the purpose of taxation under the Act. The point of levy is at the point of first sale in the State by a dealer who is liable to tax under the charging provisions of the KGST Act The rate of tax leviable is 8%. Entry 56 of the First Schedule to the Act speaks Computers of all kinds/descriptions. The entry is wide enough to include computers of all description. As in the Entry 55 of First Schedule, the levy of tax is at the point of first sale in the State by a dealer liable to tax under Section 5 of the Act which is the charging provision. The rate of tax is at 4%.
15. The Apex Court in the case of Indian Aluminium Cables Ltd. v. Union of India (1967) 64 STC 180, after referring to its earlier decisions has held, that, in determining the meaning or connotation of words and expressions describing an article in a tariff schedule, those words and expressions should be construed in the sense in which they are understood in the trade by the dealer and customer when goods are marketable. The court has observed, that, to consider whether an item falls within the meaning of an entry of a Schedule to an Act, it has to be seen whether its qualities would fall in any one of the entries or in any one of the items included in that entry. It is also well settled legal position that various entries in the Schedule have to be harmoniously construed so as to avoid confusion and over lapping. It is also well settled rule of construction of sales tax statutes that the words used by the legislature in entries in various Schedules to describe different kinds of goods for prescribing different rates of tax should be construed not in any technical or scientific sense, but as understood in common parlance. The words must therefore be construed according to their popular sense, meaning, 'that sense which people conversant with the subject matter with which the statute is dealing would attribute to it. [See, Commissioner of Sales Tax v. Jaswant Singh Charan Singh 19 STC 496 (SC)]. Even this test applied in strict to sense, the PCO Monitors by no stretch of imagination could be construed as an item to say the least, the inexpensive computer.
16. The next test is 'user test' or 'functionality test'. The Apex Court in the case of Mukesh Kumar Aggarwal and Co., v. State of Madhya Pradesh : [1988]2SCR501 has stated that, the user test is logical; but is, again inconclusive. The particular use to which an article can be applied in the hands of a special consumer is not determinative of the nature of the goods. The Gauhati High Court in the case of Shri Chitta Ranjan Saha v. State of Tripura [1990] 79 STC 51 has expressed, which view we concur, observed that, the user-test has got a very limited application. It is neither a safe guard to interpretation nor is it conclusive. Unless other tests are found to be unsatisfactory or inadequate, this test should not be applied. Besides, even in cases where resort is taken to the 'user-test' it has to be limited to decide as to what category or entry, a particular item or product would generally fall and once it is so decided, the same will apply to all sales under the Act, no matter by whom it is made or to whom it is made. In other words, the user of the goods thereafter will have no relevance. It can't be used to levy tax on different dealers at different rates depending upon the use to which the goods are put or the purpose for which it is purchased.
17. In our considered view, even if we apply common parlance or commercial parlance test or the functionality test we cannot agree with the contention of the learned Counsel for the petitioner that 'PCO Monitor' is a type of computer. It is only an electronic goods, since it has only limited functions as explained by us in previous paragraphs.
18. Now, let us briefly refer to the citations on which reliance is placed by learned Counsel for the petitioner. The learned Counsel for the petitioner has relied on the observations made by the Supreme Court in the case of State of U.P. and Ors. v. Indian Aluminium Pipe Co. Ltd. (1977) 39 STC 355. In the said decision, the precise question that came up for consideration is that whether or not Hume Pipes are 'Sanitary Fittings' as contemplated by notification issued by the Government under U.P. Sales Tax Act. The court while deciding this issue has relied upon the certificates issued by Local Self Government Engineering Department to show that the Hume Pipes supplied by the respondent was never used as 'sanitary fittings' since there was no other material produced by the State as against the certificate issued, the court gave relief to the assessee by rejecting the State's appeal. In our view, the decision relied on by the learned Counsel for the assessee would not strengthen his case, in view of the essential difference we have observed in the course of our order.
19. The learned Counsel would further contend that, if there are two entries - one general and the other special, the special entry should be applied for the purpose of levying tax. In support of this submission, the learned Counsel has relied on the observations made by this Court in the case of Kevi Hardwares v. State of Kerala 2003 (2) KLT 776 (F.B.). We have no quarrel on this proposition of law. But, in our view, the decision cited by the learned Counsel may not assist him in the instant case. A Bench of Karnataka High Court in P.R. Chindak and Ors. v. Asst. Commissioner of Commercial Taxes has stated that, 'normalrule is that each entry enumerating the goods should be given its natural or normal meaning as understood by those who deal with the goods. If mere are two entries and one entry is broader and covers an entire class of goods, while the other entry covers some of the goods out of the said class, the latter entry should be considered as a special entry in respect of those goods. In such a situation, the special entry would cut down the scope of the general entry, so that, both the entries could be read harmoniously and given effect to'.
20. We are in agreement with the view expressed by the learned Judges of the Karnataka High Court.
Now we come to (lie decision relied on by the learned Counsel for the Revenue. In our opinion, none of the decisions relied on by the learned Counsel would have any bearing on the issue involved in these revision petitions.
In view of the aforesaid discussion, we hold that 'PCO Monitor' is an electronic equipment and not a computer. Accordingly, the questions of law raised by the assessee requires to be answered in negative and against the assessee. Accordingly, the revision petitions requires to be rejected and they are rejected.
In view of the orders passed in the revision petitions, all pending interlocutory applications are dismissed.
Ordered accordingly.