No Evidence by Dept to Prove Classification of CAT Cables under General Entry of RVAT Act: Rajasthan HC quashes Tax Board Order [Read Order]

The Rajasthan High Court quashed the tax board order since the department failed to provide the classification of CAT cables under the General Entry of the Rajasthan Value Added Tax Act, 2003.

M/s Compuage Infocom Limited, the petitioner assessee is a company engaged in the business of selling computer and computer-related products, including networking cables (CAT-5 / CAT-6) whose primary function is data transmission.

The question before the court is whether the LAN Connection Cable (CAT-5, CAT-6) is taxable under S. No. 3 or 24 of Part A of Entry No. 65 of Schedule-IV or at General Rate as per Schedule-V appended to the Rajasthan Value Added Tax Act, 2003 (RVAT Act)

It was contended that the petitioner-assessee was rightly classifying the networking cables as ‘computer peripherals’ and accordingly discharging its VAT liability by treating the same as a computer system and peripherals, as classifiable under Entry 3 of Part A of Schedule IV of the RVAT Act. It was argued that the Revenue as well as the lower adjudicating authorities have given an extremely restrictive meaning to the term ‘computer peripherals’ to only include input and output devices,

On the other hand, the revenue contended that CAT-5 or CAT-6 cable are essentially networking cables, whose use and application is not restricted to computer networking and they are used in a wide array of services, including telecommunication, cable networks, CCTV cameras, etc. 

The goods CAT-5/CAT-6 cable, are admittedly used to connect the computer to a network as their primary function is high-speed data transmission. They are essential for the wired connection of a computer to a local network or the Internet.

The burden to prove that a specific product falls within a particular tariff is always on the revenue, more so when the revenue is trying to classify products in the residual entry as against the specific entry.

It was found that the term peripheral has been given an expansive meaning and is not restricted to input/output devices, as contended by the Revenue. It was viewed that even if the goods in question can have different applications independent of the computer, the same would not preclude them from being considered computer peripherals if they are also being used in computer systems to expand the capabilities of computer systems.

A single judge bench comprising Justice Sameer Jain observed that the revenue has utterly failed to adduce any evidence, technical or otherwise, to substantiate its claim that CAT-5 or CAT-6 cables are not covered in Part-A of Schedule IV to the RVAT Act which specifically deals with IT Products.

While allowing the order court quashed and set aside the order of the Tax Board.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates