Mobile Charger is an Independent product - SC

The battery charger cannot be held to be a composite part of the cell phone but is an independent product which can be sold separately, without selling the cell phone.- Says Supreme Court

STATE OF PUNJAB & ORS. v. NOKIA INDIA PVT. LTD.

CIVIL APPEAL NOS. 11486-11487 OF 2014

Judgment Dated : 17/12/2014

CORAM : SUDHANSU JYOTI MUKHOPADHAY .J, MADAN B. LOKUR .J

             

J U D G M E N T

Sudhansu Jyoti Mukhopadhaya, J.

                         Leave granted.

2. These appeals have been preferred by the appellants- State of Punjab and others against the impugned orders dated 17th 

November, 2010 passed by the High Court of Punjab and Haryana at 

Chandigarh. By the impugned orders the Division Bench of the 

High court allowed the appeals preferred by the respondent

assessee, and held that cell phone battery charger is sold as 

composite package along with cell phone, and hence said charger 

cannot be excluded from the Entry for concessional rate of tax 

which applies to cell phones and parts thereof.

3. The factual matrix of the case is as follows: 

The respondent-M/s. Nokia India Pvt. Ltd. (hereinafter 

referred to as the “Company”) is a dealer registered under the 

Punjab Value Added Tax Act, 2005 (hereinafter referred to as the 

“Act”) in the District Mohali and is doing business of sale of 

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cell phones and their accessories. During the year 2005-06, the 

Company had made sales of 1,07,2679 pieces of cell phones with 

battery chargers and had paid tax at the rate of 4% on the sale 

value of battery chargers, the rate at which the tax on the sale 

of cell phone was paid. The value of the each of the battery 

charger if separately taken was to be Rs.120/- per piece as 

quoted by the respondent-Company itself. It comes to 

Rs.12,87,21,480/-. The scrutiny proceedings were initiated under 

Section 26 of the Act, 2005 read with Rules 36 and 43 of the 

Punjab Value Added Tax Rules, 2005 by issuing notice to the 

respondent separately for the Assessment Years 2005-06 and 2006

07. The Assessing Authority had held that the battery charger 

was an accessory chargeable to tax at the rate of 12.5%. The 

difference of 8.5% was calculated and it came to 

Rs.1,09,41,325/-. Interest under Section 32(1) was charged on 

the said amount amounting to Rs.21,25,491/-. Further penalty 

under Section 53 of the Act at the rate of 2% per month was 

imposed amounting to Rs.85,01,964/- The total demand for the 

assessment year 2005-06 was raised to Rs.2,15,68,780/-.

4. For the year 2006-07, the number of battery chargers sold 

were taken to be 1807725 pieces, the value at the rate of 

Rs.120/- per piece came to Rs.21,69,27,000/-. Differential 

amount of tax at the rate of Rs.8.5% was calculated to be 

Rs.1,84,38,795/-. Interest as per Section 32(1) of the Act was 

charged which came to Rs.25,24,175/-. Further, penalty under 

Section 53 of the Act at the rate of 2% per month was calculated 

which came to Rs.1,00,96,750/- and total demand raised vide 

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order of Assessing Authority for that year had been 

Rs.3,10,59,720/-.

5. Respondent-Company filed reply on 26th November, 2008, 24th 

December, 2008 and 9th January, 2009, inter alia, stating that 

the product was being sold as mobile/cellular phone under a 

single solo pack unit and was covered under Entry No.60 of 

Schedule ‘B’ of the Act and that no separate amount for battery 

charger was being claimed from the customers, and that only 

amount charged was for handsets. It was also stated by the 

respondent that for subsequent sale of the battery charger and 

the battery in the State of Punjab, Tax/VAT at the rate of 12.5% 

was being deposited. The respondent stated that the battery 

charger is an accessory to the main product that is mobile 

phone. 

6. The Assessing Authority vide detailed common order dated 

2nd March 2009 held that the battery charger being a separate 

item was liable to be taxed at general rate i.e. 12.5% and not 

at concessional rate applicable to the cell phones inter alia on 

the premise that the respondents were selling more than one 

product which were exigible in different rate of tax in a single 

pack and had themselves admitted the battery charger as a 

separate commodity was liable to payment of tax at the rate of 

12.5% applicable to the goods in residuary Schedule ‘F’ to the 

Act. The Assessing Authority further observed that even 

according to Entry 60 of Schedule ‘B’, the product included is 

only the cellular phone and not accessories thereof.

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7. The respondent filed Appeal Nos. 804 and 805/2009-10 

under Section 62(1) of the Act before the Deputy Excise & 

Taxation Commissioner(Appeals), Patiala Division, Patiala, inter 

alia, challenging the above said order dated 2nd March, 2009. 

The Dy. Excise & Taxation Commissioner (Appeals), Patiala 

vide judgment and order dated 26th August, 2009 dismissed both 

the appeals. The respondent being aggrieved by the above filed 

Appeal Nos.656-657 of 2009 under Section 63(1) of the Act before 

the Value Added Tax, Tribunal, Chandigarh, Punjab. The Tribunal 

by a detailed order dated 11th February, 2010 dismissed both the 

appeals, inter alia, observing that the battery charger is not a 

part of the cell phone. The Tribunal further held that the 

penalty under Section 53 of the Act should not have been imposed 

and thus set aside the same viz. Rs.85,01,964/- for the year 

2005-06 and Rs.1,00,96,750/- for the year 2006-07.

8. The respondent, against the above concurrent finding 

filed VAT Appeal Nos.54 & 55 of 2010 (O&M) before the High Court 

of Punjab and Haryana at Chandigarh. By the impugned orders 

dated 17th November, 2010, the Division Bench of the High Court 

allowed the appeals holding that the battery charger is a part 

of the composite package of cell phone. 

9. Similar pleas as taken before the High Court have been 

taken by both the parties before this Court.

Learned counsel appearing on behalf of the respondent 

demonstrated the composite package of cell phone, cell phone and 

battery charger and some other accessories like head phone. 

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10. The contention of the respondent had been that battery 

charger not being independently sold, was sold with the cell 

phone in same packing and hence tax chargeable was at the rate 

of 4% and proper tax had been paid and, therefore, there was no 

good ground to charge tax at the rate of 12.5% on sale of those 

battery chargers which are free with the cell phone in the 

composite package. 

11. On the other hand, according to the counsel for the 

appellant-State a battery charger is not a part of the cell 

phone but merely an accessory thereof even as per the 

respondents themselves, who had separately paid tax at the rate 

of 12.5% on the battery chargers sold separately. According to 

him, the battery charges are not covered under Entry 60(6)(g) in 

Schedule ‘B’ of the Act and was thus liable to be taxed at the 

rate of 12.5% on its value under Schedule ‘F’ of the Act which 

covers all residuary items not falling in any of the 

classifications of other Schedules of the Act.

12. We have heard rival contentions made on behalf of the 

parties and perused the record. 

Schedule ‘B’ of the Act contains list of goods taxable at 

the rate of 4%. Cell phone is mentioned in the said schedule and 

it finds further place at Serial No.6(g) under Entry 60 and is 

thereby liable to be charged at the rate of 4%.

13. According to the counsel for the respondent, charger is 

an integral part of the cell phone and the cell phone cannot be 

operated without the charger and when any person comes for cell 

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phone, he purchases the cell phone and then automatically takes 

away the charger for which no separate money is charged. 

However, it is admitted that whenever Company sells chargers 

separately then 12.5% tax is charged which is applicable to 

goods in residuary Schedule ‘F’ of Act.

14. On behalf of the State it was rightly argued that when 

Entry 60(6)(g) of Schedule ‘B’ of the Act does not mention 

accessories for the purpose of taxing the item/product at the 

rate of 4%, they need to be charged at 12.5% as per Schedule 

‘F’. It was contended that the battery chargers are not covered 

under Entry 60(6)(g) and even otherwise there is no mention of 

the charger in HMS Code 8525.20.17 under the Excise Act, and 

therefore, charger is liable to be taxed at the rate of 12.5%.

15. Sub-sub heading code 8525 and tariff no.8525.20.17 of the 

Central Excise Duty Act, is as under:

Chapter 85 Sub-heading Code 8525

Sub-sub heading Code 8525.20.17

Tariff 

No.8525.20.17

Electrical machinery and equipment and parts thereof, radio-telegraphs sound recorders and reproducers and parts and accessories of such articles.

Transmission apparatus for radiotelephony, radiobroadcasting or television, whether or not incorp.

“Transmission apparatus incorporating reception apparatus 

Cellular Telephones

‘Cellular telephone’ is in schedule B at Entry No.60(6)

(g) vide HSN Code No.8525.20.17. The Tariff No.8525.20.17 only 

relates to cellular telephone and not the accessories. The 

Schedule ‘B’ does not indicate that the cellular phone includes 

the accessories like the chargers either in the HSN Code or by 

elaborating in words.

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16. The Assessing Authority, Appellate Authority and the 

Tribunal rightly held that the battery charger is not a part of 

the mobile/cell phone. If the charger was a part of cell phone, 

then cell phone could not have been operated without using the 

battery charger. But in reality, it is not required at the time 

of operation.  Further, the battery in the cell phone can be 

charged directly from the other means also like laptop without 

employing the battery charger, implying thereby, that it is 

nothing but an accessory to the mobile phone. The Tribunal 

noticed that as per the information available on the website of 

Nokia, the Company has invariably put the mobile battery charger 

in the category of an accessory which means that in the common 

parlance also, the mobile battery charger is understood as an 

accessory. It has also been noticed by the Tribunal that a Nokia 

make battery charger is compatible to many models of Nokia 

mobile phones and also many models of Nokia make battery 

chargers which are compatible to a particular model of Nokia 

mobile phone, imparting various levels of effectiveness and 

convenience to the users.

17. Learned counsel for the respondent referred to General 

Rules for interpretation of the First Schedule of the Import 

Tariff under the Customs Tariff Act, 1975. The classification of 

the goods in the Schedule for the purpose of Rule 3(b) in the 

general rules for interpretation of import tariff reads as 

follows:

“3(b) mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to (a), shall be classified as if they consisted of 

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the material of component which gives them their essential character, insofar as this criterion is applicable.”

It was contended that composite goods being used 

consisting of different materials and different components, and 

goods put up in sets for retail sale, cannot be classified by 

reference to clause (a). However, such submission cannot  be 

accepted as it cannot be held that charger is an integral part 

of the mobile phone making it a composite good. Merely, making a 

composite package of cell phone charger will not make it 

composite good for the purpose of interpretation of the 

provisions. The word ‘accessory’ as defined in the Webster’s 

Comprehensive Dictionary (International) Volume-I is defined as:

“a person or thing that aids subordinately; an adjunct; appurtenance; accompaniment (2) such items of apparel as complete an outfit, as gloves, a scarf, hat or handbag.(3) A person who, even if not present, is concerned, either before or after, in the perpetration of a felony below the crime of treason.  Adj.(1) Aiding the principal design, or assisting subordinately the chief agent, as in the commission of a crime.(2) contributory; supplemental; additional: accessory nerves”.  

18. In M/s. Annapurna Carbon Industries Co. vs. State of 

Andhra Pradesh, (1976)2 SCC 273, this Court while examining the 

question whether “Arc Carbon” is an accessory to cinema 

projectors or whether comes under other cinematography 

equipments under Entry 4 of Schedule I to the A.P. General Sales 

Tax Act, 1957, defined accessories as:

“an object or device that is not essential in itself but that adds to the beauty, convenience or effectiveness of something else”.  

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19. In view of the aforesaid facts, we find that the 

Assessing Authority, Appellate Authority and the Tribunal 

rightly held that the mobile/cell phone charger is an accessory 

to cell phone and is not a part of the cell phone. We further 

hold that the battery charger cannot be held to be a composite 

part of the cell phone but is an independent product which can 

be sold separately, without selling the cell phone. The High 

Court failed to appreciate the aforesaid fact and wrongly held 

that the battery charger is a part of the cell phone.

20. In view of the finding recorded above, we have no other 

option but to set aside the impugned orders dated 17th November, 

2010 in VAT Appeal Nos.54 & 55 (O&M) of 2010 passed by the High 

Court of Punjab and Haryana at Chandigarh. The order passed by 

the Tribunal is affirmed. The appeals are allowed. No costs. 

.............................J.   [SUDHANSU JYOTI MUKHOPADHAYA]

  .............................J.                         [MADAN B. LOKUR] NEW DELHI; DECEMBER 17, 2014.