STATE OF PUNJAB & ORS. Vs. NOKIA INDIA PVT LTD.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 11486-11487 of 2014, Judgment Date: Dec 17, 2014
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 11486-11487 OF 2014
(Arising out of SLP (C) Nos.30398-30399 of 2011)
STATE OF PUNJAB & ORS. ... APPELLANTS
VERSUS
NOKIA INDIA PVT. LTD. ... RESPONDENT
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 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 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.
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.
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 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 |Sub-sub heading |Tariff |
| |8525 |Code 8525.20.17 |No.8525.20.17 |
|Electrical |Transmission |"Transmission |Cellular Telephones|
|machinery and |apparatus for |apparatus | |
|equipment and parts|radio-telephony, |incorporating | |
|thereof, |radio-broadcasting |reception apparatus| |
|radio-telegraphs |or television, | | |
|sound recorders and|whether or not | | |
|reproducers and |incorp. | | |
|parts and | | | |
|accessories of such| | | |
|articles. | | | |
'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.
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 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".
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.