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2014 Supreme(SC) 905
SUPREME COURT OF INDIA
SUDHANSU JYOTI MUKHOPADHAYA, MADAN B. LOKUR, JJ.
STATE OF PUNJAB & ORS. – APPELLANTS
VERSUS
NOKIA INDIA PVT. LTD. – RESPONDENT
CIVIL APPEAL NOS. 11486-11487 OF 2014 (Arising out of SLP (C) Nos.30398-30399 of 2011)
Decided on: 17-12-2014
IMPORTANT POINT
Battery charger of a cell phone is an accessory. It is not a composite part of the cell phone but an independent product which can be sold independently.
Headnote:(a) Punjab Value Added Tax Act, 2005 – Entry 60(6)(g) of Schedule ‘B’ and Schedule ‘F’ r/w HMS Code 8525.20.17 under the Excise Act – Accessories not mentioned in Entry 60(6)(g) – Charger being an accessory cannot be covered under this entry – Charger also does not find mention in HMS Code 8525.20.17 under the Excise Act – Liable to be charged @12.5% under Schedule ‘F’. (Para 14, 15)
(b) Punjab Value Added Tax Act, 2005 – Entry 60(6)(g) of Schedule ‘B’ and Schedule ‘F’ r/w HMS Code 8525.20.17 under the Excise Act – Charger not required for operating the cell phone – Battery in cell phone can be charged with other means like lap-top etc. – Further, a battery charger can be used for a number of models of cell phones – Charger is an accessory – Not a composite part of the cell phone but an independent product which can be sold independently. (Para 16, 19)
(1976)2 SCC 273 – Relied upon
Facts of the case:
The respondent-M/s. Nokia India Pvt. Ltd. Is a dealer registered under the Punjab Value Added Tax Act, 2005 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.
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 was charged on the said amount amounting to Rs.21,25,491/-. Further penalty 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/-. Similarly for the year 2006-07, total demand raised had been Rs.3,10,59,720/-.
The Assessing Authority vide detailed common order 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.
The respondent filed VAT Appeal before the High Court of Punjab and Haryana at Chandigarh. By the impugned orders 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.
Finding of the Court:
Impugned judgment is erroneous.
Result: Appeal allowed.
JUDGMENT
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 accord
