SC verdict : VAT on mobile charger higher than mobile handset

By Ashish Kumar Gill

The Supreme Court, in State of Punjab & Ors Vs. Nokia India Pvt. Ltd.[1] has held that “a mobile phone battery charger is an accessory to a phone and not a part of the cell phone, thereby subjecting it to a different tax rate”.

In this case, the respondent M/s. Nokia India Pvt. Ltd. (‘Nokia’) had sold 1,07,2679 cell phones with battery chargers during the business year of 2005-06. The Nokia paid the tax on battery chargers at the similar rate which was applicable for the cell phones. The Assessing Authority (‘Authority’) raised objection for this and issued notice to the Nokia for the assessment year 2005-06 and 2006-07 separately. The Authority said that the battery charger was an accessory to the cell phone hence chargeable to tax at the rate of 12.5%. Nokia in reply to the notice said that “a charger is an integral part of the cell phone since the 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”. The Authority rejected  Nokia’s reply and  charged the tax at a  rate which is higher than the rate prescribed for mobile phones and also demanded interest and penalty. Nokia approached to the Deputy Excise & Taxation Commissioner (‘Deputy Commissioner’), Patiala Division, Patiala, inter alia, challenging the above said order. The Deputy Commissioner dismissed the plea of the Nokia. Thereafter the Nokia approached before the Value Added Tax, Tribunal, Chandigarh, Punjab (‘Tribunal’). The Tribunal while setting aside the penalties, dismissed Nokia’s appeals. Nokia further appealed to the Punjab and Haryana High Court (‘High Court’) which held in Nokia’s favour “holding that the battery charger is a part of the composite package of cell phone”.

Aggrieved by the order of the High Court, The State of Punjab and Ors (‘Appellants’) preferred the appeal before the Supreme Court wherein they argued that “a battery charger is not a part of the cell phone but merely an accessory thereof. They contended that Nokia had paid tax at a different rate on the battery chargers when they sold it separately. According to Appellants, the battery charges are not covered under Entry 60(6)(g) in Schedule `B’ of the Punjab Value Added Tax Act, 2005 (‘Act’) and was thus liable to be taxed at  a higher rate than that of cell phone. Nokia reiterated that battery charger not being independently sold, but was sold with the cell phone in same packing and hence taxable at the same rate of cell phone.

The Single Bench Judge of the Supreme Court set aside the order of High Court and held 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. Hence, battery charger can be taxed separately at higher rate than cell phone.

[1] Decision dated  17th December, 2014,  http://courtnic.nic.in/supremecourt/temp/sc%2030398-3039911p.txt