The Hon’ble Supreme Court of India has ruled that a mobile/cell phone charger is an accessory to cell phone and is not a part of the cell phone.

The Apex Court delivered the judgment on 17-12-2014 on appeal preferred by the State of Punjab and others against the Punjab High Court order dated 17 ^th November, 2010 whereby the High court allowed M/s Nokia India Pvt. Ltd (the respondent) 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.

The facts of the case were as under:

M/s. Nokia India Pvt. Ltd. (The company) was a registered dealer under the Punjab Value Added Tax Act, 2005 (VAT Act) in the District Mohali and was selling cell phones and their accessories which included chargers. During the FY 2005-06, the Company had sold battery chargers along with cell phones and paid tax at the rate of 4% being the rate applicable to the sale of cell phones. On scrutiny proceedings the assessing authority however held that the battery charger was an accessory chargeable to tax at the rate of 12.5% and issued demand along with penalty.

The Company in its reply stated that the chargers were 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 company that for subsequent sales of the battery charger and the battery Tax/VAT at the rate of 12.5% has been deposited. It was also stated that the battery charger is an accessory to the main product that is mobile phone.

However, the Assessing Authority vide 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 on the premise that the respondents were selling more than one product which were exigible in different rate of tax in a single pack. 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.

On appeal, Value Added Tax, Tribunal, Chandigarh, Punjab by order dated 11th February, 2010 observed that the battery charger is not a part of the cell phone. The Tribunal however set aside the penalty under Section 53 of the Act.

The respondent company contested its case in Punjab and Haryana High Court and 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.

The Apex Court reversed the order of the High Court and held that the The Assessing Authority, Appellate Authority and the Tribunal were right.

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

The important excerpts of the judgment are as under:

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.

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”.

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”

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.

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