STATE OF PUNJAB & ORS.versusNOKIA INDIA PVT. LTD.

•                   [2014) 11 S.C.R. 331


                STATE OF PUNJAB & ORS.                            A
                             v.
                  NOKIA INDIA PVT. LTD.
         (Civil appeal Nos. 11486-11487 of 2014)
                   DECEMBER 17, 2014
                                                                  B
       [SUDHANSU JYOTI MUKHOPADHAYA AND
              MADAN B. LOKUR, JJ.]

      Punjab Value Added Tax Act, 2005: Schedule 'B 'Entry
60(6)(g) - Cell Phone Battery Charger sold along with Cell        c
Phone - Applicability of concessional rate of tax on the
battery charger as applicable to cell phones and parts thereof
- Held: Battery Charger is not a part of mobile/cell phone - It
is nothing but an accessory to the mobile phone - In
common parlance also, the mobile battery charger is               D
understood as an accessory - Merely, making a composite
package of cell phone charger would not make it composite
good for the purpose of interpretation of the provisions -
Battery Charger cannot be held to be a composite part of the
cell phone but is an independent product which can be sold        E
separately, without selling the cell phone - Battery Charger
is, therefore, not covered under Entry 60(6)(g) of Schedule 'B'
and not entitled to concessional rate of tax and is taxable @
 12.5%.

    Allowing the appeals, the Court                               F

     HELD: Schedule 'B' of the Punjab Value Added Tax
Act, 2005 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             G
thereby liable to be charged at the rate of 4%. '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
                            331                                   H
    332     SUPREME COURT REPORTS            (2014] 11 S.C.R.    •

A 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. 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
B 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
c 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
0
  noticed by the Tribunal that a Nokia make battery charger
  is compatible to many models of N,okia 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
E and convenience to the users. 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. [Pa,ras 12,
F 15, 16 and 17) [338-A-F; 336-F-G; 337-H; 339-8, CJ

         Mis. Annapurna Carbon Industries Co. vs. State of
    Andhra Pradesh 1976 (2) SCC 273: 1976 (3) SCR 561 -
    relied on.
G
                       Case Law Reference:
          1976 (3) SCR 561      Relied on           Para 18
      CIVIL APPELLATE JURISDICTION : Civil appeal Nos.
H 11486-11487 of 2014.
•      STATE OF PUNJAB v. NOKIA INDIA PVT. LTD.              333


        From the Judgment & Order dated 17 .11.2010 of the High
    Court of Punjab and Haryana at Chandigarh in VAT Appeal No.
                                                                   A

    54 & 55 of 2010.
        Nikhil Nayyar, AAG, Jagjit Singh Chhabra for the
    Appellants.
                                                                   B
       V. Lakshmi Kumaran, Alok Yadav, Sundar R., M.P.
    Devanath for the Respondent.
        The Judgment of the Court was delivered by
        SUDHANSU JYOTI MUKHOPADHAYA, J. 1. Leave                   C
    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 D
    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 E
    thereof.
        3. The factual matrix of the case is as follows:
         The respondent-Mis. Nokia India Pvt. Ltd. (hereinafter
    referred to as the "Company") is a dealer registered under the F
    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 G
    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 H
    334      SUPREME COURT REPORTS                (2014] 11 S.C.R. •


A   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
B   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
C   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
D   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
E   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,
F   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
G   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.
H
•      STATE OF PUNJAB v. NOKIA INDIA PVT. LTD.
         [SUDHANSU JYOTI MUKHOPADHAYA, J.]
                                                                335


          6. The Assessing Authority vide detailed common order A
    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 B
    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 c
    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, D
    2009.
         The Dy. Excise & Taxation Commissioner (Appeals},
    Patiala vide judgment and order dated 26th August, 2009
    dismissed both the appeals. The respondent being aggrieved E
    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. F
    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 G
    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.               H
    336      SUPREME COURT REPORTS                  (2014] 11 S.C.R. •


A       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
B   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
C   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
0   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
E   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
F   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%.
G        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
H   automatically takes away the charger for which no separate
    money is charged. However, it is admitted that whenever
•     STATE OF PUNJAB v. NOKIA INDIA PVT. LTD.
        [SUDHANSU JYOTI MUKHOPADHAYA, J.)
Company sells chargers separately then 12.5% tax is charged
which is applicable to goods in residuary Schedule 'F' of Act.
                                                              337


                                                                     A

       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         8
'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%.
                                                                     c
     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        Sub-sub         Tariff No.
                  Code 8525           heading        8525.20.17
                                     Code                            D
                                     8525.20.17
    Electrical    Transmission       "Transmission Cellular
    machinery     apparatus for      apparatus     Telephones
    and           radio-telephony,   incorporating
    equipment     radio-             reception                       E
    and parts     broadcasting or    apparatus
    thereof,      television,
    radio-        whether or not
    telegraphs    incorp.
    sound                                                            F
    recorders
    and
    reproducers
    and parts
    and                                                              G
    accessories
    of such
    articles.
       'Cellular telephone' is in schedule B at Entry No.60(6)(g)
                                                                     H
    338       SUPREME COURT REPORTS                 [2014] 11 S.C.R. •


A   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.
B
       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
c 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
0 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
E 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 mobil1a phone,
  imparting various levels of effectiveness and convenience to
  the users.

F       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:
G
          "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
H         of"the material of component which gives them their
•       STATE OF PUNJAB v. NOKIA INDIA PVT. LTD.
          [SUDHANSU JYOTI MUKHOPADHAYA, J.]
                                                                  339

         essential character, insofar as this criterion is applicable." A

         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 8
    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 C
    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 D
         handbag. (3) A person who, even if not present, is
         concerned, either before or aft.er, 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; E
         supplemental; additional: accessory neNes".

         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           F
    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 G
         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       H
    340      SUPREME COURT REPORTS                [2014] ·11 S.C.R. •


A   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
B   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) of2010
c   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.

    Devika Gujral                                     Appee1ls allowed.