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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

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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

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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.

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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.

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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

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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 8525

Sub-sub  heading  Code  8525.20.17

Tariff  

No.8525.20.17 Electrical  machinery  and  equipment  and  parts  thereof,  radio-telegraphs  sound  recorders  and  reproducers  and  parts  and  accessories  of  such articles.

Transmission  apparatus  for  radio- telephony,  radio- broadcasting  or  television,  whether or not  incorp.

“Transmission  apparatus  incorporating  reception  apparatus  

Cellular  Telephones

‘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.

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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

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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”.  

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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.