NEW DELHI: The Supreme Court has held that phone chargers sold with mobile phone should be taxed separately as it is not part of phone but an accessory and turned down a plea by Nokia for treating charger and mobile as a composite product.
The apex court said that merely making one package of cell phone and charger will not make it a composite product and quashed the Punjab and Haryana high court order which had held that charger cannot be excluded from the concessional rate of tax which applies to cell phones.
The case pertains to Punjab where under state Value Added Tax Act, sale of mobile phone is taxed at 4% while charger is taxed at 12.5%.
“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,” a bench of justices S J Mukhopadhaya and Madan B Lokur said.
The apex court also noted that Nokia has itself put mobile charger in the category of accessory on its website and upheld the order passed by various authorities including the tax tribunal holding charger as an accessory to be taxed separately.
“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,” it said.
The Assessing Authority had held that the battery charger was an accessory chargeable to tax at the rate of 12.5% and directed the multinational company to pay the difference of 8.5%.
During 2005-06, the company had sold 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 total sale of charges comes to Rs.12.87 crore at the cost of Rs 120 per piece.
The tax 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 total demand was raised to Rs 2.15 crore including the penalty. Similarly for year 2006-07, the company was asked to pay Rs.3.10 crore.
The company thereafter approached the Value Added Tax Tribunal which held that sale of charger be taxed separately but set aside the penalty imposed on the company.
Nokia then moved the HC which had held that charger is a part of cell phone and cannot be taxed separately.
TOI | Dec 20, 2014
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