COMMNR. SALES TAX, U.P. vs. M/S NIKHIL KHANDSARI UDYOG

SLP(C) No.-014994-014994 - 2000Supreme Court17 December 2014Bench: SUDHANSU JYOTI MUKHOPADHAYA MADAN B. LOKUR9 pages
AI SummaryAllowed

What were the facts?

The respondent, Nokia India Pvt. Ltd., sold cell phones with battery chargers during assessment years 2005-06 and 2006-07. The company paid tax at 4% on the sale value of both cell phones and battery chargers, treating them as a composite package. The Assessing Authority initiated scrutiny, holding that battery chargers, being accessories, were liable to tax at 12.5%, not the concessional rate of 4% applicable to cell phones. This led to demands for differential tax, interest, and penalties. The Assessing Authority, Appellate Authority, and VAT Tribunal all ruled in favor of the revenue, holding the charger to be a separate item. However, the High Court of Punjab and Haryana allowed the company's appeals, deeming the charger part of a composite package.

What did the Supreme Court hold?

The Supreme Court held that the battery charger is an accessory to the cell phone and not a part of it. The Court reasoned that a cell phone can be operated without its charger (e.g., by charging the battery directly from a laptop), and Nokia itself categorizes battery chargers as accessories. The Court also noted that the HSN Code 8525.20.17, referenced for cell phones, does not include accessories. The Tribunal's finding that the charger is not a part of the cell phone was affirmed. The High Court's decision to treat the charger as part of a composite package was set aside. The appeals were allowed, upholding the orders of the Tribunal.

What were the issues?

1. Whether a cell phone battery charger, sold along with a cell phone in a composite package, is to be treated as part of the cell phone for concessional rate of tax under Entry 60(6)(g) of Schedule ‘B’ of the Punjab Value Added Tax Act, 2005, or as an accessory taxable at the general rate under Schedule ‘F’. Assessee's contention: The battery charger is sold as part of a single composite package with the cell phone, for which no separate amount is charged. Therefore, it should be taxed at the concessional rate of 4% applicable to cell phones. Revenue's contention: A battery charger is merely an accessory, not a part of the cell phone, and is separately taxed at 12.5% when sold independently. Entry 60(6)(g) of Schedule ‘B’ does not cover accessories, thus they fall under the residuary Schedule ‘F’ and are liable to tax at 12.5%. The HSN Code 8525.20.17, which covers cellular telephones, does not include accessories.

Which sections of the Income-tax Act were involved?

Section 26,Section 32(1),Section 53,Section 62(1),Section 63(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
Page 1 JUDGMENT 1 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

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