a) The assessee ('Nokia India (P.) Ltd.'), was a registered dealer under the Punjab VAT Act. It had sold mobile phones alongwith battery chargers. It had paid tax at 4% (i.e., the rate at which tax on sale of mobile phone was paid) on the sale of value of charger.
b) It stated that the product was being sold as mobile phone under a solo pack and was covered under Entry No. 60 of Schedule 'B' of the Punjab VAT Act. No separate amount for battery charger was being claimed from the customers and only amount charged was for handsets. Whenever it sold chargers separately then VAT at 12.5% was charged, which was applicable to goods in residuary Schedule 'F' of the VAT Act.
c) The assessing authority held that the battery charger was an accessory to the mobile phone and was not a part of it. It was liable to be taxed at general rate, i.e., at 12.5% and not at concessional rate applicable to the mobile phones (i.e., at 4%).
The Supreme Court held in favour of revenue as under:
1) The authorities had rightly held that the battery charger was not a part of the mobile phone. If the charger was a part of mobile phone, then it could not have been operated without using the battery charger. But in reality, it was not required at the time of operation.
2) The battery in the mobile phone could be charged directly from the other means also like laptop without employing the battery charger, implying thereby, that it was nothing but an accessory to the mobile phone.
3) The Tribunal noticed that as per the information available on the website of the assessee, it had invariably put the mobile battery charger in the category of an accessory, which meant that in the common parlance also the mobile battery charger would have to be understood as an accessory.
4) Thus, the authorities had rightly held that the mobile phone charger was an accessory to mobile phone and was not a part of mobile phone. The battery charger could not be held to be a composite part of the cell phone but was an independent product which could be sold separately without selling the cell phone. The High Court failed to appreciate the aforesaid fact and wrongly held that the battery charger was a part of the cell phone.
5) Thus, battery charger was liable to be taxed at general rate, i.e., at 12.5% and not at concessional rate applicable to the mobile phones (i.e., at 4%). - State of Punjab v. Nokia India (P.) Ltd. (2014) 52 taxmann.com 410 (SC)