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2010 DIGILAW 3090 (PNJ)

NOKIA INDIA PVT. LTD. v. STATE OF PUNJAB

2010-11-17

ADARSH KUMAR GOEL, AJAY K.MITTAL

body2010
JUDGMENT ADARSH KUMAR GOEL :- This order will dispose of V.A.T. Appeal Nos. 54 and 55 of 2010 as common questions of law are involved therein. V.A.T. Appeal No. 54 has been filed under section 68 of the Punjab Value Added Tax Act, 2005 (in short, "the Act") against the order of the VAT Tribunal, Punjab (constituted under the Act ibid), in Appeal (VAT) No. 657 of 2009 decided on February 11, 2010, proposing to raise following substantial questions of law : "(A) Whether the honourable Tribunal was legally justified in classifying the battery charges under Schedule F (unclassified goods taxable at 12.5 per cent), when battery chargers are sold in a package along with cellular telephones affixed with MRP and the cost of the battery charger is insignificant in comparison to the price of cellular telephones ? (B) Whether entry 60(6)(g) of Schedule B (January 25, 2006 and onwards) - 'cellular telephone 8525.20.17' will include battery chargers when supplied along with cell phones in a composite package ? (C) Whether the honourable Tribunal was legally justified in classifying battery chargers under the residuary Schedule F of the PVAT Act thereby taxing battery chargers at 12.5 per cent ? (D) Whether the honourable Tribunal was legally justified in upholding the levy of interest under section 32(1) of the PVAT Act ?" The appellant is a dealer registered under the Act and is doing business of sale of cell phones and their accessories. It sold cell phone with battery charger and paid tax at the rate of four per cent on the sale value at concessional rate of tax for cell phone falling under entry 60(6)(g) in Schedule B to the Act. The assessing authority held that battery charger being a separate item was liable to be taxed at general rate, i.e., 12.5 per cent and not at concessional rate applicable to cell phone. This view was upheld by the appellate authority as well as in the second appeal by the Tribunal. The Tribunal observed as under : "Charger is an accessory not mentioned in Schedule B anywhere nor there is any explanation that the interpretation which may be put to cellular phones mentioned in HSN Code 8525.20.17 under the Excise Act will be applicable. During arguments it was even admitted that charger is not part but is an accessory. The Tribunal observed as under : "Charger is an accessory not mentioned in Schedule B anywhere nor there is any explanation that the interpretation which may be put to cellular phones mentioned in HSN Code 8525.20.17 under the Excise Act will be applicable. During arguments it was even admitted that charger is not part but is an accessory. Merely because chargers are put in the box in which cell phone is sold and separate price for the charger is not shown in the box or not charged in the invoice, that does not mean that the charger will be taxed at the same rate of tax as the cell phone is taxed. Rule 53(c) of the Punjab VAT Rules makes it obligatory for a person/dealer to maintain accounts showing sale record separately of goods sold at different tax rates. Under these circumstances, the Assessing Authority had rightly charged differential amount of tax at 8.5 per cent, i.e., 12.5 per cent minus four per cent on the value of the battery chargers, sold during the respective years." We have heard learned counsel for the parties. The learned counsel for the assessee submits that battery charger was sold in a composite package along with cell phone and compared to the price of cell phone, cost of battery charger was insignificant. The price of battery chargers was included in the sale price of the cell phones. Being part of composite package, the battery chargers could not be taxed at separate rate except when sold separately. The learned counsel for the assessee relied upon rule 3(b) of the General Rules for Interpretation of Harmonized System appended to the Customs Tariff Act, 1975 to the following effect : "(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 the material or component which gives them their essential character, insofar as this criterion is applicable." About the relevance of the said rule as principle of interpretation for classification, reliance has been placed on Commissioner of C. Ex., Bhubaneswar I v. Champdany Industries Ltd. [2010] 1 GSTR 52 (SC); [2009] 241 ELT 481 (SC), Moorco (India) Ltd. v. Collector of Customs, Madras [1994] 74 ELT 5 (SC), Naffar Chandra Jute Mills Ltd. v. Assistant Collector of C. Ex. [1993] 66 ELT 574 (Cal) and Collector of Central Excise, Shillong v. Wood Craft Products Ltd. [1995] 77 ELT 23 (SC). Relying upon Sprint R.P.G. India Ltd. v. Commissioner of Customs I, Delhi [2000] 116 ELT 6 (SC), it was submitted that essential character of the goods in question in a composite transaction comprising of different components has to be determined with reference to main component of higher value. The learned counsel for the Revenue on the other hand supported the finding recorded by the Tribunal and submits that the charger was not integral part of the cell phone and was an accessory. Cell phone could be used even without charger. In such a situation, mere fact that the chargers were sold in a composite package along with cell phone did not make any exclude to the taxability of charger at a higher separate rate of tax. He further submits that distinction has to be drawn in a "part of goods" and "accessories" which could be independently sold and used. He placed reliance on the following judgments : 1. State of Uttar Pradesh v. Kores (India) Ltd. [1977] 39 STC 8 (SC). Holding that carbon paper and ribbon were accessories of typewriter and not part thereof 2. I.A.S. Products v. Commissioner, Commercial Tax, Uttarakhand at Dehradun [2010] 29 VST 507 (Uttara). Holding that LPG regulator was accessory of LPG cylind r and not part thereof. 3. V. Govindarajan & Brother v. Government of Pondicherry [1977] 40 STC 169 (Mad) Holding that leather case and battery cells of transistor were not part ther of but accessories. The question for consideration is whether battery charger sold in a package along with the cell phone without any extra charges is covered by entry of cell phone to which concessional rate of tax was applicable. In order to determine the controversy, we may refer to the entry in question which is as under : "60. Telephones, cell phones, teleprinter, wireless equipment and parts thereof, digital video disc and compact disc and information technology products as given hereunder : 6. Transmission apparatus other than apparatus for radio or TV broadcasting : (e) Cellular telephone 8525.20.17 Prior to January 25, 2006, the said entry reads as under : 60. Telephones, cell phones, teleprinter, wireless equipment and parts thereof, digital video disc and compact disc and information technology products as given hereunder : 6. Transmission apparatus other than apparatus for radio or TV broadcasting : (e) Cellular telephone 8525.20.17 Prior to January 25, 2006, the said entry reads as under : 60. IT products including computer, telephone, cell phones, digital video disk and compact disk teleprinter and wireless equipment and parts thereof." A perusal of above entry shows that even part of products mentioned in the entry was covered therein. When cell phone is sold in a composite package without any extra charges for the battery charger, the battery charger is a part of cell phone. Mere fact that battery charger was not affixed to the cell phone will not mean that it is different item. The entry in question cannot be read as excluding battery charger which is necessary for use of the cell phone. The judgments relied on behalf of the Revenue are distinguishable. In Kores (India) Ltd. case [1977] 39 STC 8 (SC) the question was whether turnover of ribbon could be subjected to tax at rate prescribed for typewriter as part thereof, there is nothing to show that the ribbon and carbon papers were sold without extra charges along with the typewriter. The plea of the assessee was that the items were sold separately and that carbon papers and ribbon were taxable at lower rate. The Revenue wanted to assess the carbon papers, ribbon and other items at the same rate at which typewriter was taxed which plea was rejected by the honourable Supreme Court. In I.A.S. Products case [2010] 29 VST 507 (Uttara), the LPG regulator was taxed at higher rate and plea of the assessee for applying concessional rate applicable to gas cylinder was rejected by holding that even though LPG regulator may be part and parcel of the connection but the same was separable from the cylinder. There is nothing to show that regulator sold was part of composite package without any extra charges along with cylinder. In V. Govindarajan & Brother case [1977] 40 STC 169 (Mad) also though battery cells were held to be separately taxable without benefit of concessional rate applicable to transistor, there is nothing to show that sale of battery cells was part of composite package along with the transistors. In V. Govindarajan & Brother case [1977] 40 STC 169 (Mad) also though battery cells were held to be separately taxable without benefit of concessional rate applicable to transistor, there is nothing to show that sale of battery cells was part of composite package along with the transistors. On the other hand, in the present case, the battery charger is sold as composite package along with cell phone. Compared to the value of the cell phone, value of the charger is insignificant. Cell phone cannot be used without the charger. On these undisputed facts, the charger cannot be excluded from the entry for concessional rate of tax which applies to cell phones and parts thereof. Accordingly, we answer the question in favour of the assessee and against the Revenue. The appeal is allowed.