TaxTMI 
TaxTMI 
2025 (4) TMI 751
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....ndia Pvt. Ltd. case by the Hon'ble Supreme Court and the orders passed by the Authorities below without adhering to the legal proposition settled down by the Hon'ble Supreme Court. C. Whether the orders of the Ld. Tax Tribunal are perverse and contrary to the provisions laid down in the VAT Act and the law settled by the Hon'ble Supreme Court in Nokia's case. D. Whether the order of the Ld. Tax Tribunal has wrongly treated the mobile battery charger taxable@5% instead of 13.75% at par with cell phone chargeable @5%. E. Whether the Ld. Tax Tribunal is justified in passing the impugned order especially when as per entry No. 60 (f) (vii) of part-II A of schedule-A of the HP VAT Act., 2005, does not include mobile charger and other accessories. F. Whether the cell phone charger is an accessory to the cell phone and is not a part of the cell phone. The battery charger cannot be held to be a composite part of the cell phone, but it is an independent product which can be sold separately, without selling the cell phone. The Ld. H.P. Tax Tribunal has miserably failed to appreciate this aspect and wrongly held that the battery charger is a ....
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.... diary No. 40320 of 2023. 6. In addition thereto, she has relied upon office memo dated 30.11.2015 wherein it was clarified by the government that the mobile charger has to be considered as compulsory to be supplied with the mobile and would therefore, attract same rate of duty, whereby the State was advised to consider the accessory to be part of main item when they are bundled and sold together. 7. We have heard the learned counsel for the parties have also gone ground through the records of the case carefully. 8. In order to appreciate the controversy in issue, it would be necessary to set out the statutory provisions of the states of Punjab, Himachal and U.P. with regard to cellular phones/cellphones. The interpretation, tax statement and legal basis are as under:- Parameter Punjab (Nokia case) HP UP Karnataka Statutory text "Cellular Phones" Entry 60 (6) (g) Punjab VAT Act, 2005 "Cellular phone" Entry 60 (f) (vii) HP VAT Act, 2005 "Cell phones and its parts but excluding cellphones with MRP exceeding Rs. 10,000" Entry 28 UP VAT Act, 2008 "IT products including telecommunication equipment as may be notified" Entry 5....
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....h are free with the cell phone in the composite package. 13. On the other hand, the stand of the State-appellant was that 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 @12.5% on the battery chargers sold separately. According to the State, the battery chargers were not covered under Entry No. 60 (6) (g) in Schedule 'B' of the Punjab VAT Act and thus liable to be taxed at the rate of 12.5% on its value under Schedule 'F' of the Punjab VAT Act which covers all residuary items not falling in any of the classification of other Schedules of the Act. Dealing with this contention, the Hon'ble Supreme Court in Nokia's case held as under:- "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 1....
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....cellular phone includes the accessories like the chargers either in the HSN Code or by elaborating in words. 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 ....
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....e 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." 14 It would thus be noted from the aforesaid decisions that:- (i) the respondent, Nokia India (P) Ltd., a registered dealer under the Punjab Value Added Tax Act, 2005, is engaged in selling cellphones and their accessories; (ii) the issue in contention is whether a cellphone battery charger, sold in a package, should be considered a part of the cellphone or merely....
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....ery charger is an accessory. It is submitted that it is not case of petitioner that battery charger is an accessory and, as such, Nokia judgment does not apply. (c) The Court in para 17 has noticed Rule 3 (b) of the General Rules of Interpretation of Ist Schedule of Customs Tariff. Rule 3 (b) applies to three distinct categories of goods being mixtures, composite goods consisting of different materials and goods put up in sets for retail sale. (d) For all three categories, text for classification is that goods are classified as if they consisted of material or component which gives "essential character". The only finding given by the Court is that merely because goods are sold in a composite pack, it does not become "composite goods", perhaps because it was argued that cellphone and battery charger are composite goods. Petitioner in present case has never argued that two are composite goods. Instead it's case is that these goods are put up in sets for retail sale and fall under category (c) noticed above. There is no finding of the Court that if goods fall in category (c), they cannot be classified according to essential character test. By use of words, "as if....
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.... principle of law which the Court ultimately formulates and declares. The quest to discern and identify the ratio of a precedent requires the judgment to be read in its entirety, not to be misled by every singular observation as also to bear in mind always the factual backdrop in which it comes to be rendered as well as the questions which are raised for the consideration of the Court. The ratio of a decision can neither be culled out nor recognized without due consideration being conferred on the aforementioned factors. While these principles are well settled, it would be relevant to notice the following observations as made by the Supreme Court in Natural Resources Allocation, (2012) 10 SCC 1:- "69. Article 141 of the Constitution lays down that the "law declared" by the Supreme Court is binding upon all the courts within the territory of India. The "law declared" has to be construed as a principle of law that emanates from a judgment, or an interpretation of a law or judgment by the Supreme Court, upon which, the case is decided. (See Fida Hussain v. Moradabad Development Authority [(2011) 12 SCC 615 : (2012) 2 SCC (Civ) 762].) Hence, it flows from the above that the "l....
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....ohd. Illiyas [(2006) 1 SCC 275 : 2006 SCC (L&S) 122] this Court observed: (SCC p. 282, para 12) "12. ... According to the well-settled theory of precedents, every decision contains three basic postulates: (i) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically flows from the various observations made in the judgment." 73. It is also important to read a judgment as a whole keeping in mind that it is not an abstract academic discourse with universal applicability, but heavily grounded in the facts and circumstances of the case. Every part of a judgment is intricately linked to others constituting a larger whole and thus, must be read keeping the logical thread intact. In this regard, in Islamic Academy of Educat....
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....rtain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings. ..." 56. From the aforesaid authorities, it is quite vivid that a ratio of a judgment has the precedential value and it is obligatory on the part of the Court to cogitate on the judgment regard being had to the facts exposited therein and the context in which the questions had arisen and the law has been declared. It is also necessary to read the judgment in entirety and if any principle has been laid down, it has to be considered keeping in view the questions that arose for consideration in the case. One is not expected to pick up a word or a sentence from a judgment de hors from the context and understand the ratio decidendi which has the precedential value. That apart, the Court before whom an authority is cited is required to consider what has been decided therein but not what can be deduced by following a syllogistic process." (emphasis supplied) 25. As has been succinctly explained in the decisions noticed above, the ratio ....
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....ently not considered." 18. Be that as it may, we need to notice that the provisions under the U.P. VAT Act, which were under consideration before the learned Single Judge, were entirely different and the same have been reproduced by the Hon'ble Supreme Court while affirming the judgment of the learned Single Judge in Samsung (India)'s case vide its order dated 20.02.2025 passed in SLP No.34086 of 2015 in M/s Naresh Kumar Gupta versus State of Punjab and another, observed as under:- "We have heard Sri Bhakti Vardhan Singh, learned counsel, who strenuously argued and placed reliance on the judgment of this Court in the case of State of Punjab others vs. Nokia India Private Limited (2014) 16 SCC 410. We have considered the said judgment relied upon by learned counsel for the petitioner(s) in light of Entry 28 Part B Schedule II of the Uttar Pradesh Value Added Tax Act, 2007, which, for the sake of immediate reference, is extracted and reads as under: SCHEDULE-II PART-B List of IT Products taxed at 5% 28 Cell Phones and its parts but excluding Cell Phones with M.R.P exceeding rupees ten thousands. We have heard learned co....
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....should be taxed separately based on the judgment of Hon'ble Supreme Court in Nokia's case (supra) whereas the petitioner argued that the composite package should be treated as a single entity for tax purposes. It was in this background that the aforesaid judgment was passed by the Allahabad High Court. 21. As regard the view taken by the Karnataka High Court, it again needs to observed that the provisions under consideration before the said court were entirely different. 22. In State of Karnataka (supra), the Karnataka High Court in para Nos. 8 to 10 of the judgment, has noticed as under:- "8. The issue involved in Nokia India Case was whether mobile charger should be excluded from the entry of concessional rate of tax which applies to cellphones under the Entry 60 (6) (g) of Schedule B of the Punjab VAT Act. The said Entry reads as follows: "Telephones, cell phones, tele-printer, wireless equipment and parts thereof, Digital Video Disc and STRP NO. 08 OF 2022 AND CONNECTED MATTERS Compact Disc and Information Technology products as given hereunder - 6. Transmission apparatus other than apparatus for radio or TV broadcasting: (g) Cell....
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....se (supra) has been construed and thereafter reflected in paras 14 to 16, which read as under:- "14. The Apex Court in Nokia India Case, further held that: "14. ...'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." 15. 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." 15. In Madhav Rao Jiwaji Rao Scindia Bahadur and Ors. Vs. Union of India MANU/SC/0050/1970: 1971 SCR (3) 9, the ....
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....ation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section..." 27. A bare perusal of the Section 4 (charging section) of KVAT Act and Rule 3 (computation provision) of KVAT Rules would clearly indicate that there is no prescribed mechanism provided for determining the value of individual goods in a composite transaction. Thus, in the absence of a valuation mechanism, tax cannot be levied differently on each of the component by separating a single composite package." 26. It would be evidently clear from the judgment passed by the Karnataka High Court that the same has been passed after taking into consideration the provisions of Karnataka VAT Act, more particularly, Entry No. 53 of Schedule III, which reads as under:- IT Products including telecommunication equipments as may be notified covered with the notification dated 01.04.2007. 27. As already extracted above, it provides for telephone sets, including telephones cellular networks, or for other wireless networks. Therefore, judgment is of no avail to the....
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....phone. We further hold that the battery charger cannot be held to be composite part of the cell phone but is an independent product which can be sold separately, without selling the cell phone." 29. Therein also, the petitioner had sought to raise contention that the entry under the Punjab Act was different from the KVAT Act, 2003 and since entry in question is adopted from Central Excise law, therefore, according to the Rules of interpretation under Excise law, the Mobile Battery Chargers (MBC) sold alongwith the mobile phones, in one retail package should be treated as taxable at the same rate as the mobile phone itself under the Third Schedule to the KVAT Act, 2003 at the rate of 4% only. This contention was rejected as being not sound as the ratio of Hon'ble Supreme Court decisions cited in Nokia's case is very clear that the Mobile Battery Chargers (MBC) cannot be treated as part of the mobile phones itself and the battery is only accessory of the mobile phone and are to be taxed separately irrespective of their packing in the common package with mobile phone. It was further held that the judgment of Hon'ble Supreme Court is binding on all Courts/ authorities in the Country....
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....d under different heads and have different distinct codes. 32. Moreover, Rule (3) (b) in the Allahabad case, could not have been relied upon by the petitioner therein because Rule (3) (b) would only be applicable if there is no specific entry with regard to products and they are being sold together in a retail package. However, that is not the case with chargers and phones as they have distinct codes, therefore, relying on rule (3) (b) is flawed. These observations are in consonance with the judgment of the Hon'ble Supreme Court in the Nokia's case that has stated that charger is an independent product and is a mere "accessory to the phone." This shows that the Custom Tariff Act, 1975 entries and the Hon'ble Apex Court judgment in the Nokia's case are in tandem and consonance with each other. Moreover, applying the rules of interpretation of custom duty (rule 3) on state excise is an exercise done arbitrarily. Such reliance defeats the purpose of residual entries. This would encourage unscrupulous companies to resort to packaging different commodities under the same retail package thereby bypassing the residual entries and defeating their significance. This would become a tax ev....
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....er Secretary to the Govt. of India" 35. Moreover, there is nothing on record to indicate that on the basis of aforesaid memo, the provisions of VAT Act had been amended in the State of H.P. 36. As regards the dominant nature test as heavily stressed upon by learned counsel for the respondent and taken note in the case before Allahabad High Court, is conceptually flawed in application. The dominant nature test or "degree of intention" or overwhelming component test or decree of labour and service tax came to be developed with the progress of law and applies to dominant composite contracts goods plus service tax, as evolved over to determine whether the contract is a work contract or a contract for sale of goods or both. Whether the contract could be treated as divisible or not. 37. In the instant case what is sold is a phone with the charger which is a pure sale of goods and containing no self-service element. It is common knowledge that today majority of the mobiles are being sold with charger and wherever we have two different products being sold in same retail package, it essentially attracts different rates of tax and the following example could be illustrative on the s....