Facts
The respondents Nokia India pvt. Ltd sold cell phones along with battery charger in a single solo pack and charged VAT at 4% on the ground that cell phones were covered under schedule B at serial entry no. 60(6)(g). According to them, when the charger is sold along with the cellphone, it was supplied free of cost and therefore, the composite pack was covered by the aforesaid entry. The HSN code applicable is 8525.20.17. They relied upon Rule 3(b) of the General Rules for interpretation of the First Schedule of the Import Tariff under the Customs Tariff Act, 1975, which reads as under:
“3(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 of component which gives them their essential character, insofar as this criterion is applicable.”
The respondents claimed that the composite pack was essentially made for sale of cell phone and no separate price was collected for the charger. As per above rule of interpretation, the composite pack should be covered by entry 60(6)(g) liable to tax @4%. The assessingofficer, appellate officer and Tribunal dismissed the claim of chargers as “accessory” and sought to levy tax @ 12.5%. However, Punjab & Haryana High Court allowed the claim of the respondents and held that chargers are “accessories” of cell phone.
Issues
- Whether mobile phone battery charger is an “accessory” of the cell phone or part/component of the cell phone?
- Whether such battery charger is covered by HSN code 20.17 covering “cellular telephones” read with rule 3(b) of the General Rules for interpretation of the First Schedule of the Import Tariff under the Customs Tariff Act, 1975?
View
The Court considered the dictionary meaning of the term “accessory” as “(1) a person or thing that aids subordinately; an adjunct; appurtenance; accompaniment (2) aiding the principal design, or assisting subordinately the chief agent, as in the commission of a crime. (3) contributory; supplemental; additional: accessory nerves”.
It also relied on the case of Annapurna Carbon Industries Co. v. State of Andhra Pradesh, (1976) 2 SCC 273, wherein the Court, while examining the question whether “Arc Carbon” is an accessory to cinema projectors or whether it comes under other cinematography equipment under Entry 4 of Schedule I to the A.P. General Sales Tax Act, 1957, observed that an “accessory” is an object or device that is not essential in itself but that adds to the beauty, convenience or effectiveness of something else.
It considered the aforesaid rule 3(b) but found it inapplicable in the given case since charger cannot be held as an integral part of the mobile phone making it a composite good. Merely, making a composite package of cell phone charger will not make it composite goodfor the purpose of interpretation of the provisions.
Held
Battery charger is not a part of the cell phone but is an accessory thereof. It is an independent product which can be separately sold even without selling the cell phone. (CA Nos 11486-11487 of 2914 arising SLP (C) Nos 30398-30399 of 2011
- 17-12-2014).
Editorial: Ratio is useful in drawing demarcating line between “accessory” and “part/component” as also in interpreting the scope of HSN code since classification under GST is based on HSN.
Under GST law, there is a new concept of ‘composite’ and ‘mixed’ supply. The case was decided in absence of such situation. The definition of the term ‘composite supply’ under section 2(30) make it clear that if two or more taxable supplies were naturally bundled and supplied together in the ordinary course of business, it would be a case of composite supply where mobile handset would be a principal supply.
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