The tax department relied on an earlier Supreme Court ruling in State of Punjab Vs. Nokia India Pvt Ltd, where it was held that a charger is an accessory and not a part of the mobile phone.
NEW DELHI: The Supreme Court of India recently ruled that mobile chargers, when sold as part of a composite package with mobile phones, cannot be taxed separately under the Uttar Pradesh Value Added Tax Act, 2008 (UP VAT Act).
A Bench of Justices BV Nagarathna and Satish Chandra Sharma refused to interfere with the Allahabad High Court’s earlier decision, which had ruled in favor of tax assessees.
On February 20, the Supreme Court dismissed the State’s appeal, stating:
“We do not find any reason to interfere with the impugned order. Hence, the Special Leave Petitions are dismissed. We clarify that this order is not applicable to a case where a charger is sold de hors a mobile phone and separately by itself.”
This means that while chargers sold separately can still be taxed separately, those sold within a package with a mobile phone must be taxed as a single unit.
Background
The issue started when the Uttar Pradesh tax department attempted to tax mobile chargers separately at a rate of 14% as an “unclassified item,” even when they were sold together with mobile phones in a single package.
The tax department relied on an earlier Supreme Court ruling in State of Punjab Vs. Nokia India Pvt Ltd, where it was held that a charger is an accessory and not a part of the mobile phone.
However, in 2018, the Allahabad High Court took a different approach, ruling that when a mobile phone and its charger are sold together in one package with a single Maximum Retail Price (MRP), they should be taxed as a single item under Entry 28 of Schedule II, Part B of the UP VAT Act.
Allahabad High Court’s Key Observations
The tax department had relied on the Supreme Court’s earlier judgment in State of Punjab Vs. Nokia India Pvt Ltd, where it was held that a charger is an accessory and not a part of a mobile phone. However, the Allahabad High Court had distinguished the Nokia case, stating that it did not apply when a mobile phone and charger are sold together in one package with a single MRP.
The High Court ruled that since the charger was included in the package with a single price, it should be treated as part of the mobile phone and taxed accordingly under Entry 28 of the UP VAT Act.
The Court further observed that the main product in the sale is the mobile phone, while the charger is incidental to the transaction. Therefore, the entire package should be taxed as a single unit.
The High Court also emphasized that the Legal Metrology Act, 2009, requires that a single MRP be mentioned for an entire package. Therefore, splitting the value of components (mobile phone and charger) for tax purposes is not allowed.
The Supreme Court upheld the Allahabad High Court’s decision, ruling that the Nokia judgment does not apply in cases where a charger and mobile phone are sold together as a single unit. It found no reason to interfere with the High Court’s ruling and dismissed the State’s appeal.
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The Uttar Pradesh Commercial Tax Department was represented by Advocates Bhakti Vardhan Singh, Ajay Prajapati, Anamika Agarwal, Harshita Raghuvanshi, Prakash Gautam, Aditya Kumar Dube, Ram Shiromani Yadav, and Nagendra Singh.
Samsung India, the respondent assessee, was represented by Senior Advocate Sujit Ghosh, along with Advocates Mannat Waraich and Ashray Behura.
Case Title: Commissioner, Commercial Tax UP Vs Samsung India.
