While allowing a revision petition filed by M/S Samsung (India) Electronics Pvt. Ltd, the Allahabad High Court held that no separate rate of tax is leviable on selling mobile chargers along with mobile phones under a composite package.
The central issue before the Court was that whether a mobile charger, when sold as part of a composite package comprising the said article as well as a mobile phone, is liable to be taxed separately treating it to be an unclassified item under the provisions of the U.P. VAT Act 2008.
The department took a view that the charger although sold as part of a composite package was not liable to be taxed at the rate of 5% as contemplated under Entry-28 appearing in Part-B of Schedule-II but as an accessory and therefore liable to be treated as an unclassified item and chargeable to tax @ 14%.
Justice Yashwant Varma noted that the mobile phone and charger are sold as part of a composite package. Therefore, the primary intent of the contract appears to be the sale of the mobile phone and the supply of the charger at best collateral or connected to the sale of the mobile phone.
“In the case of a composite contract, the true inquiry which must be undertaken is to cull out what the parties intended to buy and sell. As has been noted hereinabove, in the facts of the present case there does not appear to have existed any intention of the assessee to affect a separate or distinct sale of the charger. The Court notes that no separate price was fixed or declared for the charger. In fact, the commodity was also not separately identified on the package. The charger was supplied along with the primary article which formed the bedrock of the transaction namely, the mobile phone. There was thus no intention of the parties to enter into a transaction involving the sale of the charger. It merely happened to be part of the composite package.”
Before concluding, the Court added that “the Court finds itself unable to hold against the assessee on the basis of this contention since the same is evidently urged without having due regard to the fact that Entry 28 clearly and in unambiguous terms correlates and connects the words cell phone to the MRP. As has been held hereinabove in the case of a composite package only one MRP stands disclosed and borne on the package. It is with reference to this singular MRP only that a tax can be imposed. The State respondents do not dispute that the single retail package does not carry or bear a separate MRP for the charger included therein. It is also not their case that the charger is invoiced separately even though it may form part of the composite package. A holistic reading of Entry 28 clearly establishes an inseparable link between the cell phone and its MRP. It is this which forms the basis and measure for taxability. In view thereof, the Court holds that the disjunctive reading to the Entry which is sought to be urged on behalf of the State respondents does not commend acceptance and would not enable the charger contained in a composite package to be held to be exigible to tax separately.”To Read the full text of the Order CLICK HERE