Can chargers sold with mobiles be taxed separately in Uttar Pradesh? Supreme Court answers

The Supreme Court recently ruled that mobile chargers 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) [Commissioner, Commercial Tax UP Vs Samsung India]..A Bench of Justices BV Nagarathna and Satish Chandra Sharma refused to interfere with an Allahabad High Court ruling in the matter. The tax assessees had argued that packages containing both mobile phones and their charges, which bear a single Maximum Retail Price (MRP), must be taxed as a single item under Entry 28 of Schedule II, Part B of the UP VAT Act.In 2018, the Allahabad High Court agreed with this stance and ruled that mobile phones and chargers that are sold as a composite package cannot be taxed separately.This ruling was challenged before the Supreme Court by the State's revenue authorities. On February 20, the Supreme Court dismissed the State's appeal."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," the Court said. .The issue arose when the tax department sought to tax mobile chargers separately at 14 per cent as unclassified items, even when they were sold as part of a composite package with mobile phones. The department relied on the Supreme Court's decision in State of Punjab Vs. Nokia India Pvt Ltd, where it was held that a charger is an accessory and not part of the mobile phone.However, the Allahabad High Court distinguished the Nokia judgment, holding that when a mobile phone and charger are sold together with a single MRP, they should be taxed as a single item under Entry 28 of the UP VAT Act..The High Court held that when a mobile phone and charger are sold together in a single package with one MRP, they constitute a composite package. In such a case, the charger cannot be taxed separately as an unclassified item.It further noted that the dominant intention of the sale is the mobile phone, and the charger is incidental to the transaction. Therefore, the entire package should be taxed under Entry 28 of the UP VAT Act, which applies to "cell phones and its parts.".On the applicability of the Nokia judgment, which held that a charger is an accessory and not part of the mobile phone, the High Court clarified that this was in response to an argument that the charger and phone were composite goods. However, in the present case, the charger and phone are sold as a single package with one MRP, making the Nokia judgment inapplicable.The Supreme Court upheld this view, ruling that the Nokia judgment does not apply to cases where the charger and phone are sold as a single package..Moreover, the High Court emphasised that the Legal Metrology Act, 2009, mandates that only one MRP can be mentioned for the entire package. This makes it impermissible to split the value of the components (phone and charger part of the same package) for tax purposes..The Supreme Court found no scope to interfere in this High Court ruling and thus dismissed the appeal filed by State's tax department..The UP 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 (the respondent assessee) was represented by Senior Advocate Sujit Ghosh with Advocates Mannat Waraich and Ashray Behura.[Read Judgment]