2011 (5) TMI 872 - HC - VAT and Sales Tax

Whether on the facts and in the circumstances of the case the Tribunal is legally justified to hold that the amount of 395 (correct amount is 450) in bills is not part of turnover? Whether on the facts and in the circumstances of the case the Tribunal is legally justified to hold that packing material of refrigerator is taxable at six per cent? Whether on the facts and in the circumstances of the case the Tribunal is legally justified to allow the acceptance of form IIID as additional evidence without giving opportunity to Department for verification or rebuttal? Held that - The first appellate authority and the Tribunal are legally justified in excluding the amount realised as warranty charges towards after sales service for the period of four years after expiry of initial one year warranty from the taxable turnover of the sale of refrigerators.In view of above finding the sum of 450 per refrigerator charged by the opposite-party/dealer in effect is not towards warranty which may be included in the turnover. The said amount is realisable separately at the option of the customer towards service/maintenance charges for the next four years after expiry of one year warranty. All the three points raised and argued . Appeal dismissed.

Summary

Issues:
1. Acceptance of additional evidence without giving opportunity to rebut.
2. Taxability of secondary packing material of refrigerators.
3. Taxability of warranty charges as part of turnover.

Analysis:
1. The first issue concerns the acceptance of additional evidence without giving an opportunity to rebut. The Tribunal accepted forms IIID as additional evidence, which the first appellate authority allowed based on valid reasons. The Trade Tax Commissioner's representative had the chance to challenge the evidence but failed to do so. The appellate authority acted within its jurisdiction by admitting the evidence, as per Section 12B of the Act. The revisionist's argument that the assessing authority should have been given the opportunity is unfounded, as the law at the time required it to be given to the Commissioner or its representative. The Tribunal's decision was upheld, and the first issue was rejected.

2. The second issue revolves around the taxability of the secondary packing material of refrigerators. The dealer sold refrigerators with primary packing, and in some cases, with secondary packing. The secondary packing's value was added to the turnover and taxed at a lower rate of six per cent based on a specific notification. The law defines turnover to include the price of packing material, and the notification specified the tax rate for wooden packing cases. Therefore, the Tribunal correctly directed the tax to be levied at six per cent on the secondary packing material, distinct from the 12 per cent rate for refrigerators. The second issue was decided in favor of the dealer.

3. The final issue concerns the taxability of warranty charges as part of turnover. The dealer charged Rs. 450 per refrigerator for a four-year service contract after the one-year warranty period. The appellate authority and the Tribunal found that this amount was not towards warranty but for an optional service/maintenance contract. Previous case law established that charges for optional services beyond the warranty period are not part of turnover. The decisions in similar cases supported the exclusion of such charges from turnover. The Supreme Court's decision cited by the revisionist was deemed distinguishable. Consequently, the warranty charges were rightfully excluded from taxable turnover. All three points raised by the revisionist were dismissed, and the revisions were rejected.