2012 (7) TMI 863 - HC - VAT and Sales Tax

Optional service/warranty charges - whether be not included in the price of the goods sold (refrigerators) as they do not constitute a part of the sale price? - Held that - There was enough material before the Tax Board to hold that the charge levied by the assessee towards service/ warranty charges at the time of the sale was not universal but optional. Following this finding the legal consequences would be inexorable and entail exclusion of such charges from the ambit of sale price of the goods sold exigible to tax in view of the judgments of this court in the case of Commercial Taxes Officer v. Godrej G.E. Appliances Limited 2011 (3) TMI 1548 - RAJASTHAN HIGH COURT as also Commercial Taxes Officer v. Weston Electroniks Ltd. reported in 1991 (11) TMI 225 - RAJASTHAN HIGH COURT .

Summary

Issues:
Challenge to orders of Rajasthan Tax Board regarding optional service/warranty charges not included in sale price for tax levy under Rajasthan Sales Tax Act, 1994.

Analysis:
The High Court of Rajasthan addressed the challenge to the orders of the Rajasthan Tax Board regarding optional service/warranty charges not being included in the sale price for tax levy under the Rajasthan Sales Tax Act, 1994. The Tax Board held that charges paid by customers to dealers for service/warranty would not attract tax as they were not part of the sale price. The appellant argued that without a specific finding of fact, the charges should have been included in the sale price. However, the assessing authority and appellate authority had already considered the issue and found that the charges were optional in most transactions. The court referenced previous judgments to support the position that optional charges for service/warranty do not constitute sale price for tax purposes.

The assessing authority acknowledged that the service/warranty charges were optional in the specific case, with most customers choosing to pay them. The appellate authority also confirmed this fact, stating that 90% of customers opted for the additional charges. The High Court agreed with the Tax Board's finding that the charges were optional based on the available material. Citing previous court judgments, the court concluded that such charges should be excluded from the sale price for tax calculation purposes.

The High Court found that the orders of the Rajasthan Tax Board were based on sound judgments on both facts and law. It noted that the Tax Board had previously decided in favor of the respondent in five appeals, with the Department accepting the legal positions in connected appeals. The court dismissed the revision petitions, stating that there was no merit based on the facts and discussions presented.

In conclusion, the High Court upheld the decisions of the Rajasthan Tax Board regarding optional service/warranty charges not constituting part of the sale price for tax levy under the Rajasthan Sales Tax Act, 1994. The court found that the charges were optional based on the evidence presented and previous legal precedents, ultimately dismissing the revision petitions for lack of merit.