2016 (12) TMI 6 - HC - VAT and Sales Tax

Replacement of defective parts during warranty period - whether amounting to sales transaction? - liable to VAT or sales tax? - Held that - Both the counsels for the Revenue as well as the assessees after arguing for some time contended during the Course of hearing, that all these petitions be disposed off by this Court, to be governed in the light of the judgment pending before Apex Court in the case of M/s Marudhara Motors 2009 (3) TMI 956 - RAJASTHAN HIGH COURT , to avoid multiplication of litigation which otherwise can be saved by disposing off all these petitions and in observing that all the cases would be governed by the fate of M/s Marudhara Motors pending decision before the Apex Court. To avoid multiplication of the litigation it would be appropriate to dispose off all the petitions as raised by the Revenue to avoid multiplicity of litigation to be governed by the judgment of M/s Marudhara Motors by the Apex Court. If the civil appeal in M/s Marudhara Motors is allowed by the Apex Court in favour of the revenue then these revision petitions would be allowed automatically. However, if the Judgment of this court in M/s Marudhara Motors is upheld by the Apex Court, then all these petitions would stand automatically dismissed. It would be appropriate to dispose off the present petitions to say and to hold that the outcome of these petitions would be governed finally by the outcome of the SLP pending before the Apex Court on the same challenge in the case of M/s Marudhara Motors.

Summary

Issues:
Interpretation of sales tax liability on replacement of defective parts during warranty period.

Analysis:
The petitions involved a common issue regarding the liability of sales tax on the replacement of defective parts during the warranty period by automobile dealers. The respondent dealers argued that they replace defective parts during the warranty period as per the manufacturer's agreement, and no amount is charged from the consumers for such replacements. The dealers issue their invoices for the sale of cars but cannot exceed the maximum price set by the manufacturer. The Assessing Officer initially held that sales tax is chargeable on such replacements based on a previous Supreme Court judgment.

On appeal, the Deputy Commissioner (Appeals) referred to a judgment by the High Court of Rajasthan in a similar case and ruled that replacements during the warranty period cannot be considered as sales. The Rajasthan Tax Board also dismissed the revenue's appeal. The revenue contended that the Supreme Court judgment should prevail and cited judgments from other High Courts in support. The revenue also relied on the principle that the Supreme Court judgment is binding on all courts.

In response, the dealers' counsel argued that the facts of the case were similar to the previous High Court judgment and that the Supreme Court judgment had been appropriately distinguished. Both parties eventually agreed to dispose of the petitions based on the pending decision of the Supreme Court in a related case to avoid further litigation. The court acknowledged the distinction made in the previous High Court judgment and decided to wait for the Supreme Court's decision on the matter before making a final ruling. The court emphasized the need to avoid multiple litigations and directed that the outcome of the petitions would be determined by the Supreme Court's decision in the related case.

In conclusion, the court disposed of all the revision petitions with the understanding that the final decision would be based on the outcome of the Supreme Court's decision in the pending case related to the issue of sales tax liability on replacement parts during the warranty period.