9911796707
TMI Blog2024 (11) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the appeal was dismissed. To the extent the appeal of the respondent was allowed, the Revenue viz., the Commercial Taxes Department is in appeal before this Court. 3. The short point that arises for consideration in this Tax Case is whether the respondent can be subjected to purchase tax under Section 7-A of the Tamil Nadu General Sales Tax Act, 1959 during the Assessment Year 1994-1995 on the defective parts that were collected from the customers by providing maintenance services to the customers / clients on behalf of the head office. 4. The business model was the re- placement of defective parts with new parts supplied by the head office of the respondent and charges the customers / clients the net price of the spare parts less r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther from the manufacturer or from the open market or the manufacturer of the spare part. In the aforesaid three situations, the dealer would have paid sales tax while purchasing the said stock. When the defective part is replaced by the dealer from a spare part from his stock, the dealer is no doubt acting pursuant to the warranty on behalf of the manufacturer but is sourcing the spare part from his own stock. Simply put, the dealer is not "selling" the spare part to a customer while acting on behalf of the manufacturer but replacing the defective part free of cost by acting under the warranty. But what is to be borne in mind is that the replacement of the spare part is from the stock of the dealer who would have earlier bought the same by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he would have received a return for his investment plus a profit. But, while acting under the warranty on behalf of the manufacturer, the dealer does not receive any price from the customer. Hence, he is recompensated by the manufacturer in the form of a credit note. 10. The Hon'ble Supreme Court, in para 60 observed as under:- 60. Therefore, the entire controversy must be viewed in the perspective of a composite transaction and not in isolation as the dealer (assessee) would be acting under a warranty with there being a manufacturer on one end and the purchaser or customer of an automobile at the other end and the dealer acting on behalf of the manufacturer or an intermediary between the said customer and manufacturer. The said transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Khan does not apply to a case where the dealer has simply received a spare part from the manufacturer of the automobile so as to replace a defective part therein under a warranty collateral to the sale of the automobile. In such a situation also, the dealer may receive a consideration for the purpose of the service rendered by him as a dealer under a dealership agreement or any other agreement akin to an agent of the manufacturer which is not a sale transaction. On the above understanding of the judgment of this Court in Mohd. Ekram Khan, we are of the view that the same does not call for any interference. In light of the above, in our view, overruling of the judgments in the case of Prem Motors and Geo Motors in Mohd. Ekram Khan, is ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacture of other goods for sale or otherwise; or] (b) disposes of such goods in any manner other than by way of sale in the State, [....]* (c) 3 [despatches or carries them] to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, [or]** (e) installs and uses such goods in the factory for the manufacture of any goods. shall pay tax on the turnover relating to the purchase aforesaid at the rate mentioned in 2 [sections 3 or 4], as the may be." 13. A reading of sub-section (1) to Section 7-A of the Act as extracted above makes it clear that the question of subjecting the respondent to purchase tax would arise only if there was a purchase of defective spare parts by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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