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TMI Blog2024 (11) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... e of defective spare parts by the respondent from the customers / clients, question of involving Section 7-A of the TNGST Act, 1959 will apply. In the present case, it cannot be said that the respondent was purchasing the defective spare parts from the customers / clients. All that, the respondent did was to replace the old defective parts with the new parts and gave a discounts on the replaced new parts to the customers. Since there was no purchase of defective parts, question of levying purchase tax at the rate mentioned in Section 3 or Section 4 of TNGST Act, 1959 under Section 7-A of TNGST Act, 1959 does not arise - there are no merit in the challenge to the impugned order of the Tribunal - tax case dismissed. - Hon'ble Mr. Justic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the discarded / defective materials received from the customers for valuable consideration, original sale of which were effected by their head office in New Delhi directly and that the respondent did not offer tax on the discarded / defective parts. 7. In the impugned order, the Tribunal has concluded that the defective spare parts are not purchased by the respondent and therefore it cannot be construed that the respondent satisfied the situation in clause (c) of Section 7-A of the Act. There is also a categorical finding given by the tribunal that the retrieval of the defective parts was part of the annual maintenance charges incurred by the respondent at its branch. 8. In fact, recently, the Hon ble Supreme Court in Tata Motors Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part from his stock pursuant to a warranty, he does not receive anything in return from the customer for the spare part used from his own stock. It is in such a situation that the manufacturer issues a credit note to recompense the dealer for his investment on the spare part in his stock which was used to replace a defective part pursuant to a warranty in the sale of automobile as nothing would have been received in return from the customer. This is because if the spare part from the stock of the dealer had been sold to any other customer, across the counter and not pursuant to any warranty, he would have received a return on his investment. But such a return is not received by the dealer from the customer when he replaces a defective part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e need not be a reiteration of the significance of a warranty in a transaction of a sale of goods already discussed above. 11. Ultimately, the Hon ble Supreme Court, in para No.102 has concluded as follows:- 102. In the circumstances, the reference is answered in the following terms: i) The judgment of this Court in Mohd. Ekram Khan is applicable to a situation where a manufacturer issues a credit note to a dealer acting under a warranty given by the manufacturer pursuant to a sale of an automobile in the following situations. The dealer replaces a defective part of the automobile by a spare part maintained in the stock of the dealer or when the same is purchased by the dealer from the open market. In such situations, the credit note issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are liable to pay sales tax under the respective State enactments under consideration. (iv) In view of the above, the appeals filed by the dealers are dismissed. The appeals filed by the revenue are allowed. 12. It is the contention of the Commercial Taxes Department that the respondent / assessee was liable to pay purchase tax under Section 7-A of the Act. During the period in dispute, Section 7-A(1) of the Act reads as under:- Section 7-A. Levy of purchase Tax. (1) 1 [Subject to the provisions of subsection (1) of section 3, every dealer] who in the course of his business purchases from a registered dealer or from any other person, any goods, (the sale or purchase of which is liable to tax under this Act) in circumstances in which [no ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of TNGST Act, 1959 where such goods purchased are; a. consumed or used such goods in or for the manufacture of other goods for sale or otherwise, or b. disposed in any manner other than by way of sale in the State, or c. dispatched or carried them to a place outside the State except as a direct sale or purchase in the course of inter- State trade or commerce, 15. In the present case, it cannot be said that the respondent was purchasing the defective spare parts from the customers / clients. All that, the respondent did was to replace the old defective parts with the new parts and gave a discounts on the replaced new parts to the customers. 16. Since there was no purchase of defective parts, question of levying purchase tax at the rate men ..... X X X X Extracts X X X X X X X X Extracts X X X X
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