Warranty replacement parts supplied from dealer stock can constitute a taxable sale under binding precedent and principal-to-principal dealings.

Warranty replacement of defective parts from a dealer's own stock, with reimbursement by the manufacturer, is treated as a taxable sale where the commercial arrangement is on a principal-to-principal basis. The Bombay Sales Tax Act, 1959 definition of sale was materially similar to the provision considered in Mohd. Ekram Khan and Sons, so the Tribunal was bound by that precedent and could not avoid it by describing the arrangement as agency or by relying on the service element. The transaction therefore falls within sale for consideration, and the request for reference was rejected.

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Issues: Whether the Tribunal was justified in declining to make a reference by holding that the dealer's supply of replacement parts under warranty was governed by the Supreme Court's decision in Mohd. Ekram Khan and Sons, and therefore constituted a taxable sale.

Analysis: The dealership agreement required the dealer to replace defective parts from its own stock and provided for reimbursement by the manufacturer. The attempt to distinguish the Supreme Court decision on the basis of an alleged agency relationship was rejected, since the agreement and the commercial arrangement were on a principal-to-principal basis. The definition of sale under the Bombay Sales Tax Act, 1959 was materially similar to the definition considered by the Supreme Court, and the Tribunal was bound by that precedent. The service element in the arrangement did not justify departure from the binding ratio.

Conclusion: The Tribunal correctly applied the binding precedent and rightly declined to make a reference. The challenge failed.

Final Conclusion: The warranty replacement transactions were treated as taxable sales, and the application for reference was dismissed.

Ratio Decidendi: Where a dealer supplies replacement parts under a warranty arrangement from its own stock and is reimbursed by the manufacturer, the transaction constitutes a sale for consideration, and a binding precedent on the point cannot be avoided by characterising the relationship as one involving agency or by invoking the service aspect of the arrangement.

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