Warranty parts supplied under manufacturer-funded service may qualify for sale of goods exemption and pre-deposit waiver.

Warranty service transactions funded by the manufacturer were treated as not truly free because the manufacturer derived commercial benefit through brand value and customer satisfaction, and the parts replaced were sold to the person making payment. On that prima facie basis, the Tribunal found the sale of goods exemption under Notification No. 12/2003-ST apparently available to the value of parts supplied during warranty service. As a result, the appellant was granted waiver of pre-deposit and recovery of the disputed dues was stayed pending appeal.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery on the basis that the value of parts supplied during warranty service was prima facie covered by the sale of goods exemption under Notification No. 12/2003-ST dated 20.06.2003.

Analysis: The dispute arose from warranty services described as free service, where the manufacturer reimbursed both the service cost and the cost of parts replaced. The Tribunal observed that the activity was not truly free, that the manufacturer benefited from the service through enhanced brand value and customer satisfaction, and that the parts were sold to the person making payment for them. On that basis, it held that there was prima facie sale of goods in the transaction and that the exemption notification appeared prima facie available. In view of this conclusion and the cited precedent orders, the demand was not required to be secured at the stage of appeal admission.

Conclusion: The appellant was granted waiver of pre-deposit and collection of the disputed dues was stayed during pendency of the appeal.

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