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of <h1>High Court Upholds VAT on Warranty Parts: Precedent Key</h1> <h3>Chowgule Industries Pvt. Ltd. Versus The State of Maharashtra</h3> The High Court upheld the Tribunal's decision to levy VAT on amounts received for parts supplied under warranty, based on previous judgments like Mohd. ... Liability of VAT - the amount received by the assessee/appellant for supply of parts to the customers as a part of the warranty agreement - whether the Presiding Members of Hon'ble Tribunal was justified in applying the ratio laid down in Mohd. Ekram Khan and Sons V/s. Commissioner of Tax Trade, U.P. [2004 (7) TMI 341 - SUPREME COURT OF INDIA], decided by Hon'ble Supreme Court on 21.07.2004 to the appellant's case ? Held that: - in Mohd. Ekram Khan [2004 (7) TMI 341 - SUPREME COURT OF INDIA] as observed by our Court in Navnit Motors Pvt. Ltd. [2011 (11) TMI 614 - Bombay High Court], the relationship was that on a principal to principal basis and not on the basis of the agency which forms the foundational difference according to the Rajasthan High Court in Marudhara Motors [2009 (3) TMI 956 - RAJASTHAN HIGH COURT] for not applying the decision of the Apex Court in Mohd. Ekram Khan. Appeal dismissed. Issues:Challenge to order of Maharashtra Sales Tax Tribunal regarding levy of value-added tax (VAT) on amounts received for supply of parts under warranty agreement.Analysis:1. The appellant, an authorized dealer of Maruti Vehicles, received reimbursement for spare parts replaced under warranty from M/s. Maruti Limited. Authorities held that these amounts are subject to VAT under the Act.2. The Tribunal dismissed the appeal, citing the decision in Mohd. Ekram Khan & Sons v. Commissioner of Trade Tax, U.P., where a similar issue was decided in favor of the Revenue. The Tribunal found the appellant's case identical to the facts in Mohd. Ekram Khan.3. The appellant argued that the issue is more aligned with the Rajasthan High Court decision in Commercial Tax Officer, Jodhpur Vs. Marudhara Motors, which distinguished Mohd. Ekram Khan based on the relationship between the dealer and the manufacturer being principal to principal, not agent to principal.4. The Revenue cited the case of Navnit Motors Pvt. Ltd. V/s. State of Maharashtra, where a similar distinction was rejected by the Court. The Court found that the relationship in Mohd. Ekram Khan was also principal to principal, not agency-based.5. The Court noted that the issue was settled in favor of the Revenue by the decisions in Mohd. Ekram Khan and Navnit Motors. As the questions of law proposed did not raise any substantial issue, the appeal was dismissed.Conclusion:The High Court upheld the Tribunal's decision to levy VAT on amounts received for parts supplied under warranty, based on the precedent set by previous judgments. The distinction between principal to principal and agent to principal relationships was considered, ultimately leading to the dismissal of the appeal.
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