2018 (7) TMI 514 - HC - VAT and Sales Tax

Credit for spare parts under warranty equals sale, taxable under MVAT Act. Appeal dismissed.

The High Court held that the credit received by the Appellant for spare parts replacement under the warranty scheme constituted a sale, making it subject ... Whether the Tribunal was justified in holding that the credit in the “Dealers Spare Part Account” received by the Petitioner from Maruti Udyog Ltd. amunting to ₹ 30,52,192/ can be treated as actual Sale price received by the Appellant for replacement of spares during the manufacturer's warranty scheme and therefore liable to Tax under the provisions of the MVAT Act? Held that:- The manner of using the credit does not detract from the fact that the amounts credited to the account of the Appellant by M/s. Maruti Limited is on account of sale of parts as replaced during the warranty period - the decision in the case of Chowgule Industries Pvt. Ltd. v. State of Maharashtra [2018 (4) TMI 939 - BOMBAY HIGH COURT] do not apply to the facts of present case, the assessee therein was replacing parts during the warranty period of Maruti vehicles sold. The cost of the parts was reimbursed by M/s. Maruti Limited. It was the aforesaid amount that was brought to tax. In this case the distinction is that though during the warranty period, the parts of Maruti vehicle were replaced by it, M/s. Maruti Limited do not reimburse the same in cash but credit it the Appellant's account in its books. Appeal dismissed - decided against appellant. Issues:1. Whether the credit received by the Appellant from Maruti Udyog Ltd. for replacement of spares during the warranty scheme is liable to tax under the MVAT ActRs.2. Whether the replacement of spare parts during the warranty scheme constitutes a sale, making it assessable to taxRs.Analysis:1. The appellant challenged the Tribunal's order regarding the credit received for spare parts replacement under the warranty scheme. The counsel argued that the credit from Maruti Udyog Ltd. was not a sale price but a reimbursement for parts replaced during the warranty period. Reference was made to a previous court decision to distinguish the facts of the case. The appellant contended that the credit could only be used for purchasing spare parts, indicating no actual sales for tax assessment.2. The High Court noted that both the appellant and another case involved in the previous decision were dealers for Maruti vehicles, replacing parts during the warranty period. The Tribunal found that the Appellant received the price of replaced parts under the warranty scheme from Maruti Ltd. The Court emphasized that the credit received was for the sale of parts replaced during the warranty period, regardless of the method of utilization. The Court rejected the distinction made by the appellant, emphasizing that the credit received was a result of sales transactions.3. The Court distinguished another case cited by the appellant, where the nature of the transactions was repair services and not sales. The Court concluded that the facts of the present case were different, and the previous decision did not apply. Ultimately, the Court dismissed the appeal, stating that the questions raised did not give rise to any substantial question of law. The appeal was dismissed, with no order as to costs.This detailed analysis of the judgment highlights the issues raised, the arguments presented, and the Court's reasoning leading to the dismissal of the appeal.