Warranty replacements and consideration in sales tax disputes were left for larger Bench consideration amid conflicting precedent.

Free replacement of defective spare parts during the warranty period raised the question whether the transaction involved taxable sales tax liability or only a replacement without consideration, especially where credit notes were issued to the dealer. The Court noted conflicting prior approaches and expressed reservations about the reasoning in the precedent relied on by the Revenue. Because the controversy turned on the nature of consideration, the effect of warranty arrangements, and the tax treatment of such replacements, the Court declined to finally decide the issue and directed that the matter be placed before the Chief Justice for consideration by a larger Bench.

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Issues: Whether sales tax is payable on free replacement of defective spare parts supplied during the warranty period, and whether the precedent relied upon required reconsideration by a larger Bench.

Analysis: The matter involved competing views on whether replacement of defective parts, made free of cost under warranty and followed by issuance of credit notes to the dealer, amounted to a taxable sale or mere replacement without consideration. The Court noticed prior decisions taking different approaches and expressed reservations about the reasoning adopted in the binding precedent cited by the Revenue. As the controversy raised substantial questions on the nature of consideration, the effect of warranty, and the taxability of such transactions, the Court found it inappropriate to finally determine the issue in this proceeding.

Outcome: No final adjudication on the taxability issue was made and the matter was directed to be placed before the Chief Justice for consideration by a larger Bench.

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