2004 (7) TMI 341

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....mon judgment rendered by a learned single Judge of the Allahabad High Court. The appellant (hereinafter referred to as "the assessee") was a dealer registered under the U.P. Trade Tax Act, 1948 (hereinafter referred to as "the Act"), for the relevant assessment years, i.e., 1990- 91 and 1996-97. The only question involved in these appeals is whether the amount received by the assessee for supply of parts to the customers as a part of the warranty agreement was liable to tax. The assessee was an agent of M/s. Mahindra and Mahindra (hereinafter referred to as "the manufacturer"). The manufacturer had warranty agreement with the purchasers of vehicles (hereinafter referred to as "the customers") to replace defective parts during the warrant....

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....w is no longer res integra. In Premier Automobiles Ltd. v. Union of India [1972] 2 SCR 526, it was clearly held that the replacement of defective parts during the warranty period would not involve any sale. Reliance was also placed on decisions of the Delhi, Madhya Pradesh and Kerala High Courts reported in Commissioner of Sales Tax, Delhi Administration, Vikas Bhawan, New Delhi v. Prem Nath Motors (P.) Ltd. [1979] 43 STC 52, Prem Motors v. Commissioner of Sales Tax, Madhya Pradesh [1986] 61 STC 244 and Geo Motors v. State of Kerala [2001] 122 STC 285. It was submitted that the assessee, as part of the warranty agreement, replaced the defective parts. There was a contractual obligation for the same and, therefore, there was no sale involved....

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....car. The car manufacturers enter into an agreement with the manufacturers of components providing for a warranty so far as the components supplied are concerned. The whole object behind the warranty is that the consumer who has to make a heavy investment for the vehicle should be assured of a proper performance of the vehicle in a trouble free manner for reasonable length of time. Therefore, entire cost of warranty was to be borne by the manufacturer. The issue was entirely different from the one at hand and the ratio in the said case provides no answer to the present dispute. Prem Nath's case [1979] 43 STC 52 (Delhi), as the factual position goes to show, dealt with transfer of property in the part or parts replaced in pursuance of the sti....