2011 (11) TMI 614

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....he law laid down by the Supreme Court in Mohd. Ekram Khan and Sons v. Commissioner of Trade Tax [2004] 136 STC 515 (SC). Hence, according to the Tribunal no case was made out for making a reference. The applicant is an authorized dealer of Maruti Udyog Limited and Eicher Motors Limited and engages in the business of selling vehicles and spare parts purchased from both the manufacturers. Under the dealership agreement the applicant replaces defective parts which cannot be instantly repaired with new ones from the ready stock without any cost consideration or charge to the customer. This obligation is assumed by the applicant in respect of vehicles which are under warranty. After the defective parts are replaced with parts from the ready stoc....

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.... In Mohd. Ekram Khan and Sans v. Commissioner of Trade Tax [2004] 136 STC 515 (SC), the appellant was a registered dealer under the U. P. Trade Tax Act, 1948. The question involved in the appeal before the Supreme Court was whether live amounts received by the assessee for supply of parts to customers as a part of the warranty agreement were liable to tax. The assessee was an agent of an automotive manufacturer. The manufacturer had a warranty agreement with the purchasers of the vehicles to replace defective parts during the warranty period. The manufacturer issued credit notes to the assessee in respect of the price of the parts supplied by the assessee to customers. The Supreme Court held as follows (page 518 in 136 STC):-  &nbs....

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....Ltd., and the assessee in Mohd, Ekram Khan's case [2004] 136 STC 515 (SC), which dearly showed, that the relationship was not of an agency, but on a principal to principal basis. In our view, the attempt on the part of the applicant to distinguish the decision in Mohd. Ekram Khan's case [2004] 136 STC 515 (SC) was correctly rejected by the Tribunal. In the present case, clause 49 of the agreement of dealership which deals with warranty requires the dealer to promptly and effectively deal with any claim made by the customer of any vehicle under the provisions of the warranty currently in force. In terms of the warranty, the cost of parts incurred by the dealer in carrying out repairs or replacement of defective parts is in accorda....