TaxTMI 
TaxTMI 
2017 (11) TMI 136
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....he law in the case of Mohd. Ekram, which was not applicable." 4. Trade Tax Revision No. 322 of 2004 (hereinafter referred to as "Second Revision") has raised following three questions of law:- "(i) Whether learned Tribunal was justified in remanding the matter to the First Appellate Authority without any cogent and sufficient reasons when the law clearly stipulates that the situs of sale or purchase is wholly irrelevant to determine the transaction as inter-State sale or intra-State sale. (ii) Whether learned Tribunal was justified in remanding to the First Appellate Authority when the order was directly placed by Director General, Family Welfare U.P. to the M/s Maruti Udyog Ltd. for supply of 150 Maruti Ambulance Van on the DGS&D rate. (iii) Whether learned Tribunal was justified in including the cost of warranty replacement to the taxable turnover of the applicant irrespective of the fact whether price was received or not." 5. Though questions are differently worded but in substance, questions of law involved in both these revisions are same as to "whether cost of warranty replacement by Revisionist is liable to be treated as "taxable turn over" or not". 6. The facts adm....
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.... of Mohd. Ekram (supra) which is the sheet anchor of the arguments of learned Counsel for the Revenue. In para 1 of the judgment itself, the Hon'ble Court considered the question in the following terms: "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 warranty period. As found by the taxing authorities and the High court, the manufacturer made payment for certain price as the parts were, supplied by the assessee to the customers. Credit notes were issued by the manufacturer to the assessee in respect of the price of the parts supplied to the customers. The assessing officer was of the view that the payments received through credit notes amounted to a sale in terms of Section 2(h) of the Act." 13. In para No. 5 of the judgment, the Hon'ble Court noticed the contention of Revenue in the....
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....r of property in the part or parts replaced in pursuance of the stipulation of warranty as part of the original sale of car for the fixed price paid by the buyer/consumer. The price so fixed and received was a consolidated price for the car and the parts that may have to be supplied by way of replacement in pursuance of the warranty. That decision also throws no light on the present controversy. Though the decision in Geo Motor's case (supra) and Prem Motor's case (supra) support the stand of the assessee, we find that basic issue as to the nature of the transaction between the assessee and the manufacturer was lost sight of. As noted above, in a case manufacturer may have purchased from the open market parts for the purpose of replacement of the defective parts. For such transactions, it would have paid taxes. The position is not different because the assessee had supplied the parts and had received the price. The categorical factual finding recorded by the taxing authorities and the High Court is that the assessee had received the payment of the price for the parts supplied to customers. (Here in the present case there is no such finding by the revenue authority). That be....
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..... (f) In order to discharge its warranty obligations manufacturer has a dealer network to discharge its obligation on its behalf under the contract of dealership as and when a need to serve the vehicle under warranty arise. (g) Dealer in turn on behalf of the manufacturer collects a defective component/s or the vehicle itself from the customer if its part/s or it is found to be defective and replaces it with part/s or vehicle in his stock purchased from the manufacturer. No money is charged from the customer as he has not been sold any new, part/s or vehicle. Only a defective component or vehicle has been replaced. This defective component/s or vehicle received on exchange by the dealer from the customer is returned back to the manufacturer from whom the dealer had purchased the same in the first place i.e. Tata Motors, who after receiving the part/s or the entire vehicle and satisfying themselves about its being defective and defect being in the nature of manufacturing defect compensate the purchasing dealer at this purchase price which is their selling price by crediting the running account of the dealer with them used exclusively for the purpose of transaction of sale from t....