2011 (3) TMI 1548 - HC - VAT and Sales Tax

Whether optional service charges at the rate of Rs. 175 per refrigerator under a separate contract of warranty for providing after sale services in respect of unit of refrigerators sold by the assessee for a period of four years would not form part of taxable sale price in the hands of the respondent-assessee and therefore the imposition of the difference tax interest and penalty was not justified? Held that - In view of the fact that order of the Tax Board in the case of the same self assessee-respondent vide order dated October 28 2002 which appears to have been allowed to become final by the Revenue vide the order produced before this court this court is of the view that the Revenue cannot now contend that either the matter deserves to be remanded back to the assessing authority or such optional service charges realised by the assessee in after sales separate contract while selling the refrigerators deserves to be included in the selling price. The controversy stands concluded in favour of the respondent-assessee and therefore the present revision petition filed by the Revenue is found to be devoid of merit and the same is accordingly dismissed.

Issues:
1. Taxability of optional service charges at the rate of Rs. 175 per refrigerator in the hands of the respondent-assessee.
2. Applicability of judgments in similar cases to determine tax liability.
3. Finality of earlier orders and estoppel in re-agitating the same issue.

Issue 1: Taxability of Optional Service Charges
The revision petition challenged the Tax Board's order rejecting the Revenue's appeal regarding the taxability of "optional service charges" at Rs. 175 per refrigerator under a separate warranty contract. The Tax Board held that such charges would not form part of the taxable sale price in the hands of the respondent-assessee. The Revenue argued that since over 90% of consumers paid these charges, it should be considered part of the sale price taxable under the Rajasthan Sales Tax Act. The respondent's counsel contended that the issue was settled by the Supreme Court's decision and previous court rulings, emphasizing that the charges were optional and not includible in the assessable value.

Issue 2: Applicability of Precedents
The court referred to the Supreme Court's judgment in Collector of Central Excise, Delhi v. Kelvinator of India Ltd., where it was held that optional service charges, even when paid by a majority of consumers, were not to be included in the assessable value for excise duty purposes. This decision was cited to support the respondent's position that the charges were not taxable. Additionally, the court mentioned a coordinate Bench decision remanding a similar case to determine the optional nature of warranty charges, emphasizing that separate payments for warranty should not be included in the sale price unless proven otherwise.

Issue 3: Finality of Earlier Orders
The court noted that the controversy regarding the taxability of optional service charges had been conclusively settled by previous judgments and the finality of the Tax Board's earlier order in favor of the respondent-assessee. It was argued that the Revenue, having allowed the previous order to become final, was estopped from re-agitating the issue in the present revision petition. The court found that the matter had been decided in favor of the respondent-assessee based on binding precedents and the finality of earlier orders, leading to the dismissal of the Revenue's revision petition as lacking merit.

In conclusion, the court upheld the Tax Board's decision, ruling that the optional service charges at Rs. 175 per refrigerator were not taxable in the hands of the respondent-assessee based on established legal principles and precedents. The judgment emphasized the importance of finality in legal decisions and the application of past rulings to determine tax liability in similar cases.

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