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2016 (12) TMI 1305 - ALLAHABAD HIGH COURTSale u/s 2(ac) of the Act - spare parts given to the customers by way of replacement under warranty scheme - whether the transaction in question is a sale within the meaning of Section 2(ac) of the Act and consequently, liable to tax under Section 3 of the Act? - Held that: - There is no obligation on the part of the respondent-assessee under the warranty of the manufacturer to consumers to replace the defective parts. The respondent-assessee is not even a party to that warranty. The supply of parts by the respondent-assessee to consumers to replace the defective parts and receipt of consideration through credit notes in lieu thereof from the manufacturer is a separate transaction of sale. Credit notes received by the respondent-assessee for specific amount in terms of money towards price of the spare parts supplied by the respondent-assessee to consumers in fulfillment of the warranty obligations of the manufacturer towards consumer, construed valuable consideration in lieu of the price of such spare parts and thus a transaction of sale within the meaning of Section 2(ac) of the U.P. Act has emerged attracting liability to tax under Section 3 of the Act. The manufacturer is warrantor and the consumer is warrantee to whom the warrantor has made a statement or representation with regard to his product i.e. motor vehicle. Thus, in the present set of facts the manufacturer being warrantor has made certain promise with regard to its product to consumers (warrantee) called warranty. The respondent assessee has not given warranty to consumers. Supply of parts by him is a sale for consideration received by him through credit notes. Revision allowed - decided against Respondent-assessee.
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