TMI Blog2013 (4) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... n the name of the manufacturer. Thereafter the manufacturer has raised a credit note. The manufacturer has paid the assessee the price of the spare parts, which were replaced. If the said spare parts had been purchased in the open market, both of them have to pay sales tax. Therefore, in view of the law laid down in Mohd. Ekram Khan's case [2004 (7) TMI 341 - SUPREME COURT OF INDIA] the consideration paid by the manufacturer to the assessee by way of a credit note represents the sale price of the spare parts which are replaced and is liable to tax. In that view of the matter, the impugned order passed by the Tribunal is liable to be set aside. Hence, Revision is allowed.Order passed by the revisional authority is restored to file in its ori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of sale to customers. The assessee supplied the defective parts to the customers free of cost and after such replacement returned the defective part to the manufacturer. The assessee also raised debit notes on the manufacturer. On receipt of the debit notes, the manufacturer will carry out scrutiny and if found acceptable, it would issue credit notes to the assessee. The credit notes are issued reimbursing the assessee for the cost of the parts supplied to customers free of cost and the cost of labour. The assessee claimed deduction of the amounts for which credit notes were received from the manufacturer. The assessing authority passed assessment orders for three years, i.e., 2001-02, 2002-03 and 2003-04 and allowed the deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , appeals were allowed, revisional orders were set aside and the assessment order passed by the assessing authority was restored. Aggrieved by the said order, the Revenue is in revision. We have heard the learned counsel appearing for the parties. The apex court in the case of Mohd. Ekram Khan Sons v. Commissioner of Trade Tax, U.P. reported in [2004] 136 STC 515 (SC) held as under (page 516 in 136 STC): . . . 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 above question was answered as under (page 518 in 136 STC): . . . Though the decision in Geo Motor's case [2001] 122 STC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an's case [2004] 136 STC 515 (SC) has held that 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 manufacturer may have purchased parts from the open market for the purpose of replacing the defective parts. For such transactions it would have paid tax. The position is not different because the assessee had supplied the parts and had received the prices. That being so, the transaction was subject to levy of tax. In the instant case, customers have purchased the motor vehicles from the manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said levy of tax is justified and therefore, no case for interference in the said order is made out. However, it was contended that the Additional Commissioner was not justified in imposing penalty. Here, we find some substance. Earlier, when the assessment orders were passed, the understanding of the Department was no sales tax was payable in respect of the spare parts supplied to the customers for replacing of the defective parts during the warranty period. It is only after the judgment of the apex court in Mohd. Ekram Khan's case [2004] 136 STC 515 (SC), the tax was levied on such spare parts. Under those circumstances, we are of the view that the Additional Commissioner was not justified in imposing penalty for non-pay ment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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