TMI Blog2018 (8) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Government Advocate ORDER Per P.K. Jaiswal, J. This appeal under Section 53 (2) (b) of the Madhya Pradesh Value Added Tax Act, 2002 has been filed against order dated 22.07.2017 (Annexure A/6) passed by the Madhya Pradesh Commercial Tax Appellate Board, Bhopal in Appeal No.A-982/CTAB/12 by which the learned Board affirmed first appellate order dated 19.09.2011 (Annexure A/3) passed by the Additional Commissioner, Commercial Tax Appellate Authority; applying the decision in the case of Mohammad Ekram Sons v. Commissioner of Trade Tax, UP, Lucknow reported in (2004) 4 STJ 233 held that the amount received by the appellant from the principal by way of Credit Notes towards cost of the parts replaced during warranty period is includible in the turnover of the appellant and is liable to tax. 2. Facts of the case are that the appellant is a dealer engaged in sale of Four Wheeler Vehicles and their spare parts and accessories, as a Distributor of reputed manufacturer of such vehicles viz. Hyundai Motors India Limited. The appellant is duly registered Dealer under the provisions of the Madhya Pradesh Value Added Tax Act, 2002 (herein after referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the company. The Dealer shall meet the company s warranty obligations to the purchasers of the said products in accordance with sales and service procedures and advices issued or to be issued by company from time to time. 5. The appellant provides replacement of the defective part to the customers because of the Company s warranty to the customer and as a Dealer, the appellant is bound to give warranty to the customer, as per Policy of the Company. 6. Learned Senior Counsel for the appellant has drawn our attention to the Single Bench decision of Rajasthan High Court in the case of Commercial Tax Officer (AE), Jodhpur v. Marudhara Motors, Jodhpur and others reported in (2009) 15 STJ 313 (Rajasthan) and submitted that Rajasthan High Court has distinguished the decision of the Supreme Court in the case of Mohammad Ekram Khan Sons v. Commissioner of Trade Tax, UP, Lucknow reported in (2004) 4 STJ 233 (SC) = AIR 2004 SC 3965 and has followed Three Judges Bench decision of the Apex Court in the case of Premier Automobiles Limited v. Union of India reported in AIR 1972 SC 1690 and Delhi High Court decision in the case of CST, Delhi v. Prem Nath Motors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show, dealt with transfer 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. That being so, the transaction was subject to levy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e price. The cate gorical 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. That being so, the transaction was subject to levy of tax as has been rightly held by the High Court. The decisions in Geo Motor's case(Supra) and Prem Motor's case (supra) stand overruled. Following the said judgment, a Division Bench of this Court in the case of The Deputy Commissioner of Commercial Taxes (Spl.) V/s. M/s. Prerana Motors (P) Ltd., decided on 19th October 2005 in STRP 69/2004 held that the supply of parts to the customers against the credit note of the manufacturer is liable to tax under the Act. However, the High Court of Rajasthan in the case of Commercial Tax Officer (AE), Jodhpur V/s. Marudhara Motors, Jodhpur reported in 2009(67) Kar.L.J. 416 (Raj.) (HC) has taken a contrary stand. The Apex Court in M/s. Mohd. Ekram Khan's case 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive parts during the warranty period. It is only after the judgment of the Apex Court in Mohd. Ekram Khan's case, 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-payment of tax. In that view of the matter, that portion of the order imposing penalty is liable to be quashed. Hence, we pass the following order: (a) Sales Tax Appeal is partly allowed. (b) Levy of tax and interest is upheld. 10. The Division Bench of Karnataka High court also relied on the decision of Mohammed Ekram Sons (supra) upheld the levy of tax and interest. 11. On due consideration of the arguments of the learned Senior counsel for the appellant, as also the law laid down by the Apex court in the case of Mohammed Ekram Sons (supra) and the Division Bench of Karnataka High court in the case of State of Karnataka V/s. Cauvery Motors (P) Ltd., (supra), we reject the contention of the appellant that replacement of motor vehicle part during warranty period by the appellant assessee is not covered in sale and, therefore, is not liable to tax. 12. The appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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