Dismissed

M/S.Mgf Motors Ltd. v. State of Kerala

Kerala HC12 Mar 2012ST.Rev./157/2009

Case brief

AI extract

What is this about?

The High Court of Kerala held that free replacement of vehicle parts under warranty attracts sales tax. It followed the Supreme Court ruling that such replacement amounts to a sale, distinguishing a Rajasthan decision based on source of parts, and dismissed the revision against the assessment order.

What did the court decide?

Revision case against the assessment order dated 12/02/2009 of the Sales Tax Tribunal was dismissed.

M/S.Mgf Motors Ltd. Vs State of Kerala — Contract and Commercial Disputes | Kerala HC (2012)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HON'BLE MR. JUSTICE BABU MATHEW P.JOSEPH

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MONDAY, THE 12TH DAY OF MARCH 2012/22ND PHALGUNA 1933

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ST.Rev..No. 157 of 2009 ( ) ---------------------------

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AGAINST ORDER IN TA.71/2007 DATED 12/02/2009 of S.T.A.TRIBUNAL,ERNAKULAM

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PETITIONER(S)/APPELLANT/ASSESSEE:

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M/S.MGF MOTORS LTD.,ERNAKULAM.

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BY ADVS.SRI.E.K.NANDAKUMAR SRI.A.K.JAYASANKAR SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.ANIL D. NAIR

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RESPONDENT(S)/RESPONDENT/REVENUE:

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STATE OF KERALA.

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BY MR.BOBBY JOHN, SR. GOVERNMENT PLEADER

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THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 1203-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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S.T.REV.NO.157/2009

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APPENDIX

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REVISION PETITIONER'S EXHIBITS

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ANNEXURE-A : COPY OF ASSESSMENT ORDER FOR 2003-04-GST ISSUED BY THE ASST.COMMISSIONER (ASSMT), CIRCLE-II, ERNAKULAM TO THE PETITIONER DATED 20/04/2005.

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ANNEXURE-B : COPY OF APPELLATE ORDER ISSUED BY THE DY.COMMISSIONER (APPEALS)-II COMMERCIAL TAXES, ERNAKULAM TO THE PETITIONER DATED 08/12/2006.

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ANNEXURE-C : COPY OF ORDER ISSUED BY THE SALES TAX TRIBUNAL, ERNAKULAM TO THE PETITIONER DATED 12/02/2009.

//TRUE COPY//

PA TO JUDGE.

C.R.

C.N.RAMACHANDRAN NAIR & BABU MATHEW P. JOSEPH, JJ.

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S.T.Rev.No.157 of 2009

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Dated this the 12^th day of March, 2012.

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J U D G M E N T

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Ramachandran Nair, J.

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The question raised in the revision filed by the assessee is whether the replacement of parts of automobile during warranty period without collecting any price for the same from the vehicle owner amounts to sale that attracts sales tax.

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We have heard learned counsel for the petitioner

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and also learned Senior Government Pleader for the respondent.

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The issue stands covered against the petitioner by the decision of the Supreme Court in Mohd. Ekram Khan & Sons v. Commissioner of Trade Tax, U.P., reported in 136 STC 515. However, the learned counsel for the petitioner relied on the Single Bench decision of the Rajasthan High Court in Commercial Tax Officer (Anti-Evasion), Jodhpur v. Marudhara Motors, reported in 2010 (29) VST 114, wherein the Rajasthan

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S.T.Rev.No.157/2009

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High Court after distinguishing the decision of the Honourable Supreme Court held that free replacement of parts of vehicle sourced from the manufacturer of the vehicle does not involve any sale. Learned counsel brought to our notice the distinction in this case also by stating that in the case decided by the Supreme Court the automobile parts replaced were out sourced from other parties and not from the manufacturer of the vehicle; and in that context only the Supreme Court held the transaction as sale attracting tax. According to the learned counsel for the petitioner, manufacturers are bound to replace parts of vehicle free of cost during warranty period, and so much so, the cost of the parts replaced during warranty period should be taken to have been covered by the original value of the vehicle on which tax is paid.

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Learned Government Pleader resisted the claim of the petitioner by stating that, on facts, the transaction is a pure sale because manufacturer is not sending parts free of cost for replacement. On the other hand, the system is for the

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S.T.Rev.No.157/2009

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petitioner to purchase spare parts in bulk from the manufacturers and others and stock the same. As a dealer, the petitioner replaces the automobile parts by utilising the stock held by them, either purchased from vehicle manufacturer or from other sources, and then forward the warranty claim to the manufacturer, who issues credit note for the sale price along with the tax, if claimed by the petitioner. So far as the petitioner is concerned, the position is that the transaction is purchase and resale, and even though price of the replaced part is not collected from the vehicle owner, the petitioner gets reimbursement of the value from the manufacturer. So much so, in our view, it is the purchase and sale of spare parts by the petitioner as authorised dealer of the manufacturer and the replacement therefore is resale effected by the petitioner for which payment is received through credit note issued by the manufacturer. So much so, we feel the distinction brought by the petitioner does not justify deviation from the decision of the Supreme Court

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S.T.Rev.No.157/2009

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holding that free replacement of parts during warranty period amounts to sale of such parts.

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Consequently, we dismiss the S.T.Revision case.

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(C.N.RAMACHANDRAN NAIR, JUDGE)

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(BABU MATHEW P. JOSEPH, JUDGE)

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M/S.Mgf Motors Ltd. v. State of Kerala

Case brief

What is this about?

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M/S.Mgf Motors Ltd. v. State of Kerala

Case brief

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