XEROX INDIA LIMITED Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) This revision petition is preferred by the dealer/assessee challenging the order (Xerox Modi Corporation Limited, Bangalore v. State of Karnataka, 2014 78 KarLJ 109 (Tri.) (DB)) imposing the penalty for non-payment of sales tax pertaining to the parts used in the execution of the annual performance of maintenance contract. The assessee is a company registered under the provisions of the Companies Act, 1956, which is engaged in the business of trading in multi-functional devices used for printing, copying and scanning. In addition, it is also engaged in the business of execution of service maintenance and repair agreements. The petitioner filed his monthly returns and discharging the liability to tax in terms of the determined taxable turnover for each month. On the bona fide belief that the Full Service and Maintenance Agreements (hereinafter referred to as 'FSMA' for short) and the Spares and Service Maintenance Agreements (hereinafter referred to as 'SSMA' for short) were essentially service contracts and that the materials supplied to its customers during the execution of these contracts were only incidental and ancillary to the principal objective of the contracts of service, the petitioner had been declaring the turnover in respect of the said maintenance agreements in its monthly returns by deducting the same while calculating its taxable turnover under the provisions of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as 'the Act').

(2.) For the assessment years 1992-1993 to 1999-2000, the petitioner had been calculating the taxable turnover in accordance with the aforementioned method and duly discharging the liability to tax under the Act. However, the Assessing Authorities passed assessment orders demanding taxes on the turnover representing FSMA and SSMA from the year 1992-1993 onwards. The petitioner contested the matter right upto the Hon'ble Supreme Court. The Supreme Court finally by its order dated 24-8-2005, in the case of Xerox Modicorp Limited v. State of Karnataka,2005 59 KarLJ 369, after considering several judgments of the Apex Court on the point which gave raise to conflicting views has held as under:

(3.) In fact the Apex Court had passed an interim order earlier which has held as under: