NAVNIT MOTORS PVT. LTD. Vs. STATE OF MAHARASHTRA

JUDGEMENT

(1.) The Sales Tax Tribunal by its impugned order dated April 18, 2011, has declined to make a reference to this court under section 61 of the Bombay Sales Tax Act, 1959. The Tribunal has held that its judgment in the present case delivered on November 19, 2010, follows the law laid down by the Supreme Court in Mohd. Ekram Khan & Sons v. Commissioner of Trade Tax, 2004 136 STC 515. Hence, according to the Tribunal no case was made out for making a reference. The applicant is an authorized dealer of Maruti Udyog Limited and Eicher Motors Limited and engages in the business of selling vehicles and spare parts purchased from both the manufacturers. Under the dealership agreement the applicant replaces defective parts which cannot be instantly repaired with new ones from the ready stock without any cost consideration or charge to the customer. This obligation is assumed by the applicant in respect of vehicles which are under warranty. After the defective parts are replaced with parts from the ready stock of the applicant, the applicant receives a credit note from the manufacturer for the cost of the spare parts purchased by the applicant earlier and replaced under the warranty. The Tribunal in its judgment dated November 19, 2010 adverted to the clauses of the dealership agreement. Upon considering the terms of the agreement, the Tribunal recorded the salient features of the agreement as follows :

(2.) The Tribunal held that the present case is directly governed by the decision of the Supreme Court in Mohd. Ekram Khan & Sons v. Commissioner of Trade Tax, 2004 136 STC 515.

(3.) In Mohd. Ekram Khan & Sons v. Commissioner of Trade Tax, 2004 136 STC 515, the appellant was a registered dealer under the U.P. Trade Tax Act, 1948. The question involved in the appeal before the Supreme Court was whether the amounts received by the assessee for supply of parts to customers as a part of the warranty agreement were liable to tax. The assessee was an agent of an automotive manufacturer. The manufacturer had a warranty agreement with the purchasers of the vehicles to replace defective parts during the warranty period. The manufacturer issued credit notes to the assessee in respect of the price of the parts supplied by the assessee to customers. The Supreme Court held as follows (page 518 in 136 STC) :