Telco Construction Equipment Company Limited Vs Commissioner Commercial Tax (Allahabad High Court)
The Allahabad High Court delivered its judgment on revisions filed by Telco Construction Equipment Company Limited against the levy of tax on parts replaced during warranty periods. The case arises from Sales/Trade Tax Revision No. 11 of 2024, which challenged the order of the Commercial Tax Tribunal, Noida, regarding the Assessment Year 2007-08 under the Central Sales Tax Act. The revisions were admitted to consider two primary questions of law: whether the Tribunal was justified in imposing tax on parts replaced free of cost during the warranty, and whether reliance on the Supreme Court judgment in Mohd. Ekram Khan was appropriate while ignoring the more recent decision in Tata Motors Limited Vs. Deputy Commissioner of Commercial Taxes (Civil Appeal No. 1822 of 2007, decided on 15.05.2023).
Telco, a manufacturer and seller of earth-moving equipment such as hydraulic excavators and loaders, argued that no consideration was received for the parts replaced during warranty. The company highlighted that the machinery was sold with warranties, and any defective parts were replaced free of cost through dealers, without charging the customer or issuing credit notes. The company also reimbursed dealers only for manpower or technical service, not for the parts themselves. The Assessing Authority initially levied tax on these parts on 31.03.2016, which was set aside and remanded by the first appellate authority on 24.04.2019. Upon reassessment, tax was again levied at 10% on replaced parts on 29.06.2021, leading to first and second appeals, both of which were dismissed.
