Case Law Details
Tata Motors Ltd. Vs Deputy Commissioner of Commercial Taxes (Supreme Court of India)
Supreme Court held that the credit note issued by a manufacturer to the dealer, relating to the replacement of defective parts, is a valuable consideration and hence, leviable to sales tax.
Conclusion- Held that a credit note issued by a manufacturer to the dealer, relating to the replacement of the defective parts, is a valuable consideration within the meaning of the definition of sale and hence, exigible to sales tax under the respective State enactments of the States under consideration. In the result, appellants-dealer/assessee are liable to pay sales tax under the respective State enactments under consideration.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
Hon’ble Mrs. Justice B.V. Nagarathna, pronounced the signed Reportable Judgment in the matters Bench comprising of Hon’ble Mr. Justice K. M. Joseph, Her Ladyship and Hon’ble Mr. Justice Ahsanuddin Amanullah.
Leave granted.
The operative part of the signed Reportable Judgment reads as under:-
“70. In the circumstances, the reference is answered in the following terms:
i) The judgment of this Court in Ekram Khan is applicable to a situation where a manufacturer issues a credit note to a dealer acting under a warranty given by the manufacturer pursuant to a sale of an automobile in the following situations. The dealer replaces a defective part of the automobile by a spare part maintained in the stock of the dealer or when the same is purchased by the dealer from the open market. In such situations, the credit note issued in the name of the dealer is a valuable consideration for a transfer of property in the spare part made by the dealer to the customer and hence a sale within the meaning of the sales tax legislations of the respective States under consideration. The value in the credit note is thus exigible to sales tax under the respective sales tax enactments under consideration.
ii) The judgment in Ekram Khan does not apply to a case where the dealer has simply received a spare part from the manufacturer of the automobile so as to replace a defective part therein under a warranty collateral to the sale of the automobile. In such a situation also, the dealer may receive a consideration for the purpose of the service rendered by him as a dealer under a dealership agreement or any other agreement akin to an agent of the manufacturer which is not a sale transaction.
On the above understanding of the judgment of this Court in Mohd. Ekram Khan, we are of the view that the same does not call for any interference.
In light of the above, in our view, overruling of the judgments in the case of Prem Motors and Geo Motors in Mohd. Ekram Khan, is just and proper.
iii) It is reiterated that a credit note issued by a manufacturer to the dealer, in the situations explained above, is a valuable consideration within the meaning of the definition of sale and hence, exigible to sales tax under the respective State enactments of the States under consideration. In the result, appellants-dealer/assessee are liable to pay sales tax under the respective State enactments under consideration.
iv) In view of the above, the appeals filed by the dealers are dismissed. The appeals filed by the revenue are allowed.
Parties to bear their respective costs.”
Pending application(s), if any, stand disposed of.
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