Summary
The question whether sales tax was payable on free replacement of defective vehicle parts under warranty, against manufacturer credit notes, was referred to a larger Bench. The Court expressed reservations about the observations and propositions in Mohd. Ekram Khan & Sons. It did not finally determine whether the replacement transaction was taxable or whether a credit note constituted payment of a price.
Issues
- Whether a dealer’s warranty replacement of parts free to the customer, followed by a manufacturer’s credit note, attracted sales tax.
- Whether the observations and propositions in Mohd. Ekram Khan & Sons required larger-Bench consideration.
Provisions considered
- Section 4(1), Sale of Goods Act, 1930The requirement of transfer for a price formed part of the assessees’ argument underlying the referred question; no final application determining tax liability was made. (¶¶ 13, 20–22)
Held
- The controversy required examination of whether a replacement transaction attracted sales tax when the customer paid nothing separately, tax had been paid on the car and on the dealer’s inventory, and the manufacturer issued a credit note on return of the defective part. The treatment of that credit note as consideration remained a question for debate. (¶¶ 1–4, 20)
- The Court expressed reservations about the observations and legal propositions in Mohd. Ekram Khan & Sons and considered larger-Bench examination appropriate. It deliberately refrained from deciding the merits of tax liability. (¶ 20–22)
Result
Matter referred for consideration by a larger Bench; papers directed to be placed before the Chief Justice for necessary orders.