VAT – Reimbursement received by dealer for supply of spare parts to its customers under warranty period, are not liable to VAT under the Maharashtra VAT Act: HC

No Comments

Whether reimbursement received by a dealer for supply of spare parts free of cost to its customers under warranty period, are liable to VAT under the Maharashtra VAT Act. NO IS THE ANSWER.

Facts of the case:

The assessee company is an authorised dealer of Maruti vehicles. The assessee has preferred the appeal challenging the order passed by the Tribunal wherein, it was held that the amount received by the assessee for supply of spare parts of the vehicle to its customers as a part of warranty agreement was liable to VAT under the Act. The assessee stated that each vehicle sold by them was covered by a warranty for a particular time span. During the warranty period, the assessee was required to replace the spare parts free of cost to the owner for which, the assessee had received reimbursement for such parts so replaced under the contract of warranty from M/s. Maruti Limited.

the High Court held that,

the disputed order of the Tribunal has dismissed the assessee’s appeal by following the decision of the Apex Court in the case of Mohd. Ekram Khan on a finding that the facts in this case are identical to that which were on record in respect of Mohd. Ekram Khan. In Fact, the very distinction which the Counsel for the assessee is seeking to make viz. principal to principal and dealer and principal was considered by this Court in Navnit Motors Pvt. Ltd and disposed of;

thus, in Mohd. Ekram Khan as observed by our Court in Navnit Motors Pvt. Ltd., the relationship was that on a principal to principal basis and not on the basis of the agency which forms the foundational difference according to the Rajasthan High Court in Marudhara Motors for not applying the decision of the Apex Court in Mohd. Ekram Khan. The issue stands concluded in favour of the Revenue by the decisions of the Apex Court in Mohd. Ekram Khan and our Court in the case of Navnit Motors, the questions of law as proposed do not give rise to any substantial question of law.

Citation: 2018-TIOL-744-HC-MUM-VAT