MOHD. EKRAM KHAN AND SONS versus COMMISSIONER OF TRADE TAX, U.P., LUCKNOW

Citation: [2004] SUPP. 3 S.C.R. 116 · Decided: 21-07-2004 · Supreme Court of India · Bench: S.N. VARIAVA · Disposal: Dismissed
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Judgment (excerpt)

A 
MOHD. EKRAM KHAN AND SONS 
' 
~
v. 
COMMISSIONER OF TRADE TAX, U.P., LUCKNOW 
JULY 21, 2004 
B 
[S.N. VARIAVA AND ARIJIT PASAYAT, JJ.] 
Uttar Pradesh Trade Tax Act, 1948 : 
~ 
S.2(h)-Sale-Supply of motor parts to customers by agent under 
c warranty agreement-Amount received by agent from manufacturer for 
such· supply of parts-Assessed to tax-Held, assessee received payment 
of the price for the parts supplied to customers-Transactions were subject 
to levy of tax. 
D 
A manufacturer of vehicles in Maharashtra had an agreement 
with its customers to replace defective parts during warranty period. 
The agent in the State of Uttar Pradesh supplied the parts to the 
..-
customers under the warranty agreement and received the price 
thereof from the manufacturer. The assessing authority opined that the 
transaction amounted to sale and assessed the amount received by 
E agent from the manufacturer as liable to tax under the U.P. Trade Tax 
Act, 1948. The Commissioner (Appeals) upheld the assessment. But the 
Trade Tax Tribunal held that there was no sale. However, the High 
Court set aside the order of the tribunal holding that the transactions 
constituted sale attracting levy of tax. Aggrieved the assessee-agent 
F filed the present appeals. 
Dismissing the appeals, the Court 
HELD : The High Court has rightly held that the transaction was 
subject to levy of tax. The categorical factual finding recorded by the 
G taxing authorities and the High Court is'that the assessee had received 
the payment of the price for the parts supplied to customers. In the 
event of manufacturer purchasing parts from open market for the 
purpose of replacement of defective parts, it would have paid tax for 
such transactions. The position is not different because the assessee had 
... 
"\.' 
H supplied the parts and had received the price. Assessing authorities had 
116 
• 
MOHD. EXRAM KHAN v. COMMR. OF TRADE TAX [PASAYAT, J.] 117 
categorically recorded a finding that the transaction is intra-State in A 
nature. (120-A-D] 
Premier Automobiles Ltd & Anr. Etc. v. Union of India, [1972] 2 
SCR 526 and Commissioner of Sales Tax, Delhi Administration, Vikas 
Bhawan, New Delhi v. Prem Nath Motors (P) Ltd, (1979) 43 STC 52, B 
distinguished. 
Prem Motors v. Commissioner of Sales Tax, Madhya Pradesh, (1986) 
61 SCT 244 and Geo Motors v. State of Kera/a, (2001) 122 STC 285, 
overruled. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9618 of C 
2003. 
From the Judgment and Order dated 25.4.2003 of the Allahabad High 
Court in T.T.R. No. 332 of 2201. 
WITH 
C.A. No. 9619 of2003. 
Dhruv Agarwal and Preveen Kumar for the Appellant. 
Punit Dutt Tyagi for the Respondent. 
The Judgment of the Court was delivered by 
ARIJIT PASA Y AT, J. : These two appeals relate to 
common 
D 
E 
judgment rendered by a learned Single Judge of the Allahabad High Court. F 
The appellant (hereinafter referred to as the 'assessee') was a dealer 
registered under the Uttar Pradesh Trade Tax Act, 1948 (hereinafter 
referred to as the 'Act'), for the relevant assessment years i.e. 1990-91 and 
1996-97. The only question involved in these appeals is whether the 
amount received by the assessee for supply of parts to the customers as 
. a part of the warranty agreement was liable to tax. The assessee was an G 
agent of Mis Mahindra and Mahindra (hereinafter referred to as the 
'manufacturer'). The manufacturer had warranty agreement. with the 
purchasers of vehicles (hereinafter referred to as the 'customers') to replace 
,_ ,. 
defective parts during the warranty period. As found by the taxing 
authorities and the High Court, the manufacturer made payment for certain H 
118 
SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R. 
A price as the parts were supplied by the assessee to the customers. Credit 
notes were issued by the manufacturer to the assessee in respect_ of the price 
of the parts supplied to the customers. The assessing officer was of the view 
that the payments received through credit notes amounted to a sale in terms 
of Section 2(h) of the Act. said Provision, so far as relevant reads as 
B follows: 
c 
"(h) 'Sale' with its grammatical vanat1ons and cognate 
expressions, means any transfer of property in goods (otherwise 
than by way of a mortgage, hypothecation, charge or pledge) for 
cash or deferred payment or other valuable consideration and 
includes-" 
Accordingly tax was levied for the two assessment years in question. 
The orders of assessment were questi
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