Assistant Commercial Taxes Officer, Anti-Evasion-II vs Electrolux Kelvinator Ltd.

Jainendra Kumar Ranka, J.—This revision petition has been filed by the petitioner-Department, u/s 86 of the Rajasthan Sales Tax Act, 1994 (in short, "the Act") against the order dated December 17, 2002 passed by the Rajasthan Sales Tax Board, Ajmer (in short, "the Board") in Appeal No. 1339 of 2002 whereby the Tax Board rejected the appeal of the petitioner-Department and held that "optional service charges" at Rs. 200 per refrigerator would not form part of taxable sale price in the hands of respondent-assessee. The brief facts of the case are that the respondent is a limited company and is in the business of refrigerators and washing machines, etc. As per the separate contract of warranty the respondent charged "optional service charges" at Rs. 200 per refrigerator from the consumers for providing after-sale services in respect of refrigerator sold by the respondent for a period of four years, this Scheme was only optional and not necessarily every customer used to agree to this. The Assistant Commercial Taxes Officer (in short, "the ACTO") was of the view that since, the additional amount was charged and it was charged separately, therefore, it is also to be added in sale value and sales tax is liable to be paid by the assessee on it. The assessing officer also rejected the agreement of the respondent with buyer that amount collected by it is entirely distinct and separate and cannot be said to be part of sale price as it is charged after sale has been effected only to those who opts to undergo the scheme. Thus, the assessing officer was not satisfied with the explanation and thus added the overall amount, treated it as part of turnover liable to sales tax and not only levied sales tax but charged interest u/s 58 and even levied penalty u/s 65 of the RST Act.

Dissatisfied with the order passed by the ACTO the respondent-company preferred an appeal before the Deputy Commissioner (Appeals), Jaipur, (in short, (DC (A)), who after going through the order passed by the ACTO sustained the order of ACTO in so far as levy of sales tax and interest is concerned but deleted the penalty. Being dissatisfied with the order of DC (A), the respondent-company filed appeal before the Tax Board, who vide order dated December 17, 2002 accepted the appeal of the company by holding that in other similar matters in similar circumstances and also in the cases of Commercial Taxes Officer, Anti Evasion I Vs. Whirlpool India Ltd., Commercial Taxes Officer Vs. Godrej G.E. and Kelvinator India [1993] 90 STC 336 (Raj), etc., the Board was of the consistent view that optional service charge is not part of the turnover and it is opted only by few customers and it was not binding upon the customers to opt for this optional service charges ultimately, the Board accepted the view of the assessee and allowed the appeal.

Being dissatisfied with the order passed by the Tax Board, the petitioner filed this revision petition by challenging the order by raising following substantial questions of law:

(1) Whether the optional service charge is part of sale or not?

(2) Whether the order of assessing authority for levying tax and interest is correct or not?

(3) Whether the order passed by the DC (Appeals) Jaipur for upholding the order of AA is correct or not?

(4) Whether the judgment passed by learned Tax Board, Ajmer is legal one?

A co-ordinate Bench of this court in the case of Commercial Taxes Officer v. Kelvinator India [1993] 90 STC 336 (Raj) while remanding the case back to the assessing officer, held as under (see at page 376 and 377 in 46 VST):

I have considered over the matter. In the case of Commercial Taxes Officer v. Weston Electronics Ltd. (S.B. Sales Tax Revision No. 164 of 1988 decided on November 26, 1991), [1992] 87 STC 522 (Raj), this court has held as under:

The definition of sale price as provided u/s 2(p) of the Rajasthan Sales Tax Act, 1954, clearly envisages that only that amount which is paid or is payable to a dealer as consideration for sale of goods will be included in the sale price. This definition has further been extended to include such further sums which might be charged for anything done by the dealer in respect of the goods at the time of or before the delivery. If the dealer is charging one sale price irrespective of the warranty for the second and subsequent years then the position may be different, but if it is optional to the purchaser to avail the benefit of the warranty or not to avail in respect of the second and the subsequent years for which a separate payment is made in addition to the sale price, then such separate payment cannot be included in the sale price. The payment by way of warranty is like an insurance charge and when the said amount is collected there is no transfer of property and at a future date a contingency may or may not arise where the defective part is replaced. In such a situation it cannot be said that the amount has been collected in respect of an act done before or at the time of delivery of the goods. The said amount has been charged not in respect of any goods delivered but for some future act. I am also in agreement with the contention of Mr. Kotwani that the definition as given under the Central Excises Act for the purpose of ''cost'' cannot be applied nor the decision thereof have any relevancy because the Rajasthan Sales Tax Act, is a self-contained code and in view of the specific definition the assistance from the other Act cannot be taken. In these circumstances, I am of the view that if the payment in respect of warranty were voluntary in nature and have separately been charged then it will not form the part of the sale price. The assessee has neither produced the books of account, nor the information required was furnished before the assessing authority and the Tribunal has proceeded only on the basis of one bill. It would be proper to send the matter back to the Commercial Taxes Officer for examination whether there was separate price for the sale of the commodity with warranty and without warranty or it was one price as contended by Mr. Bafna in all cases and if it is found that the price was one whether the warranty is taken or not then no benefit can be availed of by the assessee. But if the amounts charged are separate for the value of the commodity and the warranty charges and the said payment have not been collected from all the dealers, then the same will not form part of the sale price.

In view of the decision given by this court I am of the view that the matter should go back to the assessing authority for recording finding as to whether the warranty charges were optional and whether they were separately charged. The assessee shall produce the books of accounts, documents and the agreement in proof of the contentions raised by him that the said charges do not form part of the sale price.

In view of the aforesaid binding precedents and moreover in view of the fact that order of the Tax Board in the case of the same self assessee-respondent vide order dated October 28, 2002, which appears to have been allowed to become final by the Revenue vide the order produced before this court, this court is of the view that the Revenue cannot now contend that either the matter deserves to be remanded back to the assessing authority or such optional service charges realised by the assessee in after-sales separate contract while selling the refrigerators, deserves to be included in the selling price. The controversy stands concluded in favour of the respondent-assessee and, therefore, the present revision petition filed by the Revenue is found to be devoid of merit and the same is accordingly dismissed. No costs.

This court again in the case of Commercial Taxes Officer, Anti Evasion I Vs. Whirlpool India Ltd., S.B. Sales Tax Revision Petition No. 354 of 2011 and also in Commercial Taxes Officer, Anti Evasion I Vs. Whirlpool India Ltd., S.B. Sales Tax Revision Petition No. 9 of 2008 decided on July 16, 2012 held as under (page 179 in 58 VST):

In my considered opinion, there was enough material before the Tax Board to hold that the charge levied by the assessee towards service/warranty charges at the time of the sale was not universal but optional. Following this finding the legal consequences would be inexorable and entail exclusion of such charges from the ambit of sale price of the goods sold exigible to tax in view of the judgments of this court in the case of Commercial Taxes Officer Vs. Godrej G.E. as also Commercial Taxes Officer v. Weston Electronic Ltd. [1992] 87 STC 522 (Raj).

I find in the facts obtaining in the two revision petitions before me that the impugned orders of the Rajasthan Tax Board are sound and able judgments on facts and law obtaining. It would also be relevant to note that the Rajasthan Tax Board had decided five appeals in favour of the respondent-assessee by a common order dated December 5, 2002. Mr. Mathur, has admitted to the fact that revisions against three of the said appeals were dismissed for non-prosecution by this court as early as 2008, of which in one revision petition a restoration application has been filed and is still pending. In respect of the other two revisions, the orders of the Tax Board have attained finality. It is thus evident that the Department itself has accepted the legal positions enunciated by the Rajasthan Tax Board in at least two other connected appeals with an identical legal question involved.

In view of the aforesaid facts and circumstances of the case and the judgments of this court on the same issue, I am of the view that since the issue involved in the instant case has already been settled and decided, no substantial questions of law arises. Resultantly, the instant petition has no force and the same is dismissed.