Commercial Taxes Officer, Anti Evasion I vs Whirlpool India Ltd.

Alok Sharma, J.—In both the petitions, the challenge is to the orders of Rajasthan Tax Board both passed on December 5, 2002 holding that optional service/warranty charges were not included in the price of the goods sold (refrigerators) as they do not constitute a part of the sale price. Holding thus, the Rajasthan Tax Board has held that such charges paid by a customer to a dealer would not be liable to attract levy of tax under the Rajasthan Sales Tax Act, 1994. The Tax Board thus, set aside the orders both of the assessing authority and the appellate authority holding to be contrary. Mr. R.B. Mathur, senior counsel arguing for Revenue, would submit that even while the principle on which the Tax Board has rendered its judgment is unexceptional, yet there was no material before the Tax Board to come to the conclusion that charges levied by the respondent assessee towards service/warranty were optional. He submits that without a specific finding of fact in this regard, the charges levied purportedly on account of after sales service or warranty ought to have been included in the sale price and visited with tax or at the minimum the matter ought to have been remanded to the assessing authority for determining the issue of fact.

Mr. J.K. Ranka appearing on behalf of the assessing authority would submit that from the reading of the orders of the assessing authority, appellate authority and also the Rajasthan Tax Board, it is evident that issue of the nature of optional service/warranty charges has been considered specifically by the authorities below and there is a categorical finding of fact by the appellate authority that in 90 per cent of the transactions of sale of refrigerators by the company the service/warranty charges were levied while in others they were not. He submit that this finding of fact clinches the issue in favour of the assessee establishing as it does that charge in issue was not universal but optional. He submits that in this view of facts obtaining on record, the case of the respondent-assessee is covered by the judgments of this court delivered in the case of Commercial Taxes Officer Vs. Godrej G.E. (S.B. Sales Tax Revision Petition No. 47 and 49 of 200.5 decided on March 30, 2011) as also the judgment of this court in the case of Commercial Taxes Officer v. Weston Electronics Ltd. reported in (1992) 87 STC 522 (Raj), which enunciates the principle that payment made by the customer to dealers at the time of sale of goods when made by exercising an option to avail of service charge/warranty did not constitute the sale price of the goods sold and could not be reckoned for determining sales tax.

I have heard the learned counsel for the petitioner as also the learned counsel for the respondent.

The assessing authority even while holding against the respondent-assessee on a misdirection in law in its order dated February 24, 1999, has recorded as a fact that it was the specific case of the assessee that the service/warranty charges were optional but while dealing with the said contention, the assessing authority dismissed the contention out of hand without anything more. The order of the appellate authority while upholding the order of the assessing authority in the appeal laid by the assessee yet admits to the fact that in 90 per cent of the transactions of sale of refrigerators the customers opted to avail of the additional charges on account of service/warranty charges while 10 per cent of the customers did not do so. The Tax Board has held that the charges levied on account of after sales service/warranty were optional.

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 Electronics Ltd. reported in (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 the facts therefore obtaining before this court and the discussions aforesaid, I find no force in the revision petitions and the same are dismissed.