Supreme Court Judgments — 2019

The Supreme Court did not decide the substantive issues but referred the matter to a larger bench. The crucial point for debate is whether, in the context of a warranty for free spare parts, sales tax is payable on the transaction when a defective part is replaced and returned to the manufacturer, and a credit note is issued. This is particularly relevant as the car's price includes the cost of these spare parts, sales tax is paid on the car, and sales tax is paid on the dealer's inventory of spare parts. The court noted that if there is no consideration for the replaced parts, the levy of sales tax is questionable. While Mohd. Ekram Khan & Sons referred to credit notes as consideration, the court considered it a moot point whether credit notes constitute a mode of payment. The court expressed reservations about the observations and legal propositions in Mohd. Ekram Khan & Sons and deemed it appropriate for a larger bench to consider the matter. No specific operative directions were issued, other than referring the case for constitution of a larger bench.

The Supreme Court found the High Court's reasoning that a single bogus donation doesn't prove lack of genuineness to be erroneous. The matter requires fresh consideration on merits.

The Supreme Court held that MFDs with a utility life are not strictly 'waste' and can be redeemed upon payment of market value and applicable fines. The court found no error in the High Court's decision to allow redemption.

The Supreme Court held that 'gypsum board' falls within the amended Entry 56 of Schedule IV of the RVAT, taxable at 4%. The Court reasoned that the legislative amendment to include 'Gypsum in all its forms' signified an expansion of the original entry. Examining the manufacturing process, the Court found that while gypsum board involves dehydration and mixing with additives and paper, the fundamental character of gypsum remains. The Court drew parallels with previous Supreme Court decisions like Sakarwala Brothers and Trutuf Safety Glass Industries, where 'in all forms' was interpreted broadly to include variations of the original substance. The Court also noted that a subsequent amendment in 2014 created a separate entry for 'gypsum board', which, if it were intended to be excluded from 'gypsum in all its forms' earlier, would have rendered the 2014 amendment unnecessary. The Court dismissed the appeals, allowing the parties to bear their own costs.