Auto dealers may challenge SC order

Writ against tax on spares replaced during warranty

Automobile dealers may file a review petition challenging the recent Supreme Court judgment allowing states to collect sales tax on automobile parts replaced during warranty period.

The order passed by the apex court in July this year effectively considers replacement of defective parts during the warranty period as sales and therefore liable for sales tax.

Federation of Automobile Dealers Association (FADA) secretary general, Gulshan Ahuja, said: "Replacement of defective parts during the warranty period is not a cash transaction and hence cannot attract sales tax. FADA is planning to seek further legal opinion in this and try to re-present the case properly."

Since the issue involves the manufacturers of automobiles too, Ahuja said FADA will work along with Society of Indian Automobile Manufacturers (SIAM). It is learnt that SIAM has already sought legal opinion on this and is likely to discuss the above issue in its next executive council meeting slated for December 17.

Sources within the industry, who did not wish to be named, said: "It may not be possible to challenge the apex court's orders. But when the respective collectorates at the state level make a claim based on this order, the dealers may challenge this in the local courts citing the earlier order that was in their favour."

Some of the automobile manufacturers who were contacted did not wish to comment on the subject said it will be too premature to do so. "We will have to wait and see the ramification of this development. I do not wish to give any comments on this," said the executive director of a leading two wheeler manufacturer.

However, informed sources said that the Supreme Court order is likely to impact the bigger players in the market on account of the large volumes recorded by them. The smaller players, on the other hand, are expected to be impacted by a lesser margin.

Ahuja said that though the judgment passed by the SC pertained to the automobile industry, it does not stop the sales tax office from making similar claim covering a whole range of industries including the consumer durables industry.