THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN TAX REVISION CASE Nos.275 and 276 of 2010 Dated:11.02.2011 Between: M/s.Jasper Industries (P) Ltd. …Petitioner and The State of Andhra Pradesh, Represented by the SR before STAT, 2nd Floor, Commercial Taxes Complex, Opp.Chenetha Bhavan, Nampally, Hyderabad – 500 001. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON'BLE SRI JUSTICE RAMESH RANGANATHAN TAX REVISION CASE Nos.275 and 276 of 2010 COMMON ORDER: (per Hon’ble Sri Justice Ramesh Ranganathan) Since the questions which arise for consideration in both these tax revision cases are identical, they are being disposed of by this common order. It would suffice for disposal of both the tax revision cases if the facts in Tax Revision Case No.275 of 2010 are noted. Tax Revision Case No.275 of 2010 under Section 34(1) of the Andhra Pradesh Value Added Tax Act, 2005 (the Act) is filed by the petitioner-dealer against the order of the Sales Tax Appellate Tribunal, Hyderabad, (hereafter called, the STAT), in T.A.No.91 of 2010 dated 30.07.2010. The facts, in brief, are that the petitioner is a registered dealer under the Act and an assessee on the rolls of the Commercial Tax Officer, Khairtabad Circle, Hyderabad. They carry on business as a dealer in motor vehicles, and sell vehicles manufactured by M/s.Tata Motors Limited (hereafter called, the manufacturer). The manufacturer undertakes warranty in respect of the vehicles held by them through different dealers. The petitioner purchases spare parts from the manufacturer; replaces the defective parts of the vehicles sold by it from out of the parts purchased from the manufacturer; and returns the defective parts to the manufacturer. It is the case of the petitioner that they are not acting as agents of the manufacturer, and the goods returned by them to the manufacturer are purchase returns on which tax cannot be levied treating it as a transaction of sale. The assessing authority, (Commercial Tax Officer, Khairtabad Circle, Hyderabad), by order dated 18.03.2009 for the assessment period February 2008 to April 2008, levied tax in a sum of Rs.1,33,208/- and interest thereon of Rs.3,019/- i.e., for a total amount of Rs.1,36,227/-. Aggrieved thereby, the petitioner preferred an appeal to the Appellate Deputy Commissioner (CT), Punjagutta, who relied on the judgment of the Supreme Court in Mohd.Ekram Khan and Sons v Commissioner of Trade Tax, U.P. Lucknow[1] to hold that transactions, relating to supply of spares during the warranty period, were exigible to tax as sales. The Appellate Deputy Commissioner held that G.O.Ms.No.144, dated 11.02.2008, whereby the judgment of the Supreme Court in Mohd.Ekram Khan1 was held applicable only from the date of the judgment i.e., 21.07.2004, was held to be void and unenforceable by a Division Bench of this Court in M/s.Vijaya Vasava Motors, Eluru v Assistant Commissioner (LTU), Eluru[2] and, as such, the judgment of the Supreme Court in Mohd.Ekram Khan1 would squarely apply to the facts of the case. The Appellate Deputy Commissioner also rejected the contention of the petitioner that the defective parts sent back to the manufacturer amounted to purchase returns in his hands, and as sales returns in the hands of the manufacturer. The appeal preferred by the petitioner was dismissed. Aggrieved thereby, the petitioner carried the matter in further appeal to the STAT which, by order dated 30.07.2010, dismissed the appeal. The STAT held that whether the disputed tax period was anterior or posterior to the judgment of the Supreme Court in Mohd.Ekram Khan1, the said judgment was applicable; similar view had been taken by the STAT consistently in various other cases involving motor vehicle dealers who supplied spares during the warranty period; there were no merits in the contentions of the petitioner; and there was no reason to interfere with the order of the Appellate Deputy Commissioner. Before this Court, Dr.S.R.R.Viswanath, learned Counsel for the petitioner would challenge the order of the STAT on the following grounds. (1) No rule, similar to Rule 16(3)(d) of the Andhra Pradesh Value Added Tax Rules, 2005 (the Rules), arose for consideration in Mohd.Ekram Khan1; (2) The Rajasthan High Court, in Commercial Tax Officer (Ae), Jodhpur v Marudhara Motors, Jodhpur[3], held that the judgment in Mohd.Ekram Khan1 had no application where the relationship between the manufacturer and the dealer was as a principal to principal, and not as a principal and an agent; (3) In the case on hand, the relationship between the petitioner and M/s.Tata Motors Limited was that of principal to principal, and the petitioner was not an agent of the manufacturer; (4) Even otherwise, the transaction should have been treated as an interstate sale, and no tax could have been levied thereupon under the provisions of the Act. I n Mohd.Ekram Khan1 the question which arose for consideration before the Supreme Court was 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 under the provisions of the Uttar Pradesh Trade Tax Act, 1948. The Supreme Court noted that the taxing authorities and the High Court had observed that the manufacturer had made payment for a certain price on the parts 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; and the assessee-dealer had received payment of the price for the parts supplied to the customers. The Supreme Court held that, if it had supplied parts to the customers through the assessee, the position may have been different; the manufacturer was obligated to make the replacement; if it did not possess the parts to meet the contractual obligations, it would have purchased the parts from any seller of the parts and would have paid sales tax; the assessee had supplied goods for which it received the consideration by way of credit notes/or other mode of payment; and, that being the position, the transaction was subject to levy of tax as had been rightly held by the High Court. The Supreme Court further held that, in the absence of any plea before the tax authorities regarding the nature of the sale as to whether it was an interstate sale or not, it was unnecessary for the Court to go into the said question. The law laid down by the Supreme Court in Mohd.Ekram Khan1 is that in case the manufacturer is obligated to make the replacement of spare parts during the warranty period, and the assessee-dealer has supplied such spare parts to the customers for which it had received consideration by way of credit notes for supply of goods by the dealer to the customers, it would amount to “sale”. It matters little, therefore, whether the relationship between the petitioner and the manufacturer was as a principal to principal, and not as principal to an agent. Rule 16(3)(b) of the Rules relates to return of goods to the dealer within a period of twelve months from the date of sale, and has no bearing on supply of spare parts during the warranty period. It is not open to the High Court to distinguish the judgment of a Supreme Court on a microscopic examination of the different facts situation as the law laid down by the Supreme Court is binding on all the Courts under Article 141 of the Constitution of India. Certainty of Law, and consistency of ruling, are fundamental to the rule of law and form the core of judicial discipline. The law declared by the Supreme Court binds all Courts in India (Rajeswar Prasad Misra Vs. State of W.B[4]). On the law having been declared by the Supreme Court, it is the duty of the High Court, whatever be its view, to act in accordance with Article 141 of the Constitution of India, and to apply the law laid down by the Supreme Court. Judicial discipline to abide by the declaration of law, of the Supreme Court, cannot be forsaken by any Court, be it even the highest Court in a State, oblivious of Article 141 of the Constitution of India. (Chandra Prakash v. State of U.P.[5]; State of Orissa Vs. Dhaniram Luhar[6]). The decisions of the Supreme Court are of significance not merely because they constitute an adjudication on the rights of the parties and resolve the disputes between them, but also because in doing so they embody a declaration of law operating as a binding principle in future cases. The doctrine of binding precedent is of utmost importance in the administration of our judicial system. It promotes certainty and consistency in judicial decisions. (Chandra Prakash5). I n Director of Settlements, A.P. Vs. M.R. Apparao[7] the Supreme Court held: “…..Article 141 of the Constitution unequivocally indicates that the law declared by the Supreme Court shall be binding on all courts within the territory of India. The aforesaid Article empowers the Supreme Court to declare the law. It is, therefore, an essential function of the Court to interpret a legislation. The statements of the Court on matters other than law like facts may have no binding force as the facts of two cases may not be similar. But what is binding is the ratio of the decision and not any finding of facts. It is the principle found out upon a reading of a judgment as a whole, in the light of the questions before the Court that forms the ratio and not any particular word or sentence. To determine whether a decision has “declared law” it cannot be said to be a law when a point is disposed of on concession and what is binding is the principle underlying a decision. A judgment of the Court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered. An “obiter dictum” as distinguished from a ratio decidendi is an observation by the Court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced, but even though an obiter may not have a binding effect as a precedent, but it cannot be denied that it is of considerable weight. The law which will be binding under Article 141 would, therefore, extend to all observations of points raised and decided by the Court in a given case. So far as constitutional matters are concerned, it is a practice of the Court not to make any pronouncement on points not directly raised for its decision. The decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to the notice of the Court ( s e e Ballabhadas Mathurdas Lakhani v. Municipal Committee, Malkapur: AIR 1970 SC 1002 and AIR 1973 SC 794AIR 1973 SC 794). When the Supreme Court decides a principle it would be the duty of the High Court or a subordinate court to follow the decision of the Supreme Court. A judgment of the High Court which refuses to follow the decision and directions of the Supreme Court or seeks to revive a decision of the High Court which had been set aside by the Supreme Court is a nullity. (See Narinder Singh v. Surjit Singh: (1984)2 SCC 402) and Kausalya Devi Bogra v. Land Acquisition Officer: (1984) 2 SCC 324). (emphasis supplied) We are bound by the judgment of the Supreme Court in Mohd.Ekram Khan1, and are not persuaded to take a different view relying on the judgment of the learned single Judge of the Rajasthan High Court in Marudhara Motors3. The contention that the transaction in question should have been treated as an inter-state sale, and no tax should have been levied thereupon under the provisions of the Act, has been raised across the bar by the learned counsel, and does not even find mention in the questions of law raised, or in the grounds of appeal filed in the Tax Revision Cases. We are therefore, not inclined to entertain, let alone examine, such a contention. No question of law arises for consideration in these revisions. We see no reason, therefore, to interfere with the orders of the Sales Tax Appellate Tribunal. The Tax Revision Cases are, according, dismissed at the stage of admission. _______________ (V.V.S.RAO, J) _____________________________ (RAMESH RANGANATHAN, J) .02.2011 vs [1] (2004) 6 SCC 183 [2] 47 APSTJ 71 [3] 2009 INDLAW RAJ 101 [4] AIR 1965 SC 1887 [5] (2002) 4 SCC 234 [6] (2004(5) SCC 568 [7] (2002)4 SCC 638