The Supreme Court has asked the Rajasthan High Court to examine afresh whether the optional service charge recovered in advance from consumers on sale of refrigerators will be part of sale price, thus making consumer goods manufacturers liable to pay service tax in the state. The state government had asked the consumer goods makers including Whirlpool India, Godrej GE Aplliances, Godrej Boyce Manufacturing Co and others to pay sale tax at the rate of 12%, the companies had opposed the same on the grounds that the optional service charge was recovered for the extended warranty of additional four years after expiry of guarantee period and thus, the levy was not attracted on this amount.
Allowing the batch of appeals filed by the commercial taxes officer, a bench headed by Chief Justice SH Kapadia flayed the high court for failing to determine the issue without examining various important issues. ?We regret to say that in number of cases the high court has been passing orders mechanically without giving any reasons even in cases in which important questions of law arise for determination which also requires examination of facts,? it said. Justice Kapadia in its order stated that the high court was required to examine the contract, the nature of transaction between the parties and also the question as to whether the matter stood covered by its earlier decisions.
?None of these aspects have been considered by the high court in these appeals… the impugned orders are set aside and matters are remitted to the high court for de novo consideration in accordance with law.? The department in its appeals had stated that the dealers made it compulsory for the ultimate consumers to pay the option charges and they had no choice to refuse further payment of service charges.
? No option was available to the consumers in as much as option remained only with the wholeseller and the sale being under single point sale system having taken place at the first point from the manufacturer to the wholeseller, no option was left with the ultimate consumer… the amount charged by the assessees as optional service charge is taxable under the Rajasthan Sales Tax Act,? the petition stated.