G.L. Oza, Ag. C.J.
1. This is a reference made by the President of the Board of Revenue under Section 44(1) of the M.P. General Sales Tax Act for answering the question :
Whether, under the facts and circumstances of the case, the Board of Revenue was justified in holding that the amounts reimbursed by the manufacturing company on account of replacement of parts during the warranty period and against pre-delivery charges incurred during the warranty period for which no consideration was received from customers are transactions of sale under the provisions of the M.P. General Sales Tax Act, 1958 ?
2. The facts stated in the reference are that the assessee, M/s. Prem Motors, deals in cars, tractors, motor-cycles and their spare parts. The assessee was assessed to tax for a period 1st April, 1978, to 31st March, 1979. The disputed question as has been stated by the learned President is as to whether the replacement made free of cost during the warranty period of the customers was liable to tax or otherwise. It is stated that the assessee in a number of cases received spare parts from the principal, i.e., the manufacturer, in lieu of the spare parts supplied by him to the customers during the warranty period and in some cases whether the manufacturer probably was not able to supply the spare parts reimbursed the cost of the material supplied free of cost to the customers.
3. There is also a dispute about pre-delivery expenditure incurred on account of damage to the parts of vehicles during transit to Gwalior which has been reimbursed by the principals, i.e., the manufacturers.
This reimbursement of the costs of spare parts or supply of spare parts by the manufacturer in lieu of their supply by the assessee to the customers free during the warranty period and reimbursement of pre-delivery charges were assessed to tax by the assessing authorities. The assessee's contention, according to the learned President of the Board, is that these things will not fall within the sale price which the assessee received from the customers and therefore tax on these items assessed is not in accordance with law. It appears the order of assessment was affirmed by the first appellate authority and the second appeal also was rejected and therefore at the instance of the assessee the learned President of the Board has made this reference to answer the question referred to above.
4. Learned counsel appearing for the assessee contended that the assessee is a dealer of automobiles and he sells to the customers cars, motor-cycles and tractors. It was contended that the assessee had to replace the spare parts during the warranty period and these spare parts which were replaced to the customers during the warranty period are replaced by the dealer and in case they are replaced, their cost is reimbursed by the manufacturer. It was contended that this warranty was considered by their Lordships of the Supreme Court in the decision in Premier Automobiles v. Union of India AIR 1972 SC 1690 where it has clearly been held that this is included in the sale price of the vehicle. Learned counsel, therefore, contended that tax has already been charged on the sale price of the vehicle and therefore when the principal, i.e., the manufacturer, replaces the part, or reimburses its cost, it could not be contended that there is a sale of these spare parts and therefore the assessee could not be taxed on them. Learned counsel referring to the definition of 'sale' contended that this does not amount to sale but it is just the replacement of the spare parts from the manufacturer to the customer and as the dealer is an intermediary he only does it on behalf of the manufacturer and is reimbursed by the manufacturer. Learned counsel contended that a similar question was considered by a Division Bench of this Court sitting at Indore in Commissioner of Sales Tax v. Rita Salts Coporation  17 VKN 299 and it was held that the assessee could not be held liable.
5. As regards the pre-delivery. charges, it was also contended that these vehicles when they are brought from the manufacturer to the dealer at Gwalior some cost is incurred and during transit some damage is done, the dealer sets it right on behalf of the manufacturer and these charges are shown as pre-delivery charges which the manufacturer reimburses to the assessee. This, therefore, also is neither sale nor sale price as in fact this assessee, the dealer, sells the vehicles at Gwalior in proper and salable condition and whatever damage or loss is occurred in transit is made good and that is made good at the cost of the manufacturer and therefore if this is reimbursed by the manufacturer to the assessee, it could not be said to be any transaction of sale or sale price.
6. Learned counsel for the revenue, on the other hand, contended that when the spare parts are replaced by the assessee to the customer free of charge being the condition of the warranty, he recovers the price from the manufacturer and in substance it is the sale of the spare parts to the manufacturer and therefore it is liable to tax and he therefore contended that the taxing authorities were right in assessing the dealer on the price of these spare parts either when the spare part is replaced or when the cost is reimbursed. As regards the pre-delivery charges it was contended that in these charges also the cost of parts replaced and repairs effected are charged from the manufacturer and in substance this amount also amounts to sale of these things to the manufacturer and are therefore liable to tax.
7. The contention advanced by the learned counsel for the revenue, it appears, suffers from a basic fallacy. When a dealer sells automobile vehicle, he sells it with all parts in a salable condition. The warranty is the warranty from the manufacturer and therefore if during the warranty period any part is found to be defective and is to be replaced, the responsibility of replacement is that of the manufacturer. For the convenience of the customer there is an arrangement between the manufacturer and the dealer so that the customer may get replacement done from the dealer which in due course is again made good by the manufacturer. Under these circumstances, when the dealer-assessee replaces parts to the customers and either gets those parts from the manufacturer or gets it reimbursed, it is neither sale of these parts by the dealer to the customer or to the manufacturer. What he does only is to pass on the parts from the manufacturer to the customer but in order to avoid delay and inconvenience of the customer he replaces the parts first and gets them from the manufacturer later and thus in our opinion it does not fall within the ambit of the definition of 'sale' as has been provided in Section 2(n) of the M.P. General Sales Tax Act:
'Sale' with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or for other valuable consideration and includes a transfer of property in goods involved in the supply or distribution of goods by a society or club or any association to its members, but does not include a mortgage, hypothecation, charge or pledge, and the word 'purchase' shall be construed accordingly.
8. The pre-delivery charges are also practically of the same type. The dealer when delivers a vehicle to a customer, he is supposed to deliver the vehicle in a salable condition and he delivers it on behalf of the manufacturer. The vehicle from the manufacturer to the dealer sometimes suffers some damage during transit and in fact it is the responsibility of the manufacturer to make it good so that the customer receives the vehicle in perfect order. The dealer-assessee does it on behalf of the manufacturer and whatever cost is incurred he recovers it from the manufacturer and the manufacturer reimburses it. This may involve sometimes charge of parts and also labour charges but by no stretch of imagination it could be contended that these things are sold by the dealer-assessee to the manufacturer. In fact what the dealer-assessee does it on behalf of the manufacturer for the convenience of the customer and gets it reimbursed from the manufacturer. In this view of the matter, therefore, this also does not fall within the ambit of the definition of 'sale'.
9. A Division Bench in Commissioner of Sales Tax v. Rita Sales Corporation  17 VKN 299 although may not have considered this question but has taken more or less the same view.
10. In the light of the discussion above, therefore, our answer to the question is in the negative and these transactions when the assessee gets reimbursement in respect of parts supplied during the warranty period or gets parts from the manufacturer supplied during the warranty period or gets parts from the manufacturer supplied during the period of warranty to the customers and the pre-delivery charges, these transactions do not fall within the ambit of 'sale' under the provisions of the M.P. General Sales Tax Act and therefore not liable to tax. In the circumstances of the case, parties are directed to bear their own costs.