LAHORE: Spare parts of vehicles changed under warranty are not liable to taxation according to the latest verdict of Lahore High Court.
A private company was issued a show-cause notice by the Additional Collector Customs in June 2006 regarding allegations of tax evasion for the fiscal year 2004-2005.
The petitioner plead the Supreme Court that the show-cause notice was issued for non-payment of sales tax on the parts replaced under warranty, which is unfair. The petitioner responded to the notice, but the concerned officer held him liable of the sales tax.
The petitioner argued that the Collector Customs withdrawn the appeal in November 2007, and the tribunal had also dismissed the appeal in February 2010. Sales tax cannot be levied on warranty claims because warranty money is already included in the vehicle’s value.
The two-member bench of the Lahore High Court made the legal observation upon the appeal of a private company and while accepting their plea decreed that replacement of parts under warranty should not be subjected to tax.
