The Supreme Court has
dismissed the appeal of Xerox Modicorp Ltd against the judgment of the
Karnataka High Court holding that the materials used in the “full
service maintenance agreement” and the “spares and service maintenance
agreement” were liable for sales tax.
In the first type of agreement, the company took the responsibility for
maintaining the machine, including replacement of parts during service.
In the second agreement, the company supplied materials like toners and
developers and charged for it. The revenue authorities contended that
the spare parts and goods supplied under the service agreements
amounted to sale. The company argued that the transfer of goods was an
inseverable part of the agreement.
The Supreme Court held that there was transfer of property in tangible goods and duty was payable.