T. V. R. TATACHARI, C. J.

( 1 ) THE Lt. Governor, Delhi, has referred the following two questions to this Court under Section 21 of the Bengal Finance (Sales Tax) Act, 1941, as extended to the Union Territory of Delhi (hereinafter referred to as the sales Tax Act ) :-

" (I) Whether, having regard to the facts and circumstances of the case, the replacement of the parts during the continuance of the warranty entered into by the manufacturer and/or by its authorised dealer with the purchaser would constitute a "sale" within the meaning of Section 2 (g) of the Bengal Finance (Sales Tax) Act, 1941 as in force in Delhi which is liable to be taxed under the provision of the Act ?

(II) Whether on the facts and in view of the circumstances of this case, if the supply of parts transferred to the purchaser of vehicles in replacement in compliance with the stipulations of the warranty is not "sale" within ths meaning of clause 2 (g) of the Act, the purchase price of the parts purchased on the strength of certificate of registration free of cost or purchased at the concessional rate of tax under the Central Sales Tax Act, 1956, on furnish- Ing c form, is liable to be added to the taxable turnover of the purchasing dealer under the provisions of the second proviso to clause (ii) of sub-section (2) of Section 5, of the Bengal Finance (Sales Tax) Act 1941, as in force in Delhi ?"

THE respondent herein, M/s. Prem Nath Motors (P) Ltd. (hereinafter referred to as the dealer ), is registered as a dealer under the Sales Tax Act. It carries on the business of sale of motor cars, their spare parts and their accessories For the period of assessment 1964-65, the dealer was assessed to sales tax by an order under Section 11 (1) of the Sales tax Act, dated 30th August, 1968. During the afore- said period of assessment, the dealer purchased spare parts of motor vehicles locally on the strength of the registration certificate free of sales tax under the Sales Tax Act. It also purchased spare parts of motor vehicles at concessional rate of tax furnishing Form c prescribed under Section 8 of the Central Sales Tax Act, 1956, to the selling dealers in other States in the course of Inler-State trade of commerce. The dealer transferred the said spare parts to its Service Department, where they were used for replacement purposes in the motor-cars sold under a "warranty".

( 2 ) IN the period of assessment in question, the dealer included in the "gross turnover" the value of the parts so utilised, but claimed that the value of such parts which were replaced in the motor cars/ vehicles pursuant to the terms and conditions of "warranty" during its operation should be deducted from his "gross turnover". It was first contended that under the terms of the "warranty", it was obliged to carry out replacements or repairs of defective parts, and that such replacements or repairs did not constitute "sales". But, during the assessment proceedings, it was conceded on behalf of the dealer that such replacements of spare parts constituted "sales" within the meaning of the Sales-tax Act, as the goods so utilised were purchased for purposes of re-sale either locally in Delhi free of sales tax on the strength of the local registration certificate or imported from outside Delhi in the course of Inter-State trade of commerce at concessional rate of the tax after furnishing Form c prescribed under Section 8 of the Central Sales Tax Act, 1956. The assessing authority did not, therefore, allow the deductions claimed.

( 3 ) AGAINST the said order of the assessing authority, the dealer filed an appeal under Section 20 (1) of the Sales Tax Act. It was contended again in the appeal that the replacements or repairs did not constitute "sales". By its order, dated 6th December, 1969, the Appellate Authority held that the replacements were in the nature of "sales" as admitted by the dealer, and, therefore, such replacements constituted "sales" taxable under the Act. In that view the A App

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