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DICK says in Shakespeare's King Henry VI, "The first thing we do, let's kill all the lawyers." Well, let's banish that as an impractical suggestion, and choose instead the Law Lane to check out what's new on automobiles in courtrooms.

First things first. Bajaj Tempo Ltd took on the Excise Department in a dispute that reached the New Delhi tribunal recently. And the fight was over the first-aid box. Bajaj said it was an accessory eligible for Modvat credit, but the taxman disagreed. The company pointed out that the first-aid box was compulsory as per the Motor Vehicle Rules, and that it therefore merited treatment as an accessory.

The Department, for its part, pointed out an earlier decision by the tribunal in the M&B Footwear P Ltd case, where it was held that plastic carry bags supplied for carrying footwear could not be treated as inputs. Thus, according to the taxman, the first-aid box wasn't an eligible input. The tribunal then had to drive home the point that a first-aid box is `a compulsorily prescribed item and its value forms part of the assessable value'.

How strange that the taxman should have had second thoughts on first-aid! Perhaps they put their reliance in a quote of Paul Dudley White — that a vigorous five-mile walk will do more good for an unhappy but otherwise healthy adult than all the medicine and psychology in the world. However, when roads become too unsafe for pedestrians, one may need to carry first-aid kits when going on walks too.

Service after sale

VOLVO, you know, makes impressive vehicles. But the taxman was unimpressed by the company's omission of cost of the service agreement in arriving at the vehicle value, and so demanded a duty of Rs 7.5 crore. Volvo said, "No way." And so the dispute landed in the New Delhi tribunal.

Excise officials argued that Volvo's service agreements were "by reason of or in connection with" the sale of the motor vehicles. The Department's counsel contended that `servicing' was an integral part of the sale. He drew specific reference to a condition that in order for the company's warranty to apply, the vehicle owner "must maintain the truck in accordance with Volvo's Preventive Maintenance Programme and continually record all the service occasions".

But the company said that these agreements were for the maintenance of the vehicles, after their sales and that they had nothing to do with the sale as such. Volvo also pointed out that the service agreement was optional and that 35 per cent of buyers had not opted for it and also that a buyer could enter into a service agreement at any time subsequent to the purchase.

What did the tribunal decide? It said that the service agreement and the cost recovered for it were not by reason of sale, because there was no proximate connection between the two transactions. "The linking of proper maintenance with warranty also is no ground to hold that there is proximity between sale and servicing. Such linkage is to be found even under insurance," observed the tribunal.

On a different plane, here's a thought about maintenance from Virginia Satir: "We need 4 hugs a day for survival. We need 8 hugs a day for maintenance. We need 12 hugs a day for growth." Wonder if one may like to hug a taxman. Talking of safe driving, it is said accidents can be reduced if everybody got a hug before they take the wheel.

LawLane@TheHindu.co.in

D. Murali

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