It's academic, but here are some points.
Firstly you don't pay the VAT change on a replacement, it would be a zero tansaction as it is to replace faulty items.
As to inherent fault, there are two definitions, one is design the other is component manufacturing. This would be a inherent manufacturing fault at the time the component was made, i.e it was inherently faulty when manufactured or delivered. This can be isolated to a single component out of thousands. All it means is the fault was there at manufacturing not a result of use or wear.
Easy to reject it, it's almost text book, but you would be waiting a long time for replacement unless there is one in Fiat stock. I rejected a new Punto after 3 months and it took a long time for the new one to arrive, but the garage lent us a car for the duration.
As for whoever mentioned ISO9001, this is a quality audit system. It has nothing to do with product component quality. You could write a process which says all gearboxes fail after 34 miles and it will pass ISO if it's in the documentation. Of course this isn't the way it is written, but you could.