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2018 (7) TMI 145 - KERALA HIGH COURTLiability of KVAT on the proceeds realized from the sale of hypothecated vehicles - hypothecation wherein the original owner is the borrower - Whether on the facts and in the circumstances of the case where (a) the Bank is not the owner of the vehicle at the time of sale and property in the vehicle was with the registered owner and (b) the Borrower executes irrevocable power of attorney to the Bank authorizing the bank to sell the vehicles and other documents necessary under the Motor Vehicles Act for transferring the vehicles and based on these documents the sold vehicles gets transferred from the registered owner to the purchaser; the Appellate Tribunal is right in holding that the petitioner Bank is liable to KVAT on the proceeds realized from the sale of hypothecated vehicles. Held that:- The sale, in the present case, is of a second hand vehicle which is taxable under the KVAT Act at that point of time at the rate of 4%; on the consideration. The fact that the financier had merely facilitated the sale cannot be a cause for absolving itself from the liability to include the consideration received in the turnover of the financier; exigible to tax on sale of goods - the KVAT Act, takes within the definition of dealer, any person involved in transactions where there is a system of payment by installments and definition of sale and turnover includes a sale made by one on behalf of another where the latter is the owner; on which tax is payable as has been specified in the schedules. The Bank is not the owner of the vehicle at the time of sale. But however, after re-possession, sells the vehicles and effects transfer and delivery of the goods (vehicle) to the purchaser after receiving consideration, by effecting such transfer on delivery of the vehicle and handing over the sale letter executed by the registered owner which was received by the Bank as per the specific terms of the contract of finance; the right being recognised by the Motor Vehicles Act too. There is no distinction insofar as a pledge or hypothecation is concerned and sale effected on default of payment, especially in the context of the financier exercising the right to sell the goods, which belongs to another, either under a statute or on the specific terms of the contract, would be effecting sale of goods exigible to tax. Penalty - Held that:- The fact that the amendment was brought in and there was a challenge to it indicates that there was a debatable issue even with respect to the pledge of ornaments. In the present case, the transaction was hypothecation and the possession was with the registered owner who is the loanee. The assessee bonafide claimed a distinction insofar as pledge and hypothecation which however is negatived by this Court - penalty not imposable. Appeal disposed off.
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