1990 (7) TMI 347 - HC - VAT and Sales Tax

Summary

Issues:
Determining whether transactions were sales of motor vehicles or financing transactions.

Analysis:
The case involved references arising from a common order passed by the Tribunal regarding transactions between a dealer and customers for motor vehicles. The main question referred to the Court was whether the transactions were sales of motor vehicles or merely financing transactions. The dealer facilitated finance for customers through hire-purchase agreements, where the dealer was described as the owner of the vehicle until full repayment, and the customer had the option to purchase. The Tribunal, based on a previous case, held that the transactions did not amount to sales. However, the Court analyzed the substance of the transactions and concluded that the property in the vehicle passed from the dealer to the customer upon exercising the purchase option, constituting a sale.

The Court emphasized that the method used to obtain finance determines the true nature of the transaction, and the terms of the agreement are crucial in determining the substance. The Court referred to a Supreme Court decision where a similar transaction was held to be a sale. Differences highlighted between cases were deemed inconsequential. Another case cited by the dealer was distinguished based on the different nature of the transactions involved. The Court found no conflict between the previous Supreme Court decisions, with the earlier decision being binding due to the number of judges involved.

Additionally, a case cited by the dealer to support their position was distinguished based on the dissimilarities in the facts and terms of the hire-purchase agreement. The Court ultimately answered the question in the negative, indicating that the transactions were indeed sales of motor vehicles. No costs were awarded, and the reference was answered in the negative, affirming the sales tax implications of the transactions.