2017 (7) TMI 727 - HC - Service Tax

Sale of used cars - motor vehicle dealer is dealing in used cars - Is its transaction a sale in the conventional sense attracting the sales tax, or a service--as an intermediary, agent, or broker--to the true owner attracting service tax? - Held that - the sale and the registration of the sale are two distinct acts. The sale of a motor vehicle, movable property, takes place under Section 19 of the Sale of Goods of Act. But if the transferee intends to get statutory protection as the owner of the transferred vehicle, he alone must invoke Section 31 of the Act to have the vehicle transferred on to this name. Movable property--chattel--stands on a different footing. Possessing it amounts to owning it there is an element of exclusivity. But owning it does not amount to using it. Of a motor vehicle, the sale signifies its possession; the registration, its use. The Legislation has advisedly avoided registration to be a precondition for the sale of movable property. A person can buy and possess a motor vehicle without registration so long as he does not intend to use. If he intends to use it, the registration assumes significance. As we can see, the Motor Vehicles Act regulates the use of a motor vehicle, and the sale, predates the use. Not everyone who owns a motor vehicle uses it, possessing vintage or antique cars--wealth in itself--being a case in point - the sale of a motor vehicle is governed by the Sale of Good Act, and its use by the Motor Vehicles Act. It is now well settled that strong suspicion, strange coincidences and grave doubts cannot take the place of legal proof - the Commissioner observes that the dealer takes from the used-vehicle owner a sale letter/sale deed. Incorrect. What the dealer obtains are Forms Nos.29 & 39, signed in blank, though. And neither of them is a sale letter or sale deed, nor does the statute compel the dealer, to be the owner, to obtain one. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Whether the change of name in the registration certificate under the Motor Vehicles Act is mandatory for an effective sale of a motor vehicle.
2. Whether the dealer actually purchases the used vehicle or merely acts as an agent or intermediary to the original owner.

Issue-wise Detailed Analysis:

1. Mandatory Change of Name in Registration Certificate:

The court examined whether the change of name in the registration certificate under the Motor Vehicles Act (MV Act) is mandatory for an effective sale of a motor vehicle. The judgment clarified that the MV Act does not aim to control the sale or transferability of a motor vehicle but regulates its use on the road. The sale of a motor vehicle is governed by the Sale of Goods Act, 1930, and not the MV Act. The MV Act's primary concern is the regulation of motor vehicles' use, not their sale. The judgment cited several precedents, including Vasantha Viswanthan v. V.K. Elayalwar, where the Supreme Court held that the transfer of a vehicle is governed by the Sale of Goods Act, and the mutation of the name in the certificate of registration is unnecessary for transferring ownership.

2. Dealer's Role: Purchaser or Agent:

The court analyzed whether the dealer purchases the used vehicle or acts as an agent for the original owner. The judgment detailed the dealer's business operations, including taking delivery of the used vehicle, refurbishing it, and selling it to a new buyer. The dealer issues a delivery receipt and undertakes the responsibility of the vehicle until it is sold. The court noted that the dealer bears the market risk and sells the vehicle at its own option, reflecting the transaction in its account books as a sale and paying sales tax. The judgment emphasized that the dealer does not act as a mercantile agent but as a purchaser who refurbishes and sells the vehicle for a margin. The dealer's actions do not contravene the provisions of the MV Act or the Finance Act, 1994.

Conclusion:

The court concluded that the sale of a motor vehicle is governed by the Sale of Goods Act, 1930, and not the MV Act. The dealer's transactions are sales and not services rendered as an intermediary or agent. The appeals were dismissed, and the orders of the CESTAT, Bangalore, were upheld.