2017 (8) TMI 457 - HC - VAT and Sales Tax

Hire Purchase Agreement - sales tax payable on machineries - Held that - the issue as to whether sales tax is 4% or 8% or as to whether the sale tax component is included in the 60 EMIs, boils down to arithmetics and mere reconciliation of accounts and numbers - The writ petitioner shall furnish a bank guarantee from a reputed bank favouring TIIC (making TIIC the beneficiary) for a sum of ₹ 17,00,000/-, within a fortnight from the date of receipt of a copy of this order - petition disposed off.

Summary

Issues:
1. Interpretation of a Hire Purchase Agreement regarding the payment of sales tax on machinery.
2. Dispute over the sales tax component already included in Equated Monthly Instalments (EMIs).
3. Resolution of the sales tax amount paid by the respondent to the sales tax department.
4. Decision on the release of title documents held as collateral security by the respondent.

Analysis:

1. The primary issue in this case revolves around the interpretation of a Hire Purchase Agreement (HP agreement) concerning the payment of sales tax on machinery. The petitioner seeks the return of title documents deposited as collateral security for a loan availed under the HP agreement for the purchase of specific machinery.

2. A crucial contention arises regarding the sales tax component, with the respondent arguing that the sales tax on the machinery must be paid separately as per the HP agreement. However, the petitioner asserts that the sales tax has already been incorporated into the EMIs, pointing to the general conditions of the loan agreement.

3. The respondent has paid a sum towards sales tax to the sales tax department, which has not been reimbursed by the petitioner. This non-payment has led to the withholding of the collateral security properties, namely two industrial sheds, by the respondent.

4. To resolve the impasse, the court orders the petitioner to provide a bank guarantee to the respondent within a specified timeframe. Upon compliance, the respondent is directed to release the title deeds of the collateral security properties. Additionally, the petitioner is instructed to raise specific concerns regarding the sales tax issue with the respondent for further reconciliation.

5. The court leaves the determination of the sales tax percentage and inclusion in EMIs open for future deliberation, emphasizing that the current order does not prejudice any future legal actions by the petitioner in case of an adverse decision by the respondent regarding the sales tax payable on the machinery.

6. Ultimately, the writ petition is disposed of based on the terms outlined in the court order, providing a structured framework for addressing the sales tax dispute and the release of collateral security documents, without imposing any costs on either party.