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2021 (10) TMI 313 - HC - VAT and Sales TaxScope of dealer as per section 2(15) of the TNVAT Act, 2006 - NBFC - sale of repossessed vehicle on behalf of the defaulter by the Petitioner/Appellant - liability of taxes under VAT Act on the sale of the Hypothecated Motor Vehicles - Petitioner/Appellant is a dealer even though the contractual agreements specifically states the Petitioner/Appellant is not the owner of the Vehicle or not? - Resale of Plant and Machinery, Furniture and Fittings and Fixed Asset by the Petitioner/Appellant which is used for the purpose of own business would fall within the meaning of sale and subject to VAT or not - confirmation of additions made to sale of Plant Machinery, Fixture, Furniture, air conditioner and gold/gold jewellery as part of business activity of the assessee? HELD THAT - It is not in dispute that the identical questions of law were considered by the Division Bench of this Court, in which one of us (TSSJ) was a party, in the case of M/S. CHOLAMANDALAM INVESTMENT FINANCE COMPANY LTD. VERSUS THE STATE OF TAMIL NADU (REPRESENTED BY THE ASSISTANT COMMISSIONER (CT) , CHENNAI 2019 (9) TMI 1597 - MADRAS HIGH COURT , wherein, the identical contentions were raised by the said petitioner, who was also a non-banking finance company - It was held in the case that The question, which was framed for consideration by the Division Bench was whether the bank, which holds the hypothecation of vehicles in their favour would be a 'dealer' within the definition under Section 2(15) of the TNVAT Act, merely because, the bank seized and repossessed the hypothecated vehicle and brings it to sale. The Tax Case Revisions are dismissed.
Issues Involved:
1. Definition of "dealer" under Section 2(15) of the TNVAT Act, 2006. 2. Liability to pay VAT on the sale of repossessed vehicles. 3. Ownership and agency in the context of hypothecated vehicles. 4. VAT liability on the resale of business assets. 5. Confirmation of additions made to the sale of various business assets. Issue-wise Detailed Analysis: 1. Definition of "dealer" under Section 2(15) of the TNVAT Act, 2006: The petitioner questioned whether they fall within the ambit of "dealer" as defined under Section 2(15) of the TNVAT Act, 2006. The court referred to the previous decision in the case of HDFC Bank Ltd., which held that financial institutions, including banks and NBFCs, that repossess and sell hypothecated vehicles, qualify as dealers under the Act. The court emphasized that the definition of "dealer" is exhaustive and includes agents who dispose of goods, even if they do not claim ownership. 2. Liability to pay VAT on the sale of repossessed vehicles: The petitioner contended that the sale of repossessed vehicles should not be subject to VAT as they are not the owners of the vehicles. The court referred to the HDFC Bank Ltd. case, which established that such sales are considered compulsory sales for debt realization and fall under the definition of "sale" in the TNVAT Act. The court held that the petitioner, acting independently without the borrower's express consent, is liable for VAT on these sales. 3. Ownership and agency in the context of hypothecated vehicles: The petitioner argued that they are not the owners of the vehicles and act merely as agents of the borrowers. The court noted that the nature of the transactions and the contractual agreements empower the petitioner to repossess and sell the vehicles without the borrower's involvement. The court concluded that the petitioner exercises rights under the contract, making them liable for VAT, even if they are considered agents. 4. VAT liability on the resale of business assets: The petitioner challenged the Tribunal's decision that the resale of plant and machinery, furniture, fittings, and other fixed assets used for business purposes falls within the meaning of "sale" and is subject to VAT. The court upheld the Tribunal's decision, stating that the definition of "sale" under Section 2(33) of the TNVAT Act is broad and includes the disposal of goods used in business, making such transactions liable for VAT. 5. Confirmation of additions made to the sale of various business assets: The petitioner disputed the additions made to the sale of plant machinery, fixtures, furniture, air conditioners, and gold/gold jewelry as part of their business activity. The court affirmed the Tribunal's decision, reiterating that the petitioner is liable for VAT on these sales as they fall within the scope of "sale" under the TNVAT Act. Conclusion: The court dismissed the Tax Case Revisions, holding that the petitioner is liable to pay VAT on the sale of repossessed vehicles and the resale of business assets. The substantial questions of law framed for consideration were decided against the petitioner, and no costs were awarded.
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