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TMI Blog2021 (12) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... er VAT Act on the sale of the Hypothecated Motor Vehicles? (3) Whether, on the facts and in the circumstances of the case, the Hon'ble Appellate Tribunal was right in law in stating that the Petitioner/Appellant is a dealer even though the contractual agreements specifically states the Petitioner/Appellant as not the owner of the Vehicle? (4) Whether, on the facts and in the circumstances of the case, the Hon'ble Appellate Tribunal was right in law in stating that 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 as per the TNVAT ACT, 2006? (5) Whether on the facts and in the circumstances of the case the Hon'ble Appellate Tribunal was right in law in not treating the sale of Plant & Machinery, fixture, furniture, air conditioners etc., as scrap? 2. When the matters were taken up for consideration, the learned counsel appearing for both sides in unison submitted that the identical questions of law were already decided against the assessee by a Division Bench of this Court, in Tax Case (Revision) Nos.2 to 9 of 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir 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. In the said case, the Tribunal took note of the expression 'business', 'dealer' and 'sale' respectively under Sections 2 (10), 2(15) and 2(33) of the TNVAT Act. The Tribunal also took note of Sections 6 and 8 of Banking Regulations Act, 1949 and came to the conclusion on the basis of the decision of the Hon'ble Supreme Court in Federal Bank Ltd., v. State of Kerala [(2007) 6 VST 736] that the Bank would come within the expression 'dealer' under Section 2(15) of TNVAT Act. 25.The Division Bench noted the type of transaction done by HDFC with its borrower, which empowers it to repossess the vehicle in the event of default and to direct the vehicle to be sold on public auction or by private negotiations without even involving the owner of the vehicle. The Division Bench also took note of the direction issued by the Hon'ble Supreme Court in the case of Manager, ICICI Bank Ltd., v. Prakash Kaur [(2007) 136 Comp Cas 327 (SC), wherein the arbitrary seizure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand on the ground that the assessee is a NBFC and not a person or body falling within Explanation III of Section 2(15). It is true that the assessee in the HDFC was a bank, falling within clause (ix) under Explanation III to Section 2(15) of the TNVAT Act. However, the nature of transaction done by the HDFC and that of the assessee are identical. Both HDFC and the assessee enter into agreements with the borrower and the agreement empowers the lender to repossess the vehicle in the event of default by the borrower without the express written consent of the borrower. As pointed out earlier, Banks and NBFC had used the service of collecting agents because they had to repossess the vehicle and in most cases after much resistance by the borrower. When the Hon'ble Supreme Court came down heavily on the manner in which repossession was done, the Banks and financial institutions like the petitioner started exercising their right under the loan agreement by filing application before the High Court under Section 9 of Arbitration and Conciliation Act, 1996 for appointment of an Advocate Commissioner to seize and repossess the vehicle and also seeking permission for sale of the vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in an agreement of hire purchase, the purchaser remains merely a trustee/bailee on behalf of the financier/financial institution. To this effect, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Anup Sharmah vs. Bhola Nath Sharma & Ors. [(2013) 1 SCC 400]. In the said case (Cholamandalam), the NBFC sought for a direction to quash a Government Order and to return the vehicle. The NBFC, who had financed the vehicle, had a valid hypothecation. However, the vehicle was confiscated by the Government under the provisions of Tamil Nadu Protection of Interest of Depositors (in Financial Establishment) Act, 1997. The NBFC moved the Special Court praying that they should be granted interim custody of the vehicles. The petitions were dismissed, against which Criminal Revision was filed before the High Court. The Writ Petition, challenging the Government Order of confiscation and the Criminal Revision Case, challenging the order of the Special Court rejecting the prayer for interim custody were clubbed together and heard by this Court. This Court by interpretation of hire purchase agreement and taking note of the decision of the Hon'ble Supreme Court, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce as to whether the assessee is a NBFC or a Bank. 33.The contention that the assessee takes the role of agent of the borrower, when he brings the property for sale cannot be fully right because on facts it has been found that the accessee was entitled to act independently without the express consent by the borrower to effect sale of the hypothecated vehicle. This aspect was noted in HDFC. Therefore, we respectfully agree with the observations/findings in HDFC that the sales are in the nature of compulsory sales for realization of debts due to the financial institutions and to say that the assessee sold the hypothecated goods only as agents of the owner is not completely true. 34.Various statutory provisions, which were referred to by Mr.Sriprakash, learned counsel appearing for the petitioner have been set out by us in the preceding paragraphs and in addition there to, we need to refer to a few more provisions which will bring better clarity as to whether the agent would be also liable. Section 2(41) of the Act defines turnover to mean aggregate amount for which goods are brought or sold, or delivered or supplied or otherwise disposed of in any of the ways referred to in claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The agent is also liable to pay tax as held by us supra. 39.The decision in the case of Seth Loon Sethiya v. Ivan E. John and Others [AIR 1969 SC 73] would have no application to the case for the reason that the question which arose for consideration there was whether the power of attorney is a power coupled with interest; if it is so, whether the same is revocable? No dispute of that nature arises in the instant case and the transaction between the assessee and the borrower is quite distinct and different from what was examined by the Supreme Court in the said case. 40.The decision of the Delhi High Court in Citi Bank v. Commissioner of Sales Tax (Del.) [88 VST 246] was relied by Mr.N.Sriprakash, learned counsel appearing for the petitioner to support his case that the assessee was acting on behalf of the borrower and therefore, the liability, if at all should be fastened on the borrower which also shall not be done because borrower is not a dealer as defined under the Act. This decision also refers to the decision HDFC and Federal bank, which were noted by this Court and we have already held that even accepting the case of the assessee to be that of a agent, the assessee ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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