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TMI Blog2018 (6) TMI 1830X X X X Extracts X X X X X X X X Extracts X X X X ..... BOMBAY HIGH COURT] ] was rendered on 11th July, 2011 and whereas the decision of the Hon ble Supreme Court of India in the case of K.T.C. Automobiles [ [ 2016 (1) TMI 1046 - SUPREME COURT] ] was rendered only on 29 th January, 2016? Registration charges and hand selling charges - HELD THAT:- On going through the factual position, proforma invoice, and sale contract and seen that the property, particularly possession of a motor vehicle passes or can pass legally to the purchaser only after obtaining valid registration under the Motor Vehicles Act and the purchaser gets entitled to use the vehicle in public places. It is also seen that after complying the stipulated condition to make vehicle road worthy, only the property in goods passes legally to customer. Moreover, the registration charges are recovered for making the road worthy to comply the stipulated condition and statutory compulsion before ascertainment of goods or delivery of the Motor Vehicles and therefore would be included in the meaning of sale price under Section 2(25) of the MVAT ACT, 2002 - all charges related, charged and paid by customer before the legally passing of property in goods would be considered in the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The issues and questions raised for advance ruling are framed in logical manner as under:- {I} Whether the registration Charges, insurance Charges, handling charges received and paid on behalf of the customer of a motor vehicle, form part of the "sale price", of such motor vehicle, considering the provisions of Section 2(25) of the MVAT Act?. {II} Whether Incentive and discount, received from the automotive manufacturers form part of the "sale price" or needs to be treated as a "sale price" of the motor vehicle sold to the customer or whether it results in reduction of set off? {III} Whether the Applicant is entitled to claim set off, on purchased motor vehicle and used it as "Demo Vehicles", irrespective of the fact that such vehicle continuing to be "stock-in-trade" or not being treated as "capital asset" in the books of accounts of the Applicants? {IV} Whether the prayer of "prospective effect", considering the fact that the decision of the Hon. High Court of Judicature at Bombay in the case of Sehgal Autoriders Private Limited was rendered on 11th July, 2011 and whereas the decision of the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Insurance Cover Note is available, the customer, as the owner of the Motor Vehicle, both within the meaning of the general property law, such as the Sale of Goods Act, 1930 and also within the meaning of Section 2(30) of the Motor Vehicles Act, with assistance of the Applicant, applies for registration by submitting the prescribed Form 23. e) The applicant has collected the required charges such as registration Charges, insurance Charges, handling charges to comply the conditions prescribed under Motar Vehicle ACT. f) The applicant has stated that there are two agreements between the Applicant and the buyer of motor vehicle - (a) one for sale of motor vehicle (sale within the meaning of Section 4 of the Sale of Goods Act); and - (b) another for rendering of services, to such buyer, as owner of the motor vehicle, for a consideration, viz. handling charges. These are separate agreements within the meaning of Section 2(d) and Section 2(e) of the Indian Contract Act, 1872. g) The applicant has stated that these rendered services were in the nature of assistance for the purpose of registration, third party insurance or insurance cover or pay fees or taxes. h) The Applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicles are not treated, for Income Tax purposes, as "capital asset" and thus the question of these vehicles being treated as capital asset within the meaning of Section 2(5) of the MVAT Act read with Section 2(14) of the Income-tax Act, 1961 does not survive. It is submitted that which vehicle should be capitalized and which vehicle should not be capitalized is the business decision and cannot be influenced by any a accounting requirement or any decision of any Statutory Authority or Tax Authority. d) In view of the provisions of Rule 54 of the MVAT Rules, as these vehicle are not capitalized, the bar created on availment of set off by that Rule of the MVAT Rules does not apply. 2.4 Prayer of the applicant :- The applicant has requested to pass all necessary and incidental orders and directions, as may be deemed fit as to -- (a) The RTO charges and Insurance Premium cannot be considered as a receipt of "sale consideration" or are not part of the "sale price". (b) The Handling charges received by the Applicant for rendering services to vehicles owners for fulfilling such owners' obligations related to registration and insurance cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services by the Applicants to the owner of motor vehicle, can be treated as a part of "sale price", leave apart as a "sale", within the meaning of the MVAT Act. 4. The report of fact finding authority and legal submission:- The investigation officer (10), Asst. Comm. AC-D-002, Investigation Branch, Pune has visited place of business of applicant and verified the documents. The report was called from investigation officer on the issues raised by applicant. The 10 has submitted the report through concerned joint commissioner. 4.1 The investigation officer has submitted procedure along with example as under. Type of Vehicle: POLO highline, Chassis No. MEXG1660XGTO96693. Engine No. CJL120879. i) The process starts with the enquiry from the customer (Date 01/10/2016) regarding model, colour, price and other specifications of the vehicle. If customer desires to purchase a vehicle he takes test drive (Date 03/10/2016) of the said model of the vehicle. The copy of Proforma invoice (Date 04/10/2016) is issued to the customer which contains... a) Ex show room cost., Corporate discount, Discount. b) Net Ex show room cost. c) TCS on net Ex show room, Insura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade including any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation, when such cost is separately charged. b Hon. Supreme court in the Judgment of M/s. KTC automobile v. Commissioner of commercial taxes Kerala dated 29 January 2016 had elaborately explained that where the sales is complete. It is held that a motor vehicle remains in the category of unascertained or future goods till its appropriation to the contact of sale by the seller is occasioned by handing over its possession at or near the office of registration authority in a deliverable and registrable state. c) Honourable Maharashtra Sales Tax Tribunal in appeal No. 14 to 15 of 2016 in case of M/s. Auto Hanger India Pvt. Ltd. v. The State of Maharashtra decided that handling/depot charges collected before registration of the vehicle are covered in the definition of sale price. d) The Statement recorded as per section 14 of MVAT act of Shri. Shailesh Bhandari (Director of M/s. B.U. Bhandari Auto Pvt. Ltd.) in which he clearly answered as below-- Question. No. 32: Who is responsible if any dama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance sheet under head "Revenue from operation" under sub heading as "Incentives and Discount". In short. the dealer has recovered amount of said discount from the Company and shown as income in the balance sheet. The dealer has claimed discount at Rs. 25,000/- in this particular above case. And the company has reimbursed the discount at Rs. 25,000/- to the dealer. The detail calculation of Rs. 25,000/- is as under. Sr. No. Perticulars Amount in Rs 1 Net amount 22,026/- 2 VAT @ 13.5% - 2,974/- 3 Total - 25,000/- Thus, in this case the dealer has received Credit Notes from the Company, therefore, as per provision of section 60(6) of MVAT act, 2002 the dealer has to account for the same. Accordingly the dealer has accounted these credit notes in his books of account. As the dealer has received above credit notes, therefore, the dealer has to deduct the credit notes from purchases liable for ITC. But it is seen that, the dealer has not either reduced ITC to the extent of these Credit Notes or that include in the sale price. 5. Analysis and discussion:- Mr. S.A. Gundecha, Advocate has submitted the legal contention and relied on various judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds. Delivery of the goods is effected by the seller to the buyer. The obligation under the law to obtain registration of the motor vehicle is cast upon the buyer. The service of facilitating the registration of the vehicle which is rendered by the seller-assessee is to the buyer and in rendering that service, the seller acts as an agent of the buyer. The handling charges which are recovered by the Respondent cannot therefore be regarded as forming part of the consideration paid or payable to the Respondent for the sale. Those charges cannot fall within the extended meaning of the expression "sale price", since they do not constitute a sum charged for anything done by the seller in respect of the goods at the time or before the delivery thereof. 21. For these reasons, we are of the view that the decision of the Tribunal does not suffer from any error. Both the questions of law are answered in the affirmative. The Sales Tax Appeal is dismissed. In the circumstances of the case, there shall be no order as to costs." ii) However, the Hon. Supreme Court of India in the case of Commissioner of Com. Taxes, Tvm v. M/S. KTC Automobiles on 29 January, 2016 has dealt the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssession can take place only when the vehicle reaches the place where the registering authority will be obliged to inspect for the purpose of finding out whether it is a roadworthy and register-able motor vehicle and whether its identification marks tally with those given in the sale invoice and the application for registration. The possession can lawfully be handed over to the purchaser at this juncture because law requires the purchaser as an "owner" to make an application for registration but at the same time the law also prohibits use of the motor vehicle by the owner until it is duly registered by the Registering Authority. Hence, in order to satisfy the requirement of law noticed above, the dealer can deliver possession and owner can take possession and present the vehicle for registration only when it reaches the office of Registering Authority. With the handing over of the possession of a specific motor vehicle just prior to registration, the dealer completes the agreement of sale rendering it a perfected sale. The purchaser as an "owner" under the Motor Vehicles Act is thereafter obliged to obtain certificate of registration which alone entitles him to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale at the registration office at Mahe where admittedly all were registered in accordance with Motor Vehicles Act and Rules. The aforesaid view, in the context of motor vehicles gets support from sub-section (4) of Section 4 of the Sale of Goods Act. It contemplates that an agreement to sell fructifies and becomes a sale when the conditions are fulfilled subject to which the properties of the goods is to be transferred. In case of motor vehicles the possession can be handed over, as noticed earlier, only at or near the office of registering authority, normally at the time of registration. In case there is a major accident when the dealer is taking the motor vehicle to the registration office and vehicle can no longer be ascertained or declared fit for registration, clearly the conditions for transfer of property in the goods do not get satisfied or fulfilled. Section 18 of the Sale of Goods Act postulates that when a contract for sale is in respect of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained. Even when the contract for sale is in respect of specific or ascertained goods, the property in such goods is trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 'sale price' under Section 2(25) of the Act. The appellant-assessee has urged the following questions of law in the two Appeals for our consideration before the Hon. Bombay High court. "1. On the facts and circumstances of the case whether Tribunal is justified in holding that "depot charges" are liable to MVAT Act, 2002? 2. When the sale is complete by raising invoice and acceptance of ascertained car by the buyer, whether "depot charges" charged for subsequent period till registration under Motor Vehicles Act is obtained by buyers, are liable to be included in sale price under Section 2(25) of the MVAT Act, 2002?" The Hon. Bombay High court has considered the views expressed by Hon'ble Apex court in case of Commissioner of Commercial Taxes v. M/s. KTC Automobiles, 88 VST 257 and held thus- 5. The impugned order of the Tribunal after making note of the definition of "salts price" as provided under Section 2(25) of the Act holds that it would not only induce the amount of valuable consideration paid or payable to a dealer, but it also includes any sum charged for anything done by the seller at the time of or before del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the meaning of 'sale price' under Section 2(25) of the Act. This is self-evident from the plain meaning of the definition of 'sale price'.. v) With this background, the legal position provided under MVAT ACT is to be analysed. The section 2(25) of MVAT ACT, 2002 deals with the definition of sale price and also it includes certain charges by deeming provisions. a) "sale price" means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation, when such cost is separately charged. On analysis of provision it is seen that- (i) Under the definition of the expression "sale price" in Section 2(25), valuable consideration paid or payable to a dealer for any sale made and (ii) Under Section 2(25), by deeming fiction " any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof " i.e. pre delivery charges are brought within the meaning of the expression "sale price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty in goods would be considered in the sale price. (II) The issue related to discount offered and reimbursed to the applicant from his vendor amount to sale price or otherwise :- The applicants have dealership of various automotive manufacturing companies. The relationship between the dealer and the manufacturer of the vehicle is on principal to principal basis. a) The claim related to offered discount does not form the part of sale price:- For the sake of explanation, one example is taken to understand the factual position regarding the said claims. M/s. B.U. Bhandari Auto Pvt. Ltd., (the one of the applicant) has determined the sale price of vehicle at Rs. 11,11,074/- in the invoice No. BUB/1718/Apr/19 dated 17/04/2017 for the vehicle Vento Highline MEXC 1760 XHT 124479. The discount of Rs. 22026/- is offered by the applicant under the direction/scheme of M/s. Volkswagen Group Sales Pvt. LTD (the Company) for a specified period, that period may be for 15, 30 or 90 days as per the Competition in the Market. The applicant has claimed the discount amount offered to customer along with the details of sale bills and requested to reimburse. The Company reimburses the discoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions stipulated in the provisions must be fulfilled. In present case the applicant has received the credit note along with the tax paid by him to the vendors. In such circumstances the provision related to section 48(5) is relevant. The section 48(5) of MVAT ACT reads as under:- "For the removal of doubt it is hereby declared that, in no case the amount of set-off or refund on any purchase of goods shall exceed the amount of tax in respect of the same goods, actually paid, if any, under this Act or any earlier law, into the Government treasury except to the extent where purchase tax is payable by the claimant dealer on the purchase of the said goods effected by him :" While passing the credit of Rs. 22,026, the automotive manufacturer company has reduced tax load of Rs. 2974/- on said amount. Thus they have reduced their tax liability to that extent and not paid tax into government treasury. Therefore, the claim of ITC in this respect is not found sustainable and thus required to be rejected. (III) The ITC on Demo car:- Whether the Applicant is entitled to claim set off, on purchased motor vehicle and used it as "Demo Vehicles", irrespective of the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igating officer should verify the books as to whether vehicle is capitalized or otherwise. (IV) The prayer of prospective effect:- The applicant has stated that in the unlikely event, in respect of any of the above aspects held otherwise, then such decision should be made applicable with "prospective effect", considering the fact that the decision of the Hon. High Court of Judicature at Bombay in the case of Sehgal Autoriders Private Limited was rendered on 11th July, 2011; whereas the decision of the Hon'ble Supreme Court of India in the case of K.T.C. Automobiles was rendered only on 29th January, In view of this position the related provision under section 55 (9) of MVAt ACT, 2002 is to be seen. The Section 55 (9) reads as under:- The Commissioner or, as the case may be, the Advance Ruling Authority, may direct that the Advance Ruling shall not affect the liability of the applicant or, if the circumstances so warrant of any other person similarly situated, as respects any sale or purchase effected prior to the Advance Ruling. On careful analysis of the section, it reveals that the Advance Ruling Authority may protect the liability of dealer in two condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt of law. 12. The words are of wide amplitude and if the Commissioner exercises the discretion injudiciously or arbitrarily and contrary to the object and purpose sought to be achieved by the enactment itself, his exercise of the discretionary power is always capable of being questioned. Therefore, when the Commissioner finds that there was never a disputed question to be determined and the law is very clear and free of doubt, equally its applicability, then, refusal by the Commissioner to exercise the discretion is rightly Upheld by the Tribunal. Just as the Commissioner was obliged to assign reasons for not exercising his discretionary power equally the Tribunal was in upholding his order. The Tribunal in paragraph 22 of its order found that the entire process was utilized so as to delay compliance with the mandate of the Act. The Tribunal has also found that the Commissioner refused to grant relief holding that there is no ambiguity in the provisions and there is no scope, for any doubt arising out of the provisions and relevant for the purpose of the determination. The reasons that are assigned by the Commissioner for refusing to give prospective effect to his determinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been disposed of with this common order as under. 7. In view of the discussion held herein above, the issues are decided and are answered in tabular format as under. Hence, the order- Sr. No. The Questions posed by the applicant Held as---- {1} Whether the registration Charges. insurance Charges, handling charges received and paid on behalf of the customer of a motor vehicle, form part of the "sale price", of such motor vehicle, considering the provisions of Section 2(25) of the MVAT Act?. In affirmative, the registration Charges, insurance Charges handling charges received a paid on behalf of the custom of a motor vehicle, form part of the "sale price", {2} Whether Incentive and discount, received from the automotive manufacturers form part of the "sale price" or need to be treated as a "sale price" of the motor vehicle sold to the customer or whether it results in reduction of set off ? In affirmative, Incentive and discount, received from the automotive manufactures need to be treated as a sale price" of the motor vehicle sold to the customer. Since the automotive manufacturer has given the credit note of tax amount, it re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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