Case Law Details

Case Name : TATA Engineering and Locomotive Co.Ltd.(Now Known as TATA Motors Ltd.) Vs State Of Maharashtra (Bombay High Court)
Appeal Number : Sales Tax Reference No. 16 of 2003 and 3 of 2008
Date of Judgement/Order : 30/01/2015
Related Assessment Year :
Courts : All High Courts (3996) Bombay High Court (720)

Hire purchase transaction is covered within purview of the term ‘Sale’ and therefore insurance premium forms part of ‘Sale Price’/ Trade Mark is not exhausted once goods are sold

Tata_MotorsTATA Engineering and Locomotive Co.Ltd.(Now Known as TATA Motors Ltd.)[the Appellant or the Company] is a manufacturer of Motor Vehicles and also engaged in the business of hire finance of Motor Vehicles. The Appellant purchased a new Tata Diesel Chassis from M/s India Automobiles, a registered Dealer of the Appellant, on payment of taxes for a total purchase price of Rs.5,08,180/-. The Chassis was sold by the Appellant on hire purchase basis to Ajit Singh Bhimrao (the Hirer) under sale invoice.

In terms of the hire purchase agreement dated February 7, 1996, the Hirer had to make initial payment of Rs.68,180/- and balance amount in 47 monthly installments. Thus, as against a purchase price of Rs.5,08,180/-, the Appellant was to receive an amount of Rs.8,34,781/- from the hirer which consisted of the price of the Chassis, hire premium, insurance premium for three years and auction money.

The Appellant in terms of Section 52 of Bombay Sales Tax Act, 1959 (the BST Act) made an application before the Ld. Commissioner for determination of the Sale price in respect of Motor Vehicle sold by the Appellant on hire purchase. The Appellant urged that the hire charges receivable and received were in respect of the financial services and hence will not form part of the Sale price of Motor Vehicle. Further, price of Motor Vehicle at the time of delivery thereof to the hirer willrepresent the Sale price of Motor Vehicle. Therefore, Rs.5,08,180/- and not Rs.8,34,781/- should be taken as the Sale price.

The Ld. Commissioner rejected the Appellant’s contentions and concluded that the Sale price of Motor Vehicle sold on hire purchase basis would be the entire amount including hire premium and insurance premium received from the Hirer. The same was further upheld by the Hon’ble Tribunal.

In another matter of the Appellant, the‘re-sale’ claim made under Section 8(2) of the BST Act was disallowed on the ground that the Appellant was holder of trade mark. Being aggrieved in both the matters, the Appellant preferred an appeal before the Hon’bleHigh Court of Mumbai.

The Hon’ble High Court of Mumbai held as under:

  • In the case of Jay Bharat Credit and Investment Co.[CST (2000) 120 STC 1](Jay Bharat case), the Hon’ble Supreme Court held that hire purchase transaction entered into by the Assessee is liable to imposition of Sales tax on the consolidated proceeds;
  • Even High Court of Jharkhand in the Appellant’s own case held that the position cannot be different than the one dealt with in Jay Bharat case;
  • Explanation in the definition of the term ‘re-sale’ refers to the sellers who hold a Trade Mark or a patent in respect of the goods sold and the transactions and dealings of the nature referred to in the definition, by a seller of purchased goods of this class are deemed not to be a re-sale so as to classify the Dealers into those holding a patent or a Trade Mark and those not holding so;
  • Ordinarily, sale of purchased goods in the form in which they were purchased or without doing anything to them, which amounts to or results in a manufacture can be termed as a re-sale.

However, even when this criteria or test is satisfied, still, if the sale of purchased goods is by a seller who holds a Trade Mark or a patent or is entitled to use the Trade Mark or patent in respect thereof, then, the transaction of sale of purchased goods by him is not deemed to be a re-sale;

  • The registered Trade Mark is not exhausted once the goods are sold as the rights therein are protected so long as the registration is in effect;

Therefore, the Hon’ble High Court rejected the appeal filed by the Appellant and held that hire purchase transaction is covered within purview of term ‘Sale’ and therefore, insurance premium forms part of ‘Sale price’. Further, Trade Mark is not exhausted once goods are sold, hence disallowed ‘re-sale’ claim filed by the Appellant.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

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