Vehicles sales concludes at a place where registration takes place

Brief of the case:

• The Hon’ble Supreme Court in the case of Commissioner of Commercial Taxes vs. M/s KTC Automobiles held that in case of motor vehicles the registration and sale is a co-terminus activity.
• Thus, the place of registration is deemed as place at which sale gets concluded. Accordingly, the sales tax has to be paid as per the law in force in the state/Union Territory at which sales so concludes.
  

Facts of the case:

• The assessee is engaged in the business of purchase and sale of Hyundai cars manufactured by Hyundai Motors Limited, Chennai. Assessee dealer is having head office at Kozhikode (Calicut), Kerala with a branch office at Mahe , Pondicherry. The year under dispute is Assessment Year 1999-2000.
• A sales tax departmental inspection was made at the HO in which the officer found that the assessee had wrongly shown 263 number of cars as sold from its Mahe Branch by wrongly arranging registration from Mahe and wrongly collected and remitted tax for those transactions under the provisions of Pondicherry Sales Tax Act.
• According to the Intelligence Officer, the sales were concluded at Kozhikode and hence the vehicles should have been registered within the State of Kerala. Therefore, by showing the sales at Mahe the assessee had failed to maintain true and complete accounts as an assessee under the KGST Act and had evaded payment of tax to the tune of Rs.86 lakhs. The Intelligence officer in his order levied a penalty of Rs. 86 lacs. On appeal to Deputy Commissioner , the appeal was allowed.

• Against the appellate order in favour of assessee, the Commissioner of Commercial Taxes initiated a suo-motu  proceeding in exercise of power under Section 37 of the KGST Act and passed a final order on 12.8.2002 setting aside the appellate order and restoring the original order of penalty passed by the Intelligence officer.
• Assessee again appealed before High court , the HC also decided the case in favour of assessee. Aggrieved revenue is in appeal before Hon’ble Supreme Court.
  

Contention of the Assessee:

• In case of motor vehicle the place of registration is the place of conclusion of sale because until the vehicle is registered in accordance with the provisions in Chapter IV of the Motor Vehicles Act read with the Central Motor Vehicles Rules, it continues to have the character of an unascertained good.
• Till the engine number, chassis number is ascertained by the registering authority on physical verification of the vehicle and entered into the prescribed form for showing registration, the vehicle cannot be identified as one belonging to the purchaser. Only upon valid registration, as per submissions, the vehicle is appropriated to the purchaser.
• Therefore, the place of registration Mahe, Pondicherry is place of sale, accordingly, assessee paid due tax as per Pondicherry Sale Tax Act.
  

Contention of the Revenue:

• Revenue contended that the assessee dealer had created colorable device to evade sales tax in Kerala by adopting questionable means such as providing incorrect addresses of buyers for the purpose of facilitating registration of the motor vehicles at Mahe.

• The sales transactions stood concluded in Kozhikode , Kerala and hence the assessee should not have given any facilities to residents of Kerala in getting motor vehicles registered at Mahe. But this also would not save assessee from its liability under Kerala Sales Tax Act because sale was completed in Kerala and registration in Pondicherry was only a post- sale event.
  

Held by Hon’ble Supreme Court:

• The Supreme Court agreed that registration of a motor vehicle is a post-sale event but the question as to when the property in a motor vehicle actually passes to the buyer remains to be examined in the light of provisions of Motor Vehicles Act.
• Only after obtaining valid registration under the Motor Vehicles Act, the purchaser gets entitled to use the vehicle in public places because under Motor Vehicles Act,1988 and rules , the buyer can use motor vehicle only when a temporary or permanent registration is obtained by him.
• Transfer of possession 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 (Engine no , Chasis no.) 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 point of time 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.
• The intending owner or buyer of a motor vehicle cannot ascertain the particulars of the vehicle for appropriating it to the contract of sale till its possession is handed over to him after observing the requirement of Motor Vehicles Act and Rules. Such possession can be given only at the registering office immediately preceding the registration.
• Thereafter only the goods can stand ascertained when the owner can actually verify the engine number and chassis number of the vehicle of which he gets possession. Then he can fill up those particulars claiming them to be true to his knowledge and seek registration of the vehicle in his name in accordance with law.
• Hence, technically though the registration of a motor vehicle is a post-sale event, the event of sale is closely linked in time with the event of registration. Thus, the registration and sale is a co-terminus activity.
• Thus , sale tax is payable by the Pondicherry branch where sales have been concluded in accordance with the provisions of Motor Vehicles Act,1988.Accordingly , appeal of revenue was dismissed.