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TMI Blog2011 (7) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... f the counsel appearing on behalf of the Appellant and the Respondent, the appeal is taken up for hearing and final disposal. 3 The Respondent is a registered dealer and was assessed for financial years 200506, 200607, 200708 and for the period from 1 April 2008 to 31 July 2008 under the Maharashtra Value Added Tax Act, 2002. The Respondent is an authorised dealer and a selling agent of Hero Honda motors. During the course of the audit of the accounts of the Respondent, it was found that tax was not paid on the handling charges which were received by the Respondent from its customers. The Respondent was assessed for handling charges and hence tax was levied in respect of the aforesaid period. The Appellate Authority dismissed the appeals. The Respondent moved the Tribunal in Second Appeals which were allowed by the impugned order. The Tribunal set aside the tax levied on handling charges or service charges for the registration of motor cycles and held that these charges did not constitute a part of the sale price within the meaning of Section 2(25) of the Maharashtra Value Added Tax Act, 2002 (MVAT Act). The Tribunal accordingly remanded back the proceedings to the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expression "sale price" in Section 2(25), any sum charged for anything done by the seller in respect of the goods at the time of or before the delivery thereof is liable to be included in the sale price; (ii) Under Section 2(25) pre delivery charges are brought within the meaning of the expression "sale price" and even if a sale has taken place, but delivery has not been taken, all predelivery charges would form part of the sale price; (iii) Rule 42 of the Central Motor Vehicles Rules, 1989 contains a prohibition upon the holder of a trade certificate delivering a motor vehicle to a purchaser without registration, temporary or permanent; (iv) In view of Rule 42, the dealer is prohibited from effecting delivery prior to the registration of the vehicle. In the face of a statutory prohibition, it is not open to the dealer to grant delivery before registration and hence the handling charges would form a component of the sale price within the meaning of Section 2(25); (v) The time when the property in the goods gets transferred is irrelevant where the statute provides for the inclusion of all charges levied, for anything done in respect of the goods prior to delivery and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Sale of Goods Act, 1930 defines the expression "delivery" to mean a voluntary transfer of possession from one person to another. Section 2(3) provides that goods are said to be in a deliverable state when they are in such a state that the buyer would under the contract be bound to take delivery of them. Under section 4, a contract for the sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. The contract is called a sale. Under section 5, a contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such an offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed. Section 20 stipulates that where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both is postponed. 9 The Tribunal in the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y prior to the registration of the vehicle. On the basis of rule 42, it was urged that when the Respondent recovers handling charges for facilitating registration of the motor vehicle, these are charges which are relatable to a service rendered prior to delivery being handed over to the purchaser. Since there is a prohibition on handing over of delivery prior to registration, the handling charges must of necessity be included in computing the sale price. 11 In order to appreciate the submissions which have been urged on behalf of the revenue, it would be necessary to refer to the scheme for registration as embodied in the Motor Vehicles Act, 1988 and the rules which have been framed thereunder. Section 39 of the Motor Vehicles Act, 1988 provides that no person shall drive any motor vehicle and no owner of a motor vehicle shall cause or permit the vehicle to be driven in any public place or in any other place unless the vehicle is registered and the registration of the vehicle continues to be valid. Under section 40, the obligation to register a motor vehicle is on the owner of a motor vehicle. Section 41(1) prescribes that an application by or on behalf of the owner of a mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of such vehicle, excluding the period of journey and shall be accompanied by (a) sale certificate in Form 21; (b) valid insurance certificate; (c) copy of the proceedings of the State Transport Authority or Transport Commissioner or such other authorities as may be prescribed by the State Government for the purpose of approval of the design in the case of a trailer or a semitrailer; (d) original sale certificate from the concerned authorities in Form 21 in the case of exarmy vehicles; (e) proof of address by way of any one of the documents referred to in rule 4; (f) temporary registration, if any; (g) roadworthiness certificate in Form 22 from the manufacturers, [Form 22A from the body builders;] (h) custom's clearance certificate in the case of imported vehicles alongwith the licence and bond, if any: Provided that in the case of imported vehicles other than those imported under the Baggage Rules, 1998, the procedure followed by the registering authority shall be same as those procedure followed for registering of vehicles manufactured in India, and (i) appropriate fee as specified in rule 81. (2) In respect of v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been made in Chapter III of the Central Motor Vehicles Rules, 1989. Rule 41, for instance, specifies the purposes for which the holder of a trade certificate may use a vehicle in a public place. Among the purposes is for proceeding to and from any place for the registration of the vehicle. Similarly, under clause (d) of rule 41, the holder of a trade certificate may use a vehicle in a public place for proceeding to or returning from the premises of the dealer or of the purchaser for the purpose of delivery. Rule 42 provides that no holder of a trade certificate shall deliver a motor vehicle to a purchaser without registration, whether temporary or permanent. It is evident that an application for registration is required to be made in accordance with rule 47. Rule 47, as a matter of fact, stipulates that an application for registration has to be made within a period of seven days from the date of taking delivery of the vehicle. The application has to be accompanied by a sale certificate. The statutory form for the sale certificate stipulates that delivery has been handed over to the purchaser. The Tribunal, in the present case, has found, as a matter of fact, that upon receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the goods and could not be added to the sale price of the goods. The Court held that what is the consideration in each transaction of sale must depend upon the agreement between the parties to the transaction. The Court was of the view that the charges in question may fall under the head of service charges, but in order to come to the conclusion that they form part of the consideration, there ought to be evidence to prove that the parties had agreed to that effect. The contention of the revenue was therefore negatived. 17 In State of Madras v. Srinivasa Timber Depot and others1974 (33) STC 423, a Division Bench of the Madras High Court was called upon to consider whether an amount recovered by the assessee, who was a dealer in timber as `lot cooly charges', would form part of the sale price under the Tamil Nadu General Sales Tax Act, 1959. These charges were collected for the service rendered for taking out logs of timber from the place of storage in order to place them before the customer for selection and approval. On these facts, the Division Bench held that these charges were not paid exclusively for the services rendered in respect of the goods sold, but for se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of this Court consisting of Mr. Justice M. H. Kania and Mrs. Justice Sujata Manohar (as Their Lordships then were ) held that the service pool charges collected by the assessee from its distributors were not a part of the consideration for the vehicle sold to the distributor at all. As regards the inclusive or extended definition of the expression "sale price", the Division Bench held that the service charges in question did not fall within the extended meaning for the following reason: "As far as the inclusive or the extensive portion of the definition of "sale price" is concerned, it has to be pointed out that the benefit of the service promotion scheme was available to the customers and to the distributors only after the cars had been delivered to the ultimate consumer or customers and hence the consideration for the benefit received under such scheme could not be in any way said to be related to or anything done in respect of the cards sold at or before the time of delivery." 19 In State of Karnataka and another v. Bangalore Soft Drinks Pvt.Ltd.2000 (117) STC 413, the assessee who was a manufacturer of aerated waters collected freight charges unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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