TMI Blog2011 (7) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ed:- 11-7-2011 - DR. D.Y. CHANDRACHUD ANOOP V. MOHTA, JJ. Mr. Vinay A. Sonpal, A Panel Counsel for the Appellant. Mr. V. P. Patkar with Mr. M M. Vaidya for the respondent. ORAL JUDGMENT (Per Dr. D. Y. Chandrachud,J.): This appeal by the Revenue is directed against an order of the Maharashtra Sales Tax Tribunal dated 20 February 2010. The appeal is admitted on the following substantial questions of law: (a) Whether the Maharashtra Sales Tribunal was correct in law in setting aside the tax on the handling charges or service charges for registration of motor cycle with consequential interest levied thereon? (b) Whether the Maharashtra Sales Tax Tribunal was correct in holding that the amount of handling charges or service charges for registration of motor cycle is not part of `sale price within the meaning of section 2(25) of the MVAT Act? 2 With the consent of 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is prepared in the prescribed form for being submitted to the registering authority to which is annexed the sale certificate and other documents required for registration. The application for registration is thereupon presented to the Regional Transport Office for registration. The contention of the Appellant is based on the provisions of Section 2(25) of the Maharashtra Value Added Tax Act, 2002 which defines the expression sale price as follows : (25) 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. 5 The submission which has been urged on behalf of the Appellant is that :(i) Under the definition of the 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a contract for the sale of specific goods in a deliverable state, 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. 7 By section 2(25) of the MVAT Act, 2002 the legislature has exhaustively defined what constitutes `sale price for the purposes of the legislation. The expression is defined to mean (i) The amount of valuable consideration paid or payable to a dealer for any sale made; and to include (ii) Any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof; but excluding (iii) The cost of insurance for transit or of installation when such cost is separately charged. The explanation to the statutory provisions are not material for determining the present appeal. 8 Section 2(2) of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of the revenue that the registration of the motor vehicle takes place prior to its delivery and held that rule 42 of the Central Motor Vehicles Rules could not be read in isolation. Under rule 47, registration has to be effected within a period of seven days from the date of taking of the delivery of the vehicle and, as a matter of fact, the application for registration has to be accompanied by a sale certificate and by a valid insurance certificate and other requirements. The Tribunal was of the view that the delivery of the motor cycle before registration is not prohibited by rule 47 and consequently, both rules 42 and 47 would have to be construed harmoniously. 10 The foundation of the submission which has been urged on behalf of the revenue is that under rule 42 of the Central Motor Vehicle Rules, the holder of a trade certificate is prohibited from handing over delivery 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. Sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any purpose other than those which are listed out in clauses (a) to (h) thereof. Among the purposes which are permissible is proceeding to and from any place for its registration and for a reasonable trial or demonstration to a prospective purchaser; proceeding to or returning from the place where such person intends to keep it and for proceeding to or returning from the premises of the dealer or of the purchaser or of any other dealer for the purposes of delivery. Rule 42 stipulates that no holder of a trade certificate shall deliver a motor vehicle to a purchaser without registration, whether temporary or permanent. Rule 47 stipulates as follows : 47 Application for registration of motor vehicles. ( 1) An application for registration of a motor vehicle shall be made in Form 20 to the registering authority within a period of seven days from the date of taking delivery 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 Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to obtain registration from a registering authority. Registration under Section 41(3) is granted by the registering authority to the owner of the vehicle. The obligation to register is that of an owner. An application for registration has to be submitted by the owner or on behalf of an owner. When a dealer submits an application, he is hence acting on behalf of the owner of the vehicle. The registration certificate is issued in the name of the owner. 15 The contention of the revenue, however, is that delivery cannot be granted to the owner by the holder of a trade certificate under rule 42 unless the motor vehicle has been registered. Rule 42 however does notas it cannotoverride the obligation which Section 39 imposes on the owner of obtaining registration. Moreover rule 42 cannot be construed in isolation from the other provisions which 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 ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods at the time of or before the delivery of the goods (other than the cost of insurance for transit or installation when such cost is separately charged). A similar provision in Section 2(29) of the Bombay Sales Tax Act, 1959 came up for construction before a Division Bench of the Gujarat High Court in The State of Gujarat vs. Jayantilal Bhimji Sons1973 (32) STC 527. In that case, the issue was whether amounts recovered by the assessee from its customers for expenses of postage, trunkcall and bank charges, by separately adding them in the bills were to be considered as `valuable consideration in respect of the transaction of sale . The Gujarat High Court held that the amounts were charged for services rendered to the customers in general and such service charges could not be equated to consideration for the transfer of the property in 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 conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aggregate amount of the consideration of sales shows that it has to be read in the context and not de hors it. In State of Tamil Nadu v. Srinivasa Timber Depot1991 (80) STC 393, the Supreme Court held that the statement of principle was in accordance with law and dismissed an appeal by the State. 18 In so far as this Court is concerned, a reference may be made to the judgment of a Division Bench in Commissioner of Sales Tax v. Premier Automobiles Ltd.1985 (59) STC 147. The assessee in that case had collected service pool charges at the rate of Rs.10 per vehicle from its distributor which were not included in the turnover shown by the assessee. The purpose of the recovery of service pool charges was to maintain an expert fleet of mechanics who would be available to consumers after they had obtained cars from the distributors. A 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take place at the establishment of the buyer. In these facts, since the seller was under an obligation to transport the goods to the place of the buyer and transfer of property in the goods took place only at the establishment of the buyer, the Supreme Court held, that the freight charges recovered by the seller from the buyer would form part of the sales turnover. 20 In the present case, there is absolutely no reason to fault the finding of the Tribunal that the goods which form the subject matter of the contract between the Respondent and its buyer are in a specific and deliverable state. The transfer of property in the goods in pursuance of the sale contract takes place against the payment of the price of the goods. 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 sellerassessee 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 conside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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