TMI Blog2016 (1) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... motor vehicle to the office of registering authority and only when it reaches there safe and sound, in accordance with the statutory provisions governing motor vehicles it can be said to be in a deliverable state and only then the property in such a motor vehicle can pass to the buyer once he has been given notice that the motor vehicle is fit and ready for his lawful possession and registration. The allegations and facts made or noted by the Intelligence Officer no doubt create some doubts but they do not lead to a conclusive inference that the sales under controversy had taken place at Kozhikode, Kerala. To the contrary, in view of propositions of law discussed hereinbefore, the judgment of the High Court gets reinforced and deserves affirmation. - Decided against the revenue. - Civil Appeal No. 2446 of 2007 - - - Dated:- 29-1-2016 - Dipak Misra And Shiva Kirti Singh, JJ. JUDGMENT Shiva Kirti Singh, J. 1. The Commissioner of Commercial Taxes, Thiruvananthapuram, Kerala has preferred this appeal against judgment and order dated 20.3.2006 passed by the High Court of Kerala in MFA No. 1000 of 2002. The High Court exercising an appellate power allowed the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted a detailed reply and denied the allegations and raised various objections to the proposed levy of penalty. The Intelligence Officer by his order dated 30.3.2001 stuck to his views in the show cause notice but instead of ₹ 1 crore, he imposed a penalty of ₹ 86 lakhs only. 3. The respondent appealed against that order. Their appeal was allowed by the Deputy Commissioner by a detailed order dated 8.1.2002 which has been noted and examined with meticulous care by the High Court in paragraphs 9 to 11 of the impugned judgment and later approved. 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. Against this suo-motu order the respondent preferred Miscellaneous First Appeal before the High Court of Kerala which was numbered as MFA No. 1000 of 2002 and ultimately allowed by the impugned order dated 20.3.2006. 4. Mr. K. Radhakrishnan, learned senior advocate for the appellant made detailed oral su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etimes even the delivery of the vehicle was given at Kozhikode although it was registered at Mahe. 6. A legal issue was raised on behalf of the appellant that as per Explanation under Section 45 of the KGST Act, the burden is on the assessee to show that penalty is not liable to be imposed on him. It is submitted that the respondent had failed to discharge such burden imposed by law. Reliance was placed upon Sections 39 and 40 of the Motor Vehicles Act along with Rules 46 and 47 of the Rules framed under the said Act, in support of the contention that in law the obligation to register a motor vehicle is on the owner and that necessarily implies that registration under the Motor Vehicles Act is a post-sale event. In support of this proposition reliance was placed upon a judgment of Bombay High Court in the case of Additional Commissioner of Sales Tax v. Sehgal Autoriders Pvt. Ltd., 2011 SCC OnLine Bom 872 = 43 VST 398 (Bom) and also upon a judgment of this Court in Association of Registration Plates v. Union of India, (2004) 5 SCC 364. Paragraph 28 of this judgment is as follows: 28. Section 2(21-A) defines manufacturer and it means a person who is engaged in the manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle 286(2) of the Constitution of India Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). Section 4(2) Central Sales Tax Act, 1956 A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State (a) in the case of specific or ascertained goods, at the time the contract of sale is made; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. Sale of Goods Act, 1930- Section 4 - Sale and agreement to sell (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the vehicle is appropriated to the purchaser. In support of this proposition, Mr. Prasaran also referred to Section 4 of the Central Sales Tax Act already noted earlier. He also referred to Section 2(xxi) of the KGST Act which defines sale to include every transfer of the property in goods by one person to another in the course of trade or business except transactions of a mortgage, hypothecation, charge or pledge. Particular emphasis was laid on explanation 4(a)(ii) to this definition of Sale . This explanation is more or less similar in intent and meaning as Section 4(2) of the Central Sales Tax Act, 1956 extracted earlier. It conveys that for the purposes of KGST Act, the sale or purchase of unascertained or future goods shall be deemed, if the goods are within the State at the time of their appropriation to the contract of sale or purchase. Reliance was also placed on Paragraph 8 of the judgment of this Court in Tata Engineering and Locomotive Co. Ltd. v. Assistant Commissioner of Commercial Taxes (1970) 1 SCC 622, which reads as under:- There had been many instances where the vehicles had been actually delivered from the stockyards prior to the issue of the allocation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trade Certificate from delivering a motor vehicle to a purchaser without registration, whether temporary or permanent. 10. On behalf of respondent, reliance was placed upon a judgment of Bombay High Court dated 17.1.2014 in First Appeal No. 166 of 2009 (entitled The New India Assurance Co. Ltd. vs. Clancy Arcanjia Dias). That judgment shows that a temporary registration number was obtained by the manufacturer of Mahindera Jeep at Nasik where the vehicle was manufactured and the manufacturer had also insured the vehicle during its transit by road from Nasik to Goa. After the vehicle was handed over to dealer at Goa, as per records, it was covered by a valid Trade Certificate and also insurance cover in respect of vehicles with the dealer. It was held that since the road accident leading to claim for compensation happened before the jeep was delivered to the purchaser, the liability to pay the compensation was upon the appellant, which had issued the cover note for vehicles held by the dealer under the valid Trade Certificate. 11. On facts it has been submitted on behalf of the respondent that the allegation by the Intelligence Officer that the assessee has not maintained prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oy its possession unless and until a temporary or permanent registration is obtained by him. Only thereafter, the vehicle can safely be said to be no more under possession of the dealer. Clearly, mere mentioning of engine number and chassis number of a motor vehicle in the invoice of sale does not entitle the intending purchaser to appropriate all the goods, i.e. the motor vehicle till its possession is or can be lawfully handed over to him by the dealer without violating the statutory provisions governing motor vehicles. Such 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale invoice itself must disclose such particulars as engine number and chassis number so that as an owner, the purchaser may apply for registration of a specific vehicle in his name. But as discussed earlier, on account of statutory provisions governing motor vehicles, 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. Because of such legal position, prior to getting possession of a motor vehicle, the intending purchaser/owner does not have claim over any ascertained motor vehicle. Apropos the above, there can be no difficulty in holding that a motor vehicle remains in the catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof. In the light of circumstances governing motor vehicles which may safely be gathered even from the Motor Vehicles Act and the Rules, it is obvious that the seller or the manufacturer/dealer is bound to transport the motor vehicle to the office of registering authority and only when it reaches there safe and sound, in accordance with the statutory provisions governing motor vehicles it can be said to be in a deliverable state and only then the property in such a motor vehicle can pass to the buyer once he has been given notice that the motor vehicle is fit and ready for his lawful possession and registration. 17. In view of discussions made earlier, there is no need to again traverse the factual matrix, which led the Deputy Commissioner and the High Court to decide the controversy in favour of the respondent. However, since we have gone through the judgment of the High Court carefully, we are in agreement with the contention advanced on behalf of the respondent that the allegations and facts made or noted by the In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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