TMI Blog2018 (7) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability to include the consideration received in the turnover of the financier; exigible to tax on sale of goods - the KVAT Act, takes within the definition of dealer, any person involved in transactions where there is a system of payment by installments and definition of sale and turnover includes a sale made by one on behalf of another where the latter is the owner; on which tax is payable as has been specified in the schedules. The Bank is not the owner of the vehicle at the time of sale. But however, after re-possession, sells the vehicles and effects transfer and delivery of the goods (vehicle) to the purchaser after receiving consideration, by effecting such transfer on delivery of the vehicle and handing over the sale letter executed by the registered owner which was received by the Bank as per the specific terms of the contract of finance; the right being recognised by the Motor Vehicles Act too. There is no distinction insofar as a pledge or hypothecation is concerned and sale effected on default of payment, especially in the context of the financier exercising the right to sell the goods, which belongs to another, either under a statute or on the specific terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances of the case, the Petitioner is a dealer falling within the definition of dealer under Section 2(xv) with respect to the realization of proceeds from the sale of hypothecated vehicles. III) Whether on the facts and in the circumstances of the case there is any evidence or material on record to justify the findings of the Appellate Tribunal that the Bank is to be construed as a pledgee in possession of the hypothecated vehicles and so the bank is a dealer falling within the definition of dealer under Section 2(xv). The questions of law raised in OTRV No. 102/2013 in addition to what is raised above is re-framed as follows: Whether in the facts and circumstances of the case the Intelligence Officer could have imposed the penalty especially noticing that the issue is one debatable and whether the appellate authorities were right in confirming such penalty order ? 2. The questions are restricted to the transaction of the Bank insofar as re-possession of vehicles and sale of the same; on default committed by the original registered owner, who has hypothecated the vehicles in favour of the Bank; the assessee, who is hereinafter referred to as the financier. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e banks, acting under section 176 of the Contract Act, 1872 have a right to sell the goods. That sale is not as agents but that sale is in exercise of the statutory power under the 1949 Act. No doubt the sale is on behalf of the pledgor, however, the sale is in exercise of the statutory power [Deputy Commissioner of Commercial Taxes. V. A.R.S Thirumeninatha Nadar Firm (1968) 21 STC 184 (Mad)] 5. It is argued that in the case of pledge, the possession of the goods are with the bank and the sale is made exercising the statutory right which stands on a different footing from the exercise of a contractual right to sell a vehicle, whose registered owner is the loanee. It is contended that the Motor Vehicles Act contemplates transfer of vehicle only from the registered owner to the purchaser and the Bank as financier having hypothecation cannot be equated with the registered owner. 6. The learned Government Pleader however, takes us to the following extract from Federal Bank Limited: Further, when charge or pledge is enforced that enforcement is by way of sale of the pledged or hypothected goods; that sale is for consideration and, therefore it falls within the ambit of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson not being a Company or Firm registered under the Companies Act, 1956 (Central Act 1 of 1956) and Indian Partnership Act, 1932 (Central Act 9 of 1932) [or society including a co-operative society or association of individuals whether incorporated or not] of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover. 8. The definition of dealer as extracted herein above, includes any person who is engaged in a system of payment by installments and in pursuance to that, transfer right to use any goods or supply by way of or as part of a service, directly or otherwise whether for cash or for deferred payment or for other valuable consideration. Sale includes any transfer whether in pursuance of a contract or not of the property in goods by one person to another in the course of trade or business for cash or deferred payment or valuable consideration. Explanation VII to the definition of sale is also relevant and is extracted herein below: EXPLANATION VII: Unless otherwise expressly provided in this Act, any transfer, delivery or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. The distinction drawn is insofar as the pledge itself being an implied power of sale on default; which power a hypothecation does not confer. Going by the definition we are unable to draw such a distinction since hypothecation also confers on the creditor the right to a thing belonging to another and encompass the power to cause it to be sold in order to be paid his claim out of the proceeds. The only distinction probably is that in a pledge the goods remain with the financier while in a hypothecation it is with the original owner who is the loanee who availed the finance. 12. The sale, in the present case, is of a second hand vehicle which is taxable under the KVAT Act at that point of time at the rate of 4%; on the consideration. The fact that the financier had merely facilitated the sale cannot be a cause for absolving itself from the liability to include the consideration received in the turnover of the financier; exigible to tax on sale of goods. As was noticed, the KVAT Act, takes within the definition of dealer, any person involved in transactions where there is a system of payment by installments and definition of sale and turnover includes a sale made by on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Motor Vehicles Act. Either way the sale is one carried out by the financier on behalf of the registered owner and it comes within the ambit of sale of goods as defined in the KVAT Act. The financier falls under the definition of dealer and so is the consideration liable to be included as turnover of sale of goods. We do not find any reason to come to a different conclusion insofar as the transactions are concerned, either on the distinction attempted to be drawn by the learned Senior Counsel or on the specific provisions available in the KVAT Act and the Motor Vehicles Act. 14. With respect to the questions of law we notice that the Bank is not the owner of the vehicle at the time of sale. But however, after re-possession, sells the vehicles and effects transfer and delivery of the goods (vehicle) to the purchaser after receiving consideration, by effecting such transfer on delivery of the vehicle and handing over the sale letter executed by the registered owner which was received by the Bank as per the specific terms of the contract of finance; the right being recognised by the Motor Vehicles Act too. The first question of law hence is answered in favour of the Revenue and agai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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