TMI Blog2021 (10) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... ADU (REPRESENTED BY THE ASSISTANT COMMISSIONER (CT) , CHENNAI [ 2019 (9) TMI 1597 - MADRAS HIGH COURT] , wherein, the identical contentions were raised by the said petitioner, who was also a non-banking finance company - It was held in the case that The question, which was framed for consideration by the Division Bench was whether the bank, which holds the hypothecation of vehicles in their favour would be a 'dealer' within the definition under Section 2(15) of the TNVAT Act, merely because, the bank seized and repossessed the hypothecated vehicle and brings it to sale. The Tax Case Revisions are dismissed. - Tax Case (Revision) Petition Nos.16 to 22 of 2021 - - - Dated:- 17-9-2021 - Honourable Mr.Justice T.S.Sivagnanam And Honourable Mr.Justice Sathi Kumar Sukumara Kurup For the Appellant : Mr. R. Sivaraman (in all cases) For the Respondent : Mr. M.Venkateswaran (in all cases) State Government Counsel COMMON JUDGMENT T.S.SIVAGNANAM, J. These tax case (revision) petitions have been filed under section 60(1) of the Tamil Nadu Value Added Tax, 2006 ('the TNVAT' for short) challenging the common order dated 05.02.2021 passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Case Revisions were dismissed by a common order dated 25.09.2019. The operative portion of which reads as follows:- 22.We have heard the elaborate arguments put forth by Mr.N.Sriprakash, followed by the submissions made by the learned Special Government Pleader on several dates. In our view the learned Special Government Pleader has rightly crystallized the arguments made on either side and has framed questions/issues, which are required to be answered by us in these revision petitions. The four questions/issues, which required our consideration are hereunder: (i)Whether the assessee is a dealer as defined under Section 2(15) of the TNVAT Act and liable to pay sales tax on the sale of the repossessed vehicles? (ii)Whether the decision in HDFC Bank Ltd. , would apply to the case of the asseessee? (iii)Whether the assessee when acts as an agent of the borrower is liable to pay sales tax? (iv)Whether the liability of the agents is not co-extensive with that of the Principal? 23.When we heard the case at the first instance, the learned Special Government Pleader appearing for the respondent submitted that the issues raised in these revision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitrary seizure and sale of hypothecated vehicles by the financial institutions was depreciated and also the fact that after the said decision, the banks started invoking the provisions of the Arbitration and Conciliation Act, 1996, seeking appointment of an Advocate Commissioner instead of collecting agents to seize and repossess the vehicle. The Division Bench pointed out that it is not as though the sale of the hypothecated vehicle is arranged by the banks and finance institutions for and on behalf of willing vendor. These sales effected by the Bank are in the nature of compulsory sales for realization of debts due to the financial institutions. Therefore, it was held that to say that the banks sold the hypothecated goods only as an agents of the owners may not be true completely. After noting the Explanation III to Section 2(15), it was held to be exhaustive. Identical contentions as raised before us were raised before the Division Bench in HDFC . While dealing with the said contentions, the Court pointed out that the contention that the bank does not become the owner of the property and that too for the forms TM29 and TM 30 handed over by the owners, the banks cannot even sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g permission for sale of the vehicle. These applications are being allowed by orders of this Court and this has been the consistent practice, though in certain cases the Court appointed one of the Officers of the financial institutions to carry out the process of repossession and sale at their cost. Considering the modus adopted by the assessee if they are acting on behalf of the borrower as its agent, it presupposes that there is valid consent of the borrower, which is never the case, at least in the case which are subject matter of the impugned assessments. If the assessee is the agent of the borrower effect repossession and consequent sale, there would never arise a need to approach the Court to obtain orders to effect repossession and seizure of the vehicle and put it for sale. That apart, when the vehicle is put up for sale through auction, invariably it is by negotiation with the prospective purchaser either directly or through dealers. Undoubtedly, it is done without involving the owner of the vehicle. In many cases, along with main agreement and other documents the borrower's signature is obtained in statutory forms prescribed under Motor Vehicles Act to enable the lend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the decision of the Hon'ble Supreme Court, it was held that the respondent in the said case viz., the borrower was only hirer of the vehicle and in the light of the valid deed of hypothecation executed in favour of NBFC, they retained the ownership and the same remains with them till the hypothecation is revoked. With this reasoning the Special Court was directed to consider the case of NBFC. 30.In Indian Oil Corporation v. NEPC India Ltd., and Others [(2006) 6 SCC 736] , it was pointed out that the deed of hypothecation created a charge over the hypothecated asset with right to take possession in the event of default. Thus, on a conjoint reading of the above decisions and the modus operandi of the assessee, which in our considered view, is no different from that of the modus operandi adopted in the case of HDFC . Therefore, we are necessarily conclude that the decision in HDFC , would squarely apply to the case of the assessee. 31.Mr.N.SriPrakash took stenuous efforts to distinguish HDFC . It was pointed out that the registration certificate stands in the name of the borrower, this being a vital feature, the ownership of the vehicle vests with the borrowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld, or delivered or supplied or otherwise disposed of in any of the ways referred to in clause (33), by a dealer either directly or through another, on his own account or on account of others whether for cash or for deferred payment. Therefore, this provision clearly indicates that turnover will include aggregate amount of net sales effected by the seller on his account or on account of others. Therefore, assuming the contentions raised by the Mr.Sriprakash is acceptable and that the assessee is acting as an agent of the borrower is wholly true, yet the turnover assessee should include the aggregate amount of the goods sold on his account or on account of others. 35.Next, we turn on to the definition of dealer as defined under Section 2(15) of the TNVAT Act. The definition is exhaustive and would encompass agent to bring him within the tax umbrella. If we look at the definition of sale as defined under Section 2(3), it is a very wide definition. 36.The arguments of Mr.N.Sriprakash, learned counsel appearing for the petitioner is that Explanation III to Section 2(33) will not be attracted to the assessee because the assessee is not a person or body refered to in Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h were noted by this Court and we have already held that even accepting the case of the assessee to be that of a agent, the assessee exercises the right under the contract and bringing for sale the vehicle without the express consent of the borrower would make them fully liable for payment of salestax. 41.We may take a slightly different view point, while interpreting the terms and conditions of the Loan Agreement. Clause 8 of the loan agreement deals with Security and Clause 8 (c) deals with the Certificate of Registration issued under the Motor Vehicles Act and shall contain the endorsement of hypothecated with the assessee company and in terms of clause (d) as long as the asset is hypothecated with the assessee, the borrower shall not sell or create any other hypothecation, charge, mortgage, pledge, lien or encumbrance over the Asset without prior approval of the accessee. The borrower has executed a demand promissory note in favour of the accessee, for the security as required in clause 8(f). In terms of clause 8 (g) the hypothecation shall remain until the assessee issues a certificate discharging the security created. Any change in status of the borrower will not affec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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