Case: Commissioner Of Com.Taxes, Tvm Vs. M/S. Ktc Automobiles

the respondent is in the business of purchase and sale of Hyundai cars manufactured by Hyundai Motors Limited, Chennai. As a dealer of said cars, both at Kozhikode (Calicut), Kerala where their head office is located and also at Mahe within the Union Territory of Pondicherry where they have a branch office, they are registered dealer and an assessee under the KGST Act, the Pondicherry Sales Tax Act as well as the Central Sales Tax Act. The dispute relates to assessment year 1999-2000. Its genesis is ingrained in the inspection of head office of the respondent on 1.6.2000 by the Intelligence Officer, IB, Kozhikode. After obtaining office copies of the sale invoices of M/s K.T.C. Automobiles, Mahe (branch office) for the relevant period as well as some additional period and also cash receipt books, cash book etc. maintained in the head office, he issued a show cause notice dated 10.8.2000 proposing to levy Rs.1 crore by way of penalty under Section 45A by the KGST Act on the alleged premise that the respondent had wrongly shown 263 number of cars as sold from its Mahe Branch, wrongly arranged for registration under the Motor Vehicles Act at Mahe and wrongly collected and remitted tax for those transactions under the provisions of Pondicherry Sales Tax Act. According to the Intelligence Officer, the sales were concluded at Kozhikode and hence the vehicles should have been registered within the State of Kerala. Therefore, by showing the sales at Mahe the respondent had failed to maintain true and complete accounts as an assessee under the KGST Act and had evaded payment of tax to the tune of Rs.86 lakhs and odd during the relevant period. The respondent submitted 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 Rs.1 crore, he imposed a penalty of Rs.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.

Court's reasoning:
we find that in law, the motor vehicles in question could come into the category of ascertained goods and could get appropriated to the contract of sale at the registration office at Mahe where admittedly all were registered in accordance with Motor Vehicles Act and Rules. The aforesaid view, in the context of motor vehicles gets support from sub-section (4) of Section 4 of the Sale of Goods Act. It contemplates that an agreement to sell fructifies and becomes a sale when the conditions are fulfilled subject to which the properties of the goods is to be transferred. In case of motor vehicles the possession can be handed over, as noticed earlier, only at or near the office of registering authority, normally at the time of registration. In case there is a major accident when the dealer is taking the motor vehicle to the registration office and vehicle can no longer be ascertained or declared fit for registration, clearly the conditions for transfer of property in the goods do not get satisfied or fulfilled. Section 18 of the Sale of Goods Act postulates that when a contract for sale is in respect of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained. Even when the contract for sale is in respect of specific or ascertained goods, the property in such goods is transferred to the buyer only at such time as the parties intend. The intention of the parties in this regard is to be gathered from the terms of the contract, the conduct of the parties and the circumstances of the case. Even if the motor vehicles were to be treated as specific and ascertained goods at the time when the sale invoice with all the specific particulars may be issued, according to Section 21 of the Sale of Goods Act, in case of such a contract for sale also, when the seller is bound to do 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 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. We order accordingly.