2010 (4) TMI 972 - AT - VAT and Sales Tax

Motor vehicle dealer charges not part of sale price under West Bengal Sales Tax Act

The Tribunal held that payments for insurance premium, registration cost, and road tax collected by a motor vehicle dealer should not be included in the ... Whether receipts of the sums by the dealer from the customers to whom the motor vehicles were sold by the dealer towards registration, road tax and insurance premium form part of the sales price of the motor vehicles as defined in section 2(31) of the WBST Act, 1994? Held that:- Neither of the sides asserted whether after the sale, physical possession of the goods retained by the dealer. Even if it retained, it was retained by the dealer as bailee for the purpose of service of registration, insurance and payment of road tax. This possession is a possession on behalf of the person to whom the goods were sold. Any amount spent in respect of those retained goods during such possession was spent on behalf of the buyer and as such it would not fall within the meaning of section 2(31). Application succeeds and the impugned order passed on January 20, 2009 by Shri M.C. Mukhopadhyay, Special Commissioner of Commercial Taxes, in the Revision Case No. 33/08-09 is set aside. The impugned order of assessment stands modified in exclusion of the sums included to the G.T in respect of charges on road tax, insurance charges and registration cost which are held not to be included in the 'sale price' within the meaning of section 2(31) of the WBST Act, 1994. Issues Involved:1. Whether the payments for insurance premium, registration cost, and road tax collected by the dealer form part of the sale price of motor vehicles under section 2(31) of the West Bengal Sales Tax Act, 1994.Issue-wise Detailed Analysis:1. Inclusion of Insurance Premium, Registration Cost, and Road Tax in Sale Price:The petitioner, a motor vehicle dealer, challenged the inclusion of payments for insurance premium, registration cost, and road tax in the sale price of motor vehicles. The core issue was whether these payments collected from customers should be considered part of the sale price under section 2(31) of the West Bengal Sales Tax Act, 1994.The Tribunal referred to the previous judgment in Frostees Exports (India) Pvt. Ltd. v. A.C.C.T., where it was observed that whether a particular payment is included in the sale price depends on whether the selling dealer showed the disputed expenditure as a separate item in the sale invoice. The Tribunal noted that the nature and character of a transaction of a sale are reflected in the contract or agreement entered into between the parties.The Tribunal also cited the Supreme Court's decision in Commissioner of Sales Tax, U.P. v. Rai Bharat Das & Bros., which held that the sale price includes any charge for anything done by the dealer in respect of the goods at the time or before delivery. The Tribunal further referenced Hindustan Sugar Mills Ltd. v. State of Rajasthan, where railway freight charges were included in the sale price due to government control orders.In the present case, it was argued that the dealer arranged for registration, insurance, and road tax at the time of negotiating the sale. The Tribunal found that these services were part of a pre-sale agreement and not post-sale activities. The Tribunal also considered the provisions of the Motor Vehicles Act, 1988, which mandate compulsory registration and insurance of motor vehicles.The Tribunal concluded that the payments for insurance premium, registration cost, and road tax were part of the pre-sale agreement and should be included in the sale price. The Tribunal noted that the trade practice of dealers arranging for these services at the time of sale supports this conclusion.The Tribunal also addressed the argument that the dealer acted as a bailee for the buyer after the sale. It was held that even if the dealer retained possession of the vehicle for registration, insurance, and road tax, this possession was on behalf of the buyer. Any expenses incurred during this period were on behalf of the buyer and should not be included in the sale price.Conclusion:The Tribunal set aside the impugned order passed by the Special Commissioner of Commercial Taxes and modified the assessment order to exclude the sums for road tax, insurance charges, and registration cost from the sale price. The Tribunal held that these charges are not part of the sale price within the meaning of section 2(31) of the West Bengal Sales Tax Act, 1994.Separate Judgments:- PRADIPTA RAY J. (Chairman) agreed with the judgment.- DIPAK CHAKRABORTI (Technical Member) also agreed with the judgment.