2018 (12) TMI 531 - HC - GST

Court rules transport of used car exempt from e-way bill requirement

KUN MOTOR CO. PVT. LTD. AND VISHNU MOHAN Versus THE ASST. STATE TAX OFFICER, SQUAD NO. III, KERALA STATE GST DEPARTMENT AND STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, THIRUVANANTHAPURAM

The court ruled that the transport of a used car did not necessitate an e-way bill as it fell under the category of used personal effects exempt from the ... E-way bill - purchase of car from another state - personal effects - temporary registration in the selling state - can brand new car be treated as used car - detention of car due to omission to upload e-way bill - place of supply of goods - whether the omission to upload e-way bill with respect to the transport of a car purchased in Puthuchery, by a person normally residing in Thiruvananthapuram, attracts Section 129 of the Kerala State Goods and Services Tax Act, 2017? Held that:- When, a resident of Trivandrum purchases a car in Puthuchery, takes possession of the same, obtain temporary registration in his name and takes out an insurance cover for a period of one year, also in his name; which insurance cover is mandatory under Section 146 of the M.V. Act, the presumption can only be that the delivery was effected in Puthuchery itself. All of these factors indicate that the transfer of property in goods vests with the purchaser, at Puthucherry itself, wherein the supply terminated. The registration obtained in one State is also effective throughout India by virtue of Section 46 of the M.V. Act. This is the volition of the purchaser and the movement of the goods after the supply has terminated, in accordance with Sections 7 & 8, read with Section 10 of the IG&ST Act is not the concern of the taxing authorities or even the motor vehicle authorities, the latter of whom is only concerned with the permanent registration being made within the State in which the vehicle is proposed to be used. The requirement also is that, necessarily the vehicle would have to be permanently registered in the State in which the purchaser has his residence or place of business and normally intends to keep it for use as provided in Section 42 of the M.V. Act. It was perfectly possible for the dealer to have transported the vehicle on the strength of a trade certificate but however, made the delivery of the vehicle in Thiruvananthapuram only after taking either a temporary registration or a permanent one from the registering authority having jurisdiction over Thiruvnanathapuram. Here, undoubtedly the vehicle was temporarily registered at Puthuchery. It cannot be said that the temporary registration cannot decide the aspect of sale, especially when the temporary registration was taken out in the name of the purchaser. If the vehicle need not be moved out of the dealership for the purpose of temporary registration, the question arises as how it ran for 17 kilometers; obviously after the registration. The transfer of property of goods was occasioned on the temporary registration being made, but, however, the seller-dealer understood it as an inter-state sale since the purchase was intended for use in a State other than the State from which the sale was effected. The purchaser had also paid IGST, a portion of which would be accrued to the State in which eventually the car would be used. The sale made by the dealer and the service of transportation of the vehicle are quite distinct transactions; one of supply of goods and the other of service. The transport cannot be understood as one in the course of sale for the purpose of supply at Thiruvananthapuram.The service of transportation was for a consideration on which also tax was paid by the dealer. The transportation was by the logistics wing of the selling dealer who had collected tax on the consideration for the service rendered. Though a temporary registration it has to be noticed that there is absolutely no enabling provision, though also no prohibition, in getting a permanent registration of the vehicle by yet another person. We also have to notice that even if such a provision existed, a second sale of the motor vehicle is not taxable within the State, unless there is a premium on the original sale price as seen from Notification No.8/2018 Central Tax-(Rate). Hence on these two grounds, of an intra-State sale having occasioned and the transport being of used personal effects, we find that the detention was illegal. Having found the detention to be without sanction of law, the vehicle having been already released, what remains is to quash the notice issued and the order passed, under Section 129, both being illegal and totally without jurisdiction - appeal allowed. Issues Involved:1. Requirement of e-way bill for transport of a used car.2. Nature of sale: inter-state vs. intra-state.3. Definition of 'used personal effects' under GST rules.4. Legality of vehicle detention under Section 129 of the KSGST Act.Issue-wise Detailed Analysis:1. Requirement of e-way bill for transport of a used car:The court examined whether the omission to upload an e-way bill for transporting a car purchased in Puthuchery to Thiruvananthapuram attracts Section 129 of the Kerala State Goods and Services Tax Act, 2017. The court found that there is no mandate to upload an e-way bill for transporting used personal effects, which includes a used car, as per sub-rule (14) of Rule 138 of the Kerala Goods and Services Tax Rules, 2017.2. Nature of sale: inter-state vs. intra-state:The court delved into the nature of the sale to determine if it was an inter-state or intra-state transaction. It was noted that the seller understood the sale to be inter-state, as evidenced by the invoices showing IGST collection. The court referred to Sections 7 and 10 of the Integrated Goods and Services Tax Act, 2017, which define inter-state supply based on the location of the supplier and the place of supply. The court concluded that the sale was completed in Puthuchery when the purchaser took possession of the car, obtained temporary registration, and insurance in his name. Hence, the movement of the car to Thiruvananthapuram was not occasioned by the sale transaction but was a prerogative of the purchaser.3. Definition of 'used personal effects' under GST rules:The court addressed whether the brand new car, once purchased and temporarily registered, could be considered a 'used personal effect.' The court referred to dictionary definitions and legal precedents to conclude that a car becomes a used personal effect once it is purchased, registered, and driven, even if only for a short distance. The car, having run 17 kilometers, was deemed a used personal effect exempt from the e-way bill requirement under Rule 138.4. Legality of vehicle detention under Section 129 of the KSGST Act:The court analyzed the legality of the vehicle's detention under Section 129, which deals with the detention, seizure, and release of goods and conveyance in transit. The court found that the vehicle's detention was illegal since the transport was of used personal effects, which are exempt from the e-way bill requirement. The court noted that the applicable tax had already been paid, and the vehicle was accompanied by the necessary invoices. The court quashed the notice and order of detention, deeming them illegal and without jurisdiction.Conclusion:The judgment concluded that the transport of the car did not require an e-way bill as it was a used personal effect. The sale was completed in Puthuchery, making it an intra-state sale, and the subsequent transport was not occasioned by the sale transaction. The vehicle's detention under Section 129 was found to be illegal, and the court quashed the notice and order of detention, allowing the appeal and setting aside the judgment in the writ petition.