Repossession sales and hypothecated vehicle disposals can create dealer status and VAT liability under TNVAT Act.

Repossession and sale of hypothecated motor vehicles by a financier can fall within the wide TNVAT Act definitions of "sale" and "dealer" when the financier exercises contractual rights to repossess and dispose of the goods without the owner's consent. The Court treated such disposals as compulsory sales for realisation of debt, not mere agency transactions, and noted that turnover includes sales made on account of others as well as on the assessee's own account. It also held that contractual non-ownership does not avoid tax where substantive rights of possession and sale are retained. Sales of used business assets such as plant, machinery and fittings were likewise treated as taxable disposals within the Act's ambit.

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Outcome: The tax cases were dismissed following the earlier Division Bench decision holding the assessee liable to sales tax under the TNVAT Act in respect of sale of repossessed hypothecated vehicles and related disposals.

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