TaxTMI 
TaxTMI 
2021 (10) TMI 313
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....ht in law in stating that the Petitioner/Appellant would fall within the ambit of ''dealer'' as per section 2(15) of the TNVAT Act, 2006? (2) Whether, on the facts and in the circumstances of the case, the Hon'ble Appellate Tribunal was right in law in stating that sale of repossessed vehicle on behalf of the defaulter by the Petitioner/Appellant would be liable to pay taxes under VAT Act on the sale of the Hypothecated Motor Vehicles? (3) Whether, on the facts and in the circumstances of the case, the Hon'ble Appellate Tribunal was right in law in stating that the Petitioner/Appellant is a dealer even though the contractual agreements specifically states the Petitioner/Appellant is not the owner of the Vehicle? (4) Whether, on the facts and in the circumstances of the case, the Hon'ble Appellate Tribunal was right in law in stating that Resale of Plant and Machinery, Furniture and Fittings and Fixed Asset by the Petitioner/Appellant which is used for the purpose of own business would fall within the meaning of sale and subject to VAT as per the TNVAT ACT, 2006? (5) Whether, on the facts and in the circumstances of the....
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....n No.(ii) at the first instance and the necessity to answer the other three questions will be subject to the decision we take on question No.(ii). 24.In HDFC Bank Ltd., the revision petition was filed before this Court questioning the correctness of the order of the Sales Tax Appellate Tribunal, which held that the Bank is liable to pay sales tax. The assessment under the TNVAT Act was revised by the Assessing Officer on the ground that the bank had not reported the sale of repossessed vehicle from defaulting customers in their return and not paid taxes thereon. As in the case on hand, the appeals filed before the first appellate authority as well as the Tribunal were dismissed. 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. In the said case, the Tribunal took note of the expression 'business', 'dealer' and 'sale' respectively under Sections 2 (10), 2(15) and 2(33) o....
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....ontention of the seller (bank) must be in a position to pass on title, may not stand. 26.With regard to the distinction, which was sought to be drawn to the decision in Federal Bank, it was pointed out that though the Hon'ble Supreme Court was concerned with the exercise of a statutory right of sale and the exercise of the contractual right to bring the hypothecated property to sale could not be excluded on that account Explanation III to Section 2(15) covers even the sale of unclaimed goods and if sale of unclaimed goods can be included within the purview of Explanation III, the distinction sought to be drawn between the statutory right of sale and a contractual right of sale, cannot stand. 27.The first contention raised by Mr.N.Sriprakash, learned counsel for the petitioner is that HDFC case cannot be applied to the case on hand on the ground that the assessee is a NBFC and not a person or body falling within Explanation III of Section 2(15). It is true that the assessee in the HDFC was a bank, falling within clause (ix) under Explanation III to Section 2(15) of the TNVAT Act. However, the nature of transaction done by the HDFC and that of the assessee are i....
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....er. Therefore, the right exercisable by the assessee is under a contract. 28.This issue was also considered by the Division Bench in HDFC, wherein a distinction was sought to be drawn to the decision of the Hon'ble Supreme Court in Federal Bank and the distinction was not accepted and the Court pointed out that the exercise of statutory right of sale and exercise of contractual right to bring hypothecated property to sale, both, could not be excluded and would be covered in Explanation III as the explanation is widely couched. 29.While on this issue, we wish to refer to an identical situation, which was considered in Cholamandalam Investment & Finance Co., Ltd., Coimbatore v. The Chief Secretary to Govt. and others [2014-4-L.W. 240] and while considering an identical type of transaction as done by the assessee, it was pointed out that in an agreement of hire purchase, the purchaser remains merely a trustee/bailee on behalf of the financier/financial institution. To this effect, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Anup Sharmah vs. Bhola Nath Sharma & Ors. [(2013) 1 SCC 400]. In the said case (Cholamandalam), the N....
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.... required to examine in the instant case what is the nature of the contract between the assessee and the borrower. 32.The decision in the case of Federal Bank (supra) was distinguished by contending that it was case of pledge not a hypothecation and in the case of a bank, power under the Banking Regulations Act, 1949 is invoked. We do not accept the said submissions for the reason that nature of the activity done by the Bank and the NBFC like the assessee are identical. It may be true that the banks are covered by the Banking Regulations Act, 1949. Nevertheless, the test to be applied is as to whether assessee is liable to payment of sales tax and is to be done by examining the nature of transaction and not by taking note of the statute under which their business is regulated. If this exercise is done, the nature of transactions being identical, hardly makes a difference as to whether the assessee is a NBFC or a Bank. 33.The contention that the assessee takes the role of agent of the borrower, when he brings the property for sale cannot be fully right because on facts it has been found that the accessee was entitled to act independently without the express consent....
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....aring for the petitioner referred to the decision of the Hon'ble Supreme Court in Indian Oil Corporation v. NEFC India Ltd. & Ors (SC) [(2006) 6 SCC 736], to explain as to whether there is entrustment in the hypothecation. In our considered view, we need not go into this aspect to examine the correctness of the impugned order passed by the Tribunal. We have taken note of all the decisions, which have interprepted identical agreements and are of the firm view that the assessee is liable for payment of sales tax. 38.The decision Syed Abdul Khader v. Rami Reddi & Ors. (SC) [(1972) 2 SCC 601] was pressed into service to explain as to who is the agent. We have examined the facts of the assessee and also the scheme of the Act and held that considering the nature of contract entered into between the assessee and borrower, the assessee will continue to be liable for sales tax even if its claim of agent is accepted. The agent is also liable to pay tax as held by us supra. 39.The decision in the case of Seth Loon Sethiya v. Ivan E. John and Others [AIR 1969 SC 73] would have no application to the case for the reason that the question which arose for consideration there ....