Under any Sales Tax Law the tax is leviable on the valuable consideration received from buyer for sale of goods. This is referred to as ‘sale price’. This term is normally defined in the Sales Tax Laws. Under the Maharashtra Value Added Tax Act, 2002, the said term is defined in section 2(25) as under:
“(25) ‘sale price’ means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation, when such cost is separately charged . . . .”
Thus the definition speaks about consideration received till the delivery given as ‘sale price’. Sometime the contentious issue arises while interpreting the above definition. Particularly when selling dealer collects certain amounts separately on ground of separate subject-matter, the issue arises whether such charges are part of sale price or not.
Similar issue arose in relation to registration charges and handling charges recovered separately by the motor vehicle dealer from its customers. The dealer issues sale invoice for price of the motor vehicle. He also prepares separate debit note for recovering insurance charges, road tax, incidental and handling charges, registration fees etc. The charges recovered towards specific taxes etc. are paid to respective authorities. The handling charges are retained by the motor vehicle dealer for himself as his service charges. The Sales Tax Department sought to consider the above charges as part of sale price and levied tax on the same. The periods involved were 2005-2006 to 2007-08 under the MVAT Act, 2002.
Tribunal judgment
When the issue came before the Tribunal, the position was scrutinised as to when the sale is complete, when the delivery is given and the nature of separate charges collected through debit notes, i.e., whether post delivery or prior to delivery, etc. The Tribunal came to the conclusion that the separate charges are post-delivery charges and cannot be included in ‘sale price’.
Bombay High Court judgment
Additional Commissioner of Sales Tax v. Sehgal Autoriders Pvt. Ltd., (Sales Tax App. No. 5 of 2011 dated 11-7-2011)
The issue was taken by the Department to the Bombay High Court by way of appeal under the MVAT Act, 2002. The High Court has now decided the issue.
Before the High Court the main argument of the Department was that the delivery is to be seen in light of effective delivery. It was contended that as per Motor Vehicle Act/Rules the motor vehicle cannot be plied on road unless registered. It was argued that the customer can drive away the vehicle from the dealer’s place when it is registered in his name and since the charges mentioned above are prior to the above event they are taxable.
On behalf of the dealer it was contended that the registration is the responsibility of the buyer who becomes owner of the vehicle. It is only the owner who gets it registered. The sale note is issued for the said purpose which completes sale and delivery. The further activities of registration, etc. are on behalf of the buyer as agent and the handling charges are towards such services, a separate transaction and it is a post-sale transaction. It was also contended that the provisions of the Motor Vehicles Act are for separate purpose and cannot be brought in for interpretation of the MVAT Act. The provisions of sale of the Goods Act, 1930 were also relied upon.
The High Court referred to Rule 47 of the Mo-tor Vehicle Rules and observed that as per the said rule the dealer has to issue a certificate of giving delivery to the buyer, so as to enable the registration of the vehicle under the Motor Vehicle Act. The High Court on the above facts observed as under:
“15 The contention of the Revenue, however, is that delivery cannot be granted to the owner by the holder of a trade certificate under Rule 42 unless the motor vehicle has been registered. Rule 42 however does not as it cannot override the obligation which section 39 imposes on the owner of obtaining registration. Moreover, Rule 42 cannot be construed in isolation from the other provisions which have been made in Chapter III of the Central Motor Vehicles Rules, 1989.
Rule 41, for instance, specifies the purposes for which the holder of a trade certificate may use a vehicle in a public place. Among the purposes is for proceeding to and from any place for the registration of the vehicle. Similarly, under clause (d) of Rule 41, the holder of a trade certificate may use a vehicle in a public place for proceeding to or returning from the premises of the dealer or of the purchaser for the purpose of delivery. Rule 42 provides that no holder of a trade certificate shall deliver a motor vehicle to a purchaser without regis-tration, whether temporary or permanent. It is evident that an application for registration is required to be made in accordance with Rule 47. Rule 47, as a matter of fact, stipulates that an application for registration has to be made within a period of seven days from the date of taking delivery of the vehicle. The application has to be accompanied by a sale certificate. The statutory form for the sale certificate stipulates that delivery has been handed over to the purchaser. The Tribunal, in the present case, has found, as a matter of fact, that upon receipt of the price of the goods, the respondent issues a gate pass in the name of the purchaser and issues a sale certificate in the prescribed form showing delivery of the motor cycle. The sale is complete and transfer of property in the motor cycle takes place to the purchaser coupled with the delivery thereof. The obligation to obtain registration is that of the purchaser. When a dealer facilitates the obtaining of a registration certificate, he acts for and on behalf of the purchaser, because the obligation under the law to obtain a registration certificate is cast upon the owner of the vehicle. The application for the issuance of a registration certificate and the grant of a registration certificate are both post-sale events. The charges that are levied by the appellant and recovered as handling charges are in respect of a service rendered to the purchaser upon the completion of the sale of the motor cycle. Handling charges cannot be regarded as forming part of ‘the valuable consideration paid or payable to a dealer for any sale made.’ The handling charges cannot be regarded as ‘any sum charged for anything done by the seller in respect of the goods at the time of or before delivery thereof.’
Observing as above the High Court held that the holding of the Tribunal that registration/handling charges is not part of sale price was correct and did not not require any interference.
Conclusion
The judgment, amongst others, will be a guiding judgment in understanding the nature of charges before delivery, which can be part of sale price and also nature of charges post delivery, which cannot be part of sale price.
