Value Added Tax – Sale Price – Sale of Motor Cycles – Separate Collection of Handling Charges For Registration – Not Forming Part of Sale Price, Section 2 (25) of The Maharashtra Value Added Tax Act, 2002

Dealer engaged in selling motor cycles collected service charges or handling charges from customer for registration of motor cycles under Motor Vehicles Act, 1988. The VAT authorities levied VAT on such amount which was contested before The Maharashtra Sales Tax Tribunal. The Tribunal held that such charges did not constitute a part of ‘sale price’ within the meaning of ‘sale price’ defined in section 2 (25) of the MVAT Act, 2002. The Department filed an appeal before the Bombay High Court against the decision of the Tribunal, setting aside the levy of VAT on such handling charges collected by the dealer from the customer at the time of sale of motor cycles.

Held

 The High Court held that transfer of property in the goods, in pursuance of the sale contract, took place against the payment of price of the goods. Delivery of the goods was affected by the seller to the buyer. The obligation under the law to obtain registration of the motor vehicle was cast upon the buyer. The service of facilitating the registration of the vehicles rendered by the selling-dealer was to the buyer and in rendering that service, the seller acted as an agent of the buyer. The handling charges which were recovered by the respondent could not, therefore, be regarded as forming part of the consideration paid or payable to the dealer for sale of goods. Those charges cannot fall within the extended meaning of the expression “ sale price”, since they did not constitute sum charged for anything done by the seller in respect of the goods at the time of or before the delivery thereof. The High Court accordingly dismissed the appeal filed by the department and confirmed the order of the Tribunal.