Kerala High Court
Kerala Authomobile Dealers ... vs State Of Kerala on 7 February, 2025
Author: A.K.Jayasankaran Nambiar
Bench: A.K.Jayasankaran Nambiar
WA Nos.1939 & 2134/2019
2025:KER:10345
1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE MR. JUSTICE EASWARAN S.
FRIDAY, THE 7TH DAY OF FEBRUARY 2025 / 18TH MAGHA, 1946
WA NO. 1939 OF 2019
AGAINST THE JUDGMENT DATED 2.7.2019 IN WP(C) NO.32847
OF 2018 OF HIGH COURT OF KERALA
APPELLANTS/PETITIONERS:
1 KERALA AUTOMOBILE DEALERS ASSOCIATION
C/O M/S MARIKAR ENGINEERS, 34/2401-A, N.H. BYE
PASS ROAD, CHAKKARAPARAMBU, KOCHI, PIN - 682 023,
REP. BY ITS PRESIDENT SRI JOHN.K.PAUL
2 M/S RAJASREE MOTORS PVT. LTD.,
2/393C, NH 47, MARADU P.O., KOCHI, 682304,
REPRESENTED BY ITS HEAD SALES, SRI PRAVEEN
SANKARANARAYANAN
BY ADVS.
SRI.LAL K.JOSEPH
SRI.V.S.SHIRAZ BAVA
SRI.ANZIL SALIM
RESPONDENTS/RESPONDENTS:
1 STATE OF KERALA
REPRESENTED BY ITS SECRETARY TO MOTOR VEHICLES
DEPARTMENT, GOVERNMENT SECRETARIAT, TRIVANDRUM -
695 001
2 THE TRANSPORT COMMISSIONER
MOTOR VEHICLES DEPARTMENT, TRANS TOWERS,
THIRUVANANTHAPURAM - 695 001.
3 THE REGIONAL TRANSPORT OFFICER AND REGISTERING
WA Nos.1939 & 2134/2019
2025:KER:10345
2
AUTHORITYY
ERNAKULAM, CIVIL STATION, KAKKANADU, ERNAKULAM,
PIN - 682 030
4 THE REGIONAL TRANSPORT OFFICER & REGISTERING
AUTHORITY, KANNUR CIVIL STATION, KANNUR, PIN -
670 102
5 THE JOINT REGIONAL TRANSPORT OF OFFICER
SUB REGIONAL TRANSPORT OFFICER, ANGAMALY ,
ERNAKULAM- 683 030.
OTHER PRESENT:
GOVT.PLEADER SMT.RESMITHA RAMACHANDRAN
THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON
07.02.2025, ALONG WITH WA.2134/2019, THE COURT ON THE SAME
DAY DELIVERED THE FOLLOWING:
WA Nos.1939 & 2134/2019
2025:KER:10345
3
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE MR. JUSTICE EASWARAN S.
FRIDAY, THE 7TH DAY OF FEBRUARY 2025 / 18TH MAGHA, 1946
WA NO. 2134 OF 2019
AGAINST THE JUDGMENT DATED 2.7.2019 IN WP(C) NO.32847
OF 2018 OF HIGH COURT OF KERALA
APPELLANT/S:
T.V.SUNDRAM IYENGAR AND SONS PVT.LTD
NATIONAL HIGHWAY, KALOOR, KOCHI-682 017,
REPRESENTED BY ITS CEO & GLOBAL PRESIDENT.
BY ADVS.
E.K.MADHAVAN
P.VIJAYAMMA
V.KRISHNA MENON
J.SURYA
RESPONDENTS/PETITIONERS 1& 2 & RESPONDENTS 1 TO 5:
1 KERALA AUTOMOBILE DEALERS' ASSOCIATION
C/O. M/S. MARIKAR ENGINEERS , 34/2401-A, N.H.BYE
PASS ROAD, CHAKKARAPARAMBU, KOCHI, PIN-682023,
REPRESENTED BY ITS PRESIDENT SRI JOHN K.PAUL.
2 M/S.RAJASREE MOTORS PVT. LTD.
2/393C, NH 47, MARADU P.O., KOCHI- 682304,
REPRESENTED BY ITS HEAD SALES, SRI.PRAVEEN
SANKARANARAYANAN.
3 STATE OF KERALA,
REPRESENTED BY ITS SECRETARY TO MOTOR VEHICLES
DEPARTMENT, GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM-695001.
WA Nos.1939 & 2134/2019
2025:KER:10345
4
4 THE TRANSPORT COMMISSIONER,
MOTOR VEHICLES DEPARTMENT, TRANS TOWERS,
THIRUVANANTHAPURAM - 695001.
5 THE REGIONAL TRANSPORT OFFICER AND REGISTERING
AUTHORITY,
ERNAKULAM, CIVIL STATION, KAKKANADU, ERNAKULAM -
682030.
6 THE REGIONAL TRANSPORT OFFICER AND REGISTERING
AUTHORITY,
KANNUR, CIVIL STATION, KANNUR - 670002.
7 THE JOINT REGIONAL TRANSPORT OFFICER,
SUB REGIONAL TRANSPORT OFFICE, ANGAMALY,
ERNAKULAM-683 572.
BY ADVS.
SRI.LAL K.JOSEPH
SRI.V.S.SHIRAZ BAVA
SRI.ANZIL SALIM
SMT.RESMITHA RAMACHANDRAN, GOVERNMENT PLEADER
THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON
07.02.2025, ALONG WITH WA.1939/2019, THE COURT ON THE SAME
DAY DELIVERED THE FOLLOWING:
WA Nos.1939 & 2134/2019
2025:KER:10345
5
JUDGMENT
[WA Nos.1939/2019 & 2134/2019] DR.A.K.Jayasankaran Nambiar, J.
As both these writ appeals impugn a common judgment of the learned Single Judge dated 02.07.2019 in WP(C) No.32847/2018, they are taken up together for consideration and disposed of by this common judgment.
2. The brief facts necessary for the disposal of these writ appeals are as follows:
The petitioners in WP(C) No.32847/2018 are the appellants in W.A.No.1939/2019. W.A.No.2134/2019, on the other hand is filed by an independent automobile dealer, after getting the leave of this Court to maintain the writ appeal against the judgment dated 02.07.2019 of the learned single judge referred above. The challenge in the writ petition was against Ext.P2 circular dated 6.8.2018 of the Senior Deputy Transport Commissioner (Taxation) by which the dealers of motor vehicles were required to register even those vehicles, that were covered by trade certificates and used for demonstration purposes, with the Motor Vehicles Department, since it was noticed WA Nos.1939 & 2134/2019 2025:KER:10345 6 by the Department that there were instances of misuse of the 'demo' vehicles by the dealers and also because there was revenue loss sustained by the Department on account of the said use of the motor vehicles.
3. While Ext.P2 circular is vaguely worded in its terms, through a statement filed on behalf of the 5th respondent in the writ petition, it was clarified that Ext.P2 circular was issued to curb the practice of vehicles being used by the dealers without sufficient documents, including trade certificates. It was alleged that under the guise of reasonable trial as contemplated under Rule 41 of the Central Motor Vehicles Rules, 1989, the vehicles were being continuously used on the road by persons other than dealers without registering the same indefinitely, thereby causing loss to the State on account of non-payment of tax for the period the vehicles were so used. It is further stated that it had come to the notice of the Department that dealers were selling the 'demo' vehicles at a reduced price which was also causing loss to the State by way of reduced tax paid on the reduced price, notwithstanding the fact that the original price of that model of the vehicle was significantly higher when sold directly to customers. In essence, the purport of the circular appears to have been to curb the alleged practice of misuse of the provisions of the Central Motor Vehicles Rules that enabled dealers to claim exemption WA Nos.1939 & 2134/2019 2025:KER:10345 7 from the requirement of registration, as also motor vehicles tax, when a vehicle was covered by a trade certificate that enabled the use of the vehicle for demonstration purposes.
4. The learned Single Judge, who considered the matter, took note of the provisions of the Central Motor Vehicles Rules and found that the 'demo' vehicles purchased by automobile dealers at a special cash discount or otherwise and which were intended to be used by them for demonstration purposes, could not be seen as vehicles intended for sale to the customers. Axiomatically, it was found that a 'demo' vehicle could not be termed as a vehicle in possession of the dealer in the course of his business as a dealer and could not be driven in a public place or any other place under the authorisation of a trade certificate granted under the Central Motor Vehicles Rules. After referring to the provisions of the Income Tax Act, 1961, which defined 'capital assets' as including any stock-in-trade, the learned Single Judge was of the further view that a 'demo' vehicle purchased by an automobile dealer at a special cash discount or otherwise, and which was not intended for sale to a customer, could not be included in the stock list, in order to make it appear that it is a vehicle in bona fide possession of that dealer in the course of his business and which could be driven in any public place or any other place under the authorisation of a trade certificate. The writ petition was, therefore, WA Nos.1939 & 2134/2019 2025:KER:10345 8 dismissed by upholding Ext.P2 circular and consequential proceedings as evidenced by Ext.P4 check report, Ext.P5 tax receipt and also Ext.P8 notice issued by the 4th respondent Regional Transport Officer.
5. In the appeals before us, the appellants base their contention primarily on the ground that the Deputy Transport Commissioner had no authority to pass a circular in the nature of Ext.P2, since as a creature of the statute, he could not take a position contrary to the express provisions of the Central Motor Vehicles Act, 1988 and the Rules read with the Kerala Motor Vehicles Taxation Act, 1976. It is pointed out with reference to the Central Motor Vehicles Act and the Rules that, the scheme of the Act and the Rules is essentially to permit dealers of motor vehicles to obtain trade certificates in respect of those vehicles that they intend to use for demonstration purposes in connection with their trade as dealers of motor vehicles. Once a trade certificate is obtained, the same has to cover a vehicle or vehicles in the possession of the dealer and the use of the vehicles has to be as mandated under the Central Motor Vehicles Rules. The statutory provisions under the Kerala Motor Vehicles Taxation Act, 1976 also provide for an exemption from tax under Section 3 thereof, if the vehicle in question is covered by a trade certificate. Under sub-Section (7A) of Section 3 of the Taxation Act, there is a levy of 1/15th of the life time tax leviable under Annexure-I WA Nos.1939 & 2134/2019 2025:KER:10345 9 of the Schedule with effect from 1.4.2020. These benefits, together with the benefit of exemption from registration of the motor vehicle, are available in respect of demonstration vehicles covered by trade certificates under the Central Motor Vehicles Act and Rules as also the Kerala Motor Vehicles Taxation Act and Rules. The impugned circular, according to the appellants, is therefore clearly ultra vires the power of the Deputy Commissioner under the statutory provisions.
6. We have heard Sri.V.Krishna Menon, the learned counsel for the appellant in W.A.No.2134/2019 and Sri.Sanjay Sellen, the learned counsel appearing for the appellants in W.A.No.1939/2019 and Smt.Resmitha Ramachandran, the learned Government Pleader appearing for the respondents/State.
7. On a consideration of the rival submissions, we are of the view that for the reasons that are to follow, these writ appeals must necessarily succeed. On a perusal of the statutory provisions under the Central Motor Vehicles Act and the Rules, especially Section 39 of the Central Motor Vehicles Act and Rules 33 to 41 of the Central Motor Vehicles Rules, we find that those vehicles that are covered by trade certificates issued in terms of Rule 35 of the Central Motor Vehicles Rules, are exempted from regular registration by virtue of Rule 33 thereof. The purposes for which motor vehicles with trade WA Nos.1939 & 2134/2019 2025:KER:10345 10 registration mark can be used are clearly specified in Rule 41 of the Central Motor Vehicles Rules and it is not in dispute before us that the appellants are using the vehicles covered by the trade registration mark only for demonstration purposes as mandated by the Rules. When it comes to the revenue implications as far as the State Government is concerned - a concern that was expressed in Ext.P2 circular that was impugned in the writ petition, we find that the provisions of the Kerala Motor Vehicles Taxation Act clearly envisage the grant of an exemption from payment of motor vehicles tax under Section 3 to those vehicles which are kept by a dealer or a manufacturer of motor vehicles for the purpose of trade, and are used under the authorisation of a trade certificate granted by the registering authority. In the cases before us, there is nothing to suggest that the dealers in question were not using vehicles for the purposes of demonstration without the authorisation of a trade certificate granted by the registering authority. Admittedly in these cases, the vehicles covered by trade certificates granted by the registering authority were used by the dealers in question for the purposes of demonstration of the vehicles' capability to prospective customers. Going by the statutory provisions therefore, there was nothing to suggest that any of the petitioners, or the appellant in W.A.No.2134/2019, had occasioned a misuse of the statutory WA Nos.1939 & 2134/2019 2025:KER:10345 11 provisions governing registration of the motor vehicles or the payment of motor vehicles tax under the State legislation.
8. We also find ourselves in variance with the view taken by the learned Single Judge in the impugned judgment that 'demo' vehicles purchased by automobile dealers at a special cash discount or otherwise, and which are intended to be used for demonstration purposes, are not vehicles intended for sale to customers. In our view, it is not a necessary pre-condition for obtaining the benefits available to a vehicle covered by a trade certificate that the same should be intended for sale to a customer. So long as the vehicles are used in connection with the dealership business of the appellants, and for demonstration by or for the benefit of a prospective purchaser, irrespective of whether the said person actually purchases the vehicle or not, the benefits under the respective statutes have necessarily to be granted to the demonstration vehicles.
9. We are also not persuaded by the submissions made on behalf of the respondents-State that permitting a dealer to later sell a vehicle that was covered by a trade certificate at a discounted price would result in a loss of revenue to the State Exchequer. We notice from a recent judgment of this Court in a case pertaining to the appellant in W.A.No.2134/2019 (judgment dated 24.11.2016 in WP(C) WA Nos.1939 & 2134/2019 2025:KER:10345 12 No.37610/2016] that this Court had clarified that as far as the motor vehicles tax is concerned, the tax would be payable on the purchase value of the vehicle by the buyer, and for that purpose, the entire purchase value of the vehicle has to be taken into account even if a buyer is subsequently granted a discount either from the dealer or from the manufacturer. We feel that the said clarification of the statutory provisions is sufficient to allay the apprehension of the State Government regarding loss of revenue merely because the vehicles are sold at a discounted price.
We, therefore, find ourselves unable to sustain the impugned judgment of the learned Single Judge for the reasons stated above. Accordingly, we set aside the impugned judgment dated 2.7.2019 in WP(C) No.32847/2018 and allow these writ appeals with consequential reliefs to the appellants.
Sd/-
DR.A.K.JAYASANKARAN NAMBIAR, JUDGE Sd/-
EASWARAN S., JUDGE jg WA Nos.1939 & 2134/2019 2025:KER:10345 13 APPENDIX OF WA 1939/2019 PETITIONER ANNEXURES ANNEXURE -A1 TAX INVOICE BEARING NO VH0000005912 DATED 10.09.2018 ANNEXURE -A2 TAX INVOICE BEARING NO VH0000005751 DATED 31.08.2018 ANNEXURE-A3 STOCK LIST