Custom, Excise & Service Tax Tribunal
M/S Sai Service Station Ltd vs Commissioner Of Central Excise, ... on 13 February, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No . 20227 / 2014 Application(s) Involved: ST/Stay/29239/2013 in ST/28543/2013-DB Appeal(s) Involved: ST/28543/2013-DB [Arising out of Order-in-Original No. 066/2013-14 dated 20/09/2013 passed by Commissioner of Central Excise, Customs and Service Tax , COCHIN] M/s Sai Service Station Ltd Chelanor Road, Edapally P.o, COCHIN-682012 Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax - C R BUILDING, LS PRESS ROAD, ERNAKULAM, COCHIN, KERALA-682018 Respondent(s)
Appearance:
Ms. Puloma Dalal, C.A. PULOMA DALAL & CO CHARTERED ACCOUNTANT120/1 120/123, ARUN CHAMBERS, 1ST FLOOR, TARDEO ROAD, MUMBAI MH-400034 For the Appellant Mr. A.K. Nigam, A.R. For the Respondent CORAM:
HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER Date of Hearing: 13/02/2014 Date of Decision: 13/02/2014 Order Per : B.S.V.MURTHY The appellant is an authorized dealer for vehicles manufactured and sold by M/s Maruthi Suzuki India Ltd. and is engaged in the activity of servicing and repairing of vehicles. They are also engaged in the business of used or preowned vehicles belonging to others. Taking a view that the activity undertaken by Maruti True Value Division of exchanging old cars of the customers for new cars, amounts to provision of business auxiliary service and the difference between the sale price of the old cars and the purchase price has to be treated as remuneration for providing this service, proceedings were initiated. The proceedings have culminated in confirmation of service tax demand of Rs. 53,76,644/- with interest for the period from 1.10.2006 to 30.9.2011. Penalties under various sections of Finance Act have also been imposed.
2. Learned counsel for the appellant submits that the activity undertaken by them is merely purchase of old vehicles and selling it to customers who are willing to buy the same. She submits that in the impugned order, the Commissioner has reached the conclusion that this amounts to provision of business auxiliary service and because the registration remains in the name of the person who had handed over the old car to them and the sale takes place only between the owner of the old car and the buyer of the old car and t he appellant is only acting as an intermediary. However, she submits that the only ground taken by the Revenue for treating the transaction as a service is that the registration has not changed in the name of the appellant. The sales transaction according to the Revenue is between the old owner and the new buyer. However, she submits that according to Sale of Goods Act, for transfer of property, registration is not relevant. According to Sale of Goods Act, the property can be sold even without transferring the registration especially in relation to vehicle. She also submits that the Commissioner has relied upon certain decisions which relate to immovable property and these decisions are not applicable and would not be a relevant. She relies upon the decision of the Honble High Court of Kerala in the case of Premsankar K.g. Vs Sunil Krishnan [2014(4)KHC 895] to submit that once a price is received and the property is handed over, the sale is complete. In this case, she submits that the owner of the old car hands over the old car to them, appellant takes it as stock-in-trade and as and when it is sold, it is accounted as a sale. She also submits that appellant has treated the entire transaction as purchase of old vehicles and sale of the same to the customers. The applicable VAT for transaction of old vehicles has also been paid by the appellant when such old vehicles were sold which would also support that the entire transaction is one of purchase and sale.
3. Learned A.R. on the other hand submits that the entire transaction cannot be considered as sale since the registration never gets transferred to the appellant. He pointed out that in the show-cause notice details of the transaction undertaken by the appellants have been given.
4. He also submits that the Commissioner has considered the submissions made by them on sale and purchase and has held that sale and purchase is completed only when the ownership of the vehicle changes. In this case apparently ownership does not change since in the case of vehicles it is the registration certificate which determines the ownership. Therefore, the decision taken by the Commissioner is correct. As regards the documents submitted by the appellants along with the appeal memo, he submits that no doubt, there are some documents produced to show sale of old vehicles to their customers. In the absence of any clarity as to whether the same documents produced before us, were produced before the Commissioner by the appellants, it cannot be said that these invoices reflect the correct position and therefore the matter may have to be remanded so that the Commissioner can take note of the documents submitted at this stage and decide the issue.
5. Learned A.R. submitted that in the case of old cars there are two transactions of sale. However, the appellants have produced proof only in respect of sale made by them to the customers. Therefore, it cannot be said that there was a sale in the first instance from the old car owner to the appellants.
6. We have considered the submissions made by both sides. The findings by the Commissioner as observed herein above are to be found in Para 57 of the impugned order. However in para 55, after the scrutiny of financial accounts, summary statements/replies and the data available with the Commissioner, he has recorded certain observations which in our opinion are relevant and therefore are reproduced below:
55. On a scrutiny of the financial accounts, summary statement/replies submitted by M/s Sai and the data available with me, I find that M/s Sai is engaged in the business of selling used/pre-owned cars belonging to their clients through their Maruti True Value Division under the MUL Dealer ship and provide services to handle, refurbish, promote or market pre-owned/used vehicles provided by their clients. It is observed that when a client comes to them for sale of his vehicle, they evaluate the vehicle according to certain norms specified by MSIL, based on the year of manufacture, condition of the vehicle and thereafter, fix a price after analyzing the above norms. If the said price is agreeable to the owner of the vehicle, they take delivery of the vehicle by issuing a delivery Receipt specifically undertaking the responsibility of the vehicle till its being transferred to a new buyer and issue a Possession Letter as an evidence for taking possession of the vehicle, RC Book, Insurance documents etc. in Original. At the time of taking delivery, they obtain signatures on blank Form-29 and Form-30 as prescribed in the Motor Vehicles Act, for transfer of ownership of vehicle. After refurbishing and carrying out the required works as instructed by MSIL at their workshop, they display the vehicle at their used car show room, find a buyer and sell the same on a reasonable margin. The selling price includes management fees, free services and warranty. It is observed that their executives/representatives are engaged in doing first level of scrutiny of prospective buyers, i.e. identifying such clients who could then be pursued further for the deal, if the terms and conditions are agreeable to both. This paragraph which is reproduced above clearly shows that the Commissioner himself has found that appellant is engaged in the business of selling used/preowned cars belonging to their clients. He has also observed that when a client comes to them for sale of his vehicle, they evaluate the vehicle and take delivery of the vehicle by issuing a delivery receipt specifically undertaking the responsibility of the vehicle till it is transferred to a new buyer and issue a possession letter as an evidence of taking possession of the vehicle, insurance documents etc in original. He has also observed that at the time of taking possession signatures on blank forms as prescribed in the Motor Vehicles Act for transfer of ownership of vehicles are obtained. Thereafter the vehicle is sold at a price which includes management fee, free services and warranty etc. The above observation would show that the Commissioner himself observed that the old car owners come to the appellants for selling their vehicles and they hand over all the documents and receive the agreed price and the possession of the vehicle is also transferred. The conclusion that appellants are rendering a service and it is not a transaction of sale and purchase is coming only because registration certificate remains in the name of the owner and he provides blank forms enabling transfer of the vehicle as required under the Motor Vehicles Act. Therefore, the only point that arises for consideration is whether non-transfer of registration at the time of transferring possession of the old vehicle by the owner can not be considered as a sale as held by the Commissioner or not. In this connection, we find that the decision of the Honble High Court of Kerala relied upon by the learned counsel is applicable to the facts of this case. Honble High Court of Kerala in para-15 has made the following observations which in our opinion is relevant and therefore is re 15. It is quite surprising and shocking to note that the lower Court had noticed that Ext. B5 cannot be accepted because it is not registered and sufficiently stamped as required under the Registration Act and Transfer of Property Act. It appears that the lower Court has omitted to notice that the transaction involved in this case is the sale of vehicle which is a movable article and it is governed by the provisions of the Sale of Goods Act. Section 4 of the Sale of Goods Act reads as follows:
4. Sale and agreement to sell.- (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the goods is transferred from the-seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.
(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.
Once the price is received and the property is delivered, the sale is complete. Going by the definition of sale, when the property is delivered for a price, the sale is complete. The Trial Court seems to be under the impression that unless the registration is effected there is no complete sale. The sale does not depend upon registration at all. Registration before the RTO is a consequence of sale. Therefore, the Trial Court was not justified in discarding Ext. 85 for the reason mentioned by it.
7. As can be seen, the observation are very clear and for considering a transaction as to whether it is a sale or not, what is required to be seen is not the aspect of registration but whether the price has been received and the property has been delivered or not. In this case, as observed by the Commissioner himself in paragraph 55, the property is delivered and the price has been received by the seller of the old car. Therefore, the first transaction cannot be considered as the one which is not a sale. There is no doubt as to the second transaction whether it is a sale or not. once the first transaction is considered as sale it means that the vehicle has been purchased by the appellant subsequently sold by them. Therefore it becomes totally a transaction of purchase and sale of old vehicles. It is not the case of the Revenue that refurbishing of the vehicle, repair and other activities undertaken by the appellants when the vehicle was in their possession is a service rendered to any person. These activities are undertaken as value addition by them and it is neither for the seller nor the purchaser. It is an activity undertaken to increase the value of the vehicle so that they get the maximum return out of it. Therefore we cannot say that there is a service element in this transaction either. As regards the invoices produced before us there is no clarity being there as to whether the Commissioner has seen these documents. We find that the Commissioner has observed that he has scrutinized the financial accounts, reply submitted and the data available with him. Moreover, at the time of investigation it is difficult to believe that no invoices were recovered. In any case there is no observation saying that the vehicles were not sold under an invoice by the appellants. Therefore we do not find any merit in this submission.
Since we have considered the facts and even though it was heard only as a stay application, we find that we have spent considerable time on the issue and heard the matter in great detail and after this in our opinion it would not be appropriate to postpone the final decision. Moreover, this is a recurring issue and this would only continue the litigation further since the show-cause notices will continue to be issued and more orders will follow. Since we are convinced that appellants have made out a case in their favour completely and there is nothing left to be examined for coming to a proper conclusion, we consider that the appeal itself should be allowed at this stage and we do so.
(Order dictated and pronounced in open court) S.K. MOHANTY JUDICIAL MEMBER B.S.V.MURTHY TECHNICAL MEMBER Pnr..
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