Decided on April 23,2010

Frostees Exports (India) Pvt. Ltd. Appellant
Dcct, Corporate Division, Kolkata And Others Respondents


R.K.DATTA CHAUDHURI, J. - (1.)IN this application under section 8 of the West Bengal Taxation Tribunal Act, 1987, the petitioner M/s. Frostees Exports (India) Pvt. Ltd., a motor vehicle dealer carrying business under the trade name (Mukesh Hyundai) challenges the order passed by Shri M. C. Mukhopadhyay, Special Commissioner, Commercial Taxes, West Bengal, on March 26, 2009 copy whereof was forwarded under his office memo No. 4060(3) CT dated March 18, 2009, confirming the appellate order passed by Shri A. S. Basu, the Additional Commissioner of Commercial Taxes, West Bengal, on March 27, 2008 in the Appeal Case No. A -117/CD/Addl. CCT/2006 -07 affirming inclusion of payment of insurance premium registration cost and road tax by the dealer to the sale price in the assessment order passed on June 25, 2006, in respect of fourth quarter ending March 31, 2004 under section 45 of the West Bengal Sales Tax Act, 1994 by Shri R. N. Mukherjee, Deputy Commissioner of Commercial Taxes, Corporate Division, the issue is whether receipts of the sums by the dealer from the customers to whom the motor vehicles were sold by the dealer towards registration, road tax and insurance premium form part of the sales price of the motor vehicles as defined in section 2(31) of the West Bengal Sales Tax Act, 1994 and if so, whether it violates the provisions of the articles 14, 265 and 300A of the Constitution of India. The decision of the authorities below on the point of inclusion of the payments of registration cost, road tax and insurance premium was based on the decision of the two Members' Bench of this Tribunal made in the judgment delivered on January 17, 2006 in the Case No, RN -525 of 2003 between the petitioners of this case and the ACCT, Bhowanipore Charge. In the said judgment this Tribunal's Bench consisted of two honourable Members observed as follows :
(2.)We are called upon to answer upon the facts and circumstances of the case as to whether the transaction in question is one integrated transaction or an after -sale activity. One of the modes of such determination as to whether a particular payment is to be included in the sale price or not is to see whether selling dealer while despatching goods had shown in the sale invoice - -the disputed expenditure as a separate item. Even if it is shown as a separate item in the same bill it may signify that he had expended so and that will be included in the sale price. Whether a certain expenditure or charge would be included in the 'sale price' or not is a pure question of fact depending upon the circumstances of each case. It is also to be seen whether some expenses like packing, had been incurred in order to deliver the goods in deliverable stage, prior to delivery. Cost of such expenditure like packing realized from the purchaser is to be included in the sale price. Sometimes payment shall be deemed to be made by the manufacturer and shall be includible in the taxable turnover of the manufacturer though actually paid by purchaser before removing goods from factory. To illustrate when purchase of liquor is made by a dealer, sometimes he pays the excise duty for removal of the same from the manufacturer's factory. The nature and character of a transaction of a sale to a large extent is reflected in the contract or the agreement entered into between the parties. In this case there were hire -purchase agreements and the purchase of cars were made mostly through financiers, we cannot in the absence of such agreement papers before us decipher what were the terms of the sale transactions. The honourable Supreme Court in a decision reported in Commissioner of Sales Tax, U. P. v. Rai Bharat Das & Bros. : [1988] 71 STC 277 (SC), held that the sale price means any such charge for anything done by the dealer in respect of the goods at the time or before delivery thereof. In that case at the request of the customer, sand in gunny bag was delivered and it was held that the packing charges formed part of sale price. That fell within 'any sum charged for anything done, etc.'. The ruling reported in Hindustan Sugar Mills ltd. v. State of Rajasthan : [1979] 43 STC 13 (SC) rendered by the honourable Supreme Court referred to certain facts which are not applicable here. The Government control order was paramount in deciding that railway freight charges should be part of sale price though mentioned as 'free rail destination railway station'. In Commissioner of Sales Tax v. Premier Automobiles Ltd. : [1985] 59 STC 147 (Bom), it was held that service pool charge calculated by the assessee for its distributors were not part of the consideration for the vehicle sold to the distributor. That was under a benefit of service promotion scheme available to customers and to the distributors only after cars were delivered to the ultimate customer. That is not the case here. In Hindustan Steel Ltd. v. State of Tamil Nadu, [1984] 56 STC 70 (Mad) there was sale of M. S. rod, etc., by the assessee and there was a separate bargain between the parties for cutting, binding such articles for easy transport. Calculation of cutting and binding, etc., had been shown separately in the bills. The court had to decide whether the same should be held post -sale or pre -sale matter or whether includible or not in sale price or whether form part of turnover or not. It was held that there was a separate bargain between the purchaser as regard the service to be rendered by the assessee for cutting and binding of the articles purchased by the customer for easy transport purpose. So, when there is a separate bargain, it is not possible to include such charge as part of sale price. In E. I. D. Parry (I) Ltd. v. Assistant Commissioner of Commercial Taxes, [2000] 117 STC 457 (SC), the honourable Supreme Court held that excess transport charge for transporting sugarcane borne not by the growers of sugarcane, but by the third party transporters to enable regular supply of sugarcane was not a post -sale expense and it was part of the implied agreement between the sugar manufacturers and growers of sugarcane to make the supply steady. What transpires from the above case laws is that the amount paid by way of consideration by the purchaser to the seller of goods in pursuance of the contract of sale can ultimately be regarded as purchase price while calculating the turnover for the purpose of sales tax legislation. What can legitimately brought to sales tax is the aggregation of the consideration for the transfer of property. All the payments should have been made pursuant to the contract of sale and not de hors it. Whether one of the components of the price goes to the coffers of the seller or not will not cease to be so, if it is necessary for completing the same. Thus the total amount of consideration for the purchase of goods would include the price strictly so called and also other amount which are payable by the purchaser or which represent the expenses required for completing the same as the seller would ordinarily include all of them in the price at which he would sell his goods. But if the sale price is fixed statutorily then the only application of the purchaser under the agreement would be to pay that price only and no other amount can be included in the said price even if the same is paid by the purchaser to the seller. So, decision on true nature of the transaction requires reading of the entire fact -situation concerning the agreement trade practice, etc. In the absence of any agreement it appears that the petitioner -dealer took upon the responsibility to arrange for getting registration, tax token and insurance of the vehicles done at the time of negotiation of the sale of the cars. From the impugned order, it appears that bill and other relevant documents were gone into by the concerned officer and he found those to be one not service relating to any post -sale matter; rather it was as pre -sale agreement. The argument that the provisions of the Motor Vehicles Act and rule are against such a decision as stressed by the learned advocate for the petitioner does not appear to carry much weight. Section 39 of the Motor Vehicles Act, 1988, containing provision of compulsory registration has a proviso clause stating that nothing in the section shall apply to motor vehicle in possession of a dealer. Sub -clause (30) of section 2 which defines 'owner' shows that in respect of motor vehicle subjected to hire -purchase agreement or agreement for lease or agreement for hypothetication, the person in possession of the vehicle under agreement is the owner. Section 146 of the Motor Vehicles Act does not mandate that only owner is entitled to effect the insurance. Any person who uses it or allows any other person to use it can get the insurance effected. Application for registration as per rule 47 has to be filed within seven days of taking delivery as per rule 47. Form 20 as per rule 47 in its serial number five refers to submission of sales certificate and certificate of road worthiness issued by the manufacturer from whom the vehicle has been purchased is to be submitted as enclosures. Form 23 as per rule 48 can be complied with by signature of the financier which is required to be attested by the motor vehicle registration authority. So, it does not appear that the customer has to take delivery and to get the works done himself; the dealer can get it done as per the Motor Vehicles Act through financier and other such person even when the customer actually did not in fact take physical delivery of the car. The trade practice also may be taken into account which is to the effect that the dealer does everything at the time of the sale of the vehicle and accordingly such charges as levied by the seller by including in one sale bill or invoice, shall be construed as sale price and hence liable to be included in the turnover of the dealer and therefore exigible to tax.
The petitioner contended that if the aforesaid payments made by the customers for road tax, insurance and registration certificates are included in the sale price under section 2(31) of the West Bengal Sales Tax Act, 1994, this provision is ultra vires to the provisions of the Constitution of India because the State under entry 54, List II of the Seventh Schedule, cannot legislate on these services.

The petitioner's case is this. He is a reseller of motor vehicles. He sells the motor vehicles at ex show room MRP as intimated by the manufacturer. This sale price includes sales tax, surcharge, additional surcharge. He sometimes sells the vehicles at a price lower than MRP but not exceeding MRP. After sale in some cases at the request of the buyers he arranges for getting the sold vehicle insured registered with the motor vehicles authority, payment of road tax and getting the vehicle insured on behalf of the customers. The customers separately paid the said amount, against debit notes. Some customers however themselves arrange for the above. All these payments are post -sales events. Those were not part of the consideration for the sale. During the material period he sold 2190 vehicles and out of the same in respect of 1013 vehicles the customers themselves took out their own insurance and paid for the same. In respect of the other vehicles the petitioner took responsibility for getting them insured. The amount payable to the insurance company was separately paid by the customers to the petitioner against debit note. However during the material period as a measure of sales promotion in some cases the insurance premium payable by the customers. The petitioner paid the same entirely or to the extent of 50 per cent in respect of 296 out of 1177 vehicles, the entire insurance premium was paid by the petitioner and no debit note was raised upon the customers. In the cases where 50 per cent of the insurance premium was paid by the petitioner the debit note raised upon the customers for the balance only. During that period in respect of 2093 vehicles the petitioner arranged for registration and payment of road tax and the customers reimbursed the same against its debit note. In respect of 30 vehicles as a promotion measure the registration cost and road tax were paid by the petitioner and no debit notes were raised against the customers. In respect of 67 vehicles the customers of their own got the registration done and paid the road tax without assistance of the petitioner. The customers purchased the vehicles made their own functional arrangement for such purchase. The petitioner did not provide any finance to the customers for purchase of vehicles. The finance companies provided the loan as a percentage of ex -show room price. The petitioner had no business with the agreement between the customer and the financier for the purchase of his vehicles. Out of 2,190 vehicles sold during the motor period 349 vehicles were purchased by the customers with their own funds, 1,654 vehicles were purchased by the customers with bank loans and 187 vehicles were financed by finance companies. In all cases the insurance premium, registration cost and road tax were paid by the customers themselves. It contended that under section 2(30) of the Motor Vehicles Act, 1988 a person in whose name a motor vehicle stands registered is owner thereof. In relation to a motor vehicle which is the subject of a hire -purchase agreement or lease agreement or hypothetication agreement, the person in possession of the vehicle under such agreement is the owner. Section 40 of the said Act requires owner to get the vehicle registered under section 146 of the said Act it is the obligation of the owner of the vehicle to take out the insurance. Under rule 47 of the Central Motor Vehicle Rules, 1989, the owner of the vehicle was required for apply for registration within a period of seven days from the date of taking delivery and such application in form 20 had to be accompanied with amongst others sales certificate and valid insurance. The sales certificate has to contain the certificate of delivery of the motor vehicle to the buyer. The issue in the WPTT No. 31 of 2007 having been pending before the honourable High Court the petitioner requested the Special Commissioner to keep the matter pending but ultimately the Special Commissioner declined to give further adjournment and following the judgment of this Tribunal in RN -525 of 2003 (Frostees Exports (India) Pvt. Ltd. v. ACCT, Bhowanipore Charge, [2006] 47 STA 228 (WBTT)) he disposed of the revisional application by dismissing the same. On being aggrieved with this revisional order the petitioner filed the present application on the ground that the authorities below committed error on the points of law with additional point that in the event of inclusion of the amount paid by the customers for insurance registration charges and road tax under separate arrangement for post -sale and post -delivery service in the sale price of the motor vehicle within the meaning of section 2(31) of the Act then it would be ultra vires to the constitutional provision because a tax on sale of goods imposable by the States under entry 54 of List II of the Seventh Schedule to the Constitution of India cannot be extended to the post -sale and post -delivery service cost. It would also be arbitrary, unreasonable and violative of articles 14, 265 and 300A of the Constitution of India. He prays for declaration that the amount paid by the customers for the insurance charges, registration cost and road tax does not form part of the sale price within the meaning of section 2(31) of the West Bengal Sales Tax Act, 1994 and to set aside the impugned orders of the authorities below as well as cost. The petitioner however in this application has not taken the fact of pendency of his application before the honourable High Court as a ground of challenge.

(3.)THE respondents though did not file affidavit -in -opposition, contested the application appearing through learned State Representative Mr. A. K. Nath and subsequently through learned advocate Shri Boudhayan Bhattacharyya. Mr. Bhattacharyya submitted unsigned copy of notes of argument. The respondents' contention is that this application is barred by res judicata by the judgment of this Tribunal delivered in the Case No. RN -525 of 2003 between the parties of this application. It is asserted by the respondents that as a measure of sale promotion in certain cases, the insurance premiums payable by the customers were paid by the petitioner entirely or the extent of 50 per cent and that even the registration cost and road taxes were paid by the petitioner and those did not comprise of the total value of the sales price. The pendency of the application under articles 226 and 227 of the Constitution of India was of no consequence. All the certificates as well as the sale invoices or sale bills containing the charges premium were issued on same dates. So these were all pre -sale charges and come under the cover "anything done by the dealer" before delivery of the goods as contemplated in section 2(31) of the West Bengal Sales Tax Act, 1994. It is submitted that the charges in the nature of insurance charges, registration charges and road tax realized by the petitioner from the purchaser were to be construed as integral parts of the sale price they pray for dismissal of the application.

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