KUN MOTOR CO. PVT. LTD. AND VISHNU MOHAN Versus THE ASST. STATE TAX OFFICER, SQUAD NO. III, KERALA STATE GST DEPARTMENT AND STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, THIRUVANANTHAPURAM
GST
2018 (12) TMI 531 – KERALA HIGH COURT – [2019] 60 G S.T.R. 144 (Ker), 2019 (21) G. S. T. L. 3 (Ker.)
KERALA HIGH COURT – HC
Dated:- 6-12-2018
WA. No. 1803 of 2018
GST
MR K. VINOD CHANDRAN AND MR ASHOK MENON, JJ.
For The Appellant : ADVS. HARISANKAR V. MENON, KRISHNA. K AND MEERA V. MENON
For The Respondent : SRI C E UNNIKRISHNAN SPL GP
JUDGMENT
Vinod Chandran, J
The issue arises as to whether the omission to upload e-way bill with respect to the transport of a car purchased in Puthuchery, by a person normally residing in Thiruvananthapuram, attracts Section 129 of the Kerala State Goods and Services Tax Act, 2017 (KSG&ST Act for brevity). The impugned judgment found that there should be an adjudication carried on and refused release of the vehicle.
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
name of the 2nd appellant was also taken from Puthuchery Motor Vehicles Department as also an insurance cover obtained. The 2nd appellant then, could have driven the vehicle to Thiruvananthapuram where he normally resides. However, the purchase being made of a fancy car at a fancy price he felt that he should not subject the car to a long journey from Puthuchery to Thiruvananthapuram. He hence entrusted the same to the dealer itself for transportation. Here, we have to notice that the dealer has a transportation and logistic wing which is also registered under the GST enactment. The goods were transported in a specially equipped carriage by road. The invoice of purchase of car showed collection of IGST, obviously deeming the sale to be an inter-state one. An invoice is issued for the transporting charges, which too shows collection of IGST, being the tax for service of transportation of the vehicle. The vehicle in which the car was carried was detained at Amaravila, within the State of
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ed under Sub-rule (14) of Rule 138 read with the Annexure. It was also argued that the 2nd appellant if had driven the vehicle from Puthuchery to Thiruvananthapuram there would have been no such detention or demand for tax. The demand raised as per the notice issued and the order passed was the applicable tax and penalty at 100% of the tax applicable, being the IGST which the dealer had already collected as evidenced from the invoice produced at Ext.P1.
6. The learned Single Judge rightly found Section 129 to be the mechanism for detention,seizure and release of goods and conveyance, in transit, with interim release controlled by sub-section (4) of Section 67, by virtue of Section 129(2). Release of goods detained can be effected under sub-clause (a) of Section 129, when the owner comes forth, on payment of applicable tax and penalty coming to 100% of tax and when any other person so offers, on payment of applicable tax and penalty equal to 50% of tax under sub-clause(b). Sub-clause (
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
129, there has to be necessarily payment of tax and penalty or furnished; bank guarantee for the said amounts and a bond for the value of the goods. The Division Bench had set aside the order of the learned Single Judge which directed interim release, on payment of 50% of the demanded tax in that case. (Asst.Sales Tax Officer v. Indus Motors Ltd. (2018) 5 SGSTR 402 (Ker))was also relied on in which another Division Bench (ourselves) had found that even if the transaction is not taxable, Rules 55 and 138 of the KG&ST Rules prescribed documents to accompany the goods as provided thereunder and any failure; would result in detention under Section 129 and consequent demand of applicable tax and penalty. The learned Single Judge noticed Exts.P1 and Ext.P3, the tax invoice of sale of vehicle and tax invoice for transportation, both of which indicated the supply at Thiruvananthapuram. The second proviso to sub-rule (3) of Rule 138 was noticed to find that even an unregistered person transpor
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ced. The learned Single Judge refused to venture into such adjudication for it being premature. Considering the fact that the appellant wanted only release of the goods as an interim measure, the learned Single Judge confined his consideration to that.
8. Considering the issue of an interim release, the learned Single Judge held that if the 2nd appellant had driven the car by himself to Puthuchery then, the tax regime would not have hampered the transport. But however, the 2nd appellant having entrusted the vehicle to a transporter, the consequence of his driving the car from Puthuchery to Kerala remains in the conjectural realm, it was observed. Sub-rule (2) of Rule 138 was noticed to find that the registered person as a consignee or as a consignor has to generate e-way bill and upload it in the common portal. The decision in Indus Towers (supra) was relied on to find that if there is contravention of the provisions under the Act and Rules definitely Section 129 operates, as a result
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
y] and the judgment of a Division Bench of this Court in C.E Appeal 14/2014 dated 07.07.2017. The learned Counsel also takes us through the provisions being Rule 55A and Rule 138 to contend that there is no requirement to upload the e-way bill if it falls under Annexure of Rule 138. 2016 (4) SCC 82 Commissioner of Commercial Taxes , Thiruvananthapuram v. KTC Automobiles is relied on to assert that the sale took place at Puthuchery and the purchaser took possession of the goods by virtue of the temporary registration taken and insurance cover obtained in his name.
10. The learned Special Government Pleader would however, contend that there can be no sale said to have been carried out or a transfer of property in goods, in Puthuchery merely for reason of a temporary registration issued. It is pointed out that the vehicle had run only 17kms as seen from the Odometer, the copy of which is produced as Annexure R2(a). It is contended that temporary registration is a necessary requirement in
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
Puthucherry merely by reason of the temporary registration obtained for the car, which is an essential requirement for delivery to the purchaser. The parties to the transaction too understood it to be an inter-State sale, hence the IG&S tax collected in the invoice. A trade certificate as can be seen from Rule 41 of the CMV Rules cannot be the document on which delivery made to a purchaser of a vehicle intended for use in the roads. Rule 42 requires the holder of a trade certificate, being a dealer, to deliver a motor vehicle to a purchaser with registration whether temporary or permanent.
11. The temporary registration taken out for the car has in fact been taken out by the dealer without which the purchaser cannot take the vehicle out on to the public road. It is also argued that for the purpose of temporary registration the vehicle is never taken out of the dealership. There can also be no dispute, it is argued, that the transport was of a brand new car purchased by the 2nd appella
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ect for the transaction, pursuant to which transport is carried out; the compliance of the statutory prescriptions is sacrosanct, in default of which there could be automatic imposition of penalty. The bonafides or otherwise of a transport, is not at all a question which can be considered by an adjudicating authority especially since it is a civil liability cast on the persons carrying out conveyance. The detention is not related to an attempt at evasion alone, is the compelling argument. The learned Special Government Pleader would urge this Court to leave the adjudication to the adjudicating authority especially since there is a mixed bundle of facts and law involved to be considered. The adjudicating authority at the first instance has to look into it and this Court need not preempt such consideration. The decision relied on by the appellant in KTC Automobiles (supra) has absolutely no application and if at all it can be applied, it has to be in favour of the State, concludes the le
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
Special Government Pleader(Taxes)the G&ST regime being destination based and the purchaser being from an outside State, it was understood by the seller that it was an inter-State sales. The State of Kerala stood to benefit by that understanding. There is no dispute that the tax payable on an inter-State sale was paid by the purchaser and the same reflected in the invoice issued by the seller. We however raise a caveat here, that the nature of the transaction whether it is inter-State or intra-State supply is to be decided from the provisions in the statute and not by the intention or understanding of the parties to the transaction.
13. In understanding inter-State and intra-State sale, one has to look at the IG&ST Act, specifically Chapter IV, which speaks of 'Determination of Nature of Supply'; the word “supply” being defined under Section 7 of the Central Goods and Services Tax Act, 2017 (CG&ST Act). The levy under Section 9 of that Act is on every supply of goods and servic
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ivery to the recipient.”
14. To determine the place of supply of goods, what is relevant is that the movement of goods should be occasioned by the transaction of supply, as evident from the words “where the supply involves movement of goods”. It is in such circumstances that the location of supply would be the location of the goods, at the time at which the movement of goods terminates for delivery to the recipient. What is discernible is that, we repeat, the transaction of supply itself, should occasion the movement of the goods. Then the location of the supply would be fixed as the place where the goods are delivered, so as to apply Section 7 or Section 8.
15. A transaction which terminates with the supply within a State is an intra-State supply. However, when a dealer or manufacturer within the State of Kerala purchases goods for the purpose of further sale or manufacture within the State of Kerala, from an outside State dealer and transports it to their manufacturing unit or dea
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
the Union Territory of Puthuchery and purchased a car from a dealership there. It is the specific submission of the purchaser that the said car was not available within the State of Kerala for purchase, there being no dealership for the manufacturer within the State of Kerala. There is also no question of any tax evasion as of now, by a purchase made from outside the State, since there is a uniform rate prescribed all over the country. The shift in so far as the GST regime being destination based taxation, is only the shift from the earlier regimes, which was source of goods or origin based. Hence earlier, when goods were sold from one State to another, the levy was under the CST Act, which benefit goes to the State from which the sale originates. In the destination based regime, there is a shift in so far as when there is an inter-State sale, the tax benefit accrues to the State in which supply is made, where the goods eventually are used.
17. When, a resident of Trivandrum purchases
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
8, read with Section 10 of the IG&ST Act is not the concern of the taxing authorities or even the motor vehicle authorities, the latter of whom is only concerned with the permanent registration being made within the State in which the vehicle is proposed to be used. The requirement also is that, necessarily the vehicle would have to be permanently registered in the State in which the purchaser has his residence or place of business and normally intends to keep it for use as provided in Section 42 of the M.V. Act.
18. Madhu M.B. was a case in which the goods were detained for reason of no nexus between the documents accompanied and the actual goods under transport. The Division Bench found that under Rule 140(2), there is a provision for release of goods on a provisional basis, but only on execution of a bond in Form GST INS 04 and furnishing of security in the form of a bank guarantee equivalent to the amount of applicable tax and penalty payable. The Division Bench after considering
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ansport. The perceived doubt as to whether the transaction was an intra-state or inter-state sale actually brings forth a Catch-22 situation; for if it was the former there is no ground for detention within the State of Kerala and if it was the latter then the applicable tax is satisfied, which document is accompanying the transport also.
19. Rule 41 of the Central Motor Vehicles Rules details the purposes for which motor vehicle with trade certificate may be used. Sub-clause (d) of Rule 41 speaks of “for proceeding to or returning from the premises of the dealer or of the purchaser or of any other dealer for the purpose of delivery.” Rule 42 however, mandates that the delivery of a vehicle to a purchaser can be only after registering the vehicle temporarily or permanently. The application for registration has to be made under Rule 47 in Form No.20 to the registering authority within a period of 7 days from the date of taking delivery of such vehicle, excluding the period of journey a
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
it ran for 17 kilometers; obviously after the registration. The transfer of property of goods was occasioned on the temporary registration being made, but, however, the seller-dealer understood it as an inter-state sale since the purchase was intended for use in a State other than the State from which the sale was effected. The purchaser had also paid IGST, a portion of which would be accrued to the State in which eventually the car would be used.
21. In this context, we have to see KTC Automobiles (supra) wherein the Department, under the Kerala General Sales Tax Act, proceeded under Section 45A on the premise that the dealer had shown 263 numbers of car having sold from its Mahe Branch when the cars had never been delivered at Mahe by the manufacturer. The allegation was that the cars were merely registered by the motor vehicles department of Mahe and the cars never physically reached there. Mahe being a Union Territory, at that point, levied lesser tax on the sale of motor vehicles
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
levant particulars of the vehicle such as engine number and chassis number and hence, registration of a motor vehicle is a post-sale event.
20. But this legal proposition does not take the appellant far. It must be carefully seen as to when the properties, particularly possession of a motor vehicle passes or can pass legally to the purchaser, authorising him to apply for registration. Only after obtaining valid registration under the Motor Vehicles Act, the purchaser gets entitled to use the vehicle in public places. Under the scheme of the Motor Vehicles Act, 1988 and the Central Motor Vehicles Rules, 1989 the dealer cannot permit the purchaser to use the motor vehicle and thus enjoy its possession unless and until a temporary or permanent registration is obtained by him. Only thereafter, the vehicle can safely be said to be no more under possession of the dealer. Clearly, mere mentioning of engine number and chassis number of a motor vehicle in the invoice of sale does not entitle
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ssession and present the vehicle for registration only when it reaches the office of the registering authority. With the handing over of the possession of a specific motor vehicle just prior to registration, the dealer completes the agreement of sale rendering it a perfected sale. The purchaser as an “owner” under the Motor Vehicles Act is thereafter obliged to obtain certificate of registration which alone entitles him to enjoy the possession of the vehicle in practical terms by enjoying the right to use the vehicle at public places, after meeting the other statutory obligations of insurance, etc. Hence, technically though the registration of a motor vehicle is a post-sale event, the event of sale is closely linked in time with the event of registration. Neither the manufacturer nor can the dealer of a motor vehicle permit the intended purchaser having an agreement of sale to use the motor vehicle even for taking it to the registration office in view of the statutory provisions alread
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
not having registered the pre-owned cars in its name and merely facilitates the sale from the prior owner. This Court found that the “sale or the ownership transfer of a motor vehicle is governed by the Sale of Goods Act and not the Motor Vehicles Act”. We referrred to this only to emphasize that whatever be the position, in the subject transaction there is transfer of property in goods and completed sale within Puthuchery as per the Sale of Goods Act and the Motor Vehicles Act. The fact that temporary registration was obtained at Puthuchery, and insurance cover taken in the name of the registered owner establishes that the sale had been completed at Puthuchery itself.
23. The fact remains that the 2nd appellant could have very well driven the vehicle from Puthuchery to Kerala without any problem. If the vehicle was driven by the petitioner, there was absolutely no reason to upload an e-way bill. However, as noticed at the beginning, the purchaser having taken delivery of a fancy car
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
the brand new car taken delivery of by the 2nd appellant at Puthuchery and transported to Thiruvananthapuram can be termed to be a used car and hence a used personal effect. How “used” is generally understood, is evident from the various definitions as available in the dictionaries as extracted here-under:-
Oxford Advanced Learner's Dictionary:
Used: that has belonged to or been used by somebody else before SECOND-HAND: used cars
New Webster's Dictionary:
Utilized in or employed for some accomplishment or function; having undergone use; secondhand
Collins COBUILD English Dictionary:
A used car has already had one or more owners Would you buy a used car from this man.. His only big purchase has been a used Ford.
We see from the various definitions as extracted from the dictionaries herein above that “used” means something which is second hand. A car on purchase from the authorised dealer of the manufacturer, with a registration taken is owned by the registere
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
s, televisions, radios, etc. Term when used in will, includes only such tangible property as attended the person, or such tangible property as is worn or carried about the person. In re Sorensen's Estate, 46 Cal.App.2d 35, 115 P.2s 241, 243. Term “personal effects” when employed in a will enjoys no settled technical meaning and, when used in its primary sense, without any qualifying words, ordinarily embraces such tangible property as is worn or carried about the person, or tangible property having some intimate relation to the person of the testator or testatrix; where it is required by the context within which the term appears, it may enjoy a broader meaning. In re Stengel's Estate, Mo.App., 557 S.W.2d 255, 260″
26. Rana Hemant Singhji was in the context of the specific words employed in the definition that was considered; which was as follows:
(4A) “Capital asset” means property of any kind held by an assessee, whether or not connected with his business, profession or vo
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
has no application here. The reference to Customs Tariff Act is also irrelevant since the taxing statute herein does not, by specific words or intendment adopt that definition available in the other enactment. Even going by the normal connotations, a car is the personal effect of the person, who carries the registration in his name, who also carries with it the liability to compensate any third party injury caused by the use of such car on the roads. In the case of a car the like of which has been purchased by the 2nd appellant, it is also a priced possession, to be driven around and more to be flaunted as a status symbol.
27. We also are in agreement with the proposition as seen from the English decisions placed before us. Elliott v. Grey was concerned with a situation where a motor car, without an insurance policy, being parked outside the registered owner's house after it had broken down. The vehicle was not in a movable condition, since the owner had jacked up the wheels and r
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
nufacturers of motor cars, who marketed and sold the cars manufactured through its authorised distributors. An individual purchased a car with warranty, which was for the new vehicle and for the first owner/user. The purchaser took delivery of the car and then sold it to a motor dealer, who advertised the car in a newspaper under the heading 'New Cars', which was challenged by the manufacturer. It was held that a car ceased to be new, when it was sold in retail by the authorised dealer and is registered with the local authority and had been driven away by a purchaser. Here also even accepting the fact that there need be no production of the vehicle for a temporary registration, it has to be noticed that the car had been driven for 17kms. The brand new car would have an odometer showing zero and necessarily it was driven only after the supply to the purchaser. The purchaser came to the possession of the vehicle on its retail sale and had taken out a registration albeit temporary
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
of the supply, whether it be an inter-state or intra-State, would not depend on whether the purchaser carries it as a head-load through the borders or transports it through his own conveyance or through a transporter. The incidence of tax is on the supply and not on the nature of transport. There is no distinction in so far as the IG&ST Act is concerned, of a supply by road or on a carriage. We hence are of the opinion that the supply of the new vehicle by its authorised dealer terminated on it being purchased by the 2nd appellant in Puthuchery and the subsequent movement of the goods was not occasioned by reason of the transaction of supply. The goods having come into the possession of the purchaser, and the vehicle having been used, however negligible the distance run, we are also of the opinion that it is his “used personal effect” and there can be alleged no taxable transaction in so far as the movement of goods from Puthuchery to Trivandrum in Kerala, especially since the car had
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
