M/S.
Madras Credit & Investment Ltd Vs. State of Kerala [2008] INSC 755 (30 April
2008)
ASHOK BHAN & DALVEER BHANDARI
1 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL
Nos.8335-8336 OF 2002 M/S. MADRAS CREDIT & INVESTMENT LTD. Appellant (s)
VERSUS STATE OF KERALA Respondent(s) ORDER The assessee has filed the present
Appeals by special leave.
The assessee is a financier, providing finance to the customers who wish to
purchase of goods, such as equipments, machinery, vehicles, etc., both from
within Kerla and from outside the State of Kerala, and delivery of the goods in
the State of Kerala, under hire purchase agreement executed between the
assessee and the customers/parties.
The modus operandi followed by the assessee is as under:
The intending customers would approach the supplier for purchasing
equipment, machinery, etc. and obtain a proforma invoice from the supplier for
the purchase of the goods.
The customers then approach the assessee with an application in the
prescribed form, stating the amount required to be financed for purchase of
goods and enclosing therewith the proforma invoice obtained by the customer
from the supplier. The assessee after being satisfied itself about the bona
fides and credit worthiness of the customers, sanctions the amount of advance.
2 Upon the terms of financing, viz., the extent of finance, rate of
interest, period of hire purchase, etc. being settled between the assessee and
the customers in Kerala, hire purchase agreement is executed. Under the Agreement,
the purchase order is placed by the assessee to the supplier outside Kerala,
directing the supplier to deliver the goods to the customer in Kerala. The
invoice is raised in the name of the assessee and the payment thereof is made
by the assessee to the supplier. The assessee thus retains the title of the
goods until the last instalment under the Hire Purchase Agreement is paid by
the customer. The customer pays to the assessee the amount borrowed in
instalments as agreed upon and on payment of the last instalment, the goods
become the property of the customer. The ownership is transferred to the
customer thereafter. In case of breach in payment of instalment under the
agreement, the assessee was free to take back the possession of the goods and deal
with it in the manner it likes.
The dispute in the present case pertains to the purchase of goods made from
outside the State of Kerala. So far as the goods purchased within the State of
Kerala are concerned, no tax had been levied, as the assessee has been treated
as the second seller of the goods. The goods purchased from outside the State
was treated sale by the appellant to the customers within the State of Kerala.
Therefore, the goods purchased from outside the State of Kerala and delivered
in the State of Kerala was treated as "sale" of the goods by the
assessee and, accordingly the same was taxed. The appellant, inter alia,
contended that the sale of the goods took place outside Kerala and, at any
rate, it was an inter-State sale not taxable in Kerala.
Rejecting the contention of the appellant, the Assessing Officer levied the
sales tax on the assessee in respect of the purchase made from outside the
State of Kerala. The assessee 3 challenged the assessment in appeal. The
Appellate Assistant Commissioner vide orders dated 21.04.1999 dismissed the
appeal. The appellant filed second appeal before the Sales Tax Appellate
Tribunal, Kerala (for short "the Tribunal") which also dismissed the
appeal.
Aggrieved theiragainst, the appellant thereafter filed Tax Revisions, as
provided under the Act, in the High Court, (being TRC Nos. 318 and 319 of
2000).
By the impugned judgment, the High Court while affirming the decision of the
Tribunal, held that the assessee was liable to tax in respect of the hire
purchase transaction which is independent of the inter-State purchase by the
assessee. The assessee relied upon two judgments of this Court in extending the
scope of "inter-State sale" falling under Section 3(a) of the Central
Sales Tax Act.
outside State sales under Section 4 of the C.S.T. Act or inter-State sales
from outside Kerala. It was contended that the sales being inter-State sales,
sales tax could not be levied in the State of Kerala. Rejecting this contention
the High Court held:
"We find that the above decisions have application only in respect of
first of the two transactions, that is purchases of goods by the assessee from
the outside State suppliers. Therefore, so far as the supplier's sales to the
assessee are concerned, they are inter-State sales falling within Section 3(a)
of the CST Act, and there is no dispute about the same by the department also.
The question is with regard to second transaction between the assessee and the
4 customer in Kerala, which gives rise to the liability for the disputed tax.
We feel, as already observed by us above, there are two transactions, one is
the inter-State purchase by the assessee, and the other is the delivery of
goods under the hire purchase agreement by the assessee to the customer in
Kerala, which is the deemed sale under Explanation 3A to Section 2(xxi) of the
KGST Act. Therefore, the decisions referred to above do not affect the
assessee's liability for tax in respect of the hire purchase transaction, which
is independent of the inter-State purchase by the assessee."
We entirely agree with the view taken by the High Court. Consequently, we
find no merit in these appeals and the same are dismissed with no orders as to
costs.
....................J.
(ASHOK BHAN) ....................J.
(DALVEER BHANDARI) NEW DELHI;
April 30, 2008.
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