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2010] Cheerans Auto Agencies v. State of Kerala (Ker.) 221
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then the petitioner has no right to claim the balance sale consideration of
the new vehicle sold to the customer irrespective of whether the value of
the old vehicle fixed by the broker is realised by sale of the old vehicle
surrendered by the customer or not. In other words, there is clear sale of
the old vehicle by the customer by delivering the possession of the same
along with its registration certificate and transfer documents in terms of
the Motor Vehicles Rules. The consideration paid to him is by way of
adjustment of the purchase value of the old vehicle, towards the sale price
of the new vehicle. It is the conceded position that the petitioner treats the
sale of the new vehicle under the exchange scheme as full and complete
with no debit balance of price in the customer’s account. Therefore,
purchase of old vehicle from the customer is complete when new vehicle
is sold to him by recovering its value reduced by the cost of the old vehicle
taken over from the customer.
4. The next question to be considered is as to whether petitioner purchased
old vehicle or whether it is the broker who has purchased the old
vehicle. The terms of arrangement between the petitioner and the broker
for purchase and sale of the old vehicle are not disclosed to the Department.
In other words, it is not known as to who makes the profit or suffers
the loss in the resale of the old vehicle purchased from the customer.
However, we do not think, there is any need to go into the question because
the transaction of purchase of old vehicle from the customer and the sale
of new vehicle to him is between the petitioner and the customer. There
is no privity of contract between the broker and the customer because the
broker takes over possession of the old vehicle only after sale of new
vehicle by the petitioner to customer by adjusting consideration of old
vehicle, that is the value fixed by the broker, in the sale price of the new
vehicle. In other words, consideration for the purchase of the old vehicle
passes from the petitioner to the customer by way of credit given against
sale price of the new vehicle. It is not known whether the broker takes the
profit or suffers the loss on resale of the old vehicle above or below the
value for which it was purchased. If the petitioner allows the broker to take
profit or loss, then the position is that after purchase, the petitioner sells the
old vehicle at the same value of its purchase to the broker on credit sale
basis and broker later pays the value to the petitioner whether before or
after sale. On the other hand, if the broker is only paid commission or share
of profit on resale of old vehicle, then the broker only acts as an agent of
the petitioner. In other words, the purchase and sale of the old vehicle is
either by or on behalf of the petitioner. In our view, the Intelligence Officer,
rightly found that the petitioner evaded payment of tax on purchase and
sale of old vehicle by not disclosing the sales turnover in the return filed
and therefore, the penalty was rightly levied under section 67(1) of the
KVAT Act.
5. The next question to be considered is with regard to the reduction of
penalty claimed by the petitioner. We find that the Tribunal has reduced
the penalty to equal amount of tax as against the double amount sustained
GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 97