Sunday, May 8, 2016

Commissioner of Commercial Taxes, Thiruvananthapuram, Kerala V/s.M/s K.T.C. Automobiles


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 2446 OF 2007

Commissioner of Commercial
Taxes, Thiruvananthapuram, Kerala            …..Appellant

M/s K.T.C. Automobiles                            …..Respondent

                               J U D G M E N T


The  Commissioner  of  Commercial  Taxes,  Thiruvananthapuram,  Kerala   has
preferred this appeal against judgment and order dated 20.3.2006  passed  by
the High Court of Kerala in MFA No. 1000 of 2002. The High Court  exercising
an appellate power allowed the appeal filed by M/s K.T.C.  Automobiles,  the
respondent  herein  and  set  aside  the  original  order  passed   by   the
Intelligence Officer under Section 45A of the Kerala General Sales  Tax  Act
(for brevity ‘KGST  Act’)  imposing  a  penalty  of  Rs.86  lakhs  upon  the
respondent dealer for the  alleged  non-maintenance  of  complete  and  true
accounts during the period 1.4.1999 to 31.3.2000. The High  Court  also  set
aside  the  suo-motu   order  of  Commissioner  of  Commercial  Taxes  dated
12.8.2002 passed under section 37 of the KGST Act whereby  the  Commissioner
had set aside appellate order of the Deputy Commissioner dated 8.1.2002  and
had restored the order of the Intelligence Officer.
The undisputed facts disclose that the respondent  is  in  the  business  of
purchase and sale of Hyundai cars manufactured by  Hyundai  Motors  Limited,
Chennai. As a dealer of said  cars,  both  at  Kozhikode  (Calicut),  Kerala
where their head office is  located  and  also  at  Mahe  within  the  Union
Territory  of  Pondicherry  where  they  have  a  branch  office,  they  are
registered dealer and an assessee under the KGST Act, the Pondicherry  Sales
Tax Act as well as the  Central  Sales  Tax  Act.  The  dispute  relates  to
assessment year 1999-2000. Its genesis is ingrained  in  the  inspection  of
head office of the respondent on 1.6.2000 by the Intelligence  Officer,  IB,
Kozhikode. After obtaining office copies of the sale invoices of M/s  K.T.C.
Automobiles, Mahe (branch office) for the relevant period as  well  as  some
additional period and also cash receipt books, cash book etc. maintained  in
the head office, he issued a show cause notice dated 10.8.2000 proposing  to
levy Rs.1 crore by way of penalty under Section 45A by the KGST Act  on  the
alleged premise that the respondent had wrongly shown 263 number of cars  as
sold from its Mahe Branch,  wrongly  arranged  for  registration  under  the
Motor Vehicles Act at Mahe and wrongly collected and remitted tax for  those
transactions under the provisions of Pondicherry Sales  Tax  Act.  According
to the Intelligence Officer, the  sales  were  concluded  at  Kozhikode  and
hence the vehicles should have been registered within the State  of  Kerala.
Therefore, by showing the  sales  at  Mahe  the  respondent  had  failed  to
maintain true and complete accounts as an assessee under the  KGST  Act  and
had evaded payment of tax to the tune of Rs.86  lakhs  and  odd  during  the
relevant period. The respondent submitted a detailed reply  and  denied  the
allegations and raised various objections to the proposed levy  of  penalty.
The Intelligence Officer by his order dated 30.3.2001 stuck to his views  in
the show cause notice but instead of Rs.1 crore, he  imposed  a  penalty  of
Rs.86 lakhs only.
The respondent appealed against that order. Their appeal was allowed by  the
Deputy Commissioner by a detailed order dated 8.1.2002 which has been  noted
and examined with meticulous care by the High Court in paragraphs  9  to  11
of the impugned judgment and later approved. Against the appellate order  in
favour of assessee, the Commissioner of Commercial Taxes  initiated  a  suo-
motu proceeding in exercise of power under Section 37 of the  KGST  Act  and
passed a final order on 12.8.2002 setting  aside  the  appellate  order  and
restoring the original order of penalty passed by the Intelligence  officer.
Against this suo-motu order the  respondent  preferred  Miscellaneous  First
Appeal before the High Court of Kerala which was numbered as  MFA  No.  1000
of 2002 and ultimately allowed by the impugned order dated 20.3.2006.
Mr. K.  Radhakrishnan,  learned  senior  advocate  for  the  appellant  made
detailed oral submissions on facts  as  well  as  law.  The  same  has  been
supplemented by way of written submissions also. The  submission  on  behalf
of appellant is that  the  order  imposing  penalty  is  based  upon  proper
appreciation of all the facts and circumstances noted  by  the  Intelligence
Officer in the show cause notice as well as in his  final  order.  According
to submissions, there was no other conclusion possible except to  hold  that
the respondent dealer had created colorable device to  evade  sales  tax  in
Kerala by adopting questionable means such as providing incorrect  addresses
of buyers  for  the  purpose  of  facilitating  registration  of  the  motor
vehicles at Mahe. According to  Mr.  Radhkrishnan,  the  sales  transactions
stood concluded in Kozhikode, Kerala and hence  the  respondent  should  not
have given any facilities to residents of Kerala in getting  motor  vehicles
registered at Mahe. By adoption of such means, the  respondent  had  derived
advantage of paying sales tax in Pondicherry where the rate  was  lower  and
evaded payment of lawful tax under the KGST Act in Kerala.
To elaborate and support the aforesaid factual stance,  the  learned  senior
counsel has highlighted some facts which  have  been  duly  noticed  by  the
authorities under the KGST Act as well as the  High  Court.  He  highlighted
that  in  the  “customer  booking   registration   and   necessary   fitting
instructions” issued from main office at Kozhikode the  respondent  gave  an
unwarranted option to the customers of registering the vehicle at  Mahe.  It
was contended on behalf of appellant that such option  was  not  for  lawful
purposes of promoting sales at Mahe but an offer to facilitate  registration
of cars at Mahe against the provisions of Motor Vehicles Act and  the  Rules
which require registration at the place of residence or  place  of  business
of the owner of the vehicle.  Some allegations were highlighted  to  contend
that in some purchase orders the buyers had given Kerala addresses  but  the
respondent as a dealer raised sale invoices  showing  Mahe  addresses  which
were fictitious. This was alleged to be a deliberate  act  on  the  part  of
dealer to escape tax liability in Kerala. It was also highlighted that  same
cash receipt book in the head office at Kozhikode  was  at  times  used  for
issuance of cash receipts for transactions where the sale  and  registration
was shown at Mahe. Letters of few buyers allegedly supported the  allegation
that sometimes even the delivery of  the  vehicle  was  given  at  Kozhikode
although it was registered at Mahe.
A legal issue was raised on behalf of the appellant that as per  Explanation
under Section 45 of the KGST Act, the burden is  on  the  assessee  to  show
that penalty is not liable to be imposed on him. It is  submitted  that  the
respondent had failed to discharge such burden imposed by law. Reliance  was
placed upon Sections 39 and 40 of the Motor Vehicles Act  along  with  Rules
46 and 47 of the Rules  framed  under  the  said  Act,  in  support  of  the
contention that in law the obligation to register a motor vehicle is on  the
owner and  that  necessarily  implies  that  registration  under  the  Motor
Vehicles Act is a post-sale event. In support of this  proposition  reliance
was placed upon a judgment of Bombay High Court in the  case  of  Additional
Commissioner of Sales Tax v. Sehgal Autoriders Pvt. Ltd.,  2011  SCC  OnLine
Bom 872 = 43 VST 398 (Bom) and also  upon  a  judgment   of  this  Court  in
Association of Registration Plates v. Union of  India,  (2004)  5  SCC  364.
Paragraph 28 of this judgment is as follows:
      “28. Section 2(21-A) defines “manufacturer’ and it means a person  who
is engaged in the manufacture  of  motor  vehicles.  Section  2(28)  defines
“motor vehicles” or  “vehicle”  and  it  means  any  mechanically  propelled
vehicle adapted for sue upon  roads.  A  motor  vehicle  manufactured  by  a
manufacturer is sold without a registration  plate.  Thereafter  the  dealer
sells the motor vehicle to a customer again without the registration  plate.
 This position will be clear from the proviso  to  Section  39  of  the  Act
which says that nothing in the section shall apply to  a  motor  vehicle  in
possession of a dealer subject to such conditions as may  be  prescribed  by
the Central Government. Section 41 also points to the same  position  as  it
enjoins an application on behalf of the owner of a  motor  vehicle  for  its
registration. The question of issuing  a  certificate  of  registration  and
assigning it a registration mark arises only after sale of a motor  vehicle.
Therefore, until the motor vehicle has been sold to a person  by  a  dealer,
the registering authority would not come into the picture and  there  is  no
occasion for assigning it a registration mark…..”

The aforesaid issue need  not  detain  us  any  further  in  view  of  cited
judgments and combined reading of Section 39 and 41 of  the  Motor  Vehicles
Act, 1988.  Section  41  in  particular  leaves  no  manner  of  doubt  that
application for registration of a motor vehicle is required to  be  made  by
or on behalf of the owner in the prescribed form along with  prescribed  fee
within a specified period. The registering authority after  being  satisfied
with all  statutory  compliances,  has  a  corresponding  duty  to  issue  a
certificate  of  registration  in  the  form  prescribed  by   the   Central
Government. But even after accepting the proposition that registration of  a
motor vehicle is a post-sale event, the question as to when the property  in
a motor vehicle actually passes to the buyer remains to be examined  in  the
light of provisions of Motor Vehicles Act and the Rules framed  there  under
as well as the other relevant provisions of law.  According  to  submissions
advanced on behalf of appellant, for deciding  the  issue  as  to  when  and
where sale takes place in respect of motor vehicle bought by a buyer from  a
dealer, the relevant  provisions  of  law  are  in  Article  286(2)  of  the
Constitution of  India,  Section  4(2)  Central  Sales  Tax  Act,  1956  and
Sections 4, 19 and 20 of the Sale of  Goods  Act,  1930.  For  the  sake  of
clarity those provisions are extracted below:
“Article 286(2) of the  Constitution  of  India  –  Parliament  may  by  law
formulate principles for determining when a sale or purchase of goods  takes
place in any of the ways mentioned in clause (1).”

“Section 4(2) Central Sales Tax Act, 1956 – A  sale  or  purchase  of  goods
shall be deemed to take place inside a State, if the goods  are  within  the
State –
(a)   in the case of specific or ascertained goods,       at  the  time  the
contract of sale is made; and

(b)   in the case of unascertained or future  goods,       at  the  time  of
their appropriation to the contract of  sale by the seller or by the  buyer,
whether assent    of  the  other  party  is  prior  or  subsequent  to  such

“Sale of Goods Act, 1930-

Section 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.

Section 19 - Property passes when intended to pass

(1) Where there is a contract for the sale of specific or ascertained  goods
the property in them is transferred  to  the  buyer  at  such  time  as  the
parties to the contract intend it to be transferred.

(2) For the purpose of ascertaining the  intention  of  the  parties  regard
shall be had to the terms of the contract, the conduct of  the  parties  and
the circumstances of the case.

(3) Unless a different intention appears, the Rules  contained  in  sections
20 to 24 are Rules for ascertaining the intention of the parties as  to  the
time at which the property in the goods is to pass to the buyer.

Section 20 - Specific goods in a deliverable state

Where there is an unconditional contract for the sale of specific  goods  in
a deliverable state, the property in the goods passes to the buyer when  the
contract is made, and it is immaterial whether the time of  payment  of  the
price or the time of delivery of the goods, or both, is postponed.”

Before evaluating the impact of aforesaid legal provisions  relied  upon  on
behalf of the appellant, it would be appropriate  to  notice  the  arguments
advanced and the stand adopted by Mr. K. Prasaran, learned  senior  advocate
for the respondent.   According to him, the situs of first sale of  a  motor
vehicle by a dealer is only at the place of registration of the  vehicle  by
the authority empowered to register motor vehicles under Chapter IV  of  the
Motor Vehicles Act. This submission is founded upon a hypothesis that  until
the vehicle is registered in accordance with the provisions  in  Chapter  IV
of the Motor Vehicles Act read with the Central  Motor  Vehicles  Rules,  it
continues to have the character of an unascertained good.  In  other  words,
till the engine number, chassis number is  ascertained  by  the  registering
authority on physical verification of  the  vehicle  and  entered  into  the
prescribed form for showing registration, the vehicle cannot  be  identified
as one belonging to the purchaser.  Only upon  valid  registration,  as  per
submissions, the vehicle is appropriated to the  purchaser.  In  support  of
this proposition, Mr. Prasaran also referred to Section  4  of  the  Central
Sales Tax Act already noted earlier.   He also referred  to  Section  2(xxi)
of the KGST Act  which  defines  sale  to  include  every  transfer  of  the
property in goods by one person  to  another  in  the  course  of  trade  or
business  except  transactions  of  a  mortgage,  hypothecation,  charge  or
pledge.  Particular emphasis  was  laid  on  explanation  4(a)(ii)  to  this
definition of ‘Sale’.  This explanation is more or less  similar  in  intent
and meaning as Section 4(2) of the Central Sales  Tax  Act,  1956  extracted
earlier. It conveys that for the purposes of KGST Act, the sale or  purchase
of unascertained or future goods shall be deemed, if the  goods  are  within
the State at the time of their appropriation to  the  contract  of  sale  or
purchase.  Reliance was also placed on Paragraph 8 of the judgment  of  this
Court in Tata Engineering and Locomotive Co. Ltd. v. Assistant  Commissioner
of Commercial Taxes (1970) 1 SCC 622, which reads as under:-
“…There had been  many  instances  where  the  vehicles  had  been  actually
delivered from the stockyards prior to the issue of the  allocation  letter.
The vehicles delivered to the dealer from the stockyard were  accounted  for
against the allocation over the period. It was the  stockyard  incharge  who
appropriated the required number of vehicles to the contract of sale out  of
the stocks available with him and put down the vehicle  engine  and  chassis
number in the delivery challan. This was done after  a  delivery  order  had
been addressed by the sales office at Bombay to the stockyard in-charge  for
delivery of stated number of vehicles of specified  model  to  a  particular
dealer. Till such appropriation of vehicles  through  specification  of  the
engine and chassis numbers, it was always open to the company to “allot  any
vehicle to any purchaser or to transfer the vehicles from the  stockyard  in
one State to a stock-yard in another State.”” (emphasis supplied)

According to the respondent the fact that  the  vehicles  in  question  were
registered at Mahe, irrefutably leads  to  the  conclusion  of  their  being
produced before the Registering Authority at Mahe prior to registration,  as
per requirement of Section 44 of the Motor Vehicles  Act.   It  was  pointed
out that Chapter  III  of  the  Central  Motor  Vehicles  Rules  deals  with
registration of motor vehicles and as per Rule  33,  a  dealer  is  exempted
from the necessity of registration even though  in  possession  of  a  motor
vehicle, if it obtains a Trade Certificate from  the  Registering  Authority
of the area where he carries on his business.  Form 16 under Rule  34  is  a
form of application for grant or renewal of Trade Certificate  whereas  Form
17 contains the form of Trade  Certificate.   These  forms  show  that  only
general information as to class of motor vehicle is noted  for  the  purpose
of Trade Certificate and not specific particulars of  any  vehicle  such  as
engine number or chassis number.  Rule 40  places  restrictions  on  use  of
Trade Certificate by specifying that it shall be used only by the person  to
whom it is issued.  The exceptions  indicated  in  this  Rule  also  do  not
permit use by a purchaser of a vehicle.  Rule  41  enumerates  the  purposes
for which motor vehicle with Trade Certificate may be used.   A  perusal  of
the purposes reveals that it is permissible for a dealer only who is  holder
of a Trade Certificate to use a vehicle with  Trade  Certificate  for  test,
repair etc.  including  for  proceeding  to  and  from  any  place  for  its
registration.   Rule 42 prohibits the holder of  a  Trade  Certificate  from
delivering a motor vehicle to  a  purchaser  without  registration,  whether
temporary or permanent.
 On behalf of respondent, reliance was placed  upon  a  judgment  of  Bombay
High Court dated 17.1.2014 in First Appeal No. 166  of  2009  (entitled  The
New India Assurance Co. Ltd. vs. Clancy Arcanjia Dias). That judgment  shows
that a temporary registration number was obtained  by  the  manufacturer  of
Mahindera  Jeep  at  Nasik  where  the  vehicle  was  manufactured  and  the
manufacturer had also insured the vehicle during its transit  by  road  from
Nasik to Goa. After the vehicle was handed over to dealer  at  Goa,  as  per
records, it was covered by a valid  Trade  Certificate  and  also  insurance
cover in respect of vehicles with the dealer.  It was held  that  since  the
road accident leading to claim for compensation  happened  before  the  jeep
was delivered to the purchaser, the liability to pay  the  compensation  was
upon the appellant, which had issued the cover note  for  vehicles  held  by
the dealer under the valid Trade Certificate.
On facts it has  been  submitted  on  behalf  of  the  respondent  that  the
allegation by the Intelligence Officer that the assessee has not  maintained
proper accounts for justifying imposition of penalty, is based upon a  wrong
assumption that sales of 263 cars leading  to  their  registration  at  Mahe
were actually sales in Kerala.
According to respondent, when  the  entire  facts,  relevant  documents  and
alleged evidence were before the authorities as well as the High Court,  the
burden of proof under Section 45A of the KGST Act  loses  its  significance.
The appeal to the High  Court  under  Section  40  of  the  KGST  Act  is  a
statutory appeal on questions of law as well as fact and hence, the  finding
of facts returned by the High  Court  by  confirming  the  findings  of  the
Appellate Authority, the Deputy Commissioner need no  interference  by  this
Court.  According to the respondent, the Deputy Commissioner  and  the  High
Court have come to a concurrent finding that the materials do  not  lead  to
any conclusive proof  that  the  vehicles  in  question  had  been  sold  at
Kozhikode in Kerala.  According to both the authorities, the  materials,  at
best, raise only some suspicion which can never  take  the  place  of  proof
which is necessary for imposition of penalty upon the assessee.
From the above submissions and counter submissions of the  parties  as  well
as relevant statutory provisions in the Motor Vehicles  Act,  1988,  Central
Motor Vehicles Rules, 1989, Section 4(ii) of Central Sales  Tax  Act,  1956,
Sections 4, 19 and 20 of the Sales of Goods Act and relevant  provisions  of
the KGST Act and Rules noticed earlier, we find no difficulty  in  accepting
the submissions advanced on behalf of the appellant that the application  of
registration is by law required to be made by or  on  behalf  of  the  owner
whose name is to be mentioned in the registration form along  with  relevant
particulars of the vehicle such as engine  number  and  chassis  number  and
hence, registration of a motor vehicle is a post-sale event.
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,  authorizing  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  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  the  intending
purchaser to appropriate all the goods, i.e.  the  motor  vehicle  till  its
possession is or can be lawfully handed over to him by  the  dealer  without
violating the statutory provisions governing motor vehicles.  Such  transfer
of possession can take place only when the vehicle reaches the  place  where
the registering authority will be obliged to  inspect  for  the  purpose  of
finding out whether it is a roadworthy and register-able motor  vehicle  and
whether its identification marks tally with those given in the sale  invoice
and the application  for  registration.   The  possession  can  lawfully  be
handed over to the purchaser at  this  juncture  because  law  requires  the
purchaser as an “owner” to make an application for registration but  at  the
same time the law also prohibits use of  the  motor  vehicle  by  the  owner
until it is duly registered by the Registering Authority.  Hence,  in  order
to satisfy the requirement of law noticed  above,  the  dealer  can  deliver
possession and owner  can  take  possession  and  present  the  vehicle  for
registration only when it reaches the office of 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 the dealer of a  motor  vehicle  can  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
already  noticed.   Hence  lawful  possession  with  the  right  of  use  is
permissible to be given to  the  intended  owner  only  after  reaching  the
vehicle to the office of Registering Authority.   Thus  seen,  in  practical
terms  though  sale  precedes  the  event  of    registration,   in   normal
circumstances and as the law stands, it is co-terminus with registration  of
a new motor vehicle.
Article 286(2) of the Constitution  of  India  empowers  the  Parliament  to
formulate by making law, the principles  for  determining  when  a  sale  or
purchase of goods takes place in the context of clause (1). As  per  Section
4(2) of the Central Sales Tax Act, in the case of  specific  or  ascertained
goods the sale or purchase is deemed to have taken place  inside  the  State
where the goods happened to be at the time of making  a  contract  of  sale.
However, in the case of unascertained or future goods, the sale or  purchase
shall be deemed to have taken place in a State where the goods  happened  to
be at the time of their appropriation by the seller or buyer,  as  the  case
may be.  Although on behalf of the respondent, it has been vehemently  urged
that motor vehicles remain unascertained goods till their engine  number  or
chassis  number  is  entered  in  the  certificate  of  registration,   this
proposition does not merit acceptance because the sale invoice  itself  must
disclose such particulars as engine number and chassis number so that as  an
owner, the purchaser may apply for registration of  a  specific  vehicle  in
his name.  But as discussed earlier,  on  account  of  statutory  provisions
governing motor vehicles, the intending owner or buyer of  a  motor  vehicle
cannot ascertain the particulars of the vehicle for appropriating it to  the
contract of sale till its possession is handed over to him  after  observing
the requirement of Motor Vehicles Act and Rules.   Such  possession  can  be
given  only  at   the   registering   office   immediately   preceding   the
registration.  Thereafter only the goods  can  stand  ascertained  when  the
owner can actually verify the  engine  number  and  chassis  number  of  the
vehicle of which he gets possession. Then he can fill up  those  particulars
claiming them to be true to his  knowledge  and  seek  registration  of  the
vehicle in  his  name  in  accordance  with  law.   Because  of  such  legal
position, prior to getting possession of  a  motor  vehicle,  the  intending
purchaser/owner does not have claim  over  any  ascertained  motor  vehicle.
Apropos the above, there can be  no  difficulty  in  holding  that  a  motor
vehicle remains in the category of unascertained or future  goods  till  its
appropriation to the contact of sale by the seller is occasioned by  handing
over its possession at or near the office of  registration  authority  in  a
deliverable and  registrable  state.   Only  after  getting  certificate  of
registration the owner becomes entitled to enjoy the benefits of  possession
and can obtain required certificate of insurance in his name and meet  other
requirements of law to use the motor vehicle at any public place.
In the light of legal formulations discussed  and  noticed  above,  we  find
that in law, the motor vehicles in question could come into the category  of
ascertained goods and could get appropriated to the contract of sale at  the
registration  office  at  Mahe  where  admittedly  all  were  registered  in
accordance with Motor Vehicles Act and Rules.  The aforesaid  view,  in  the
context of motor vehicles gets support from sub-section (4) of Section 4  of
the Sale of Goods Act. It contemplates that an agreement to sell  fructifies
and becomes a sale when the conditions are fulfilled subject  to  which  the
properties of the goods is to be transferred.  In  case  of  motor  vehicles
the possession can be handed over, as noticed earlier, only at or  near  the
office of registering authority, normally at the time of  registration.   In
case there is a major accident when the dealer is taking the  motor  vehicle
to the registration office and vehicle  can  no  longer  be  ascertained  or
declared fit for  registration,  clearly  the  conditions  for  transfer  of
property in the goods do not get satisfied or fulfilled.  Section 18 of  the
Sale of Goods Act postulates that when a contract for sale is in respect  of
unascertained goods no property in the goods is  transferred  to  the  buyer
unless and until the goods are ascertained.   Even  when  the  contract  for
sale is in respect of specific or ascertained goods, the  property  in  such
goods is transferred to the buyer only at such time as the  parties  intend.
The intention of the parties in this regard  is  to  be  gathered  from  the
terms of the contract, the conduct of the parties and the  circumstances  of
the case.  Even if the motor vehicles were to be  treated  as  specific  and
ascertained goods at the time when the sale invoice with  all  the  specific
particulars may be issued, according to Section 21  of  the  Sale  of  Goods
Act, in case of such a contract for sale also, when the seller is  bound  to
do  something  to  the  goods  for  the  purpose  of  putting  them  into  a
deliverable state, the property does not pass until such thing is  done  and
the buyer has notice thereof.   In  the  light  of  circumstances  governing
motor vehicles which may safely be gathered even  from  the  Motor  Vehicles
Act and the Rules, it is obvious that the seller or the  manufacturer/dealer
is bound to transport  the  motor  vehicle  to  the  office  of  registering
authority and only when it reaches there safe and sound, in accordance  with
the statutory provisions governing motor vehicles it can be said to be in  a
deliverable state and only then the property in such  a  motor  vehicle  can
pass to the buyer once he has been given notice that the  motor  vehicle  is
fit and ready for his lawful possession and registration.
In view of discussions made earlier, there is no need to again traverse  the
factual matrix, which led the Deputy Commissioner  and  the  High  Court  to
decide the controversy in favour of the respondent.  However, since we  have
gone through the judgment of the High Court carefully, we are  in  agreement
with  the  contention  advanced  on  behalf  of  the  respondent  that   the
allegations and facts made or noted by the  Intelligence  Officer  no  doubt
create some doubts but they do not lead to a conclusive inference  that  the
sales under controversy  had  taken  place  at  Kozhikode,  Kerala.  To  the
contrary, in  view  of  propositions  of  law  discussed  hereinbefore,  the
judgment of the High Court gets reinforced  and  deserves  affirmation.   We
order accordingly.  As a result, the  Civil  Appeal  is  found  to  be  sans
merits and is dismissed as such.  In the facts of the case  there  shall  be
no order as to costs.

                       [DIPAK MISRA]

                       [SHIVA KIRTI SINGH]
New Delhi.
January 29, 2016.

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