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2025 Supreme(Online)(Mad) 62350
IN THE HIGH COURT OF JUDICATURE AT MADRAS
S.M.SUBRAMANIAM, MOHAMMED SHAFFIQ, JJ
Tvl.Shriram Finance Ltd. – Appellant
Versus
State of Tamil Nadu represented by The Joint Commissioner (CT), Chennai (East) Division, Chennai. – Respondent
Tax Case (Revision) No.101 of 2025
For the Appellants/Petitioners: Mr.R.Sivaraman
For the Respondents:Mr.V.Prashanth Kiran Government Advocate (Taxes)
A financial institution acting as a dealer under the Tamil Nadu Value Added Tax Act is liable to sales tax on the sale of repossessed vehicles, regardless of ownership claims in contractual agreements.
Headnote:(A) Tamil Nadu Value Added Tax Act, 2006 - Sections 2(15), 2(33), 6, 8 - The Appellate Tribunal affirmed the petitioner as a 'dealer' under the TNVAT Act, liable to pay sales tax on sale of repossessed vehicles, despite contractual claims of non-ownership which were found unsupported in law. This classification is consistent with judicial interpretation of similar financial transactions across various cases. (Paras 1-43)
(B) Tax Liability - The classification of a financial institution as a dealer under the Act depends significantly on the nature of transactions involving repossession and sale of hypothecated vehicles, irrespective of the ownership claims made in agreements. (Paras 1-43)
Facts of the case:
The appellant challenged the Appellate Tribunal's conclusion that it is a 'dealer' liable for sales tax under the TNVAT act, with identical legal questions previously adjudicated against it in HDFC Bank Ltd. (Paras 1-43)
Findings of Court:
The Court concluded that the sales of repossessed vehicles are compulsory for debt recovery and the appellant has independent rights to sell the vehicles, not merely acting as an agent. (Paras 1-43)
Issues: Main questions included whether the appellant qualifies as a dealer and whether sales tax applies to its repossession and sale of hypothecated vehicles. (Paras 1-43)
Ratio Decidendi: The court found that the Appellate Tribunal’s decision was supported by precedents establishing that repossessing and selling hypothecated property constitutes dealership under tax laws. The contractual agreements did not exempt the appellant from liability as a dealer. (Paras 1-43)
Result: Tax Cases (Revision) dismissed with no costs.
| Table of Content |
|---|
| 1. introduction of the case and questions of law. (Para 1) |
| 2. arguments regarding the appellant's status as an agent. (Para 2) |
JUDGMENT
(Judgment of the Court was made by S.M.SUBRAMANIAM, J.)
This Tax Case has been filed by the petitioner/appellant, raising the following substantial questions of law:-
“(1) Whether, on the facts and in the circumstances of the case, the Hon'ble Appellate Tribunal was right in law in stating that the Petitioner/Appellant would fall within the ambit of “dealer” as per section 2(15) of the TNVAT Act, 2006?
(2) Whether, on the facts and in the circumstances of the case, the Hon'ble Appellate Tribunal was right in law in stating that sale of repossessed vehicle on behalf of the defaulter by the Petitioner/Appellant would be liable to pay taxes under VAT Act on the sale of the Hypothecated Motor Vehicles?
(3) Whether, on the facts and in the circumstances of the case, the Hon'ble Appellate Tribunal was right in law in stating that the Petitioner/Appellant is a dealer even though the contractual agreements specifically states the Petitioner/Appellant as not the owner of the Vehicle?
(4) Whether, on the facts and in the circumstances of the case, the Hon'ble Appellate Tribunal was right in law in stating that Resale of Plant and Machinery, Furniture and Fittings and Fixed Asset by the Petitioner/Appellant which is used for the purpose of own business would fall within the meaning of sale and subject to VAT as per the TNVAT ACT, 2006?
(5) Whether on the facts and in the circumstances of the case the Hon'ble Appellate Tribunal was right in law in not treating the sale of Plant & Machinery, fixture, furniture, air conditioners etc., as scrap?”
2. When the matter was taken up for consideration, the learned counsel appearing for both sides in unison submitted that the identical questions of law were already decided against the assessee by a Division Bench of this Court, in Tax Case (Revision) Nos.2 to 9 of 2019 on 25.09.2019 in the case of Cholamandalam Investment v. The State of Tamil Nadu . The relevant paragraphs of the said order are usefully extracted below:
“?22. We have heard the elaborate arguments put forth by Mr.N.Sriprakash, followed by the submissions made by the learned Special Government Pleader on several dates. In our view the learned Special Government Pleader has rightly crystallized the arguments made on either side and has framed questions/issues, which are required to be answered by us in these revision petitions. The four questions/issues, which required our consideration are hereunder:
“(i)Whether the assessee is a dealer as defined under Section 2 (15) of the TNVAT Act and liable to pay sales tax on the sale of the repossessed vehicles?
(ii)Whether the decision in HDFC Bank Ltd. , would apply to the case of the assessee?
(iii)Whether the assessee when acts as an agent of the borrower is liable to pay sales tax?
(iv)Whether the liability of the agents is not co- extensive with that of the Principal?”
23. When we heard the case at the first instance, the learned Special Government Pleader appearing for the respondent submitted that the issues raised in these revision petitions are clearly covered by the decision in HDFC Bank Ltd. , Mr.N.Sriprakash submitted that the Tribunal erred in applying the decision in HDFC Bank Ltd. , to the case of the assessee, who is the non-banking finance company. Therefore, we are to test the applicability or otherwise of the decision in HDFC Bank Ltd. , For such reason, we propose to test question No.(ii) at the first instance and the necessity to answer the other three questions will be subject to the decision we take on question No.(ii).
24. In HDFC Bank Ltd. , the revision petition was filed before this Court questioning the correctness of the order of the Sales Tax Appellate Tribunal, which held that the Bank is liable to pay sales tax. The assessment under the TNVAT Act was revised by the Assessing Officer on the ground that the bank had n
