Holding

A motor vehicle sale is deemed to occur at the place of registration, as the vehicle remains an unascertained good until possession is handed over at the registering authority, so the penalty for tax evasion was unwarranted.

Summary

The Commissioner of Commercial Taxes of Kerala challenged a penalty of Rs.86 lakh imposed on K.T.C. Automobiles for allegedly evading Kerala sales tax by registering 263 cars sold from its Mahe branch under the Pondicherry Sales Tax Act. The High Court set aside the penalty, holding that the sale was completed at Mahe where the vehicles were registered, not at the dealer's head office in Kozhikode. On appeal, the Supreme Court examined whether registration of a motor vehicle is a post‑sale event and when property in the vehicle passes to the buyer under the Motor Vehicles Act, Central Motor Vehicles Rules, the Central Sales Tax Act, the Sale of Goods Act, and Article 286(2) of the Constitution. It held that a motor vehicle remains an unascertained good until it is handed over at the registering authority, making the sale co‑terminus with registration and deemed to occur in the state of registration. Consequently, the alleged tax evasion could not be established and the penalty was rightly set aside. The appeal was dismissed.

Issues considered

The appropriate situs of sale of a motor vehicle for tax purposes – whether at the dealer's place of business or at the place of registration.
Whether registration of a motor vehicle is a post‑sale event and when the property in the vehicle passes to the buyer.
Whether the penalty under Section 45A of the Kerala General Sales Tax Act can be imposed on the basis of the alleged evasion.
The interpretation of Article 286(2) of the Constitution, Section 4(2) of the Central Sales Tax Act and relevant provisions of the Sale of Goods Act in the context of motor vehicles.

Legislation cited

Central Motor Vehicles Rules, 1989s. 33, s. 34, s. 40, s. 41, s. 42
Central Sales Tax Act, 1956s. 4(2)
Constitution of Indias. Article 286(2)
Kerala General Sales Tax Acts. 37, s. 45A
Motor Vehicles Act, 1988s. 39, s. 41
Sale of Goods Act, 1930s. 18, s. 19, s. 20, s. 21, s. 4

Subjects

tax evasionsales taxmotor vehicle registrationsale of goodsunascertained goodspenaltyinter‑state saleKGST ActCentral Sales Tax Actjurisdiction

Judgment

[2P' '·I I S.C.R. 994

A COMMISSIONER OF COMMERCIAL TAXES,
THIRUVANANTHAPURAM, KERALA
v.
MIS K.T.C. AUTOMOBILES
B (Civil Appeal No. 2446 of2007)
JANUARY 29, 2016
[DIPAK MISRA AND SHIVA KIRTI SINGH, JJ.]
Kera/a General Sales Tax Act: s. 45A - Penalty for evasion of
tax - A/legation against re~pondent-car dealer was that respondent
c showed the sale of cars from its Mahe Branch, wrongly arranged
for registration under Motor Vehicles Act at Mahe and wrongly
collected and remitted tax for those transactions under the provisions
of Pondicherry Sales Tax Act while the sale of cars had concluded
at Kozhikode Branch and by adoption of such means, respondent
D had derived advantage of paying sales tax in Pondicherry where
the rate was lower and evaded payment of tax under the KGST Act
in Kera/a - Department imposed penalty of Rs.86 /akhs upon the
respondent - High Court set aside the order of penalty - Appeal by
Department - Held: Technically though the registration of a motor
vehicle is a post-sale event, the event of sale is closely linked in
E
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 -
Motor vehicle remains in the category of unascertained or future
F goods till its appropriation to the contract of sale by the seller is
occasioned by handing over its possession at or near the office of
registering authority in deliverable and registrable state - Thus,
sale is co-terminus with the registration of new motor vehicle - Jn
the instant case, vehicles were registered at Mahe which lead to
G conclusion that they were produced before the Registering Authority
at Mahe prior to registration and thus sale concluded at Mahe -
Respondent was not guilty of evasion of tax - Penalty was thus
rightly set aside by the High Court - Constitution of India, 1950 -
Article 286(2) - Central Sales Tax Act - s.4(2) - Sale of goods Act
- s.4 - Constitution of India, 1950 - Article 286(2).
H
994
COMMNR. OF COMMERCIAL TAXES, THIRUVANANTHAPURAM, 995
KERALAv. K.T.C.AUTOMOBILES

Dismissing the appeal, the Court A
HELD: l, It is only after obtaiuing 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 B
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 c
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 D
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, With the
handing over of the possessiou 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 E
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 F
registration of a motor vehicle is a post-sale event, the event of
sale is closely linked in time with the event of registration. Thus
seen, in practical terms though sale precedes the event of
registration, in normal circumstances and as the law stands, it is
co-termi.nus with registration of a new motor vehicle, [Paras 14)
G
(1006-F-H; 1007-A-B, D-FJ
2. 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
H
996 SUPREME COURT REPORTS [2016] I S.C.R.

A 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
B
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
c 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 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
D
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
E 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
F
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
G 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. [Para 15J[1007-G-H; 1008-A-F]
3. In law, the motor vehicles in question could come into
H the category of ascertained goods and could get appropriated to
COMMNR. OF COMMERCIAL TAXES, THJRUYANANTHAPURAM, 997
KERALAv. K.T.C.AUTOMOBILES

the contract of sale at the registration office at Mahe where A
admittedly all were registered in accordance with Motor Vehicles
Act and Rules. The said 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
B
the properties of the goods is to be transferred. In case of motor
vehicles the possession can be handed over, 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 c
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
D
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 E
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
F
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 G
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. The
allegations and facts made or noted by the Intelligence Officer
H
998 SUPREME COURT REPORTS [2016) I S.C.R.

A 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. [Paras 16, l 7)[1008-G-H; 1009-A-F, HJ
Additional Commissioner of Sales Tax v. Sehgal
Autoriders Pvt. Ltd. 2011 SCC OnLine Born 872 = 43
B VST 398; Association of Registration Plates v. Union
of India (2004) 5 SCC 364; Tata Engineering and
Locomotive Co. Ltd. v. Assistant Commissioner of
Commercial Taxes (1970) 1 SCC 622: 1970 (3) SCR
862 - referred to.
C Case Law Reference
(2004) s sec 364 referred to. Para 6
1970 (3) SCR 862 referred to. Para 8
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2446
D of 2007
From the Judgment and Order dated 20.03.2006 at the High Court
of Kerala at Ernakulam in M. F. A. No. I 000 of2002
K. Radhakrishnan, Liz Mathew, M. F. Philip forthe Appellant.
K. Parasaran, A. Raghunath, B. G. Bhaskar, Aditidani for the
E Respondents.
The Judgment of the Court was delivered by
SHIVA KIRTI SINGH, J. I. The Commissioner of Commercial
Taxes, Thiruvananthapuram, Kerala has preferred this appeal against
F judgment and order dated 20.3.2006 passed by the High Court of Kerala
in MFA No. 1000 of2002. The High Court exercising an appellate power
allowed the appeal filed by Mis 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
G 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
H dated 8.1.2002 and had restored the order of the Intelligence Officer.
COMMNR. OFCOMMERCJAL TAXES, TH!RUVANANTHAPURAM, 999
KERALA v. K.T.C.AUTOMOBILES (SHIVA KIRT! SINGH, J.]

2. The undisputed facts disclose that the respondent is in the A
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,
B
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 Mis K.T.C. Automobiles, Mahe (branch office) for the
relevant period as well as some additional period and also cash receipt c
books, cash book etc. maintained in the head office, he issued a show
cause notice dated 10.8.2000 proposing to levy Rs. I crore by way of
penalty under Section 4SA 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
D
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
marntain true and complete accounts as an assessee under the KGST E
Act and had evaded payment of tax to the tune ofRs.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. I crore, he
F
imposed a penalty ofRs.86 lakhs only.
3. 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 imp.ugn.edjudgment and later approved.
G
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 H
1000 SUPREME COURT REPORTS [2016] I S.C.R.

A ofKerala which was numbered as MFA ~o. 1000 of2002 and ultimately
allowed by the impugned order dated 20.3.2006.
4. 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
13 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 huld that the respondent dealer had created colorable device to evade
sales tax in Kerala by adopting questionable means such as providing
c 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,
D the respondent had derived advantage of paying sales tax in Pondicherry
where the rate was lower and evaded payment of lawful tax under the
KOST Act in Kerala.
5. To elaborate and support the aforesaid factual stance, the learned
senior counsel has highlighted some facts which have been duly noticed
E by the authorities under the KOST 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 behalfof appellant that such option was not
for lawful purposes of promoting sales at Mahe but an offer to facilitate
F 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
0 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
1-1
COMMNR. OF COMMERClAL TAXES, THIRUVANANTHAPURAM, 1001
KERALA v. K.T.C.AUTOMOBILES [SHIVA KIRT! SINGH, J.]

of the vehicle was given at Kozhikode although it was registered at A
Mahe.
6. A legal issue was raised on behalf of the appellant that as per
Explanation under Section 45 of the KOST 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 I:!
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 ajudgmentofBombay High
c
Court in the case of Additional Commissioner of Sales Tax v. Sehgal
Autoriders Pvt. Ltd., 2011 SCC Online Bom 872 ~ 43 VST 398 (Born)
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: D
"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 "veh ide" and it means
any mechanically propelled vehicle adapted for sue upon roads. A
motor vehicle manufactured by a manufacturer is sold without a E
registration plate. Thereafter the dealer sells the motor vehicle to
a customer again withoutthe 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 F
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 G
not come into the picture and there is no occasion for assigning it
a registration mark ....."
7. 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
H
1002 SUPREME COURT REPORTS [2016] I S.C.R.

A 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
B
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
c 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 oflndia, 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:
D "Article 286(2) of the Constitution of India - Parliament may
by law formulate principles fordetennining when a sale or purchase
of goods takes place in any of the ways mentioned in clause ( l )."
"Section 4(2) Central Sales Tax Act, 1956- A sale or purchase
of goods shall be deemed to take place inside a State, ifthe goods
E 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
F buyer, whether assent of the other party is prior or subsequent
to such appropriation.
"S.ale of Goods Act, 1930-
Section 4 - Sale and agreement to sell
G (I) 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.
H
COMMNR. OF COMMERCIAL TAXES, THIRUVANANTHAPURAM, 1003
KERALAv. K.T.C.AUTOMOBILES [SHIVAKIRTI SINGH,J.]

(3) Where under a contract of sale the property in the goods is A
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 B
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 c
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.
D
(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 prope11y in the goods is to pass
to the buyer.
Section 20 - Specific goods in a deliverable state
E
Where there is an [mconditional 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."
F
8. Before evaluating the impact ofaforesaid 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
G
the vehicle by the authority empowered to register motor vehicles under
Chapter IV of the Motor Vehicles Act. This snbmission is founded upon
a hypothesis that until the.vehicle is registered in accordance with the
provisions in Chapter JV 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, ti 11 the engine number, chassis number H
1004 SUPREME COURT REPORTS [2016] I S.C.R.

A is asce1tained by the registering authority on physical verification of the
vehicle and entered into the prescribed fonn for showing registration,
the vehicle cannot be identified as one belonging lo 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
B
referred to Section 2(xxi) of the KG ST 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
c 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
KUST ..\ct. the sale or purchase ofunascertaincd 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 Coult in Tata Engineering
D
and Locomotive Co. Ltd. v. Assistant Commissioner of
Commercial Taxes ( 1970) I 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
E 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 avai !able
with him and put down the vehicle engine and chassis number in
the delivery challan. This was done after a delivery order had
F 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
G stock-yard in another State."" (emphasis supplied)
9. 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.
H
COMMNR. OF COMMERCIAL TAXES, THIRUVANANTHAPURAM, 1005
KERALAv. K.T.C.AUTOMOBILES [SHIVA KIRT! SINGH, J.]

It was pointed out that Chapter lll of the Central Motor Vehicles Rules A
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 ofTrade Certificate
B
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 c
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 wl10 is holder of a Trade Certificate to use a vehicle with
Trade Certificate for test, repair etc. including for proceeding to and
D
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.
I 0. On behalfofrespondent, reliance was placed upon a judgment
of Bombay High Court dated 17.1.2014 in First Appeal No. 166 of2009
(entitled The New India Assurance Co. Ltd. vs. Clancy Arcanjia E
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 F
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. G
11. 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 of263 cars leading to their registration
at Mahe were actually sales in Kerala. H
1006 SUPREME COURT REPORTS [2016] I S.C.R.

A 12. 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 hv confirming
B
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 Corn1 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
c 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.
13. From the above submissions and counter submissions of the
parties as well as relevant statutory provisions in the Motor Vehicles
D 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
E
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.
14. But this legal proposition does not take the appellant far. It
must be carefully seen as to when the properties, particularly possession
F 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
G 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
H
COMMNR. OF COMMERCIAL TAXES, THIRUVANANTHAPURAM, 1007
KERALA v. K.T.C.AUTOMOBILES (SHIVA KIRTI SINGH, J.]

its possession is or can be lawfully handed over to him by the dealer A
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
B
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 RegisteringAuthority.
Hence, in order to satisfy the requirement of law noticed above, the c
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
D
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 ofa motor vehicle is a post-sale event,
the event of sale is closely linkeil in time with the event of registration. E
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 fortaking 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
F
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.
15. Article 286(2) of the Constitution of India empowers the
Parliament to formulate by making law, the principles for determining G
when a sale or purchase of goods takes place in the context of clause
(I). 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 ofunascertained or H
1008 SUPREME COURT REPORTS [2016] I S.C.R.

A 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 ofregistration, this proposition does not merit acceptance
B
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
c 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
D
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 ofa motor vehicle, the intending purchaser/owner does not
have claim over any ascertained motor vehicle. Apropos the above, there
E can be no difficulty in holding that a motor vehicle remains in the category
ofunascertained 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 ofregistration the owner becomes entitled
to e1tjoy the benefits of possession and can obtain required certificate of
F
insurance in his name and meet other requirements of law to use the
motor vehicle at any public place.
16. In the light oflegal 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
G 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
H are fulfilled subject to which the properties of the goods is to be
COMMNR. OF COMMERCIAL TAXES, THIRUVANANTHAPURAM, 1009
KERALAv. K.T.C.AUTOMOBILES [SHIVA KIRT! SINGH, J.]

transferred. In case of motor vehicles the possession can be handed A
over, as noticed earlier, only at or near the office ofregistering 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
B
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 c
be gathered from the terms of the contract, the conduct of the parties
and the circumstances of the case. Even ifthe 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,
D
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 E
to the office ofregistering 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
F
possession and registration.
17. 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 G
of the respondent that the al legations 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 r"einforced H
JOJO SUPREME COURT REPORTS [2016] 1 S.C.R.

A and deserves affinnation. 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.
I
Devika Gujral
Appeal dismissed.

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