MANDOVI MOTORS PRIVATE LIMITED Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) THE assessee has preferred these revision petitions challenging the order passed by the Karnataka Appellate Tribunal reviewing its earlier order and partially setting aside the order dated 26 -10 -2011 insofar as the issue of applicability of rate of tax on the sale of demo cars is concerned. The petitioner is an authorised dealer engaged in the business of sale of vehicles manufactured by M/s. Maruthi Udyog Limited. They also undertake services of the said cars. The petitioner is a registered dealer and is assessed to tax under the provisions of the Karnataka Value Added Tax Act, 2003 (for short hereinafter referred to as 'the KVAT Act'). The manufacturing company sells units of car to the petitioner for demonstration and test drive to get an idea of the units and also the physical appearance. These vehicles are called as demo vehicles. The demo vehicles are registered in the companies name and are the assets of the petitioner. The petitioner had paid consideration on the purchase of the demo cars and included the same in the fixed assets schedule of the company. When these vehicles get obsolete and there is a change of model the petitioners sell these cars as used cars for a price. In terms of the notification dated 25 -10 -2005 the reduced rate of tax is applicable on sale of used vehicles. The petitioner claimed benefit of the said notification when they sold these demo cars. When the authorities noticed that the claim is for demo cars and not used cars, the said claim was disallowed and tax was levied at 12.5% on the value of the cars sold. Aggrieved by the said order, the petitioner filed an appeal before the Joint Commissioner of Commercial Taxes (Appeals) who confirmed the said order. Aggrieved by the said order the assessee preferred second appeal to the Karnataka Appellate Tribunal. The KAT held the aforesaid notification is applicable to such used cars and therefore set aside the orders passed by the lower authorities and extended benefit of 4% tax on such used cars. Thereafter, the State preferred a review petition pointing out that the demo cars sold are not used cars in terms of the notification issued by them and therefore, the assessee is not entitled for the said benefit. Accepting the said contention, the Tribunal has allowed the review petition partially setting aside its earlier order and restoring the order passed by the lower authorities. Aggrieved by the said order, these revision petitions are filed by the assessee.

(2.) LEARNED Counsel for the assessee assailing the impugned order contended firstly a case for reviewing the order as contemplated under Section 63(8) of the Act is not made out and therefore, it is a case of irregular exercise of review power by the Tribunal. On that ground, the impugned order requires to be set aside. Secondly, it was contended used cars does not necessarily mean cars used by purchasers from the petitioner. These demo cars are purchased by the petitioner and used for giving demonstration to the intending purchaser and after a lapse of time they are re -painted and sold. They also fall within the definition of used cars and therefore, the Tribunal was not justified in not extending the benefit of the said notification and therefore, she submits viewed from any angle, the impugned order requires to be set aside.

(3.) THE fact that these demo cars were purchased by the petitioner on payment of tax is not noticed. Similarly, when the said cars were sold, whether the said input tax paid by the petitioner was deducted out of the output tax payable was also not placed on record and not considered. It is in the review petition, it was brought to the notice of the Court that the notification does not apply to the demo cars as it was not purchased from an unregistered dealer and it was not purchased for re -sale immediately. Therefore, the Tribunal has exercised its power under Section 63(8) of the Act and reviewed the said order.