CENTRAL MOTORS Vs. COMMISSIONER OF SALES TAX

JUDGEMENT

(1.) THIS is a reference under Section 44 of the Madhya Pradesh General Sales Tax Act, 1958, on the basis of cross applications for reference made by the assessee and the Revenue against the Tribunal's common order dated March 18, 1981, in Appeal Nos. 252, 253, 254, 349, 350, 351, 267, 269 and 270 -PBR/78, relating to assessment years 1958 -59, 1959 -60, 1960 -61, 1965 -66, 1966 -67, 1967 -68, 1968 -69, 1969 -70 and 1970 -71. The Tribunal has referred the following four questions of law for our decision :

(2.) THE assessee, Central Motors, Khandwa, is an undertaking of Motor and General Finance Ltd., New Delhi, and has been engaged in the business of selling motor vehicles, as also in financing motor vehicles and machinery sold on hire -purchase basis. During the assessment periods 1958 -59 and 1959 -60, the assessee paid with its returns Rs. 1,36,694 and Rs. 2,35,846, respectively, but the assessments resulted in refunds of Rs. 1,34,622 and Rs. 1,28,669 in the light of the Supreme Court decision in Johar and Co. v. Deputy Commercial Tax Officer [1965] 16 STC 213. The assessing authority determined the sale price of the vehicles sold on hire -purchase basis by allowing deductions in respect of hire -charges, but disallowing claim for depreciation. On the same lines the assessment was made for the period 1960 -61. The assessee preferred appeals against rejection of its claim for deduction of depreciation on the basis of the said decision of the Supreme Court. The first appellate authority rejected the claim by holding that the assessments were made by following the alternative method of finding the sale price suggested by the Supreme Court in such cases of sale on hire -purchase basis. On further appeals to the Tribunal, the assessee's contention for allowing depreciation was rejected, but the cases were remanded to the assessing authority for making fresh assessments after enquiry into the prevailing hire -charges in the market and the charges added by the assessee at the time of executing the hire -purchase agreement and then to split -up into two parts the charges recovered by the assessee in accordance with the decision of the Supreme Court.

(3.) AS regards assessment years 1965 -66 and 1966 -67, the assessing authority worked out the sale price by deducting hire money from the total price which included basic price and finance charges. Hire money was worked out on the basis of interest at 9 per cent per annum, profit 10 per cent and maximum penalty payable under the Central Act and the legal charges at Rs. 1,000 per vehicle. For the years 1967 -68 to 1970 -71, the basis followed was the same as for the years 1958 -59 to 1960 -61. The appeals preferred before the Deputy Commissioner of Sales Tax were disposed of by him in accordance with his earlier order dated March 30, 1978, on appeals against the fresh assessments after remand. The assessee preferred further appeals before the Tribunal. The Revenue also filed applications for enhancement under Section 38(5) of the State Act. It was contended on behalf of the Revenue that the transactions ought to have been treated as transactions of sale and not those of hire -purchase agreements, because the assessee only financed the prospective purchasers of vehicles. This argument of the department was rejected by the Tribunal by holding that the assessing and the first appellate authorities had carefully examined the transactions and had returned a finding that those were hire -purchase transactions. It was also observed that the Tribunal had also held the transactions to be hire -purchase transactions in respect of earlier years of assessments of 1958 -59 and 1960 -61.