Page 1

C.A.No. 2446/07

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2446 OF 2007

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

Versus

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

J U D G M E N T

SHIVA KIRTI SINGH, J.

1. 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  

1

Page 2

C.A.No. 2446/07

Commissioner dated 8.1.2002 and had restored the order of the  

Intelligence Officer.

2. 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  

2

Page 3

C.A.No. 2446/07

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.

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  

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  

3

Page 4

C.A.No. 2446/07

which was numbered as MFA No. 1000 of 2002 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 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.

5. To elaborate and support the aforesaid factual stance, the  

learned senior counsel has highlighted some facts which have  

4

Page 5

C.A.No. 2446/07

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.

6. A legal issue was raised on behalf of the appellant that as  

per Explanation under Section 45 of the KGST Act, the burden is  

5

Page 6

C.A.No. 2446/07

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  

6

Page 7

C.A.No. 2446/07

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…..”

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  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  

7

Page 8

C.A.No. 2446/07

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 appropriation.

“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.  

8

Page 9

C.A.No. 2446/07

(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.”  

8. 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  

9

Page 10

C.A.No. 2446/07

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  

10

Page 11

C.A.No. 2446/07

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)

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.  It was pointed out that  

Chapter  III  of  the  Central  Motor  Vehicles  Rules  deals  with  

11

Page 12

C.A.No. 2446/07

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.

12

Page 13

C.A.No. 2446/07

10.  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.

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 of 263  

cars leading to their registration at Mahe were actually sales in  

Kerala.

12. According to  respondent,  when the  entire  facts,  relevant  

documents and alleged evidence were before the authorities as  

13

Page 14

C.A.No. 2446/07

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.  

13. 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  

14

Page 15

C.A.No. 2446/07

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 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  

15

Page 16

C.A.No. 2446/07

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  

16

Page 17

C.A.No. 2446/07

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.  

15. 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  

17

Page 18

C.A.No. 2446/07

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  

18

Page 19

C.A.No. 2446/07

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.  

16. 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  

19

Page 20

C.A.No. 2446/07

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  

20

Page 21

C.A.No. 2446/07

pass to the buyer once he has been given notice that the motor  

vehicle is fit and ready for his lawful 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 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.

      …………………………………….J.

     [DIPAK MISRA]

…………………………………….J. [SHIVA KIRTI SINGH]

New Delhi. January 29, 2016.

21