Bombay High Court Declines To Answer Reference On Taxability Of Hire-Purchase Premium In Tata Motors Case

The Bombay High Court has declined to answer questions of law on whether the hire-purchase premium collected on the sale of vehicles forms part of taxable turnover under the Bombay Sales Tax Act, in references arising from a dispute involving Tata Motors Ltd. after the company stated that it was no longer interested in pursuing the matter.

The court clarified that although a reference made by the Sales Tax Tribunal cannot formally be withdrawn at the instance of a party, the High Court can dispose of the reference by declining to answer the questions when the parties do not wish to pursue the matter.

A Division Bench of Justices G.S. Kulkarni and Aarti Sathe was hearing two sales tax references arising from orders of the Maharashtra Sales Tax Tribunal.

The tribunal had referred questions, including whether hire-purchase premiums recovered on vehicles would form part of “sale price” and taxable turnover under the Bombay Sales Tax Act even though such charges were also subject to service tax.

During the hearing, Tata Motors, which had sought the reference after losing before the Tribunal in second appeal, informed the Court that it was no longer interested in having the questions answered. The Court noted that in such circumstances the Revenue would also not be interested in pursuing the reference.

Examining the legal position, the Bench held that once a reference on a question of law is made by the Tribunal, it cannot be withdrawn at the instance of a party because the reference is made by the Tribunal itself and not by the litigant.

Relying on Gajadhar Prasad Nathu Lal vs Commissioner of Wealth Tax (1970), the Bench quoted the following passage from the judgment:

“Though the party at whose instance the reference has been made cannot be permitted to withdraw it, yet if the party fails to appear at the hearing of the reference or appears and says that it is not interested in the reference being answered or makes an application for withdrawing the reference, then this court is not bound to answer the question referred and can decline to answer the reference.”

The court thus observed that when the party at whose instance the reference was made expresses disinterest, the High Court is not obliged to answer the questions of law and may dispose of the reference without adjudicating them.

The bench accordingly disposed of both references by declining to answer the questions, while keeping the legal issues open to be decided in an appropriate case.

For  Applicant: Advocate Tanishq Dube along with R. P. Shinde instructed by Khare Legal Chambers

For Respondent: Addl. GP Jyoti Chavan along with Mr. Himanshu Takke for Respondent-State and  Atul Jasani, Amicus Curie.