V. Ramaswami, J.
1. In respect of the assessment year 1961-62, originally the petitioners were assessed on a turnover of Rs. 25,200 and a penalty of Rs. 2,646 was levied under Section 12(3) of the Madras General Sales Tax Act, 1959. On an appeal preferred by the petitioners, the Appellate Assistant Commissioner remanded the case for a fresh disposal. After remand, the assessing officer held that, except in respect of three transactions the petitioners had proved that the other transactions were not liable to sales tax. The three transactions which were disputed were held to be sales by the petitioners. Since they have not proved that they were second or subsequent sales, they were held to be liable for tax. The turnover of these items was determined at Rs. 8,500 and assessed at 7%. The assessing officer also levied a penalty of Rs. 892-50. This order was confirmed by the Appellate Assistant Commissioner and the Tribunal.
2. The contention of the petitioners before us and before the authorities below was that they were only financiers, that they advanced loans as against the security of motor cars, that there was no sale at all by them and that, therefore, no sales tax was payable. Before the Tribunal, the petitioners filed an affidavit setting out the details of the transactions. They have stated therein that the customers who desired to obtain loans approached the petitioners for a specific amount which were far lower than the actual value of the vehicle and that they were asked to sign a sale note in favour of the petitioners purporting to sell the vehicle. Thereafter, a hire purchase agreement would be taken styling the petitioners as lessors and the customers as the hirers. Under this agreement, hirers had to pay the loan in equated instalments. The interest payable on the loan was immediately taken on signing of the agreement and the principal alone was to be paid in instalments as provided in the agreement. The hire-purchase agreement signed by the party would then be sent to the registering authority constituted under the Motor Vehicles Act requiring that an endorsement as to the hire-purchase may be made in the registration certificate. The registration certificate itself was not transferred in the name of the petitioners, but only an endorsement would be made by the registering authority that the vehicle was under a hire-purchase agreement with the petitioners herein.
3. The Tribunal called for the registration certificate from the police department and satisfied itself that the statement of the petitioners that the registration certificate was not transferred in their name, but only an endorsement was effected to the effect that the vehicle was under a hire-purchase agreement with the petitioners was true. But the Tribunal began to consider the question as to whether the transaction had suffered any tax already, forgetting that the transaction by the petitioners itself was not a sale at all. On the facts, which could not be disputed, and as there is no evidence to show the contrary, we have to state that the transaction was not sale at all. It was a financial agreement and in order to secure the payment of the loan, the petitioners have obtained the sale note, the hire-purchase agreement, the promissory note and the endorsement in the registration certificate. In the circumstances, therefore, neither the assessment nor the penalty levied is sustainable.
4. The petition is accordingly allowed with costs. The orders of the Tribunal and the assessing officers are set aside. Counsel's fee Rs. 250.