2000 (8) TMI 1013 - SC - VAT and Sales Tax

Whether the respondents were justified in holding that hire- purchase transactions entered into by the appellants were liable to imposition of sales tax on the consolidated proceeds? Held that - Appeal dismissed. Coming to the definition of the expression sale price if we substitute the defined meaning of the word sale occurring in section 2(g) into the said section 2(h), it would in effect read as follows Sale price means the amount payable to a dealer as consideration for transfer of goods on hire-purchase . The word sale occurring in section 2(h) must have the meaning ascribed to it as in section 2(g). When the word sale includes transfer of goods on hire-purchase, then whatever is the amount which is paid/payable to the dealer on such a transfer would be included within the meaning of the expression sale price in section 2(h). This being so, the sales tax authorities in the present cases were justified in including in the turnover of the appellants the hire charges as provided for in the hire-purchase agreements.

Issues Involved:
1. Whether hire-purchase transactions are liable to imposition of sales tax on the consolidated proceeds.
2. Interpretation of the term "sale" under the Bengal Finance (Sales Tax) Act, 1941 as extended to the Union Territory of Delhi.
3. The impact of the amendment to the Bengal Finance (Sales Tax) Act on October 1, 1959.
4. Applicability of the Central Sales Tax Act, 1956 definition of "sale".
5. The relevance of previous judgments on similar matters.

Issue-wise Detailed Analysis:

1. Whether hire-purchase transactions are liable to imposition of sales tax on the consolidated proceeds:
The court examined if the respondents were justified in holding that hire-purchase transactions entered into by the appellants were liable to imposition of sales tax on the consolidated proceeds. The appellants, engaged in the business of hire-purchase, argued that sales tax should only be levied on the sale price of the vehicle at the time the hirer exercises the option to purchase, excluding hire charges. However, the court upheld that the sales tax authorities were justified in including the hire charges in the taxable turnover as per the Bengal Finance (Sales Tax) Act.

2. Interpretation of the term "sale" under the Bengal Finance (Sales Tax) Act, 1941 as extended to the Union Territory of Delhi:
The court referred to the definitions of "sale" under the Bengal Finance (Sales Tax) Act before and after October 1, 1959, and under the Delhi Sales Tax Act, 1975. The term "sale" was interpreted to include a transfer of goods on hire-purchase or other systems of payment by installments. This interpretation was consistent with the Central Sales Tax Act, 1956, which also included hire-purchase transactions within the definition of "sale".

3. The impact of the amendment to the Bengal Finance (Sales Tax) Act on October 1, 1959:
The court noted that the amendment on October 1, 1959, incorporated the words "transfer of goods on hire-purchase or other system of payment by instalments" into the main definition of "sale" and excluded the non-obstante clause. The court concluded that this amendment did not alter the position that hire-purchase transactions could be taxed as sales. The principle from the first Instalment Supply (Private) Ltd. case continued to apply, affirming that hire-purchase agreements could be subjected to sales tax.

4. Applicability of the Central Sales Tax Act, 1956 definition of "sale":
The court considered the definition of "sale" under the Central Sales Tax Act, 1956, which included hire-purchase transactions. This definition applied throughout India, and the court rejected the contention that the extended definition of "sale" in the Delhi Act infringed Article 14 of the Constitution. The court observed that hire-purchase transactions were included within the definition of "sale" for the purpose of Central sales tax, and this definition was applicable in Delhi as well.

5. The relevance of previous judgments on similar matters:
The court referred to several previous judgments, including Instalment Supply (Private) Ltd. v. Union of India, Instalment Supply Ltd. v. Sales Tax Officer, Ahmedabad-I, and K.L. Johar and Co. v. Deputy Commercial Tax Officer. The court noted that these judgments supported the view that hire-purchase transactions could be taxed as sales. The court clarified that the amendment to the Delhi Act in 1959 did not change the principle that hire-purchase agreements could be subjected to sales tax, as established in the first Instalment Supply (Private) Ltd. case.

Conclusion:
The court affirmed the decision of the High Court and dismissed the appeals, holding that the sales tax authorities were justified in including hire charges in the taxable turnover of the appellants. The court concluded that the definition of "sale" under the relevant acts included hire-purchase transactions, and the amendment to the Bengal Finance (Sales Tax) Act did not alter this position. The previous judgments supported the view that hire-purchase agreements could be taxed as sales.

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