1955 (3) TMI 24 - HC - VAT and Sales Tax

Summary

Issues:
Nature of transaction between petitioners and actual purchasers, interpretation of "sale" under Bengal Finance (Sales Tax) Act, 1941, legality of explanation I under section 2(g) of the Act, classification of petitioners as dealers.

Analysis:
The judgment revolves around determining the true nature of the transaction between the petitioners and the actual purchasers of motor vehicles. The court notes that the petitioners act as financiers, advancing money on the security of the motor car, while the actual purchaser retains the equity of redemption upon payment of all instalments due under the agreement. This arrangement establishes the actual purchaser as a mortgagor and the petitioners as a mortgagee, rather than involving a direct sale between the petitioners and the purchasers. The court emphasizes that the definition of "sale" under the Bengal Finance (Sales Tax) Act, 1941, excludes transactions such as mortgage, hypothecation, charge, or pledge, thereby excluding the petitioners' financial dealings from falling under the purview of a taxable sale.

Moreover, the judgment addresses the contention raised by the petitioners' advocate regarding the constitutionality of explanation I under section 2(g) of the Bengal Finance (Sales Tax) Act, 1941. The court clarifies that this constitutional question is irrelevant to the present case as the transaction in question does not constitute a hire-purchase agreement. Even if it did, the decision on the constitutionality of the explanation would rest with the High Court, not the Board of Revenue. Ultimately, the court allows the petition, ruling that the petitioners are not to be classified as dealers concerning the financial transactions with the actual purchasers of motor cars. However, the court provides guidance that if the petitioners intend to engage in hire-purchase agreements in the future, they should register as dealers under the Act to facilitate lawful transactions and tax obligations.