1979 (10) TMI 207 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of hire-purchase transactions under the Bihar Sales Tax Act, 1959.
2. Applicability of the second proviso to section 7(2)(b) of the Act.

Analysis:

Issue 1: Interpretation of hire-purchase transactions under the Bihar Sales Tax Act, 1959

The case involved a reference made by the Commissioner of Commercial Taxes regarding whether the transfer of goods on hire-purchase constituted resale under the Bihar Sales Tax Act, 1959. The Superintendent of Commercial Taxes and Deputy Commissioner of Commercial Taxes held that hire-purchase did not amount to resale until the agreement matured into a sale. However, the Commercial Taxes Tribunal disagreed, considering hire-purchase as resale based on a Supreme Court decision. The Tribunal also cited an explanation in the Act, which was later deemed ultra vires by a High Court decision. The High Court, relying on a previous judgment, emphasized that the substance of the transaction, not its form, determines if it is for resale. It concluded that if the ultimate aim of a hire-purchase agreement is to transfer property to the hirer, it constitutes resale. In this case, most hire-purchase transactions had turned into sales, indicating an intention to resell, leading to a positive answer to the first question posed.

Issue 2: Applicability of the second proviso to section 7(2)(b) of the Act

The second question referred to whether the second proviso to section 7(2)(b) of the Act was applicable. The High Court's analysis of the hire-purchase transactions being deemed as resale led to a negative answer to this question. The Court highlighted that the intention behind the hire-purchase agreement, aiming at eventual sale to the hirer, meant the goods were not utilized for any purpose other than resale. The Court emphasized that hire-purchase is a method of selling and purchasing goods, and if the seller's intention is to pass property rights to the hirer, it constitutes resale. The judgment concluded that since the transactions in question had mainly resulted in sales, the second proviso was not applicable. The Court considered the findings of fact by the Deputy Commissioner and the Tribunal, emphasizing that the first question was essentially a matter of fact and intention, which had been conclusively determined.

In conclusion, the High Court answered the first question affirmatively and the second question negatively, ruling in favor of the dealer and awarding costs. The judgment provided a detailed analysis of hire-purchase transactions, emphasizing the importance of the intention behind such agreements in determining their classification under the Bihar Sales Tax Act, 1959.