1987 (3) TMI 491 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the hiring of bank lockers constitutes a "sale" u/s 2(g) of the Bengal Finance (Sales Tax) Act, 1941.
2. Whether the bank's control over the lockers affects the classification of the transaction as a "sale."

Summary:

Issue 1: Definition of "Sale" u/s 2(g) of the Bengal Finance (Sales Tax) Act, 1941

The case revolves around whether the hiring of bank lockers by customers constitutes a "sale" as defined u/s 2(g) of the Bengal Finance (Sales Tax) Act, 1941. The Commercial Tax Officer issued notices to banks alleging that the hiring of lockers amounted to a "sale" effective from 1st April 1984, and demanded documents for levying sales tax. The definition of "sale" was expanded by the Constitution (46th Amendment) Act, 1982, to include various forms of transfer, including the "transfer of the right to use any goods for any purpose" for valuable consideration.

Issue 2: Bank's Control Over Lockers

The court examined whether the transaction of hiring lockers falls within the extended definition of "sale" u/s 2(g)(ii). The banks argued that the lockers are part of a complex service arrangement, not merely a transfer of the right to use goods. The lockers are located in bank premises, installed in strong rooms, and maintained by the bank. Customers have limited access, requiring dual control keys, and the bank retains significant control over the lockers, including the right to refuse access and terminate agreements. The bank also provides security and maintenance services, indicating that the transaction is more than just hiring out storage space.

The court concluded that the hiring of bank lockers does not constitute a "transfer of the right to use any goods" as envisaged in section 2(g)(ii). The return received by the bank is not solely from the exercise of property rights over the lockers but from providing a complex service arrangement. Therefore, the transaction cannot be treated as a "sale" within the meaning of the Act.

Judgment:

The writ petition was allowed, and the notices issued by the Commercial Tax Officer were quashed. The court ordered in terms of prayers (b), (c), and (d) of the writ petition, with no order as to costs.