1996 (10) TMI 450 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the petitioner qualifies as a "dealer" under the Kerala General Sales Tax Act.
2. Whether the transaction of lending cassettes constitutes a "sale" as per the Act.

Analysis:
The petitioner, a partner in a video library business, challenged assessment orders claiming not to be a dealer under the Act. The Court referred to the Supreme Court's interpretation of "sale of goods" and the Forty-sixth Amendment of the Constitution broadening the definition of "tax on the sale or purchase of goods." The Act was amended to include an extended meaning of "dealer" and "sale" to cover various transactions.

The Court analyzed the definitions of "dealer" and "sale" under the Act post-amendment. The key question was whether the petitioner's lending of video cassettes constituted a transfer of the right to use goods. The Government argued that under Explanation (3B) of the Act, such lending amounted to a taxable transfer. The Court examined the control and use of the cassettes by library members, concluding that the petitioner indeed effected a transfer of the right to use the cassettes, falling within the Act's definitions.

The Court invoked the principle that a person within the letter of the law must be taxed, emphasizing the clarity of the Act's language. Citing relevant case law, the Court distinguished cases involving machinery and bank lockers, asserting that the lending of video cassettes for viewing qualified as a transfer of the right to use goods. Consequently, the petitioner was deemed a "dealer" and subject to taxation based on the transfer of right to use the cassettes.

In light of the above analysis, the Court dismissed the petitioner's claims, finding the original petition devoid of merit. The assessment orders against the petitioner were upheld, and the petition was consequently dismissed.