2013 (7) TMI 183 - HC - VAT and Sales Tax

Transfer of goods under hire purchase - whether be included in the definition of sale - Time of passing of property and place of delivery - whether the issue of time of passing of property and place of delivery are irrelevant for the purpose of section 3(b) of the Central Sales Tax Act? - Held that - Given the fact that the definition of sale under the State enactment is pari materia with the definition of sale under the Central Sales Tax Act, and that the issue considered therein also related to a case of hire purchase, the decision of JAY BHARAT CREDIT AND INVESTMENT CO LTD v. COMMISSIONER OF SALES TAX AND ANOTHER 2000 (8) TMI 1013 - SUPREME COURT OF INDIA would squarely apply to the case on hand referring to the definition of sale under Section 2(g) and pointed out to the use of the two expressions viz., transfer of property in goods and transfer of goods . The definition of sale under the Central Sales Tax Act as however amended under Section 150 of the Finance Act, (No.20 of) 2002 with effect from 11.5.2002. Even therein, delivery of goods on hire purchase or in system of payment by instalments is treated as deemed sale. Considering the categorical pronouncement of the Apex Court on a similarly worded provision, which was also seen in the context of the provision of definition of sale under the Central Sales Tax Act no hesitation in accepting the case of the assessee that the claim of transit sale merits acceptance. As there is an endorsement of title to the goods while in transitm no hesitation in accepting the case of the assessee.

Summary

Issues:
1. Interpretation of Section 2(g) of the Central Sales Act in hire purchase transactions.
2. Rejection of exemption claim under Section 3(b) of the Central Sales Tax Act.
3. Assessment of turnover and penalty under the Tamil Nadu General Sales Tax Act.
4. Applicability of previous court decisions on hire purchase transactions.
5. Consideration of the definition of 'sale' under the Central Sales Tax Act.
6. Amendment of the definition of 'sale' under the Central Sales Tax Act in 2002.

Issue 1: Interpretation of Section 2(g) of the Central Sales Act in hire purchase transactions:
The case involved a Government of India undertaking claiming exemption under Section 3(b) of the Central Sales Tax Act for machineries purchased from outside Tamil Nadu. The Assessing Authority rejected the claim, stating that the property in goods did not pass to the buyer in a hire purchase agreement. The Tribunal upheld the assessment, leading to the revision by the assessee. The court analyzed the definition of 'sale' under Section 2(g) and referred to previous court decisions to conclude that in hire purchase transactions, the transfer of goods without the transfer of property suffices for levying tax.

Issue 2: Rejection of exemption claim under Section 3(b) of the Central Sales Tax Act:
The Assessing Authority rejected the assessee's claim of exemption under Section 3(b) by emphasizing that the property in goods did not pass to the hirer in the hire purchase agreement. This decision was based on the view that the hire purchase agreement involved two sales, one from the dealer to the financier and the other from the financier to the purchaser. The court, however, relying on the Apex Court decision, held that the transfer of goods in a hire purchase transaction is sufficient for the levy of Central Sales Tax.

Issue 3: Assessment of turnover and penalty under the Tamil Nadu General Sales Tax Act:
The Assessing Officer confirmed the turnover and penalty under Section 16(2)(a) of the Tamil Nadu General Sales Tax Act, which was partly set aside by the Appellate Assistant Commissioner. The Tribunal, considering the absence of transfer of property in goods, confirmed the assessment. The court, following the Apex Court's decision, accepted the assessee's case and set aside the Tribunal's order.

Issue 4: Applicability of previous court decisions on hire purchase transactions:
The court relied on a previous decision of the Apex Court related to hire purchase transactions under a different state enactment to support the assessee's case. The court found the definition of 'sale' under the State enactment similar to the Central Sales Tax Act, leading to the acceptance of the assessee's claim based on the transfer of goods in hire purchase agreements.

Issue 5: Consideration of the definition of 'sale' under the Central Sales Tax Act:
The court examined the definition of 'sale' under the Central Sales Tax Act, particularly Section 2(g), which includes the transfer of goods on hire purchase. The court highlighted the distinction between 'transfer of property in goods' and 'transfer of goods,' emphasizing that in hire purchase agreements, the latter suffices for the application of Central Sales Tax.

Issue 6: Amendment of the definition of 'sale' under the Central Sales Tax Act in 2002:
The court noted the amendment to the definition of 'sale' under the Central Sales Tax Act in 2002, which continued to treat the delivery of goods on hire purchase or in payment by installments as a deemed sale. This observation further supported the assessee's claim based on the transfer of goods in hire purchase transactions. Ultimately, the court allowed the Tax Case Revision in favor of the assessee.