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TMI Blog2000 (8) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... es as provided for in the hire-purchase agreements. - Civil Appeal No. 2942-2944 of 1979, 2708-2711, 2570 of 1979, 2111, 2118-2127, 2978, 3002-3004 of 1980, 1221-1230, 1232 of 1981, 1976, 1231 - - - Dated:- 9-8-2000 - KIRPAL B.N. AND PHUKAN S.N. AND RUMA PAL JJ. S. Sukumaran, B.A. Ranganathan, Ms. A.K. Verma, Randhir Chawla, Ms, Renu Saigal, Rakesh K. Sharma and Ms. Hemantika Wahi, Other Advocates. Joseph Vellapally, K.K. Venugopal and Ashok Grover, Senior Advocates. -------------------------------------------------- The judgment of the Court was delivered by B.N. KIRPAL, J.- The only question which arises for consideration in all these cases is: Whether the respondents were justified in holding that hire- purchase transactions entered into by the appellants were liable to imposition of sales tax on the consolidated proceeds. 2.. The appellants carrying on the business of hire-purchase. They enter into agreements with hirers for the purpose of enabling the hirers to obtain a vehicle. The normal term of the agreement entered into between a hirer and the appellant contemplates a vehicle being purchased by the appellant and the said vehicle is then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt to which we shall presently refer. 5. In order to appreciate the contention of the learned Senior Counsel for the appellants, we may refer to the definition of the word "sale" as occurring in the Act before October 1, 1959, after October 1, 1959, and under the Delhi Sales Tax Act, 1975. The said definition is as follows: Under the Bengal Finance (Sales Tax) Act, 1941 as extended to Delhi. Before 1-10-1959: "2(g) 'Sale' means any transfer of property in goods for money consideration and includes a transfer of property in goods supplied in the execution of a contract but does not include a mortgage, hypothecation, charge or pledge; and any grammatical variations of the expression 'sale' shall be construed accordingly. Explanation 1.- A transfer of goods on hire-purchase or other instalment system of payment shall, notwithstanding that the seller retains a title to any goods as security for payment of the price, be deemed to be a sale: Explanation 2.- A sale shall be deemed to have taken place in the State of Delhi if the goods are actually delivered in the State of Delhi as a direct result of such sale for the purpose of consumption in the State of Delhi, notwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight or delivery or the cost of installation in cases where such cost is separately charged." 6.. In Instalment Supply (Private) Ltd. v. Union of India [1961] 12 STC 489 (SC); [1962] 2 SCR 644, the challenge was to the levy of sales tax on hire-purchase transactions, similar to the ones in the present case. M/s. Instalment Supply (Private) Ltd., which is also an appellant in one of these appeals, was carrying on the business of hire-purchase and had entered into hire-purchase agreements with different hirers. It was sought to be contended in a petition under article 32 of the Constitution that sales tax could not be levied on hire-purchase transactions because hire-purchase was not "sale" within the meaning of that expression under the Sale of Goods Act, 1930. While upholding the validity of Explanation I, this Court first considered what is the true nature and character of a hire-purchase agreement. After adverting to definition of the word "sale", this Court observed that the transaction in question partakes of the nature of a contract of bailment with an element of sale. It held that the definition in section 2(g) included not only what was compendiously described as a sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non obstante clause has been added only to emphasise the categorical statement of the law contained in the main clause to the effect that a transfer of goods on hire-purchase, etc., shall be deemed to be a 'sale' even though there may be a stipulation to the effect that in spite of the transfer of goods to the hirer, the owner retains title to those goods until the happening of the ultimate event, namely, completion of title at the option of the hirer. " 9.. The court then concluded, on interpreting the said provisions, that the agreement in question contained not only a contract of bailment simpliciter but also an element of sale which element has been seized upon by the Legislature for the purpose of subjecting a transaction like that to the sales tax. Another ground of attack in that case was based on article 14 of the Constitution. It was submitted that though Parliament may have had the power to tax something which was not strictly speaking a sale, the said law was discriminatory against the traders in Delhi as such a law has not been made applicable to whole of India. This contention was rejected firstly on the ground that it had not been averred that other Part "C" States ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction could be regarded as a sale for the purpose of Sales Tax Act. 11.. After the amendment of the Act on October 1, 1959, the words "transfer of goods on hire-purchase or other system of payment by instalments" occurring in Explanation I in the original section 2(g) were incorporated in the main part of section 2(g). The non obstante words occurring in Explanation I in the unamended section were excluded. It is because of this change that the learned Senior Counsel for the appellants have contended that now with the amendment on 1st October, 1959, there can be sale in a hire-purchase agreement only when the hirer exercised the option and the transfer of property takes place and the effect of that would be that it is only the price of the article, namely, the vehicle, which can be subjected to sales tax and the hire charges cannot be included therein. 12.. In support of this contention, learned Senior Counsel has sought to place reliance on the second case of the Instalment Supply Co, entitled Instalment Supply Ltd. v. Sales Tax Officer, Ahmedabad-I [1974] 34 STC 65 (SC); [1975] 1 SCR 386. That was a case where the State of Gujarat in the case of a hire-purchase agreement b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended in 1959 by Act 20 of 1959 and reads as follows: "sale , with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of, or a charge or pledge on, goods. Explanation .-A sale or purchase of goods shall be deemed to take place inside the Union Territory of Delhi if the goods are within that territory- (i) in the case of specific or ascertained goods, at the time the contract of sale is made; and (ii) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation.' This definition is, in effect, the same as the one in the Gujarat Act. Therefore, the type of transactions which were subjected to tax in the earlier Instalment Supply case [1961] 12 STC 489 (SC); [1962] 2 SCR 644 will not be subject to taxation after this amendment and the prob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax a hire-purchase agreement to sales tax whereas in Delhi such a transaction could be subjected to tax and the same had been specifically upheld by this Court in the first case of Instalment Supply (Private) Ltd. [1961] 12 STC 489 (SC); [1962] 2 SCR 644. 17.. It appears to us that the amendment of the Act on October 1, 1959 has, in effect, not altered the position from what existed prior to that date and even after the amendment the principle laid down by this Court in the first case of Instalment Supply (Private) Ltd. [1961] 12 STC 489 (SC); 1962] 2 SCR 644, would continue to hold good. 18.. We would like to point out that section 2(g) uses two expressions, namely, "transfer of property in goods" and "transfer of goods on hire- purchase". If the latter part relating to hire-purchase had not been there, there can be little doubt that the principle enunciated by this Court in K.L. Johar s case [1965] 16 STC 213 (SC) ; [1965] 2 SCR 112, would have clearly been applicable, the hire-purchase agreement itself would have been taxable and tax could have been levied only at that time when the option was exercised. This definition of the word "sale", the first part of which is in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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