Reserved HIGH COURT OF UTTARAKHAND AT NAINITAL Writ Petition No.2215 of 2008 (M/S) M/s Kailash Motors Gandhi Road, Dehradun Through its Partner Sri Ishwar Chandra & another … Petitioners Vs State & another … Respondents Hon’ble Tarun Agarwala, J. Heard Mr. Bharat Ji Agarwal, the learned senior counsel duly assisted by Mr. S. K. Posti, the learned counsel for the petitioners and Mr. Sudhir Kumar, the learned brief holder for the State. The petitioner is a registered partnership firm carrying on the business of motor vehicles and chassis and is also doing the business of giving motor vehicles / chassis on hire purchase basis. According to the petitioners, they have effected sales on hire purchase basis and, only when the sale is complete and the ownership of the chassis of the motor vehicles is transferred, they paid the taxes. The petitioners have paid the taxes when the petitioners have received the last installment under the hire purchase agreement and have transferred the vehicles on the payment of the last installment. The petitioners contend that the sale of such vehicles / chassis is complete after the last installment is paid and that the sales tax becomes payable at the prescribed rate at the time when the last installment was paid in the assessment year. The petitioners further contend that under the agreement, the hirer would be at liberty to terminate the agreement by returning the motor vehicle to the owner. Further, the hirer does not have any right or interest as a purchaser until the vehicle was transferred to him in his name. The hirer only uses the same on payment on hiring charges. Further, the owner -2- has a right to terminate the agreement and can recover the possession of the vehicle at any time. The owner can take re- possession of the vehicle, if any terms and conditions of the agreement is breached. According to the petitioners, no tax was liable to be paid till the last installment was paid or till the time when the vehicle was transferred, inspite of which, the Assistant Commissioner (Assessment), Sales Tax, Dehradun imposed a huge liability of tax while passing the assessment order for the year assessment years 1983-84 and 1984-85. According to the petitioners, the assessing authority committed an error in holding that the vehicles given on hire by the hire purchase company to the consumer amounted to a sale under the definition of “sale” as defined under Section 2(h) of the Uttar Pradesh Sales Tax Act (hereinafter referred to as the Act) as amended by U.P. Act No.25 of 1985. Further, the notification issued under Section 3-A(1)(d) of the Act provides two different point at which the motor vehicles, including the chassis of the motor vehicles were made taxable, namely, one at the point of the sale by the dealer to the consumer and the second at the point of sale to a hire purchase company financing the purchase by the consumer. In the light of the aforesaid contention, the petitioner has prayed that the Notification No.ST-II-6606 dated 05th December, 1984 and Notification No.ST-II5784 dated 07th September, 1981 be declared illegal, invalid and void in so far as it relates to motor vehicles and chassis of motor vehicles. The petitioners have further prayed for the quashing of the assessment orders dated 21.12.1987 and 10.12.1989 passed by the Assistant Commissioner (Assessment), Sales Tax, Dehradun for the assessment years 1983-84 and 1984-85 respectively. -3- The basic contention of the petitioners is that the Notification No.ST-II-6606 dated 05th December, 1984 and Notification No.ST-II5784 dated 07th September, 1981 issued under Section 3-A(1)(d) of the Act forms the basis of the assessment orders and, if the notifications are declared invalid and illegal, the very basis of the assessment order would be knocked out and, consequently, the assessment orders would also be liable to be quashed. In order to appreciate the stand of the petitioner, it would be appropriate to refer to certain provisions of the Act. Section 2(h) of Act as amended by U.P. Act No.25 of 1985 as inserted on 13th of September, 1985 provides as follows : “2(h) -“Sale”, with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration, and include- (i) a transfer, otherwise, than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract; (iii) the delivery of goods on hire purchase or any system of payment by installment; (iv) a transfer of the rights to use any goods for any purpose (whether or not for a specified period for cash, deferred payment or other valuable consideration; (v) the supply of goods by any unincorporated association, or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (vi) the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxication, where such supply or service -4- is for cash, deferred payment or other valuable consideration;” Section 3-A(1) (d) of the U.P. Sales Tax Act (hereinafter referred to as the Act provides that the turnover in respect of the goods mentioned in the schedule shall be taxable at such point and at such rate not exceeding 15% as the State Government, may, by notification, determine and different points and different rates may be declared in respect of different goods comprised in any entry to the Schedule. For facility, Section 3-A(1)(d) is extracted hereunder:- “3-A. Rate of Tax- (1) Except as provided in Section 3-D, the tax payable by a dealer under this act shall be levied- (a) …… (b) …… (c) …… (d) on the turnover in respect in respect of goods specified in the Schedule, at such point and at such rate, not exceeding fifteen percent, as the State Government may, by notification, declare, and different points and different rates may be declared in respect of different goods comprised in any entry in the said schedule : Provided that the State Government may, by notification, omit entry relating to any goods from the Schedule and may, in the like manner, restore, any entry so omitted, and upon the issue of any such notification omitting or restoring any entry, the said schedule shall, subject to the provisions of sub section (2), be deemed to be amended accordingly” Entry no.- 43 of the Schedule, as referred to in Section 3-A, provides for Motor Vehicles, which reads as follows:- “Motor vehicles including motor cars, motor taxi cabs, motor cycles, motor cycles combinations, motor scooters, mopeds, motorettes, motor omni-buses, motor vans, motor lorries, motor trucks, jeeps, station wagons and chassis of motor vehicles and -5- bodies or tankers or motor carvans built or meant for mounting on chassis or motor vehicles, but excluding tractors whether on wheels or tracts.” In exercise of the powers under clause (d) of sub-section (1) of Section 3-A of the Uttar Pradesh Sales Tax Act, 1948 read with Section 21 of the U.P. General Clauses Act 1904, entry 43(1) of the schedule was amended by Notification No.ST-II-6072/X- 9(121)/82-U.P. Act 15-48-Order-83, dated 30th September, 1983, which is extracted hereunder:- Sl. No. Description of goods Point of tax Rate of tax 1 2 3 4 43 (1) Motor vehicles including motor cars, motor taxi cabs, motor cycles, motor cycles combinations, motor scooters, mopeds, motorettes, motor omni- buses, motor vans, motor lorries, motor trucks, jeeps, station wagons and chassis of motor vehicles and bodies or tankers or motor carvans built or meant for mounting on chassis or motor vehicles, but excluding tractors whether on wheels or tracts. Sale by dealer to consumer or, in the case of sale through a hire purchase company, to the hire purchase company financing the purchase by the consumer. 10% Under the said notification, the motor vehicles were made taxable at a single point on the point of sale by a dealer to a consumer or, in the case of sale to a hire purchase company to the hire purchase company financing the purchase by the consumer at the rate of tax of 10%. Subsequently, by a notification No.ST- II-6606 dated 05th December 1984, the sale of motor vehicles was made taxable @ 10% at the point of a sale by a dealer to a consumer or in the case of sale to a hire purchase company to the -6- hire purchase company financing the purchase by the consumer. The relevant portion of the notification dated 05.12.1984 is extracted hereunder :- “Not. No.ST-II-6606/X-9(66)-1984 U.P. Act –XV- 48-Order-84, dated 5th December, 1984 [Published in the Gazette Extraordinary, dated 5th December, 1984] In exercise of the powers under Clause (d) of sub-section (1) of Section 3-A of the Uttar Pradesh Sales Tax Act, 1948 (U.P. Act No.XV of 1948), read with Section 21 of the Uttar Pradesh General Clauses Act, 1904, (U.P. Act No.1 of 1904), the Governor is pleased to make, with effect from December 5, 1984, the following amendments in Government Notification No.ST-II-5784/X-10 (1)- 80 U.P. Act-15-48-Order-81, dated September 7, 1981 (S. No.376): AMENDMENT In the Schedule to the aforesaid condition, for the entries against sub-item (1) of Serial No.43, the following entries columnwise shall be substituted, namely:-” Sl. No. Description of goods Point of tax Rate of tax 1 2 3 4 43 (1)(b) Motor vehicles including motor cars other than those specified in sub- item (a) above, motor taxi cabs, motor cycles, motor cycles combinations, motor scooters, mopeds, motorettes, motor omnibuses, motor vans, motor lorries, motor trucks, jeeps, station wagons ……………….. Sale by dealer to consumer or, in the case of sale through a hire purchase company, to the hire purchase company financing the purchase by the consumer. 10% According to the petitioners, Section 3-A(1)(d) of the Act provides that the turnover in respect of the goods mentioned in -7- the Schedule shall be taxable at such point and such rate not exceeding 15% as the State Government may by notification declare and the different points and different rates may be declared in respect of different goods comprised in any entry in the Schedule. According to the petitioners, the impugned notification notifies motor vehicles to be taxable at two points, namely, at the point when the motor vehicle is sold to the consumer and subsequently when the motor vehicle is sold to the hire purchase company. The validity of the said notification has been questioned by the petitioner basically on two grounds, namely: (i) In exercise of delegated power, the State Government cannot go beyond Section 3-A (1) (d) of the Act by providing two different point of sale in respect of the same goods, namely, at the point of sale to the consumer and at the point of sale to a hire purchase company financing the purchase by the consumer. (ii) Section 3-A(1)(d) of the Act does not authorise the State Government to issue a notification subject to any condition or restrictions unlike other provisions of the Act where power has been given to the State Government to issue a notification subject to such condition and restriction as may be specified in the notification. According to the petitioners, the Legislature has only delegated the State Government to issue a notification. The State Government, while exercising its delegated powers, cannot go beyond the provision of Section 3-A(1)(d) by providing two different points and rates in respect of the same goods. In -8- support of his submission, the learned senior counsel placed reliance upon a decision of the Supreme Court in Hukum Chandra Vs. Union of India & others AIR 1972 SC 2427 wherein it was held :- “The initial difference between subordinate legislation and the statute laws lies in the fact that a subordinate law making body is bound by the terms of its delegated or derived authority and that court of law, as a general rule, will not give effect to the rules, thus made, unless satisfied that all the conditions precedent to the validity of the rules have been fulfilled.” The Supreme Court further held :- “As it is section 40 of the Act which empowers the Central Government to make rules, the rules would have to conform to that section. The extent and amplitude of the rule making power would depend upon and be governed by the language of the section. If a particular rule were not to fall within the ambit and purview of the section, the Central Government in such an event would have no power to make that rule.” According to the petitioner, the decision in the case of Hukum Chandra (supra) is fully applicable in the present case. Section 3-A(1)(d) of the Act gives power to the State Government to provide different point of sale for different goods, whereas the present notification provides different point of sale for the same goods, which is not permissible. In this regard, the -9- learned senior counsel for the petitioners placed reliance upon a decision in Assam Company Ltd. & another Vs. State of Assam 2001 U.P.T.C. 751, wherein the Supreme Court held :- “It is an established principle that the power to make rules under an Act is derived from the enabling provisions found in such Act. Therefore, it is fundamental that a delegate on whom such power is conferred as to act within the limits of the authority conferred by the Act and it cannot enlarge the scope of the Act. A delegate cannot override the Act either by exceeding the authority or by making provision which is inconsistent with the Act. Any Rule made in exercise of such delegated power has to be in consonance with the provisions of the Act and if the Rules goes beyond what the Act contemplates, the rule becomes in excess of the power delegated under the Act and if it does any of the above, the rule becomes ultra vires of the Act. The Supreme Court in the case of Additional District Magistrate Vs. Delhi Adminstration AIR 2000 SC 2143 has held :- “It is a well recognised principle of interpretation of a statute that conferment of rule-making power by an Act does not enable the rule-making authority to make rule which travels beyond the scope of the enabling Act or which is inconsistent therewith or repugnant thereto. From the above discussion, we have no hesitation to hold that by amending the -10- Rules and Form P-5, the rule-making authority has exceeded the power conferred on it by the Land Reforms Act. ” The Supreme Court in the case of Himalaya Stone Industry & others Vs. State of Uttarakhand & others 2005 (141) S.T.C. 95 (Uttra) held as under :- “In view of the above proposition of law, the subordinate and the delegated legislation cannot travel beyond the scope of enabling provision of the Act. The State Government under Section 3-A(1)(b) of the Act cannot issue notification providing different point of sale of sale of the stone crushers when the goods were already sold by the dealers to the stone crushers is clearly repugnant and beyond to scope of Section 3-A(1)(b) of the Act in as much as the point of sale having been notified for the same goods as the point of sale to the consumers. The impugned condition travels beyond the scope of delegated power in the section.” In the light of the aforesaid principles enunciated by the Supreme Court, this court is required to see as to whether the impugned Notification dated 05.12.1984 has been issued beyond the provision of Section 3-A(1)(d) of the Act. No doubt, the subordinate and delegated authority cannot travel beyond the scope of the enabling Act. The power having been conferred on the State Government under Section 3-A(1)(d) of the Act, the State Government cannot issue a notification providing different point of sale in respect of the same goods. The court finds that -11- the column No.3 of the impugned notification relates to the point of tax by a dealer to the consumer, and in the case of sale through a hire purchase company, to the hire purchase company financing the purchase by the consumer. The said entry in column no.3 is not happily worded, but what it provides is the point of tax when there is a sale by a dealer to a consumer and in the case where a sale is made through a hire purchase company, then the point of tax is the sale made by the hire purchase company, who is financing the purchase by the consumer. When a sale is being made by a dealer to a consumer, the consumer is the purchaser and, where a hire purchase company is financing the purchase of the consumer, then the hire purchase company would be deemed to be a consumer. This is how the provision has to be harmoniously construed and once construed harmoniously, the court finds that there are no two points of sale provided under the notification. The point of sale is the sale made by a dealer to the consumer and sale through a hire purchase company, then the point of tax is at the hire purchase company who is deemed to be a consumer. In the light of the aforesaid, the court does not find that the impugned notification is inconsistent with the provision of Section 3-A(1)(d) of the Act. The contention that the impugned notification laid down certain conditions and restrictions, which were not permissible since Section 3-A(1)(d) of the Act did not authorize the State Government to issue a notification, which would be the subject to certain conditions or restrictions. In this regard, the learned senior counsel submitted that the provision of 4-AA, Section 4- AAA & Section 4-BB of the Act indicates that the State Government, while issuing a notification, could impose certain conditions and restrictions whereas no such restrictions was provided under Section 3-A(1)(d) of the Act to the State Government while issuing a notification. The submission of the -12- learned senior counsel for the petitioners is not correct in as much as from a reading of the impugned notification the court does not find any such restrictions or conditions imposed by the State Government. The entry only indicates the description of goods, the point of tax and the rate of tax. An attempt was made by the learned senior counsel for the petitioner that the assessment order should be set aside since there was no sale as provided under Section 2(h) of the Act and that the sale comes into existence only when the delivery of the goods after the last installment was paid by the hirer. It was contended that there cannot be any deemed sale as provided under the amended definition of the word ‘sale’ under Section 2(h) of the Act. On the other hand, the learned brief holder for the State contended that pursuant to the 46th Amendment, Article 366 of the Constitution of India was amended and clause 29A was inserted whereby the delivery of goods on hire purchase or any system of payment by installment was brought under the purview of sale or purchase of goods. Pursuant to the Amendment made under Article 366 of the Constitution of India, the definition of ‘sale’ was amended by U.P. Act No.25 of 1985 with retrospective effect and Section 2 (h) of the Act, defining ‘sale’, was accordingly amended. It was urged that in accordance with the amended definition, the assessment orders were passed for the assessment years 1983-84 and 1984-85. With regard to this aspect of the matter, the court finds that pleadings are lacking. The question whether the sale comes within the purview of the amended definition of ‘sale’ as defined under Section 2(h) of the Act can only be judged when the hire purchase agreement is perused, which has not been filed. This is -13- a matter of evidence, which can only be considered in the assessment proceedings or in appeal. The court further finds from the counter affidavit that against the assessment orders for the assessment years 1983-84 and 1984-85, the petitioner filed an appeal before the Deputy Commissioner (Appeals) which has been dismissed and consequently, the assessment order has merged with the appellate order. In the light of the aforesaid, it is no longer open for the court to consider the prayer of the petitioners for the quashing of the assessment order for the assessment year 1983-84 and 1984- 85. In the light of the aforesaid, the court does not find any merit in the writ petition and is accordingly dismissed. (Tarun Agarwala, J.) Dated 21st December, 2011 LSR