Case: M/S.Jay Bharat C.&amp; I.Co.Ltd Vs. Commissioner Of Sales Tax

Instalment Supply case will not be subject to taxation hereafter and the problem of the same transaction being subjected to taxation at two different stages will not arise." 17. Learned senior counsel submits that by equating the two provisions of the Acts, we must give to the Sales Tax Act applicable in Delhi after 1st October, 1959 the same meaning as was given to the Gujarat Act. 18. It appears to us that the aforesaid observations were by way of an obiter. This Court was not called upon to consider the effect of the amendment made to the Delhi Act in 1959. This Court was only concerned with a question whether the State of Gujarat could levy any sales tax at the time when the hirer exercises his option to purchase the vehicle which happened to be in Gujarat at the time when the option was so exercised and despite the fact that sales tax had already been paid on the hire purchase transaction in Delhi earlier. The observations quoted above were merely to the effect that after the amendment there would be no case of taxation at two stages. The aforesaid decisions can be of no assistance to the appellants. 19. Our attention was also drawn to K.L. Johar and Company v. Deputy Commercial Tax Officer, 1965(2) SCR 112. We are unable to see how that case can be of any assistance. The Court there was concerned with the validity of Explanation I to Section 2(h) of the Madras General Sales Tax Act which purported to include a hire purchase transaction within the meaning of the term "sale". This Court held that Explanation I was beyond the competence of the State legislature and the same was accordingly struck down. The Court then dealt with the question as to whether a hire purchase agreement even ripened into a sale and if so when. It took note of the fact that a hire purchase agreement had two elements, namely, the element of bailment and the element of sale, in the sense that it contemplates an eventual sale. The Court came to the conclusion that a sale does take place and the same could be taxed when the hirer exercises the option to purchase the vehicle. With regard to the price at which the transaction would be regarded as having been entered into, the Court observed that the hire charges have to be excluded and the price of the vehicle worked out. The said decision, as we have already observed, can be of no assistance because the State of Madras, as it then was, had no legislative competence to seek 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 (P) Ltd. (supra). 20. It appears to us that the amendment of the Act on 1st October, 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 Co. (supra) would continue to hold good. 21. 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. Johars case (supra) 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 pari materia with the Sale of Goods Act, was expanded so as to include a transfer of goods on hire purchase or other system of payment by instalments. In the latter portion, in order that the tax is levied there is no requirement that the property in goods should be transferred. What is required is transfer of goods, unlike the first part of this definition which requires transfer of property in goods. The reason for this is very obvious. In the case of hire purchase there are two elements, namely, that of bailment and an element of sale and when a hire purchase agreement is entered into there is transfer of goods on hire purchase which would not include, at that point of time, any transfer of property in the said goods. If the contention of the learned senior counsel for the appellants is accepted, the effect of that would be that the latter portion of the definition could be otiose. If the definition of Section 2(g) was to include within its ambit only that transfer which takes place at the time of purchase when the option is exercised, then it would not have been necessary to widen the scope of the definition to include transfer of goods on hire purchase and to provide for it separately. 22. Coming to the definition of the expression "sale price", we find that if we substitute the defined meaning of the word "sale" occurring in Section 2(g) into the said Section 2(h), it would in effect read as follows : "Sale price means the amount payable to a dealer as consideration for transfer of goods on hire purchase". The word "sale" occurring in Section 2(h) must have the meaning ascribed to it as in Section 2(g). When the word "sale" includes transfer of goods on hire purchase, then whatever is the amount which is paid/payable to the dealer on such a transfer would be included within the meaning of the expression "sale price" in Section 2(h). This being so, the sales tax authorities in the present cases were justified in including in the turnover of the appellants the hire charges as provided for in the hire purchase agreements. 23. For the aforesaid reasons, we

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Coming to the definition of the expression "sale price", we find that if we substitute the defined meaning of the word "sale" occurring in Section 2(g) into the said Section 2(h), it would in effect read as follows : "Sale price means the amount payable to a dealer as consideration for transfer of goods on hire purchase". The word "sale" occurring in Section 2(h) must have the meaning ascribed to it as in Section 2(g). When the word "sale" includes transfer of goods on hire purchase, then whatever is the amount which is paid/payable to the dealer on such a transfer would be included within the meaning of the expression "sale price" in Section 2(h). This being so, the sales tax authorities in the present cases were justified in including in the turnover of the appellants the hire charges as provided for in the hire purchase agreements.