TMI Blog1961 (5) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of Central sales tax, and this definition has become applicable throughout India, and it cannot, therefore, be said that the State of Delhi, and now the Union Territory of Delhi, has been selected for hostile discrimination,therefore, there is no substance in the contention that the extended definition of "sale" in the main statute infringes Article 14 of the Constitution. - Petition No. 146 of 1958 - - - Dated:- 2-5-1961 - SINGH B.P., DAS S.K., SARKAR A.K., RAJAGOPALA AYYANGAR N. AND MUDHOLKAR J.R. JJ. C.K. Daphtary, Solicitor-General of India (R. Gopalakrishnan and D. Gupta, Advocates, with him), for the respondents. Veda Vyasa, Senior Advocate (S.K. Kapur and Ganpat Rai, Advocates, with him), for the petitioners. -------------------------------------------------- The Judgment of the Court was delivered by SINHA, C.J.- The petitioners have moved this Court under Article 32 of the Constitution for a writ or order in the nature of mandamus and/or prohibition and/or other suitable writ, order or direction to the respondents not to levy, charge or collect any sales tax on transactions of what the petitioners characterised as hire-purchase agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold and is thus not liable to be taxed as sale-price. The Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941) was extended to the State of Delhi, which is now the Union Territory of Delhi. In pursuance of the provisions of that Act, the Sales Tax Authorities started demanding and levying sales tax on all transactions of the nature aforesaid on the ground that the instalments paid by the hirers to the company were sales-price and, therefore, liable to sales tax. The company challenged the right of the Sales Tax Authorities to levy any such tax on the ground that the law was beyond the competence of the legislature. Ultimately, the company moved the Punjab High Court (Circuit Bench at Delhi) under Articles-226 and 227 of the Constitution. In the Writ Petition, which was registered as Civil Writ Application No. 289-D of 1954, the company prayed for a writ in the nature of prohibition and/or mandamus restraining the respondent from realising or levying any sales tax under the provisions of the Bengal Act, extended to Delhi. There was also a prayer for a writ of certiorari quashing certain orders passed by the Sales Tax Authorities in 1953-54. The said application was heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases either from dealers or from non-registered dealers. The assessment will, however, be made accord- ingly as before in the normal way." Thereafter in the case of Mithan Lal v. State of Delhi [1959] S.C.R. 445; 9 S.T.C. 417., this Court examined the vires of the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi, and came to the conclusion that the law had been validly promulgated. According to that decision, the definition of "sale" could be legally extended so as to make it permissible to tax sale of goods involving the supply of materials in pursuance of building contracts. As a result of the decision aforesaid of this Court, a press note was issued by the Commissioner of Sales Tax, Delhi, to the effect that provision regarding levy of tax on hire-purchase transactions was valid and that all hire-purchase dealers as come within the purview of sections 4 and 7 of the Bengal Finance (Sales Tax) Act, 1941, as ex- tended to Delhi, are liable to pay sales tax and to get themselves registered under the Act; that all such hire-purchase dealers as were formerly registered with the Sales Tax Department shall be deemed to be registered with effect from the first of Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible to accede to the request made in this behalf. 4.. Sales tax will be payable on total amounts charged by the hire- purchase company from the hirer and it is not possible to waive sales tax on the so-called incidental charges. 5.. It is regretted that it is not possible to alter the date of liability of the hire-purchase company which has already been fixed with effect from 1st of April, 1958, in pursuance of the Supreme Court judgment. It is true that the Press Note was issued in the month of June and so hire-purchase companies have been making purchases of vehicles on payment of sales tax. The hire-purchase companies are advised to approach the dealers for refund of the sales tax paid by them on such purchases. If, however, it is not possible for any hire-purchase company to obtain refund of the sales tax so paid by them, the amounts so paid may be adjusted towards their liability on the hire-purchase transactions." On receipt of the answer of the department, as set out in the previous paragraphs, the petitioners moved this Court under Article 32 of the Constitution on the ground that the "threatened action of the respondents is illegal and unconstitutional as the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluable consideration, including a transfer of property in goods involved in the execution of a contract, but does not include a mortgage, hypothecation, charge or pledge. 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." It is clear from the definition that it includes not only what may be compendiously described as a sale under the Sale of Goods Act, but also transactions, which, strictly speaking, are not sales, not even "contracts of sale" but only contain an element of sale, that is the option to purchase, and that is the reason why the explanation ends with the words "be deemed to be a sale", thereby indicating that a legal fiction has been introduced into the concept of "sale" as ordinarily understood. The explanation has included within its amplitude a mere transfer of goods without the transfer of title to the goods, if it is in the course of an agreement of the nature of "hire-purchase", or other instalment system of payment. A contract of hiring, under the common law, is one of the species of a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal fiction has been introduced into the concept of "sale" as ordinarily understood. The explanation has included within its amplitude a mere transfer of goods without the transfer of title to the goods, if it is in the course of an agreement of the nature of "hire-purchase", or other instalment system of payment. A contract of hiring, under the common law, is one of the species of a contract of bailment and has, during the last 60-70 years, undergone a series of refinements as a result of modern industrial and commercial developments. The term "hire-purchase" has not been defined in the Act. We have, therefore, to construe the expression in its ordinary common law sense, which may best be expressed in terms of the Dictionary of English Law by Earl Jowitt at pages 913-914, which runs as follows: "Hire-purchase-a system whereby the owner of goods lets them on hire for periodic payments by the hirer upon an agreement that when a certain number of payments have been completed, the absolute property in the goods will pass to the hirer, but so that the hirer may return the goods at any time without any obligation to pay any balance of rent accruing after return; until the conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form- ing and observing the terms of the agreement, with particular reference to the payment of the monthly instalments, "the hiring shall come to an end and the vehicle shall, at the option of the hirer, become his absolute property; but until such payments as aforesaid have been made, the vehicle shall remain the property of the owners. The hirer shall also have the option of purchasing the vehicle at any time during the currency of this agreement by paying in one lump sum the balance of all the hire hereinbefore mentioned and any other expenses incurred by the owners relating to the transaction." It is clear, therefore, that in addition to the contract of hiring an option has been given to the hirer to purchase or not to purchase. The more serious question on this part of the petitioners' contention is whether the non obstante clause in the explanation "notwithstanding that the seller retains a title to any goods as security for payment of the price" governs the main clause of the explanation. In our opinion, it does not. The 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing definition: " '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 the 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." It would thus appear that hire-purchase transactions have been included within the definition of "sale" for the purpose of Central sales tax, and this definition has become applicable throughout India, and it cannot, therefore, be said that the State of Delhi, and now the Union Territory of Delhi, has been selected for hostile discrimination. In our opinion, therefore, there is no substance in the contention that the extended definition of "sale" in the main statute infringes Article 14 of the Constitution. Now, the remaining contentions raised on behalf of the petitioners may be disposed of by observing that what the Sales Tax Department does, or does not do, cannot change the law. The department issued its instructions to the Sales Tax Officers, in conformity with the law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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