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TMI Blog1966 (9) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... nP., Rs. 703.79 at 4 nP., Rs. 1,06,45,113.66 at 7 nP. and Rs. 467.79 at 6 nP. After perusing the books of accounts of the appellant, the respondent issued a notice pointing out that a turnover of Rs. 33,25,728 had not been included in the return. The appellant replied that the said amount represented transactions of hire-purchase entered into by the appellant-company with its customers and that these transactions were not taxable under the Kerala General Sales Tax Act, 1125. Notwithstanding the objection of the appellant, the respondent proceeded to assess the appellant on a turnover inclusive of the disputed amount of Rs. 33,25,728. The respondent also made a levy of surcharge at 5 per cent. of the tax for the assessment year 1960-61. Similarly, for the assessment year 1961-62, the appellant filed a return showing a net turnover of Rs. 4,49,224.66 taxable at 2 nP., Rs. 390.47 at 4 nP., Rs. 16.62 at 6 nP. and Rs. 1,05,48,247.60 at 7 nP. On perusing the books of accounts of the appellant, a notice was issued by the respondent that a turnover of Rs. 29,71,310.25 had not been included in the return. The appellant replied that the said amount represented transactions of hire-purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligation to pay the hire moneys payable under the agreement. Nor was it open to the appellant to compel the buyer to purchase the vehicle at the end of the hire period. Under the agreement, therefore, the option to purchase the vehicle was entirely at the discretion of the purchaser and a sale took place only when the buyer exercised his option to purchase. Section 2(j) of the Kerala General Sales Tax Act, 1125, states as follows: "(j) 'Sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration and includes also a transfer of property in goods involved in the execution of a works contract, but does not include a mortgage, hypothecation, charge or pledge; Explanation (1)-A transfer of goods on the hire-purchase or other instalment system of payment shall, notwithstanding the fact that the seller retains the title in the goods as security for payment of the price, be deemed to be a sale." The argument of the appellant is that explanation (1) to section 2(j) of the Kerala General Sales Tax Act, 1125, is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ras General Sales Tax Act (9 of 1939) the language of which is almost in identical terms with the explanation (1) of section 2(j) of the Kerala General Sales Tax Act, 1125. The ratio of the decision of this Court in K.L. Johar & Company's case [1965] 2 S.C.R. 112; 16 S.T.C. 213., applies to the present case and it must, there- fore, be held that explanation (1) to section 2(j) of the Kerala General Sales Tax Act, 1125, is beyond the competence of the State Legislature and is invalid. On behalf of the respondent, the Solicitor-General referred to the decision of this Court in Instalment Supply (P.) Ltd. and Another v. The Union of India and Others [1962] 2 S.C.R. 644; 12 S.T.C. 489., but the material facts of that case are different. The question which arose for consideration in that case was the constitutional validity of section 24 of the Bengal Finance (Sales Tax) Act, 1941, as extended to Delhi State which provided as follows: "'Sale' means any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods involved in the execution of a contract, but does not include a mortgage, hypothecation, charge or ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be passed on to the consumer. It was contended that the classification was based on no intelligible criteria and there was no nexus with the objects sought to be achieved by the Act. Section 3 of the Kerala Surcharge on Taxes Act, 1957 (Act 11 of 1957) states as follows: "3. Levy of surcharge on sales and purchase taxes: (1) The tax payable under the Travancore-Cochin General Sales Tax Act, 1125, or the Madras General Sales Tax Act, 1939, shall, in the case of a dealer whose turnover exceeds thirty thousand rupees in a year, be increased by a surcharge at the rate of two and a half per centum of the tax payable for that year and the provisions of the Travancore-Cochin General Sales Tax Act, 1125, or the Madras General Sales Tax Act, 1939, shall, as the case may be, apply to the levy and collection of the said surcharge: Provided that where in respect of declared goods as defined in clause (c) of section 2 of the Central Sales Tax Act, 1956, the tax payable by such dealer under the Travancore-Cochin General Sales Tax Act, 1125, or the Madras General Sales Tax Act, 1939, together with the surcharge payable under this sub-section, exceeds two per centum of the sale or purch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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