TMI Blog1974 (5) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... G.L. Sanghi and M.N. Shroff, Advocates, for respondent No. 4. -------------------------------------------------- The judgment of the court was delivered by ALAGIRISWAMI, J.- The very same question that arises in these three petitions, though from a different angle, was considered by this court in an earlier litigation to which the petitioner was a party [Instalment Supply (P.) Ltd. v. Union of India [1961] 12 S.T.C. 489 (S.C.); [1962] 2 S.C.R. 644.]. The question is when does a sale liable to sales tax take place under a hire-purchase agreement. On the earlier occasion it was the Delhi State that sought to tax certain transactions under hire- purchase agreements. In the present case it is the Gujarat State that has sought to tax certain transactions under certain hire-purchase agreements. The petitioner is a limited company with its registered office in New Delhi. It carries on the business of financing the purchase of motor vehicles. The person desiring to purchase a motor vehicle enters into a hire-purchase agreement with the petitioner-company. It may be useful to give within a short compass the terms of the agreement: The company charges the hirer an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced into the concept of 'sale' as ordinarily understood, and that the explanation has included within its amplitude a mere transfer of goods without the transfer of title to the goods". To the attack on behalf of the petitioner that the explanation, in so far as it sought to extend the concept of "sale" to what in law was not a real sale, was unconstitutional, this court pointed out that in view of its decision in Mithan Lal's case [1958] 9 S.T.C. 417 (S.C.); [1959] S.C.R. 445., this contention had lost all its force. In Mithan Lal's case(1), this court upheld the right of Parliament to Impose a tax on the supply of materials in building contracts even though in the State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. [1958] 9 S.T.C. 353 (S.C.); [1959] S.C.R. 379., it had been held that it could not be done. This was on the basis that the power of Parliament to legislate in respect of Part C States is untrammelled by the limitations prescribed by article 246, clauses (2) and (3), and entry 54 of List II, and is plenary and absolute and there is no restriction which is material to the competency of Parliament to legislate on this topic. Though this court did not say so the refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement to sell a jus in personam is created, by a sale a jus in rem also is transferred. Where goods have been sold and the buyer makes default, the seller may sue for the contract price on the count of "goods bargained and sold", but where an agreement to buy Is broken, the seller's normal remedy is an action for unliquidated damages. If an agreement to sell be broken by the seller, the buyer has only a personal remedy against the seller. The goods are still the property of the seller, and he can dispose of them as he likes. But if there has been a sale, and the seller breaks his engagement to deliver the goods, the buyer has not only a personal remedy against the seller, but also the usual proprietary remedies in respect of the goods themselves. In many cases, too, he can follow the goods into the hands of third parties. Again, if there be an agreement for sale, and the goods are destroyed, the loss as a rule falls on the seller, while if there has been a sale, the loss as a rule falls upon the buyer though the goods have never come into his possession. (Chalmers' Sale of Goods Act, 14th Edn., pp. 4 and 12; Halsbury's Laws of England, 3rd Edn., Col. 34, paras. 29 to 31). A contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sider the incidents of a hire-purchase agreement. In doing so, it set out the nature of a typical hire-purchase agreement as distinct from a sale in which the price is to be paid later by instalments in the following words: "In the case of a sale in which the price is to be paid by instalments, the property passes as soon as the sale is made, even though the price has not been fully paid and may later be paid in instalments. This follows from the definition of sale in section 4 of the Indian Sale of Goods Act (as distinguished from an agreement to sell) which requires that the seller transfers the property in the goods to the buyer for a price. The essence of a sale is that the property is transferred from the seller to the buyer for a price, whether paid at once or paid later in instalments. On the other hand, a hire-purchase agreement, as its very name implies, has two aspects. There is first an aspect of bailment of the goods subjected to the hire-purchase agreement, and there is next an element of sale which fructifies when the option to purchase, which is usually a term of hire- purchase agreements, is exercised by the intending purchaser. Thus, the intending purchaser is kn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluable consideration, and includes any supply by a society or club or an association to its members on payment of a price or of fees or subscription, but does not include a mortgage, hypothecation, charge or pledge; and the words 'sell', 'buy' and 'purchase' with all their grammatical variations and cognate expressions, shall be construed accordingly. Explanation .-For the purposes of this clause, a sale within the State includes a sale determined to be inside the State in accordance with the principles formulated In sub-section (2) of section 4 of the Central Sales Tax Act, 1956." As according to the explanation a sale within the State includes a sale determined to be inside the State in accordance with the principles formulated in sub-section (2) of section 4 of the Central Sales Tax Act, 1956, it is necessary to set out that sub-section here: "4. (2) A sale or purchase of goods shall be deemed to take place inside a State if the goods are within the State- (a) in the case of specific or ascertained goods, at the time the contract of sale is made; and (b) ................................................." The actual sale in this case fructified only when the hirer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 S.T.C. 489 (S.C.); [1962] 2 S.C.R. 644., will not be subject to taxation after this amendment and the problem of the same transaction being subjected to taxation at two different stages will not arise. Finally, we may refer to an objection taken by Mr. Bhandare on behalf of the State of Gujarat that no petition under article 32 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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