1998 (9) TMI 532 - SC - VAT / Sales Tax

Hire charges for shuttering supplied to builders are 'sale' under section 2(l)(iv) as deemed sale

Aggarwal Brothers Versus State of Haryana and Another

SC held that hire charges for shuttering supplied to builders and contractors constitute 'sale' under section 2(l)(iv) as a deemed sale. The Court ruled ... Hire shuttering to builders and contractors who use it in the course of construction of buildings - hire charges received by it were sales within the meaning of section 2(l)(iv) - Deemed sale - Held that:- The language used in section 2(j)(iv) and 2(l)(iv) of the said Act is the language used in article 366(29A)(d), section 2(j) dealing with purchase and section 2(l) with sale. The provision expressly speaks of “transfer of the right to use goods” and not of transfer of goods. There is, therefore, no merit in the submission that to be a deemed sale within the meaning of the abovementioned provision of the said Act there must be a legal transfer of goods or that the transaction must be like a lease. Where there is a transfer of a right to use goods for consideration, the requirement of the provision of the said Act is satisfied and there is deemed to be a sale. In the instant case, the assessees owned shuttering. They transferred the shuttering for consideration to builders and building contractors for use in the construction of buildings. There can, therefore, be no doubt that the requirements of a deemed sale within the meaning of the abovementioned provision of the said Act are satisfied. Issues:1. Whether the hire charges for shuttering materials constitute a sale under the Haryana General Sales Tax Act, 1973.2. Whether the transfer of the right to use goods for consideration falls within the definition of sale under the said Act.3. Interpretation and application of the provisions of the said Act regarding the definition of sale.Analysis:Issue 1:The assessees hired shuttering materials to builders and contractors for use in construction, leading to notices for sales tax payment. The High Court upheld the assessment orders, considering the hire charges as sales under the Act. The assessees challenged this, arguing the provision was unconstitutional. However, the High Court found that the transfer of shuttering material to customers for use constituted a sale, falling within the definition of 'sale' under the Act.Issue 2:The assessees contended that the transfer of the right to use goods for consideration should involve a legal transfer of goods, akin to a lease, to qualify as a sale under the Act. However, the Act defines sale to include the transfer of the right to use goods for consideration, deeming it a sale. The Court clarified that a legal transfer of goods or a lease-like transaction is not necessary for a deemed sale under the Act.Issue 3:The language used in the Act aligns with the definition of sale under Article 366(29A)(d) of the Constitution. The Court emphasized that a transfer of the right to use goods for consideration satisfies the Act's requirement for a deemed sale. In this case, the assessees transferred shuttering materials to builders for use in construction, meeting the criteria for a deemed sale under the Act.In conclusion, the Supreme Court dismissed the appeals, upholding the High Court's decision that the hire charges for shuttering materials constituted sales under the Haryana General Sales Tax Act, 1973. The Court clarified that the transfer of the right to use goods for consideration falls within the definition of sale under the Act, emphasizing the fulfillment of statutory requirements for a deemed sale.