Transfer of the right to use goods: hiring video cassettes can trigger dealer status and sales tax liability.

A hire arrangement that gives a customer exclusive control and use of video cassettes for a period constitutes a transfer of the right to use goods. Under Article 366(29A) and the amended definitions in the Kerala General Sales Tax Act, such transfers fall within the sales tax net, and the person carrying on that business is treated as a dealer. On that basis, the article explains that the lessor's liability to tax arises where effective control passes to the hirer during the period of custody, distinguishing situations where control remains with the owner.

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Issues: Whether lending video cassettes to library members for hire amounted to a transfer of the right to use goods, bringing the petitioner within the definition of "dealer" and rendering the transaction taxable under the Kerala General Sales Tax Act, 1963.

Analysis: By virtue of clause (29A) of Article 366 of the Constitution, the State Legislature had competence to tax a transfer of the right to use goods. The amended definitions of "dealer" and "sale" in the Kerala General Sales Tax Act, 1963, together with Explanation (3B) to section 2(xxi), extended tax liability to such transfers. The members of the video library obtained exclusive control over the cassettes for the period of hire and were entitled to use them according to their choice. That arrangement constituted a transfer of the right to use the goods, and the petitioner was carrying on business within the statutory definition of dealer. The cited decisions on machinery and lockers were distinguished on facts because there was no comparable effective control retained by the petitioner over the cassettes during the period of custody.

Conclusion: The lending of video cassettes on hire was a transfer of the right to use goods, the petitioner was a dealer liable to tax, and the assessment orders were rightly sustained.

Ratio Decidendi: Where a person, for valuable consideration, gives another exclusive use of goods for a period, the transaction is a transfer of the right to use goods and falls within the sales tax net under the statutory deeming provision.

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