Deemed sale in hire-purchase transactions upheld; constitutional and res judicata objections to the sales tax levy failed.

Hire-purchase transactions combining bailment with an option to purchase were treated as deemed sales under the taxing statute because the statutory explanation created a legal fiction covering transfers on instalment or hire-purchase terms, and the transactions were therefore taxable. The constitutional challenge to the extended definition of sale failed because the prior validity of the enactment had already been upheld and no adequate factual basis for hostile discrimination under Article 14 was shown. Objections based on departmental instructions, an earlier High Court view, and res judicata were rejected because administrative practice cannot override the law and taxation assessments are year-specific.

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Issues: (i) Whether the transactions styled as hire-purchase agreements fell within the extended definition of sale under the taxing statute and were liable to sales tax; (ii) whether the extended definition of sale was unconstitutional, including on the ground of discrimination under Article 14; (iii) whether the earlier departmental instructions, the prior High Court decision, or the doctrine of res judicata barred the levy.

Issue (i): Whether the transactions styled as hire-purchase agreements fell within the extended definition of sale under the taxing statute and were liable to sales tax.

Analysis: The agreement was not a mere contract of hiring. It combined bailment with an option to purchase and, in substance, transferred goods on a hire-purchase or instalment basis. The statutory explanation created a legal fiction by deeming such transfers to be sales even where title remained with the owner as security for payment. On the true construction of the agreement and the definition, the transaction had the necessary element of sale for tax purposes.

Conclusion: The transactions were within the extended definition of sale and were taxable.

Issue (ii): Whether the extended definition of sale was unconstitutional, including on the ground of discrimination under Article 14.

Analysis: The earlier decision upholding the validity of the taxing enactment had already negatived the basic constitutional attack on the extension of the definition of sale. The Article 14 challenge failed because there was no adequate factual foundation for hostile discrimination, and the same type of hire-purchase transactions had been brought within the Central sales tax regime throughout India. No unconstitutional discrimination against Delhi was shown.

Conclusion: The constitutional challenge failed and the provision was upheld.

Issue (iii): Whether the earlier departmental instructions, the prior High Court decision, or the doctrine of res judicata barred the levy.

Analysis: Departmental instructions could not override the law as later authoritatively declared by the Court. The earlier High Court view did not prevent application of the subsequently settled legal position. In taxation matters, res judicata does not apply in the same manner because each assessment year is distinct and final only for that period.

Conclusion: The objections based on departmental practice, prior litigation, and res judicata were rejected.

Final Conclusion: The petitioners' transactions were held taxable, and none of the constitutional or procedural objections succeeded.

Ratio Decidendi: A hire-purchase arrangement that combines bailment with an option to purchase may be treated as a deemed sale where the statute expressly so provides, and in taxation matters prior assessment or departmental practice does not create a bar of res judicata or estoppel against the correct legal position.

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