TaxTMI 
TaxTMI 
1961 (5) TMI 53
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....to be hereinafter examined in detail. The first petitioner is a private limited company incorporated under the Companies Act, with its registered office at Janpath, New Delhi. The second petitioner is the managing director and shareholder of that company and is directly interested in the result of this application, because it is claimed that his rights and property are directly involved. The company has been carrying on in Delhi the business of financing the purchase of new as well as second-hand motor cars and other kinds of motor vehicles. The system adopted by the company for financing a purchase such as aforesaid is as follows. A person desiring to purchase a motor vehicle fixes a bargain with the owner and the petitioner company would then advance the necessary finance on the terms and conditions appearing in a printed copy of the agreement, marked Annexure "A" to the petition. According to that agreement, the company charges the "hirer" an initial deposit by way of premium as a consideration for granting the lease of the vehicle, which deposit becomes the absolute property of the company; the premium charged as aforesaid is a substantial amount, being usually 25 per cent o....
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.... State to forbear from enforcing its notice for the realisation of the sales tax. It was held by the High Court that the State Legislature had not the power to enlarge the meaning of the words "sale of goods" by going beyond the meaning attached to it by the Sale of Goods Act. After the judgment aforesaid of the High Court of Punjab, it is further alleged, a settlement was arrived at between the companies carrying on hire-purchase business in Delhi and the Commissioner of Sales Tax, who issued a circular, being Circular No. 10 of 1956, containing the following decisions of the Department: "(i) Companies which are exclusively engaged in the hire-purchase business will not be treated as dealers and their certificate of registration will be cancelled. (ii) Companies which are partially engaged in the business of hire- purchase will continue to be dealers as hithertofore and their hire-purchase transactions will be appropriately examined in the light of the judgment of the Punjab High Court, and will be liable to sales tax at one stage. (iii) As a result of (i) above, sales made to the above companies by the dealers in vehicles would be liable to sales tax at the hands of the ....
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.... all hire-purchase dealers who had not got them- selves registered so far should immediately have themselves so registered in order to avoid being penalised for contravention of the provisions of the Act. In pursuance of the aforesaid circular of the department, the petitioner company was also called upon to comply with the requirements of the Act. The company made representation to the Commissioner of Sales Tax that the company and other such companies which deal in hire-purchase were not liable to pay sales tax, but the Commissioner of Sales Tax refused to accept the company's contention and answered to the following effect: "1. The incidence of sales tax on such transactions is to be govern- ed by the provisions of sections 3 and 4 of the Central Sales Tax Act, 1956. If, however, the vehicles are purchased by a company having its place of business in Delhi from a dealer outside Delhi on payment of sales tax of that State and the vehicle is hire-purchased to the party in that very State, neither Delhi sales tax nor Central sales tax will be leviable on the Delhi firm irrespective of the fact that the hire-purchase agreement is entered into at Delhi. If, however, vehicle is ....
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.... sales tax on the transactions" described above. In support of the petition, the learned counsel for the petitioners has raised the following contentions: (1) that the transactions in respect of which the petitioners are sought to be taxed are not covered by the explanation to section 2(g) of the Bengal Finance (Sales Tax) Act, as extended to Delhi; (2) alternatively, that is to say, if it is held that the explanation covers the transactions of the nature aforesaid, then the explanation, extending the concept of "sale" is unconstitutional; (3) that in any case it is unconstitutional as it infringes Article 14 of the Constitution in so far as the State of Delhi has been selected for hostile discrimination; (4) that the judgment of the Punjab High Court in Instalment Supply Ltd., New Delhi v. State of Delhi [1956] 7 S.T.C. 586; A.I.R. 1956 Punj. 17. is final and conclusive as between the parties to that judgment; (5) that if it is held that the judgment of the Punjab High Court, referred to above, has been superseded by the judgment of this Court in Mithan Lal's case [1959] S.C.R. 445; 9 S.T.C. 417., that judgment cannot be given retrospective operation; and (6) ....
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....lment and has, during the last 60-70 years, undergone a series of refinements as a result of modern industrial and commercial developments. The term "hire-purchase" has not been defined in the Act. We have, therefore, to construe the expression in its ordinary common law sense, which may best be expressed in terms of the Dictionary of English Law by Earl Jowitt at pages 913-914, which runs as follows: "Hire-purchase-a system whereby the owner of goods lets them on hire for periodic payments by the hirer upon an agreement that when a certain number of payments have been completed, the absolute property in the goods will pass to the hirer, but so that the hirer may return the goods at any time without any obligation to pay any balance of rent accruing after return; until the conditions have been fulfilled, the property remains in the owner. The instrument by which the hire- purchase is effected does not ordinarily require registration as a bill of sale (Exp. Crawcour [1878] 9 Ch. D. 419.), the hirer is 'reputed owner' within the Bankruptcy Act, 1914 (Exp. Brooks [1883] 23 Ch. D. 261.), but the hirer does not 'agree to buy' within the Factors Act or the Sale of Goods Act, 18....
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....ns have been fulfilled, the property remains in the owner. The instrument by which the hire- purchase is effected does not ordinarily require registration as a bill of sale (Exp. Crawcour [1878] 9 Ch. D. 419.), the hirer is 'reputed owner' within the Bankruptcy Act, 1914 (Exp. Brooks [1883] 23 Ch. D. 261.), but the hirer does not 'agree to buy' within the Factors Act or the Sale of Goods Act, 1893, so as to be able to sell or pledge the goods as if he were a mercantile agent: Helby v. Matthews [1895] A.C. 471., Brooks v. Biernstein [1909] 1 K.B. 98. Such agreements are to be distinguished from agreements such as in Lee v. Butler [1893] 2 Q.B. 318., which are in fact a sale, the price being paid in instalments with the condition that the property passes when all the instalments have been paid; here there is a binding a hire-purchase agreement, there is a bailment of goods and either the bailee may buy the goods, or the property therein will or may pass to the bailee, the agreements shall be treated for the' purposes of this Act as a single agreement made at the time when the last of the agreements was made." It is clear that under the law, as it now stands, which has now been cry....
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....f goods on hire-purchase, etc., shall be deemed to be a "sale" even though there may be a stipulation to the effect that in spite of the transfer of goods to the hirer, the owner retains title to those goods until the happening of the ultimate event, namely, completion of title at the option of the hirer. There is, thus, no doubt that the agreement in question does contain not only a contract of bailment simpliciter but also an element of sale, which element has been seized upon by the legislature for the purpose of subjecting a transaction like that to the sales tax. This leads us to the second ground of attack raised by the peti- tioners, namely, that the explanation, if it has the effect of extending the concept of "sale" to what, in law, is not a real sale, but only an incipient or inchoate sale, then in so far as the law has extended the definition of "sale" it is unconstitutional. This contention has lost all its force, if ever it had any, in view of the decision of this Court in Mithan Lal's case [1959] S.C.R. 445; 9 S.T.C. 417.. But then it is argued that Mithan Lal's case [1959] S.C.R. 445; 9 S.T.C. 417. requires re-consideration and that, in any view of the matte....