TaxTMI 
TaxTMI 
2000 (5) TMI 980
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....y Choudhary, Ms. Tania Bery, Sanjay Katyal,Sanjay Chaudhary, Vineet kumar, Yashank Adhyary, P.K. Jain, Mrs. Urmila Sirur, Mrs. B. Sunitha Rao, D.P. Mukerjee, Mrs, Kamini Jaiswal, G.B. Sathe, Ashish Dholakia, Dilip Sen, J.R. Das, D, Krishnan, V. Krishna-Murthy, A. Mariarputham, T. Harish Kumar, V.Rama Subramaniam, D.Gobur-dhan, Ms. Pinky Anand, Ms,Geeta Luthra, M. Veerappa, Kh.Nobin Singh, A.S. Bhasme, K.R.Nambiar, Ranjan Mukharjee, Mrs. Sumita Mukherjee, K. Ram Kumar, Ms. Santi Narayan, Y Subba Rao, B.Sridhar (For G. Prabhakar), Sushil Jain, Pradeep Agrawal, Prakash Shrivastava, A. Mishra, Ms. Anjali Doshi, Dilip Tandon, Ms. Neera Gupta, M. Shivram, R.C. Verma, P. Parameswaran, S.N. Terdol, and Mrs. Shureshtha Bagga, Advocates. -------------------------------------------------- V.N. KHARE, J.-Despite the decisions of this Court in Builders' Association of India v. Union of India [1989] 73 STC 370; (1989) 2 SCC 645 and Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204; (1993) 1 SCC 364, the controversy as regards the power of the State Legislature to levy sales tax under clause (29A)(d) of article 366 of the Constitution in the context of the ques....
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....hat the equipment to be leased will be dispatched by the manufacturer or supplier concerned to the locations specified in the lease. Thereafter, at the instance of the lessees, the appellants place their purchase orders to the suppliers or manufacturers for supply of individual items or equipments falling within the category and correct value mentioned in the Master Lease Agreement Schedules. The appellants' and the petitioners' further case is that they disburse the value of equipment to the suppliers and, at the instance of the appellants and the petitioners, the suppliers deliver the equipments to the lessees at the specified locations for use. After the equipments are delivered and put to use, the lessee executes supplementary lease schedules acknowledging due receipt of the lease equipments, and such supplementary lease deeds form an integral part of the Master Lease Agreement. Such is the nature of business carried on by the appellants and the petitioners in this group of cases. According to the appellants and the petitioners, one transaction of transfer of right to use goods is subjected to sales tax by more than one State. On such a transaction, some States levy tax on t....
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....the right to use such goods is made, and whether the assent of the party is prior or subsequent to such transfer of the right to use any such goods." Section 3 of the Maharashtra Act provides for incidence of tax and section 4 deals with levy of tax. There is no dispute as regards the definition of "sale". What is under challenge is the Explanation to sub-section (10) of section 2 of the Act, which fixes situs of deemed sale within the State of Maharashtra on location of goods at the time of their use. The appellants in Civil Appeals excepting Civil Appeal Nos. 6218 to 6223 of 1995, had challenged the levy of sales tax by State of Maharashtra by means of writ petitions under article 226 of the Constitution before the Bombay High Court. Before the High Court, it was contended by the appellants that the Maharashtra Act, particularly section 3 read with section 2(10), purports to levy tax not only the transfers of right to use goods which takes place within the State of Maharashtra, but also upon the transfer which occasions the movement of leased or to be leased goods from one State to another, and also upon the transfers effected during movement of goods from one State to another....
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.... the State of Maharashtra, contended that, in the absence of any enactment by the Parliament, the nature of contract, i.e., the transfer of right to use goods is to be determined with reference to law dealing with contract, namely, the Indian Contract Act, 1872, and in that connection referred to sections 148 and 149 of the Indian Contract Act. According to him, the transfer of the right to use goods being in the nature of a contract of bailment, there must be delivery or possession of goods before it can be said that the right to use is transferred. According to him, until the goods are delivered to the lessee it is only an agreement to give it on bailment and, in fact, the delivery of goods is sine qua non of the transfer of right to use goods. Thus, the State Legislature was fully competent to enact the Explanation to section 2(10) of the Act. In brief, the argument is that the taxable event would be the location of goods-delivery of which is to be effected for use. Shri C.S. Vaidyanathan, learned Additional Solicitor-General, appearing for the Union of India, Shri A.K. Ganguly, learned Senior Counsel appearing for the State of Tamil Nadu, Shri K. Ram Kumar, appearing for the....
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....r levy of tax, as a result of which one transaction of sale was subjected to levy of sales tax by more than one Province resulting in burden on the consumers. These difficulties were well taken care of while framing the Constitution and, as a result of which we find article 286, as it existed in the Constitution, when it was enforced. Relevant article 286 is reproduced below: 286.. Restrictions as to imposition of tax on the sale or purchase of goods.- (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. Explanation.-For the purposes of sub-clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State. (2) Except in so far as P....
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....ticle 226 of the Constitution, struck down the aforesaid provision being of the view that the definition of "sale " in the Bombay Sales Tax Act was repugnant to article 286 of the Constitution. But, the said decision of the Bombay High Court was reversed by the Supreme Court in the case of State of Bombay v. United Motors (India) Ltd. [1953] 4 STC 133; [1953] 4 SCR 1069. However, the controversy did not abate and correctness of decision in the case of United Motors [1953] 4 STC 133; [1953] SCR 1069, was doubted and, therefore, it was reconsidered in Bengal Immunity Company Ltd. v. State of Bihar [1955] 6 STC 446 (SC); [1955] 2 SCR 603, wherein it was held, as thus: "The operative provisions of the several parts of article 286, namely, clause (1)(a), clause (1)(b), clause (2) and clause (3) are intended to deal with different topics and, one cannot be projected or read into another and there- fore the Explanation in clause (1)(a) cannot be legitimately extended to clause (2) either as an exception or as a proviso thereto or read as curtailing or limiting the ambit of clause (2). ...................... What is an inter-State sale or purchase continues to be so irrespective o....
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....aid amendment in article 269, the Parliament was empowered to levy and collect tax on sale or purchase of goods where such sale or purchase takes place in the course of inter-State trade or commerce, and also to lay down the principles for determining when sale or purchase of goods takes place in the course of inter-State trade or commerce. The Sixth Amendment also omitted Explanation to clause (1)(a) of article 286 and further, clauses (2) and (3) of article 286 were substituted by two new clauses. Amended article 286 read as under: "286. Restrictions as to imposition of tax on the sale or purchase of goods.- (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). (3) Any law of a State shall, in so far as it imposes, or authorises the imposition of a tax on the sale or purchase of goods declared ....
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....rnment of India Act, 1935, to impose a tax on the supply of the materials used in such a contract treating it as a "sale". 13.. After the decision of this Court in Gannon Dunkerley case [1958] 9 STC 353; [1959] SCR 379, States suffered losses as a result of avoidance of the Central sales tax leviable on inter-State sales of goods. Therefore, the matters were referred to the Law Commission of India. The Law Commission, after considering the matters referred, made certain recommendations suggesting amendments in the Constitution in order to augment the revenue of the States. In the light of the recommendations of the Law Commission, Parliament passed the Constitution (Forty-sixth Amendment) Act, whereby a new clause (29A) was inserted in article 366 of the Constitution, which is extracted below: "(29A) 'tax on the sale or purchase of goods' includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods....
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....ticle 366, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify." 17.. After the Forty-sixth Amendment, State Legislatures became competent to levy sales tax on deemed sales envisaged in clause (29A) of article 366 of the Constitution although such transactions were not sales within the meaning of "sale" and most of the State Legislatures enacted law to levy sales tax on deemed sale in terms of the provisions of clause (29A) of article 366 of the Constitution, and sought to assess the contractors on the transactions of works contracts. It is at this stage writ petitions were filed in this Court challenging such levy contending, that the power of State Legislatures to levy tax on transfer of property in goods involved in the execution of works contracts referred to in sub-clause (b) of clause (29A) of article 366, is in excess of power conferred on State Legislatures under entry 54, List II. The respondent-States in those writ petitions defended the levy on the ground that sub-clause (b) of article 366(29A) bestowed on them a power to levy tax on works contract independent of entry 54....
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....hen such law is enacted by Parliament, the State Legislature would be required to exercise its legislative power in conformity with such law. Thus, what we have stated above, are the limitation on the powers of State Legislatures on levy of sales tax on deemed sales envisaged under sub-clause (d) of clause (29A) of article 366 of the Constitution. 20.. While examining the power of State Legislatures under entry 54 of List II in earlier part of this judgment, we have noticed that the situs of the sale or purchase is wholly immaterial as regards the inter-State trade or commerce, as held in Bengal Immunity Co. Ltd.'s. case [1955] 6 STC 446 (SC); [1955] 2 SCR 603. Further, the State Legislature cannot by law treat sales outside the State and sales in the course of import as "sales within the State" by fixing the situs of sales within its State in the definition of sale, as it is within the exclusive domain of the appropriate Legislature, i.e., Parliament, to fix the location of sale by creating legal fiction or otherwise. 21.. It may be noted that the transactions contemplated under sub- clauses (a) to (f) of clause (29A) of article 366 are not actual sales within the meaning of....
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....lause in the Explanation which refers to the general law relating to 'sale of goods under which property in the goods has, by reason of such sale or purchase, passed in another State'. These two together indicate that it is the passing of property within the State that is intended to be fastened on, for the purpose of determining, whether the sale in question is 'inside' or 'outside' the State, and therefore, subject to the operation of the 'Explanation' that State in which property passes would be the only State which would have the power to levy a tax on the sale. As was explained in the recent decision of this Court in Burmah Shell Oil Storage & Distributing Co. of India Ltd. v. Commercial Tax Officer [1960] 11 STC 764 (SC): By sale here [article 286(1)(a)] is meant a completed transaction by which property in the goods passes. Before the property in the goods passes, "the contract of sale is only executory, and the buyer has only a chose in action".......... The Constitution thinks in terms of a completed sale by the passing of property and not in terms of an executory contract for the sale of goods.' Notwithstanding that is not an 'outside' sale, the power of the State t....
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....f goods. As there was no delivery of tea as a direct result of sale for purposes of consumption in any particular State, Explanation to clause (1)(a) of article 286 as it existed prior to Constitution (Sixth Amendment) Act, was not available. Since there was no legal fiction to determine the situs of sale it was held that the sale was "outside" sale and was not "inside" sale qua State of Travancore-Cochin because the property in goods passed when the contract was accepted on the fall of hammer in Fort Cochin which was in the State of Madras. The relevant extract of the judgment is reproduced below: "that the property in the goods passed when the contract was accepted on the fall of the hammer in Fort Cochin. Under article 286(1) it was the 'passing of the property within the State' that was intended to be fastened on for the purpose of determining whether the sale was 'inside' or 'outside' the State. Subject to the operation of the 'explanation' that State in which property passed would be the only State which would have the power to levy the tax on the sale. But the explanation did not apply in the present case as there was no delivery as a direct result of the sale for cons....
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....Connaught Circus for consumption in the State of Delhi. On one view of the law, the situs of such a sale would be Gurgaon. We need not decide that it is, because that type of case is not before us and there may be other views to consider, but it is certainly a possible view. It is also possible to hold that this is not inter-State trade or commerce, because there is no movement of goods across a State boundary. Again, we need not decide that because that also may be controversial. But given these two postulates the transaction would fall squarely within the Explanation and yet it would not come within clause (2), for there is no movement of the goods across the border of any State and both the seller and the buyer are in the same place. Surely, the Explanation will, in presenti, govern such cases irrespective of whether Parliament has lifted the ban under clause (2). If these postulates are accepted then by virtue of clause (1)(a) read with the Explanation the State of Delhi alone will be entitled to impose a tax on such a sale or purchase and the State of Punjab will be precluded from doing so by reason of the fictional situs assigned to such a sale or purchase by the Explan....
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.... of goods will be a deemed sale in case of sub-clause (c), the supply of goods and services respectively will be deemed sales in the cases of sub-clauses (e) and (f) and the transfer of the right to use any goods will be a deemed sale in the case of sub-clause (d). Clause (29A) cannot, in our view, be read as implying that the tax under sub-clause (d) is to be imposed not on the transfer of the right to use goods but on the delivery of the goods for use. Nor, in our view, can a transfer of the right to use goods in sub-clause (d) of clause (29A) be equated with the third sort of bailment referred to in "Bailment" by Palmer, 1979 edition, page 88. The third sort referred to there is when goods are left with the bailee to be used by him for hire, which implies the transfer of the goods to the bailee. In the case of sub-clause (d), the goods are not required to be left with the transferee. All that is required is that there is a transfer of the right to use the goods. In our view, therefore, on a plain construction of sub-clause (d) of clause (29A), the taxable event is the transfer of the right to use the goods regardless of when or whether the goods are delivered for use. What is re....
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.... are available and a written contract is executed between the parties, it is at that point situs of taxable event on the transfer of right to use goods would occur and situs of sale of such a transaction would be the place where the contract is executed. 29.. Learned counsel representing the respondents-States contended that by virtue of application of section 4 of the Central Sales Tax Act, State Legislatures are competent to enact law imposing tax on the transfer of right to use goods if the goods are located for use within their States and placed reliance on the decision of this Court in the second Gannon Dunkerley & Co. [1993] 88 STC 204; (1993) 1 SCC 364. The relevant passage of the said judgment runs as under: "The question whether a sale is an outside sale or a sale inside the State or whether it is a sale in the course of import or export will have to be determined in accordance with the principles contained in sections 4 and 5 of the Central Sales Tax Act and the State Legislature while enacting the sales tax legislation for the State cannot make a departure from those principles." 30.. The aforesaid contention advanced has no merit and reliance on the second Gann....
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....venth Schedule. The levy of tax is not on use of goods but on the transfer of right to use goods. The High Court proceeded on the footing that the transfer of right to use is different from sale or deemed sale without considering the legal fiction engrafted in clause (29A) of article 366 of the Constitution. We are, therefore, of the view that the reasoning of the High Court in upholding the Explanation to section 2(10) of the Act is not tenable in law. This question is also related to another question which falls to be considered, namely, whether the State of Maharashtra can levy tax on the transaction which is an inter-State sale. The Bombay High Court expressed the view that in case of transfer of right to use goods when agreement is made in one State for giving delivery of goods for use by the lessee in another State, the movement precedes a transfer of right to use, i.e., the movement is antecedent to the completed transaction and only upon delivery of goods the transfer of right to use is completed as the transfer of right to use goods is not concluded merely by execution of an agreement or document. In view of the fact that the transaction in question is deemed sale and defi....
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....ansaction of transfer of right to use any goods would be the place where the property in goods passes, i.e., where the written agreement transferring the right to use is executed. (c) Where the goods are available for the transfer of right to use the taxable event on the transfer of right to use any goods is on the transfer which results in right to use and the situs of sale would be the place where the contract is executed and not where the goods are located for use. (d) In cases where goods are not in existence or where there is an oral or implied transfer of the right to use goods, such transactions may be effected by the delivery of the goods. In such cases the taxable event would be on the delivery of goods. (e) The transaction of transfer of right to use goods cannot be termed as contract of bailment as it is deemed sale within the meaning of legal fiction engrafted in clause (29A)(d) of article 366 of the Constitution wherein the location or delivery of goods to put to use is immaterial. 36.. In the light of what we have stated above, we will examine the provisions of the various Acts which are impugned in the present case. 37.. These civil appeals and writ pe....
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....ative power conferred on the State Legislature under entry 54 of List II and we, thus, instead of striking it down, direct that the Explanation to section 2(10) of the Act shall be read down to this effect that it would not be applicable to the transactions of transfer of right to use any goods if such deemed sale is (i) an outside sale, (ii) sale in course of the import of the goods into or export of the goods out of the territory of India and (iii) an inter-State sale. 39.. Karnataka Act: The tax on the transfer of right to use any goods is levied under the General Sales Tax Act, namely the Karnataka Sales Tax Act. Section 2(t) of the Karnataka Sales Tax Act, 1957, defines "sale" as under: "'Sale' with all its grammatical variation and cognate expressions means every transfer of the property in goods (other than by way of a mortgage, hypothecation, charge or pledge) by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration and includes,- .................... (iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other....
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....II of the Seventh Schedule. Another important aspect to notice is that the provision of section 5(3) which provides for single point taxation has been omitted in its application to section 5-C. Therefore, Explanation 3(d) to section 2(t) of the Act has to be held in excess of legislative power conferred to the State Legislature under entry 54 of List II of the Seventh Schedule to the Constitution following the reasoning given while discussing the Maharashtra Act. We, accordingly, direct that Explanation 3(d) to section 2(t) of the Act shall be read down to this effect that it would not be applicable to the transactions of transfer of right to use any goods if such deemed sale is (i) an outside sale, (ii) sale in course of the import of the goods into or export of the goods out of the territory of India and (iii) an inter-State sale. 41.. Tamil Nadu: The Tamil Nadu General Sales Tax Act, 1959, also levies tax on transfer of right to use any goods. Section 2(n) defines "sale " as under: " 'Sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods (other than by way of a mortgage, hypothecation, charge or pledge) by one perso....
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....aluable consideration and includes- ................... (iv) transfer of the right to use any goods except tents, kanats, chholdari, crockery, utensils, furniture and all other goods dealt with by the tent dealers as also other allied dealers for decoration and lighting purposes for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; ". The charging section in relation to tax on transfer of right to use any goods is under the general provisions of the Sales Tax Act. Note 4 of section 2(l) reads as thus: "Note 4: A sale falling under sub-clause (iv) shall be deemed to have taken place within the State if the goods in respect of which right to use has been transferred are within the State at the time of their use." Note 4 is substantially akin to explanation impugned in the Maharashtra Act. Note 4 widens the ambit of definition of "sale" by including outside sale, inter-State sale and import into the territory of India. Following the reasoning given earlier, we direct that Note 4 to section 2(l) of the Act shall be read down to this effect that it would not be applicable to the transactions of transfer of rig....
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....enting the value of the goods exempted under section 4; ..............." The aforesaid provisions show that so far as the inter-State sales are concerned, in substance, are not taxable, but no provision has been made for declared goods. Yet, there is another aspect. By virtue of clause (ii) of Explanation I to section 2(h), the ambit of sale has been widened by including "outside sale" as "inside sale" on mere location of goods for use within the State irrespective of the fact that the agreement for transfer of right to use has been executed outside the State or whether the sale is outside the State, the tax is chargeable within the State. And, further, on account of a special provision for rates of tax, the other provision such as single point tax as well as exemption, etc., is not applicable to the transaction of transfer of right to use any goods. We find that clause (ii) of Explanation I of section 2(h) is in excess of legislative power under entry 54, List II of the Seventh Schedule and, therefore, we direct that clause (ii) of Explanation I of section 2(h) of the Act shall be read down to this effect that it would not be applicable to the transaction of transfer of r....
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....to the transaction of the transfer of right to use any goods if such deemed sale is (i) an outside sale, (ii) sale in course of the import of the goods into or export of the goods out of the territory of India and (iii) an inter-State sale. 49.. Andhra Pradesh: The Andhra Pradesh General Sales Tax Act, 1957 levies tax on the transfer of right to use any goods. Section 2(n) defines "sale", which is being reproduced below: " 'sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods whether as such goods or in any other form in pursuance of a contract or otherwise by one person to another in the course of trade or business, for cash, or for deferred payment, or for any other valuable consideration or in the supply or distribution of goods by a society (including a co-operative society), club, firm or association to its members, but does not include a mortgage, hypothecation or pledge of, or a charge on goods." The above sub-section has explanations. The relevant Explanations are reproduced below: "Explanation II.-(a) Notwithstanding anything contained in the Indian Sale of Goods Act, 1930 (Central Act III ....
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....n the course of the import of the goods into, or export of the goods out of the territory of India; or (iii) in the course of inter-State trade or commerce." Explanation: The provisions of Chapter II of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), shall apply for the purpose of determining when a sale or purchase takes place in the course of inter-State trade or commerce or outside a State or in the course of import or export. 51.. Although, the aforesaid section was required to be amended after the I.T.C. Classic case [1995] 97 STC 330 (AP) under appeal, it remained unamended and its Explanation provides that the provisions of Chapter II of the Central Sales Tax Act, 1956, shall apply for the purpose of determining when a sale or purchase takes place in the course of inter-State trade or commerce or outside a State or in the course of import or export. 52.. We have already held that since the definition of "sale" so far as it relates to transaction of transfer of right to use any goods is concerned in Central Sales Tax Act has not been amended, the provisions of section 4 of the Central Sales Tax Act will not be applicable to such transactions. Thus, we fi....
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.... by our learned brother; he has also referred to the respective contentions of the learned counsel in extenso, so we do not consider it necessary to repeat the same here. 57.. The questions that arise for consideration in this batch of cases are: (1) What are the limitations on the power of the State Legislature to levy tax on the transaction embodied in sub-clause (d) of clause (29A) of article 366 of the Constitution. (2) What is the real import of sub-clause (d) of clause (29A) of article 366 and where does the taxable event on the transfer of right to use goods arise. (3) Whether the impugned legislations of the States are unconstitutional being in violation of clauses (1) to (3) of article 286 and clauses (1) and (3) of article 269 of the Constitution, and (4) Whether the orders impugned in the appeals the provisions challenged in writ petitions and transfer petitions are sustainable. 58.. On the first question, after tracing the history of the sales tax legislation both under the Government of India Act, 1935, as well as under the Constitution of India and dealing with the events leading to the insertion of clause (29A) in article 366 of the Constitution and....
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....deemed sale", it is necessary to quote clause (29A) here: "(29A) 'tax on the sale or purchase of goods' includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (c) a tax on the delivery of goods on hire-purchase or any system of payment by instalments; (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods sh....
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....ned reading of the first and the second limb of clause (29A) suggests that mere execution of a document de hors passing the domain of the goods does not result in transfer of right to use any goods and will not constitute a "deemed sale" within the meaning of clause (29A). The "deemed sale" envisaged in sub-clause (d) involves not only a verbal or written transfer of right to use any goods but also an overt act by which the transferor places the goods at the disposal of the transferee to make their use possible. On this construction, it is explicit that the transfer of right to use any goods involves both passing of a right in as well as domain of the goods in which right to use is transferred. 67.. It is a common ground that the transaction mentioned in sub-clause (d) which is treated as a "deemed sale ", is in effect leasing/hiring of the goods, which implies use of the goods by the hirer. 68.. It will be useful to note the following passage in "Introduction to the Law of Property" by Mr. F.H. Lawson 1958 Edition, page 117. "In Roman law hire was nothing more than contract. In English law, however, it is much more. Here again we must distinguish between chattels and land. W....
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....t. It may, however, be mentioned that various High Courts in India treated the transaction in sub-clause (d) as bailment; among them are the High Court of Andhra Pradesh in Rashtriya Ispat Nigam Ltd. v. Commercial Tax Officer, Company Circle, Visakhapatnam [1990] 77 STC 182, I.T.C. Classic Finance and Services v. Commissioner of Commercial Taxes [1995] 97 STC 330, the High Court at Bombay in 20th Century Finance Corporation Limited v. State of Maharashtra [1989] 75 STC 217 the High Court of Punjab and Haryana (sic) in Upasana Finance Ltd. v. State of Tamil Nadu [1999] 113 STC 403 (TNTST), the High Court of Orissa in Krushna Chandra Behera v. State of Orissa [1991] 83 STC 325. 72.. Reverting to sub-clause (d) of clause (29A), a perusal of the Statement of Objects and Reasons appended to the Constitution (Forty-sixth Amendment) Act, 1982, shows that the Parliament has taken note of the fact that the main right in regard to films relates to its exploitation and after exploitation for a certain period of time, in most cases, the film ceases to have any value, so instead of resorting to the outright sale of a film, only a lease or transfer of the right to exploit the film is made. Th....
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....he appellants and the hirer for leasing of an equipment. The equipment, on that date, is not in existence. After execution of the master lease, the appellants will place an order for purchase of an equipment with the manufacturer purporting to be at the instance of the hirer with instruction that the same be delivered at his place. On the aforementioned premise, can the transfer of the right to use the equipment be complete on execution of the master lease and the appellants' liability under sub-clause (d) to pay sales tax would commence immediately even though the equipment in regard to which "the right to use" has been transferred to the hirer is not in existence? But then it is conceded that transfer in sub-clause (d) will not be effectual where the goods are not in existence. Now, the next stage, after placing the order for purchase of an equipment, let us take, an equipment has been manufactured and is thus brought into existence but remains unspecified; will then the transfer be complete at that stage and the appellants' tax liability will start immediately on its manufacture. In our opinion, no. At that stage even the sale of the equipment in favour of the appellants will no....
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....ces). 78. It may be apt to notice here the principles with regard to unascertained goods in the case of sale of goods, which are: Halsbury's Laws of England, Vol. 41, paras 708-709. "(i) The rule relating to unascertained goods is fundamental to the contract of sale inasmuch as a contract to sell unascertained goods is not a complete sale but a promise to sell. (ii) Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. In particular, where the individuality of the goods depends upon their being separated, weighed, measured, tested or counted, or upon some other act or thing being done in relation to them for their ascertainment, the goods are not ascertained until such act or thing is done. Goods are unascertained, notwithstanding that they are to be taken from a specific larger bulk, if the identity of the portion so to be taken is unascertained. The ascertainment of the goods does not of itself necessarily pass the property. It does so only if the parties have agreed that the property in the goods should pass when ascertained." In our view the same principles will....
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.... Pursuant to the delivery notes, the tea lots were sent from Willingdon Island (Travancore Cochin) for consumption to other States and other countries. On the ground that the goods were within the State of Travancore-Cochin, sales tax was sought to be levied by that State on those transactions of sale. This Court opined that the property in the goods passed when the contract was accepted on the fall of the hammer at Fort Cochin (Madras) and held: "On the facts of this case it was found by the Sales Tax Appellate Tribunal that in regard to the sales of tea in 'full lots' the property passed at Fort Cochin and this view has not been challenged in this Court. Therefore, on the majority decision in India Copper Corporation Ltd. v. State of Bihar [1961] 12 STC 56 (SC); [1961] 2 SCR 276, the only State which would have the power to levy a tax on such sale would be the State of Madras and so far as Travancore-Cochin was concerned, the sale would be an outside sale. In the present case, therefore, the sale was an 'outside sale' and cannot be said to be an 'inside sale' qua Travancore-Cochin because the title passed at Fort Cochin which is in the State of Madras. Apart from tha....
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....gard to each of the deemed sales the taxable events are specified in sub-clauses (a) to (f) of clause (29A) of article 366 of the Constitution. For purposes of levy of a tax on transactions referred to in sub-clauses (a) and (b) the taxable event is transfer of property in goods, in sub-clause (c) it is delivery of goods, in sub-clause (d) it is transfer of right to use any goods, whereas in sub-clauses (e) and (f), supply of goods is postulated as taxable event. It must, however, be made clear that no tax can be levied under a legislation enacted by virtue of the power conferred in entry 54, List II of the Seventh Schedule to the Constitution on the agreement for sale, therefore, necessarily the taxable event has to be on the completion of a deemed sale. We have also discussed above as to when and where a deemed sale will be complete in regard to specified goods as also in regard to unspecified goods. However, some aspects which remained untouched may be dealt with here. In the case of a deemed sale of goods, whether specified or unspecified, under sub-clause (d), where more States than one are involved, the taxable event will arise where the transfer is complete ; if the contract....
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....nnot, therefore, be at any earlier stage and at a place other than Delhi. 85.. Here it will be apt to refer to the following principle in Halsbury's Laws of England: Halsbury's Laws of England, Vol. 41, para 711. "An appropriation takes place where the goods are situated at the time of the appropriation, not where the contract of sale is made, or where one party assents to an appropriation by the other. An authority given by one party to the other to appropriate the goods is an implied assent by the party giving the authority to a subsequent appropriation by the other, provided the appropriation is made in accordance with the contract." This principle deals with the sale of goods but there is no legal impediment or difficulty in applying the same to a deemed sale as well. 86.. It may be noted that levy of tax under sub-clause (d) is on transfer of right to use any goods. The tax is not on the actual use of the goods; the hirer may use the goods during the period specified in the contract in exercise of the right acquired thereunder or he may not use them at all. The taxable event does not depend on the actual use. For purposes of sub-clause (d), actual exercise of the r....
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.... which is held permissible by the decisions of the Constitution Benches of this Court in Tata Iron & Steel Co. Ltd. v. State of Bihar [1958] 9 STC 267 (SC); [1958] SCR 1355 and in Gannon Dunkerley's case [1993] 88 STC 204; (1993) 1 SCC 364, the very taxable event has been altered from "the transfer of the right to use the goods" to the situs of the goods in the State of Maharashtra at the time of their use. In the example referred to above, namely, taking car "X" on rent by hirer though the contract of the transfer of the right to use the car was entered into in Delhi, the control/domain of the car was also given in Delhi by handing over key of the car and the delivery of the car was taken from Gurgaon (Haryana), thus, the taxable event, namely, the transfer was complete in Delhi, but if the hirer uses the car in Bombay, the Maharashtra Act treats such a deemed sale as taxable by that State on the mere use of the car in Maharashtra State which has no nexus to the taxable event under sub-clause (d). 89.. The impugned Explanation is sought to be saved on the following grounds: (i) The incidence of a deemed sale under sub-clause (d) is delivery of possession and the goods can be....
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....deemed sale under clause (29A) of article 366. We are of the view, having regard to the above discussion, that sections 3 and 4 of the Central Sales Tax Act cannot save the impugned Explanation. (iii) The impugned Explanation has to be read subject to section 8A of the Maharashtra Sales Tax Act. That is no doubt a correct way of reading the said provisions because that section incorporates the mandate contained in article 286(1) of the Constitution. But this can hardly remove the vice in the impugned Explanation which has already been adverted to in detail. 90.. For the foregoing reasons, the impugned Explanation cannot be sustained being violative of article 286(1)(a), articles 269(1)(g) and 269(3) read with sections 3 and 4 of the Central Sales Tax Act. 91.. The same result follows in the case of the impugned legislation of the Haryana Act, Note 4 of section 2(l), Andhra Pradesh Act, clause (b) of section 5E of the Act, the U.P. Act, clause (ii) of Explanation I to section 2(h) and in the Rajasthan Act, the definition of sale contained in section 2(38), Explanation II, clause (b) given in the statement above. Though they are differently worded, they convey the same meani....
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.... before the High Court of Andhra Pradesh assessment of tax for the years 1989-90 to 1994-95 was in fact made under the provisions of the Andhra Pradesh General Sales Tax Act. The crucial question before the High Court was when on the basis of master lease, the contract to take the equipment on lease, entered into between the respondent and the hirer, the respondent placed an order with the supplier at Calcutta with instructions to deliver it to the hirer at Hyderabad, was the movement of the equipment from Calcutta to Hyderabad pursuant to the sale of the equipment or deemed sale under sub-clause (d)? The Division Bench of the Andhra Pradesh High Court proceeded on the footing, following, among others, the judgment of the Bombay High Court in the 20th Century Finance Corporation [1989] 75 STC 217, as well as the earlier judgments of the Andhra Pradesh High Court, that the transaction referred to in sub-clause (d) is a specie of bailment and on the interpretation of the contract of the master lease, it held that the transfer of right to use the equipment (deemed sale) was complete on execution of the master lease and that the deemed sale occasioned the movements of the goods from....