Full Judgment Text
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PETITIONER:
INSTALLMENT SUPPLY (P.) LTD. AND ANOTHER
Vs.
RESPONDENT:
THE UNION OF INDIA AND OTHERS
DATE OF JUDGMENT:
02/05/1961
BENCH:
SINHA, BHUVNESHWAR P.(CJ)
BENCH:
SINHA, BHUVNESHWAR P.(CJ)
DAS, S.K.
SARKAR, A.K.
AYYANGAR, N. RAJAGOPALA
MUDHOLKAR, J.R.
CITATION:
1962 AIR 53 1962 SCR (2) 644
CITATOR INFO :
R 1964 SC 318 (9)
R 1974 SC1105 (1,5,8,9,11)
ACT:
Sales Tax-Hire-purchase agreement-Transaction on such
agreement, if liable to tax-Bengal Finance (Sales Tax) Act,
1941, as extended to Delhi State, S. 2(g).
HEADNOTE:
Section 2(g) of the Bengal Finance (Sales Tax) Act, 1941, as
extended to Delhi State, provided as follows,-
"’Sale’ means any transfer of property in goods for cash or
deferred payment or other valuable consideration, including
a transfer of property in goods involved in the execution of
a contract, but does not include a mortgage, hypothecation,
charge or pledge.
Explanation I....A transfer of goods on hire-purchase or
other instalment system of payment shall, notwithstanding
that the seller retains a title to any goods as security for
payment of the price, be deemed to be a sale."
The hire-purchase agreement entered into by the petitioner
company provided that after all the monthly instalments had
been paid, "the hiring shall come to an end and the vehicle
shall, at the option of the hirer, become his absolute
property; but until such payments as aforesaid have been
made, the vehicle shall remain the property of the owners.
The hirer shall also have the option of purchasing the
vehicle at any time during the currency of this agreement by
paying in one lump sum the balance of all the hire
hereinbefore mentioned and any other expenses incurred by
the owners relating to the transaction." The question for
determination was whether the agreement was a transaction of
mere hiring or one of hire-purchase within the meaning of
Explanation 1 to s. 2(g) of the Act.
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Held, that the language of Explanation 1 to S. 2(g) of the
Act was wide enough to include a mere transfer of goods
without the transfer of the title thereto, if such transfer
took place in the course of an agreement of hire-purchase or
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any other instalment system of payment.
As the Act did not define the term ’hire-purchase’, it had
to be construed in its ordinary Common Law sense, i.e., that
it partook of the nature of a contract of bailment with an
element of sale added to it.
Lee v. Butler, [1893] z Q. B. 318 and Helby v. Matthews,
[1895] A. C. 471, referred to.
The non obstacle clause in Explanation 1 to S. 2(g) of the
Act did not govern the main clause of the said Explanation
and its sole purpose was to emphasise the categorical
statement of the law Contained therein. Since the agreement
in the instant case contained not merely a contract of
bailment simpliciter but also an element of sale, the
transaction had rightly been subjected to sales tax.
There could be no force in the contention that the Act in so
far as it sought to extend the concept of sale to what in
law was not a real sale, was unconstitutional.
Mithan Lal v. State of Delhi, [1959] S.C.R. 445, referred
to.
Nor was there any substance in the contention that the
extended definition of the word ’sale’ in the Act infringed
Art. 14 of the Constitution.
It is well settled that in matters of taxation there can be
no question of res judicata.
Society of Medical Officers of Health v. Hope (Valuation
Officer), [1960] A. C. 551 and Broken Hill Proprietary
Company Ltd. v. Municipal Council of Broken Hill, [1925] A.
C. 94, referred to.
Installment Supply Ltd., New Delhi v. State of Delhi, A.I.R.
1956 Punj. 177, considered.
JUDGMENT:
ORIGINAL JURISDICTION: Petition No. 146 of 1958.
Petition under Art. 32 of the Constitution of India for
enforcement of Fundamental Rights.
Veda Vyasa, S. K. Kapur and Ganpat Rai, for the petitioners.
C. K. Daphtary, Solicitor-General of India, R. Gopala-
krishnan and D. Gupta, for the respondents.
1961. May 2. The Judgment of the Court was delivered by
SINHA, C. J.-The petitioners have moved this sin Court under
Art. 32 of the Constitution for a writ
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or order in the nature of mandamus and/or prohibition and/or
other suitable writ, order or direction to the respondents
not to levy, charge or collect any sales tax on transactions
of what the petitioners characterised as hire-purchase
agreements, a typical example of which is contained in
Annexure ’A’ to the petition, 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
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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% of the
price in respect of new vehicles. The ’Hirer’ undertakes to
pay instalments and when all the instalments are paid, the
vehicle becomes the property of the ’Hirer’ at his option,
on payment of rupee one to the Company, as a consideration
for the option; until all the stipulated instalments have
been paid and the option exercised as aforesaid, the vehicle
remains the property of the Company as owners. The ’Hirer’
is delivered possession of the vehicle and he remains
responsible to the Company for damage or destruction or
loss. The ’Hirer’ has to pay interest at the rate of one
per cent. per mensem on all sums overdue. Until the option
of
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purchase is exercised by the ’Hirer’, he is at liberty to
return the vehicle and to put an end to tile Hiring
Agreement, on certain terms. Thus, under the agreement, the
’Hirer’ has the use of the vehicle, which is entrusted to
him as the property of the Company, and it is open to the
’Hirer’ to become the purchaser of the vehicle as aforesaid,
but he is not bound to do so. The hire-money received by
the Company, it is contended, is not a part of the price of
the goods sold and is thus not liable to be taxed as sale
price. The Bengal Finance (Sales Tax) Act, 1941 (Bengal Act
VI of 1941) was extended to the State of Delhi, which is now
the Union Territory of Delhi. In pursuance of the
provisions of that Act, the Sales Tax authorities started
demanding and levying sales tax on all transactions of the
nature aforesaid on the ground that the instalments paid by
the hirers to the Company were sales-price and, therefore,
liable to Sales Tax. The Company challenged the right of
the Sales Tax authorities to levy any such tax on the ground
that the law was beyond the competence of the legislature.
Ultimately, the Company moved the Punjab High Court (Circuit
Bench at Delhi) under Arts. 226 and 227 of the Constitution.
In the Writ Petition, which was registered as Civil Writ
Application No. 289-D of 1954, the Company prayed for a writ
in the nature of prohibition and/or mandamus restraining the
respondent from realising or levying any sales tax under the
provisions of the Bengal Act, extended to Delhi. There was
also a prayer for a writ of certiorari quashing certain
orders passed by the Sales Tax authorities in 1953-54. The
said application was heard by a, Division Bench, which
allowed the petition and issued a mandamus to the 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 tile judgment
aforesaid of the High Court of Punjab, it is further
alleged, a settlement was arrived at between the companies
carrying on hire-purchase
648
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.
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(ii) Companies which are partially engaged in
the business of hire purchase will continue to
be dealers as hitherto fore 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 latter.
(iv) In respect of vehicles, and machineries,
etc., for which tax has been paid, at the time
of purchases thereon from the market, no Sales
Tax would be payable in respect of hire monies
collected on them by the hire purchase
companies or on their resale or rehire
following repossession or on the exercise of
the option of purchases by the hirer.
(v) In respect of second hand vehicles
purchased by the companies from private
individuals for purposes of hire purchase, the
companies will not be liable to any sales tax
either at the time of purchase or in respect
of subsequent transaction thereon. The
Companies will be as other nonregistered
dealers, in view of (i), their Registration
Certificates in respect of Hire purchase
business having been cancelled.
(vi) The assessment which are already made
will not be reopened except in the case of
M/s. Installment Supply Co. Ltd. for which
there are specified orders of the High Court.
(vii) In their up-to-date assessment, the hire
purchase Companies should take upon themselves
the responsibility to pay tax which they have
save by making tax free purchases either from
dealers or from non-registered dealers. The
assessment will, however, be made accordingly
as before in the normal way."
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Thereafter in the case of Mithan Lal v. State of Delhi (1)
this Court examined the vires of the Bengal Finance (Sales
Tax) Act, 1941, as extended to Delhi, and came to the,
conclusion that the law had been validly promulgated.
According to that decision, the definition of ’sale’ could
be legally extended so as to make it permissible to tax sale
of goods involving the supply of materials in pursuance of
building contracts. As a result of the decision aforesaid
of this Court, a press note was issued by the Commissioner
of Sales Tax, Delhi, to the effect that provision regarding
levy of tax on hire-purchase transactions was valid and that
all hire-purchase dealers as come within the purview of ss.
4 and 7 of the Bengal Finance (Sales Tax) Act, 1941, as
extended to Delhi, are liable to pay sales tax and to get
themselves registered under the Act; that all such hire-
purchase dealers as were formerly registered with the Sales
Tax Department shall be deemed to be registered with effect
from the first of April, 1958 for the purpose of the Act and
that all hire-purchase dealers who had not got themselves
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
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of the Act. The Company made representation to the Commis-
sioner 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 governed 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
(1) [1959] S. C.R. 445.
650
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 purchased in State ’A’
but is hire-purchased to a party in State
’B’, Central Sales Tax will be leviable in the
State according to the rules in force in that
State.
2. The hire-purchase transactions of
secondhand vehicles, where the owner
approaches the Hire Purchase Co. for finances
against the vehicles, will be leviable to
Sales Tax, because according to the Hire
purchase Agreement the property in the vehicle
vests in the Hire Purchase Co. and this
property is to be transferred to the so-called
owner by virtue of the Hire-purchase
transactions.
Secondhand vehicles purchased outside Delhi
and hire-purchased to the parties outside
Delhi or hire purchase transactions conducted
outside Delhi in which owner approaches the
Hire-purchase Co. for finance will be governed
by the clarification given in 1 above.
3. In the case of vehicles purchased by the
Hire purchase Companies from the local
registered dealers, they will not be required
to pay any Sales Tax because all Hire-purchase
companies will be registered and will be
entitled to make tax free purchases of such
vehicles. It is, therefore, regretted that it
is not possible to accede to the request made
in this behalf.
4. Sales Tax will be payable on total
amounts charged by the Hire-purchase Co. from
the hirer and it is not possible to waive
Sales Tax on the so called incidental charges.
5. It is regretted that it is not possible
to alter the date of liability of the Hire-
purchase Co. which has already been fixed with
effect from 1st of April, 1958, in pursuance
of the Supreme Court Judgment. It is true
that the Press Note was issued in the month of
June and so Hire-purchase Companies have been
making purchases of vehicles on payment of
sales tax. The Hire-purchase companies are
advised to approach the dealers for
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651
refund of the Sales Tax paid by them on such
purchases.
If, however, it is not possible for any Hire
Purchase Co. to obtain refund of the Sales Tax
so paid by them, the amounts so paid may be
adjusted towards their liability on the hire
purchase transactions."
On receipt of the answer of the Department, as set out in
the previous paragraphs, the petitioners moved this Court
under Art. 32 of the Constitution on the ground that the
"threatened action of the respondents is illegal and
unconstitutional as the petitioner company is not liable to
pay 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 s.
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 Art. 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 Installment Supply Ltd., New Delhi v. State of
Delhi (1) 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 (2), that judgment cannot be given retrospective
operation; and (6) lastly, that the settlement between the
Department and the Companies transacting business in "Hire-
purchase" is binding until the decision of this Court in
Mithan Lal’s case (3), aforesaid. We shall examine these
arguments in the order in which they have been stated.
The most important question in this case is: What
(1) A.I.R. 1956 Puaj. 177.
(2) [1959] S.C.R- 445.
652
is the true nature and character of the transaction which
is the subject matter of the present controversy? Do the
terms and conditions of the agreement typified by Annexure
’A’ to the petition, as described above, constitute a mere
agreement of hiring, as contended on behalf of the
petitioners, or do they constitute a contract of hire-
purchase, within the meaning of explanation (1) to the
definition of ’sale’ contained in the statute in question,
as contended on behalf of the respondents? There is no
doubt that the concept of ’sale’, as it appears from the
following words of the definition, along with explanation
(1), is rather extended. In the definition of the term
’sale’ for the purposes of the Act, the words are as
follows:-
" ’Sale’ means any transfer of property in
goods for cash or deferred payment or other
valuable consideration, including a transfer
of property in goods involved in the execution
of a contract, but does not include a
mortgage, hypothecation, charge or pledge.
Explanation I.-A transfer of goods on hire-
purchase or other instalment system of payment
shall, notwithstanding that the seller retains
a title to any goods as security for payment
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of the price, be deemed to be a sale."
It is clear from the definition that it includes not only
what may be compendiously described as a sale under the Sale
of Goods Act, but also transactions, which, strictly
speaking, are not sales, not even ’contracts of sale’ but
only contain an element of sale, that is the option to
purchase, and that is the reason why the explanation ends
with the words "be deemed to be a sale", thereby indicating
that a legal fiction has been introduced into the concept of
sale’ as ordinarily understood. The explanation has
included within its amplitude a mere transfer of goods
without the transfer of title to the goods, if it is in the
course of an agreement of the nature of "hire-purchase", or
other instalment system of payment. A contract of hiring,
under the Common Law, is one of the species of a contract of
bailment and has, during the last 60-70
653
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, 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. Bernstein (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 agreement for the party to purchase,
where in a true hire-purchase agreement there
is not."
In Halsbury’s Laws of England, Third Edition,
Volume 19, paragraph 823, at pages 510-511,
the nature of a hire-purchase transaction is
thus expressed:
"The contract of hire purchase is one of the
variations of the contract of bailment, but it
is a modern development of commercial life,
and the rules with regard to bailments, which
were laid down before
83
654
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any contract of hire purchase was
contemplated, cannot be applied simpliciter,
because such a contract has in it not only the
element of bailment but also the element of
sale. At common law the term ’hire purchase’
properly applies only to contracts of hire
conferring an option to purchase, but it is
often used to describe contracts which are in
reality agreements to purchase chattels by
instalments, subject to a condition that the
property in them is not to pass until all
instalments have been paid. The distinction
between these two types of hire purchase
contracts is, however, a most important one,
because under the latter type of contract
there is a binding obligation on the hirer to
buy and the hirer can therefore pass a good
title to a purchaser or pledge dealing with
him in good faith and without notice of the
rights of the true owner, whereas in the case
of a contract which merely confers an option
to purchase there is no binding obligation on
the hirer to buy, and a purchaser or pledge
can obtain no better title than the hirer had,
except in the case of a sale in market overt,
the contract not being an agreement to buy
within the Factors Act, 1889, or the Sale of
Goods Act, 1893."
The observations quoted above are based mostly on two
leading cases which have come to be regarded as the locus
classics upon the subject, namely, Lee v. Butler (1) in
which the transaction was described by Lord Esher, M.R., as
"Hire and Purchase Agreements" and Helby v. Matthews (2) in
which the House of Lords distinguished the former case on
the ground that in that case there was a binding contract to
buy and not merely an option to buy, without any obligation
to buy. Both these cases were decided in terms of Factors
Act of 1889 (52 & 53 Vict. c. 45, s. 9). Both the kinds of
agreements exemplified by the two leading cases aforesaid
would now be included in the definition of ’hire-purchase’
as contained in s. 21 of the Hire Purchase Act, 1938 (1 & 2
Geo., 6, c. 53):-
"’Hire-purchase agreement’ means an agreement
for the bailment of goods under which the
bailer
(1) [1893] 2 Q.B. 318.
(2) [1895] A.C. 471.
655
may buy the goods or under which the property
in the goods will or may pass to the bailee,
and where by virtue of two or more agreements,
none of which’ by itself constitutes 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 crystallised into the section of the Hire Purchase
Act, quoted above, the transaction partakes of the nature of
a contract or bailment with an element of sale, as
aforesaid, added to it. In such an agreement, the hirer may
not be bound to purchase the thing hired; he may or may not
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be. But in either case, if there is an obligation to buy,
or an option to buy, the goods delivered to the hirer by the
owner on the terms that the hirer, on payment of a premium
as also of a number of instalments, shall enjoy the use of
the goods, which ultimately may become his property, the
transaction amounts to one of hire-purchase, even though the
title to the goods has remained with the owner and shall not
pass to the hirer until a certain event has happened,
namely, that all the stipulated instalments have been paid,
or that the hirer has exercised his option to finalise the
purchase on payment of a sum, nominal or otherwise.
But it has been contended on behalf of the petitioners that
there is no binding agreement to purchase the goods and that
title is retained by the owner not as a security for payment
of the price but absolutely. According to third term of the
agreement, on the hirer duly performing and observing the
terms of the agreement, with particular reference to the
payment of the monthly instalments, "the hiring shall come
to an end and the vehicle shall, at the option of the hirer,
become his absolute property; but until such payments as
aforesaid have been made, the vehicle shall remain the
property of the owners. The hirer shall also have the
option of purchasing the vehicle at any
656
time during the currency of this Agreement, by paying in one
lump sum the balance of all the hire hereinbefore mentioned
and any other expenses incurred by the owners relating to
the transaction."
It is clear, therefore, that in addition to the contract of
hiring an option has been given to the hirer to purchase or
not to purchase. The more serious question on this part of
the petitioners’ contention is whether the non obstante
clause in the explanation "notwithstanding that the seller
retains a title to any goods as security for payment of the
price" governs the main clause of the explanation. In our
opinion, it does not. The non obstante clause has been
added only to emphasise the categorical statement of the law
contained in the main clause to the effect that a transfer
of 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
petitioners, 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 (1).
But then it is argued that Mithan Lal’s case (1) requires
reconsideration and that, in any view of the matter, this
Court did not consider the further attack based on Art. 14
of the Constitution. It is true that in Mithan Lal’s case
(1) the contention that the enactment in question had
infringed Art. 14 of the
(1) [1959] S.C.R. 445.
657
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Constitution had not been raised. This Court, therefore,
had no occasion to pronounce on that aspect of the
controversy We have, therefore, to consider the contention
under head (3), namely, that though the Parliament may have
had the power to tax something which was not strictly
speaking a ’sale’, the law is open to the attack that it
discriminates against traders in Delhi inasmuch as, it is
further contended, such a law has not been made applicable
to the whole of India. In our opinion, there is no
substance in this contention because no proper foundation
was laid in the pleadings for supporting such a contention.
It has not been averred that other Part II States have not
been similarly treated. On the other hand, it does appear
that under the Central Sales Tax Act (LXXIV of 1956), the
definition of ’Sale’ contains the extended definition,
without the non obstante clause, discussed above. Section
2(g) of the Central Sales Tax Act, 1956, has the following
definition:
"’Sale’ with its grammatical variations and
cognate expressions, means any transfer of
property in goods by one person to another for
cash or for deferred payment or for any other
valuable consideration, and includes a
transfer of goods on the hire purchase or
other system of payment by instalments, but
does not include a mortgage or hypothecation
of or a charge or pledge on goods."
It would, thus appear ’that hire-purchase transactions have
been included within the definition of sale’ for the purpose
of Central Sales Tax, and this definition has become
applicable throughout India, and it cannot, therefore, be
said that the State of Delhi, and now the Union Territory of
Delhi, has been selected for hostile discrimination. In our
opinion, therefore, there is no substance in the contention
that the extended definition of ’,sale’ in the main statute
infringes Art. 14 of the Constitution.
Now, the remaining contentions raised on behalf of the
petitioners may be disposed of by observing that what the
Sales Tax Department does, or does not do, cannot change the
law. The Department issued its
658
instructions to the Sales Tax Officers, in conformity with
the law as laid down in the judgment of the Punjab High
Court in Instalment Supply Ltd., New Delhi v. State of Delhi
(1). This Court later laid down the law more
authoritatively in Mithan Lal’s s case (2) and the
Department was bound to take notice of what this Court had
laid down. It cannot, therefore, be argued that the
Department had, in any sense estopped itself by issuing
those instructions, or that this Court, by laying down the
law in Mithan Lal’s case (2) had laid down a new rule of law
which has no application to pending proceedings for levy,
assessment and realisation of sales tax, either in Delhi or
elsewhere.
There is another answer to the point of res judicata raised
on behalf of the petitioners, relying upon the decision of
the Punjab High Court in Instalment Supply Ltd., New Delhi
v. State of Delhi (1). It is well settled that in matters
of taxation there is no question of res judicata because
each year’s assessment is final only for that year and does
not govern later years, because it determines only the tax
for a particular period. (See the decision in the House of
Lords in Society of Medical Officers of Health v. Hope
(Valuation Officer) (3) approving and following the decision
of the Privy Council in Broken Hill Proprietary Company
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11
Limited v. Municipal Council of Broken Hill (4).
As all the contentions raised on behalf of the petitioners
fail, this petition is dismissed with costs.
Petition dismissed.
(1) A I.R. 1956 Punj I77.
(2) [1959] S.C.R. 445.
(3) [1960] A.C. 551.
(4) [1925] A.C. 94.
659