Holding

The amendment of 1 October 1959 did not change the earlier position; the definition of "sale" includes transfer of goods on hire‑purchase and the "sale price" includes hire‑purchase charges, making the levy of sales tax on the total amount lawful.

Summary

Jay Bharat Credit and Investment Co. Ltd., a hire‑purchase financier, challenged the levy of sales tax on the total amount (vehicle price plus hire charges) paid by hirers under the Bengal Finance (Sales Tax) Act, 1941 as extended to Delhi and later the Delhi Sales Tax Act. The tax authorities held that the hire‑purchase charge formed part of the "sale price" and the High Court affirmed this view. The Supreme Court examined whether the amendment of 1 October 1959 altered the definition of "sale" in Section 2(g) and whether "sale price" in Section 2(h) should include hire charges. Relying on earlier decisions, the Court held that the amendment did not change the position; the definition of "sale" expressly includes transfer of goods on hire‑purchase and the "sale price" therefore comprises the hire charges. Consequently, the tax on the consolidated proceeds was justified. The Court dismissed the appeals.

Issues considered

Whether a hire‑purchase transaction is deemed a "sale" under Section 2(g) of the Bengal Finance (Sales Tax) Act, 1941 as amended on 1 Oct 1959.
Whether the term "sale price" under Section 2(h) includes hire‑purchase charges.
Whether sales tax can be levied only at the time the option to purchase is exercised, or on the entire amount payable at the inception of the hire‑purchase agreement.
Whether the 1959 amendment altered the tax incidence on hire‑purchase transactions.

Legislation cited

Central Sales Tax Act, 1956s. 2(g)
Delhi Sales Tax Act, 1975s. 2(1)

Subjects

hire purchasesales taxdefinition of salesale priceBengal Finance (Sales Tax) ActDelhi Sales Tax Acttax incidencetransfer of goodsinstalment system

Judgment

A JAY BHARAT CREDIT AND INVESTMENT CO. LTD. ETC. ETC.
v.
COMMISSIONER OF SALES-TAX AND ANR.

AUGUST 9, 2000

B [B.N. KIRPAL, S.N. PHUKAN AND RUMA PAL, JJ.]

Sales Tax-Bengal Finance (Sales Tax) Act, 1941-As amended w.e.f
1.10.1959-As extended to Union Territory of Delhi-Hire purchase transac-
tion-Whether sale price would include hire charges-Held, Yes.
c Sales Tax-Bengal Financial (Sales Tax) Act, 1941-As applicable to
Union Territory of Delhi-Sale of Goods Act, 1950-Sections 2(g), 2(h)-
lncidence of Tax in hire purchase transaction-Held, takes place when there is
transfer of goods, not when there is transfer of property in goods.

Words and Phrases-Sale-Meaning of
D
Appellants were carrying on the business of hire purchase by enter-
ing into agreements with hirers for the purpose of enabling the hirers to
obtain a vehicle. The normal term of the agreement entered into between a
hirer and the appellant contemplated a vehicle being purchased by the
E appellant and the said vehicle was then taken by the hirer on hire purchase
basis. The terms of the agreement provided that on the execution of the
hire purchase agreement an initial amount was paid by the hirer by way of
premium for granting a lease and thereafter hire charges were required to
be paid. The amount which is paid by the hirer included the price of the
vehicle and the hire purchase charges. As and when all the instalments
F were paid, the hirers were given an option to obtain the ownership of the
vehicle on the payment of a nominal amount. On exercising of the option
and the payment being so made, the vehicle was transferred in the name of
the hirer.

The Respondents-sales tax authorities held that on the correct inter-
G
pretation of the provisions of the Bengal Finance (Sales Tax) Act, as
extended to the Union Territory of Delhi, in force at the relevant time
between 1.10.1959 and the coming into force of the Delhi Sales Tax Act in
1975, the hire charge would be regarded as a part of the sale price. The
question of law was referred to the High Court wherein the decision of the
H sales tax authorities was affirmed.
340
JAY BHARAT CREDIT AND INVESTMENT CO. LTD. v. COMMR. OF SALES TAX 341
In appeal to this Court, the appellants contended that with the A
amendment in the Bengal Finance (Sales Tax) Act, 1941 with effect from
1st October, 1959, in the case of hire purchase agreements sales tax can be
levied not on the full amount paid by the hirer which would include the
hire charges, but the sale consideration on which tax can be imposed will
only be the price of the vehicle at the time when the hirer exercises the B
option to purchase the same; that under the Sale of Goods Act, the defini-
tion of the word "sale" would not include or take within its ambit a hire
purchase agreement; that Delhi being a Union Territory; Parliament could
in exercise of its powers under Entry 97 of List I of the Seventh Schedule of
the Constitution regard a hire purchase agreement as a sale and tax can be
levied but with the amendment made in 1959 the tax is leviable only on the C
sale and the amount paid towards hire charges cannot be included in the
sale price and that the Sales Tax Act applicable in Delhi after 1st October,
1959 must be given the same meaning as was given to the Gujarat Sales
Tax Act.
D
Dismissing the appeals, the Court

HELD : 1. The amendment of the Bengal Finance (Sales Tax) Act on
1st October, 1959 has, in effect, not altered the position from what existed
prior to that date and even after the amendment the principle laid down by
this Court in the first case of Instalment Supply Co. would continue to hold E
goods. (351-D]

Instalment Supply ( P) Ltd. & Anr. v. The Union of India & Ors., (1962] 2
SCR 644; Instalment Supply Ltd. v. The Sales Tax Officer, Ahmedabad-1 &
Ors., (1975] 1 SCR 386 and K.L. Johar & Company v. Deputy Commercial
Tax Officer, (1965] 2 SCR 112, distinguished. F
2. The definition of the word "sale" in Sec. 2(9) the first part of which
is in pari materia with the Sale of Goods Act, was expanded so as to include
a transfer of goods on hire purchase or other system of payment by instal-
ments. In the latter portion, in order that the tax is levied there is no re-
quirement that the property in goods should be transferred. What is re- G
quired is transfer of goods, unlike the first part of this definition which
requires transfer of property in goods. The reason for this is very obvious.
In the case of hire purchase, there are two elements, namely, that of bail-
ment and an element of sale and when a hire purchase agreement is entered
into there is transfer of goods on hire purchase which would not include, at H
342 SUPREME COURT REPORTS (2000] SUPP. 2 S.C.R.
A that point of time, any transfer of property in the said goods. If the conten-
tion of the appellants is accepted, the effect of that would be that the latter
portion of the definition could be otiose. If the definition of Section 2(g) was
to include within its ambit only that transfer which takes place at the time of
purchase when the option is exercised, then it would not have been neces-
sary to widen the scope of the definition to include transfer of goods on hire
B
purchase and to provide for it separately. [351-F-H; 352-A-B]

3. If the meaning of the word "sale" occurring in Section 2(g) is sub-
stituted into Section 2(h), it would in effect read as follows : "Sale price
means the amount payable to a dealer as consideration for transfer of goods
c on hire purchase". The word "sale" occurring in Sec. 2(h) must have the
meaning ascribed to it as in Section 2(g). When the word "sale" includes
transfer of goods on hire purchase, then whatever is the amount which is
paid/payable to the dealer on such a transfer would be included within the
meaning of the expression "sale price" in Section 2(h). The sales tax au-
D thorities were justified in including in the turnover of the Appellants the
hire charges as provided for in the hire purchase agreements. [352-C-D]

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2942-44 of
1979.

E From the Judgment and Order dated 20.4.79 of the Delhi High Court in
C.W.P. Nos. 433-435 of 1976.

WITH

Civil Appeal Nos. 2118-27/1980, 211111980, 2708/1979, 2709-2711/
F 1979, 2978/1980. 3002-04/1980, 1221-1232/81 and 2570/1979.

Joseph Vellapally, K.K. Venugopal and Ashok Grover, S. Sukumaran,
B.A. Ranganathan, Ms. A.K. Verma, Randhir Chawla, Ms Renu Saigal, Rakesh
K. Sharma and Ms. Hemantika Wahi for the appearing parties.

G The Judgment of the Court was delivered by

KIRPAL, J, The only question which arises for consideration in all these
cases is: Whether the respondents were justified in holding that hire purchase
transactions entered into by the appellants were liable to imposition of sales tax
H on the consolidated proceeds'?
JAY BHARAT CREDIT AND INVESTMENT CO. LTD.'· COMMR. OF SALES TAX [KIRPAL, I.] 343
The appellants carry on the business of hire purchase. They enter into A
agreements with hirers for the purpose of enabling the hirers to obtain a
vehicle. The normal term of the agreement entered into between a hirer and the
appellant contemplates a vehicle being purchased by the appellant and the said
vehicle is then taken by the hirer on hire purchase 'basis. The terms of the
agreement provide that on the execution of the hire purchase agreement an B
initial amount is paid by the hirer by way of premium for granting a lease and
thereafter regular instalments are required to be paid. The amount which is paid
by the hirer would include the price of the vehicle and the hire purchase
charges. As and when all the instalments are paid, the hirer is given an option
to obtain the ownership of the vehicle on the payment of a nominal amount.
On the payment being so made, the vehicle is transferred in the name of the c
hirer.

As already indicated above, the sales tax authorities came to the conclu-
sion that on the correct interpretation of the provisions of the Bengal Finance
(Sales Tax) Act, as extended to the Union Territory of Delhi (hereinafter D
referred to as "the Act"), as in force at the relevant time, the time being between
1.10.1959 and the coming into force of the Delhi Sales Tax Act in 1975, the
finance charges would be regarded as a part of the sale price. On the Financial
Commissioner coming to the aforesaid conclusion, the question of law was
referred to the High Court who affirmed the decision of the sales tax authori-
ties. Hence, these appeals by special leave. E

It has been contended by the learned senior counsel for the appellants
that with the amendment in the Bengal Finance (Sales Tax) Act, 1941 with
effect from 1st October, 1959, in the case of hire purchase agreements sales tax
can be levied not on the full amount paid by the hirer which would include the F
hire charges, but the sale consideration on which tax can be imposed will only
be the price of the vehicle at the time when the hirer exercises the option to
purchase the same. It was submitted by the learned senior counsel that under
the Sale of Goods Act, the definition of the word "sale" would not include or
take within its ambit a hire purchase agreement. Delhi being a Union Territory,
the Parliament could in exercise of its powers under Entry 97 of List I of the
G
Seventh Schedule of the Constitution regard a hire purchase agreement as a sale
and tax can be levied but with the amendment made in 1959 the tax is leviable
only on the sale and the amount paid towards hire charges cannot be included
in the sale price. In support of this contention, our attention has been drawn
to three decisions of this Court to which we shall presently refer. H
344 SUPREME COURT REPORTS [2000) SUPP. 2 S.C.R.
A In order to appreciate the contention of the learned senior counsel for the
appellants, we may refer to the definition of the word "sale" as occurring in
the Act before 1.10.1959, after 1.10.1959 and under the Delhi Sales Tax Act,
1975. The said definition is as follows :

Under the Bengal Finance (Sales Tax) Act, 1941 as extended to Delhi.
B
BEFORE 1.10.1959

"2(g) - "Sale" means any transfer of property in goods for money
consideration and includes a transfer of property in goods supplied in
the execution of a contract but does not include a mortgage,
c hypothecation, charge or pledge; and any grammatical variations of
the expression 'sale' shall be construed accordingly.

Explanation-I. A transfer of goods on hire-purchase or other
instalment system of payment shall, notwithstanding that the seller
D retains a title to any goods as security for payment of the price, be
deemed to be a sale;

Explanation-2. A sale shall be deemed to have taken place in the
State of Delhi if the goods are actually delivered in the State of Delhi
as a direct result of su;h sale for the purpose of consumption in the
E State of Delhi, notwithstanding the fact that under the general law
relating to the sale of goods the property in the goods has by reason
of such sale passed in another State."

Underthe Bengal Finance (Sales Tax) Act, 1941 as extended to Delhi.

F AFTER 1.10.1959.

"2(g) - "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 hire-purchase or
G
other system of payment by instalments, but does not include a mort-
gage or hypothecation of or a charge or pledge on goods.

Explanation - A sale or purchase of goods shall be deemed to take
place inside the Union Territory of Delhi if the goods are within that
H territory -
JAY BHARAT CREDIT AND INVESTMENT CO. LID." COMMR. OF SALES TAX [KIRPAL, I.] 345
(i) in the case of specific or ascertained goods, at the time the A
contract of sale is made; and

(ii) in the case of unascertained or future goods, at the time of
their appropriation to the contract of sale by the seller or by the buyer,
whether assent of the other party is prior or subsequent to such
appropriation." B

Under Delhi Sales 7i1x Act, 1975

"2(1) - "Sale", with its grammatical variations and cognate ex-
pressions, means any transfer of property in goods by one person to
another for cash or for deferred payment or for any other valuable C
consideration, and includes:-

(i) a transfer of goods on hire-purchase or other system of pay-
ment by instalments, but does not include a mortgage or hypothecation
of or a charge or pledge on goods;
D
(ii) supply of goods by a society (including a co-operative Soci-
ety), club, firm or any association to its members for cash or for
deferred payment, or for commission, remuneration or other valuable
consideration, whether or not in the course of business; and

(iii) transfer of goods by an auctioneer referred to in sub-clause E
(iv) of clause (e);

It would also be relevant to refer to the definition of the expression "sale
price" occurring in Section 2(h) of the Act which reads as follows :

"Sale price", means the amount payable to a dealer as considera-
F
tion for the sale of any goods, less any sum allowed as cash discount
according to the practice normally prevailing in the trade, but inclusive
of any sum charged for anything done by the dealer in respect of the
goods at the time of or before the delivery thereof other than the cost

.. of freight or deli very or the cost of installation in cases where such cost
is separately charged." G
In Instalment Supply (P) Ltd. and Another v. The Union of India and
Others, [1962] (2) SCR 644, the challenge was to the levy of sales tax on hire
purchase transactions, similar to the ones in the present case. Mis. Instalment
Supply (P) Ltd., which is also an appellant in one of these appeals, was carrying
on the business of hire purchase and had entered into hire purchase agreements H
346 SUPREME COURT REPORTS [2000] SUPP. 2 S.C.R.

A with different hirers. It was sought to be contended in a petition under Article
32 of the Constitution that sales tax could not be levied on hire purchase
transactions because hire purchase was not 'sale' within the meaning of that
expression under the Sale of Goods Act. While upholding the validity of
Explanation I, this Court first considered what is the true nature and
character of a hire purchase agreement. After adverting to definition of
B the word "sale" this court observed that the transaction in question partakes
of the nature of a contract of bailment with an element of sale. It held that
the definition in Section 2(g) included0
not only what was 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
C an element of sale which is the option to purchase and that is why the
Explanation to Section 2(g) ended 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. It was clarified that the Explanation
included within its amplitude a mere transfer of goods without the transfer of
title to the goods if it was in the course of an agreement of the nature of hire
D purchase.

While explaining the nature of the hire purchase agreement, the Court
took note of the fact that in such an agreement, the hirer may not be bound to
purchase the thing hired. It was observed as follows :

"It is clear t.hat under the Law, as it now stands, which has now been
E
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 be.
But in either case, if there is an obligation to buy, or an option to buy,
F the goods delivered to the hirer by the owner on the terms that the hirer,
on payment of a preriiium 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

G
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."

The Court also was called to consider the effect of the non
obstante clause contained in Explaination I and in regard thereto it held as
H follows :
JAY BHARAT CREDIT AND INVESTMENT CO. LTD. '· COMMR. OF SALES TAX [KIRPAL. J.) 347
"It is clear, therefore, that in addition to the contract of hiring an A
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 obs tan te clause has been added only to emphasise
B
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, com- c
pletion of title at the option of the hirer."

The Court then concluded, on interpreting the said provisions, that the
agreement in question contained not only a contract of bailment simplicitor 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. Another D
ground of attack in that case was based on Article 14 of the Constitution. It
was submitted that though the Parliament may have had the power to tax
something which was not strictly speaking a sale, the said law was discrimi-
natory against the traders in Delhi as such a law has not been made applicable
to whole of India. This contention was rejected firstly on the ground that it had
not been averred that other Part 'C' States had not been similarly treated, but
E
what is important for our purposes in the present case, the Court took note of
the fact that under the Central Sales Tax Act, the definition of the word "sale"
contained the extended definition as in the Delhi Act without the non obstante
clause. Section 2(g) of the Central Sales Tax Act, 1956 to which reference was
made reads as follows: F
"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".
G

After referring to the same, the Court observed as follows:

"It would, thus appear that hire-purchase transactions have been in-
cluded within the definition of 'sale' for the purpose of Central Sales H
348 SUPREME COURT REPORTS (2000] SUPP. 2 S.C.R.

A 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 in no substance in the contention that the
extended definition of 'sale' in the main statute infringes Art. 14 of the
Constitution."
B
Definition of "sale" in the Central Sales Tax Act is similar to that which
was applicable in Delhi with effect from 1.10.1959.

After reading the aforesaid judgment, it leaves no manner of doubt that
this Court in unequivocal terms came to the conclusion that as far as Delhi was
c concerned, it being a Part 'C' State at that point of time, the Parliament could
enact a law which had the effect of regarding a hire purchase agreement as a
sale even though under the Sale of Goods Act it could have been so regarded.
The definition of the word "sale" under Section 2(g) had been expanded and
'• was to include a hire purchase agreement. The hire purchase agreement had
D two elements : one being the element of bailment and the other being the
element of sale at the option of the hirer. By referring to the Central Sales Tax
Act, the contention based on Article 14 was rejected, the implication clearly
being that even without the non-obstante clause the position was similar to that
which was there in the Delhi Act, namely, a hire purchase transaction could be
E regarded as a sale for the purpose of Sales Tax Act.

After the amendment of the Act on 1st October, 1959, the words "trans-
fer of goods on hire-purchase or other system of payment by instalments"
occurring in Explanation I in the original Section 2(g) were incorporated in the
main part of Section 2(g). The non obstante words occurring in Explanation
F I in the unamended Section were excluded. It is because of this change that the
learned senior counsel for the appellants have contended that now with the
amendment on 1st October, 1959 there can be sale in ahire purchase agreement
only when the hirer exercised the option and the transfer of property takes place
and the effect of that would be that it is only the price of the article, namely,
the vehicle, which can be subjected to sales tax and the hire charges cannot be
G
included therein.

In support of this contention, learned senior counsel has sought to place
-
reliance on the second case of the Instalment Supply Co. entitled Instalmen!
Supply Ltd. v. The Sales Tax O.ffice1; Ahmedabad-1 & Ors, [1975] 1 SCR 386,
H That was a case where the State of Gujarat in the case of a hire purchase
JAY BHARAT CREDIT AND INVESTMENT CO. LID.'· COMMR. OF SALES TAX [KIRPAL. J.] 349
agreement between the hirer and the Instalment Supply Co. sought to tax the A
sale of the vehicle when the hirer exercised his option to purchase the same.
At that time the goods were inside the State of Gujarat. The Gujarat Act being
a State enactment, did not enable that State to tax transfer of goods on hire
purchase but tax was sought to be levied at the time when the hirer had
exercised his option to obtain the ownership of the vehicle. This Court dealt
B
at length with the meaning of a hire purchase agreement. It observed that at
common law the term hire purchase properly applied to contracts of hire
conferring an option to purchase, but it was often used to describe the contracts
which were 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. It recognised the difference between two types of agreements - first c
where, as in the case of a hire purchase contract, the hirer is not obliged to buy
the goods at the end of the contract, whereas in the latter type of contract there
is an obligation on the hirer to buy. In both the cases, however, the property
remains with the financier and the ownership passes only when the hirer
exercises the option in the case of hire purchase agreement, or in the second
D
type of agreement when all the instalments are paid. Even though in the Gujarat
Act sales tax could not be imposed on a contract of hire purchase but this Court
held that at the time when the sale fructifies, with the hirer exercising the option
to purchase, tax could be levied on that event. It was also obseved that there
is no rule that any goods could be subjected to tax only once, the implication
clearly being that whereas under the Delhi Act the contract of hire purchase E
would attract sales tax at the time when the contract is entered into but under
the Gujarat Sales Tax Act the value of the vehicle could be taxed at the time
when option to purchase was exercised under the same contract.

Mr. Vellapally, however, placed strong reliance on the following obser-
vations of this Court in the second case of Instalment Supply Ltd. (supra) when
F
at page 393 it was observed as follows:

"We may however point out that the definition of "sale" in the
Bengal Finance (Sales Tax) Act applicable to the State of Delhi has
been amended in 1959 by Act 20 of 1959 and reads as follows: G
"Sale'', with its grammatical variations and cognate ex-
pressions means any transfer of property in goods by one person
to another for cash or for deferred payment or for any other valu-
able consideration, and includes a transfer of goods on hire-pur-
chase or other system of payment by instalments, but does not H
350 SUPREME COURT REPORTS [2000] SUPP. 2 S.C.R.

A include a mortgage or hypothecation o~ or a charge or pledge on
goods.

Explanation. - A sale or purchase of goods shall be deemed
to take place inside the Union Territory of Delhi if the goods are
within that territory -
B
(i) in the case of specific or ascertained goods, at the time
the contract of sale is made; and

(ii) in the case of unascertained or future goods, at the time
of their appropriation to the contract of sale by the seller or by the
c buyer; whether assent of the other party is prior or subsequent to
such appropriation."

This definition is, in effect, the same as the one in the Gujarat Act.
Therefore, the type of transactions which were subjected to tax in the
earlier Instalment Supply case will not be subject to taxation hereafter
D and the problem of the same transaction being subjected to taxation at
two different stages will not arise."

Learned senior counsel submits that by equating the two provisions of
the Acts, we must give to the Sales Tax Act applicable in Delhi after 1st
E October, 1959 the same meaning as was given to the Gujarat Act.

It appears to us that the aforesaid observations were by way of an obiter.
This court was not called upon to consider the effect of the amendment made [
to the Delhi Act in 1959. This court was only concerned with a question
whether the State of Gujarat could levy any sales tax at the time when the hirer
F exercises his option to purchase the vehicle which happened to be in Gujarat
at the time when the option was so exercised and dewite the fact that sales tax
had already been paid on the hire purchase transaction in Delhi earlier. The
observations quoted above were merely to the effect that after the amendment
there would be no case of taxation at two stages. The aforesaid decisions can
be of no assistance to the appellants.
G
Our attention was also drawn to K.L Johar and Company v. Deputy
Commercial Tax Officer, (1965] 2 SCR 112. We are unable to see how that case
can be of any assistance. The Court there was concerned with the validity of
Explanation I to Section 2(h) of the Madras General Sales Tax Act which
H purported to include a hire purchase transaction within the meaning of the term
JAY BHARATCREDff AND INVESTMENT CO. LTD.'· COMMR. OF SALES TAX [KIRPAL, I.] 351
"sale". This court held that explanation I was beyond the competence of the A
State Legislature and the same was accordingly struck down. The Court then
dealt with the question as to whether a hire purchase agreement ever ripened
into a sale and if so when. It took note of the fact that a hire purchase agreement
had two elements, namely, the element of bailment and the element of sale, in
the sense that it contemplates an eventual sale. The Court came to the conclu-
B
sion that a sale does take place and the same could be taxed when the hirer
exercises the option to purchase the vehicle. With regard to the price at which
the transaction would be regarded as having been entered into, the Court
observed that the hire charges have to be excluded and the price of the vehicle
worked out. The said decision, as we have already observed, can be of no
assistance because the State of Madras, as it then was, had no legislative c
competence to seek to tax a hire purchase agreement to sales tax whereas in
Delhi such a transaction could be subjected to tax and the same had been
specifically upheld by this Court in the first case of Instalment Supply (P) Ltd.
(supra).
D
It appears to us that the amendment of the Act on 1st October, 1959 has,
in effect, not altered the position from what existed prior to that date and even
after the amendment the principle laid down by this Court in the first case of
Instalment Supply Co. (supra) would continue to hold goods.

We would like to point out that Section 2(g) uses two expressions, E
namely, "transfer of property in goods" and "transfer of goods on hire-pur-
chase". If the latter part relating to hire purchase had not been there, there can
be little doubt that the principle enunciated by this Court in K.L. Johar's case
(supra) would have clearly been applicable, the hire purchase agreement itself
would have been taxable and tax could have been levied only at that time when F
the option was exercised. This definition of the word "sale", rhe first part of
which is in pari materia with the Sale of Goods Act, was expanded so as to
include a transfer of goods on hire purchase or other system of payment by
instalments. In the latter portion, in order that the tax is levied there is no
requirement that the property in goods should be transferred. What is required
is transfer of goods, unlike the first part of this definition which requires G
..... transfer of property in goods. The reason for this is very obvious. In the case
of hire purchase, there are two clements, namely, that of bailment and an
clement of sale and when a hire purchase agreement is entered into there is
transfer of goods on hire purchase which would not include, at that point of
time, any transfer of property in the said goods. If the contention of the learned H
352 SUPREME COURT REPORTS [2000] SUPP. 2 S.C.R.
A senior counsel for the appellants is accepted, the effect of that would be that
the latter portion of the definition could be otiose. If the definition of Section
2(g} was to include within its ambit only that transfer which takes place at the
time of purchase when the option is exercised, then it would not have been
necessary to widen the scope of the definition to include transfer of goods on
hire purchase and to provide for it separately.
B
Coming to the definition of the expression "sale price" we find that if
we substitute the defined meaning of the word "sale" occuring in Section 2(g)
into the said Section 2(h}, it would in effect read as follows : "Sale price means
the amount payable to a dealer as consideration for transfer of goods on hire
c purchase". The word "sale" occurring in Sec. 2(h) must have the meaning
ascribed to it as in Section 2(g) when the word "sale" includes transfer of goods
on hire purchase, then whatever is the amount which is paid/payable to the
dealer on such a transfer would be included within the meaning of the expres-
sion "sale price" in Section 2(h). This being so, the sales tax authorities in the
present cases were justified in including in the turnover of the appellants the
D hire charges as provided for in the hire purchase agreements.

For the aforesaid reasons, we affirm the decision of the High Court and
dismiss these appeals. There will, however, be no order as to costs.

V.M. Appeals dismissed.