INSTALMENT SUPPLY PVT. LTD. vs. SALES TAX OFFICER

W.P.(C) No.-000129-000131 - 1969Supreme Court01 May 1974Bench: RAY, A.N. (CJ) MATHEW, K.K. ALAGIRISWAMI, A. GOSWAMI, P.K. SARKARIA, R.S.9 pages
AI SummaryDismissed

What were the facts?

The petitioner, Instalment Supply Ltd., with its registered office in New Delhi, finances the purchase of motor vehicles through hire-purchase agreements. Under these agreements, the hirer pays an initial deposit, makes instalment payments, and can exercise an option to purchase the vehicle for a nominal sum. The goods (vehicles) were located in Gujarat. The hire-purchase agreements were entered into in Delhi, instalments were paid in Delhi, and the option to purchase was exercised in Delhi. The State of Gujarat sought to levy sales tax on these transactions. The petitioner challenged the validity of Section 2(28) of the Gujarat Sales Tax Act, 1973, which defines 'sale' and includes sales determined to be within the state as per Section 4(2) of the Central Sales Tax Act, 1956. The petitioner filed a writ petition under Article 32 of the Constitution.

What did the Supreme Court hold?

The Supreme Court held that the State of Gujarat was entitled to levy sales tax on the hire-purchase transactions. The Court reasoned that the sale itself took place only when the hirer exercised the option to purchase the vehicle, and at that specific moment, the goods were located within the State of Gujarat. The Court found no objection to the incorporation of the definition of 'sale within the State' from Section 4(2) of the Central Sales Tax Act, 1956, into Section 2(28) of the Gujarat Act. The fact that the contract was entered into in Delhi and instalments were paid in Delhi did not alter the situs of the sale, which was determined by the location of the goods at the time the property passed. The Court also held that there is no rule preventing the same goods from being subjected to sales tax multiple times if there are multiple sales. Regarding the maintainability of the writ petition under Article 32, the Court affirmed that it lies when action is taken under an ultra vires statute, without jurisdiction, or procedurally ultra vires, and since the constitutionality of Section 2(28) was questioned, the petition was maintainable. The Court dismissed the petitions.

What were the issues?

1. Whether the State of Gujarat could levy sales tax on hire-purchase transactions where the contract was concluded and payments were made in Delhi, but the goods were located in Gujarat at the time the option to purchase was exercised? (Question of law, turning on the interpretation of 'sale within the State' under Section 2(28) of the Gujarat Sales Tax Act, 1973, read with Section 4(2) of the Central Sales Tax Act, 1956). 2. Whether a writ petition under Article 32 of the Constitution of India is maintainable in this case? (Question of law, concerning the scope of Article 32). Assessee's Contentions: The assessee argued that the entire transaction, including the contract formation and payment of instalments, occurred in Delhi, and therefore, Gujarat could not levy sales tax. The constitutionality of Section 2(28) of the Gujarat Act was questioned, implying a challenge to its validity or applicability. Revenue's Contentions: The revenue contended that the sale was completed when the option to purchase was exercised and the goods were within Gujarat at that time, making the transaction taxable by Gujarat. The revenue also raised a preliminary objection regarding the maintainability of the writ petition under Article 32.

Which sections of the Income-tax Act were involved?

Section 2(28),Section 4(2)

AI-generated summary — verify with the full judgment below

http://JUDIS.NIC.IN SUPREME COURT OF INDIA PETITIONER: INSTALMENT SUPPLY LTD.

Vs. RESPONDENT: THE SALES TAX OFFICER, AHMEDABAD-I & ORS. DATE OF JUDGMENT01/05/1974 BENCH: CHANDRACHUD, Y.V. BENCH: CHANDRACHUD, Y.V. ACT: Gujarat Sales Tax Act-S. 2(28) whether state could goods inside the State, but agreement entered into outside the State.

Constitution of India, 1950-Art. 32-When a petition will lie. HEADNOTE: The petitioner, a limited company with its registered office in New Delhi, carries on business of financing purchase of motor vehicles. The intending buyer of a motor vehicle enters into a hire purchase agreement with the petitioner company. Under the terms of the agreement the hirer makes an initial deposit by way of premium as consideration for granting the lease of the vehicle, which deposit becomes the absolute property of the company. 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. Till the completion of the instalments the vehicle remains the property of the company as owners bu

The order continues below.

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