1. Hiring of shuttering materials to builders — Assessment of sales tax on hire charges under Haryana General Sales Tax Act, 1973 — Challenge to the definition of sale. (Para 1 , 2 )
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1998 Supreme(SC) 915
SUPREME COURT OF INDIA
S.P. BHARUCHA AND V.N. KHARE, JJ.
Aggarwal Brothers, Appellant
Versus
State of Haryana and another, Respondents.
Civil Appeal No. 78 with 79 of 1996, D/- 1-9-1998.
The transfer of the right to use goods for consideration satisfies the requirements of a deemed sale under the Haryana General Sales Tax Act, 1973.
Headnote:
SALES TAX - HIRE CHARGES - The court upheld the assessment orders requiring the appellants to pay sales tax on hire charges for the transfer of the right to use shuttering materials, deeming it to be a sale within the meaning of the Haryana General Sales Tax Act, 1973.
Fact of the Case:
The appellants were served with notices to pay sales tax on hire charges for the transfer of the right to use shuttering materials. They filed writ petitions to challenge the constitutionality of the provision under the said Act.
Finding of the Court:
The High Court upheld the assessment orders, finding that the transfer of the right to use the shuttering materials constituted a deemed sale under the said Act.
Issues: Constitutionality of the provision under the Haryana General Sales Tax Act, 1973 and the interpretation of the definition of sale under the said Act.
Ratio Decidendi: The court interpreted the provision under the said Act, emphasizing that the transfer of the right to use goods for consideration satisfies the requirements of a deemed sale.
Final Decision: The appeals were dismissed with costs.
Legal Category Hierarchy
Table of Contents
2. Whether hiring goods constitutes a transfer of the right to use under Article 366(29A)(d) or requires a permanent legal transfer similar to a lease. (Para 3 )
3. The statutory language mirrors the Constitution; a transfer of the right to use goods for consideration constitutes a deemed sale regardless of whether it is a lease. (Para 4 , 5 )
4. A transfer of the right to use goods for consideration satisfies the requirements of a deemed sale under the Haryana General Sales Tax Act, 1973. (Para 5 , 6 )
5. Appeals dismissed with costs. (Para 7 )
6. Does the hiring of goods for construction constitute a sale under the Haryana General Sales Tax Act, 1973?
Yes, because the Act defines sale to include the transfer of the right to use any goods for any purpose for cash, deferred payment, or other valuable consideration, which is treated as a deemed sale. (Para 5 , 6 )
7. Is a permanent legal transfer or a lease-like agreement necessary for a transaction to be considered a deemed sale of the right to use goods?
No, the provision expressly refers to the transfer of the right to use goods and not the transfer of the goods themselves; therefore, no legal transfer of goods or lease-like transaction is required. (Para 5 )
8. How does the Haryana General Sales Tax Act, 1973, align with the Constitution regarding the taxation of the right to use goods?
The language used in the Act regarding the transfer of the right to use goods mirrors the language used in Article 366(29A)(d) of the Constitution. (Para 4 , 5 )
Judgement
JUDGMENT :- These appeals by special leave impugn the judgment and order of a Division Bench of the High Court of Punjab and Haryana whereby writ petitions filed by the appellants, and others, were dismissed.
2. The assessee (appellants) hire shuttering to builders and contractors who use it in the course of construction of buildings. The assessees were served with notices under the HARYANA GENERAL SALES TAX ACT , 1973 (the said Act) requiring them to pay sales tax on such hire charges and assessment orders were then so made. The assessment order in the case of M/s. DD Shuttering recorded that the assessee dealt in shuttering materials used in the construction of buildings and received hire charges from its various customers. The hire charges received by it were sales within the meaning of Section 2(l)(1)(iv) of the said Act. The writ petitions were filed to quash these assessment orders and it was contended that the aforementioned provision of the said Act was unconstitutional. The High Court repelled the challenge to constitutionality. It found that the possession of the shuttering material was transferred by the assessees to their customers for use during the construction of buildings. The customers were in effective control of the shuttering during the periods it remained in their possession. The transactions, therefore, fell within the amended definition of the word "sale" as there was a transfer of the right to use the shuttering.
3. The argument of learned counsel for the assessees goes thus: Entry 54 of Part II of Schedule VII of the Constitution enables the State to levy "taxes on the sale or purchase of goods other than newspapers.......". Article 366 sets down definitions for the purposes of the Constitution. Clause (29A) thereof refers to "tax on the sale or purchase of goods" and it includes "(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." In the submission of learned counsel, having regard to Entry 54 of Part II of Schedule VII, the transfer contemplated by sub-clause (d) of Clause (29A) of Article 366 is a legal transfer of the right in the goods. It has to be a transfer of goods. It has to be permanent. It has to be something like a lease. The giving of goods on hire is not such transfer and, therefore, falls outside the ambit of sub-clause (d) of Clause (29A) of Article 366. Learned counsel referred to paragraph 40 of the judgment of this Court in Builders Association of India v. Union of India, (1989) 2 SCC 645 : (AIR 1989 SC 1371, Para 40) which says :
"As the Constitution exists today the power of the States to levy taxes on sales and purchases of goods including the "deemed" sales and purchases of goods under clause (29-A) of Article 366 is to be found only in Entry 54 and not outside it."
4. The language used in Section 2(j)(1)(iv) and 2(l)(1)(iv) of the said Act is the language used in Article 366(29A)(d), Section 2(j) dealing with purchase and Section 2(1) with sale. The argument before us is, therefore, not an argument on the constitutionality of these provisions of the 2869 said Act but of their interpretation and the application thereof to the facts of the present case.
5. The said Act defines sale to mean the transfer of property in goods for cash or deferred payment or other valuable consideration and includes 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." Such transfer of the right to use goods for consideration is "deemed" to be a sale. The provision expressly speaks of "transfer of the right to use goods" and not of transfer of goods. There is, therefore, no merit in the submission that to be a deemed sale within the meaning of the abovementioned provision of the said Act there must be a legal transfer of goods or that the transaction must be like a lease.
