1989 Supreme(Bom) 261

IN THE HIGH COURT OF BOMBAY
Mookerjee C., C.J. Kenia M.P., J.
20th Century Finance Corporation Ltd. another .... Petitioners.
    Versus
State of Maharashtra.... Respondent.
Writ Petition No. 2632 of 1986, decided on 12-9-1989.
Advocates appeared :
Aspi Chinoy with J.J. Bhatta S.J. Vazifdar i/b. Kanga Co., for petitioners.
Miss P.D. Anklesaria, for respondent.

Headnote:MAHARASHTRA SALES TAX ON THE TRANSFER OF THE RIGHT TO USE ANY GOODS FOR ANY PURPOSE ACT, 1985 (AS AMENDED IN 1986).

       Sections 2 (1) and 3-Explanateion-Constitutlon of India, Articles 246, 169,286 and Schedule VII, List 1, Entry 92-A and 366 (29-A)-Validity of Explanation to Section 3 (10) and Section 3-By said Explanation transfer of right to use any goods situate In State of Maharashtra shall be deemed to have taken place in State of Maharashtra, irrespective of place where agreement for such transfer of right to use took place- the provision is not violative of Articles 246, 269 and 286-Section 3 of the Act, is also valid.

       Under Section 2 (10) of the impugned Act, "sale" means the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or any other valuable consideration, and the word "sell" with all its grammatical variations and cognate expressions, shall be construed accordingly Court has mentioned that the original explanation to section 2 (IC) had been amended by Maharashtra Act XXIII of 1986 By reason of the said explanation, transfer of the right to use any goods shall be deemed to have taken place in the State of Maharashtra, irrespective of the place where the agreements for such transfer of the right to use took place, if the goods are in the State of Maharashtra at the time of their use. In other words, the sites or the location of the goods at the time of their use bas been chosen as the basis of taxability under the Act. Thus, in view of of the amended explanation to section 2 (10) of the impugned Act, the place where an agreement is made for transfer of right to use goods is irrelevant and under the impugned Act, the State of Maharashtra has assumed power to levy tax on such transfer of right to use goods which are located in the State of Maharashtra at the time of their use. In courts view, the said provision contained in the explanation to section 2 (10) does not result in bringing inter-State sales or sales taking place outside the State of Maharashtra within the scope of the impugned Act. The reported decisions upon which the learned Counsel had relied were rendered in the context of sale transactions w\lich than only meant transfer of property in goods. Court has already pointed out that after clause 20-A was inserted in Article 366, tax on sale or purchase of goods included, inter alia tax on transfer or right to use for any purpose goods for cash, deferred payment or other valuable consideration, Therefore, the validity of a tax on such transfer of right to use ought not to be tested by applying these reported decisions regarding the meaning of sale. It would not be also appropriate to apply the tests applicable for deciding when transfer of property in goods passes in case of right to use goods for any purpose.

       The Act does not at all impose tax on use of goods made before the appointed day. Therefore, no question arises of imposing tax under section tax under section 3 (i) upon any transfer of right to use goods taking place prior to either the appointed day or prior to insertion of clause (29-A) in a Article 366. Section 3 (ii) deals with the cases where transfer of right was agreed prior to the appointed day and the said right to use might have also commenced before the appointed day. But tax is to be levied only upon use of goods made on or after the appointed day. In other words, price or consideration paid for exercise of the right to use made before the appointed day is not taxable. Under clause (ii) of section 3, tax is livable upon the price or any other consideration received or receivable in respect of use from the date the impugned Act has come into force. Courts has already mentioned that the impugned Act has made taxable the transfer of right to use goods without passing of property in such goods. Under clauses (ii) and (iii) of section 3, price received or receivable in respect of the post-Act use of goods irrespective of the dates of the agreement to transfer, had became taxable. Therefore, none of the clause of section 3 of the impugned Act purports to levy tax on deemed sales covered by the said Act, taking place prior to the appointed day.