The main legal point established in the judgment is that the lending of video cassettes to library members constituted a transfer of the right to use goods for hire, making the petitioner liable to be assessed as a dealer under the Kerala General Sales Tax Act, 1963.

K.G. Balakrishnan, J.

Petitioner in this Original Petition is the partner of a firm which conducts business of Video library in Trivandrum. The nature of the business conducted by the petitioner is that members of the library would be enlisted on payment of a fee of Rs. 50/- with an additional security amount of Rs. 300/-. The members of the library are eligible to borrow cassettes from the library on a lending fee of Rs. 10/- per cassette. The member can retain the cassette for 2 days and if he keeps it for more than 2 days, he has to pay extra fee. The member is also liable to make good any damage or loss caused to the cassette.

2. The 1 st respondent issued notice to the petitioner stating that the firm would come within the definition of "dealer" given in S.2(viii) of the Kerala General Sales Tax Act, 1963 (for short "the act) and was liable to be assessed under the Act. Petitioner filed objection to the notice. His objections were overruled and Exts. P5 and P6 assessment orders were passed for the year 1984-85 and 1985-86. Petitioner challenged Exts. P5 and P6 orders. Petitioner alleges that he is not a dealer under the Act nor the transaction of lending cassettes to the members on hire would come within the term "sale' as defined in the Act. The respondents have filed a detailed counter affidavit supporting the assessment orders passed by the Government.

3. We heard counsel for the petitioner and the Government Pleader. In Madras State v. Dwkerley & Co. (AIR 1958 SC 560) the Supreme Court held that the expression "sale of goods" as used in the entries in the Seventh Schedule to the Constitution has the same meaning as in the sale of Goods Act, 1930. The Supreme Court in various decisions held that in order to be assessed under the provisions of the Sales Tax Act the transaction must resemble to the "sale of goods" as defined in the Sales of Goods Act and should have the ingredients such as parties must be competent to contract, mutual assent and transfer of property in goods from one of the parties to the contract to the other party thereto for a price. It was felt that this restricted meaning of sale led to avoidance of tax in various ways. The Government also wanted to generate more sources of revenue for the State and by the Forty-sixth Amendment of the Constitution, which came into for in 1982, 29A of Art.366 was amended and an extended meaning was given to the words tax on the sale or purchase of goods'.

3. Art. (29A) of Art.366 of the Constitution reads as follows : "(29A) tax on the sale or purchase of goods" includes -

(a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;

(b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;

(c) a tax on the delivery of goods on hire purchase or any system of payment by instalments;

(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:

(e) a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;

(f) a tax on the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or an other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be sale of those goods by a person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made".

Subsequent to Forty Sixth Amendment of the Constitution various State legislations came into existence and the term "dealer" occurring in S.2(viii) and "sale" occ