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Report No. 61

Position under The Central Sales Tax Act

1B.11. Position under the Central Sales Tax Act.-

The definition of "sale" in Central Sales Tax Act, which we have already quoted1, is as follows2:-

"(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 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."

It is obvious that in the earlier part of the definition, transfer of 'property' is required; but, in the latter part (the inclusive part), transfer of 'goods' is enough, and transfer of 'property' is not required. It is, therefore, a plausible view to take that hire-purchase not resulting in sale is also covered by the definition.

1. Para. 8, supra.

2. Section 2(g), Central Sales Tax Act.

1B.12. Discussion in Supreme Court cases as to Central Sales Tax Act.-

The question whether the Central Sales Tax Act applies to a hire-purchase not resulting in sale has indirectly come up for discussion in two cases before the Supreme Court. In one of them1(which related actually to works contracts), the argument was advanced that because the Central Sales Tax Act was wide enough to cover such hire-purchase, it showed that the legislative entry relating to power to tax (inter-State) sales or purchase should also be widely construed; and if that was so, then the legislative entry regarding taxation of (internal) sale or purchase (State List, entry 54), should also be widely construed so as to include works contracts. The argument did not succeed. The Supreme Court pointed out that there was a difference in the position regarding Parliament's power and power of the States. So far as Parliament was concerned, it could tax hire-purchase not resulting in sale under the residuary power.

1. Gannon Dunkerley's case, (Works Contracts), AIR 1958 SC 560 (on appeal from AIR 1954 Mad 1130).

1B.13. Definition in Bengal Act as extended to Delhi as in 1954.-

In another case1, the validity of the Bengal Finance Sales Tax Act, 1947 as extended to the Delhi Union Territory, was in issue, in so far as the provision in that Act taxing hire-purchase not resulting in sale was concerned. The Supreme Court upheld its validity, and again pointed out that Parliament's power of levying taxes was wider than that of the States. The Court further pointed out that this had already been held in Mithan Lal's case, AIR 1958 SC 682 (685) (Works Contracts). case3 where it was stated that under Article 246(4) of the Constitution, Parliament's power was untrammelled in relation to Part C States-now Union territories.

An argument was then advanced that since, in other Part C States, such sales were not taxed, there was discrimination against traders in Delhi. The Supreme Court rejected this argument, first on the ground that there was no evidence that in other Part C States such sales were not taxed; and secondly by observing that the Central Sales Tax Act levied tax on such hire-purchase also throughout India. With respect to the second reason (pertaining to the Central Sales Tax Act), it may be permissible to point out that the Central Sales Tax Act relates only to inter-State sales. Thus, the position is that while there is no reported case directly relating to the scope of "sale"2 in the Central Sales Tax Act (in relation to hire-purchase), we can draw assistance from the views of the Supreme Court which were expressed in dealing with the question of the validity of the Act, giving that expression a wide scope.

1. Instalment Supply Ltd. case, AIR 1962 SC 53 (59), Para. 13, reversing Instalment Supplies Ltd., AIR 1956 Punj 177.

2. Para. 1B.11, supra.

1B.14. Doubt arising due to absence of non-obstante clause.-

A doubt was expressed during, our discussion as to whether the absence of a non-obstante clause in the definition of "sale" in the Central Sales Tax Act1 makes any difference.2 We have, however, after careful consideration, come to the conclusion that the words "transfer of goods" are clear enough to cover hire-purchase not resulting in sale.

1. Para. 1B.11, supra.

2. Such non-obstante clause is found in some State Acts.

Certain Problems connected with Powers of the States to Levy a Tax on the Sale of Goods and with the Central Sales Tax Act, 1956 Back

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