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, as a companysideration for the option until all the stipulated instalments have been paid and the option exercised as aforesaid, the vehicle remains the property of the Company as owners.
In pursuance of the provisions of that Act, the Sales Tax authorities started demanding and levying sales tax on all transactions of the nature aforesaid on the ground that the instalments paid by the hirers to the Company were sales price and, therefore, liable to Sales Tax.
The Bengal Finance Sales Tax Act, 1941 Bengal Act VI of 1941 was extended to the State of Delhi, which is number the Union Territory of Delhi.
289 D of 1954, the Company prayed for a writ in the nature of prohibition and or mandamus restraining the respondent from realising or levying any sales tax under the provisions of the Bengal Act, extended to Delhi.
226 and 227 of the Constitution.
There was also a prayer for a writ of certiorari quashing certain orders passed by the Sales Tax authorities in 1953 54.
Until the option of purchase is exercised by the Hirer, he is at liberty to return the vehicle and to put an end to tile Hiring Agreement, on certain terms.
The hire money received by the Company, it is companytended, is number a part of the price of the goods sold and is thus number liable to be taxed as sale price.
The system adopted by the Company for financing a purchase such as aforesaid is as follows.
Thus, under the agreement, the Hirer has the use of the vehicle, which is entrusted to him as the property of the Company, and it is open to the Hirer to become the purchaser of the vehicle as aforesaid, but he is number bound to do so.
per mensem on all sums overdue.
The Hirer has to pay interest at the rate of one per cent.
The Company challenged the right of the Sales Tax authorities to levy any such tax on the ground that the law was beyond the companypetence of the legislature.
According to that agreement, the Company charges the Hirer an initial deposit by way of premium as a companysideration for granting the lease of the vehicle, which deposit becomes the absolute property of the Company the premium charged as aforesaid is a substantial amount, being usually 25 of the price in respect of new vehicles.
In the Writ Petition, which was registered as Civil Writ Application No.
ORIGINAL JURISDICTION Petition No.
Veda Vyasa, S. K. Kapur and Ganpat Rai, for the petitioners.
The companypany has been carrying on in Delhi the business of financing the purchase of new as well as second hand motor cars and other kinds of motor vehicles.
May 2.
32 of the Constitution for a writ or order in the nature of mandamus and or prohibition and or other suitable writ, order or direction to the respondents number to levy, charge or companylect any sales tax on transactions of what the petitioners characterised as hire purchase agreements, a typical example of which is companytained in Annexure A to the petition, to be hereinafter examined in detail.
Petition under Art.
The Judgment of the Court was delivered by SINHA, C. J. The petitioners have moved this sin Court under Art.
The first petitioner is a private limited companypany incorporated under the Companies Act, with its registered office at Janpath, New Delhi.
Ultimately, the Company moved the Punjab High Court Circuit Bench at Delhi under Arts.
K. Daphtary, Solicitor General of India, R. Gopala krishnan and D. Gupta, for the respondents.
The second petitioner is the Managing Director and shareholder of that companypany and is directly interested in the result of this application, because it is claimed that his rights and property are directly involved.
146 of 1958.
A person desiring to purchase a motor vehicle fixes a bargain with the owner and the petitioner Company would then advance the necessary finance on the terms and companyditions appearing in a printed companyy of the agreement, marked Annexure A to the petition.
