MARIKAR MOTORS LIMITED Vs. SALES TAX OFFICER

JUDGEMENT

(1.) This appeal is preferred against the judgment of a full bench of the kerala High court. The matter arises under the Kerala Sales Tax Act and the relevant Assessment Year is 1965-66. The appellant is a dealer in motor vehicles and automobile parts. The question herein, however, is confined to motor trucks. The appellant sells trucks both by way of direct sale and also on the basis of hire-purchase. We are concerned with the sales effected on hire-purchase basis.

(2.) According to the hire-purchase agreement entered into between the appellant and the hirer, the period of hire is two ars. The agreement stipulates that the entire consideration specified under the said agreement shall be paid within the said period of two years and that, at the end of that period, the hirer shall become the owner.

(3.) In the course of assessment proceedings, the question - how to value the vehicles and with reference to which date - arose. The matter was brought to this court in Marikar (Motors) Ltd. v. STO. This court held that the hire-purchase agreement comprises two elements, (1 the element of bailment and (2 the element of sale in the sense that it contemplates an eventual sale. It was held that element of sale in the transaction fructifies when the option is exercised by the intending purchaser after fulfilling the terms of the agreement. When all the terms of agreement are satisfied and the option is exercised, it was held, sale takes place of the goods which till then have been hired. Only when the sales take place, it was held further, it will attract the sales tax.