M/S KAILASH MOTORS Vs. STATE AND ANOTHER

JUDGEMENT

(1.) Heard Mr. Bharat Ji Agarwal, the learned senior counsel duly assisted by Mr. S. K. Posti, the learned counsel for the petitioners and Mr. Sudhir Kumar, the learned brief holder for the State.

(2.) The petitioner is a registered partnership firm carrying on the business of motor vehicles and chassis and is also doing the business of giving motor vehicles/chassis on hire purchase basis. According to the petitioners, they have effected sales on hire purchase basis and, only when the sale is complete and the ownership of the chassis of the motor vehicles is transferred, they paid the taxes. The petitioners have paid the taxes when the petitioners have received the last installment under the hire purchase agreement and have transferred the vehicles on the payment of the last installment. The petitioners contend that the sale of such vehicles/chassis is complete after the last installment is paid and that the sales tax becomes payable at the prescribed rate at the time when the last installment was paid in the assessment year. The petitioners further contend that under the agreement, the hirer would be at liberty to terminate the agreement by returning the motor vehicle to the owner. Further, the hirer does not have any right or interest as a purchaser until the vehicle was transferred to him in his name. The hirer only uses the same on payment on hiring charges. Further, the owner has a right to terminate the agreement and can recover the possession of the vehicle at any time. The owner can take re-possession of the vehicle, if any terms and conditions of the agreement is breached.

(3.) According to the petitioners, no tax was liable to be paid till the last installment was paid or till the time when the vehicle was transferred, inspite of which, the Assistant Commissioner (Assessment), Sales Tax, Dehradun imposed a huge liability of tax while passing the assessment order for the year assessment years 1983-84 and 1984-85. According to the petitioners, the assessing authority committed an error in holding that the vehicles given on hire by the hire purchase company to the consumer amounted to a sale under the definition of "sale" as defined under Sec. 2(h) of the Uttar Pradesh Sales Tax Act (hereinafter referred to as the Act) as amended by U.P. Act No.25 of 1985. Further, the notification issued under Sec. 3-A(1)(d) of the Act provides two different point at which the motor vehicles, including the chassis of the motor vehicles were made taxable, namely, one at the point of the sale by the dealer to the consumer and the second at the point of sale to a hire purchase company financing the purchase by the consumer.