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Citation2000 SSC 165
Date of Judgment9 August, 2000
CourtSupreme Court of India
Case TypeCivil Appeal No. 2844 of 2011
ApplicationJai Bharat Credit Pvt Lmt
RespondentCST and ANR
BenchB.N Kripal, S.N Phukan, Ruma Pal
Referred Sales Tax Act 


Jai Bharat Credits Pvt Lmt has their business in which they purchase vehicles and then give them on hire rent and the person who hires the vehicle pays an initial amount and then pays the rest amount later. In this amount the price of the vehicle and hier charge is included, it is to be paid in instalment. After the payment of the last installment, the person who hires the vehicle gets an option to transfer the ownership of the vehicle in his name after the payment of a nominal charge.

The sales tax authorities i.e. CST and ANR are respondents said that the amount paid in installments was the sale price part and it comes under the circumference of the Sales Tax Act, 1941 as extended to the union territory of Delhi.


           Whether respondent is justified in holding that hire purchase transaction done into by applicant were liable to the imposition of sales tax on consolidated proceeds ?


Applicant argued that sales tax cannot be levied on the entire amount paid by the hirer including the hire charge but the sale consideration that can be taxed will only be the price of the vehicle at the time the hirer exercises the option to buy. This is in accordance with the amendments made in the Bengal Finance ( Sales Tax) Act, 1941, The definition of sale under the Sale of Goods Act will not include hire purchase agreement.

There is a violation of Article under the part 14 of the constitution, hire purchase transactions were not included in the scope of taxation in the entire country, but only in Delhi.


The Supreme Court stated that the amendment of act does not, in fact, alter the position before that date. The definition of sale under section 2(g) of the act includes both the terms ‘transfer of property in goods’ and ‘transfer of goods and hire purchase’ and hence the latter can also be charged to tax. Section 2 (g)- definition of sale and Section 2 (h)- definition of sale price, read together, also lead to the same conclusion  that hire purchase charges are included in the sale price and thus fall within the scope of taxation. 

It is rejected on the basis that the definition of sale in the Central Sales Tax Act includes hire purchase agreement and is applicable throughout India.






This case analysis is written by Bhaavya Mishra of Vikramajit Singh Sanatan Dharma College, Intern at Legal Vidhiya.


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