XXTH CENTURY FINANCE CORPORATION LIMITED Vs. STATE OF MAHARASHTRA
LAWS(SC)-2000-5-99
SUPREME COURT OF INDIA (FROM: ANDHRA PRADESH)
Decided on May 09,2000

20TH CENTURY FINANCE CORPORATION LIMITED Appellant
VERSUS
STATE OF MAHARASHTRA Respondents





Cited Judgements :-

SAJJAN KUMAR SHARMA VS. COMMERCIAL TAX OFFICER [LAWS(CAL)-2003-4-37] [REFERRED TO]
STATE OF TAMIL NADU VS. TVL KARNATAKA BANK LIMITED [LAWS(MAD)-2011-9-361] [REFERRED TO]
M/S DOMINOS PIZZA OVERSEAS FRANCHISING B.V. VS. STATE OF U.P. AND OTHERS [LAWS(ALL)-2016-11-30] [REFERRED TO]
VITAN DEPARTMENTAL STORES & INDUSTRIES LIMITED VS. STATE OF TAMIL NADU, REP. BY THE JOINT COMMISSIONER [LAWS(MAD)-2013-10-69] [REFERRED TO]
SICPA INDIA PVT. LTD. VS. COMMISSIONER OF CUS., C. EX & S.T., SILIGURI [LAWS(CE)-2012-11-26] [REFERRED TO]
COMMERCIAL TAXES OFFICER (WC AND LT) VS. UNIQUE PRECURED RETREADERS [LAWS(RAJ)-2008-7-99] [REFERRED TO]
SARABHAI PIRAMAL PHARMACEUTICALS LTD VS. COLLECTOR AND ADDITIONAL SUPERINTENDENT OF STAMPS [LAWS(GJH)-2013-7-543] [REFERRED TO]
PETRONET LNG LIMITED VS. COMMISSIONER OF SERVICE TAX [LAWS(CE)-2013-10-42] [REFERRED TO]
POOMPUHAR SHIPPING CORPORATION LTD VS. INCOME TAX OFFICER, CHENNAI [LAWS(MAD)-2013-10-22] [REFERRED TO]
ASSISTANT COMMISSIONER VS. H.E.G. LIMITED, RISHAV TEXTILES [LAWS(RAJ)-2008-12-48] [REFERRED TO]
SUNDARAM FINANCE LIMITED VS. STATE OF TAMIL NADU [LAWS(MAD)-2013-11-402] [REFERRED]
M/S G.D. GOENKA (P) LTD VS. STATE OF U.P. AND OTHERS [LAWS(ALL)-2016-12-178] [REFERRED TO]
STATE OF TAMIL NADU VS. TVL ESSAR SHIPPING LIMITED [LAWS(MAD)-2011-8-399] [REFERRED TO]
M/S.AGS ENTERTAINMENT PRIVATE LIMITED, VS. UNION OF INDIA [LAWS(MAD)-2013-6-97] [REFERRED TO]
COMMERCIAL TAXES OFFICER (WC AND LT) VS. UNIQUE PRECURED RETREADERS [LAWS(RAJ)-2008-7-98] [REFERRED TO]
SMT. KABITA MUKHERJEE VS. PADAM CHAND BANTHIA [LAWS(CAL)-2001-1-47] [REFERRED TO]
VYSYA BANK LTD. VS. COMMISSIONER OF TRADE TAX [LAWS(ALL)-2009-10-259] [REFERRED TO]
HEWLETT PACKARD FINANCIAL SERVICES INDIA PRIVATE LIMITED VS. THE STATE OF KARNATAKA AND ORS. [LAWS(KAR)-2016-2-146] [REFERRED TO]
MOHD WASIM KHAN VS. COMMISSIONER, TRADE TAX [LAWS(ALL)-2006-4-320] [REFERRED TO]
COMMISSIONER, TRADE TAX VS. OSWAL AGRA MILLS LTD [LAWS(ALL)-2006-11-275] [REFERRED TO]
BRAHMAPUTRA VALLEY CONSTRUCTION AND SUPPLIERS VS. OIL AND NATURAL GAS CORPN. LTD [LAWS(GAU)-2012-7-95] [REFERRED TO]
DIPAK NATH VS. OIL AND NATURAL GAS CORPORATION LTD. AND ORS. [LAWS(GAU)-2009-11-66] [REFERRED TO]
ALLIED TRADERS VS. STATE OF ASSAM [LAWS(GAU)-2002-3-36] [REFERRED TO]
ASSAM ROLLER FLOUR MILLS ASSOCIATION VS. STATE OF ASSAM [LAWS(GAU)-2006-4-18] [REFERRED TO]
FIRST LEASING COMPANY OF INDIA LIMITED VS. STATE OF ASSAM [LAWS(GAU)-2011-4-25] [REFERRED TO]
ASHOK KR. JAISWAL VS. STATE OF ASSAM AND ORS. [LAWS(GAU)-2010-3-67] [REFERRED TO]
JAY KUMAR BARDIA VS. STATE OF ASSAM AND OTHERS [LAWS(GAU)-2009-12-77] [REFERRED TO]
VIJAYA STEELS LIMITED, KALLANAYAKANAHALLI, ANCHEPALYA POST, KUNIGAL TALUK, KUNIGAL VS. BANGALORE ELECTRICITY SUPPLY COMPANY LIMITED, BENGALURU AND OTHERS [LAWS(KAR)-2016-10-16] [REFERRED TO]
ARUNODOI CONSTRUCTION CO P LTD VS. STATE OF ASSAM [LAWS(GAU)-2002-3-44] [REFERRED TO]
HINDUSTAN PAPER CORPORATION LTD VS. COMMISSIONER OF TAXES [LAWS(GAU)-2002-9-18] [REFERRED TO]
SAUMYA MINING PVT LTD VS. COMMISSIONER OF TAXES [LAWS(GAU)-2004-4-20] [REFERRED TO]
HLS ASIA LTD VS. STATE OF ASSAM [LAWS(GAU)-2006-11-60] [REFERRED TO]
INDIAN OIL CORPORATION LTD VS. COMMISSIONER OF TAXES ASSAM [LAWS(GAU)-2009-2-34] [REFERRED TO]
HSL ASIA LIMITED VS. STATE OF TRIPURA [LAWS(GAU)-2011-3-49] [REFERRED TO]
COMMISSIONER, TRADE TAX VS. SUNDER SINGH ANEJA [LAWS(ALL)-2006-3-385] [REFERRED]
MAHESH TRAVELS (P) LTD VS. OIL AND NATURAL GAS COMMISSIONTL [LAWS(GAU)-2009-2-69] [REFERRED TO]
THE STATE OF KARNATAKA VS. UNITED BREWERIES LTD. [LAWS(KAR)-2015-10-103] [REFERRED TO]
FELGUERA GRUAS INDIA PRIVATE LIMITED VS. ASSISTANT COMMISSIONER (CT)-IV, ENFORCEMENT WING [LAWS(APH)-2015-7-89] [REFERRED TO]
SRI BHARGAVI AGRO TECH VS. ASSISTANT COMMISSIONER (CT), KAKINADA, EAST GODAVARI [LAWS(APH)-2014-10-60] [REFERRED TO]
ENGINEERS INDIA LTD VS. STATE OF A P LABIC [LAWS(APH)-2018-12-27] [REFERRED TO]
M/S INDUS TOWERS LIMITED VS. COMMERCIAL TAX OFFICER, BEGUMPET [LAWS(APH)-2012-6-31] [REFERRED TO]
STATE OF ANDHRA PRADESH VS. BHARAT SANCHAR NIGAM LIMITED [LAWS(APH)-2011-9-141] [REFERRED TO]
USHAKIRAN MOVIES VS. STATE OF ANDHRA PRADESH [LAWS(APH)-2006-6-97] [REFERRED TO]
A P AKSH BROAD BAND LTD VS. COMMERCIAL TAX OFFICER [LAWS(APH)-2011-1-45] [REFERRED TO]
M/S. TRANSOCEAN OFFSHORE, INTERNATIONAL VENTURES LIMITED VS. UNION OF INDIA [LAWS(APH)-2017-4-33] [REFERRED TO]
VICEROY HOTELS LIMITED VS. COMMERCIAL TAX OFFICER AND THREE ORS [LAWS(APH)-2011-2-99] [REFERRED TO]
LARSEN AND TOUBRO LTD. VS. STATE OF ANDHRA PRADESH AND ORS. [LAWS(APH)-2015-9-16] [REFERRED TO]
COROMANDAL FINANCE CO LTD VS. COMMISSIONER OF COMMERCIAL TAXES [LAWS(APH)-2001-2-22] [REFERRED TO]
VYSYA BANK LIMITED VS. COMMISSIONER OF SALES TAX [LAWS(ORI)-2008-4-1] [REFERRED TO]
STATE OF ORISSA VS. DREDGING CORPORATION OF INDIA LTD. [LAWS(ORI)-2009-3-59] [REFERRED TO]
COMMISSIONER OF SERVICE TAX VS. SGS INDIA PVT. LTD. [LAWS(BOM)-2014-4-195] [REFERRED TO]
ESSAR SHIPPING PORTS AND LOGISTICS LIMITED VS. COMMERCIAL TAX OFFICER (FAC) [LAWS(MAD)-2010-2-722] [REFERRED TO]
HOME SOLUTIONS RETAILS INDIA LTD VS. UNION OF INDIA [LAWS(DLH)-2011-9-272] [REFERRED TO]
SUNDARAM FINANCE LTD VS. SALES TAX OFFICER BHUBANESWAR-I CIRCLE [LAWS(ORI)-2001-9-30] [REFERRED TO]
MAHYCO MONSANTO BIOTECH (INDIA) PVT LTD VS. UNION OF INDIA [LAWS(BOM)-2016-8-209] [REFERRED]
COMMISSIONER OF SALES TAX VS. ROLTA COMPUTER AND INDUSTRIES PRIVATE LIMITED [LAWS(BOM)-2009-6-159] [REFERRED TO]
COMMISSIONER OF SALES TAX MAHARASHTRA STATE VS. ROLTA COMPUTER AND INDUSTRIES PRIVATE LIMITED [LAWS(BOM)-2009-6-182] [REFERRED TO]
STATE OF ANDHRA PRADESH VS. NATIONAL THERMAL POWER CORPORATION LIMITED [LAWS(SC)-2002-4-55] [REFERRED]
STATE OF UTTAR PRADESH VS. UNION OF INDIA [LAWS(SC)-2003-2-112] [REFERRED]
ASHOK LEYLAND LIMITED VS. STATE OF TAMIL NADU [LAWS(SC)-2004-1-1] [REFERRED TO]
OM SINDHOORI CAPITAL INVESTMENTS LTD VS. ASSISTANT COMMISSIONER OF INCOME TAX [LAWS(MAD)-2005-7-174] [REFERRED TO]
BHARTI INFRATEL LTD. VS. STATE OF MADHYA PRADESH AND ORS. [LAWS(MPH)-2015-8-35] [REFERRED TO]
B G EXPLORATION AND PRODUCTION INDIA LIMITED VS. STATE OF GUJARAT [LAWS(GJH)-2015-5-78] [REFERRED TO]
GOA CARBON LTD VS. COMMISSIONER OF TRADE TAX [LAWS(SC)-2008-2-162] [REFERRED TO]
HDFC BANK LTD. VS. STATE OF GUJARAT [LAWS(GJH)-2016-7-189] [REFERRED TO]
LAL PRODUCTS VS. INTELLIGENCE OFFICER, COMMERCIAL TAXES [LAWS(KER)-2018-12-35] [REFERRED TO]
ESSAR OIL LTD VS. STATE OF GUJARAT [LAWS(GJH)-2018-5-17] [REFERRED TO]
TATA IRON AND STEEL CO.LTD. VS. STATE OF BIHAR, THE SUB DIVISIONAL OFFICER, DHALBHUM-CUM-THE CERTIFICATE OFFICER [LAWS(JHAR)-2007-9-36] [REFERRED TO]
J K UDAIPUR UDYOG LTD VS. STATE OF GUJARAT [LAWS(GJH)-2001-7-7] [REFERRED TO]
WEST COAST INDUSTRIAL GASES LTD VS. STATE OF KERALA [LAWS(KER)-2002-10-21] [REFERRED TO]
ALPHA CLAYS VS. STATE OF KERALA [LAWS(KER)-2003-8-81] [REFERRED TO]
RAJASTHAN CYLINDERS AND CONTAINERS LTD VS. COMMERCIAL TAXES OFFICER [LAWS(RAJ)-2015-2-186] [REFERRED TO]
J K CORPORATION LIMITED VS. STATE OF GUJARAT [LAWS(GJH)-2001-7-108] [REFERRED]
SHV ENERGY PVT. LTD. VS. STATE OF TAMIL NADU [LAWS(MAD)-2017-7-289] [REFERRED TO]
TATA COMMUNICATIONS LTD , THROUGH ITS ASSISTANT MANAGER (HR) V GEETHA VS. TELECOM REGULATORY AUTHORITY OF INDIA [LAWS(MAD)-2018-7-25] [REFERRED TO]
KARUN KARPETS P LTD VS. STATE OF KERALA [LAWS(KER)-2003-3-115] [REFERRED TO]
MANUSHI SANGTHAN, DELHI VS. GOVT. OF DELHI [LAWS(DLH)-2010-2-276] [REFERRED TO]
INDIAN AIRLINES VS. COMMISSIONER OF CUSTOMS, COCHIN/BANGALORE [LAWS(CE)-2004-12-156] [REFERRED TO]
INFRASTRUCTURE LEASING AND FINANCIAL SERVICES LTD. VS. COMMISSIONER OF VALUE ADDED TAX AND ORS. [LAWS(DLH)-2010-2-478] [REFERRED TO]
STATE OF KARNATAKA VS. ECE INDUSTRIES LIMITED [LAWS(KAR)-2004-11-23] [REFERRED TO]
N C R CORPORATION INDIA PVT LTD VS. DEPUTY COMMISSIONER OF COMMERCIAL TAXES [LAWS(KAR)-2008-9-66] [REFERRED TO]
ELGI FINANCE LIMITED VS. STATE OF ANDHRA PRADESH [LAWS(ST)-2007-12-3] [REFERRED TO]
UNIQUE INFLATABLES LIMITED VS. STATE OF ANDHRA PRADESH [LAWS(ST)-2013-7-3] [REFERRED TO]
GE CAPITAL TRANSPORTATION FINANCIAL SERVICES LTD VS. STATE OF HARYANA [LAWS(P&H)-2013-3-191] [REFERRED TO]
RUNGTA IRRIGATION LTD. VS. COMMISSIONER OF TRADE TAX, U.P. LUCKNOW [LAWS(ALL)-2011-8-325] [REFERRED TO]
RELIANCE INFRASTRUCTURE LTD VS. DEPUTY COMMISSIONER, SALES TAX [LAWS(CAL)-2014-12-103] [REFERRED TO]
FIZZ DRINKS P LTD VS. STATE OF HARYANA [LAWS(P&H)-2001-3-3] [REFERRED TO]
TATA ELXSI LIMITED VS. STATE OF UTTARANCHAL [LAWS(UTN)-2003-12-3] [REFERRED TO]
ABHISAR BUILDWELL PVT. LTD. VS. STATE OF TRIPURA AND ORS. [LAWS(TRIP)-2015-4-38] [REFERRED TO]
NEWSCO INTERNATIONAL ENERGY SERVICES INC. VS. STATE OF TRIPURA [LAWS(TRIP)-2016-2-27] [REFERRED TO]
Indus Towers Ltd No. 12 Tower-D, 7th Floor, Subramanya Arcade, Bannerghatta Road Bangalore-560029 (Represented by Sri K M Ashwin Kumar DGM-Finance) and other etc. VS. The Deputy Commissioner of Commercial Taxes Enforcement I. South Zone, Koraman [LAWS(KAR)-2011-9-239] [REFERRED TO]
L & T FINANCE LTD. A COMPANY INCORPORATED VS. COMMISSIONER OF COMMERCIAL TAX [LAWS(ALL)-2014-8-25] [REFERRED TO]
LAKSHMI AUDIO VISUAL INC VS. ASSISTANT COMMISSIONER OF COMMERCIAL TAXES [LAWS(KAR)-2001-7-51] [REFERRED TO]
BPRL FINE CHEMICALS PVT LTD VS. STATE OF KARNATAKA [LAWS(KAR)-2003-12-59] [REFERRED TO]
SANDAN VIKAS (INDIA) LIMITED VS. STATE OF HARYANA [LAWS(P&H)-2012-1-149] [REFERRED TO]
MC. DOWELL & CO. LTD. VS. STATE OF ANDHRA PRADESH [LAWS(ST)-2013-8-7] [REFERRED TO]
ASIAN OILFIELD SERVICES, A COMPANY, INCORPORATED UNDER THE COMPANIES ACT, 1956 VS. THE STATE OF TRIPURA AND ORS. [LAWS(TRIP)-2015-5-4] [REFERRED TO]
DR. JAISHRI LAXMANRAO PATIL VS. THE CHIEF MINISTER & ORS [LAWS(SC)-2021-5-9] [REFERRED TO]
GREAT EASTERN SHIPPING CO. LTD. VS. STATE OF KARNATAKA [LAWS(SC)-2019-12-8] [REFERRED TO]
MC DONALDS INDIA PVT. LTD. VS. COMMISSIONER OF TRADE AND TAXES, NEW DELHI [LAWS(DLH)-2017-5-208] [REFERRED TO]
BINANI INDUSTRIES LIMITED VS. ASSISTANT COMMISSIONER OF COMMERCIAL TAXES [LAWS(KAR)-2001-8-13] [REFERRED TO]
L V SANKESHWAR PROPRIETRIX VIJAYANAND TRAVELS VS. SUPERINTENDENT OF CENTRAL EXCISE RANGE A [LAWS(KAR)-2006-9-26] [REFERRED TO]
STATE OF KARNATAKA VS. L & T FINANCE LIMITED [LAWS(KAR)-2010-7-89] [REFERRED TO]
COMMISSIONER OF TRADE TAX VS. ROTOMACK FINANCE PVT LTD [LAWS(ALL)-2014-11-148] [REFERRED TO]
KODAL INDUSTRIES LIMITED VS. STATE OF TAMIL NADU [LAWS(STT)-2000-9-2] [REFERRED TO]
QUIPPO OIL AND GAS INFRASTRUCTURE LIMITED AND ORS. VS. STATE OF TRIPURA AND ORS. [LAWS(TRIP)-2014-11-75] [REFERRED TO]
TATA POWER DELHI DISTRIBUTION LTD. VS. COMMISSIONER OF SALES TAX, DELHI AND ORS. [LAWS(DLH)-2016-3-48] [REFERRED TO]
GREAT EASTERN SHIPPING COMPANY LIMITED VS. STATE OF KARNATAKA [LAWS(KAR)-2004-1-30] [REFERRED TO]
ANTRIX CORPORATION LTD VS. ASSISTANT COMMISSIONER OF COMMERCIAL TAXES [LAWS(KAR)-2010-2-3] [REFERRED TO]
ABG HEAVY INDUSTRIES LTD. VS. SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH AND ANR. [LAWS(STT)-2001-4-1] [REFERRED TO]
SANDAN VIKAS (INDIA) LIMITED VS. THE STATE OF HARYANA AND ORS. [LAWS(P&H)-2011-4-157] [REFERRED TO]
MANJIT KAUR VS. M.D.U. ROHTAK AND ANR. [LAWS(P&H)-2004-1-95] [REFERRED TO]
20TH CENTURY FINANCE CORPORATION LIMITED VS. STATE OF MAHARASHTRA [LAWS(BOM)-1989-9-80] [REFERRED TO]


JUDGEMENT

V. N. KHARE, J. - (1.) 1. (For himself and on behalf of S. P. Bharucha and D. P. Mohapatra, JJ.) (Majority view). Despite the decisions of this Court in Builders' Association of India v. Union of India, (1989) 2 SCC 645 : (AIR 1989 SC 1371) and M/s. Gannon Dunkerley and Co. v. State of Rajasthan, (1993) 1 SCC 364 : (1993 AIR SCW 2621), the controversy as regards the power of the State legislature to levy sales tax under clause (29A)(d) of Article 366 of the Constitution in the context of the question where is the taxable event on the transfer of right to use any goods remained unresolved. In this group of cases, we are concerned with the power of States legislature to levy sales tax on the transfer of right to use any goods envisaged under clause (29A)(d) of Article 366 of the Constitution on the premise that goods put to use are located within their States. Several States by their legislations have levied tax on the transactions of transfer of right to use goods on the location of goods at the time of their use within their States irrespective of the place where the agreement for such transfer of the right to use such goods is made. The questions therefore, that arise for consideration in these cases are, whether a State can levy sales tax on transfer of right to use goods merely on the basis that the goods put to use are located within its State irrespective of the facts that - (a) the contract of transfer of right to use has been executed outside the State; (b) sale has taken place in the course of an inter-State trade; and (c) sales are in the course of export or import into the territory of India. The appellants' case is that, the State legislature cannot so frame its law as to convert an outside sale or a sale in the course of import or a sale in the course of an inter-State trade or commerce into a sale inside the State.
(2.) THE appellants in civil appeals and the petitioners in the writ petitions filed under Article 32 of the Constitution and transferred petition, and respondent in Civil Appeal Nos. 6218-23/95 are the companies incorporated under the Companies Act and some have their registered offices at places outside the respondent States and others have inside the States. THEy carry on business of leasing diverse equipments. According to them, they entered into Master Lease Agreements with the lessee i.e. the party who desired to take equipment for use on hire. THE appellants and the petitioners agree to give on lease diverse machinery/equipments listed in the Lease Summary Schedule, subject to terms and conditions stipulated in the Master Lease Agreements. THE Lease Summary Schedule only mentions the broad category of equipment proposed to be leased and the correct value thereof. THE Master Lease Agreement provides that orders for individual equipment will be placed by the appellants at the instance of lessees and that the equipment to be leased will be dispatched by the manufacturer or supplier concerned to the locations specified in the lease. THEreafter, at the instance of the lessees, the appellants place their purchase orders to the suppliers or manufacturers for supply of individual items or equipments falling within the category and correct value mentioned in the Master Lease Agreement Schedules. THE appellants' and the petitioners' further case is that, they disburse the value of equipment to the suppliers and at the instance of the appellants and the petitioners the suppliers deliver the equipments to the lessees at the specified locations for use. After the equipments are delivered and put to use, the lessee executes supplementary lease schedules acknowledging due receipt of the lease equipments, and such supplementary lease deeds form an integral) part of the Master Lease Agreement. Such is the nature of business carried on by the appellants and the petitioners in this group of cases. According to the appellants and the petitioners, one transaction of transfer of right to use goods is subjected to sales tax by more than one States. On such a transaction, some States levy tax on the appellants and the petitioners, merely because the goods were found to be located in their States at the time of execution of contract which has taken place outside the State. Some States levy tax when the goods are delivered in their States for use in pursuance of agreements of transfer executed outside their States and some States tax such transactions of deemed sales on the premise that agreements for transfer of right to use have been executed within their States. THE appellants and the petitioners, therefore, have challenged the validity of the legislations by various States whereby one transaction of transfer of right to use goods has been subjected to tax by more than one States. The petitioners by means of writ petitions under Article 32 and transferred petition have challenged the validity of the provisions relating to imposition of tax on transfer of right to use goods contained in the sales tax laws of States of Maharashtra, Karnataka, Tamil Nadu, Haryana, Uttar Pradesh, Rajasthan and Andhra Pradesh. Civil Appeal Nos. 6218-23/95 are directed against the judgment of the Andhra Pradesh High Court allowing the writ petitions filed by the respondents therein. We will separately deal with the sales tax laws of other States. At present, we propose to consider the controversies involved in these cases with reference to the provisions contained in the Maharashtra Sales Tax on the Transfer of the Right to Use Any Goods for any Purpose Act, 1985 (hereinafter referred to as the 'Maharashtra Act'). The Maharashtra Act purports to levy and collect tax on the transfer of the right to use any goods for any purpose in the State of Maharashtra. Section 2(10) of Maharashtra Act defines 'sale' thus: "sale" means the "transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or any other valuable consideration, and the word "sell" with all its grammatical variations and cognate expressions, shall be construed accordingly". The above sub-section has an Explanation, which runs as under :- "Explanation.- For the purposes of this clause, the transfer of the right to use any such goods shall be deemed to have taken place in the State of Maharashtra if the goods are in the State of Maharashtra at the time of their use irrespective of the place where the agreement for such transfer of the right to use such goods is made, and whether the assent of the party is prior or subsequent to such transfer of the right to use any such goods". Section 3 of the Maharashtra Act provides for incidence of tax and Section 4 deals with levy of tax. There is no dispute as regards the definition of 'sale'. What is under challenge is the Explanation to sub-section (10) of Section 2 of the Act, which fixes situs of deemed sale within the State of Maharashtra on location of goods at the time of their use. The appellants in Civil Appeals excepting Civil Appeal Nos. 6218-23/95, had challenged the levy of sales tax by State of Maharashtra by means of writ petitions under Article 226 of the Constitution before the Bombay High Court. Before the High Court, it was contended by the appellants that the Maharashtra Act, particularly Section 3 read with Section 2(10), purports to levy tax not only the transfers of right to use goods which takes place within the State of Maharashtra, but also upon the transfer which occasions the movement of leased or to be leased goods from one State to another, and also upon the transfers effected during movement of goods from one State to another and, therefore, the Act is ultra vires Articles 269(3) and 246 read with Entry 92A of List I of the Seventh Schedule of the Constitution. It was also contended that the Act imposes sales tax upon transfers of the right to use goods which takes place outside the State of Maharashtra and also in the course of import of the goods into the territory of India and as such the Act is ultra vires Articles 286(1)(a) and (b) of the Constitution. The High Court was of the view that the transaction of transfer of right to use goods is a species of bailment, as there is no transfer of ownership in such transaction and since such transactions are in the nature of contract of bailment, the transfer is completed only upon the delivery of the goods and, therefore, situs of sale created by the Explanation to Section 2(10) of the Act is valid. Consequently, the writ petitions were dismissed. It is in this way the appellants are in appeal before this Court. Excepting two States the provisions of the Sales Tax Acts of all the other States are on line with that of the Maharashtra Act. Since the grounds of challenge to all the Acts are substantially the same, we, therefore, propose to decide these cases by a common judgment. S/Shri K. R. Parasaran, R. F. Nariman and Harish N. Salve, learned senior counsel, appearing for the appellants and the petitioners urged, that there are two independent limitations upon the taxing power of the State based on situs of the sale one is engrafted in Article 286 and the other where the sale occurs within the State, it cannot by virtue of Entry 54 of List II read with Entry 92-A of List I levy a tax on a sale which is in the course of inter-State trade or commerce and, therefore, Section 3 and Explanation to Section 2(10) of the Maharashtra Act which seeks to levy tax on mere location of goods at the time of their use within the State, are ultra vires Articles 286 and 269 of the Constitution. Their further argument is that, taxable event of such transaction of sale would be upon the transfer in law of the right to use goods in question and, therefore, the situs of transaction of sale would, on first principle, be the situs of the contract which has the effect in law of transferring the right to use goods and, therefore, no such tax can be levied merely on location of goods in that State. Shri S. K. Dholakia, learned senior counsel, appearing for the State of Maharashtra contended that, in the absence of any enactment by the Parliament, the nature of contract i.e. the transfer of right to use goods is to be determined with reference to law dealing with contract, namely, the Indian Contract Act, and in that connection referred to Sections 148 and 149 of the Indian Contract Act. According to him, the transfer of the right to use goods being in the nature of a contract of bailment, there must be delivery or possession of goods before it can be said that the right to use is transferred. According to him, until the goods are delivered to the lessee it is only an agreement to give it on bailment and, in fact, the delivery of goods is sine qua non of the transfer of right to use goods. Thus, the State legislature was fully competent to enact the Explanation to Section 2(10) of the Act. In brief, the argument is that the taxable event would be the location of goods - delivery of which is to be effected for use. Shri C. S. Vaidyanathan, learned Additional Solicitor General, appearing for Union of India, Shri A. K. Ganguly, learned senior counsel appearing for the State of Tamil Nadu, Shri K. Ram Kumar, appearing for the State of Andhra Pradesh, Shri Adarsh Goel, appearing for the State of Uttar Pradesh and the State of Haryana, Shri S. K. Jain, appearing for the State of Rajasthan and Shri M. Veerappa for the State of Karnataka argued, that the taxable event of such transaction of deemed sale would be on the location of goods the delivery of which is to be effected for use within the State. They further contended that, in view of the decision in the second Gannon Dunkerley's case (1993 AIR SCW 2621) (supra), the provisions of Section 4 of the Central Sales Tax Act are applicable to deemed sales envisaged under clause (29-A)(d) of Article 366 of the Constitution and, therefore, on the application of Section 4 of the Central Sales Tax Act, States legislatures were fully competent to levy sales tax if the goods at the time of their use are located within their States.
(3.) ON the argument of learned counsel for the parties, the questions that arise for consideration are (a) what are the limitations on the power of State to levy tax on the transactions of transfer of right to use any goods and (b) where is the situs of taxable event on the transfer of right to use goods under Article 366(29A)(d) of the Constitution. Before we deal with the aforesaid questions, it would be helpful to look into the legislative history of levy of sales tax in this country and the decisional law in order to resolve the controversy before us. The power of the State legislature to levy sales tax first time found place by virtue of Entry 48 of List II of the Seventh Schedule of the Government of India Act, 1935. The Entry was to the following effect :- "taxes on sale of goods and on advertisement". In exercise of the aforesaid power, the then Provincial legislatures levied sales tax on the sale and purchase of a number of commodities. Government of India Act did not make any provision about situs of sale for purposes of levy of sales tax by the then Provincial legislatures with the results, the then Provincial legislatures on the basis of one or more than one elements constituting "sale" made it as the basis for levy of tax by legislations. Some of the States levied sales tax merely because the goods were located within their provinces at the time of contract. In the province of Bihar, if the goods were produced and manufactured inside the province, it was made a basis for levy of tax, as a result of which one transaction of sale was subjected to levy of sales tax by more than one Provinces resulting in burden on the consumers. These difficulties were well taken care of while framing the Constitution and, as a result of which we find Article 286, as it existed in the Constitution, when it was enforced. Relevant Article 286 is reproduced below :- "Article 286. Restrictions as to imposition of tax on the sale or purchase of goods - (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place - (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. Explanation.- For the purposes of clause (a), a sale or purchase shall be deemed to have taken place in the State in which the goods have actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, notwithstanding the fact that under the general law relating to sale of goods the property in the goods has by reason of such sale or purchase passed in another State. (2) Except insofar as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce : Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the day of 31/03/1951. (3) No law made by the legislature of a State imposing, or authorizing the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent. ;


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