20TH CENTURY FINANCE CORPORATION LTD. AND ANR. versus STATE OF MAHARASHTRA

Citation: [2000] SUPP. 1 S.C.R. 120 · Decided: 09-05-2000 · Supreme Court of India · Bench: S.P. BHARUCHA

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Judgment (excerpt)

A 
20TH CENTURY FINANCE CORPORATION LTD. AND ANR. 
v. 
ST A TE OF MAHARASHTRA 
MAY 9, 2000 
B 
[S.P. BHARUCHA, B.N. KIRPAL, V.N. KHARE, SYED SHAH 
c 
MOHAMMED QUADRI AND D.P. MOHAPATRA, JJ.] 
Sales Tax 
Maharashtra Sales Tax on the Transfer of the Right to Use Any Goods 
for Any purpose Act, 1985 (18 of 1985)-S.2(10) Explain, Ss.3 and 8-A: 
Constitutionality of Expln to S.2(10)-Read down to the effect that it 
would not be applicable if the deeme,f sale is: (i) an outside; (ii) a sale in 
D course of import or export; (iii) an inter-State sale. 
Transfer of right to use any goods/or any purpose-Taxable event and 
situs of-In absence of a legal fiction created by the appropriate legislature 
contemplating otherwise, situs of such sale, held, would be the place where 
the property in goods passes and not the place of location of the goods where 
E they are put to use-Where the goods are in existence and right to use them 
is transferred under a written contract, the taxable event would be the 
execution of the contract and situs of the sale would be the place where the 
contract is executed-Where the goods are not in existence or there is an 
oral or implied transfer of the right to use them, the taxable event would be 
. F 
the delivery of goods. 
Contract Act, 1878-Ss. 148,14'9-Bailment-Transfer of right to use 
goods-Nature of-Held, not in the nature of bailment-It is a deemed sale 
under the legal fiction engrafted in Art. 366(29-(A)(d). 
U.P. Trade tax Act, 1948(15 to 1948)-Ss.2(h)(iv) & Expln. /(ii) and 
G S.3F-Consitutionality-Expln. /(ii), held is in excess of legislative power of 
the State Legislature-However, instead of striking it down, it is read down. 
Rajasthan Sales Tax Act, 1954-Ss.2(38}(4) and Expln. IJ(b)-
Constitutiona/ity-Expln. II(b), Held, is in excess of legislative power-
H provision read down. 
120 
•
= 
20TH CENTURY FINANCE CORPN. LTD. v. STATE OF MAHARASHTRA 
121 
A.P. General Sales Tax Act, 1957-Ss. 5-E(a)&(b) and 38 and S.2(n) A 
Explns. ll(a)&(JV)-Constitutiona/ity-S. 5-E(b), held, is in excess of 
legislative power of the State of under Entry 54 of List 11 of Sch. VJ/ of the 
Constitution-provision read down. 
Haryana General Sales Tax Act, 1973-S.2(J)(iv) Note 4-
Constitutionality-upheld. 
B 
Karnataka Sales Tax Act, 1957-S.2(t)(iv) & Expln. 3(d) and S.5-C-
Constitutionality-Expln. 3(d) to S.2(1), held, is beyond the State Legislature's 
power under Entry 54 of List 11 of Sch. Vll to the Constitution-Provision read 
down. 
T.N. General Sales Tax Act, 1959, S.2(n)(iv) & Expln. 3(a) and S.3-
A-Constitutionality-Exp/n. 3(a) to S.2(n), held, is in excess of legislative 
power under Entry 54 of List 11 of Sch. Vl! to the Constitution-Provision 
read down. 
c 
Constitution of India-Arts. 366(29-A)(d), 269 & 286 and Sch. Vl! D 
List II Entry 54 & List /, Entry 92-A-Power of State Legislatures to levy tax 
on the transfer of right to use any goods-Held, is subject to Entry 92-A of 
list I read with Art. 269 and is also subject to restrictions under Art. 286-
Central Sales Tax Act, 1956, Ss. 4, 3, 5, 2(g). 
The appellants and the petitioner companies having offices in and out 
of the respondent State carrying on business of leasing diverse equipments, 
entered into Master Lease Agreements with lessees i.e. the party who desired 
to take equipment for use on hire. The petitioners agreed to give on lease 
various machinery/equipments listed in the Lease Summary Schedule, subject 
E 
to terms and conditions stipulated in the Master Lease Agreements. The Lease F 
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 G 
lease. Thereafter, at the instance of the lessees, the appellants placed purchase 
orders to the suppliers or manufacturers for supply of individual items or 
equipments fal!ing within the category and correct value mentioned in the 
Master Lease Agreement Schedules. 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 H 
122 
SUPREME COURT REPORTS [2000] SUPP. I S.C.R. 
A use. After the equipments are delivered and put

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