LexM/S. DAMODAR VALLEY CORPORATION versus THE STATE OF BIHAR
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522 SUPREME COURT REPORTS [1961] to uphold his conviction under s. 65(£) of the Act. Keki Bejonji at1d .Another It was finally urged that the sentence should be reduced. In our opinion, the sentence imposed cannot be said to be unduly severe having regard to the pro- visions of the Act. v. The Stale of Bombay Accordingly, the appeal of appellant No. 2 is allow- ed and his conviction and sentence are set aside but the appeal of appellant No. I is dismissed. Imam ]. z960 November 2 r. Appeal disposed of acrordingly. M/S. DAMODAR VALLEY CORPORATION v. THE STATE OF BIHAR (B. P. SINHA, c. J., s. J. IMAM, A. K. SARKAR, K. SuBBA RAO and J.C. SHAH, JJ.) Sales Ta%-Liabi!ity-Agreement to supply equipment and macl1inery to contractor-If a sale or hire-Test-Bihar Sales Tax Act, I947 (I9 of z947) s. z(g), z3(5), z5. The appellant Corporation was assessed to sales tax under s. 13(5) of the Bihar Sales Tax Act, 1947, on the price of machi- • nery and equipment, amounting approximately to Rs. 42,63,305, supplied to two contractor firms on the basis of an agreement which it entered into with them for the construction of a dam. The agreement provided, inter alia, that the price of the machinery and equipment supplied was to be paid by the con- tractors and until that was done they were to remain the pro- perty of the Corporation. It was further agreed that the Cor- poration would take them over after the completion of the work at their residual value, to be calculated in the manner set out in the agreement, provided· that they were properly looked after during the period of operation; and if the contractors so chose earlier, if they were declared surplus and certified as such by the consulting Engineer. The price was to be paid in 18 equal instalments, two-thirds of which was realisable in any case, and thereafter the Corporation was to consider the date or dates of taking them over after assessment of the depreciation in order to arrive at the residual value. The Corporation was not bound to take over if the residual life of the equipment fell below one-third of the standard life as fixed by the parties. 2 S.C.R. SUPREME COURT REPORTS 523 The contractors were to. replenish the stock of spare parts sup- plied to them at their own cost. The appellant's case was t_hat the transaction represented by the agreement was not a sale within the meaning of the Act. The Sales Tax authorities held against it and the only question that was ultimately referred to the High Court by the Board of Revenue.under s. 25 of the Act was whether the property in the equipment and machinery passed to the contractors and the transaction amounted to a sale. The High Court answered the question in the affirmative, holding that the transaction was a sale within the meaning of s. 2(g) of the Act. The High Court having refused the neces- sary certificate, the appellant appealed by special leave granted by this court. Held, that the appeal must be confined to the question debated in the High Court. It is well settled that, while function- ing .in its advisory capacity under a taxing statute, the High Court cannot go beyond the question referred to it or on a reference called by it. That the appeal was by special leave could make no difference and the scope of the controversy could not be extended beyond what could be legally raised before the High Court. The two fold test to determine whether a particular agree- ment is a contract of mere hiring or of purchase on deferred payments is (1) whether the hirer is under an obligation to pur- chase the goods and (2) whether he has the right to return the goods at any time during the subsisterce of the contract. What has to be considered in each case is the substance of the agreement and not the words describing its category. Helby v. Matthews and others, (1895) A.C. 471, referred to. So judged, there could be no doubt that on the terms of the agreement between the parties the transaction in the instant case was clearly a sale on deferred payments with an option to repurchase and not a mere contract of hiring. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 285 of 1959. Appeal by Special Leave from the Judgment and Decree dated the 13th July, 1956, of the Patna. High Court in M. J.C. No. 404 of 1954. M. C. Setalvad, Attorney-General for India and S. P. Varma, for the Appellants. A. V. V iswanatha Sastri, Buresh Aggarwala and D. P. Singh, for the
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