C.N Ramachandran Nair, J.:— The above two tax revision cases filed by the assessee under section 41 of the Kerala General Sales Tax Act, 1963 arise from the assessments for the assessment years 1995-96 and 1996-97. The assessee is a financier engaged in the purchase and delivery of goods under hire-purchase agreement with parties. Goods such as equipments, machinery, vehicles, etc., are purchased locally in Kerala as well as from outside State. The assessing officer held that the assessee is a purchaser and reseller of these items and therefore the assessee's sales are subject to sales tax in Kerala except in respect of second sales which are transactions of purchases and sales in Kerala. The assessee's sales are by way of delivery of possession on execution of hire-purchase agreement with customers. The assessee will retain the title of goods, though delivery is given to the customer, and title passes on to the customer only on payment of the last instalment. In the event of breach of the agreement, the assessee will take over possession of the goods and is free to sell the same. In respect of items purchased in Kerala which have suffered tax in the State, the assessing officer granted exemption when sold by the assessee to customers in Kerala by delivering possession on execution of hire-purchase agreements. However, in respect of items purchased from outside Kerala, but delivered to customers in Kerala, the assessing officer levied tax on the assessee. The assessment on the turnover was confirmed in first appeal, and again by the Tribunal in second appeal. The assessee has come up in revision before us against the orders of the Tribunal confirming the levy. The Tribunal has passed a detailed order after elaborately discussing the terms of the standard hire-purchase agreement and the relevant statutory provisions in the appeal for the assessment year 1996-97 and for the assessment year 1995-96, the Tribunal followed its detailed order in the other appeal, and dismissed the assessee's case. Both the tax revision cases were heard together by us. Learned counsel Sri. V.P Sukumar appeared and argued the case on behalf of the assessee, and the Government Pleader defended the orders of the Tribunal.

2. The nature of transaction which is the subject-matter of dispute in these cases, the relevant clauses in the hire-purchase agreement between the assessee and the customers and the relevant statutory provisions are discussed in detail by the Tribunal in its order for the assessment year 1996-97. The Tribunal has found that the assessee is engaged in the purchase of goods, namely, machinery, equipments, etc., from outside the State and delivery of the same to customers who are located in Kerala for their use in Kerala. It is for the customer to identify the item to be purchased and get quotation from the supplier. Pro forma invoice is obtained by the customer which would be forwarded to the assessee for approval and arranging for finance under the hire-purchase agreement. Once the terms of the financing, such as the extent of the finance, rate of interest, the period of hire purchase, etc., are settled between the assessee and the customer, the hire-purchase agreement is executed between the assessee, the financier, and the customer in Kerala. The assessee will place purchase order with outside State party with direction to deliver the goods to the customer and the payment will also be made by the assessee. Invoice/bill for the goods will be in the name of the assessee and the assessee will retain the title over the goods until the last instalment under the hire-purchase agreement is paid by the customer. In other words, on execution of hire-purchase agreement, possession of the goods is given to the customer and the customer will continue to use the goods on payment of instalments under the hire-purchase agreement and on payment of the last instalment title will be transferred to the customer. In the event of breach of payment of instalments under the hire-purchase agreement, the assessee is free to take over possession of the goods and sell the same to recover the balance amount due under the hire-purchase agreement. Relying on the terms of the hire-purchase agreement, the Tribunal held that the transactions are “sale” as defined under explanation (3) to section 2(xxi) of the Kerala General Sales Tax Act—3 per cent.

3. The main argument of counsel for the assessee is that explanation (3) to section 2(xxi) provides for sale of goods under hire-purchase agreement by delivering possession to the customer. In the instant case, counsel's argument is that the assessee never takes possession of the goods and the supplier directly books the goods from outside Kerala to customer in Kerala. In other words, since the assessee has never taken over possession of the goods, the delivery of possession was given by the supplier outside Kerala directly to the customer in Kerala, and the sales are therefore “outside State sales” as contemplated under section 4 of the Central Sales Tax Act, 1956. Therefore, the contention of counsel for the assessee is that these transactions are not local sales assessable in Kerala. The learned Government Pleader on the other hand contended that hire-purchase agreements are entered into between the assessee and the customers in Kerala and the goods are delivered pursuant to the hire-purchase agreement by the assessee to the customers in Kerala after purchase from suppliers outside Kerala. Therefore, according to the Government Pleader, the transactions are squarely falling under “sales” under explanation (3) to section 2(xxi) of the Kerala General Sales Tax Act, 1963.

4. There is no dispute with regard to the nature of transactions that goods are purchased by the assessee, the financier who retains the title over the same, until the last instalment due under the hire-purchase agreement is paid by the customer. There is also no dispute with regard to the fact that the delivery is given by the out side supplier to the customer in Kerala, obviously through public carriers. The question is whether the transactions of this nature come within the definition of “sale” as contained in explanation (3) to section 2(xxi) of the Kerala General Sales Tax Act, 1963, which was introduced in the Act pursuant to the Constitution 46th (Amendment) Act, which provided for, among other things, levy of tax on transactions of hire-purchase. The definition of “sale” incorporated in explanation (3) to section 2(xxi) is the same as the definition of “sale” contained in article 366(29A)(c) of the Constitution of India. The point of sale contemplated under explanation (3) to section 2(xxi) is delivery of goods under hire-purchase. Therefore, the only question is whether delivery of goods by the assessee to the customers is in Kerala to enable the department to levy sales tax on the hire-charges in Kerala. From the nature of transaction narrated in the Tribunal's order, we find that there is purchase of goods by the assessee from outside Kerala and delivery of the same to customers in Kerala for use in Kerala under the hire-purchase agreement. However, there is only one delivery by the outside supplier to the customers in Kerala, even though there are two transactions, one is the purchase by the assessee, and the other is the delivery to the customers in Kerala, under the hire-purchase agreements. Since the assessee is the purchaser of the goods and the assessee issued purchase orders to the supplier outside Kerala to deliver the goods to the customer the receipt of goods by the customer is on behalf of the assessee. In fact, the outside supplier has no privity of contract with the customer in Kerala and delivery to the customer is made by outside supplier only under instructions from the assessee in Kerala. Therefore, there are two transactions, one is the purchase by the assessee, and the other is the delivery of the same by the assessee to the customers in Kerala under hire-purchase agreement executed between the assessee and the customer. We are unable to find out any inter-State sale between the outside supplier and the customer in Kerala, because there is no transaction between the supplier and the customer in Kerala. Under the purchase order placed by the assessee with the outside supplier, there is an inter-State purchase, and it is for the outside supplier to give delivery of the goods to the assessee in Kerala. Instead of taking delivery by the assessee itself, the assessee has instructed the supplier to deliver the goods to the customer in Kerala. It makes no difference whether the assessee delivers the goods to the customer directly or arranging delivery by the supplier to the customer. In either case there are two transactions; one assessee's purchase from outside State and the other assessee's delivery to the customer under hire-purchase agreement. The delivery under the hire-purchase agreement between the assessee and the customer takes place only when the customer appropriates the goods under the hire-purchase agreement after receipt from the outside supplier. In that view of the matter, we are of the opinion that the Tribunal rightly held that the goods are delivered by the assessee in Kerala under the hire-purchase agreement, and therefore the assessee is a seller liable to pay tax under explanation (3) to section 2(xxi) of the Act.

5. The assessee's counsel has brought to our notice various decisions of the Supreme Court explaining the scope of “inter-State sale” falling under section 3(a) of the Central Sales Tax Act. He has also relied upon the decisions of the Supreme Court in Builders Association of India v. Union of India, [1989] 73 STC 370 and Gannon Dunkerley & Co. v. State of Rajasthan, [1993] 88 STC 204 and contended that sales are outside State sales under section 4 of the Central Sales Tax Act or inter-State sales from outside Kerala. We find that the above decisions have application only in respect of first of the two transactions, that is purchases of goods by the assessee from the outside State suppliers. Therefore so far as the supplier's sales to the assessee are concerned, they are inter-State sales falling within section 3(a) of the Central Sales Tax Act, and there is no dispute about the same by the department also. The question is with regard to second transaction between the assessee and the customer in Kerala, which gives rise to the liability for the disputed tax. We feel, as already observed by us above, there are two transactions, one is the inter-State purchase by the assessee, and the other is the delivery of goods under the hire-purchase agreement by the assessee to the customer in Kerala, which is the deemed sale, under explanation (3) to section 2(xxi) of the Kerala General Sales Tax Act. Therefore the decisions referred to above do not affect the assessee's liability for tax in respect of the hire-purchase transaction, which is independent of the inter-State purchase by the assessee.

6. Therefore, we do not find any infirmity in the orders of the Tribunal. We accordingly dismiss the tax revision cases.

7. Petitions dismissed.