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TMI Blog2007 (3) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... of the word "sale" in section 4 of the Sale of Goods Act, 1930. Further, when charge or pledge is enforced that enforcement is by way of sale of the pledged or hypothecated goods; that sale is for consideration and, therefore, it falls within the ambit of section 2(xxi) of the 1963 Act. In the circumstances, there is no infirmity in the impugned judgments of the division Bench of the Kerala High Court. - Civil Appeal No. 6459 of 2003, 6460 of 2003, - - - Dated:- 21-3-2007 - KAPADIA S.H. AND SUDERSHAN REDDY B. JJ. T.L.V. Iyer, Senior Advocate (G. Prakash and S.N. Bhat, Advocates with him) for the respondents. Ms. June G. Chaudhary and S. Ganesh, Senior Advocates, (Manoj Saxena, Rajnish Kr. Singh, Rahul Shukla, Krishna Venugopal, A. Raghunath, Romy Chacko and Venkat Subramaniam T.R., Advocates with them) for the appellants. -------------------------------------------------- The judgment of the court was delivered by S. H. KAPADIA J. A short question which arises in these two civil appeals is: whether banks are "dealers" under section 2(viii) read with Explanation I of the Kerala General Sales Tax Act, 1963. Since common question of law arises in b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 5 of the 1963 was applicable and in the circumstances the learned single Judge upheld the demand notices leaving the question of legislative competence open to challenge. Aggrieved by the said decision of the learned single Judge, Federal Bank along with other banks carried the matter in appeal. By the impugned judgment dated April 3, 2003 See [2004] 134 STC 377 (Ker). it was held that in view of the Kerala Finance Act, 1998 under which the definition of the word "dealer" is expanded to cover banks, the department was right in seeking to cover the transactions of auction sale of pledged gold articles. It was further held that amended section 2(viii)(g) was intra vires the Constitution of India and that the said section did not infringe articles 14 and 19 of the Constitution. It was further held that even assuming that the transaction of sale of pledged articles is not a part of the main business activity still the said transaction would come within the meaning of "incidental or ancillary to the business of banking" and in the circumstances there was no infirmity in the judgment of the learned single Judge. Accordingly, the division Bench dismissed the writ appeals filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 6(1)(a) of the 1949 Act. It was further contended that under section 8 of the said 1949 Act, banks are prohibited expressly from trading in goods except to the extent of buying or selling of goods in realisation of security given to it by the borrower. Under the Explanation to section 8 of the 1949 "goods" are defined to mean every kind of movable property other than actionable claims, stocks, shares, money, etc. It is submitted that in view of section 8 banks cannot sell goods in the course of business and in view of the said prohibition it cannot be said that banks are in the business of selling pledged ornaments. Therefore, according to the banks (appellants) auction sale of pledged ornaments by banks for realisation of security will not fall in the course of banking business and, therefore, such transactions will not come within the definition of the word "sale" as defined in section 2(xxi) of the 1963 Act. We do not find any merit in the above contention. As stated above, we are not concerned in the present civil appeals with the question of legislative competence of the State Legislature to insert clause (g) in section 2(viii) of the 1963 Act. In the present case, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sual trader; (c) a commission agent, a broker or a del credere agent or an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods [executing works contract, transferring right to use any goods or supplying by way of or as part of any service, any goods] on behalf of any principal; (d) a non-resident dealer or an agent of a non-resident dealer, or a local branch of a firm or company or [association or body of persons whether incorporated or not] situated outside the State; (e) a person who, whether in the course of business or not, sells; (i) goods produced by him by manufacture, agriculture, horticulture or otherwise; or (ii) trees which grow spontaneously and which are agreed to be severed before sale or under the contract of sale; (f) a person who whether in the course of business or not: (1) transfers any goods, including controlled goods whether in pursuance of a contract or not, for cash or deferred payment or other valuable consideration; (2) transfers property in goods (whether as goods or in some other form) involved in the execution of a works contract; (3) deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atical variations and cognate expressions means every transfer whether in pursuance of a contract or not of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration, but does not include a mortgage, hypothecation charge or pledge; (xxv) 'taxable turnover' means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of the goods into territory of India; (xxvi) 'total turnover' means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax including the turnover of purchase or sale in the course of inter-State trade or commerce or in the course of export of the goods out of the territory of India or in the course of import of the goods into the territory of India; Section 5. Levy of tax on sale of goods. (1) Every dealer (other than a casual trader or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agents for any Government or local authority or any other person or persons; the carrying on of agency business of any description including the clearing and forwarding of goods, giving of receipts and discharges and otherwise acting as an attorney on behalf of customers, but excluding the business of a managing agent or secretary and treasurer of a company; (c) contracting for public and private loans and negotiating and issuing the same; (d) the effecting, insuring, guaranteeing, underwriting, participating in managing and carrying out of any issue, public or private, of State, municipal or other loans or shares, stock, debentures, or debenture stock of any company, corporation or association and the lending of money for the purpose of any such issue; (e) carrying on and transacting every kind of guarantee and indemnity business; (f) managing, selling and realising any property which may come into the possession of the company in satisfaction or part satisfaction of any of its claims; (g) acquiring and holding and generally dealing with any property or any right, title or interest in any such property which may form the security or part of the security for any loans or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accounts and balance-sheet. (1) At the expiration of each calendar year (or at the expiration of a period of twelve months ending with such date as the Central Government may, by notification in the Official Gazette, specify in this behalf), every banking company incorporated (in India), in respect of all business transacted by it, and every banking company incorporated (outside India), in respect of all business transacted through its branches (in India), shall prepare with reference to (that year or period as the case may be), a balance-sheet and profit and loss account as on the last working day of (that year or the period, as the case may be), in the Forms set out in the Third Schedule or as near thereto as circumstances admit: Provided that with a view to facilitating the transition from one period, of accounting to another period of accounting under this sub- section, the Central Government may, by order published in the Official Gazette, make such provisions as it considers necessary or expedient for the preparation of, or for other matters relating to, the balance-sheet or profit and loss account in respect of the concerned year or period, as the case may be. (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Fund) (iii) Building Fund (iv) Dividend Equalisation Fund (v) Special Bad Debts Reserve (vi) Bad and Doubtful Debts Reserve (vii) Investment and Depreciation Reserve (viii) Other Funds and Reserves (to be specified) 3. PRINCIPAL/SUBSIDIARY STATE PARTNERSHIP FUND ACCOUNT: For share capital of: (i) Central co-operative banks (ii) Primary agricultural credit societies (iii) other societies 4. DEPOSITS AND OTHER ACCOUNTS: (i) Fixed deposits* (a) Individuals** (b) Central co-operative banks (c) Other societies (ii) Savings Bank Deposits (a) Individuals** (b) Central co-operative banks (c) Other societies (iii) Current deposits (a) individuals** (b) Central co-operative bank (c) Other societies (iv) Money at call and short notice 5. BORROWINGS: (i) From the Reserve Bank of India 32[the National Bank] State/Central co-operative Bank: (a) Short-term loans, cash, credits and overdrafts (A) Government and other approved securities (B) Other tangible securities (c) Long-term loans Of which secured against: Government and other approved securities Other tangible securities From the State Bank of India (a) Short term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m loans Of which secured against: (a) Government and other approved securities (b) Other tangible securities Of the advances, amount due from individuals. Of the advances, amount overdue considered bad and doubtful of recovery (b) Medium term loans of which secured against (A) Government and other approved securities (B) Other tangible Securities (ii) Long-term loans Of which secured against (a) Government and other approved securities (b) Other tangible securities Of which secured against: Of the advances, amount due from individuals Of the advances, amount overdue Considered bad and doubtful of recovery 7. INTEREST RECEIVABLE Of which overdue Considered bad and doubtful of recovery 8. BILLS RECEIVABLE BEING BILLS FOR COLLECTION As per contra 9. BRANCH ADJUSTMENT 10. PREMISES LESS DEPRECIATION 11. FURNITURE AND FIXTURES LESS DEORECIATION 12. OTHER ASSETS (to be specified) 13. NON-BANKING ASSETS ACQUIRED IN SATISFACTION OF CLAIMS (standing mode of valuation) 14. Profit and loss Total Total FORM B FORM OF PROFIT AND LOSS ACCOUNTS Profit and Loss Account for the year ended EXPENDITURE INC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an agent of the borrower even under the 1949 Act. When the bank sells the goods pledged to them they do not act as the agents of the borrower. As pledgees, the banks, acting under section 176 of the Contract Act, 1872 have a right to sell the goods. That sale is not as agents but that sale is in exercise of the statutory power under the 1949 Act. No doubt the sale is on behalf of the pledgor, however, the sale is in exercise of the statutory power [See: Deputy Commissioner of Commercial Taxes v. A. R. S. Thirumeninatha Nadar Firm [1968] 21 STC 184 (Mad)]. To the same effect is the judgment of the Punjab and Haryana High Court in the case of High Channel Video v. Enclave Electronics [1999] 116 STC 131. Further, on reading the provisions of the 1949 Act, one finds that every bank is required to maintain its balance sheet in Form "A" of the Third Schedule, quoted above. The prescribed form indicates that non-banking assets acquired by the banks even in satisfaction of claims, are required to be declared. The prescribed form of balance sheet indicates that banks are required to show on the asset side non-banking assets acquired by them in satisfaction of claims. Similarly, in Form "B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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