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TMI Blog1997 (2) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... lation Act. Section 6(1)(f) of the Regulation Act enables the banks to sell and realise in satisfaction of the claim. No provision is available under section 6 for doing the business of buying and selling of the gold jewellery. As a matter of fact section 8 of the Regulation Act prohibits a banking company either directly or indirectly deal in the buying or selling of goods, except in connection with the realisation of security given to them. 4.. Section 2(viii) of the Sales Tax Act defines a dealer , which is as follows: "'Dealer' means any person who carries on the business of buying, selling, supplying or distributing goods, executing works contract, transferring the right to use any goods or supplying by way of or as part of any service, any goods directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration and includes: (a)................ (b) a casual 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, transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght. They are not acting as an agent of the owner of the gold jewellery. As per section 176 of the Indian Contract Act the right of sale is a transfer of special property rights and not a transfer of general property. Therefore, it will not come under sale as defined under the Sales Tax Act. In support of these contentions the petitioners relied on the following decisions: In an unreported judgment of the Karnataka High Court in W.P. No. 18751 of 1988 and W.A. No. 2511 of 1992 dated February 7, 1996 a division Bench has taken the view that realisation of loan by disposing of the securities is not an activity incidental or ancillary to the business. According to the division Bench to hold otherwise would nullify the prohibition of trading prescribed by section 8 of the Regulation Act. The division Bench distinguished the decision in Member, Board of Revenue, West Bengal v. Controller of Stores, Eastern Railway [1989] 74 STC 5 (SC); AIR 1989 SC 1468. According to the division Bench, disposal of goods by sale by the Railways was adjunctive to the principal activity of the carriage of goods by the Railways and consequently the activity may be regarded as necessarily incidental or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther unserviceable materials since as per Andhra Pradesh Housing Board Act it was not engaged in trade or commerce as generally understood. 8.. Learned Government Pleader appearing on behalf of the State submitted that section 8 of the Regulation Act enables them to sell the gold jewellery for realisation of security given. The banks are carrying on the business of selling and the business as per the definition includes commerce. He also submitted that in any event they will be casual trader even if occasionally they involved the buying and selling. He submitted that the points raised are fully covered by the decisions against the petitioners. In this context he relied on the following decisions: 9.. In District Controller of Stores, Northern Railway v. Assistant Commercial Taxation Officer [1976] 37 STC 423 the Supreme Court held that the sales of unserviceable materials and scrap by the Northern Railway, were exigible to sales tax since the activity of the Railways in the selling of unserviceable materials would be business . In Member, Board of Revenue, West Bengal v. Controller of Stores, Eastern Railway, Calcutta [1989] 74 STC 5; AIR 1989 SC 1468, the Supreme Court held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing loans on jewellery and gold. They also regularly conduct and cause the auction conducted for realisation of loan. Nobody prohibited them from doing it. Obviously because they are entitled to under the exception covered at section 8. 11.. Identical question raised in Syndicate Bank v. Commercial Tax Officer [1995] 99 STC 52, was negatived by the Karnataka High Court following United India Insurance Co. Ltd. v. Commissioner of Commercial Taxes [1990] 78 STC 99 (Kar); ILR 1989 Kar. 3473 and Karnataka Pawn Brokers Association (Regd.) v. State of Karnataka [1994] 94 STC 243 (Kar); ILR 1993 Kar. 240. I am in full agreement with the view of the learned Judge. Therefore the contention that they are prohibited from doing the business cannot be accepted. With the result the petitioners would come within the definition of dealer under the Sales Tax Act as a person carrying on business of buying, selling, etc. The business of advancing money and selling the jewellery for realising may not be the principal or regular course of the business. There is no exclusion in the definition for such a dealer and in any event they will come under the definition of a casual trader . Even if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the banker s liability held as follows: In so far as it held that the banks in selling the goods pawned to them did not act as the agents of the assessee, it was right. As pledgees, the banks, acting under section 176 of the Contract Act, had a right to sell the goods. Their sale was but an exercise of the statutory power and not as agents. But the sales were nevertheless on behalf of the pledger, for, the pawn or pledge by itself did not make the pawnee or pledgee the owner of the goods. The very concept of a pledge carries with it the elements of custody and a power to sell the goods in default of payment. This is evident in this case by the fact that after crediting towards the debts due from the pawner, the balance of the sale proceeds were paid over to him. Since reported as Canara Bank v. Commercial Tax Officer in [1997] 107 STC 488 (Kar). 15.. A Division Bench of the Madras High Court in Madras Pawn Brokers Association v. State of Tamil Nadu [1995] 98 STC 457, while dealing with the tax liability of a pawnbroker under the Tamil Nadu General Sales Tax Act, 1959, and while considering in detail on the subject held that the pawnbroker satisfies the definition of de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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