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TMI Blog2001 (6) TMI 805X X X X Extracts X X X X X X X X Extracts X X X X ..... If the borrower fails to repay the loan within the stipulated period the petitionerbank reimburses itself by selling the pledged articles such as gold jewellery. This mode of lending is approved by the Reserve Bank of India. The petitioner-bank realised certain amounts by selling the gold ornaments pledged to it against the loans. The Commercial Tax Officer, Warangal through his letter Rc. No. A3/93/89, dated April 3, 1989 demanded payment of sales tax on the amount realised by the petitioner-bank at its Warangal branch from the sale of jewellery. The Commercial Tax Officer, Guntur through his letter Rc. No. 334/89A5, dated October 18, 1989 has also demanded from the petitionerbank at its branch at Guntur details regarding the sale of pledged jewellery. These two communications have been challenged in this writ petition and it is submitted that the respondent-State has no power under the Sales Tax Act to demand sales tax on the abovementioned sales. It is further submitted that the Government had issued a G.O. Ms. No. 1091 on June 10, 1957 by which banks were exempted from application of the provisions of the A.P. General Sales Tax Act, 1957. But, some time earlier the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes......". All sub-sections to section 2(e) are not necessary but Explanation IV is necessary and is reproduced below: "Explanation IV-For the purpose of this clause, each of the following persons and bodies who sells or dispose of any goods including unclaimed or confiscated or unserviceable goods or scrap, surplus, old, obsolete, or discarded material or waste products whether by auction or otherwise, directly or through an agent for cash, or for deferred payment or for any other valuable consideration shall be deemed to be a dealer to the extent of such disposals or sales, namely: Only (i) is important for the purpose of this case which is reproduced: (i) Insurance and financial corporations or companies and banks included in the Second Schedule to the Reserve Bank of India Act, 1934. So, from the definition itself it follows that "dealer" would mean a person who carries on business of buying, selling, supplying or distributing goods. Therefore, this Court will have to consider whether pledging of ornaments with the bank against a loan and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g or investment, of deposits, of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise." 4.. Section 6 is important in a way that sub-section (2) of section 6 imposes a restriction on banking not to engage in any form of business other than those referred in sub-section (1) of section 6. Section 6(1) elaborately lays down the parameters within which the banking business would have to be done. Sub-section (1)(f) of section 6 is as follows: "6. Forms of business in which banking companies may engage.-(1) In addition to the business of banking a banking company may engage in any one or more of the following forms of business, namely: (a) to (e)................. (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) to (o)..................". 5.. It will be again important to note that "trade " has been prohibited under section 8. Section 8 lays down: "8. Prohibition of trading.-Notwithstanding anything contained in section 6 or in any contract, no banking company shall directly or indirectly deal in the buying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. State of Madras [1960] 11 STC 224 held that the Port Trust was not constituted for the purpose of "carrying on any business" of buying and selling with a view of make profit and that while supplying water to the ships that came to the port it was only discharging a statutory duty imposed upon it by the statute and was not a dealer within the meaning of section 2(b) of the Madras General Sales Tax Act, 1939. The Act of 1939 was replaced by the Tamil Nadu General Sales Tax Act, 1959. The definitions with regard to "business" and "dealer" come under section 2(d) and 2(g) of the Tamil Nadu General Sales Tax Act, 1959 which were amended from time to time. Section 2(d) which defined "business" initially did not state that the motive to gain or profit was not relevant, but this sub-section was substituted thereafter with a new clause by Madras Act No. 15 of 1964. Motive to gain or profit was made irrelevant. After the amendment of 1964 the matter regarding Madras Port Trust again went before the Madras High Court in State of Madras v. Trustees of the Port of Madras [1974] 34 STC 135. This time the dispute was with respect to sale of unclaimed and unserviceable goods by Madras Port T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness'." Thereafter, considering the activities of the Port Trust in terms of the Act and the judgments on the subject the Supreme Court found in paragraph 39: "39. We have referred to the Port Trust's activities and services in some detail only with a view to show that the Port Trust was not constituted by Parliament to 'carry on business' as stated in Aminchand Pyarelal's case [1976] 1 SCR 721. We have given the long list of its activities and services only to show how infinitesimal are the sales of unserviceable or unclaimed goods as compared to the very large range of the activities and services it is supposed to render." In paragraph 42 again the Supreme Court found: "42. From the above provisions, in our opinion, it is clear that the Port Trust is not involved in any activity of 'carrying on business' as has been clearly held in Aminchand Pyarelal's case [1976] 1 SCR 721, and that unclaimed and unserviceable goods are sold in discharge of various statutory charges, items, etc., and the sales of these items are also an infinitesimal part of the Port Trust's main activities or services. No doubt, the sales of goods are in connection with, or incidental or ancillary to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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