Pledgee's sale through auction did not create sales tax liability on the auction proceeds.

Sale of pledged goods through court auction machinery for recovery of a secured debt did not, on the stated facts, create sales tax liability under the Haryana General Sales Tax Act, 1973 or the Central Sales Tax Act, 1956. The governing principle applied was that a pledgee's sale is an exercise of the statutory power of sale under the Contract Act and does not change the juridical character of the transaction into a taxable sale as asserted by the revenue. The demand and recovery of sales tax on the auction proceeds could not be sustained, and the refund claim was allowed.

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Issues: Whether the sale of pledged goods by the court auctioneer gave rise to liability to sales tax under the Haryana General Sales Tax Act, 1973 and the Central Sales Tax Act, 1956.

Analysis: The dispute turned on the character of the transaction. The goods had been pledged and were sold through court auction machinery for recovery of the secured amount. The governing principle applied was that a pledgee's sale is an exercise of the statutory power of sale under the Contract Act and does not alter the juridical character of the transaction so as to fasten sales tax liability in the manner asserted by the revenue authorities. The court, on the facts, accepted the petitioner's contention that the amount recovered from the auction purchaser could not be retained as sales tax.

Conclusion: The petitioner's challenge succeeded, and the demand/recovery of sales tax on the auction sale could not be sustained.

Final Conclusion: The refund application was allowed and the revision petition was disposed of in favour of the petitioner, without costs.

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