2013 (10) TMI 1166 - HC - VAT and Sales Tax

Court affirms ICICI Bank & NBFCs as 'dealers' under VAT Act, reject challenges, clarify liability

Tata Motors Finance Ltd. And Others Versus Asst. Commissioner of Sales Tax And Others

The court affirmed the Tribunal's decision that ICICI Bank and other Non-Banking Financing Companies (NBFCs) qualify as 'dealers' under the West Bengal ... Dealer's liability to pay tax - Hypothecation of goods - Whether in respect of disposal of the vehicle for recovery of the loan the petitioners are liable for tax as dealers as per the definition in Section 2(11) of the Act - Held that:- Even if the sale of pledged ornaments takes place outside the banking business, the 1963 Act would cover even such transactions. Therefore, once such transactions fall under section 2(viii)(g) of the 1963 Act, banks become 'dealers' and they are liable to pay sales tax under the said 1963 Act. It is true that the definition of the word 'sale' under section 2(xxi) of the 1963 Act does not include mortgage, hypothecation, charge or pledge, however, the important point to be noted is that the definition of the word 'sale' under the 1963 Act is not the same as under section 4 of the Sale of Goods Act, 1930. The definition of the word 'sale' in section 2(xxi) in the 1963 Act is very similar to section 2(g) of the Central Sales Tax Act, 1956 which is held to be having a very wide meaning as compared to the definition 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 - Decided against assessee. Issues Involved:1. Whether ICICI Bank and other Non-Banking Financing Companies (NBFCs) qualify as 'dealers' under the West Bengal Value Added Tax Act, 2003.2. Interpretation of the term 'dealer' under Section 2(11) of the Act.3. Applicability of the principle of ejusdem generis to the definition of 'dealer.'4. Whether the sale of hypothecated vehicles by banks and NBFCs constitutes business activity under the Act.5. The role and liability of agents in the context of selling goods on behalf of others.Detailed Analysis:1. Whether ICICI Bank and other Non-Banking Financing Companies (NBFCs) qualify as 'dealers' under the West Bengal Value Added Tax Act, 2003:The Tribunal held that ICICI Bank is a dealer under the VAT Act as the disputed sales are part of its banking business and executed under its statutory rights. Similarly, NBFCs were deemed dealers as they arranged sales of hypothecated vehicles based on hypothecation agreements and irrevocable power of attorney from borrowers.2. Interpretation of the term 'dealer' under Section 2(11) of the Act:The definition of 'dealer' includes any person who carries on the business of selling or purchasing goods in West Bengal. The definition is exhaustive, covering both owners and non-owners of goods. The court rejected the argument that the definition applies only to owners, emphasizing that the section must be construed as a whole.3. Applicability of the principle of ejusdem generis to the definition of 'dealer':The court dismissed the application of the principle of ejusdem generis, which limits general terms to the same kind as the specific terms preceding them. It held that the words 'Government,' 'local authority,' 'statutory body,' and 'trust' do not share common characteristics that would justify applying this principle. The court emphasized the natural meaning of the words used by the legislature.4. Whether the sale of hypothecated vehicles by banks and NBFCs constitutes business activity under the Act:The court found that selling hypothecated vehicles for loan recovery is a business activity. The banks and NBFCs sell these vehicles to realize their dues, which include profits. Even if no commission or remuneration is charged, the activity is not gratuitous and constitutes valuable consideration.5. The role and liability of agents in the context of selling goods on behalf of others:The court concluded that banks and NBFCs act as agents when selling hypothecated vehicles. Despite having greater rights than mere agents, they operate under irrevocable power of attorney, making them agents in the ordinary sense. The court cited the definition of 'mercantile agent' as an agent related to trade or commerce, which applies to the petitioners.Conclusion:The court affirmed the Tribunal's judgment, holding that both ICICI Bank and NBFCs qualify as 'dealers' under the VAT Act. The petitions challenging this classification were dismissed, and the court rejected the request for a stay.