Bank sale of pledged assets can fall within banking business and attract VAT under dealer-based charging provisions.

Sale of pledged assets by a bank in exercise of statutory enforcement powers under SARFAESI can form part of banking business for VAT purposes. The Orissa Value Added Tax Act definition of "dealer" and "business" was read to include transactions incidental or ancillary to banking activity, and the charging provisions were applied to taxable turnover from sales. On that basis, auction sale of pledged goods for recovery of loan dues was treated as a taxable transaction within the Act's charging scheme, even though the bank was not expressly named in the definition.

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Issues: Whether a bank selling pledged assets in auction for recovery of loan dues is a "dealer" under the Orissa Value Added Tax Act, 2004 and liable to value added tax on such sale.

Analysis: The definition of "dealer" under section 2(12) of the Act covers a person carrying on the business of buying and selling goods, while "business" under section 2(7) includes transactions incidental or ancillary to trade, commerce or manufacture. The banking activity of enforcing security interest and selling pledged goods under section 13 of the SARFAESI Act, 2002 read with rule 6 of the Security Interest (Enforcement) Rules, 2002 was examined in the light of the Supreme Court's view that sale of pledged assets is part of banking business. The levy provisions under sections 9, 11(1) and 14 show that tax is imposed on a dealer's taxable turnover of sales at the prescribed rate. On that basis, auction sale of pledged goods to recover loan dues was held to be a transaction in the course of banking business and not outside the charging scheme merely because the bank was not expressly named in the definition.

Conclusion: The bank is covered by the definition of "dealer" and is liable to value added tax on the auction sale of pledged assets conducted for recovery of loan dues.

Ratio Decidendi: Sale of pledged assets by a bank in exercise of its statutory power for recovery of loan dues constitutes part of banking business and, where the charging provisions apply to a dealer's taxable turnover, the bank falls within the statutory definition of dealer liable to VAT.

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