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Issues: (i) Whether the disposal of repossessed cars by the bank constituted a sale under the Delhi Sales Tax Act, 1975. (ii) Whether the bank was a dealer within the meaning of Section 2(e) read with Section 2(c) of the Delhi Sales Tax Act, 1975. (iii) Whether the activity of banking carried on by the bank amounted to business under Section 2(c)(i) of the Delhi Sales Tax Act, 1975. (iv) Whether the sale of repossessed cars by the bank was incidental or ancillary or in connection with its business.
Issue (i): Whether the disposal of repossessed cars by the bank constituted a sale under the Delhi Sales Tax Act, 1975.
Analysis: The bank repossessed vehicles hypothecated to it on default and sold them under the authorisation contained in the loan agreement and power of attorney. The transfer was therefore effected by the bank in substance and not as a mere stranger to the transaction. The nature of the transaction was treated as a sale within the statutory meaning.
Conclusion: The disposal of repossessed cars by the bank constituted a sale under the Delhi Sales Tax Act, 1975.
Issue (ii): Whether the bank was a dealer within the meaning of Section 2(e) read with Section 2(c) of the Delhi Sales Tax Act, 1975.
Analysis: The definition of dealer under the Act is broad and covers a person carrying on business of selling goods, including persons who sell goods belonging to another. Since the bank sold hypothecated vehicles under authority granted by the borrower, it fell within the inclusive scope of the definition. The statutory scheme did not exclude such activity from the concept of dealing in goods.
Conclusion: The bank was a dealer within the meaning of Section 2(e) read with Section 2(c) of the Delhi Sales Tax Act, 1975.
Issue (iii): Whether the activity of banking carried on by the bank amounted to business under Section 2(c)(i) of the Delhi Sales Tax Act, 1975.
Analysis: The statutory definition of business includes not only trade or commerce but also transactions in connection with, or incidental or ancillary to, such activity. The sale of assets taken as security and realised for repayment of dues was treated as part of the permissible business activity of banking. The bank's recovery and realisation of secured assets was therefore within the statutory concept of business.
Conclusion: The activity of banking carried on by the bank amounted to business under Section 2(c)(i) of the Delhi Sales Tax Act, 1975.
Issue (iv): Whether the sale of repossessed cars by the bank was incidental or ancillary or in connection with its business.
Analysis: The sale of hypothecated vehicles was undertaken to recover outstanding loan dues and to adjust the sale proceeds against the borrower's liability. That activity was directly connected with the bank's lending and recovery function and not a separate or foreign commercial venture. It was therefore incidental or ancillary to the bank's business.
Conclusion: The sale of repossessed cars by the bank was incidental or ancillary or in connection with its business.
Final Conclusion: The reference was answered against the bank on all substantive questions decided, and the Tribunal's view that the repossessed-vehicle sales were taxable business transactions was upheld.
Ratio Decidendi: A bank that repossesses hypothecated vehicles under borrower authorisation and sells them to recover dues carries on business for sales tax purposes, and such sales constitute transactions incidental or ancillary to its banking business.
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