AI Drafter 
TaxTMI 
TaxTMI 
2007 (3) TMI 366
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.... demand notice on respondent-Bank for payment of tax on turnover of auction sale of jewellery held on August 19, 1987 under section 5 read with Explanation IV of the Andhra Pradesh General Sales Tax Act, 1957 ("the 1957 Act", for short). In this connection reliance was placed on section 2(1)(e) read with Explanation IV of the 1957 Act. Aggrieved by the demand notice, the respondent-bank filed writ petition before the High Court challenging the legality of the notice. In the writ petition the respondent-bank contended that the provisions of the 1957 Act are not applicable to banking transactions. By judgment dated June 8, 2001 See [2002] 125 STC 346. the division Bench allowed the writ petition quashing the impugned notices holding that banks are not amenable to sales tax on sale of gold pledged with the banks as security for loan. Hence this civil appeal by the State (appellants). At the outset we may point out that in the civil appeal filed by the State (appellants), the entire emphasis is placed on Explanation IV to section 2(1)(e) of the 1957 Act which was inserted by Act No. 27 of 1996 by which the definition of the word "dealer" was expanded to cover banks, L.I.Cs. an....
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....f any principal or principals; Explanation I: Every person who acts as an 'agent of a non- resident dealer'; that is, as an agent on behalf of a dealer residing outside the State, and buys, sells, supplies or distributes goods in the State or acts on behalf of such dealer as,- (i) a mercantile agent as defined in the Indian Sale of Goods Act, 1930 (Central Act III of 1930); or (ii) an agent for handling goods or documents of title relating to goods; or (iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment and every local branch of a firm or company situated outside the State, shall be deemed to be a dealer for the purposes of this Act; Explanation II: Where a grower of agricultural or horticultural produce sells such produce grown by himself or grown on any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise, in a form different from the one in which it was produced after subjecting it to any physical, chemical or any process other than mere cleaning, grading or sorting, he shall be deemed to be a dealer for the purposes of this Act; Explanation III: T....
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....tion led to litigation when demand notices were issued to banks calling upon the said banks to pay tax on sale of pledged jewellery/ornaments for default on the part of the borrower/ pledgor. The banks contended that they were not in the business of pawnbroking. They contended that the ornaments/gold pledged with them were sold pursuant to the instructions given by the pledgor. They contended that they were not the owners of the said gold/ornaments. They contended that sale of pledged gold/ornaments did not fall "in the course of their business" under section 2(1)(e) of the 1957 Act. These contentions were accepted by the High Court. Consequently, the State Legislature enacted Act. No. 27 of 1996 by which Explanation IV was inserted in the 1957 Act. That Explanation, inter alia, has sought to cover L.I.Cs., financial corporations, companies and banks falling in Second Schedule to the Reserve Bank of India Act, 1934. The constitutional validity of the said Amending Act No. 27 of 1996 has not been challenged in the present proceeding by the bank (respondent). As stated above, in the civil appeal filed by the State (appellants) the only contention raised is that with the enactme....
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.... purpose of the subsequent Explanation was not to enlarge the scope of section 48(1)(e) in the Bihar and Orissa Co-operative Societies Act, 1935. In the present case, prior to the Amending Act No. 27 of 1996, there was no Explanation covering banks, LICs., etc. As stated above, Explanation IV was added for the first time by the said Amending Act No. 27 of 1996. The definition of the word "dealer" thus stands expanded by the said amending Act No. 27 of 1996. In our view, therefore, Explanation IV was not to clear any doubt or ambiguity. It has been enacted in order to expand the definition of the word "dealer" in section 2(1)(e) of the 1957 Act. In the case of Doypack Systems Pvt. Ltd. v. Union of India [1988] 36 ELT 201, this court has held that the internal aids of construction are definitions, exceptions, explanations, fictions, deeming provisions, headings, marginal notes, preamble, provisos, punctuations, saving clauses, non- obstante clauses, etc. It was observed that the object of interpretation is to discover the intention of the Legislature. It was further observed that the court has to examine whether an Explanation inserted by the amending Act was to clear the ambig....