TaxTMI 
TaxTMI 
TaxTMI 
2008 (1) TMI 842
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....ion of the word "dealer ". By the impugned amendment clause (g) was added. It reads as follows: "(g) a bank or a financing institution which, whether in the course of its business or not, sells any gold or other valuable article pledged with it to secure any loan, for the realisation of such loan amount;" For the purpose of this clause, Explanation I includes a Nationalised Bank or a Scheduled Bank or a Co-operative Bank. It is the case of the petitioner that it is beyond the legislative competence of the State of Kerala to encompass a bank, which disposed of gold or valuable articles pledged as security to secure the loan amount, for realisation of the loan amount. the Petitioner also calls in question exhibit P1 issued by the Commercial Tax Officer to the petitioner on the strength of the impugned amendment requesting the petitioner to instruct all the branches in Trivandrum District to remit any amount of tax collected and deposited in the suspense account within seven days of the receipt of the communication. Exhibit P1 would show that the officer directed that the branches may be instructed to remit the tax collected on the sales of gold ornaments or other valuables during e....
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....special property' has, however, been criticised and the use of the word 'special interest' preferred, on the ground that when the pawnee's right to sell is examined, the so-called 'special property' which that right is said to create, is in truth no property at all." He would contend that unless there is a sale as contemplated in the Sale of Goods Act, it is not competent for the State Legislature to impose tax on the footing that there was a sale of goods as understood in entry 54 of List II of the Seventh Schedule to the Constitution. In this connection, he drew our attention to entry 45 of List I of the Constitution. Entry 45 of List I of the Constitution reads as follows: "45. Banking." He would contend that being a bank, its activities are regulated by the provisions of the Banking Regulation Act, 1949, which is a central enactment providing for the regulation of the activities of the Bank. According to him, under section 8 of the Act, there is an embargo against the banks selling goods. Section 8 being pertinent to the issue is extracted: "8. Prohibition of trading.-Notwithstanding anything contained in section 6 or in any contract, no banki....
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.... is therefore contended that the definition of the word 'sale' itself would reflect an intention to exclude a pledge. It is contended by the petitioner/appellant that though this court had occasion to consider the question in the decision reported in Federal Bank Ltd.'s case [2004] 134 STC 377; [2003] 2 KLT 347, the question relating to the legislative competence was not in issue. The decision of this court as confirmed by the apex court in Federal Bank Ltd. v. State of Kerala [2007] 6 VST 736; [2007] 8 RC 657; [2007] 3 KLT 106 will not preclude the present litigation and adjudication sought herein, it is pointed out. In paragraph 8 of the judgment of the apex court, the court has held as follows (at page 740 of 6 VST): "We do not find any merit in the above contention. As stated above, we are not concerned in the present civil appeals with the question of legislative competence of the State Legislature to insert clause (g) in section 2(viii) of the 1963 Act. In the present case, we are concerned only with the limited question argued before us, namely, whether auction sale of pledged goods by scheduled banks is a 'transaction' which takes place in the course of....
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....re is deprived of its legislative power to impose tax when a sale of goods is effected by a bank. When a sale of goods is effected, as is comprehended in entry 54 of List II of the Seventh Schedule, the State becomes endowed with authority to tax the sale. He would point out that when there is a pledge, what is transferred may be the special right in favour of the pledgee to cause the pledged articles to be sold in the event of default by a borrower, who has pledged the items. But, in the event of default, the creditor/pledgee is clothed with a power to sell the said items, no doubt for realisation of the loan. When the sale takes place, it is not a special property which is transferred. On the contrary, what is transferred is indeed the general property in the goods as contemplated in the Sale of Goods Act. In other words, a sale in enforcement of the pledge, according to the learned Government Pleader, would result in vesting of the full title to the goods as would have been transferred by the owner of the goods. He would point out section 176 of the Indian Contract Act, 1872 in this connection and he would also take us through the decision reported in Federal Bank Ltd. v. State ....
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....ale of Goods Act, 1930 [see: State of Maharashtra v. Embee Corporation, Bombay [1997] 107 STC 196 (SC); [1997] 7 SCC 190]. 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." It is therefore not open to the petitioner/appellant to contend that when the pledged articles are sold by the banks, it is not in the course of banking business. It is also not open to them to contend that section 8 of the Banking Regulation Act read with section 5(b) of the said Act and section 6 of the Act prohibit the bank from effecting sale of goods and therefore the sale in public auction by the banks of pledged articles cannot be subjected to tax. It is clear that sale of pledged goods is not prohibited under section 8 of the Banking Regulation Act. We also think that there is no merit in the contention that when the pledgee disposes off the pledged articles on default being committed by the borrower/pledger, it only amounts to realisation of security and it cannot be treated as the sale of goods. In our view, while it amou....
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.... in the goods by the bank to the buyer. In Karnataka Pawn Broker's Association v. State of Karnataka [1998] 111 STC 752; [1998] 7 SCC 707, the apex court after referring to the Contract Act and more pointedly the Karnataka Pawnbrokers Act, 1961 and Rules made thereunder held as follows (at page 762 of STC): "It cannot be and it is not disputed that the pawnbroker has special property rights in the goods pledged, a right higher than a mere right of detention of goods but a right lesser than general property right in the goods. To put it differently, the pawnor at the time of the pledge not only transfers to the pawnee the special right in the pledge but also passed on his right to transfer the general property right in the pledge in the event of the pledge remained unredeemed resulting in the sale of the pledge by public auction through an approved auctioneer. The position being what is stated above, the natural consequence will be that it is the pawnee who holds not only the absolute special property right in the pledge but also conditional general property interest in the pledge, the condition being that he can pass on that general property only in the event of the pledge bro....
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....f the Central Legislature. Entry 54 of List II of the Seventh Schedule manifests an intention to confer power to tax sale of goods. A sale of goods by a bank is not excluded from the purview of the legislative powers of the State in entry 54 of List II of the Seventh Schedule. In New India Sugar Mills Ltd. v. Commissioner of Sales Tax [1963] 14 STC 316; AIR 1963 SC 1207 the apex court was considering the question whether there is sale, which could be taxable under the Bihar Sales Tax Act. The matter was answered in the context of entry 48 of List II of the Seventh Schedule of the Government of India Act, 1935, whereunder power to legislate in respect of taxes on sale of goods was conferred on the provincial Legislature. The court took note of the fact that the expression sale of goods, was not defined in the Government of India Act. The court further held that the expression has to be understood in the sense in which it is used in the Sale of Goods Act, 1930. It held as follows: "In popular parlance 'sale' means transfer of property from one person to another in consideration of price paid or promised or other valuable consideration. But that is not the meaning of 's....
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.... under entry 54, List II of the Seventh Schedule to the Constitution the expression 'sale of goods' bears the same meaning which it has in the aforesaid Act. Thus in spite of the definition contained in section 2(n) read with Explanation I of the Act if there is no transfer of property from one to another there is no sale which would be exigible to tax. If the club even though a distinct legal entity is only acting as an agent for its members in the matter of supply of various preparations to them no sale would be involved as the element of transfer would be completely absent. This position has been rightly accepted even in the previous decision of this court." We would think that these decisions would not assist the petitioner/ appellant. It cannot be said that there is no contract by the bank when they sell the pledged articles. It cannot also be said that in the transaction there is no transfer of general property in the goods to the buyer. When a sale takes place at the hands of a pledgee, there is indeed transfer of general property to the buyer and it is not a special right which is transferred. It cannot be said that in the case of sale by the pledgee there is no vo....
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....intention that a conflict should exist; and in order to prevent such a result, the two provisions must be read together, and the language of one interpreted, and, where necessary modified by that of the other. . . . The law 'with respect to' a subject might incidentally 'affect' another subject in some way; but that is not the same thing as the law being on the latter subject. There might be overlapping; but the overlapping must be in law. The same transaction may involve two or more taxable events in its different aspects. But the fact that there is an overlapping does not detract from the distinctiveness of the aspects. . . . It is trite that the true nature and character of the legislation must be determined with reference to the question of the power of the Legislature. The consequences and effects of the legislation are not the same thing as the legislative subject-matter. It is the true nature and character of the legislation and not its ultimate economic results that matters." In Elel Hotels and Investments Ltd. v. Union of India [1989] 74 STC 146 (SC); AIR 1990 SC 1664, the Hotel Receipts Tax Act, 1980 was impugned on the ground of lack of legislative co....
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.... follows (pages 114-115 of STC; pages 117-119 of VST) : "Clause (a) covers a situation where the consensual element is lacking. This normally takes place in an involuntary sale. Clause (b) covers cases relating to works contracts. This was the particular factsituation which the court was faced with in Gannon Dunkerley [1958] 9 STC 353 (SC) and which the court had held was not a sale. The effect in law of a transfer of property in goods involved in the execution of the works contract was by this amendment deemed to be a sale. To that extent the decision in Gannon Dunkerley [1958] 9 STC 353 (SC) was directly overcome. Clause (c) deals with hire-purchase where the title to the goods is not transferred. Yet by fiction of law, it is treated as a sale. Similarly the title to the goods under clause (d) remains with the transferor who only transfers the right to use the goods to the purchaser. In other words, contrary to A.V. Meiyappan's decision [1967] 20 STC 115 (Mad) a lease of a negative print of a picture would be a sale. Clause (e) covers cases which in law may not have amounted to sale because the member of an incorporated association would have in a sense begun both the suppli....
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....The sale of pledged articles is not a composite transaction. "Sale" is defined in section 2(xxi) of the KGST Act. Thus in fact after the 46th Amendment to the Constitution and after the insertion of the definition of the word "sale" as contained in the KGST Act even an involuntary sale, that is a sale which is not in pursuance of a contract would also qualify as a sale. In State of West Bengal v. Purvi Communication P. Ltd. [2005] 140 STC 154, the apex court reversed the declaration by the High Court of Calcutta that section 4A of the West Bengal Entertainment-cum-Amusement Tax Act, 1982 as amended by the West Bengal Finance Act, 1998 was ultra vires the Constitution. Cable Television Networks (Regulation) Act, 1995 is a central legislation enacted to regulate the operation of cable television (1)See Attorney General v. Edison Telephone Company of Landon [1880] 6 QBD 244. networks in the country. The apex court proceeded to hold that the said enactment did not fetter the legislative power or competence of the State to levy tax on luxuries, including taxes on entertainments, amusements, betting and gambling under entry 62 of List II of the Seventh Schedule to the Constitution. The ....