TaxTMI 
TaxTMI 
2015 (12) TMI 1040
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.... on the application dated 15th October 1995 was valid in law? (iii) Whether in the facts and under the circumstances of the case the Tribunal was correct in holding that the disposal of repossessed cars by the Appellant Bank constitutes a sale by the Bank? (iv) Whether in the facts and under the circumstances of the case the Appellate Tribunal was correct in holding that the Appellant Bank which has disposed of cars repossessed from defaulting borrowers is a dealer within the meaning of Section 2 (e) read with Section 2 (c) of the Delhi Sales Tax Act? (v) Whether in the facts and under the circumstances of the case the Tribunal was correct in holding that the activity of the banking carried on by the Appellant Bank amounts to business under Clause (i) of Section 2 (c) of the Delhi Sales Tax Act, 1975? (vi) If the answer to Question No. 5 is yes, whether in the facts and under the circumstances of the case the Tribunal was correct in holding that the sale of the repossessed cars by the Appellant is incidental or ancillary or in connection with the Appellant's business.? 2. The background to the reference is set out in the statement of case draw....
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....y." Additionally the borrower executes "irrevocable power of attorney" at the time of availing of the loan, in favour of the Bank. Inter alia this document authorises the Bank "to take possession of the financed vehicle in case of default in terms of the loan agreement. Clause 10 thereof authorizes the Bank "to receive on consideration by sale, transfer, disposition of the said car and to give proper receipt and valid and effectual discharge for the same." 4. Pursuant to the aforementioned loan agreement and power of attorney, the Bank has, in the event of default by the borrower, been taking possession of the vehicles financed by it and bringing them to sale. The Bank filed an application under Section 49 of the DST Act on 15th September 1995 seeking determination of the following questions of law: (1) Whether the disposal of repossessed car is sale as per the Sales Tax Act, 1956? (2) Whether the Citi Bank N.A. is required to be registered under the Sales Tax Act? (3) Whether the tax as sale of car is chargeable/payable or not? 5. By an order dated 21st July 1997 the Commissioner of Sales Tax, Delhi ('CST') decided the said questions after hearing ....
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....Appellant is a 'dealer' within the meaning of Section 2 (e) read with Section 2 (c) of the DST Act; whether the activity of the banking carried on by the Appellant Bank is 'business' under Section 2 (c) (i) of the DST Act and if so whether the sale of the repossessed cars by the Appellant is incidental or ancillary or in connection with its business? 11. Mr. Mahna referred to a large number of decisions in regard to the same question that arose under the local sales tax law of other States. 12. In State of Tamil Nadu v. Board of Trustees of the Port of Madras (1999) 114 STC 520 the question that arose was whether the Port Trust was a dealer within the meaning of the Tamil Nadu General Sales Tax Act, 1959 ('TNGST Act') and whether the sale by it of the "unclaimed and unserviceable goods" could be subjected to sales tax. The Supreme Court held as under: "42. From the above provisions, in our opinion, it is clear that the Port Trust is not involved in any activity of 'carrying on business' as has been clearly held in Aminchand Pyarelal's case [1976]1 SCR 721, and that unclaimed and unserviceable goods are sold in discharge of various statutor....
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....urchase, the sales tax was paid on the cars by the dealer. After passage of time the dealer sought to replace them. These cars were then sold as used cars. The demand raised on PBL by the Sales Tax Officer under the Delhi Sales Tax Act, 1975 ('DST Act') as well as the Central Sales Tax Act, 1956 ('CST Act') was challenged by the Petitioner, first before the Joint Commissioner, and later before the Additional Commissioner (Appeals) who affirmed the above order. The High Court reversed the said orders and held that the main business of the dealer was manufacture and sales of pharmaceutical products and "the vehicles were used by it in the course of business." In these circumstances, it was held that "the sale of used cars could not by any stretch of imagination be characterized as 'ancillary' or incidental to the business of a pharmaceutical company." Accordingly, it was held that "the inclusion of the sales transaction of the cars in question in the turnover of the dealer was unsustainable in law." 15. The above cited decisions are distinguishable in their application to the facts on hand. The sale by a Bank of gold pledged with it, the possession of which is with the Bank, as in....
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.... was observed that "unlike activities of Port Trust, sale of pledged goods is in the course of banking business." 17. In Tata Motors Finance Limited, ICICI Bank Limited and Family Credit Limited v. Assistant Commissioner of Sales Tax (decision dated 8th October 2033 in W.P.T.T. Nos. 4 and 6 of 2011 and 24 of 2010) the Division Bench of the Calcutta High Court was considering the question whether the bank was a dealer within the meaning of Section 2 (11) of West Bengal Value Added Tax Act, 2003 ('WBVAT Act'). In that case, the bank had disposed of vehicles hypothecated to it for recovery of outstanding loans under the strength of irrevocable power of attorney obtained from the borrower. It was held that the Petitioners/Banks were 'dealers' under the wider meaning of that expression under Section 2 (11) of the WBVAT Act. The word 'dealer' included an 'agent' and since the bank had undertaken the sale on the strength of irrevocable power of attorney, it was also acting as an agent. It was noted that "they undertake the activity of selling the hypothecated vehicles for the purpose of realizing the consideration which had already passed from them to the borrower. By selling the vehic....
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....ing that the Petitioner Bank is indeed a 'dealer' within the meaning of Section 2 (e) read with Section 2 (c) of DST Act. The sale by the Bank of cars hypothecated to it or offered as security against loans advanced towards financing the purchase of the car is a 'sale' within the meaning of S. 2 (m) of the DST Act. Even if the borrower is the owner in possession of the car, the sale is made by the Bank on the strength of the letter of authorisation executed in its favour by the borrower. Questions No. 3 and 4 referred to this Court are answered accordingly. 22. The next question is whether the selling of vehicles hypothecated to it by the Petitioner/Bank constitutes business'' within the meaning of Section 2 (c)(i) of DST Act. Again the word 'business' as defined is an inclusive one. It includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not it is for gain or profit. It also includes "any transaction in connection with, or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern." It is not in dispute that the Petitioner-Bank was granted permission to sell go....