1992 (11) TMI 265 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the pawnbrokers could be considered as "dealers" under section 2(1)(k) of the Karnataka Sales Tax Act, 1957.
2. Whether the provisions contained in section 3A of the Karnataka Sales Tax Act, 1957, are violative of Article 14 of the Constitution.
3. The necessity to consider the validity of the provisions contained in section 3A and the circular dated October 30, 1991, if point No. (i) is answered in the affirmative.

Detailed Analysis:

Issue 1: Whether the pawnbrokers could be considered as "dealers" under section 2(1)(k) of the Karnataka Sales Tax Act, 1957.
The court examined the provisions of the Pawn Brokers Act, 1961, and the Karnataka Sales Tax Act, 1957. It was noted that the Pawn Brokers Act regulates and controls the business of pawnbrokers, allowing them to sell pawned articles through auction if the pawner defaults. The court emphasized that the pawnbroker has a special property interest in the pawned articles, which allows them to sell these articles to recover the loan amount.

The court held that the sale of pawned articles by pawnbrokers constitutes a "sale" under the Karnataka Sales Tax Act, 1957, as the general property in the goods passes to the purchaser in an auction. Consequently, pawnbrokers fall within the definition of "dealer" under section 2(1)(k) of the Act, as they carry on the business of selling goods.

Issue 2: Whether the provisions contained in section 3A of the Karnataka Sales Tax Act, 1957, are violative of Article 14 of the Constitution.
The appellants contended that section 3A of the Act is violative of Article 14 of the Constitution because the circular issued under this section was done without affording an opportunity of hearing to the affected parties. The court noted that section 3A does not explicitly require such an opportunity and that the circulars issued are of a general nature, applicable to all pawnbrokers. Therefore, the absence of a hearing does not render the circular or the section unconstitutional.

Issue 3: The necessity to consider the validity of the provisions contained in section 3A and the circular dated October 30, 1991, if point No. (i) is answered in the affirmative.
Since the court concluded that pawnbrokers are "dealers" under the Act, it found it unnecessary to delve into the constitutional validity of section 3A. The circular dated October 30, 1991, was deemed valid as it was in conformity with the court's decision that pawnbrokers are dealers under the Act.

Conclusion:
The court dismissed the writ appeals, holding that pawnbrokers are "dealers" under the Karnataka Sales Tax Act, 1957, and that the circular dated October 30, 1991, is valid. The court did not find it necessary to address the constitutional validity of section 3A of the Act in this context.