TMI Blog2007 (3) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... cted to recover the tax from the pledgor in respect of old auction sales which took place much prior to August 1, 1996. - Civil Appeal No. 299 of 2002 - - - Dated:- 29-3-2007 - KAPADIA S.H. AND SUDERSHAN REDDY B. JJ. June G. Chaudhary, Senior Advocate (Manoj Saxena, Rajnish Kr. Singh and Rahul Shukla, Advocates, with her) for the appellant. T.L.V. Iyer, Senior Advocate (G. Prakash and S.N. Bhat, Advocates, with him) for the respondent. -------------------------------------------------- The judgment of the court was delivered by S. H. KAPADIA J. A short question which arises for determination in this civil appeal filed by the State (appellants) is: whether pledging of ornaments with the bank against a loan and sale of such goods if the loan is not discharged, would be "business" within the meaning of section 2(1)(e) of the Andhra Pradesh General Sales Tax Act, 1957 read with Explanation IV thereto. On April 3, 1989, the Commercial Tax Officer, Warangal, issued 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 Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sociation which carries on such business; (ii) a society (including a co-operative society), club, firm or association which buys goods from or sells, supplies or distributes goods to its members; (iii) a casual trader, as hereinbefore defined; (iii-a) any person, who may, in the course of business of running a restaurant or an eating house or a hotel (by whatever name called), supply by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating); (iii-b) any person, who may transfer the right to the use of any goods for any purpose whatsoever (whether or not for a specified period) in the course of business to any other person; (iv) a commission agent, a broker, a del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of 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 dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al corporations or companies and banks included in the Second Schedule to the Reserve Bank of India Act, 1934; (j) Advertising agencies; (k) Any other corporation, company body or authority owned or set up by or subject to administrative control of the Central Government or any State Government." (emphasis supplied) The 1957 Act has been enacted to consolidate and amend the law relating to levy of general tax on the sale/purchase of goods in the State of Andhra Pradesh. Under section 2(1)(e) the word "dealer" was defined to mean any person who carried on the business of buying, selling or distributing goods, directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration. The original definition of the word "dealer" referred to any person who carried on business of selling goods for cash or deferred payment or other valuable consideration. That definition 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court observed that an Explanation must be read ordinarily to clear up any ambiguity in the main section and it cannot be construed to widen the ambit of the section. However, if on a true reading of an Explanation it appears to the court in a given case that the effect of the Explanation is to widen the scope of the main section then effect must be given to the legislative intent. It was held that in all such cases the court has to find out the true intention of the Legislature. Therefore, there is no single yardstick to decide whether an Explanation is enacted to clarify the ambiguity or whether it is enacted to widen the scope of the main section. On the facts it was held that before 1948 Amendment to the Bihar and Orissa Co-operative Societies Act, 1935, there was an Explanation on the Statute Book and the subsequent Explanation was only to clarify the earlier Explanation and, therefore, the court held that the 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 st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that an Explanation can also supply something to the content of the provision and in such a case the court has to consider its effect, whether it is retrospective or prospective. In the case of Aphali Pharmaceuticals Ltd. v. State of Maharashtra AIR 1989 SC 2227, this court found that in the earlier Explanation in the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 certain changes were made by way of another Explanation brought in by the Finance Act, 1962 with retrospective effect. The court upheld the contention advanced on behalf of the State that the new Explanation was retrospective. While doing so the court observed that the impugned Explanation has not altered the existing classification in the Schedule so as to impose a new liability and, therefore, the impugned Explanation was clarificatory and retrospective. Applying the above test to the present case, we find that by Explanation IV to section 2(1)(e) of the 1957 Act, banks, financial institutions, etc., are sought to be covered by an in-built expression "deeming provision" in the said Explanation. By the said deeming fiction the meaning of "dealer" is sought to be expanded so as to include banks, fina ..... 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