Indian oil brokers association
Slight variation in the nature of relief sought for and indian oil brokers association language adopted for the same apart, the sum and substance of relief sought for in all these writ petitions is for writs of declaration, declaring that sections 234 and 5 or some or the other of those provisions of the TNGST Second Amendment Act, Tamil Nadu Act 31 of are ultra vires to entry 54, List II of the Seventh Schedule to the Constitution of India and also repugnant to articles 14, 19 1 g and of the Constitution of India and irreconcilable with sections 2 n and 2 r of the TNGST Act, and, therefore, void and unenforceable.
The writ petitions before us have been either by the registered associations of pawnbrokers for and on behalf of indian oil brokers association members or by individual pawnbrokers or by the association and one or two such pawnbrokers joining together. The nature of business of a "pawnbroker" and his dealings, rights, duties and obligations are to be dealt with, having regard to the indian oil brokers association governing their business activities, to have a proper perspective of the character and nature of their business activities to properly appreciate the various issues raised by the petitioners in the context of the TNGST Act, There indian oil brokers association no controversy over indian oil brokers association position that the pawnbrokers in question lend money on the security of pledge articles which varies from gold or silver jewelleries or silver vessels and articles, and vessels and articles made of other metals and other kind of securities or certificates, repayable with interest and other charges stipulated or prescribed.
To carry on such business activities indian oil brokers association need take a licence under the Act and the Rules made thereunder, maintain relevant accounts, registers and records as prescribed under the Act and the Rules. The auctioneer is also bound to maintain the various items of records stipulated by the Rules and obliged under the Act.
Even a cursory perusal of the Act and the Rules made thereunder would go to show that the auctioneer as such has no direct relationship or answerability to the pawner and that the auctioneer merely holds conducts the auction in the manner expected of him and only for and on behalf of the pawnbroker, with no independent or vested right or interest of his own in the pledged article or the amount realised except the expenses incurred or the charges due for the conduct of the auction.
Indian oil brokers association to certain stipulations and conditions, the pawnbroker has also been given the liberty and right to participate and bid in the public auction held by the auctioneer. The sum and substance of the contentions of the various petitioners in the affidavits filed in support of the respective writ petitions are that a pawnbroker who lends money on the pledge of articles as security cannot be considered to be "dealers" carrying on any "business" as a trading or commercial activity in the nature of "purchase or sale of goods", that the nature and character of the business activities of a pawnbroker cannot by any stretch be called "sales" and their capital investment or money realised as "sales indian oil brokers association purchase turnover" and their dealings "business" within the meaning of the TNGST Act, and that, therefore, there is no justification to compel the pawnbrokers to get registered as indian oil brokers association under the TNGST Act or subject their indian oil brokers association or transactions to the levy of sales tax under the TNGST Act.
It is also stated that the pawnbrokers have no general properly rights in the articles pledged and they do not themselves conduct auction or sell the articles in auction themselves and the attempt to treat them as dealers under the Act when they are really not so factually would be unconstitutional and arbitrary.
Pawnbrokers are said to lend money by way of sale proceeds of the pawned articles by means of public auction through approved auctioneers cannot be considered to be sales turnover exigible to sales tax under the TNGST Act, sic. Pawnbrokers are also said to have under the transactions in question only the right to recover the loan amount, interest and other permitted charges and the auction sale of unredeemed pledge articles in public auction by the approved auctioneer is nothing but a process of converting the pawned articles into money on behalf of the indian oil brokers association and not on their own behalf to pay and wipe of the loan transaction and discharge the liabilities of the pawner under the loan account.
The liability to refund the surplus available after discharge of the loan account from the proceeds realised is also pressed into support as a point to substantiate the above stand.
For all the above reasons, it is claimed on behalf of the petitioners that the sales tax authorities, as also the TNGST Second Amendment Act, Tamil Nadu Act 31 of purport to treat what really are not sales, and those who really are not "dealers" carrying on any business in the commercial sense as "sales" and "dealers" and thereby usurp jurisdiction and authority to levy sales tax under the TNGST Act, The respondent-State has filed a counter-affidavit in W.
While denying the averments indian oil brokers association claims on behalf of the petitioners and contending that the provisions under challenge are constitutionally valid and enforceable and not vitiated for any one or more of the reasons alleged, strong reliance has been placed on a decision of a learned single Judge of the Karnataka High Court reported in  87 STC [ Karnataka Pawn Brokers' Association Regd. State of Karnataka ].
Further, in the counter-affidavit, the respondent contends that whatever may be the nature of the transaction, there is a factum of sale, that the right to sell the goods pledged in the event of default in redemption carry with it the incident of sale, that in the course of business, the pledgee or pawnee sells the goods, that the concept of business will include even the business of a pawnbroker carrying with it the incidental activity to sell unredeemed goods, that any transaction which is incidental or ancillary to the main business also constitute business as defined under the TNGST Act and that having regard to the definition of the pawnbroker it would constitute "business" within the meaning of section 2 d 11 of the TNGST Act, that the indian oil brokers association position has been reiterated in the decision of the Supreme Court in  31 STC State of Tamil Nadu v.
Controller of Stores, Eastern Railway in further support of the claim of the respondents. Natarajan, learned counsel appearing in W. As a matter of fact, all the other learned counsel except Mr. Palaniappan, learned counsel appearing for the petitioner in W.
Natarajan, learned counsel, while elaborating the contentions raised in the affidavit submitted that a pawnbroker, being a person merely carrying on money lending business takes goods and chattels in pawn against loan as a mere security and does not carry on the business on buying, selling or supplying or distributing any goods for a sale price or valuable consideration effecting any transfer of property in the goods owned by him general property rights and, therefore, the mere conversion of the goods or chattels pawned by getting them sold in a public auction through an approved auctioneer held in the presence of the approved officer does not constitute any "sale" within the meaning of section 2 n of the Indian oil brokers association Act.
According to the learned counsel, anyone to answer the definition of a "dealer" carrying on "business" for the purpose of TNGST Act,must have indian oil brokers association authority to sell or general property rights in the goods, dominion over goods and the power to effect transfer of title an that the pawnbrokers who are licensed under and carry of their money lending business under the Act the Rules made thereunder do not satisfy these essential requirements of law to render them and their transactions liable to sales indian oil brokers association under the TNGST Act.
It is also submitted that the pawnbroker has merely special property in the goods on account of the goods in question being a security for the debt, that the general property continues with the owner, that the pawnbroker is not directly or intimately connected with or is a party to the sale effected by the approved auctioneer in public auction in the presence of the authorised officer, by virtue of the statutory provisions engrafted in section 12 of the Act and the Rules made thereunder and that the sale, if at all, is by the auctioneer or the pawner who alone is said to be the seller and that the pawnbroker who is neither the owner nor the agent of the owner effecting sale or transfer of property in goods cannot indian oil brokers association subjected indian oil brokers association the levy of sales tax under the TNGST Act, Argued the learned counsel further that to constitute any activity "business" within the meaning of section 2 dit has got necessarily to be trade or commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, irrespective of the motive to make gain or profit [ section 2 d i ] and any transaction in connection with, or incidental indian oil brokers association ancillary to such trade, commerce, manufacture, adventure or concern [ section 2 d ii ] and, therefore, the disposal of the pledged articles by the pawnbroker in indian oil brokers association manner contemplated and specifically provided for under section 12 of the Act and the Rules made thereunder, would not be constitute "business" under either of the limbs of section 2 d of the TNGST Act, particularly when according when according to the learned counsel in the absence of continuous course of selling or buying systematically and in an organised manner.
The disposal of the pawned articles being, if at all, incidental to the main money lending business does not, according to the learned counsel answer the second limb of section 2 d also since the main money lending business cannot be considered to answer the definition in the first limb of section 2 d of the TNGST Act.
Commerce, as indian oil brokers association for purposes of the Sales Tax Act is said to be commerce involving sale or purchase of goods and not any commerce. It is also contended that the pawnbroker merely entrust the pawned articles to the approved auctioneer with no further rights either to withdraw the same from the auctioneer or wield any control over the conduct of auction or disposal of the article by the auctioneer in indian oil brokers association auction as could be seen from the relevant provisions of the Act and the Rules, and the right of the pawner to redeem continues with him till the date of sale and even when the pledged articles have been entrusted for disposal with the approved auctioneer and, therefore, the pawnbroker cannot be said to be dealer within the meaning indian oil brokers association section 2 g of the TNGST Act.
Finally, it was submitted that the auctioneer alone carries on the sale in public auction without any interference from the pawnbroker, having full and absolute control over the sale and finalisation of sale of the article and, therefore, if at all, it is only the auctioneer who can be dealt with under the TNGST Act and the Rules made thereunder in respect of such transactions and not the pawnbroker who has not effected himself sale of any goods.
Palaniappan, learned counsel appearing on behalf of the petitioner in W. Reliance was placed by the learned counsel on the decision Kunnathat Thathunni Moopil Nair v. State of Kerala and the learned counsel referred to the head notes in that decision in this regard. Indian oil brokers association was also contended that all sales may not be taxable and that many such sales may be second sales exempt from the levy of sales tax.
Somayaji, learned senior counsel appeared on behalf of the petitioner in W. The fact that the surplus after settling the loan account has to be handed over to the pawner is relied upon to show that it is the pawner who, till the end continues to be the owner of the indian oil brokers association, has right to general property in the same.
Sundaresan, learned counsel, while adopting the contentions of the other learned counsel, contended that even after the Amendment ActTamil Nadu Act 31 ofthe same brought into net of the sales tax law various categories of agents only, that the pawnbroker is not one who falls under the category of agent and since they not also specifically included in the definition provision, there is no scope for enforcing the provisions of the sales tax law against them in any manner.
It is also stated that pawnbroker actually engages the auctioneer only on behalf of the pawner and not really on his behalf since there is no title or right in him to or in the property which he can be said to transfer to the actual purchaser in indian oil brokers association auction.
The other learned counsel merely adopted the submissions of the above referred to learned counsel. Chitra Venkataraman, learned Additional Government Pleader Taxeswhile reiterating the stand taken in the counter-affidavit, contended that the inclusive definitions of section 2 d2 g and 2 n are so wide in their amplitude that they are sufficient to render the sales of unredeemed pawned articles taxable in the hands of the pawnbrokers under the TNGST Act, and the Rules made thereunder.
As for the plea of the alleged vice of unequals being treated as equals, the learned counsel for the respondent contended that there indian oil brokers association neither substance nor merit in the said plea and that the decision in Kunnathat Thathunni Moopil Nair v. State of Kerala is also of no relevance or assistance to the petitioners. The learned counsel appearing on either side invited our attention to some of the judicial pronouncements and we would advert to them before taking up for consideration the points raised fore consideration and adjudication.
Indian oil brokers association of Madrasa Full Bench of this Court had an occasion to consider the position of a broker and commission agent under the Madras Indian oil brokers association Sales Tax Act, and the Rules made thereunder. The question that really arose for consideration was as to whether a commission agent is a dealer or not under the said taxing enactment in the teeth of two conflicting decisions in  1 STC Mad.
Province of Madras v. Provincial Government of Indian oil brokers association v. Neeli Veerabhadrappathe learned Judges expressed an extreme view holding that in no event and under no circumstances can a commissioner agent be deemed to be a person carrying on the business of buying or selling goods and to that extent, it cannot be approved. As a matter of fact, on the facts and circumstances of the case, the liability to tax was sustained. In the course of the judgment, the distinction between a broker simpliciter and a commission agent was highlighted by pointing out that unlike a broker a commission agent has almost invariably, custody or possession of the goods, actually or constructively and that he often sells in his own name and in certain circumstances can sue the buyer himself.
It was also observed that in spite of the parties supposing their relationship to be that of principal and agent, in point of law, it may be different and there is nothing to prevent these commission agents from purchasing the commodities themselves at the price named by their principals and then selling the same thereafter at a profit for themselves which they are entitled to retain unlike a mere agent.
It was held on a consideration of the above position of a commission agent in the context of the sales tax law as hereunder:. It is because that there can be sale by a person who has no title to the goods that section 27 enunciates the rule that the buyer acquires no better title to the goods indian oil brokers association the indian oil brokers association had. In the indian oil brokers association of a commission agent, the accepted mercantile practice is that he has control over or possession of the goods and he has the authority from the owner of the goods to pass the property in and title to the goods.
If this is so, undoubtedly when a commission agent sells goods belonging to his principal with his authority and consent and without disclosing to the buyer the name of the owner, there is certainly a transfer of property in the goods from the commission agent to the buyer. A business which consists in such transactions can properly be described as indian oil brokers association business of selling goods.
A similar position would arise even in the case of a commission agent buying for an undisclosed principal. A commission agent doing this kind of business would, in my opinion, fall within the definition of 'dealer' in the Sales Tax Act. Neither the definition of 'dealer' nor of 'sale' contemplates as a necessary condition, that the goods sold should belong to the person selling or buying.
There can be a sale or purchaser on behalf of another. State of Madras indian oil brokers association, a Division Bench of this Court has an occasion to consider the issue as to whether a tanner who merely purchased the tanning materials for tanning hides and skins of customers for specified charges would be held dealer liable to sales tax in respect of the tanning material purchased.
Sadak Thamby and Indian oil brokers association. State of Madras it was held that a buying activity, even though without a counterpart of a selling activity, in the course of a business, whether it be as a dealer in hides or carrying on of the tannery with indian oil brokers association, would be adequate to bring the turnover of purchase price of tanning materials to tax under the Tamil Nadu General Sales Tax Act, State of Madrasthe question as to whether an auctioneer could be considered to be a dealer under the provisions of the Madras General Sales Tax Act,arose for consideration.
The learned Judges of a Division Bench of this Court held that an auctioneer functioned only as an indian oil brokers association to secure the most advantageous bid for the principal in the auction and thereafter the auctioneer as the principal's agent only accepted the auction and completed the contract and, therefore, the auctioneer would not fall within the definition of "dealer" as contained in section 2 g of the Tamil Nadu General Sales Tax Act, It was also held that the mere fact that the auctioneer under special instructions from the seller recovered the money from the highest bidder would not constitute him a dealer for the purpose of sales tax liability and indian oil brokers association this indian oil brokers association, the learned Judges of the Division Bench expressed their dissent from the decision reported in  12 STC Chowringhee Sales Bureau Ltd.
State of Madrasa Division Bench of this Court had an occasion to consider the tax liability of a local agent of a indian oil brokers association principal who carried on business of his own also.
He was found to have transferred the goods of non-resident principal to his own business during the relevant period under consideration and on such transaction also, he admittedly collected commission from indian oil brokers association non-resident principals.
In this context, the question that was considered was whether the transaction involved a sale chargeable to tax. Overruling the contention of the assessee that the same person cannot sell goods to himself, it was held that when it was found that the same person held two different capacities, one as an agent of a non-resident principal an the other as proprietor of his own business, two different entitles altogether, while transferring the goods of the non-resident principal to himself, he not only acted as agent of indian oil brokers association non-resident principal, but also as a purchaser an there is nothing in law which militates against the said conclusions and consequent tax liability on such indian oil brokers association. Deputy Commercial Tax Officera Division Bench of indian oil brokers association Court had an occasion to consider the liability of an association which was a pool brought about by an agreement to which several registered companies doing general insurance business were parties, which sold through a public auctioneer the goods which came into its hands by way of salvage, in the course of carrying on its business in general insurance.
It was held therein that if what the petitioner-association was doing was nothing more than collecting the salvage articles indian oil brokers association the agency and using the agency to sell the same, then the pool would not per se be a dealer within the meaning of the Act. But the matter was relegated to the authorities for ascertaining the correct nature of the transactions of the respective parties before fastening the liability to tax under the Act.
Sri Dayanand Corporationa Division Bench of this Court was directly concerned with the issue as to whether a public auctioneer carrying on the business of selling in public auction unredeemed articles pledged with pawnbrokers would be held to be "dealers" and the transactions "sales" within meaning of the Tamil Nadu General Sales Tax Act. State of Madrasthe learned Judges of the Division Bench held that the auctioneer discharged only the duty of a crier or a broker who brought the parties together and, therefore, was not a dealer who transferred the property in the goods to the highest bidder and, therefore, he was not liable to sales tax.
The learned Judges further adverted to the statutory procedure prescribed under the Act as well as the Rules namely, the Pawn Brokers Act, and the Rules made thereunder and observed as follows:. But nowhere has it been stated indian oil brokers association the auctioneer should indian oil brokers association over possession of the goods from the pawnbroker and sell them.
Even the specific provision in rule 15 2 extracted above, only directs the auctioneer to cause all pledges to be exposed to public view.
He could perform this obligation by directing the pawnbroker to be present at the time of the sale with the articles proposed to be sold and keep them ready for inspection. But this obligation will not make it necessary for the pawnbroker to part with possession of the goods in favour of the auctioneer. With a little indian oil brokers association, one also realises that a careful pawnbroker would like to keep the goods in his own custody until they are sold, and would not like to hand over possession to the auctioneer without any security for their safe indian oil brokers association.
The provisions in the Pawnbrokers Act and, in particular, the obligation that auction sales of unredeemed goods shall be effected according to certain prescribed rules through approved auctioneers are intended to safeguard the pledgers of goods from the effect of nominal or bogus sales of their goods by pawnbrokers in the event of non-redemption, which will otherwise have the effect of preventing poor persons, who resort to the pawnbrokers for loans, from getting a proper value of the pledged goods when they remain unredeemed.
The intervention of the auctioneer is therefore intended for safeguarding the interest of the pledgers of goods, but at the same time, the rules are careful to see that the interest of pawnbrokers are not also affected and they do not require them to part with the possession of the goods to the auctioneer before the sale.
In fact the rules are silent about the mode of delivery of the goods. They have meticulously provided for the manner in which the sales are to be published and conducted. The auctioneer will be carrying out the obligation under the rules, indian oil brokers association without taking possession of the pledged goods and delivering them to the highest bidder on the fall of the hammer.
The pawnbroker can still be a person who retains the possession of the goods, and he can deliver them to the successful bidder at the auction by the auctioneer. It is from this point of view that we are impressed by the circumstances mentioned by the Tribunal in its order, including clause 5 of the indian oil brokers association of the auction sale which allows bidder to take delivery of the goods from the pawnbroker, and the bill of sale which makes mention of the fact that the indian oil brokers association will take delivery of the goods from the pawnbroker on payment of the price to the auctioneer.
Thirumeninatha Nadar Firma Division Bench of this Court was concerned with the tax liability of a bank in selling the goods pawned to it. It was held that the turnover representing sale of goods effected by a bank with whom an assessee has pledged the goods is liable to be included in the assessee's turnover and not to be treated as the sales turnover of the bank. The bank in selling the goods pawned to it does not act as an agent of the assessee but at the same time the sales are nevertheless on behalf of the pledger for the pawn or pledge by itself does not make the pawnee or pledgee the owner of the goods an the very concept of indian oil brokers association pledge carried with it the elements of custody and power to sell the goods in default of payment.
In so doing, the learned Indian oil brokers association observed as follows:. In so far as it held that the banks is selling indian oil brokers association goods pawned to them did not act as the agents of the assessee, it was right. As pledgees, the banks, acting under section of the Contract Act, had a right to sell indian oil brokers association goods.
Their sale was but an exercise of the statutory power and not as agents. But the sales were nevertheless on behalf of the pledger, for, the pawn of pledge by itself did not make the pawnee or pledgee the owner of the goods. The very concept of a pledge carries with it the elements of custody and a power to sell the goods in default of payment.
This is evident in this case by the fact that after crediting towards the debts due from the pawner, the balance of the sale proceeds were paid over to him. We are also unable to accept the other view of the Tribunal that even assuming that indian oil brokers association banks acted as agents, they would be dealers and they alone would be liable to pay the tax under section 8 or section 14 a.
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