The Kerala Small Financier''s Association and Others vs State of Kerala and Others

Petitioners are the members of the Kerala Small Financier''s Association. The writ petition has been filed by the Kerala Private Bankers Association, represented by its President, North Kerala Private Banker''s Association, represented by its President and the Managing Partner of Oriental Firm (Financiers), Kattoor.

The Original Petition was filed to declare that the Respondents are rot entitled in law to levy sales tax on the auction of gold (pledged) conducted by the private small financiers and to declare that the amendments brought into Section 2 of the K.G.S.T. Act by Ext. P-8 are unconstitutional and void, to strike down Section 2 of the K.G.S.T. Act as amended by Ext. P-8 as unconstitutional, illegal, void and violative of the fundamental rights of the Petitioners and for a mandamus restraining the Respondents 3 and 4 from taking any further steps against the members of the Association pursuant to Ext. P-8. According to the Petitioners the numbers of the Petitioners Association stand it" the shoes of a bailee and does not become the owner of the goods and that they have also got a right to sell the goods not as an owner or as agent or any other capacity and that they can sell the goods after giving notice to the pawner and the amount obtained is to be appropriated to the amount due to them. Thus the entire consideration is not taken by the pawnee (Petitioners) because if the amount obtained exceeds the loan amount, the balance has to be returned to the owner of the goods.

In an identical case filed by the Karnataka Pawnbrokers Association and others against the State of Karnataka before the Supreme Court of India challenging the levy of sales tax by the Karnataka State the Supreme Court in the judgment reported in Karnataka Pawn Brokers Assn. and Others, Etc. Vs. State of Karnataka and Others, Etc., held in paragraph 31 of its judgment that the sales of unredeemed goods through public auction by an approved auctioneer the pawnee who has control or possession over the goods and who was given statutory authority to pass the general property in and title to the goods, is the seller and as such, satisfied the definition of ''dealer'' under the General Sales Tax Act of both the States, viz., State of Karnataka and Tamil Nadu. The Supreme Court has further observed that the above conclusion is further strengthened by the definition of pawn-broker. It is further hell as follows:

The explanation to the definition of pawn-broker contemplates that every person who kee ps the shop for the purchase or sale of goods or chattels and who purchases goods or chattels and pays or advances thereon any sum of money, with or under an agreement or understanding expressed or implied that, the goods or chattels may be Afterwards re-purchased on any terms, is a ''pawn-broker'' within the meaning of main clause. The activities of pawn-broker as detailed above will satisfy the definition of ''business'' as well. We have also noticed that the pawner has no role at all in the sale of the goods pledged except to redeem the same before the sale is concluded. Therefore, he cannot be treated as seller in the context of the transaction.

The Supreme Court also held that any activity incidental or ancillary to the main business will also come within the definition of business under the Sales Tax Act and therefore, the contention that the sale of unredeemed goods, being incidental to the business of pawn-broker was not liable to sales tax, cannot be accepted. The above judgment squarely applies to the fact and circumstances of the case and the contentions raised therein. In view of this we dismiss the Original Petition. No costs.