The court clarified the prospective application of the Amending Act NO.27 of 1996 and the interpretation of Explanation IV to Section 2(1)(e) of the 1957 Act.

JUDGMENT

KAPADIA, J.

1. 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.

2. On 3.4.89 the Commercial Tax Officer, Warangal, issued demand notice on respondent-Bank for payment of tax on turnover of auction sale of jewellery held on 19.8.87 under Section 5 read with Explanation IV of Andhra Pradesh General Sales Tax Act, 1957 ("the 1957 Act", for short). In this connection reliance was placed on Section 2(1)(e) read with Explanation IV of the 1957 Act.

3. Aggrieved by the demand notice, the respondent-Bank filed writ petition before the High Court challenging the legality of the notice. In the writ petition the respondent Bank contended that the provisions of the 1957 Act are not applicable to banking transactions.

4. By judgment dated 8.6.01 the Division Bench allowed the writ petition quashing the impugned notices holding that Banks are not amenable to sales tax on sale of gold pledged with the Banks as security for loan. Hence this civil appeal by the State (appellants).

5. At the outset we may point out that in the civil appeal filed by the State (appellants), the entire emphasis is placed on Explanation IV to Section 2(1)(e) of the 1957 Act which was inserted by Act NO.27 of 1996 by which the definition of the word "dealer" was expanded to cover banks, L.I.Cs. and financial institutions. Therefore, the question which we have to answer in this civil appeal is: whether Explanation IV of the 1957 Act would operate retrospectively, particularly, since in the present case the notice given to the Bank pertains to the auction sale of ornaments held on 19.8.87.

6. Act NO.27 of 1996 was an Amending Act. It received the assent of the Governor on 15.10.96. It was published on 17.10.96 in the Andhra Pradesh Gazette. It was preceded by an Ordinance. The said Amending Act operated with effect from 1.8.96. It is so specifically stated in the said Act NO.27 of 1996.

7. For deciding the above controversy we quote herein below the amended Section 2(1)(e) read with Explanation IV of the 1957 Act:

"Section 2.-Definitions:- (1) In this Act, unless the context otherwise requires:-

(e) "dealer" means any person who carries on the business of buying selling, supplying or distributing goods or delivering goods on hire purchase or on any system of payment by installments, or carries on or executes any works contract involving supply or use of material directly or otherwise, whether for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, and includes-

(i) local authority, a company, a Hindu undivided family or any society (including a co-operative society), club, firm or association which carries on such business;

(ii) a society (including a co-operative society), club firm or association which buys goods from or sells, supplied or distributes goods to its members;

(iii) a casual traders, 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 1:- Every person who acts as an agent of a non-resid