1. Petitioners in O.P. No. 1169 of 2002 are the appellants. They are scheduled banks engaged in banking business in accordance with the provisions of the Banking Regulation Act. As part of their business some of the branches of the appellants advanced loans as against pledge of gold ornaments. In case of default committed by the customer in the matter of repayment of loan, the bank is vested with the right of realisation of the loan amount with interest by sale in public auction of the gold ornaments pledged. Accordingly when the customers defaulted repayment of the loan amount secured by pledge of gold ornaments the banks had effected sale of the pledged gold ornaments by public auction for the purpose of realisation of the loan amounts with interest from the customers. The proceeds of the auction sale is

credited to the account of the customers and the balance, if any, after adjusting the amounts towards the dues of the bank is being returned to the customers in due course.

2. The respondents who are the State of Kerala and the authorities under the Kerala General Sales Tax, 1963 (for short 'the Act') have been taking the view that such transaction of the sale of gold o