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2003 DIGILAW 938 (KAR)

P. MAHENDRA AND CO. v. DENA BANK

2003-11-07

CHANDRASHEKARAIAH

body2003
CHANDRA SHEKARAIAH, J. ( 1 ) THIS appeal is by the plaintiff challenging the judgment and decree dated 31-3-1998 in OS No: 3302/88 on the file of the 17th Addl. City Civil Judge, Bangalore city. ( 2 ) THE plaintiff is a dealer carrying on business in non-ferrous metal scrap and the defendant is a nationalised bank having its branch at K. G. Road, Bangalore. The defendant invited tenders for two consignments comprising of 1386 an 139 pieces of "lead Ingots" weighing 35,178 and 6562 k. Gs respectively. Pursuant to that the plaintiff has filed his tender quoting the price of the lead ingots at Rs. 10. 60 per kg exclusive of taxes. The tender of the plaintiff was accepted by the defendant Bank Pursuant to this acceptance the plaintiff has paid the entire sale consideration calculated at the rate of Rs. 10. 60 ps and paid a sum of Rs. 31, 855. 95 ps. towards Karnataka sales tax at 6% plus surcharge, plus R. D. C or sales tax. According to the plaintiff has defendant bank being not a registered dealer is not entitled to collect the same and therefore he has filed the suit for recovery of a sum of Rs. 32,805. 95ps. ( 3 ) THE defendant in its written statement has admitted the case pleaded by the plaintiff in its plaint except insofar as the right of the plaintiff to collect the sales tax. According to the defendant, the defendant being a nationalised bank, though not a registered dealer, is entitled to collect the sales tax. It is further pleaded that since the sales tax collected by the defendant has been paid to the State Govt. the question of refund to the plaintiff does not arise. In view of the above said averments, the Trial Court has framed the following issues: "1) Whether the suit is not maintainable for registration certificate? 2) Whether the plaintiff proves that the defendant is not entitled to collect Sales Tax? 3) Whether the defendant has paid the tax to Government? 4) To what relief?" ( 4 ) THE plaintiff and defendant examined one witness each on their behalf as PW1 and DW1 respectively. The plaintiff has produced seven documents marked as Exhibits P1 to P7. The defendant has not produced any documents. 3) Whether the defendant has paid the tax to Government? 4) To what relief?" ( 4 ) THE plaintiff and defendant examined one witness each on their behalf as PW1 and DW1 respectively. The plaintiff has produced seven documents marked as Exhibits P1 to P7. The defendant has not produced any documents. Now the question that arises for consideration is: "whether the Trial Courts is justified in dismissing the suit holding that the plaintiff has failed to prove that the defendant is not entitled to collect the sales tax?" Since the facts are not disputed, the case can be disposed of with reference to Sections 18 and 19 of the Sales Tax Act. ( 5 ) ADMITTEDLY, the defendant Bank is a Banking Company registered under the Banking regulations Act. The business of the defendant Bank is regulated by the Banking Regulations act. Section 8 of the Banking Regulations Act reads as follows: "8. Prohibition of trading- Notwithstanding anything contained in Section 6, or in any contract, no banking company shall directly or indirectly deal in the buying or selling or bartering of goods, except in connection with the realisation of security given to or held by it, or engage in any trade, or buy, sell or barter goods for others otherwise than in connection with bills of exchange received for collection or negotiation or with such of its business as is referred to in clause (i) of Sub-section (1) of Section 6: provided that this section shall not apply to any such business as is specified in pursuance of clause (o) of Sub-section (1) of Section 6. " From a reading of the above section, it is clear that no banking company shall directly or indirectly deal in the buying or selling or bartering of goods except in connection with the realisation of security given to or held by it or engage in any trade, or buy, sale or barter goods for otherwise than in connection with the bill of exchange received for collection or negotiations or with such of the business as is referred to in Clause (1) of Sub-section (1) of Section 6. If that is so, the Bank which sold the goods to the plaintiff by calling tender cannot be considered as a dealer. It is also an admitted fact by the defendant that the defendant is not a registered dealer. If that is so, the Bank which sold the goods to the plaintiff by calling tender cannot be considered as a dealer. It is also an admitted fact by the defendant that the defendant is not a registered dealer. Sections 18 and 19 of the Karnataka Sales Tax Act, reads as follows: 18) (1) (a ). A person who is not a registered dealer liable to pay tax shall not collect any amount by way of tax or purporting to be by way of tax under, this Act: nor shall a registered dealer collect any amount by way of tax or purporting to be by way of tax at a rate or rates exceeding the rate or rates specified under Section 5. b) No person shall collect any amount by way of tax or purporting to be by way of tax in respect of sales of any goods on which no tax is payable by him under the provisions of this Act. " 19) Not withstanding anything contained in this Act, the Central Government, a State government, a statutory body or a local authority, shall in respect of any sale of goods effected by them be entitled to collect by way of tax any amount which a registered dealer effecting such sale would have been entitled to collect by way of tax under this Act and shall pay the tax so collected into the Government Treasury. " From reading of the above section it is clear that a person who is not a registered dealer liable to pay tax, shall not collect any amount by way of tax under Section 19 of the Act, though the central Government State Government, a statutory body or local authority though not registered dealers, are conferred with the power to collect tax. The defendant bank being a banking company cannot be considered either as a Central Government or a State Government or as a statutory body or a local authority. No doubt, the nationalised bank may be, for the purpose of article 12 of the Constitution, an instrumentality of the State, but it cannot be considered as a state or Government for the purpose of collecting tax under Section 19 of the Act. Therefore, I hold that the defendant Bank is not entitled to collect any tax from the plaintiff in respect of the goods sold. Therefore, I hold that the defendant Bank is not entitled to collect any tax from the plaintiff in respect of the goods sold. The Trial Court in the impugned Judgment, has held as follows: "if Sections 18 and 19 of the K. S. T. Act is read together, it appears to me that the collection of sales tax by the defendant-bank from the plaintiff falls within the purview of the Section 19 and not under the Section 18 as urged by the plaintiff's Counsel. " The case of the defendant is that it had no doubt collected the tax but paid the same to the State government and therefore is not liable to refund the amount to the plaintiff. The manager of the dena Bank who has examined himself as DW-1 has stated before the Trial Court as follows: "since we had not remitted the amount to the sales tax Department we did not give any reply to the notice issued by the plaintiff. " From this it is seen that the defendant bank had not paid the tax collected by it to the State government when it received the notice issued by the plaintiff. Before the Trial Court, defendant has not produced any material to show that it has paid the tax collected from the plaintiff to the state Government. If really the defendant has paid the said amount to the State Government nothing prevented the defendant from producing the receipt for having paid the same. From the evidence it is seen that though the defendant in its written statement has pleaded that whatever tax collected from the plaintiff has been paid to the State Government has not produced the same. Therefore, I hold that the defendant has not paid the tax collected to the State Government. Further, in the absence of any proof by the defendant for having paid the amount to the State government, the defendant bank shall not be allowed to enrich itself unjustly, when it has admitted the collection of the tax from the plaintiff. Therefore, the suit of the plaintiff is to be decreed. In the result, appeal is allowed. The impugned judgment and decree passed by the Trial Court is set aside. The suit filed by the plaintiff is decreed as prayed for. Parties to bear their own costs in this appeal.