REP licence transfers as goods: Karnataka HC treated the right as present property, not an actionable claim, for sales tax.

Transfer of REP licences was treated as a transfer of goods under the Karnataka Sales Tax Act, 1957, because the licence conferred a present, perfected and immediately exercisable right to clear covered goods at the customs barrier. Applying the distinction between a choate right in praesenti and a contingent right in futuro, the Karnataka HC held that the licence was movable property and not an actionable claim. As actionable claims are excluded from the statutory definition of goods, the premium realised on transfer of REP licences was held liable to sales tax.

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Issues: Whether transfer of REP licences is a transfer of "goods" within section 2(m) of the Karnataka Sales Tax Act, 1957, or an actionable claim exempt from sales tax.

Analysis: The definition of "goods" under the Act excludes actionable claims. Applying the principles drawn from the law relating to movable property and actionable claims, the Court held that the decisive question was whether the licence transferred a present, perfected and immediately exercisable right, or only an inchoate future entitlement. The Court relied on the distinction recognised in lottery-ticket jurisprudence between a choate right in praesenti and a contingent right in futuro. On that basis, REP licences were held to confer on the transferee an immediate right to clear covered goods at the customs barrier. That right was treated as a present and perfected entitlement, not a contingent claim. The Court further held that the licence was movable property and not an actionable claim.

Conclusion: REP licences are "goods" within the meaning of the Karnataka Sales Tax Act, 1957, and the premium realised on their transfer is liable to sales tax.

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