Purchase tax on exim scrips upheld where transfer for consideration was treated as a taxable purchase of goods.

Exim scrips and REP licences were treated as goods, and their voluntary transfer to the bank for consideration amounted to a purchase rather than a mere surrender. The bank was held to be a dealer because its large-scale, continuous acquisition of such scrips constituted a separate business activity within the broad statutory meaning of business, even though it acted under RBI directions. Section 4(6)(iii) was read as a residuary purchase-tax provision not confined to purchases for resale, and it was not shown to be arbitrary or violative of Article 14. The levy of purchase tax on the bank's acquisitions was therefore upheld.

---

---

Issues: (i) whether exim scrips or REP licences are "goods" and whether their transfer to the bank constituted a "purchase" within the meaning of the sales tax law; (ii) whether the bank was a "dealer" carrying on the "business" of purchasing such scrips so as to attract purchase tax under section 4(6)(iii); (iii) whether section 4(6)(iii) was confined to purchases for resale or was unconstitutional.

Issue (i): whether exim scrips or REP licences are "goods" and whether their transfer to the bank constituted a "purchase" within the meaning of the sales tax law.

Analysis: Exim scrips were held to be goods and transferable instruments capable of being sold for consideration. The transactions were not mere surrenders, because the holders voluntarily transferred the scrips to the bank in return for money and the bank acquired property in them for valuable consideration. The form of the transaction, the RBI's own description of it as purchase, and the absence of any superior proprietary interest in the bank or the RBI negatived the plea of surrender.

Conclusion: The exim scrip transactions were purchases of goods and were capable of being taxed.

Issue (ii): whether the bank was a "dealer" carrying on the "business" of purchasing such scrips so as to attract purchase tax under section 4(6)(iii).

Analysis: The bank had long been a registered dealer and the attempt to deny that status was rejected. The definition of "dealer" and "business" was applied in a wide sense, and the bank's large-scale purchase of exim scrips over a continuous period, though under RBI directions, was treated as a separate business activity and not merely an isolated or casual transaction. The activity was also held to be within the bank's legally permissible functions under the banking law and the State Bank of India Act. The contention that the bank was outside the concept of dealer because its ordinary business was sale of gold was also rejected.

Conclusion: The bank was a dealer and the impugned purchases formed part of its business for tax purposes.

Issue (iii): whether section 4(6)(iii) was confined to purchases for resale or was unconstitutional.

Analysis: Section 4(6)(iii) was treated as a residuary charging provision and not limited to purchases made for resale. The purpose behind the purchase need not be resale, and the provision was not shown to be arbitrary or violative of article 14. The court held that the post-purchase cancellation or onward transmission of the scrips did not alter the taxable character of the purchases.

Conclusion: Section 4(6)(iii) applied to the impugned purchases and was not unconstitutional.

Final Conclusion: The levy of purchase tax on the bank's acquisition of exim scrips was upheld and the challenge to the assessment failed in full.

Ratio Decidendi: Transfer of exim scrips for valuable consideration is a taxable purchase of goods, and a statutory body may be a dealer where it carries on a substantial, legally authorised commercial activity that falls within the broad statutory meaning of business.

---