Export entitlement transfers by disclaimer are taxable sales when tradable licences are issued in India for consideration.

A disclaimer of export-linked REP licences or exim scrips in favour of export houses, followed by direct issue of those tradable entitlements, amounted to a sale of goods under the Central Sales Tax Act because the entitlements had market value and were transferred for consideration. The percentage of f.o.b. value paid by the export houses, though described as service charge or commission, was the real consideration for that transfer, as no genuine service was shown. The taxable event occurred when the licences or scrips were issued in India, so the transaction did not take place outside India and remained liable to Central sales tax.

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Issues: (i) Whether the appellant's disclaimer of export benefits in favour of export houses amounted to a sale of REP licences or exim scrips exigible to Central sales tax. (ii) Whether the percentage of f.o.b. value paid by export houses, described as service charge, premium, commission or incentive, was the consideration for such sale. (iii) Whether the transfer of export benefits took place outside the territory of India so as to escape Central sales tax.

Issue (i): Whether the appellant's disclaimer of export benefits in favour of export houses amounted to a sale of REP licences or exim scrips exigible to Central sales tax.

Analysis: The definition of sale under the Central Sales Tax Act covers transfer of property in goods for valuable consideration, and REP licences or exim scrips are goods because they have market value and are freely tradable. The agreements showed that the export houses would receive the export benefits only because the appellant executed disclaimers and authorised direct issue in their favour. The substance of the transaction was therefore a transfer of the export entitlements, not a mere formal disclaimer.

Conclusion: The disclaimer and consequent direct issue of REP licences or exim scrips to the export houses constituted a sale taxable under the Central Sales Tax Act, against the assessee.

Issue (ii): Whether the percentage of f.o.b. value paid by export houses, described as service charge, premium, commission or incentive, was the consideration for such sale.

Analysis: The arrangement did not show any real service rendered by the appellant to the export houses. The claimed income-tax benefit under section 80HHC was illusory as the export proceeds and profits were received by the appellant, not the export houses. On the real substance of the bargain, the only meaningful payment by the export houses was the agreed percentage of f.o.b. value in return for the export benefits secured through the appellant's disclaimer.

Conclusion: The amount paid by the export houses was the consideration for the transfer of export benefits, against the assessee.

Issue (iii): Whether the transfer of export benefits took place outside the territory of India so as to escape Central sales tax.

Analysis: The subject-matter of the sale was not the exported marine products but the REP licences or exim scrips. The transfer was completed only when, in pursuance of the agreement and disclaimer, the licensing authority issued the licences or scrips to the export houses. The taxable event therefore occurred within India and not in an export transaction outside the territory of India.

Conclusion: The transfer did not occur outside the territory of India and remained liable to Central sales tax, against the assessee.

Final Conclusion: The revisional order was upheld and the appeals failed because the disclaimer arrangement was held to be a taxable sale of export entitlements for valuable consideration within India.

Ratio Decidendi: Where an assessee entitled to export-linked licences or scrips, for consideration, executes disclaimers enabling direct issue of those tradable entitlements to another party, the transaction is a sale of goods and the taxable event arises on such direct issue within India.

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