Regulatory mopping-up of Exim scrips was not a business purchase and fell outside purchase tax.

A one-time regulatory mopping-up of Exim scrips under RBI directions was not treated as business activity for purchase-tax purposes because the dealings were brief, non-recurring, and lacked the continuity, regularity and profit motive ordinarily associated with business. The receipt of the scrips was also characterised as a surrender rather than a purchase, since the scheme required immediate cancellation and return to the issuing authority, removing the scrips from commercial circulation. On that basis, the transaction did not attract section 4(6)(iii) of the Bengal Finance (Sales Tax) Act, 1941, and purchase tax could not be levied.

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Issues: (i) Whether the bank, in purchasing Exim scrips only for a limited mopping-up operation under the Reserve Bank of India's directions, could be treated as carrying on business in those scrips and therefore as a dealer for purchase-tax purposes; (ii) Whether receipt of Exim scrips from holders under the said scheme amounted to a purchase attracting section 4(6)(iii) of the Bengal Finance (Sales Tax) Act, 1941, or merely a surrender outside the tax net.

Issue (i): Whether the bank, in purchasing Exim scrips only for a limited mopping-up operation under the Reserve Bank of India's directions, could be treated as carrying on business in those scrips and therefore as a dealer for purchase-tax purposes.

Analysis: The statutory concept of business requires volume, frequency, continuity and regularity of transactions, ordinarily with a profit motive. The bank's dealings in Exim scrips were confined to a brief, one-time period pursuant to regulatory instructions and were not part of its ordinary business of dealing in such instruments. The transaction was not undertaken for commercial profit and lacked the continuity and regularity necessary to constitute business in Exim scrips.

Conclusion: The bank was not carrying on business in Exim scrips in the sense required to treat it as a dealer for this transaction.

Issue (ii): Whether receipt of Exim scrips from holders under the said scheme amounted to a purchase attracting section 4(6)(iii) of the Bengal Finance (Sales Tax) Act, 1941, or merely a surrender outside the tax net.

Analysis: The scheme required the purchased scrips to be cancelled immediately and returned to the original issuing authority, thereby destroying their commercial liquidity and removing them from market circulation. The transaction was designed as a mopping-up operation, not as an acquisition for resale or commercial exploitation. In this setting, the transfer was closer to surrender than purchase, and the earlier commercial treatment of freely transferable Exim scrips was inapplicable.

Conclusion: The transaction did not attract section 4(6)(iii) and could not be taxed as a purchase.

Final Conclusion: The tax assessment and appellate order were unsustainable, and the bank's acquisition of Exim scrips under the Reserve Bank of India's circular was held to fall outside the purchase-tax provision.

Ratio Decidendi: A one-time regulatory mopping-up of Exim scrips, followed by mandatory cancellation and return to the issuing authority, is not a commercial purchase in the ordinary course of business and does not attract purchase tax under a provision aimed at business purchases of goods.

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