2017 (12) TMI 1078 - AT - Central Excise

Appellate Tribunal Rules Transfer of Sugar Quota Rights as Sale of Goods

The appellate tribunal concluded that the transfer of rights and privilege of export of sugar quota constitutes a sale of goods based on precedents set by ... Sale of goods - transaction in goods - service - transfer of rights and privilege of export - intrinsic value and marketability - REP licence/DEPB treated as goods - exigible to taxSale of goods - transfer of rights and privilege of export - service vs goods - intrinsic value and marketability - REP licence/DEPB treated as goods - Transaction consisting of transfer of rights and privilege of export of sugar quota on receipt of consideration is a transaction in goods and not a service. - HELD THAT: - The Tribunal accepted the reasoning in Vikas Sales Corporation and the reaffirmation in Yasha Overseas that instruments like REP licences or DEPB credits possess intrinsic value and are freely tradable market commodities. Such instruments, by virtue of their intrinsic value and transferability, qualify as goods for the purposes of sales taxation and their sale is exigible to tax. Applying that principle, the transfer of rights and privileges of export of sugar quota, when made for consideration, is to be characterised as a sale of goods rather than a service. The Tribunal therefore rejected the contention that the transaction is a service and confirmed the findings of the Commissioner (Appeals).Appeal dismissed; transaction held to be sale of goods and not a service; Order-in-Appeal confirmed.Final Conclusion: The appeal is dismissed and the Order-in-Appeal confirming that the transfer of export quota rights is a sale of goods (not a service) is upheld; the miscellaneous application for stay is disposed of. Issues:Whether the transfer of rights and privilege of export of sugar quota, on receipt of consideration, constitutes a service or a transaction in goods.Analysis:The appeal in question revolved around determining the nature of a transaction involving the transfer of rights and privilege of export of sugar quota by the respondent assessee. The key issue was whether this transaction should be classified as a service or a transaction in goods. The Learned Commissioner (Appeals) relied on the ruling of the Hon'ble Supreme Court in Vikas Sales Corporation case, which dealt with the transfer of REP licence/Exim scrips and held that such transfers constitute a sale of goods. The Supreme Court interpreted the definition of goods under the Central Sales-Tax Act, 1956, to include all movable property, emphasizing that licenses have inherent value and are freely bought and sold in the market, thus qualifying as goods. This interpretation was further supported in the case of Yasha Overseas v/s Commissioner of Sales Tax, where the Supreme Court reiterated that certain licenses, like REP license, have intrinsic value and are considered goods for sales tax purposes.The Supreme Court clarified that DEPB, similar to REP license, possesses intrinsic value and is considered a market commodity, thus qualifying as goods under sales tax laws. Drawing analogies with prize-winning lottery tickets, prepaid meal tickets, petrol coupons, and flying miles credit, the Court emphasized that items with inherent value and market transferability are considered goods. The Court concluded that the sale of DEPB is subject to tax, affirming the position established in previous judgments. Consequently, the Court dismissed all appeals related to the classification of such transactions, holding that DEPB and REP license are goods under sales tax laws.In light of the precedents set by the Supreme Court in Vikas Sales Corporation and Yasha Overseas cases, the appellate tribunal concluded that the transaction involving the sale of rights and privilege of export of sugar quota should be treated as a sale of goods, with no service element involved. Therefore, the appeal was dismissed, and the Order-in-Appeal was confirmed based on the legal interpretation provided by the Supreme Court in the aforementioned cases. The tribunal's decision aligned with the established legal principles regarding the classification of transactions involving the transfer of certain rights and privileges, emphasizing the goods' intrinsic value and marketability in determining their classification for tax purposes.