TaxTMI 
TaxTMI 
2016 (11) TMI 416
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.... by the Bank did not attract the provisions of Section 4(6) (iii) of the Act and resultantly quashed the orders of fora below and issued consequential directions. 2. It is necessary to state the facts in detail to appreciate the controversy at hand. The SBI is a body corporate constituted under the State Bank of India Act, 1955 for the extension of banking facilities in the country and for other public purposes. The bank has to perform various functions as per the directions issued from time to time by the RBI in keeping with the economic and monetary policies of the Central Government. 3. Policies are notified by the Government of India under the Imports and Exports (Control) Act, 1947, as amended from time to time, and the Imports (Control) Order, 1955, to regulate imports into and exports out of the country and contain different incentive schemes and subsidies to build up foreign exchange resources of the country. As the facts would reveal before July 4, 1991 there was provision for issuance of Replenishment Licences which were referred to as "REP Licences". The objective behind the grant of such licences was to provide the registered exporters the facility of importing es....
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....airman, State Bank of India, Bombay, authorising all designated branches of the said Bank to purchase Exim scrips from holders, who intended to dispose of the same at a premium of 20 per cent of the face value of the Exim scrips, from March 23, 1992, subject to certain terms and conditions. Thereafter, the General Manager (Planning of the International Banking Department of the State Bank of India) communicated to the Deputy Manager, State Bank of India, Overseas Branch, Calcutta, the respondent no.1 herein, on March 21, 1992, forwarding the memorandum of procedure drawn up by the Central Officer of the SBI for the purpose of purchasing the Exim scrips as directed by the RBI. In due course, various holders of Exim scrips sold and/or surrendered their Exim scrips to the Bank and received a premium of 20 per cent of the face value of the scrips in compliance with the direction contained in the letter of the RBI dated March 18, 1992. 7. In the course of assessment proceedings under the Act for the four quarters ending on March 31, 1993, the Commercial Tax Officer, Park Street Charge informed the assessee that apart from payment of sales tax on the sale of gold and silver, it would ....
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....e to pay tax under Section 4(1), 4(2), 4(4) or 8(3) of the aforesaid Act and since the said Bank was not a dealer under the provisions of the aforesaid Act, it did not have any liability to pay tax under Section 4(6) of the said Act. It was also submitted that the transactions involving recovery of Exim scrips from their holders could not be treated to be "purchases" for the purpose of Section 4(6) of the above Act, but amounted to "surrender" by the holders which had been wrongly equated with "purchase" at the Branch level. A further stand was taken that for Section 4(6) to apply, the purchase must have been made with the intention of re-selling the Exim scrips and that the same would be apparent from proper reading of Clauses (i) and (iii) of Section 4(6) of the above Act. It was argued that if such a construction was not adopted, Clause (iii) of Section 4(6) would be unconstitutional and violative of Article 14 of the Constitution. 10. The tribunal by its order dated 11th February, 1998 rejected all the contentions made on behalf of the appellants and dismissed the appeal preferred by them. As has been stated earlier, the SBI had not levied purchase tax. When the matter trave....
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....ause surrender is also envisaged by operation of law and hence, the concept of "surrender" is inapplicable in the instant case; and that there was enough indication of "sale" and "purchase" and transfer of property in the scrips as is evident from documents that the holder of script was "encashing" them by completely foregoing his "entitlements" under it. After so holding, the tribunal dealt with the concept of business as has been defined under Section 2(1) of the Act, referred to various decisions including Commissioner of Sales Tax v. Billion Plastics Pvt. Ltd. [1995] 98 STC 184, State of Tamil Nadu v. Burma Shell Co. Ltd. 31 S.T.C. 426 (S.C.), District Controller of Stores v. A.C. Taxation Officer 37 S.T.C. 423 (S.C.) and State of Tamil Nadu v. Binny Ltd., Madras 49 S.T.C. 17 (S.C.), Board of Revenue v. A.M. Ansari 38 S.T.C. 577 (S.C.) and State of Gujarat v. Raipur Manufacturing Co. Ltd. AIR 1967 SC 1066 and after deliberating on them, posed the question whether mere lack of the element of regularity or frequency, when the other elements are present would it be sufficient to keep take the transactions out of the compass of "business" and opined that where an ....
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....ness and with the intention to carry it on as a business". 11. Thereafter, it opined that the SBI is not an ordinary businessman, but it is a body created by an Act. Analysing the statutory scheme and the obligation, it proceeded to state thus: "We have to keep this distinction in mind when we consider whether purchase of exim scrips was done by the bank as a business with the intention to do a business. It is undisputed that not only the bank paid money for purchasing exim scrips but also it made some gain by receiving commission out of the transactions. Even without any commission the activity clearly constitutes a "business". Another question is : when the activity was carried on under the instructions of the Reserve Bank of India, can it be said to be a "business"? In the facts of the case, the apparently compulsory nature of purchase of exim scrips was not such as to take it out of the ambit of "business". The bank could not compel any holder of exim scrips to sell the same to it. It was wholly voluntary on the part of a holder to sell scrips to the bank. As soon as a holder exercises his opinion to sell and gives a scrip to the bank, the bank purchases it on payme....
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....rried on business of buying or selling the goods in question; that whatever may be the nature of the transaction, the Bank had only acted as an agent of the RBI in the transaction relating to Exim scrips and would not, therefore, come within the definition of the expression "dealer" as defined in Section 2(c) of the 1941 Act; that the transaction involving the acquisition of Exim scrips by the Bank could not be said to be a case of purchase but a case of surrender; that the Exim scrip was in substance a licence or a grant from the Sovereign and there could not be any sale of such Exim scrips to the Sovereign and accordingly, when the holder of the Exim scrips gives up his right in favour of the granter it is an act of surrender and nothing else; that SBI had merely acted as an agent of the Sovereign, namely, the department of the Central Government which had issued the Exim scrips, that is, the Joint Chief Controller of Import and Export and under the instruction of the RBI and once the said Exim scrips were surrendered by the holders, the same were required to be cancelled and forwarded to the office of the Joint Chief Controller of Import and Exports who had originally issued the....
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....ccording to the High Court, they were reduced to mere paper having no commercial value. The Division Bench distinguished the judgments rendered by this Court as well as by the High Courts of Madras and Karnataka. It further proceeded to opine that the purchases by the SBI were not effected in the usual course of business of the Bank, for it was a one-time affair and there was no continuity or regularity involved in such transactions so as to bring the same within the concept of business. The High Court took note of the fact that the Bank was mainly confined to purchase and sale of gold and silver. On behalf of the revenue, it was contended that the bank was a registered dealer under the Act, but the said submission did not weigh with the High Court because as the impugned order would show, it has been persuaded by the decision rendered by the Bombay High Court in Billion Plastics Pvt. Ltd. (supra). Thereafter, the High Court came to the following conclusion:- "56. ....we are not inclined to accept the arguments advanced on behalf of the Revenue that purchasing of Exim scrips on the direction of the Reserve Bank of India for the purpose of destroying its very commercial nat....
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.... following terms and conditions: a) The holder of the scrips would be required to submit an application to the designated branch in the form prescribed by the State Bank of India. b) State Bank of India would, incorporate, in consultation with their legal department, a suitable indemnity clause in the application form to be submitted by the holder of the scrip. c) As the scrip is transferred by a letter, State Bank of India would verify the letter in favour of the holder presenting the scrip and would then make payment on the basis of usual banking procedures adopted for identification of the person to whom payment is made. d) The payment would be rounded off to the nearest rupee and would be made only by means of a Crossed Banker's Cheque. The term 'Exim Scrip' would also cover post paid REP licenses issued up to 29th February 1999 of export proceeds. e) State Bank of India, Bombay Main Branch, would arrange to get daily details of scrips paid by their various designated branches and then seek reimbursement, on a consolidated basis, daily from Reserve Bank of India, Bombay on the basis of a certificate indicating the total amou....
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.... to the holder, the scrip was to be cancelled. Certain formalities were stipulated to be complied by the holder as well as by SBI. 18. Section 2(1a) of the Act defines "business" as follows:- "business" includes - (i) any trade, commerce or manufacture or execution of work contract or any adventure or concern in the nature of trade, commerce or manufacture or execution of works contract, whether or not such trade, commerce, manufacture, execution of works contract, adventure or concern is carried on with the motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, execution of works contract, adventure or concern; and (ii) any transaction in connection with, or ancillary or incidental to, such trade, commerce, manufacture, execution of works contract, adventure or concern;" 19. The term "dealer" has been defined under Section 2(iv) (c), which reads thus:- ""dealer" means any person who carries on the business of selling goods in West Bengal or of purchasing goods in West Bengal in specified circumstances or any person making a sale under Section 6D and includes - the Central or a State Government, ....
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....ufactured goods are transferred by him to a place outside West Bengal or disposed of by him, otherwise than by way of sale in West Bengal. (iii) any person, whether a dealer or not, who is not registered under this Act, of goods other than gold, rice and wheat intended for a purpose, other than those specified in clause (i)." 22. Section 6C stipulates the liability to payment of purchase tax and rate thereof. 23. We have referred to the aforesaid statutory provisions as the learned counsel for the revenue would stress upon the tenor of the said provisions and submit that respondent Bank is a dealer and once it has purchased something, which is goods, it is liable to pay the purchase tax. In essence, the learned counsel for the State would defend the order passed by the tribunal in entirety and would contend that the High Court has wholly flawed in appreciation of the factual score and the provisions applicable to the transaction. 24. In Vikas Sales Corporation (supra), the question arose whether the transfer of an Import Licence called REP Licence/Exim Scrip by the holder thereof to another person constitutes a sale of goods within the meaning of and for the purpo....
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....wn and are traded as such. They are treated and dealt with in the commercial world as merchandise, as goods. A REP Licence/Exim Scrip is neither a chose-in-action nor an actionable claim. It is also not in the nature of a title deed. It has a value of its own. It is by itself a property - and it is for this reason that it is freely bought and sold in the market. For all purposes and intents, it is goods. Unrelated to the goods which can be imported on its basis, it commands a value and is traded as such. This is because, it enables its holder to import goods which he cannot do otherwise". And again:- "Another contention raised in the written submissions of Shri K.V. Mohan is that even if the said licences/scrips are treated as goods, the tax must be levied at the first point of sale, viz., upon the authority issuing the licence. We cannot agree. The grant of licence by the licensing authority to the registered exporter is not a sale. The sale is when the registered exporter or the purchaser sells it to another person for consideration". 26. The High Court has distinguished the aforesaid authority by stating that this Court did not have the occasion to consider the ef....
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....the right to participate in the draw is created for the first time in the buyers. In other words, it was urged that by the sale of lottery ticket, the right to participate is created for the first time; if it is considered to be a "grant" and as such a sale of goods, it was contended that such right was not existing before the sale of the lottery ticket. This contention has caused me anxiety from the jurisprudential point of view. 42. I agree with respect that "grant" is an agreement of some sort which creates rights in the grantee and an agreement which transfers rights may be termed as assignment. But the question, is, before the grant, was such a right, namely the right to participate in the draw, existing in the grantor? The point made is that there is no transfer of property involved in the issue of a lottery ticket and it is only after the issue of the lottery ticket that the grantee gets a right to participate. In other words, it was sought to be urged that in a lottery, the promoter sponsoring it does not have any right to participate nor to claim a prize in a draw and these come into existence for the first time by the purchase of lottery ticket when he purchases ....
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....ghts in goods." Hence, when used in the definition of "goods" in the different sales tax statutes, the word "property" means the subject-matter of ownership. The same word in the context of a "sale" means the transfer of the ownership in goods. 36. We have noted earlier that all the statutory definitions of the word "goods" in the State sales tax laws have uniformly excluded, inter alia, actionable claims from the definition for the purposes of the Act. Were actionable claims, etc., not otherwise includible in the definition of "goods" there was no need for excluding them. In other words, actionable claims are "goods" but not for the purposes of the Sales Tax Acts and but for this statutory exclusion, an actionable claim would be "goods" or the subject-matter of ownership. Consequently, an actionable claim is movable property and "goods" in the wider sense of the term but a sale of an actionable claim would not be subject to the sales tax laws." And, again:- "51. We are therefore of the view that the decision in H. Anraj (supra) incorrectly held that a sale of a lottery ticket involved a sale of goods. There was no sale of goods within the meaning of S....
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....rlier reproduced. 31. A three-Judge Bench of the Court in Yasha Overseas v. Commissioner of Sales Tax and others (2008) 8 SCC 681 had examined the question whether the sale or transfer of replenishment licences and duty entitlement passbooks would attract sale tax. Reliance placed on Sunrise Associates (supra) to contend that the decision in Vikas Sales Corporation (supra) impliedly overruled. The three-Judge Bench did not accept the contention by stating thus:- "40. Thus, on a detailed examination, we are unable to see how the decision in Sunrise (supra) can be said to alter the position in regard to the sale of REP licences as held by the earlier decision in Vikas (supra). It is noted above that the Constitution Bench in Sunrise (supra) firmly and expressly declined to go into the question whether REP licences (or DEPB which replaced REP licences) were "goods". It is indeed true that the Constitution Bench in Sunrise (supra) did not approve the decision in Vikas (supra) insofar as it gave their free marketability as an additional reason to hold that REP licences were not actionable claim but "goods" properly so called. The Constitution Bench held that the assumption t....