IMPORTANT POINT
Exim scrips when obtained from holders and returned to grantor or the sovereign authority for cancellation or extinction, the object was to mop up and remove the replenishment licences or Exim scrips from the market. SBI did not hold any goods in the scrips as agent of RBI. The “ownership” in the goods was never transferred or assigned to the SBI. Section 4(6) (iii) not attracted.

JUDGMENT

Dipak Misra, J.

The seminal question that emerges for consideration in this appeal is whether the State Bank of India (SBI) and its branches, which are registered dealers under the Bengal Finance (Sales Tax) Act, 1941 (for brevity, ‘the Act’) would be liable to levy of purchase tax under Section 5(6a) of the Act for accepting the Exim Scrips (Export Import Licence) on payment of premium of 20 per cent of the face value of the scrips in compliance with the direction contained in the letter of Reserve Bank of India (RBI) dated 18th March, 1992.

The authorities of the revenue as well as the Taxation Tribunal (for short, ‘the tribunal’) had held against the SBI but the Division Bench of the High Court of Calcutta in a writ petition has dislodged the said conclusion holding, inter alia, that the purchase of Exim scrips 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 essential goods required for the manufacture of the products to be exported. Such licences were made freely transferable and such transfer did not require any endorsement or permission from the licensing authority and only a letter from the transferor the transferee became the lawful holder of the licence and was entitled to either import the goods for which the licence had been issued or sell the licence to someone else.

4. The aforesaid policy remained in vogue till July 3, 1991, when it was substituted by a new policy with effect from July 4, 1991 and the nomenclature of the REP Licence was changed to "Exim Scrip" (Export Import Licence). The provisions governing Exim scrips were more or less the same as those governing REP licences with certain minor variations which are really not pertinent for the purpose of adjudication of the controversy.

5. In March, 1992, the RBI took a policy decision to the effect that the unutilised Exim scrips in the hands of the holders who were willing to dispose of the same should be mopped up through specified branches of the SBI. In pursuance to such a decision, the RBI issued a circular, being No. 12/92 on 27th March, 1992. The said circular is as follows:-

"Reserve Bank of India had earlier notified that arrangements were being made to purchase Exim scrips at an appropriate premium from those holders of Exim Scrips who wish to dispose of them. The designated branches of State Bank of India would be purchasing these Exim scrips from March 23, 1992, up to the end of May 1992, at a premium of 20 per cent of the face value. The list of branches which would be purchasing these Exim scrips would be notified by the State Bank of India. The bona fide holder of the Exim scrips should submit an application to the designated branch of the State Bank of India, in the form prescribed by the State Bank of India. The scrips up to the face value of Rs. 5 lakhs will be straightaway purchased by the designated branch of S