1. Transfer of Import Licences (R.E.P. Licence/Exim Scrip) — Determination of whether such transfer constitutes sale of goods under State Sales Tax enactments. (Para 1 , 2 , 3 , 4 )
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1996 Supreme(SC) 886
1996(5) Supreme 42
SUPREME COURT OF INDIA
A. M. Ahmadi, C.J.I., B.P. Jeevan Reddy and Suhas C. Sen, JJ.
Vikas Sales Corporation & Anr. etc. etc. -Appellants
versus
Commissioner of Commercial Taxes & Anr. etc. etc. -Respondents
Civil Appeal Nos.7771-75 of 1996
with
Arising Out of S.L.P. (C) Nos. 10150-60/94, 10554-58/92, 10709-10/94, 10767-68/94, 11186/95, 11308-11/95, 11657/95, 11661-62/95, 11770-74/94, 11807/94, 1200-07/95, 13045-48/94, 13275-76/95, 13644-52/94, 13799-13800/94, 14441/94, 15491-97/94, 15851-52/94, 15974-78/94, 15974-78/94, 15980-81, 16097/94, 16549-53/94, 16557-58/94, 16702-04/94, 16845-54/94, 16878-81/94, 16884-87/94, 16934-36/94, 17258-90/94, 17297-98/94, 17640/95, 17990-91/94, 18064/94, 18189/94, 18203-06/94, 18208-09/94, 18298-99/94, 18301-04/94, 18404/94, 18954/94, 19016-28/94, 19221-22/94, 19787/94, 19791/94, 20353-54/94, 20362-63/95, 20371-72/94, 20787/95, 21367/94, 21402-03/94, 21752/94, 21872/94, 25721/95, 3128-29/95, 4500/95, 4554-56/95, 4574-76/95, 4581/95, 4583-84/95, 4586-87/95, 4591-92/95, 4594/95, 4596/95, 4819-24/95, 493/95, 5191/95, 5205/95, 5278/95, 5676-79/95, 6178/95, 6451/95, 7066-67/95, 7216/95, 7611/95, 7945-52/94, 8139-56/94, 8359-60/94, 8638-46/94, 8985-9004/94 and 9789-9819/94
with
W.P. (C) Nos. 106/95, 118/95, 139/95, 14-20/95, 194-95/95, 267-68/95, 279/95, 309/95, 31-33/95, 334/94, 360/95, 379/94, 408/94, 449/95, 459-60/94, 465-66/95, 469/95, 478/95, 523-26/94, 543-44/94, 554/94, 558/95, 563/94, 572/95, 605-606/95, 626-27/94, 688/95, 709-710/94, 718/95, 723/94, 748-49/94, 797-98/94, 804/94, 91/95 and 93/95
All Decided on 1-5-1996
Important Points
IMPORTANT POINT
Transfer of an Import Licence called R.E.P. Licence/Exim Scrip by the holder thereof to another person constitutes a sale of goods within the meaning of and for the purpose of the Sales Tax enactments of Tamil Nadu, Karnataka and Kerala, so exigible to sales tax.
Transfer of an Import Licence called R.E.P. Licence/Exim Scrip by the holder thereof to another person constitutes a sale of goods within the meaning of and for the purpose of the Sales Tax enactments of Tamil Nadu, Karnataka and Kerala, so exigible to sales tax.
Subject
Tax Law - Indirect Tax
Act Referred
Headnote
Sales Tax-Replenishment Licences (R.E.P)-Whether transfer of an Import Licence called R.E.P. Licence/ Exim Scrip by holder thereof to another person constitutes a sale of goods within the meaning of Sales Tax enactments of Tamil Nadu, Karnataka and Kerala?-(Yes)-It is exigible to sales tax-R.E.P. Licences/Exim Scrips constitute goods-On their transfer, sales tax is leviable-Whether these licences/scrips are securities?-(No)
Held : That R.E.P. licences have their own value. They are bought and sold as such. The original licencee or the purchaser is not bound to import the goods permissible thereunder. He can simply sell it to another and that another to yet another person. In other words, these licences/Exim Scrips have an inherent value of their own 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. (With effect from March 1, 1992, of course, the very policy and system under which these licences/scrips were being issued, has been discontinued.) (Para 24)
Further held : That the enactments in question are referable to Entry 54 in List-II and not to Entry 41 in List-I. By no stretch of imagination can they be related to Entry 41 in List-I. The State Legislatures are not seeking to make a law with respect to customs duties. They are seeking only to levy tax upon the sale of goods. The test to be applied in this behalf has been authoritatively stated by the Constitution Bench of this Court in A.S. Krishna v. State of Madras, 1957 S.C.R. 399. (Para 32)
Consequently held : That the definition of "goods" in the said Sales Tax enactments does exclude securities, but the question is whether these licences/scrips are securities. They are not. Before the definition of the expression "securities" in Clause (h) of Section 2 of the Securities Contracts (Regulation) Act was amended by Act 15 of 1992. (Para 34)
Legal Category Hierarchy
- taxation
- constitutional law
- property law
- administrative law
Table of Contents
2. Whether Import Licences constitute goods or are actionable claims, securities, or mere permissions revocable by authority, thus exempt from sales tax. (Para 9 , 26 , 32 , 34 )
3. Analysis of definitions of goods and movable property — Evaluation of inherent commercial value and transferability of licences compared to lottery tickets. (Para 11 , 12 , 13 , 18 , 19 , 20 , 21 , 24 , 25 )
4. Freely transferable licences with inherent exchangeable value traded as merchandise constitute movable property and thus goods under sales tax legislation. (Para 24 , 25 )
5. Appeals and writ petitions dismissed. (Para 34 )
6. Do R.E.P. Licences/Exim Scrips constitute goods for the purpose of sales tax?
Yes, because they are movable property with inherent value, are freely transferable, and are traded in the commercial world as merchandise, fitting the definition of goods in State Sales Tax Acts. (Para 24 , 25 )
7. Are such import licences considered actionable claims?
No, they are not actionable claims as they possess an independent value unrelated to the goods imported and are traded freely as goods in the market. (Para 26 )
8. Does the revocability of a licence by the issuing authority affect its status as property?
No, the fact that a licence can be cancelled by the appropriate authority according to law does not detract from its inherent value or its character as property. (Para 26 )
9. Do R.E.P. Licences/Exim Scrips qualify as securities under the Securities Contracts (Regulation) Act, 1956?
No, they do not fit the statutory definition of securities, nor were they declared as such by the Central Government during the relevant period. (Para 34 )
JUDGMENT
B.P. Jeevan Reddy, J.-Leave granted in Special Leave Petitions.
This batch of appeals and writ petitions raise the question-whether the transfer of an Import Licence called R.E.P. Licence/Exim Scrip by the holder thereof to another person constitutes a sale of goods within the meaning of and for the purposes of the Sales Tax enactments of Tamil Nadu, Karnataka and Kerala. If it does, it is exigible to sales tax. Otherwise not. The Karnataka and Madras High Courts have taken the view that R.E.P. Licences/Exim Scrips constitute goods and, therefore, on their transfer, sales tax is leviable. Their judgment appears to be influenced mainly by the decision of this Court in H. Anraj etc. v. Government of Tamil Nadu etc.1.
2. With a view to conserve precious foreign exchange and to channelise the nation s economy on desired lines, the Central Legislature enacted the Imports and Exports (Control) Act in 1947. Section 3 empowers the Central Government to make provisions by order published in the official gazette for prohibiting, restricting or otherwise controlling the import into and export of the goods from the country. The expression "licence" is defined in clause (i) of Section 2 to mean, a licence granted, including a customs clearance permit issued, under any control order. Pursuant to Section 3 and Section 4(a) of the said Act, the Central Government issued the Imports (Control) Order, 1955. Clause (3) (i) of the Order provides that "save as otherwise provided in this Order, no person shall import any goods of the description specified in Schedule I except under and in accordance with a licence or a customs clearance permit granted by the Central Government or by any Officer sepcified in Schedule II". The Order contains elaborate provisions governing the grant and cancellation of licences and conditions subject to which the licences have to be operated.
3. The Central Government has been issuing, from time to time, what is called the Import and Export Policy, published in the form of a brochure. The Import Policy in vogue during the years concerned herein provided for issuance of what is called "replenishment licences" (for short "R.E.P. Licences"). The objective behind the licences was to provide to the registered exporters the facility of importing the essential inputs required for the manufacture of the products exported. The essential idea was to encourage exports and for that purpose import licences called R.E.P. Licences were issued equal to the prescribed percentage of the value of exports. These licences were made freely transferable. If was provided that the transfer of such licences did not require any endorsement or permission from the licencing authority. It was clarified that such would be "governed by the ordinary law". It only required a letter from the transferor recording and evidencing the transfer. On that basis, the transferee became the due and lawful holder of the licence and could either import the goods permitted thereunder or sell it to another in turn.
4. With effect from July 3, 1991, the name of the licence was changed to Exim Scrip (Export-Import Licence). The provisions governing the Exim Scrip were broadly the same as those governing the R.E.P. Licence with certain minor variations, which are not relevant for our purposes.
5. Several registered exporters who obtained R.E.P. Licences/Exim Scrips sold them to others for profit. In fact, these licences/Exim Scrips were being traded freely in the market and on stock exchanges. The sales tax authorities of certain States proceeded to subject such sales to sales tax under their respective enactments. The assessees immediately protested contending that these licences/Exim Scrips do not constitute "goods" within the meaning of the relevant sales tax enactments and, therefore, not exigible to tax. The matter came up for consideration in the first instance before a learned Single Judge of the Karnataka High Court in Bharat Fritz Werner Ltd. v. Commissione
