IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR WEDNESDAY, THE 28TH MAY 2008 / 7TH JYAISHTA 1930 S.T.Rev.No.132 of 2008 ---------------------------------------- (AGAINST THE ORDER DATED 27/11/2007 IN T.A.NO.96/2007 OF THE KERALA SALES-TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOTTAYAM) .................... PETITIONER/APPELLANT:- ------------------------------------- M/S.G.R.K. & COMPANY, ERAMALLOOR, ALAPPUZHA DISTRICT. BY ADV. SRI.V.P.SUKUMAR SRI.JAIRAM.V.MENON RESPONDENT/RESPONDENT:- --------------------------------------------- STATE OF KERALA, REP.BY THE CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM. BY SENIOR GOVERNMENT PLEADER SRI.MUHAMMED RAFIQ. THIS SALES TAX REVISION HAVING COME UP FOR ADMISSION ON 28/05/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & T.R.RAMACHANDRAN NAIR, J. ------------------------------------------ S.T.Rev.No.132 of 2008 ------------------------------------------ Dated, this the 28th day of May, 2008 ORDER H.L.Dattu, C.J. Sri.Muhammed Rafiq, learned Senior Government Pleader takes notice for the respondent. 2. Since the issue framed by the assessee for our consideration and decision is now squarely covered by the decision of the apex Court, though the matter is posted for admission, by consent of the learned counsel appearing for the parties to the lis, the matter is taken up for final hearing. 3. This revision petition arises out of an order passed by the Kerala Sales Tax Appellate Tribunal in T.A.No.96 of 2007 dated 27th November, 2007. By the impugned order the Tribunal has rejected the appeal filed by the assessee. 4. The assessment year in question is 2002-03. The assessee has framed the following questions of law for our consideration and decision. They are as under: “(i) DEPB is issued by the Director General of Foreign Trade under the Export – Import Policy 1977 – 2002. In Chapter 7.14 of the said policy it is provided that for exporters not desirous of going through the licensing route, an optional facility is given under DEPB. The objective of DEPB Scheme is to neutralize the incidence of customs duty on the import content of the product of export. The neutralization shall be provided by way of grant of duty credit against the product of export. Under the Duty Entitlement Pass Book Scheme (DEPB), an exporter may apply for credit at a specified percentage of FOB value of exports, made in freely convertible currency. The credit shall be S.T.Rev.No.132 of 2008 2 available against such products of export and at such rate as may be specified by the Director General of Foreign Trade by way of Public Notice issued in this behalf, for import of raw materials, intermediates, components, parts, packing material etc. The holder of DEPB shall have the option to pay additional customs duty, if any, in cash as well. It is therefore clear that DEPB is a substitute for cash, or in other words, it is just like cash or demand draft. In the said circumstance, is the Tribunal justified in law in holding that transfer value of DEPB is exigible to sales tax? (ii) The Tribunal arrived at the conclusion that DEPB certificate is 'goods' on the basis of the decision of this Hon'ble Court in International Creative Foods Case (13 KTR 211). In the decision of this Hon'ble Court reported in 13 KTR 211 it was held that transfer value of DEPB certificate is exigible to sales tax. The said decision was rendered following the decision of the Hon'ble High Court of Delhi in Philco Exports Vs. Sales Tax Officers and others (124 STC 503). The decision in Philco Exports was rendered relying on the decision of the apex Court in Vikas Sales Corporation (102 STC 106). The Constitution Bench of the Hon'ble Supreme Court in Sunrise Associate's case (145 STC 576) held that the decision in Vikas Sales Corporation is erroneous and hence the very foundation of the decision of this Hon'ble Court reported in 13 KTR 211 stands demolished. The law laid down by the Hon'ble Supreme Court in the decision reported in 145 STC 576 was put to the notice of the Tribunal. Is the Tribunal still justified in relying on the decision of this Hon'ble Court reported in 13 KTR 211 without adverting to the law declared by the Apex Court in the Sunrise Associate's case (145 STC 576)? S.T.Rev.No.132 of 2008 3 (iii) The tribunal in Annexure-III order held that since the Hon'ble Supreme Court in the decision reported in 145 STC 576 overruled its earlier decisions prospectively and because the Judgment is dated 28.04.2006 the same is not applicable to the assessee's case for the assessment year 2002-03. The doctrine of prospective overruling as elaborated by the Hon'ble Supreme Court in Somaiya Organics' case (9 KTR 560) was put to the notice of the Tribunal. Is the Tribunal justified in law in holding that the decision of the Hon'ble Supreme Court reported in 145 STC 576 is not applicable to the assessee's case for the assessment year 2002-03 without even speaking about the scope of doctrine of prospective overruling as explained by the Hon'ble Supreme Court in the decision reported in 9 KTR 560?” 5. In our opinion, the questions of law framed by the assessee are no more res integra in view of the declaration of law made by the apex Court in the case of M/s.Yasha Overseas & Others v. Commissioner of Sales Tax & Others (Civil Appeal No.2155 of 2000 and connected matters disposed of on 6.5.2008). In the said decision the apex Court at paragraphs 35, 36 and 38 has observed as under: 35. Paragraph 7.32 dealt with transferability and provided as follows: “The DEPB on post export basis and/or the items imported against it are freely transferable. The transfer of DEPB shall however be for import at the port specified in the DEPB which shall be the port from where exports have been made. However, imports from a different port shall be allowed as per the terms and conditions of notification issued by Department of Revenue” S.T.Rev.No.132 of 2008 4 Paragraph 7.40 stated that pre-export DEPB would be non-transferable and also subject to actual user condition but in this case we are not concerned with pre-export DEPB. 36. It is thus to be seen that in two vital aspects, relevant to the issue under consideration, DEPB is exactly the same as REP licence. Like REP licence it has an innate value and for which it freely sells in the market. Much argument was advanced on the point that DEPB, unlike REP licence was not a licence for import of goods but the submission is clearly misconceived and unacceptable. DEPB is not a licence simply because under the liberal import policy no licence is required to import a very large number of goods and very few items, placed under the negative list, require a licence for import. We are, therefore, unable to accept the submission that DEPB is materially different from REP licence and its transfer by way of sale would not be exigible to sales tax. xxx xxx 38. Learned counsel alternatively submitted that even if the credit is seen not as a debt but as movable property, the sale of DEPB only involved the transfer of the right to claim credit. The credit not being in possession of the claimant, the right to utilize it against duty payable on a future import was certainly a beneficial interest in that movable property. Seen thus the credit would still fall within the second part of the definition of actionable claim.” 6. The apex Court has further stated that DEPB has an intrinsic value that makes it a market commodity. Therefore, DEPB, like REP licence qualifies as 'goods' within the meaning of the Sales Tax laws of Delhi, Kerala and Mumbai and its sale is exigible to tax. (underlining is by us). S.T.Rev.No.132 of 2008 5 7. In view of the declaration of law made by the apex Court in M/s Yasha Overseas' case, the questions of law framed by the assessee require to be answered against the assessee and in favour of the Revenue. 8. Accordingly this revision petition is disposed of. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (T.R.RAMACHANDRAN NAIR) JUDGE vns