IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE THOMAS P.JOSEPH TUESDAY, THE 30TH SEPTEMBER 2008 / 8TH ASWINA 1930 ST.Rev..No. 102 of 2006 ------------------------------------- (TA.No.621/2003 OF THE KERALA AGRICULTURAL INCOME TAX AND SALES TAX APPELLATE TRIBUNAL, ADDITIONAL BENCH, KOTTAYAM (ORDER DATED 20.5.2005) (ASSESSMENT YEAR 1999.2000) .................... REVISION PETITIONER/APPELLANT: ---------------------------------------------------- M/S. INTERNATIONAL FREEZ FISH EXPORTS, AROOR, ALAPPUZHA DISTRICT, REPRESENTED BY ITS PARTNER, N.RAVEENDRANATH BHAT. BY ADV. SRI.V.P.SUKUMAR RESPONDENT/RESPONDENT: ------------------------------------------ STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM. BY SPECIAL GOVERNMENT PLEADER SRI.VINOD CHANDRAN. THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 30/09/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & THOMAS P.JOSEPH, J. ------------------------------------------------------ S.T.Rev.No.102 of 2006 --------------------------------------------- Dated, this the 30th day of September, 2008 O R D E R H.L.Dattu, C.J. In this revision petition, petitioner calls in question the correctness or otherwise of the orders passed by the Kerala Agricultural Income Tax and Sales Tax Appellate Tribunal, Additional Bench, Kottayam in T.A.No.621/2003 dated 20th May, 2005. 2. The petitioner has framed the following questions of law for our consideration and decision. They are as under: i). DEPB Certificate is issued by the Director General of Foreign Trade under the Export-Import policy 1997-2002. In charter 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 export product. The neutralization shall be provided by way of grant of duty credit against the export product. Under the Duty Entitlement Passbook Scheme (DEPB), an export may apply for credit, as a specified percentage of FOB value of exports, made in freely convertible currency. The credit shall be available against such S.T.Rev.No. 102/2006 -2- export products and at such rates 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 Duty Entitlement Passbook Scheme (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. In the said circumstance, is the Tribunal justified in law in holding that transfer value of DEPB certificate is exigible to sales tax? ii). The Tribunal arrived at the conclusion that DEPB certificate is goods on the basis of the decision of the Hon'ble Supreme Court in the case of Vikas Sales Corporation (102 STC 106). In Vikas Sales Corporation the issue involved was as to whether transfer value of REP licence was exigible to sales tax. In the said decision of the Hon'ble Supreme Court held that the objective behind issue of REP licence was to provide to the registered exporters facility for importing essential inputs required for the manufacture of products exported. The licenses thus issued were freely transferable. Those licenses have an inherent value of their own and it can be simply sold to another and that person to yet another. They are treated and dealt with in the commercial world as merchandise, as goods. It was S.T.Rev.No. 102/2006 -3- on the said reasoning that it was held by the Apex Court that it is goods and its transfer is liable to tax. In contrast, in the case of DEPB certificate there is no licence to import goods, but it is simply cash which can be adjusted against import duty payable and it can be transferred only with the prior sanction of the issuing authority. Therefore, is the Tribunal justified in law in holding that the decision in Vikas Sales Corporation can be applied to decide that DEPB is goods and its transfer is liable to sales tax under the KGST Act? iii). In the decision of this Hon'ble Court in International Creative Foods Ltd. Vs. State of Kerala (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 Officer and others (124 STC 503). The decision in Philco Exports was rendered relying on the decision in Vikas Sales Corporation (102 STC 106). Is the law laid down by this Hon'ble Court in the case of International Creative Foods Ltd (13 KTR 211) correctly decided in view of the fact that REP licence and DEPB certificate are absolutely different in character? 3. The issue involved in this case is whether the transfer value of DEPB can be subjected to tax under the provisions of the S.T.Rev.No. 102/2006 -4- Kerala General Sales Tax Act? 4. The issue is no more debatable, in view of the dicta laid down by the Apex Court in the case of M/s.Yasha Overseas & Others Vs. Commissioner of Sales Tax & Others (Civil Appeal No.2155/2000 and connected matters) disposed of on 6-5-2008. In the said decision, the Supreme Court has stated as under: “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.” 5. In view of the above, the questions of law raised by the assessee require to be answered against the assessee and in favour of the Revenue. Accordingly, the Sales Tax Revision Petition is rejected. 6. In view of the order passed in the revision petition, I.A.No.1258 of 2006 is closed. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (THOMAS P.JOSEPH) JUDGE MS