Case: Commercial Tax Officer  Vs. State Bank Of India

was correct." 30. Thus, the Constitution Bench did not overrule the decision of the Court in Vikas Sales Corporation (supra) holding replenishment licences were goods. The Constitution Bench, however, held that the reliance placed in Vikas Sales Corporation (supra) on the observations in H. Anraj (supra), which was agreed to and stood overruled, was to this extent bad in law. To clarify, Vikas Sales Corporation (supra) specifically dealt with the transfer of replenishment licences after they had been issued. However, in Vikas Sales Corporation (supra) it was opined that the grant of a licence by the licensing authority to a registered exporter was not a sale. Sale will take place only when the registered owner further sells it to another person for consideration. The relevant paragraph of the judgment has been earlier 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 that actionable claims were not transferable for value was quite unfounded and the conclusion drawn on that basis was quite wrong. In paras 39 and 40 of the decision, Sunrise (supra) decision gave illustrations of a number of actionable claims which are transferable.41. But to our mind that does not in any way change the position insofar as REP licences are concerned. While examining the three-Judge Bench decision in Vikas (supra) earlier in this judgment it is seen that the Court first came to hold that REP licence/Exim scrip fell within the definition of goods quite independently. The Court found and held that REP licences had their own value; they were freely bought and sold in the market for their intrinsic value and for that reason alone those were goods. (See para 29 of the decision in Vikas (supra) that is reproduced above.) It was only after coming to the conclusion that the Court proceeded to examine the matter in light of the observations made in Anraj (supra) relating to lottery tickets and that too because the Karnataka and the Madras High Courts had heavily relied upon Anraj (supra) decision for holding that the sale of REP licences was exigible to sales tax. On a careful reading of the decision in Vikas (supra) it is apparent that it was the intrinsic value of REP licence that brought it within the definition of goods." 32. After so stating, the Court specifically referred to the term "goods" as interpreted in Sunrise Associates (supra) to mean the title and ownership of a thing and not the nature of interest in the goods. The question of free-marketability, it was held, was not primarily relevant as per the decision in Sunrise Associates (supra), albeit could be relied upon as an additional reason, for replenishment licences fall within the definition of "goods" quite independently. These licences could have their own intrinsic value and could be freely brought and sold at their market value. There was also a ready market for the sale and purchase of replenishment licences. 33. Thus analysed, the replenishment licences or Exim scrips would, therefore, be "goods", and when they are transferred or assigned by the holder/owner to a third person for consideration, they would attract sale tax. However, the position would be different when replenishment licences or Exim scrips are returned to the grantor or the sovereign authority for cancellation or extinction. In this process, as and when the goods are presented, the replenishment licence or Exim scrip is cancelled and ceases to be a marketable instrument. It becomes a scrap of paper without any innate market value. The SBI, when it took the said instruments as an agent of the RBI did not hold or purchase any goods. It was merely acting as per the directions of the RBI, as its agent and as a participant in the process of cancellation, to ensure that the replenishment licences or Exim scrips were no longer transferred. The intent and purpose was not to purchase goods in the form of replenishment licences or Exim scrips, but to nullify them. The said purpose and objective is the admitted position. The object was to mop up and remove the replenishment licences or Exim scrips from the market.34. Be it noted that the initial issue or grant of scrips is not treated as transfer of title or ownership in the goods. Therefore, as a natural corollary, it must follow when the RBI acquires and seeks the return of replenishment licences or Exim scrips with the intention to cancel and destroy them, the replenishment licences or Exim scrips would not be treated as marketable commodity purchased by the grantor. Further, the SBI is an agent of the RBI, the principal. The Exim scrips or replenishment licences were not "goods" which were purchased by them. The intent and purpose was not to purchase the replenishment licences because the scheme was to extinguish the right granted by issue of replenishment licences. The "ownership" in the goods was never transferred or assigned to the SBI.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]17. The aforesaid, as is manifest, authorises the SBI to purchase the Exim scrips as an agent of RBI and after payment of the premium at 20% of the value to the holder, the scrip was to be cancelled. Certain formalities were stipulated to be complied by the holder as well as by SBI.The High Court has distinguished the aforesaid authority by stating that this Court did not have the occasion to consider the effect of purchase of Exim scrips made by SBI, for it was not a part of business regularly carried on by it but was a transaction which was to be undertaken on the direction of the RBI. Exim scrips were no longer available as "goods" for the purpose of commercial transaction and were to be reduced to mere papers having no commercial value whatsoever and such a scenario changed the entire perspective. The High Court has laid emphasis on immediate cancellation of Exim scrips and after cancellation to be sent to the original granting authority.27. The controversy involved in the case at hand, in our considered opinion, has to be analysed regard being had to the existing factual score. The observations made in Vikas Sales Corporation (supra), as the aforequoted passages would show, the initial grant of license by the Government to the registered exporters was not a sale. The said finding is significant and it has potency. It is also seen that the said authority extensively relies on the earlier judgment in H. Anraj (supra) that dealt with the question whether lottery tickets are "goods" and accordingly whether sale thereof would invite sales tax. H. Anraj (supra) draws distinction between lottery tickets and steamship tickets, railway tickets, cinema tickets, etc. Salmonds Jurisprudence, 12th Edition at pagesunder the heading "The Classes of Agreements" was quoted to draw distinction between three classes, namely, agreements which create rights, agreements which transfer or assign rights, and lastly agreements which extinguish them. Agreements which create rights were divided into two subclasses, namely, contracts and grants. A contract is an agreement, which creates an obligation or right in personam between the parties, whereas a grant creates a right of another description such as leases, assignments, patents, etc. An agreement, which transfers a right, may be termed generically as an assignment. However, when a transaction extinguishes a right, it is called a release, discharge or surrender. The distinction between creation of a right by a grant and subsequent transfer or assignment was also highlighted in H. Anraj (supra) and noted by Sabyasachi Mukherjee, J. (as His Lordship then was) in his concurrent judgment with the followingIt was urged before us on behalf of the dealers that by the issue of lottery tickets, 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 the ticket and therefore it cannot be said that any transfer of right is involved, but only creation of new right by the grantor in favour of theobservations made in the aforesaid paragraphs that there is no transfer of property involved in a grant, for the rights come into existence after purchase.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 theof 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.Thus, the Constitution Bench did not overrule the decision of the Court in Vikas Sales Corporation (supra) holding replenishment licences were goods. The Constitution Bench, however, held that the reliance placed in Vikas Sales Corporation (supra) on the observations in H. Anraj (supra), which was agreed to and stood overruled, was to this extent bad in law. To clarify, Vikas Sales Corporation (supra) specifically dealt with the transfer of replenishment licences after they had been issued. However, in Vikas Sales Corporation (supra) it was opined that the grant of a licence by the licensing authority to a registered exporter was not a sale. Sale will take place only when the registered owner further sells it to another person for consideration. The relevant paragraph of the judgment has been earlier reproduced.Thus analysed, the replenishment licences or Exim scrips would, therefore, be "goods", and when they are transferred or assigned by the holder/owner to a third person for consideration, they would attract sale tax. However, the position would be different when replenishment licences or Exim scrips are returned to the grantor or the sovereign authority for cancellation or extinction. In this process, as and when the goods are presented, the replenishment licence or Exim scrip is cancelled and ceases to be a marketable instrument. It becomes a scrap of paper without any innate market value. The SBI, when it took the said instruments as an agent of the RBI did not hold or purchase any goods. It was merely acting as per the directions of the RBI, as its agent and as a participant in the process of cancellation, to ensure that the replenishment licences or Exim scrips were no longer transferred. The intent and purpose was not to purchase goods in the form of replenishment licences or Exim scrips, but to nullify them. The said purpose and objective is the admitted position. The object was to mop up and remove the replenishment licences or Exim scrips from the market.34. Be it noted that the initial issue or grant of scrips is not treated as transfer of title or ownership in the goods. Therefore, as a natural corollary, it must follow when the RBI acquires and seeks the return of replenishment licences or Exim scrips with the intention to cancel and destroy them, the replenishment licences or Exim scrips would not be treated as marketable commodity purchased by the grantor. Further, the SBI is an agent of the RBI, the principal. The Exim scrips or replenishment licences were not "goods" which were purchased by them. The intent and purpose was not to purchase the replenishment licences because the scheme was to extinguish the right granted by issue of replenishment licences. The "ownership" in the goods was never transferred or assigned to the SBI.