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Judgment
Raju, J.—These batch of writ petitions relate to a challenge made to the levy of sales tax both under the Tamil Nadu General Sales Tax Act,
1959 and the Central Sales Tax Act, 1956, on the sale consideration or the premium as it is called by the petitioners realised on the sale or transfer
of what are known as replenishment (REP) licences/exim scrips for the assessment years 1986-87 onwards. The occasion as also the basis of
action by the authorities functioning under the above two taxation enactments to spread their net of taxation wide upon the above objects for levy
apparently appears to be the decision of the Karnataka High Court since reported in [1992] 86 STC 175 (Bharat Fritz Werner Ltd. v.
Commissioner of Commercial Taxes) rendered mainly applying the ratio of the decision of the Supreme Court in the decision reported in [1986]
61 STC 165 (H. Anraj v. Government of Tamil Nadu).
A reference to the nature, purport and the attributes of those category of licences need mention before the highly debated issue as to whether
they are ""goods"" generally and if so whether they answer the description of ""goods"" within the meaning of section 2(j) of the State law and section
2(d) of the Central Act is taken up for consideration. The Imports and Exports (Control) Act, 1947, as amended from time to time, the Imports
(Control) Order, 1955 and the periodical policy notified thereunder regulated the imports into and export outside the country and also the
channelisation of imports and exports of certain commodities. The policy so declared from time to time also contained incentive schemes and
subsidies to build up the foreign exchange resources of the country. As part of such schemes the issue of replenishment licences was introduced to
provide to registered exporters by way of import replenishment the essential inputs required in the manufacture of the products exported and also
permit flexibility to enable diversification of the export products. Apart from enabling import of relevant items of raw materials, components,
consumables and packing materials the same can be availed of for importing permissible non-OGL capital goods and up to a certain extent even at
concessional rates of customs duty. As per the procedure envisaged the REP licence will be issued in the name of the registered exporter only and
will not be subject to ""actual users condition"" and a licence-holder was enabled to transfer the licence to another person and the licence-holder or
such transferee may import the goods permitted therein. The transfer does not require any endorsement or permission from the licensing authority
and it will be governed merely by ordinary law. Consequently, clearance of goods covered by an REP licence has been allowed to be made by the
customs authorities on production by the transferee of only the document of transfer of the licence concerned in his name. The transferor is obliged
to give a formal letter to the transferee giving full particulars regarding number, date and value of the licence transferred and the name and address
of the transferee and complete description of the items of import for which the licence is transferred. This policy was in vogue till July 3, 1991 and
from July 4, 1991, the new scheme came to be introduced.
Under the new scheme introduced, the licences issued for purposes of imports by way of replenishment was ordered to be called exim scrip and
as had been before, the objective of the scheme is to provide to the registered exporters by way of import replenishment the essential inputs
required in the manufacture of the products exported and also to allow certain flexibility to enable diversification of the export products. While
allowing maximum incentive to exporters, the exim scrip licences also have been rendered transferable. As per the procedure formulated, the exim
scrip licence will be issued in the name of the registered exporter only and it will not be subject to ""actual users conditions"" and the licence-holder
may transfer the licence to any other person so that the licence-holder or the transferee may import the goods permitted therein. The procedure for
transfer was the same as was in vogue in respect of REP licence. It is seen that the exim scrips have been made freely tradeable. Taking note of the
position that importers, exporters and some regulated intermediaries or agents are dealing in them and considering the volume of trading in those
scrips and the need to assure a fair price, liquidity and transparency, the Government evolved and announced several guidelines. As part of the
above, while recognising the existing categories of traders in exim scrips, the designated financial institutions, viz., IDBI, IFCI, ICICI, EXIM Bank,
UTI, LIC, GIC and subsidiaries have been allowed either as agents of their importer/exporter customers or on their own to buy or hold or sell
exim scrips. Banks, directly dealing in the import/export transactions as authorised dealers of foreign exchange and purveyors of credit, were also
authorised to buy, hold or sell exim scrips and further allowed them to be traded on the stock exchanges subject to certain conditions. The
modalities and procedure for such tradings have also been laid down and the existing system of transfer mechanism through issue of a transfer letter
accompanying the exim scrips was made to continue and a broker could buy or sell only on behalf of his importers/exporters, customers and not in
his own name or in his own behalf. The State Bank of India, enabled to purchase exim scrips were obliged to forward paid exim scrip to the
issuing offices of the JC CIE for post payment scrutiny. As a matter of fact, the Reserve Bank of India was said to have authorised the State Bank
of India to buy the exim scrips inclusive of post paid REP licences issued up to February 29, 1992 and details of the designated branches of the
State Bank of India who would handle the purchases have also been duly notified.
The learned counsel appearing for the petitioners have urged in the forefront that the licences in question - REP/exim scrips are not ""goods"" and
that at any rate they do not come within the meaning of ""goods"" as defined in section 2(j) of the State Act and section 2(d) of the Central Act.
Elaborating the said issue, it was contended that the licences merely conferred a right to import goods from outside the country into this country
and that mere abstract and intangible right do not constitute movable property or goods. Accordingly to them, in any event, the licences in question
would stand outside the purview of section 2(j) of the State Act and section 2(d) of the Central Act falling within the exempted category of goods
specifically excluded from the statutory definitions contained therein. The further submission was that the licences in question merely entitle the
holder who may be the grantee or subsequent transferee the right to import goods from outside the country which may or may not be effected by
the holder or transferee for the time being and consequently such licences could not be held to be relatable to or representative of any goods as
such, which alone, according to the counsel for the petitioners, could be the subject-matter of levy under the Sales Tax Acts in question.
The first part of the submission as to whether the licences in question are ""goods"", in our view, stood answered and is also covered by the ratio
of the decision of the Supreme Court reported in [1986] 61 STC 165 (H. Anraj v. Government of Tamil Nadu). The apex Court was concerned
with the validity of levy of tax on sales of lottery tickets in the said case before them and in that context not only held such sales to be taxable under
the Tamil Nadu General Sales Tax Act but the court also evolved the general principles governing the determination of what constitutes ""goods"".
After adverting to the definition of ""goods"" in article 366(12) of the Constitution of India, section 2(7) of the Sale of Goods Act, 1930 and the
definition of ""movable properties"" in the General Clauses Act, it was held that there could be no dispute, the lottery tickets as such would be
movable property as opposed to immovable property and consequently would normally qualify to fall within the expression ""goods"". In Solmond
on Jurisprudence, Twelfth Edition, by P. J. Fitzgerald, at page 421, it is stated as follows :
In connection with the distinction between movable and immovable and between real and personal property, we must notice the legal significance
of the term chattel. This word has apparently three different meanings in English Law :
(1) A movable physical object; for example, a horse, a book, or a shilling, as contrasted with a piece of land.
(2) Movable property, whether corporeal or incorporeal; that is to say, chattels in the first sense together with all proprietary rights except those
which are classed as immovable. In the usage debts, shares, contracts, and other chooses-in-action are chattels, no less than furniture or stock-in-
trade. So also are patents, copyrights, and other right in rem which are not rights over land. This double use of the word chattel to indicate both
material things and rights is simply an application, within the sphere of movable property, of the metonymy which is the source of the distinction
between corporeal and incorporeal property.
The right to import goods from outside the country into this country of a particular value, which otherwise could not be done without a specific
permit granted therefore by the competent authorities, is an entitlement to a beneficial interest which is no doubt of incorporeal or intangible nature,
but that cannot prevent the licences in question which are the source of such right being regarded as ""goods"". In the decision reported in [1970] 25
STC 188 (Commissioner of Sales Tax M.P. v. Madhya Pradesh Electricity Board), the apex Court has also held, dealing with an issue arising
under the C.P. and Berar Sales Tax Act, 1947 and the Madhya Pradesh General Sales Tax Act, 1958, that electricity or electric energy would fall
within the definition of ""goods"" in those Acts. This was on the view taken by the apex Court that the definition of ""goods"" was very wide and
included all kinds of movable property and the term ""movable property"" when considered with reference to ""goods"" as defined for purposes of
sales tax cannot be taken in a narrow sense and that merely because electric energy is not tangible or cannot be moved or touched like, for
instance, a piece of wood or a book it cannot cease to be movable property when it has all the attributes of such property. That apart, the apex
Court in Anraj case [1986] 61 STC 165 has also approved the view taken by a Division Bench of this Court in [1967] 20 STC 115; AIR 1969
Mad. 184 (A. V. Meiyappan v. Commissioner of Commercial Taxes) that the right of exhibiting a feature film which was the subject-matter of the
agreement concerned in the said decision of this Court falls within the definition of ""goods"" as defined u/s 2(j) of the State Act and held that if an
incorporeal right like a copyright or an intangible thing like electric energy can be regarded as ""goods"" exigible to sales tax there is no reason why
the entitlement to a right to participate in a draw which is beneficial interest in movable property of incorporeal or intangible character should not be
regarded as ""goods"" for the purpose of levying sales tax. The plea that the licence enables a future import which may or may not be exercised and
till such right is exercised, the licences if at all carry an inchoate right has no meaning whatsoever, adjudged by the principles underlying the
definition of ""goods"" in the various provisions referred to supra including the definition of the said expression in the sales tax laws in force in the
State and the ratio of the decisions referred to above. It needs no serious efforts or exercise to hold that the licences in question would constitute
goods"" generally and also for purposes of sales tax laws in force in the State.
The next submission that requires for our consideration would be as to whether the licences could be called or classified as ""actionable claims"",
stocks and shares and securities and thereby stand excluded on account of the exception created by the sales tax laws in force in the State. As to
what constitutes an ""actionable claim"" has been dealt with also by the apex Court in Anraj case [1986] 61 STC 165. While adopting the principles
enunciated in section 3 of the Transfer of Property Act, 1882, for that purpose, it has been held therein as hereunder :
Since ''goods'' are defined to exclude actionable claims it will be useful at this stage to refer to the definition of ''actionable claim'' as given in
section 3 of the Transfer of Property Act, which runs thus :
''Actionable claim'' means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of
movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the
civil courts recognise a affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.
This definition an analysed in Mulla''s Transfer of Property Act (at page 805 of the 6th Edition) comprises two types of claims - (a) a claim to
unsecured debts and (b) a claim to beneficial interest in movable property which is not in possession, actual or constructive - whether present or
future, conditional or contingent. We would be concerned not with (a) but with (b) in this case, and reading (b) it is clear that if the beneficial
interest in movable property is not in possession of the claimant it will be an actionable claim but if it is in his possession or enjoyment it will not be
an actionable claim but a chose in possession.
The right under the licences can by no stretch of imagination, be said to answer the two types of claims noticed supra. In our view, the rights to
import conferred under the licences in question are very valuable rights and as slips of paper or memoranda evidencing the entitlement and right to
import goods of the category and of value from outside the country into this country, in a sense by itself could be regarded as an article of
merchandise and, therefore, would constitute ""goods"" capable of themselves being bought or sold in the market. The submission that the licences
under consideration are actionable claims, therefore, is not tenable.
Equally untenable is the submission that the licences partake the character of ""stocks and shares and securities"". The expressions ""stocks and
shares and securities"" have to be construed contentiously and ""stocks"" meaning thereby ordinary proprietary stock is in substance identical with
shares and ""share"" means the share capital of a company. In substance the expressions ""stocks and shares and securities"" would refer to
documents issued under the common seal of a company that the bearer thereof is entitled to the share specified therein in the share capital of the
company. The licences cannot be treated as such, and there can be no two views on this issue. The licences under consideration cannot also be
claimed to be ""securities"" which again and particularly having regard to the context is referable to only shares, scrips, stocks, bonds, debentures
and should always mean or aim at making the payment of any money more assured payment and more readily recoverable. The licences under
consideration can hardly be claimed to satisfy this criteria also. Therefore, we are of view that the licences under consideration which have been
held by us to be ""goods"" do not fall within the excluded category or class of goods so as to take them outside the purview of the sales tax laws in
force in the State.
The learned counsel appearing for the petitioners with the exception of Mr. C. Natarajan, one of the learned counsel who also made
submissions by way of addition to the submissions made by the others, forcefully contended that the licences in question have been issued as part
of the scheme and policy underlying exports and imports evolved under the Imports and Exports (Control) Act, 1947 and with effect from June
19, 1992 under the Foreign Trade (Development and Regulation) Act, 1992, a subject and topic of legislation exclusively within the competence
of the Parliament in view of List I, entry 41 of the Seventh Schedule to the Constitution of India and that, therefore, the licences so issued under the
authority of such a law cannot be subjected to any levy of sales tax by the State Legislature and on this ground alone, the levy proposed under the
sales tax laws in force in this State is unconstitutional, void and unenforceable. No doubt List I, entry 41 of the Seventh Schedule which reads as
trade and commerce with foreign countries; import and export across customs frontiers, definition of custom frontiers"" is a topic of legislation
exclusively at the disposal of Parliament of India. Similarly inter-State trade and commerce is also a subject included in List I, entry 42 as an
exclusive Central subject of legislation as against the subject ""trade and commerce within the State, subject to provisions of entry 33 of List III"",
which has been exclusively made a State subject, of course subject to entry 33 of List III of the Seventh Schedule to the Constitution of India. But,
the above referred to legislative entries have no relevance or concern with the levy of any tax and particularly levy of tax on sales or purchases of
goods imported into or for export outside the country since they are dealt with and distributed also differently and specifically. The subject of levy
of taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter-State trade and
commerce is exclusively earmarked to the Parliament by virtue of entry 92-A of List I in the same manner as the allocation of the subject ""taxes on
the sale or purchase of goods other than newspapers, subject to the provisions of entry 92-A"" of List I has been exclusively made in favour of the
State Legislature under entry 54 of List II of the Seventh Schedule to the Constitution of India. The above referred to contention on behalf of the
petitioners, in our view, totally ignores the obvious and indisputable position that the Constitution of India effects a complete separation of the
taxing power of the Union and of the States under article 246 of the Constitution read with the Lists in the Seventh Schedule leaving no scope for
even any overlapping exercise. Even that apart, there is complete distinction between general subjects of legislation and entries of taxation. Even
among the provisions contained in List I and List II, the general subjects are distinctly dealt with as one group of entries and powers of taxation as
a separate group and this method of mutual exclusiveness is brought out by the further fact that in List III, the Concurrent List, there is no entry
relating to a tax but it contains only an entry relating to levy of fees in respect of topics specified in that List, other than court fees. The framers of
Constitution have taken sufficient care to ensure that a conflict of the taxing power of the Union and of the States cannot arise. Further, the power
of taxation has always been treated as a distinct matter for purposes of legislative competence and consequently apart from the position that the
power to tax cannot be deduced from a general legislative entry as an ancillary power the element of taxation has been held not to directly flow
from the power to regulate trade and commerce. We find no rhyme or reason in the attempt sought to be made to visualise an alleged conflict
without any regard to the pith and substance of the legislative enactments made in exercise of the powers under List I, entry 41 on the one hand
and List II, entry 54 on the other and acceptance of the plea on behalf of the petitioners would render the power conferred upon the State
Legislature under List II, entry 54 completely otiose and totally meaningless. Consequently, we are unable to persuade ourselves to give credence
to or countenance the plea of want of legislative competency in the State Legislature to subject the sales and purchases of licences under
consideration to sales tax under the State law or even the Central law, depending upon the facts and exigencies of each case.
Further, under the sales tax laws in force in the State, the incidence of taxation and the taxable event is the sale of the licences in question for
consideration in return and not either the event of import or even the goods imported into this country from outside the country. The fact that such
licences are issued in favour of an exporter as an incentive or a privilege to encourage export or earn for the country the required foreign exchange
does not in any manner alter the position that the privilege or right embodied in the form of a document constitutes ""goods"", the sale or transfer of
which for consideration attracts liability to sales tax either under the State Act or under the Central Act as the case may be. The licence though
entitles and enables the holder, who may be either the grantee or the transferee from such grantee, by itself to import into this country from outside
the country goods worth a particular value, but by itself the said licence does not assure the grant or secure the payment of any money as such to
the holders of the licences. The contentions to the contrary therefore, are devoid of merit.
Mr. C. Natarajan, one of the learned counsel appearing for the petitioners, while stating that the statutory right granted to an exporter under the
licences under consideration being an intangible right which defies location in a particular place, contends that the principles flowing from article
286 and section 4 of the Central Sales Tax Act, 1956, alone would apply in fixing the situs of the sale. It is also contented that the import licences
granted have force and life all over the country and it may not be correct to say that the right exists only in a particular town or State in the Union of
India and the fact that the property is supposed to exist all over the country is indicative of the position that it has no physical existence in any one
place to render any dealing with such property a local sale in this State within the meaning of section 4 of the Central Sales Tax Act, 1956. In this
connection, the learned counsel invited our attention to some of the English decisions pertaining to patent right, bond, debt, share certificate,
goodwill and benefits arising out of a contract. Having regard to the above, the ultimate submission made on behalf of the petitioners was that the
pre-requisite for the State power of taxation treating a sale to be inside sale is the existence or situs of sale within the meaning of article 286(2) of
the Constitution and section 4 of the Central Act and the State cannot adopt or apply any other rule or principle. We consider it wholly
unnecessary to refer to the various English decisions relied upon in this regard. The norms for fixing of situs or local situation of a property varies
with the purpose, depending also on the context and the nature of the property concerned. The normal principle is that if a chattel is a physical,
tangible thing which can be touched and seen and which can be placed in a particular place, it may be locally situate at the place where it was at
the appropriate point or moment of time. Incorporeal property in the abstract may not be said to have any physical existence or locality or situs at
any one place but the same could not be the position in the conception or contemplation of law. The hypothetical assumptions and abstract
principles advanced and urged, in our view, unnecessarily sets one on an unintelligible errand wholly irrelevant for the purpose on hand. The right
or privilege or entitlement to import conferred under the licences is fortunately crystallised and incorporated in a document which has a corporeal
existence and which can be held or traded with like any other chattel or article or goods having regard to the scheme underlying and governing the
very grant. For the purpose of levy of sales tax, the taxable event is the ""sale"" to be fixed and identified in the light of the well-settled principles
emanating from the statutory provisions and those laid down by several judicial pronouncements and such an exercise pertain to the area of
assessment on an analysis of the fact-situation in each case and there is no room or scope for pleading any lack of legislative competency or total
want of jurisdiction in dealing with a definite situation or a positive claim presented by the facts in a case. Paradoxical and platitudinous pitfalls
presented on abstract and hypothetical considerations cannot provide sufficient basis in law to deny the indisputable power of the State to impose
sales tax in exercise of its powers under entry 54 of List II of the Seventh Schedule to the Constitution of India or challenge the Jurisdiction and
authority of the Constitution of India or challenge the jurisdiction and authority of the authorities entrusted with the task of assessment,
quantification and recovery of the tax under the sales tax laws in force in the State.
The endeavour liberally adopted by the counsel appearing for the petitioners to equate the licences under consideration and their sale or
purchase or transfer with the goods which such licence permits or entitles them to import appears to be in our view, a desperate attempt to cloud
the real issue and such attempts neither present any logic nor reason in them or any grievance worth credence in law. The attempts made on behalf
of some of the petitioners to draw inspiration from section 5(3) of the Central Act, for that matter also are unintelligible and illogical in the context
of consideration of levy of sales tax on the transfer or sales of REP/exim scrip licences and not of any goods actually exported or to be imported.
So far as the taxable event for consideration in these cases being the sale or transfer of the licences under consideration by a document to be
executed coupled with the handing over of the original licence, we are unable to visualise any serious difficulty in fixing the situs of the sale with the
place of such sale or transfer. The fact that those licences issued have validity or force of enforcement at all or any part of the country or that it may
be availed of to import goods from outside the country into any other part of this country, at times even outside the State of Tamil Nadu has no
relevance whatsoever in fixing or identifying the actual place or situs of the sale of these licences which alone attract the levy of sales tax.
Mr. Habibullah Badsha, learned Senior Counsel for the petitioner in W.P. No. 9136 of 1992, while reiterating the contentions urged by the
other learned counsel, contended that the licences under consideration have been issued in order to compensate the loss to the traders in this
country competing in the world market and being a statutory right flowing from a statute, it cannot be taxed. It is also stated that it is in the nature of
an incentive or subsidy and consequently, the levy of tax would defeat the very purpose and object of the grant. Mr. R. L. Ramani, learned counsel
appearing for the petitioner in W.P. No. 16025 of 1992, contended that the licence by itself has no intrinsic value and, therefore, could not be
treated as ""property"". Mr. S. V. Subramaniam, learned Senior Counsel appearing for the petitioner in W.P. No. 2901 of 1993, contended that the
sale or purchase of a licence is inextricably connected with the import and, therefore, could not be subjected to levy. As noticed earlier, the
submissions of the nature proceed on unwarranted assumptions wholly irrelevant for the purpose of consideration on hand. To equate the levy on
sales or purchase of the licences under consideration, to a levy on any statutory right or the goods permitted to be imported would be an exercise
in futility. The fact remains that the tax sought to be levied is on the event of sale of an instrument conferring rights, which itself constitutes like any
other article of merchandise capable of being sold or conveyed. The object with which the scheme of licence under consideration is granted,
equally is no ground to render it any the less a sale attracting liability to tax. Mr. Habibullah Badsha, learned Senior Counsel, further raised a
contention based on the orders of the Government of Tamil Nadu in G.O. Ms. No. 150, Industries (MIG-2) dated April 24, 1993 and G.O. Ms.
No. 258, Industries (MIG-II) dated June 30, 1993 that this Court should direct the payment of the grant of subsidy even before the actual
payment of tax. According to the learned counsel, the initial payment of tax and thereafter getting reimbursed from the Government by way of
subsidy creates avoidable hardship and inconvenience and consequently, this Court should direct the Government to adjust the entitlement of
subsidy worked out on the basis of the orders of assessment and appropriate the same as against the tax dues, without subjecting the petitioner to
the onerous liability of paying first and getting it later. The Government of Tamil Nadu, no doubt, in G.O. Ms. No. 150, Industries, dated April 24,
1993, considered the representations of the All India Skin and Hide Tanners and Merchants Association requesting for withdrawal of levy of 8 per
cent sales tax on REP licences/exim scrips sought to be levied with retrospective effect from 1986-87. As part of implementation of the new
industrial policy announced by the Government during the year 1992-93, they resolved to retain the levy of tax and at the same time offered a
compensatory export subsidy to electronics and leather industries alone which shall be equivalent to the sales tax payable from the date of the
order in G.O. Ms. No. 258, Industries, dated June 30, 1993. The State Government also nominated Industries Commissioner and Director of
Industries and Commerce as the agents of the Government for disbursement of the export subsidy sanctioned to the tune of Rs. 200 lakhs for
disbursement. Para 7 of the said order makes it very clear that the Industries Commissioner and Director of Industries and Commerce should draw
and disburse the export subsidy to the eligible industrialists ""after obtaining the necessary application along with the assessment order issued by the
concerned commercial tax authority"" and it further provided that ""the subsidy should be limited to the tax actually paid and should be released only
after the applicant produces a certificate issued by the concerned Commercial Tax Officer certifying to the amount of sales tax actually paid on the
REP licence/exim scrips"". The above position brought about by the two Government orders would indicate that the Government was not inclined
to grant any exemption as such under the statute in exercise of its statutory powers. Consequently, the authorities functioning under the sales tax
laws in force are not only obliged, but, have a duty to assess the transactions of the nature in accordance with law and recover the lawful taxes due
to the State. The Government, instead of according exemption from levy, has chosen to extend the benefit of subsidy sanctioned up to a particular
limit and prescribed certain eligibility conditions for the payment of such subsidy, of which one is the production of a certificate issued by the
concerned Commercial Tax Officer, certifying to the actual payment of the tax on REP licences/exim scrips. If that be the scheme or the necessary
ingredients for entitlement to the payment of a subsidy sanctioned under a particular scheme, we do not see any legal right in the petitioners to be
vindicated before this Court in this proceedings to insist upon the payment of the subsidy or adjust the subsidy that may ultimately become payable
even before the tax is paid to the State on the sales of REP licences/exim scrips. It is not for this Court to modify the scheme or alter the conditions
stipulated for disbursement of subsidy announced as part of the administrative munificence. Hence, we are unable to countenance the claim made
by the learned counsel in this regard.
Mr. Gangadharan, learned counsel appearing in W.P. No. 19467 of 1993, raised a plea that the authorities are seeking to levy sales tax also
on the value or sum received by the petitioner therein on surrendering the licence in question to the specified or designated banks and the act of
surrender cannot be treated as a transaction of sale attracting liability to sales tax. The learned Additional Government Pleader (Tax) submitted that
if in any case it is substantiated that there was merely a surrender and no transfer or sale has really taken place such transactions may not be taxed
by the assessing authorities. The submission on behalf of the petitioner, in our view, is based upon an imperfect claim on a coloured version of the
nature of the transaction itself. The act of surrender is one where the licence granted is returned back to the grantor. In the context of surrender of
rights generally it conveys an abdication or giving up of a right in favour of some one who also holds an interest in the very matter. The word
surrender"" is an anachronistic word for the identification or description of the action of the petitioner. It is not the case of the petitioner that the
licence under consideration was returned to or handed over back to the grantor-department of the Government of India but on the other hand the
specific claim is that it has been delivered to the designated bank on receipt of valuable consideration therefor. The circular orders of the
department, in unmistakable terms provide, that the Reserve Bank of India has authorised the State Bank of India ""to buy the exim scrips"" which
term would also cover the post paid REP licences up to February 29, 1992 and that the Reserve Bank of India had also disclosed details of the
designated branches of the State Bank of India and the procedure therefor. The copy of the Press release issued by the Reserve Bank of India,
REP Circular No. 12/92 dated March 27, 1992, made available by the petitioner in W.P. No. 13924 of 1992 is as hereunder :
Copy of press release issued by RBI :
Reserve Bank 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 straightway purchased
by the designated branch of State Bank of India and the premium amount would be paid to the holder of the scrips. Where the face value of the
scrip exceeds Rs. 5 lakhs, the concerned branch would send it to the Office of the JCCI, which had issued the scrip, for authentication and on
receipt of the scrip duly authenticated would pay the amount of premium.
The scheme appears to provide for sale by the grantee/holder and purchase by the designated banks as noticed supra and consequently, such sales
or purchases by the bank can by no stretch of imagination be called or characterised as an act of ""surrender"". The purchases by banks of these
licences from the holders of such licences are as much sales as the purchases by private importers who ultimately avail of them for import of goods.
Hence, we are unable to countenance the claim by the learned counsel that the authorities have either assessed or threatening to assess to sales tax
what was not a sale within the meaning of the sales tax laws in force in the State, while subjecting the turnover relating to sales of those licences to
the designated banks. The contention to the contrary, therefore, shall stand rejected.
Finally, the learned counsel appearing on behalf of the petitioners uniformly voiced their grievance against the levy of penalty or threat to levy
penalty u/s 12(3) or section 16(2) of the TNGST Act, 1959, while assessing or proposing to assess the turnover in question to tax. It is the case of
the petitioners that even the departmental authorities were under a mistaken impression about the nature of the transaction and the assessability of
such transactions to tax till the decision of the Karnataka High Court reported in [1992] 86 STC 170 and [1992] 86 STC 175 (Bharat Fritz
Werner Ltd. v. Commissioner of Commercial Taxes) and, therefore, the petitioners and other assessees could not be attributed with wilful non-
disclosure of assessable turnover. The fact remains and it is beyond controversy that at no time before the department has assessed the
transactions of the nature to tax and that both the assessees and the department shared a common view that there is no taxable turnover involved
for assessment in such cases. Not only there were bona fide reasons and genuine grounds for thinking that such transactions as are now under
consideration could not be treated as sales attracting levy of tax but the assessees could not in these cases be considered to have not disclosed the
same as taxable turnover with a view to evade or avoid or postpone the payment of tax legitimately due to the State. Though for purposes of levy
of penalty under sections 12(3) and 16(2) of the Act, a finding regarding wilful non-disclosure is a necessary ingredient and pre-requisite, it cannot
be claimed that the culpability or bona fides of the assessee are totally strange concepts even while considering the levy of penalty u/s 12(4) and
12(5) of the Act. As rightly held by the Division Bench in the decision reported in (1992) 1 MTCR 81; (printed at page 157 infra) (State of Tamil
Nadu v. Indian Silk Traders) though the element of deliberateness, wilfulness or blameworthy conduct on the part of the assessee may not be
necessary for invoking section 12 or 12(5) yet the bona fides of the assessee requires to be gone into before imposing the penalty since the
underlying intent of penalty is only to deal with the non-disclosure of a turnover which with the oblique purpose of evading liability or postponing
the payment of tax lawfully due to the State. Viewed thus, we are unable to come to the conclusion that levy of penalty is warranted at least for the
period prior to the date on which the department has first made publicly known its mind to bring to tax transactions of this nature. The respondents
have made it known that the transactions of the nature under consideration are liable to be taxed at some point of time during the assessment years
1992-93 and the various assessees had an opportunity to submit revised returns or pay tax due on the transactions in question. Consequently, we
are of the view that the penalty, if any, could be leviable only for the assessment years 1992-1993 onwards and the respective assessing authorities
shall consider the issue relating to the actual levy of penalty in individual cases depending upon the facts and circumstances of the case, in
accordance with law.
The petitioners, in some of these writ petitions, have challenged the action of the assessing authorities in bringing to tax such transactions in
those cases under the Central Sales Tax Act, 1956, on the ground that there had been no inter-State movement warranting the levy under the
Central Act. Except the said plea, the challenge is common with reference to the levy of tax both under the State Act and the Central Act. The
reasons assigned by us to reject the claim of the petitioners also would equally apply to cases relating to the levy under the Central Act. If the
petitioners or for that matter any of the assessees consider that the taxable event has not taken place inside this State in terms of the principles laid
down by the Central Act, they shall be at liberty to file statutory appeals/revisions as are permissible under law vindicating their rights in respect of
such claims and as and when such proceedings are filed, the competent and concerned authorities shall consider the claims in individual cases in
accordance with law and on their own merits. The petitioners or such of those assessees who are desirous of filing appeals/revisions in respect of
levy already made either under the State Act or Central Act by passing assessment orders shall have the period of statutory limitation fixed
therefore counted and computed from this date and the authorities shall entertain and dispose of the appeals, if any filed, in accordance with law.
We may also place on record the fact that a learned single Judge as also a Division Bench of the Karnataka High Court in the decisions
reported in [1992] 86 STC 170 and 175 (Bharat Fritz Werner Ltd. v. Commissioner of Commercial Taxes) respectively have sustained the levy
of sales tax on similar transactions. No doubt, the petitioners have urged in these cases before us some additional points which have been dealt
with by us on their own merits. That apart, we are also in respectful agreement with the view expressed by the Division Bench of the Karnataka
High Court in the decision reported in [1992] 86 STC 175 (Bharat Fritz Werner Ltd. v. Commissioner of Commercial Taxes).
We summarise our conclusions as hereunder :
(a) REP licences/exim scrips are ""goods"" in etymological sense and in common parlance as also within the meaning of section 2(1) of the TNGST
Act, 1959 and section 2(d) of the CST Act, 1956;
(b) The transfer, sale or assignment of those licences for value or consideration shall be liable to levy of sales tax under the sales tax laws in force in
the State. The sales to and purchase by designated banks are also subject to levy of tax;
(c) The respective assessing authorities shall be at liberty to proceed in the matter further after giving a further opportunity to make representations
by the assessees and in accordance with law, in cases where the proceedings have not been already finalised;
(d) Wherever the proceedings have culminated in an order of assessments made already by the competent assessing authorities, the
petitioners/assessees shall be at liberty to pursue their statutory remedies of appeal/revision and the computation and counting of the statutory
period of limitation prescribed therefore shall commence from this date and the appellate/revisional authorities shall entertain such appeals, if any
filed, in accordance with law and deal with them on merits of the contentions raised;
(e) The levy of penalty u/s 12 or 16 of the TNGST Act, 1959, shall be available to the assessing authorities in these categories of cases on and
from assessment years 1992-93 onwards, and the authorities shall be at liberty to do so having regard to the facts and circumstances of each case
on its own merits;
(f) Subject to the declaration of law as above and directions contained herein, these writ petitions shall dismissed; and
(g) There shall be no order as to costs.
RAJU and AR. LAKSHMANAN, JJ.
Immediately after the orders have been pronounced, Mr. K. M. Vijayan, learned counsel appearing for the petitioner in one of the writ
petitions, sought for a certificate of leave to appeal to the Supreme Court of India against this judgment. We, in deciding the issues raised, have
only applied the ratio of the decisions of the Supreme Court and we do not find any justification, therefore, to grant leave as prayed for. Since, in
our view, the question involved in the writ petitions does not involve any substantial question of law of great importance or as to the interpretation
of the Constitution, leave is refused.
Writ petitions dismissed.