1992 (4) TMI 221 - HC - VAT and Sales Tax

Summary

Issues involved:
The issue in this case is whether sales tax is payable on the sale of replenishment (REP) licenses under the Karnataka Sales Tax Act, 1957, and whether REP licenses qualify as "goods" under the said Act.

Summary:

The appellant sold ten REP licenses during the relevant period for the assessment year 1985-86 and was served with a notice under section 12-A of the Karnataka Sales Tax Act, stating that sales tax was applicable on the sale of REP licenses based on a circular by the Commissioner of Commercial Taxes. The appellant filed a writ petition to challenge the notice and circular, arguing that REP licenses were actionable claims and therefore exempt from sales tax. The single Judge dismissed the petition.

The appellant contended that REP licenses were not property and were outside the definition of "goods" under section 2(m) of the Act. Alternatively, it was argued that REP licenses were actionable claims as they conferred a right to clear goods at the customs barrier. Reference was made to legal precedents to support this argument.

The Supreme Court judgment in H. Anraj v. Government of Tamil Nadu [1986] 61 STC 165 (SC) was crucial in determining whether REP licenses could be considered as goods for sales tax purposes. The Court analyzed the definition of "goods" and "actionable claim" to establish the nature of REP licenses in relation to the Act.

The Court concluded that REP licenses confer an immediate right to clear goods at the customs barrier, making them goods within the meaning of the Act. The premium received from the transfer of REP licenses is therefore subject to sales tax. The appeal was dismissed, and no costs were awarded. The respondents were restrained from taking further action based on the circular and notice for a specified period.

In essence, the judgment clarified that REP licenses qualify as goods under the Karnataka Sales Tax Act, making them liable to sales tax on the premium received from their transfer.