1994 (4) TMI 366 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether REP licences/exim scrips are "goods" under the Tamil Nadu General Sales Tax Act, 1959 and the Central Sales Tax Act, 1956.
2. Whether the transfer or sale of REP licences/exim scrips is subject to sales tax.
3. Whether the licences in question can be classified as "actionable claims", "stocks and shares", or "securities".
4. Whether the State Legislature has the competency to levy sales tax on the sale of REP licences/exim scrips.
5. Whether the act of surrendering the licence to designated banks constitutes a sale attracting sales tax.
6. Whether penalties under sections 12(3) and 16(2) of the TNGST Act, 1959, are applicable for non-disclosure of the taxable turnover.

Summary:

Issue 1: Classification of REP Licences/Exim Scrips as "Goods"
The Court held that REP licences/exim scrips are "goods" within the meaning of section 2(j) of the Tamil Nadu General Sales Tax Act, 1959, and section 2(d) of the Central Sales Tax Act, 1956. The Court referenced the Supreme Court decision in [1986] 61 STC 165 (H. Anraj v. Government of Tamil Nadu), which established that intangible rights could be classified as "goods".

Issue 2: Taxability of Transfer or Sale of Licences
The Court concluded that the transfer, sale, or assignment of REP licences/exim scrips for value or consideration is liable to sales tax under the sales tax laws in force in the State. This includes sales to and purchases by designated banks.

Issue 3: Classification as "Actionable Claims", "Stocks and Shares", or "Securities"
The Court rejected the contention that the licences could be classified as "actionable claims", "stocks and shares", or "securities". It was determined that these licences do not fit the definitions of these categories and are therefore subject to sales tax.

Issue 4: Competency of State Legislature
The Court held that the State Legislature is competent to levy sales tax on the sale of REP licences/exim scrips under entry 54 of List II of the Seventh Schedule to the Constitution of India. The Court emphasized that the power to tax is distinct from the general legislative power, and there is no conflict between the State and Central legislative powers in this context.

Issue 5: Surrendering Licences to Designated Banks
The Court found that the act of surrendering the licence to designated banks constitutes a sale, as the transaction involves the transfer of the licence for consideration. Therefore, such transactions are subject to sales tax.

Issue 6: Applicability of Penalties
The Court ruled that penalties under sections 12(3) and 16(2) of the TNGST Act, 1959, are not warranted for the period before the department publicly announced its intention to tax such transactions. Penalties could be levied from the assessment years 1992-93 onwards, depending on the facts and circumstances of each case.

Conclusion:
(a) REP licences/exim scrips are "goods" under the relevant sales tax laws.
(b) The transfer, sale, or assignment of these licences is subject to sales tax.
(c) These licences are not "actionable claims", "stocks and shares", or "securities".
(d) The State Legislature is competent to levy sales tax on these transactions.
(e) Surrendering licences to designated banks constitutes a taxable sale.
(f) Penalties for non-disclosure of taxable turnover are applicable from the assessment year 1992-93 onwards.

The writ petitions were dismissed, and no costs were ordered. The Court also refused to grant leave to appeal to the Supreme Court.