2002 (12) TMI 572 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the writ petitioner-bank was a "dealer" within the meaning of section 2(c) of the Bengal Finance (Sales Tax) Act, 1941.
2. Whether the transactions involving the acquisition of Exim scrips by the writ petitioner-bank amounted to "purchases" or "surrender".
3. Whether the provisions of section 4(6)(iii) of the Bengal Finance (Sales Tax) Act, 1941, applied to the transactions in question.
4. Whether the learned Tribunal's judgment and order were sustainable.

Issue-wise Detailed Analysis:

1. Whether the writ petitioner-bank was a "dealer" within the meaning of section 2(c) of the Bengal Finance (Sales Tax) Act, 1941:
- The writ petitioner-bank argued that it was not a "dealer" as it did not carry on the business of sale or purchase of Exim scrips. The definition of "business" under section 2(1a) of the Act was cited, emphasizing that business involves volume, frequency, continuity, and regularity of transactions with a profit motive. The bank's transactions in Exim scrips were a one-time affair from March 23, 1992, to May 31, 1992, and did not exhibit the characteristics of regular business. The Supreme Court's decisions in State of Gujarat v. Raipur Manufacturing Co. Ltd. and Board of Revenue v. A.M. Ansari were referenced to support this argument.
- The Revenue contended that the bank was a registered dealer under the 1941 Act and thus liable to pay tax on goods sold. The bank's registration certificate and the provisions of section 4(6)(iii) of the Act were highlighted to establish its liability.

2. Whether the transactions involving the acquisition of Exim scrips by the writ petitioner-bank amounted to "purchases" or "surrender":
- The bank argued that the transactions were acts of surrender, not purchases, as the Exim scrips were surrendered to the bank as an agent of the Reserve Bank of India (RBI) and subsequently canceled. The definition of "surrender" from Black's Law Dictionary and other legal lexicons was cited. The bank emphasized that the Exim scrips were not intended for resale or commercial use but were canceled and returned to the original grantor.
- The Revenue, relying on the Supreme Court's decision in Vikas Sales Corporation and the Madras High Court's decision in P.S. Apparels, argued that the transactions were purchases and not acts of surrender. The Exim scrips were considered goods and their acquisition by the bank was a commercial transaction.

3. Whether the provisions of section 4(6)(iii) of the Bengal Finance (Sales Tax) Act, 1941, applied to the transactions in question:
- The bank argued that even if it were considered a dealer, the provisions of section 4(6)(iii) should be related to the business carried on by the bank. The bank's business did not include buying and selling Exim scrips, and the transactions were not for commercial profit. The bank cited the Supreme Court's decision in Govind Saran Ganga Saran v. Commissioner of Sales Tax, which emphasized the need for clear and definite ascertainability of tax components.
- The Revenue contended that section 4(6)(iii) clearly applied to the bank as a registered dealer and that the transactions in Exim scrips attracted tax liability. The plain and natural meaning of the statutory provisions was emphasized, and it was argued that there was no vagueness or inconsistency in the legislation.

4. Whether the learned Tribunal's judgment and order were sustainable:
- The bank challenged the Tribunal's judgment, arguing that it had failed to appreciate the distinction between purchase and surrender and had erroneously dismissed the bank's application. The bank emphasized that the transactions were not in the usual course of business and did not attract the provisions of section 4(6)(iii).
- The Revenue supported the Tribunal's judgment, arguing that the issues raised by the bank had been settled by the Supreme Court in Vikas Sales Corporation and other relevant cases. The Tribunal's findings were consistent with established legal principles.

Judgment:
- The court concluded that the purchase of Exim scrips by the bank did not attract the provisions of section 4(6)(iii) of the 1941 Act. The transactions were acts of surrender, not purchases, as the Exim scrips were canceled and returned to the original grantor, destroying their commercial liquidity.
- The court set aside the Tribunal's judgment and quashed the orders of assessment and appeal. The bank was declared not liable to pay purchase tax on the Exim scrips under the 1941 Act.
- The writ petition was allowed, and an injunction was issued restraining the respondents from enforcing the impugned orders. The bank was discharged from the undertaking given for the continuation of the interim order. No order as to costs was made.