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2012 (11) TMI 1056 - HC - VAT and Sales TaxWhether the premium received on surrender of REP licences/exim scrips is sale consideration ? Whether the transaction of surrender of the REP licences/exim scrips pursuant to circular No. 11/93 dated May 5, 1993 is in the nature of sale within the meaning of section 2(1)(n) of the Andhra Pradesh General Sales Tax Act, 1957 and therefore, would constitute turnover within the meaning of section 2(1)(s) of the Andhra Pradesh General Sales Tax Act ? Held that - Admittedly the policy and system under which the REP licences/ exim scrips were issued were discontinued with effect from March 1, 1992 and the unutilized REP licences/exim scrips could be surrendered to the Government of India by the assessees and they would be paid 20 per cent premium as per the circular No. 11/1993 dated May 5, 1993. After March 1, 1992, the holders of unutilized REP licences/exim scrips cannot deal with them in the open market or utilize them for importing goods as the very policy and scheme under which they were issued are discontinued. By no stretch of imagination can it be said that such a surrender by an exporter of REP licences/exim scrips is in the course of trade or business. The premium paid by the Government to the exporters on the surrender of the REP licences/ exim scrips is only a solatium for the inability of the exporters to avail of the benefit of the incentives and in our view cannot be treated as price or valuable consideration. Therefore, the transaction of surrender of REP licences/exim scrips is not a sale within the meaning of section 2(1)(n) of the Act and also would not constitute turnover within the meaning of section 2(1)(s) of the Act.
Issues Involved:
1. Whether the premium received on surrender of REP licences/exim scrips constitutes "sale consideration." 2. Whether the transaction of surrender of REP licences/exim scrips is a "sale" within the meaning of section 2(1)(n) of the Andhra Pradesh General Sales Tax Act, 1957. 3. Whether such transactions constitute "turnover" under section 2(1)(s) of the Andhra Pradesh General Sales Tax Act, 1957. Issue-Wise Detailed Analysis: 1. Premium as Sale Consideration: The core question addressed was whether the premium received upon surrendering REP licences/exim scrips is considered "sale consideration." The court examined the nature of the transaction and concluded that the premium paid by the Government was not a sale consideration. The premium was deemed a solatium or compensation for exporters who could not utilize the incentives provided by the licences, rather than a price for the sale of goods. 2. Nature of the Transaction as Sale: The court analyzed whether the surrender of REP licences/exim scrips to the Government constituted a "sale" under section 2(1)(n) of the Andhra Pradesh General Sales Tax Act, 1957. The Sales Tax Appellate Tribunal had conflicting views in different cases. In T.R.C. Nos. 229 of 1999 and 252 of 1999, the Tribunal considered the transaction a sale, while in T.R.C. No. 164 of 2003, it did not. The High Court agreed with the latter view, emphasizing that the surrender was not in the course of trade or business but a cancellation of the facility provided by the Government. The transaction lacked the essential elements of a sale, such as mutual consent and transfer of title for valuable consideration. 3. Constitution of Turnover: The court further deliberated on whether such transactions constituted "turnover" under section 2(1)(s) of the Andhra Pradesh General Sales Tax Act, 1957. The court held that since the surrender of REP licences/exim scrips did not qualify as a sale, the premium received could not be considered turnover. The surrender was a regulatory action by the Government, not a commercial transaction in the open market. Conclusion: The High Court concluded that the surrender of REP licences/exim scrips and the receipt of a premium from the Government did not constitute a sale or turnover under the Andhra Pradesh General Sales Tax Act, 1957. The court dismissed T.R.C. No. 164 of 2003 and allowed T.R.C. Nos. 229 of 1999 and 252 of 1999, thereby ruling in favor of the assessees who contended that the premium received was not taxable as it did not arise from a sale transaction.
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