2008 (5) TMI 43 - SC - VAT and Sales Tax

Levy of tax on sale of DEPB licence - REP licences appellant contention that DEPB is different from REP, so even if sale of REP is taxable, we can t say that sale of DEPB is also taxable, is not acceptable - held that DEPB has an intrinsic value that makes it a market commodity - Therefore, DEPB, like REP licence qualifies as goods and its sale is eligible to tax - lottery tickets are included in definition of goods and, hence, the sale of lottery tickets are subject to sales tax

Summary

Issues Involved:
1. Whether the decision in Vikas Sales Corporation regarding the taxability of REP licenses has been implicitly overruled by the Constitution Bench decision in Sunrise Associates.
2. If Vikas Sales Corporation remains valid, whether it applies to the sale of Duty Entitlement Passbook (DEPB).
3. The nature and taxability of DEPB under various State Sales Tax Acts.

Detailed Analysis:

1. Whether the decision in Vikas Sales Corporation regarding the taxability of REP licenses has been implicitly overruled by the Constitution Bench decision in Sunrise Associates:

The Supreme Court examined whether the three-Judge Bench decision in Vikas Sales Corporation, which held that the transfer/sale of an import license called Replenishment License (REP license) was subject to sales tax, was implicitly overruled by the Constitution Bench decision in Sunrise Associates. The Sunrise Associates case held that lottery tickets were actionable claims and thus excluded from the definition of 'goods' under the Sales Tax Act, which implied that their sale was not subject to sales tax. However, the Court noted that the Constitution Bench in Sunrise Associates firmly and expressly declined to address the taxability of REP licenses, focusing solely on lottery tickets. The Court in Sunrise Associates did not approve the reasoning in Vikas Sales Corporation to the extent that it treated the marketability of REP licenses as a distinguishing feature from actionable claims. Despite this, the Supreme Court concluded that the decision in Sunrise Associates did not alter the position regarding the sale of REP licenses as held in Vikas Sales Corporation. The intrinsic value and free transferability of REP licenses made them market commodities and 'goods' within the meaning of the Sales Tax laws.

2. If Vikas Sales Corporation remains valid, whether it applies to the sale of Duty Entitlement Passbook (DEPB):

The Supreme Court considered whether the principles laid down in Vikas Sales Corporation regarding REP licenses would also apply to DEPB. DEPB, like REP licenses, had an intrinsic value and was freely transferable. The Court noted that DEPB was part of the export and import policy and aimed to neutralize the incidence of customs duty on the import content of export products. The Court found that DEPB had similar features to REP licenses, making it a market commodity with inherent value. Therefore, the Court held that the sale of DEPB, like REP licenses, was exigible to sales tax under the Sales Tax laws of Delhi, Kerala, and Mumbai.

3. The nature and taxability of DEPB under various State Sales Tax Acts:

The Court examined the definitions of 'goods' and 'sale' under the Delhi Sales Tax Act, Kerala General Sales Tax Act, and Bombay Sales Tax Act. The definitions were found to be similar to those in the Tamil Nadu, Karnataka, and West Bengal enactments considered in Vikas Sales Corporation and Sunrise Associates. The Court concluded that DEPB, like REP licenses, had an intrinsic value and was freely transferable, making it 'goods' within the meaning of the Sales Tax laws. The Court rejected the argument that DEPB credit represented a debt or a beneficial interest in movable property not in possession of the claimant. Instead, the Court held that DEPB was clearly 'goods' and its sale was subject to sales tax.

Conclusion:

The Supreme Court held that the decision in Sunrise Associates did not affect the taxability of REP licenses as held in Vikas Sales Corporation. DEPB, like REP licenses, was found to have intrinsic value and was freely transferable, making it 'goods' within the meaning of the Sales Tax laws. Consequently, the sale of DEPB was exigible to sales tax under the Sales Tax laws of Delhi, Kerala, and Mumbai. All appeals were dismissed with no order as to costs.