2017 (12) TMI 1078 - AT - Central Excise

Nature of transaction - service or goods - transfer of rights and privilege of export of sugar quota - whether the transaction being, transfer of rights and privilege of export of sugar quota by the respondent assessee on receipt of consideration, whether the same is a service or transaction in goods? Held that - the transaction in question regarding sale of rights and privilege of export of sugar quota is sale of goods and no service is involved - reliance placed in the case of Vikas Sales Corporation and Another Versus Commissioner of Commercial Taxes and Another 1996 (5) TMI 363 - SUPREME COURT OF INDIA , where it was held that DEPB has an intrinsic value that makes it a market commodity. Therefore, DEPB, like REP licence qualifies as goods within the meaning of the sales tax laws of Delhi, Kerala and Mumbai and its sale is exigible to tax. Appeal dismissed - decided against Revenue.

Summary

Issues:
Whether the transfer of rights and privilege of export of sugar quota, on receipt of consideration, constitutes a service or a transaction in goods.

Analysis:
The appeal in question revolved around determining the nature of a transaction involving the transfer of rights and privilege of export of sugar quota by the respondent assessee. The key issue was whether this transaction should be classified as a service or a transaction in goods. The Learned Commissioner (Appeals) relied on the ruling of the Hon'ble Supreme Court in Vikas Sales Corporation case, which dealt with the transfer of REP licence/Exim scrips and held that such transfers constitute a sale of goods. The Supreme Court interpreted the definition of goods under the Central Sales-Tax Act, 1956, to include all movable property, emphasizing that licenses have inherent value and are freely bought and sold in the market, thus qualifying as goods. This interpretation was further supported in the case of Yasha Overseas v/s Commissioner of Sales Tax, where the Supreme Court reiterated that certain licenses, like REP license, have intrinsic value and are considered goods for sales tax purposes.

The Supreme Court clarified that DEPB, similar to REP license, possesses intrinsic value and is considered a market commodity, thus qualifying as goods under sales tax laws. Drawing analogies with prize-winning lottery tickets, prepaid meal tickets, petrol coupons, and flying miles credit, the Court emphasized that items with inherent value and market transferability are considered goods. The Court concluded that the sale of DEPB is subject to tax, affirming the position established in previous judgments. Consequently, the Court dismissed all appeals related to the classification of such transactions, holding that DEPB and REP license are goods under sales tax laws.

In light of the precedents set by the Supreme Court in Vikas Sales Corporation and Yasha Overseas cases, the appellate tribunal concluded that the transaction involving the sale of rights and privilege of export of sugar quota should be treated as a sale of goods, with no service element involved. Therefore, the appeal was dismissed, and the Order-in-Appeal was confirmed based on the legal interpretation provided by the Supreme Court in the aforementioned cases. The tribunal's decision aligned with the established legal principles regarding the classification of transactions involving the transfer of certain rights and privileges, emphasizing the goods' intrinsic value and marketability in determining their classification for tax purposes.