2020 (6) TMI 546 - HC - VAT and Sales Tax

VAT on sale of Duty Entitlement Pass Book (DEPB) - Transaction took place in Tamil Nadu or Maharashtra - Ascertained goods or not - It is the petitioners' case that the asset in question constitutes specific and ascertained goods. Mr.Haribabu however, points out that the DEPB is categorised in Entry 70/Part B/ First Schedule to the Act as intangible goods along with copyright, patent and REP licence and is thus, according to him, unascertained - HELD THAT - Explanation (V)(a)(i) provides that the sale or purchase of specified/ascertained goods shall be deemed to have taken place in the State if the goods are within the State at the time when the contract of sale or purchase is entered into. There being no dispute on the position that the goods in question, the DEPB, and additionally, the seller as well as the buyer were all located in Bombay at the time when the transaction in question was finalised, the turnover from the transaction is liable to tax only in Maharashtra. The sole argument of the Revenue is that the petitioner is an exporter, exporting and importing from the Tuticorin Port. Clause 4.3.4 of the Foreign Trade Policy containing the DEPB Scheme makes it clear that the passbook is issued only in regard to a specified Port, which in this case is Tuticorin. This then is the only nexus which the State of Tamil Nadu has to the transaction in question and in my considered view, is insufficient to bring the transaction to tax in Tamil Nadu. In the present case, we are concerned with a tangible asset, insofar as the right in connection with the export has been reduced to a passbook, constituting specified goods - The categories of specific/ascertained goods and unascertained/future goods are separate and distinct from tangible and intangible goods. The assets may be tangible or intangible on the one hand, also simultaneously being specific/unascertained on the other. Petition allowed.

Summary

Issues:
1. Taxability of the sale and delivery of a Duty Entitlement Pass Book (DEPB) in different states.
2. Interpretation of relevant provisions of the Tamil Nadu Value Added Tax Act, 2006.
3. Classification of DEPB as specific/ascertained goods or unascertained/future goods.
4. Application of legal precedents regarding the taxation of intangible assets.

Analysis:
1. The petitioner, an exporter of prawn and fish, sold a DEPB in Bombay, Maharashtra, before utilizing it for exports. Dispute arose regarding the taxability of this sale in Tamil Nadu, where the petitioner was registered, as opposed to Maharashtra. The court analyzed the relevant provisions of the Tamil Nadu Value Added Tax Act, focusing on the definition of "sale" and the situs of the transaction.

2. The court examined Section 2(33) of the Act along with Explanation (V), which defines the scope of a sale of goods and determines the state for tax purposes. The crux of the argument revolved around whether the DEPB should be classified as specific/ascertained goods or unascertained/future goods. This classification was pivotal in deciding the appropriate state for taxation.

3. The respondent contended that DEPB falls under intangible goods, making it unascertained and taxable in Tamil Nadu due to the petitioner's registered office being there. However, the petitioner argued that since all parties involved were in Bombay during the transaction, Maharashtra should have jurisdiction for taxation. The court delved into legal precedents and the nature of DEPB to clarify its classification.

4. Drawing from previous judgments involving intangible assets like DEPB and REP licenses, the court emphasized that once reduced to a physical form, such assets are akin to specific/ascertained goods for tax purposes. The court differentiated between tangible and intangible goods, highlighting that the nature of the asset does not solely determine its classification. Relying on these precedents, the court concluded that the transaction involving the sale of the DEPB should be taxed in Maharashtra, where the sale was finalized.

In conclusion, the court set aside the impugned order and allowed the writ petition, emphasizing the importance of assessing the nature of assets and the location of parties involved in determining the appropriate state for taxation.