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TMI Blog2008 (5) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... hok Bhan, Ms. Neera Gupta, A. Tarique, D.S. Mahra, Ravindra K. Adsure, Ms. Subhangi Tuli and R. Sathish, Advocates. JUDGMENT AFTAB ALAM, J.-1. Leave granted in the three Special Leave Petitions in this batch of six cases. 2. Does the three-Judge Bench decision of this Court in Vikas Sales Corporation Vs. Commnr. of Commercial Taxes [(1996) 4 SCC 433], holding that the transfer/sale of an import licence called Replenishment Licence (REP licence) granted under the 1992-97 Exim Policy was exigible to sales tax stands impliedly overruled by the Constitution Bench decision in Sunrise Associates Vs. Govt. of NCT of Delhi [(2006) 5 SCC 603] that held that lottery tickets were actionable claims and were, therefore, excluded from the definition of 'goods' under the Sales Tax Act and, hence, the sale of lottery tickets was not subject to sales tax and the earlier two-Judge Bench decision of the court in H. Anraj Vs. Govt. of Tamil Nadu [1986) 1 SCC 414] holding otherwise, did not lay down the correct legal position? It is to consider this question that this batch of six cases was referred to the three-Judge Bench. 3. Apparently, lottery tickets are not the same thing as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternatively argued that assuming, though not admitting that lottery tickets are a kind of movable property or some kind of merchandise they would be so only in the limited sense but in pith and substance they are 'actionable claims' that are expressly excluded from the definition of 'goods'. A two-Judges' Bench of this Court repelled both the contentions and in paragraph 27 of the judgment held that : ".......a sale of a lottery ticket confers on the purchaser thereof two rights (a) a right to participate in the draw and (b) a right to claim a prize contingent upon his being successful in the draw. Both would be beneficial interests in movable property the former 'in praesenti', the latter 'in futuro' depending on a contingency. Lottery tickets, not as physical articles, but as slips of paper or memoranda evidence not one but both these beneficial interests in movable property which are obviously capable of being transferred, assigned or sold and on their transfer, assignment or sale both these beneficial interests are made over to the purchaser for a price. Counsel for the dealers sought to contend that the concept of a lottery cannot be sub-divided in two parts, namely, a rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under and in accordance with a licence or a customs clearance permit issued under that Order, or (ii) if they were covered by an Open General Licence (subject to such conditions as might be stipulated), or (iii) if they were covered by the Savings Clause 11 of the Imports (Control) Order. Under the provisions of the 1947 Act and the Control Order 1955, the Government of India issued the Import and Export Policy for the period April, 1988 to March, 1991. The Policy had the definition clauses in Chapter I where 'Registered Exporter' was defined to mean a person holding a valid Registration Certificate issued by the specified designated authorities for the purposes of Export Promotion'. Chapter XV of the policy document dealt with the Import Policy for Registered Exporters. Paragraph 164 in that chapter declared that the object of the scheme was to provide to the Registered Exporters by way of import replenishment, the essential inputs required in the manufacture of the products exported and also to allow certain flexibilities to enable diversification of the export products. Paragraph 165(1) provided that all exports subject to certain specified exception would qualify for the gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a business but it also excluded competition. Hence, it could not be said that it was only a beneficial interest in some moveable property, not in the holder's possession but it was itself a valuable right and it was undeniably freely transferable. In taking the view that REP licence was not merely actionable claim but it constituted 'goods', amenable to sales tax, the Karnataka High Court substantially relied on the earlier decision of this court in Anraj. It pointed out that if a lottery ticket that gave its holder only the right to participate in the lottery draw was 'goods' (as held by this court in Anraj) there was no reason why REP licence carrying a far more valuable and tangible right may not be 'goods'. 10. The Madras High Court also rejected the challenge to imposition of tax on transfer of REP licences. 11. The matter finally came to this court in a batch of appeals from the High Courts' decisions and writ petitions directly filed here, with the leading case being Vikas Sales Corporation and was decided by a Bench of three-Judges. 12. In Vikas it was noticed at the outset that the High Courts' judgments were influenced mainly by the decision in Anraj (Paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to Black's Law Dictionary (6 th . Edn. 1990), Dictionary of Commercial Law by A.H. Hudson (published by Butterworths, 1983) and Jowitt's Dictionary of English Law (Sweet and Maxwell Limited, 1977) and noted that all the commentaries and the referred case law uniformly emphasised the expansive manner in which the expression 'property' was understood. The court also referred to the meanings of the term 'property' set out in Chapter 13, "The Law of Property" in Salmond's Jurisprudence (12 th . Edn. 1966) cited by the counsel for the assesses and observed that in Salmond's there was nothing that would militate against the meanings ascribed to the expression in the authorities earlier referred to by the court and as a matter of fact those were consistent with each other. 15. The court then examined the features of REP licence and in particular it's free transferability for consideration and finally recorded its conclusions in paragraph 29 of the judgment as follows: "The above provisions do establish that REP Licences have their own value. They are bought and sold as such. The original licensee or the purchaser is not bound to import the goods permissible thereunder. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent." When these licences/scrips are being bought and sold freely in the market as goods and when they have a value of their own unrelated to the goods which can be imported thereunder, it is idle to contend that they are in the nature of actionable claims. Indeed, in Anraj the main contention of the petitioners was that a lottery ticket was in the nature of an actionable claim. The said argument was rejected after an elaborate discussion of law on the subject. We agree with the said decision and on that basis hold that the REP Licences/Exim Scrips are not in the nature of actionable claims." The court then considered the decisions relied upon on behalf of the assessees and held those were of no assistance to the appellants/petitioners before the court. Then commenting upon the decision relied upon by the counsel for the State of Tamil Nadu the court made the following observation in paragraph 42 of the judgment: "....Having regard to the context in which the said question had arisen, we do not think it necessary to refer to the observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Article 246(3) of the Constitution. It also referred to Entry 92-A of List I of that Schedule. It noted that Clause 12 of Article 366 of the Constitution, before its amendment, defined 'goods' as including "all materials, commodities and articles" but it did not define the expression 'sale of goods'. It then referred to the Constitution Bench decision in State of Madras V. Gannon Dunkerley Co. (Madras Limited), [1959 SCR 379] that held that in the absence of a definition in the Constitution the expression must have the same meaning as given to it in section 4 (1) of the Sales of Goods Act where it is defined as a "contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price". The narrow meaning ascribed to the expression by this court was naturally followed by courts all over the country and this led to the amendment of Article 366 by insertion of clause 29A, defining 'Sale of Goods' so as to include the six kinds of transactions which, as a result of the Court's decision in Gannon Dunkerley, were excluded from the expression. It took note of sub-clause (a) of clause 29-A which is as follows: "29-A "tax on the sale or purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and was merely a convenient mode for ascertaining the identity of the winner. It then examined the conclusion arrived at by the Court in Anraj and in paragraph 14 of the judgment summed up the ratio of the Anraj decision as follows: "The Court in H.Anraj came to the conclusion that the transfer of a lottery ticket upon consideration paid by the purchaser was not a mere contract creating an obligation or right in personam between the parties, but was in the nature of a grant. The Court noted the various definitions of the word "lottery" in dictionaries and authoritative text books and decisions of the courts and held that a lottery was composed of three essential elements, namely, (1) chance, (2) consideration; and (3) prize. As we have mentioned earlier, according to the learned Judges a sale of a lottery ticket conferred on the purchaser two rights viz. (a) the right to participate in the draw, and (b) the right to claim a prize contingent upon the purchaser being successful in the draw. Both were held to be beneficial interests in movable property, the former in praesenti, the latter in futuro depending on the contingency." The Sunrise decision then proceeded to note how th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses of Article 366(29-A) (a) of the Constitution and the State sales tax laws, was correct." Having thus identified the issue that came up for consideration before it, the Court, in view of the apparent divergence in understanding Anraj, once again analysed the decision and in paragraphs 32 and 33 of the judgment held and found that in Anraj the lottery ticket was held to be 'goods' - not as a physical article but as a slip of paper or memorandum evidencing (a) the right to participate in the draw, and (b) the right to claim a prize contingent upon the purchaser being successful in the draw. Further, for the purpose of levy of sales tax, lottery ticket could be regarded as 'goods' properly so called insofar as it entitled its holder to take part in the draw. In other words, lottery ticket, to the extent it evidenced the right to claim the prize, was not 'goods' but an actionable claim and, therefore, expressly excluded from the definition of 'goods' under the sales tax laws. A transfer of it was consequently not a sale. The lottery ticket per se had no innate value. The Delhi High Court was, therefore, plainly in error in interpreting and following Anjar. 23. Having thus set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision in Sunrise observed as follows: "It was assumed that actionable claims are not transferable for value and that that was the difference between "actionable claims" and those other goods which are covered by the definition of "goods" in the Sale of Goods Act, 1930 and the sales tax laws. The assumption was fallacious and the conclusion insofar as it was based on this erroneous perception, equally wrong." The decision in Sunrise then examined the nature of a ticket. It referred to Webster's Words and Phrases, Permanent Edn., Vol.25-A and in paragraph 43 came to hold as follows: "The sale of a ticket does not necessarily involve the sale of goods. For example, the purchase of a railway ticket gives the right to a person to travel by railway. It is nothing other than a contract of carriage. The actual ticket is merely evidence of the right to travel. A contract is not property, but only a promise supported by consideration, upon breach of which either a claim for specific performance or damages would lie (Said v. Butt) [1920 (3) KB 497]. Like railway tickets, a ticket to see a cinema or a pawnbroker's ticket are memoranda or contracts between the vendors of the tick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not and was not suggested to be the movable property. The only object of the right to participate would be to win the prize. The transfer of the right would thus be of a beneficial interest in movable property not in possession. By this reasoning also a right to participate in a lottery is an actionable claim." It thus arrived at the conclusion that the decision in Anraj wrongly held that sale of lottery ticket is a sale of goods. 24. The decision in Sunrise makes two very significant points and to us it appears that the decision mainly turns on those two points. The first is with regard to the two different meanings of 'property', as highlighted in paragraph 35 of the judgment and the second is with regard to the distinction between interests in goods and a contract as highlighted in paragraph 43 of the judgment. In paragraph 35 of the decision the court explained that the word 'property' occurring both in the definitions of 'goods' and 'sale' carries different meanings. In the definition of 'goods' the word 'property' is used to mean the subject matter of ownership, that is to say, the thing itself. In the definition of 'sale' the same word is used to mean the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis was quite wrong. In paragraphs 39 and 40 of the decision, the Sunrise decision gave illustrations of a number of actionable claims which are transferable. 28. But to our mind that does not in any way change the position insofar as REP licenses are concerned. While examining the three-Judge Bench decision in Vikas earlier in this judgment it is seen that the Court first came to hold that REP licence/exim scrip fell within the definition of goods quite independently. The court found and held that REP licenses had their own value; they were freely bought and sold in the market for their intrinsic value and for that reason alone those were goods. (See paragraph 29 of the decision in Vikas that is reproduced above). It was only after coming to the conclusion that the Court proceeded to examine the matter in light of the observations made in Anraj relating to lottery tickets and that too because the Karnataka and Madras High Courts had heavily relied upon the Anraj decision for holding that the sale of REP licences was exigible to sales tax. On a careful reading of the decision in Vika it is apparent that it was the intrinsic value of REP licence that brought it within the def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded by the decision in Vikas. 30. This takes us to the next question, whether what is said in Vikas in regard to REP licences would also apply in the case of DEPB. On behalf of the appellants it is strongly contended that DEPB has materially different features and hence, the decision in Vikas will have no application to it. Mr.A.K.Jain, learned counsel appearing for the appellants in Civil Appeal No.4075/2007 especially made elaborate arguments to bring out the points of distinction between REP licence and DEPB. But before proceeding to examine what is DEPB and how far it is different from REP licence it will be useful to take a look at the provisions of law under which the present cases arise and to establish their similarity with the statutory provisions that came up for consideration in Vikas and Sunrise. As noted above, the present appeals arise under the Delhi Sales Tax Act, 1975, the Kerala General Sales Tax Act, 1963 and the Bombay Sales Tax Act, 1959. 31. In the Delhi Sales Tax Act `goods' is defined in Section 2(g) as follows: ""goods" includes all materials, articles, commodities and all other kinds of movable property, but does not include newspapers, actionab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subscription, but does not include a mortgage, hypothecation, charge or pledge; and the words "sell", "buy" and "purchase" with all their grammatical variations, and cognate expressions, shall be construed accordingly." Schedule C of the Bombay Act contains a list of 'Goods, Other Than Declared Goods, The Sale Or Purchase Of Which Is Subject To Sales Tax Or Purchase Tax'. At Sl.No.26(6) of the Schedule, 'credit of duty entitlement pass book' is entered with sales tax or purchase tax leviable at the rate of four per cent. 32. A perusal of the aforesaid provisions would show that the definitions of "goods" and "sale" under the Delhi, Bombay and Kerala Acts are much the same as the definitions of the two expressions in the Tamil Nadu, Karnataka and West Bengal enactments. Hence, what is said in Vikas and Sunrise in regard to the legal provisions fully applies to the cases in hand. 33. Coming now to DEPB it may be recalled that it was part of the export and import policy for the period April 1, 1997 to March 31, 2002 issued under the Foreign Trade (Development and Regulation)Act, 1992. In order to appreciate the differences between DEPB and REP licences it needs to be borne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferability and provided as follows: "The DEPB on post export basis and/or the items imported against it are freely transferable. The transfer of DEPB shall however be for import at the port specified in the DEPB which shall be the port from where exports have been made. However, imports from a different port shall be allowed as per the terms and conditions of notification issued by Department of Revenue." Paragraph 7.40 stated that pre-export DEPB would be non-transferable and also subject to actual user condition but in this case we are not concerned with pre-export DEPB. 36. It is thus to be seen that in two vital aspects, relevant to the issue under consideration, DEPB is exactly the same as REP licence. Like REP license it has an innate value and for which it freely sells in the market. Much argument was advanced on the point that DEPB, unlike REP licence was not a licence for import of goods but the submission is clearly misconceived and unacceptable. DEPB is not a licence simply because under the liberal import policy no licence is required to import a very large number of goods and very few items, placed under the negative list, require a licence for import. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To us it is plain that DEPB like REP licence has its own intrinsic value and the purchaser, on payment of consideration, buys something for its value. The DEPB credit is thus clearly 'goods' within the meaning of sales tax laws and its sale clearly exigible to tax. 41. We may observe here, if DEPB (or for that matter REP license!) has to be compared with a lottery ticket, it can only be compared with a lottery ticket that has won the prize. The prize-winning lottery ticket ceases to be a mere piece of paper having no value itself. It acquires inherent value and becomes itself a thing of value. Imagine a situation where prize winning lottery tickets are freely available for sale. (As a matter of fact, clandestine sale of the prize winning lottery ticket for conversion of black money into white is not completely unknown!). In buying the prize winning lottery ticket the purchaser would pay the consideration for the value that the piece of paper has acquired and in that situation we fail to see how that ticket can be described as anything else but 'goods'. 42. If any more analogies are to be given one might compare DEPB with prepaid meal tickets or prepaid petrol coupons or ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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