COMMERCIAL TAX OFFICER & ORS.versusSTATE BANK OF INDIA & ANR.

                             [2016) 5 S.C.R. 704



A                COMMERCIAL TAX OFFICER & ORS.
                                      v.
                    STATE BANK OF INDIA & ANR.
                       (Civil Appeal No. 1798 of2005)
B                          NOVEMBER 08, 2016
           [DIPAK MISRA AND SHIVA KJRTI SINGH, JJ.)
           Bengal Finance (Sales Tax) Act, 1941 - ss. 4(6) (iii), 5(6a) -
    Purchase tax - Levy of- Acceptance of Exim Scrips (Export Import
    Licence) by State Bank of India (SB!) and its branches, on payment
c   of premium of 20% of the face value of the scrips in compliance
    with the direction of RBI - Levy of purchase tax - Held: SB! not
    liable to levy of purchase tax for replenishment licences or Exim
    scrips taken as a participant in the process of cancellation -
    Replenishmell/ licences or Exim scrips are goods and when they are
D   transferred or assigned by the holder/owner to a third person for
    consideration, they would attract sale tax - When SB! took the said
    instruments as an agent of the RBI, it did not hold or purchase any
    goods - It merely acted as per the directions of the RBI. as its agent
    and as a participant in the process, to ensure that the replenishment
    licences or Exim scrips ll'ere 110 longer transferred - Intent and
E
    purpose was not to purchase good~ in the f<1r111 of replenishment
    licences or Exim scrips, but to nullify them.
          Dismissing the appeal, the Court
          HELD: 1.1 The facts of the case at hand has its distinctive
F   features and, therefore, the view of the High Court that the SBI
    was not liable to levy of purchase tax under the Act, is concurred
    with. [Para 35J(730-C)
          t.2 The replenishment licences or Exim scrips would be
    "goods" and when they arc transferred or assigned by the holder/
G   owner to a third person for consideration, they would attract sale
    tax. However, the position would be different when replenishment
    licences or Exim scrips are returned to the grantor or the
    sovereign authority for cancellation or extinction. In this process,
    as and when the goods are presented, the replenishment licence
    or Exim scrip is cancelled and ceases to be a marketable
H
                                     704
   COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                       705



instrument. It becomes a scrap of paper without any innate market      A
value. The SBI, when it took the said instruments as an agent of
the RBI did not hold or purchase any goods. It was merely acting
as per the directions of the RBI, as its agent and as a participant
in the process of cancellation, to ensure that the replenishment
licences or Exim scrips were no longer transferred. The intent
                                                                       B
and purpose was not to purchase goods in the form of
replenishment licences or Exim scrips, but to nullify them. The
said purpose and objective is the admitted position. The object
was to mop up and remove the replenishment licences or Exim
scrips from the market. (Para 33)[729-D-G]
      1.3 The initial issue or grant of scrips is not treated as        c
transfer of title or ownership in the goods. Therefore, as a natural
corollary, it must follow when the RBI acquires and seeks the
return of replenishment licences or Exim scrips with the intention
to cancel and destroy them, the replenishment licences or Exim
scrips would not be treated as marketable commodity purchased           D
by the grantor. Further, the SBI b an agent of the RBI, the
principal. The Exim scrips or replenishment licences were not
"goods" which were purchased by them. The intent and purpose
was not to purchase the replenishment licences because the
scheme was to extinguish the right granted by issue of
replenishment licences. The "ownership" in the goods was never          E
transferred or assigned to the SBl.[Para 34)[729-G-H; 730-A-B]
      Sunrise Associates v. Govt. of NCT of Delhi and others
      (2006) 5 SCC 603 : 2006 (1) Suppl. SCR 421 - relied
      on.
                                                                        F
      Vikas Sales C01poration and another v. Commissioner
      of Commercial Taxes and another (1996) 4 SCC 433 :
      1996 (2) Suppl. SCR 204;Co111111issioner of Sales Tax v.
      Billion Plastics Pvt. Ltd. (1995) 98 STC 184; State of
      Tamil Nadu" Burma Shell Co. Ltd. 31 S.T.C. 426 (S.C.);
      District Controller of Stores v. A.C. Taxation Officer 37         G
      S.T.C. 423 (S.C.); State of Ta111il Nadu v. Binny Ltd.,
      Madras 49 S.T.C. 17 (S.C.); Board of Revenue v. A.M
      Ansari 38 S.T.C. 577 (S.C.); State of G11jara1 v. Raipur
      Manufacturing Co. Ltd. AIR 1967 SC 1066:1967 SCR
      618; Stale of Andhra Pradesh v. H Abdul Bakhi and                H
706          SUPREME COURT REPORTS                       [2016] 5 S.C.R.


A         Bros. AIR 1965 SC 531 : 1964 SCR 664; Hindustan
          Steel Ltd v. State of Orissa AIR 1970 SC 253 : 1970
          (1) SCR 753; Board of Revenue v. A.M Ansari (1976)
          3 SCC 512 : 1976 (3) SCR 661; P.S. Apparels v. Deputy
          Commercial Tax Officer, Madras [1994) 94 STC 139;
          Bharat Fritz Werner Ltd. v. Commissioner of Commercial
B
          Taxes [1991) 86 STC 175; H. Anraj v. Government of
          Tamil Nadu (1986) 1 SCC 414 : 1985 (3) Suppl. SCR
          342; Yasha Overseas v. Commissioner of Sales Tax and
          others (2008) 8 sec 681 - referred to.
           Black's Law Dictionary; Aiyer~· Judicial Dictionary -
c          referred to.
                           Case Law Reference
           1996 (2) Suppl. SCR 204      referred to        Paras 10,24,
                                                            27,30,31
D          [1995) 98 STC 184              referred to      Para 10
           31 S.T.C. 426 (S.C.)           referred to      Para 10
           37 S.T.C. 423 (S.C.)           referred to      Para 10
           49 S.T.C. 17 (S.C.)            referred to      Para 10
 E         38 S.T.C. 577 (S.C.)           referred to      Para 10
           1967 SCR 618                   referred to      Para 10
           1964 SCR 664                   referred to      Para 10
           1970 (1) SCR 753               referred to      Para 10
 F         1976 (3) SCR 661               referred to      Para 12
           [1994) 94 STC 139               referred to     Para 13
           [1991) 86 STC 175              referred to      Para 13
           1985 (3) Suppl. SCR 342        referred to      Paras 24,27,
G                                                          28,30
           (2008) 8 sec 681                referred to     Para 31
           2006 (1) Suppl. SCR 421         relied on       Para32
           CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1798
      of2005.
H
   COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                         · 707



     From the .I udgment and Order dated 16. 12.2002 of the Division          A
Bench of the Calcutta High Court in W. P. T. T. No. 03 of 1998.
      Soumitra G. Chaudhuri, Parijat Sinha, Advs. for the Appellants.
      Pradip Kumar Ghosh, Sr. Adv., Pinaki Addy, Ch iraranjan Addey,
Advs. for the Respondents.
                                                                              B.
      The Judgment of the Court was delivered by
       DIPAK MISRA, J. I. The seminal question that emerges for
consideration in this appeal is whether the State Bank oflndia (SBI) and
its branches, which are registered dealers under the Bengal Finance
(Sales Tax) Act, 1941 (for brevity, 'the Act') would be liable to levy of     c
purchase tax under Section 5(6a) of the Act for accepting the Exim
Scrips (Export Import Licence) on payment of premium of20 per cent
of the face value of the scrips in compliance with the direction contained
in the letter of Reserve Bank of India (RBI) dated J 81h March, 1992.
The authorities of the revenue as well as the Taxation Tribunal (for
short, 'the tribunal') had held against the SBI but the Division Bench of     D
the High Court of Calcutta in a writ petition has dislodged the said
conclusion holding, inter alia, that the purchase of Exim scr 1ps by the
Bank did not attract the provisions of Section 4(6) (iii) of the Act and
resultantly quashed the orders of fora below and issued consequential
directions.                                                                   E
      2. It is necessary to state the facts in detail to appreciate the
controversy at hand. The SBI is a body corporate constituted under the
State Bank of India Act, 1955 for the extension of banking facilities in
the country and for other pub Iic purposes. The bank has to perform
various functions as per the directions issued from time to time by the
                                                                              F
RBI in keeping with the economic and monetary policies of the Central
Government.
       3. Policies are notified by the Government of India under the
Imports and Exports (Control) Act, 1947, as amended from time to time,
and the Imports (Control) Order, 1955, to regulate imports into and exports
                                                                              G
out of the country and contain different incentive schemes and subsidies
to build up foreign exchange resources of the country. As the facts would
reveal before July 4, 1991 there was provision for issuance of
Replenishment Licences which were referred to as "REP Licences".
The objective behind the grant of such licences was to provide the
                                                                              H
708             SUPREME COURT REPORTS                          [2016] 5 S.C.R.



A     registered exporters the facility ofimporting essential goods required for
      the manufacture of the products to be exported. Such licences were
      made freely transferable and such transfer did not require any
      endorsement or permission from the licensing authority and only a letter
      from the transferor the transferee became the lawful holder of the licence
      and was entitled to either import the goods for which the licence had
B
      been issued or sell the licence to someone else.
             4. The aforesaid policy remained in vogue till July 3, 1991, when it
      was substituted by a new policy with effect from July 4, 1991 and the
      nomenclature of the REP Licence was changed to "Exim Scrip" (Export
      Import Licence). The provisions governing Exim scrips were more or
c     less the same as those governing REP licences with certain minor
      variations which are really not pertinent for the purpose of adjudication
      of the controversy.
             5. In March, 1992, the RBI took a policy decision to the effect
      that the unutilised Exim scrips in the hands of the holders who were
D     willing to dispose of the same should be mopped up through specified
      branches of the SBI. In pursuance to such a decision, the RBI issued a
      circular, being No. 12/92 on 27th March, 1992. The said circular is as
      follows:-
            " Reserve Bank of India had earlier notified that
E           arrangements were being made to purchase Exim scrips at
            an appropriate premium from those holders of Exim Scrips
            who wish to dispose of them. The designated branches of
            State Bank oflndia would be purchasing these Exim scrips
            from March 23, 1992, up to the end of May 1992. at a
F           premium of 20 per cent of the face value. The Iist of
            branches which would be purchasing these Exim scrips
            would be notified by the State Bank oflndia. The bona fide
            holder of the Exim scrips should submit an application to
            the designated branch of the State Bank of India, in the
            form prescribed by the State Bank of India. The scrips up
G           to the face value of Rs. 5 lakhs will be straightaway
            purchased by the designated branch of State Bank oflndia
            and the premium amount would be paid to the holder of the
            scrips. Where the face value of the scrips exceeds Rs. 5
            lakhs, the concerned branch would send it to the office of
H           the JCCI, which had issued the scrip, for authentication
   COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                           709
                 rDIPAK MISRA, J.l

      and on receipt of the scrip duly authenticated would pay              A
      the.amount of premium."
       6. The RBI, pursuant to the circular sent a letter on March 18,
1992 to the Chairman, State Bank of India, Bombay, authorising all
designated branches of the said Bank to purchase Exim scrips from
holders, who intended to dispose of the same at a premium of 20 per         B
cent of the face value of the Exim scrips, from March 23, 1992, subject
to certain terms and conditions. Thereafter, the General Manager
(Planning of the International Banking Department of the State Bank of
India) communicated to the Deputy Manager, State Bank of India,
Overseas Branch, Calcutta, the respondent no. I herein, on March 21,             '   .
1992, forwarding the memorandum of procedure drawn up by the Central
                                                                            c
Officer of the SB! for the purpose of purchasing the Exim scrips as
directed by the RBI. In due course, various holders of Exim scrips sold
and/or surrendered their Exim scrips to the Bank and received a premium
of 20 per cent of the face value of the scrips in compliance with the
direction contained in the letter of the RBI dated March 18, 1992.          D
       7. In the course of assessment proceedings under the Act for the
four quarters ending on March 31, 1993, the Commercial Tax Officer,
Park Street Charge informed the assessee that apart from payment of
sales tax on the sale of gold and silver, it would also be liable to pay
"purchase tax" in respect of purchase of Exim scrips from the holders       E
thereof at a premium of 20 per cent of the face value. Before the
assessing authority, it was contended by the SB! that the Exim scrips
had not actually been purchased but the same had been surrendered by
their holders pursuant to the terms contained in the letter of the RBI
dated March 18, 1992. It was also put forth that such surrender could
not be treated as purchase for the purpose of levying tax under Section     F
4( 6) of the Act. It was also averred that Exim scrips were not "goods"
within the meaning of Section 2(d) of the Act and hence, no purchase
tax could be levied under Section 4(6) of the said Act on the surrender
of the Exim scrips by its holders. In addition to the above, a specific
objection was taken that the Bank had not entered into any transaction      G
on its own which could be regarded as purchase to attract the provisions
of Section 4(6) of the Act but had merely acted as an agent of the RBI
 in terms of the order contained in the above mentioned circular dated
March 18, 1992.
      8. The assessing officer did not accept the said stand of the Bank    H
710             SUPREME COURT REPORTS                           [2016] 5 S.C.R.



A     and levied purchase tax under Section 5(6a) of the Act, amounting to
      sum of Rs. 1,00,04,000/- on the total taxable specified price of Rs.
      25,00.00,000/-. In the order of assessment. the assessing authority held
      that the scheme contained in the circular of the RBI dated March 18,
      1992, provided for sale of Exim scrips by the holder and purchase by
      designated bankers and consequently such sale or purchase by the
B
      bankers could not by any stretch of imagination be treated as an act of
      surrender. It was also held that the purchase of the Exim scrips by the
      bankers from the holders thereof were as much sales as purchase by
      private importers who availed of the same for import of goods.
              9. The aforesaid order of assessment was assailed in an appeal
c      before the Assistant Commissioner, Commercial Taxes, Calcutta (South)
       Circle, who vide order dated September 19, 1996, rejected the appeal
       and confirmed the order of assessment. The Bank Manager of the
       coitcerned Branch and the Chairman ofSBI npproached the West Bengal
       Taxation Tribunal (for short, 'the tribunal'). During the hearing of the
D      appeal it was conte1idcd on behalf of the Sl31 that in order to attract the
       mischiefofSection 4(6)(iii) of the Act, n dealer must be liable to pay tax
       under Section 4( I), 4(2), 4(4) or 8(3) of the aforesaid Act and since the
       said Bank was not a dealer under the provisions of the aforesaid Act, it
       did not have any liability to pay tax under Section 4(6) of the said Act. It
      ·was also submitted that the transactions involving recovery of Exim scrips
E      from their holders could not be treated to be ''purchases" for the purpose
       of Section 4(6) of the above Act, but amounted to "surrender" by the
       holders which had been wrongly equated with "purchase" at the Branch
       level. A further stand was taken that for Section 4(6) to apply, the
       purchase must have been made with the intention ofre-selling the Exim
F      scrips and that the same would be apparent from proper reading of
       Clauses (i) and (iii) of Section 4(6) of the above Act. It was argued that
       if such a construction was not adopted, Clause (iii) of Section 4(6) would
       be unconstitutional and violative of Article 14 of the Constitution.
             10. The tribunal by its order dated I J1h February, 1998 rejected al I
G     the contentions made on behalfofthc appellants and dismissed the appeal
      preferred by them. As has been stated earlier. the SBI had not levied
      purchase tax. When the matter travelled to the tribunal. the question
      arose whether the Bank by payment at a premium of twenty per cent on
      the face value or unutilised face value thereof was exigible to purchase
      tax under Section 4(6)(iii) read with Section 5(6) of the Act. The tribunal
H
   COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                                711
                 [DIPAK MISRA, J.l

narrated the facts and noted the stand and the stance of the assessee            A
and the Revenue and came to hold that the Bank had acted in relation to
the impugned transactions as agent of RBI, which is an instrumentality
of the Government of India, to accept Exim scrips on payment of a
premium to the holders thereof and the activity is thus covered by Section
6(1)(a) and (b); that under Section 6(l)(n) such activity was certainly
                                                                                 B
"incidental" or "conclusive" to the promotion or advancement of the
business of the Company, because admittedly the assessee received
commission for these transactions; that the stand that the Bank was not
a dealer in view of the Banking Regulation Act, 1949 was unacceptable,
for when Section 8 of the Act is correctly construed, it would be clear
that purchase of Exim scrips was not prohibited by it; that the Exim             c
scrips were goods as has been conclusively settled in Vikas Sales
Corporation anti anotlter v. Co111111issio11er of Commercial Tuxes
and anotlter that the submission to the effect that the purchase is
                1
                    ;


made not for resale and hence, the bank would not be liable for tax does
not commend acceptation, for legislature does not contemplate or lay
                                                                                 D
down that Section 4(6)(iii) would apply to purchase for the purpose of
only resale but has left the expression unspecified and unqualified; that
there is no rationale to restrict it to resale and limit the expression; that
Section 4(6)(iii) uses the word "purpose", a purchase for any purpose
other than those specified in clauses (i) and (ii) of Section 4(6) would be
enough to attract the clause and in the case at hand, RBl's letter dated         E
March 18, 1992 the purpose was to forward the "scrips" to the Joint
Chief Controller of Imports and Exports, Government of India, after
suitably cancelling them; that use of the purchased scrips by way of
cancellation and onward transmission to the Joint Chief Controller was
clearly subsequent to completion of the transactions and such use cannot
keep the transactions out of the mischief and purview of Section 4(6Xiii);
                                                                                 F
that the transactions were really "surrenders" and not ''.purchases" is
untenable because surrend.er is also envisaged by operation of law and
hence, the concept of"surrender" is inapplicable in the instant case; and
that there was enough indication.of "sale" and "purchase" and transfer
of property in the scrips as is evident from documents that the holder of        G
script was "encashing" them by completely foregoing his "entitlements"
under it. After so holding, the tribunal dealt with the concept of business
as has been defined under Section 2( 1) of the Act, referred to various
decisions including Co111111issio11er ofS"/es T"x v. Billion Pl"stics Pvt.
 1 (1996) 4   sec 433                                                            H
712              SUPREME COURT REPORTS                          [2016] 5 S.C.R.


A     Ltd.=, State of Tamil Nadu v. Burma Size/I Co. Ltd.-', District
      Controller of Stores v. A.C. Taxation O.fficer' and State of Tamil
      Nadu v. Binny Ltd., Madras.<, Board of Revenue v. A.M. Ansari•
      and State of Gujarat v. Raipur Manufacturing Co. Ltd.' and after
      deliberating on them, posed the question whether mere lack of the element
      of regularity or frequency, when the other elements are present would it
B
      be sufficient to keep take the transactions out of the compass of
      "business" and opined that where an intention to carry on business was
      clearly established, mere lack of the element of regularity or frequency
      would not convert business transactions into non-business transactions
      and would not make a "dealer" a "non dealer". To arrive at the said
c     conclusion, the tribunal referred to the definition of"dealer'' under Section
      2(c) of the Act and definition of"business" and other provisions and in
      that context, referred to State ofAndlira .Pradesh v. H. Abdul Bak/ii
      and Bros. 8 and Hindustan Steel Ltd v. State of Orissa 9 and came to
      hold that profit motive is not imperative, because as per law "business"
      connects some activity actually in the nature of trade or commerce or
D
      manufacture which is done not for sport or pleasure or for charity. Thus,
      there is little difference between the primary or main part of the definition
      of "business" and its inclusive part which basically means, as in the
      present context, any trade or commerce or similar activity and any
      transaction in connection with, or ancillary or incidental to, such trade or
E     commerce. Process of exchange can be completed by the exchange of
      goods and services for money. The tribunal has observed-that in the
      instant case the purchase of exim scrips was by way of exchange of the
      scrips, which are financial instruments, for· money. Thereafter, the tribunal
      referred to the meaning of the terms trade and commerce and stated in
      Black's Law Dictionary and certain other dictionaries includingAiyer's
F
      Judicial Dictionary and eventually came to hold as follows:-
             "Thus, purchase of exim scrips for money, comprising a
             large volume (at least Rs. 25 crores) is in every sense a
             "business" within the meaning of Section 2(1 a). That being
      ' [1995) 98 STC 184
G     3
        31 !i.T.C, 426 (S.C.)
      ' 37 !i.T.C, 423 (S.C.)
      ' 49 S.T.C .. 17 (S.C.)'
      '38 !i.T.C. 577 (S.C.)
      7
        AIR 1967 SC 1066
      'AIR 1965 SC 531
      9
H       AIR 1970 SC 253
   COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                           713
                 fDIPAK MISRA, J.l

      so, having carried on such a "business" the applicant bank           A
      became a "dealer" under section 2(c), even apart from the
      fact that it was already a registered dealer for sale of gold.
      Since sale of gold has no connection with purchase of exim
      scrips, the latter transactions cannot be said to be either in
      connection with or ancillary or incidental to sale of gold. In
                                                                           B
      our view, the purchase of exim scrips was a separate
      "business" of the applicant bank. A point was argued on
      behalfofthe bank that it had to undertake this activity under
      instructions from the Reserve Bank oflndia. The fact that
      it was so, indicates that it was carried on as a business and
      with the intention to carry it on as a business".                     c
      11. Thereafter, it opined that the SBI is not an ordinary
businessman, but it is a body created by an Act. Analysing the statutory
scheme and the obligation, it proceeded to state thus:
      "We have to keep this distinction in mind when we consider
      whether purchase of exim scrips was done by the bank as               D
      a business with the intention to do a business. It is
      undisputed that not only the bank paid money for purchasing
      exim scrips but also it made some gain by receiving
      commission out of the transactions. Even without any
      commission the activity clearly constitutes a "business".             E
      Another question is: when the activity was carried on under
      the instructions of the Reserve Bank oflndia, can it be said
      to be a "business"? In the facts of the case, the apparently
      compulsory nature of purchase of exim scrips was not such
      as to take it out of the ambit of"business". The bank could
      not compel any holder of exim scrips to sell the same to it.          F
      It was wholly voluntary on the part of a holder to sell scrips
      to the bank. As soon as a holder exercises his opinion to
      sell and gives a scrip to the bank, the bank purchases it on
      payment of money. As already said, the compulsory nature
      of performance of the duty of purchase of exim scrips                 G
      emanates from Act of 1955 which created the bank. Unlike
      any other dealer, the applicant bank could not think of acting
      beyond the provisions of Act of 1955. That being so, in the
      special circumstances of the case, the element of compulsion
       involved in the instruction of the Reserve Bank oflndia is
                                                                            H
714            SUPREME COURT REPORTS                           [2016] 5 S.C.R.



A         irrelevant. Apart from that aspect, we may refer to the
          case of Coffee Board v. Commissioner of Commercial
          Taxes (1988) 70 S.T.C. 162 (S.C.) in which it was held that
          there was a sale, where the growers of coffee delivered
          coffee to the Board, though the growers did not actually
          sell it. It was a sale by operation of law. The imposition of
B
          sales tax on such sale of coffee was upheld. From the
          above points of view we hold that the purchase of exim
      · - scrips by the applicant bank were rightly brought to purchase
          tax under 1941 Act."
              12. The said order was challenged before the High Court of
c     Calcutta in a writ petition wherein it was contended that the Bank was
      not a "dealer" within the meaning of Section 2(c) of the Act in respect
      of the Exim scrips since it does not and/or did not carry on the business
      of sale or purchase of such Exim scrips; that in the case at hand it was
      only a solitary case and that too for a brief period from March 23, 1992
D     to May 31, 1992 but neither before nor after the said period had any
      such transaction been entered into which could justify the finding of the
      tribunal that the assessee-Bank had an intention to carry on business in
      purchase of Exim scrips and that mere lack of regularity or frequency
      would not convert a business into non-business and would not make a
      dealer a non-dealer; that there was 110 material on record to arrive at the
E     conclusion that it was clearly established that the writ petitioner No. I,
      i.e., the SB!, had the intention to carry on business in purchase ofExim
      scrips; that even ifthe Bank was to be treated as a dealer, the provisions
      of Section 4(6)(iii) would have to be related to the business being carried
      on by the Bank inasmuch as the said provisions would otherwise suffer
 F    from vagueness and would expose it to attack on the ground of
      constitutional validity; that keeping in view the scheme of the Act and
      the intent and purpose ofrelevant provision, purchase tax could be levied
      on a dealer only if he carried on business of buying or selling the goods
      in question; that whatever may be the nature of the transaction, the
      Bank had only acted as an agent of the RBI in the transaction relating to
G     Exim scrips and would not, therefore, come within the definition of the
      expression "dealer" as defined in Section 2( c) of the 1941 Act; that the
      transaction involving the acquisition of Exim scrips by the Bank could
      not be said to be a case of purchase but a case of surrender; that the
      Exim scrip was in substance a licence or a grant from the Sovereign and
H
      COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                              715
                   fDIPAK MISRA, J.l

there could not be any sale of such Exim scrips to the Sovereign and             A
accordingly, when the holder of the Exim scrips gives up his right in
favour of the granter it is an act of surrender and nothing else; that SBI
had merely acted as an agent of the Sovereign, namely, the department
of the Central Government which had issued the Exim scrips, that is, the
Joint Chief Controller oflmport and Export and under the instruction of
                                                                                  B
the RBI and once the said Exim scrips were surrendered by the holders,
the same were required to be cancelled and forwarded to the office of
the Joint Chief Controller oflmport and Exp01ts who had originally issued
the same and in effect the grant under the Exim scrips would, upon
cancellation by the Bank, cease to exist, which state of affairs is consistent
with the concept of surrender and it was not intended that upon acquisition       c
of the Exim scrips from their holders, the same would be utilised by the
Bank for the purpose of either selling the same or using the same for the
purpose for which they had been intended. Be it noted learned counsel
for the Bank placed reliance on the decisions in Raipur Mm11ift1cturillg
Co. Ltd. (supra), Board of~eve1111e v. A.M.A11sari1° and Bi//io11 Plastics
                                                                                  D
Pvt. Ltd. (supra).
       13. Learned counsel for the Commercial Tax Officer, resisting
the submissions of the learned counsel for the Bank contended that the
controversy raised by the bank having set at rest by the three-Judge
Bench in Vik as Sales Corporatio11 (supra), wherein the Supreme Court
had given stamp of approval to the decision in P.S. Apparels v. Deputy            E
Commercial T<Lr: Officer, Madras". It was urged by the revenue that
REP Licence are goods and the premium or price received therefrom
by transfer thereof was liable to sales tax within the ambit and sweep of
Section 4(6)(iii) of the Act and, therefore, the finding recorded by the
tribunal that the transaction involving the purchase ofExim scrips by the         F
assessee bank amounted to sale could not be found fault with. It was
also canvassed that the intention of the legislature was clear and in view
of the authority rendered in Vikas Sales Corporation (supra), P.S.
Apparels (supra) and the decision in Bharat Fritz Wemer Lttl. v.
Commissioner of Commercial Tttxes 11 nothing really remain to be
adjudicated.                                                                      G

        14. The High Court analysed the principles in all the authorities

 "'(1976) 3 sec 512
 II [1994] 94 STC 139
 12
    [1991] 86 STC 175
                                                                                  H
716             SUPREME COURT REPORTS                           [2016] 5 S.C.R.



A     cited before it and came to hold that this Court has opined that REP
      licences/Exim scrips were merchandise and/or goods in the commercial
      world and were freely bought and sold in the market and hence, no
      argument could be urged that they do not constitute goods for the purposes
      of commercial transactions. The High Court referred to the circular
      dated March 18, 1992, issued by the RBI regarding purchase of Exim
B
      scrips by the designated branches of the SB! and opined that the said
      Exim scrips were handed over to the Bank solely for the purpose of
      cancellation and not be used as goods for the purpose of commercial
      transactions. According to the High Court, they were reduced to mere
      paper having no commercial value. The Division Bench distinguished
c     the judgments rendered by this Court as well as by the High Courts of
      Madras and Kamataka. It further proceeded to opine that the purchases
      by the SBI were not effected in the usual course of business of the
      Bank, for it was a one-time affair and there was no continuity or regularity
      involved in such transactions so as to bring the same within the concept
      of business. The High Court took note of the fact that the Bank was
D
      mainly confined to purchase and sale of gold and silver. On behalf of
      the revenue, it was contended that the bank was a registered dealer
      under the Act, but the said submission did not weigh with the High Court
      because as the impugned order would show, it has been persuaded by
      the decision rendered by the Bombay High Court in Billion Plastics
E     Pvt. Ltd. (supra). Thereafter, the High Court came to the following
      conclusion:-
             "56 ..... we are not inclined to accept the arguments
             advanced on behalf of the Revenue that purchasing of Exim
             scrips on the direction of the Reserve Bank oflndia for the
 F           purpose of destroying its very commercial nature, amounted
             to business being carried on by the writ petitioner-Bank in
             such Exim scrips. There was no question of selling the Exim
             scrips once they had been purchased by the Bank. The
             entire transaction appears to be in the nature of a mopping
             up operation for removing the Exim scrips from the market.
G
             57. Having regard to the view taken by us that the purchase
             of Exim scrips by the writ petitioner-Bank did not attract
             the provisions of Section 4(6)(iii) of the 1941 Act, we do
             not think it necessary to go into the other submission of Mr.
             Ghosh that the aforesaid provisions were either vague or
H
  COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                             717
                [DIPAK MISRA, J.l

      uncertain and thus unconstitutional. We are not, therefore,           A·
      inclined to dilate further on such point.
      58. In view of what we have indicated hereinabove, we
      are unable to sustain the judgment and order of the learned
      Tribunal and we, accordingly, set aside the same and we
      also quash the order of assessment dated June 30, 1995                 B
      passed by the Commercial Tax Officer, Park Street Charge,
      as also the order dated September 19, 1996, passed by the
      Assistant Commissioner, Commercial Taxes, Calcutta
      (South) Circle, in Appeal case No. A495/1995-96 under
      Section 20(1) of the Bengal Finance (Sales Tax) Act, 1941 ".
                                                                             c
       The aforesaid conclusion entailed allowing the writ petition
preferred before the High Court and resultantly the assessee was
discharged from the undertaking given for the purpose of continuation.
of the interim order initially passed.
       15. We have heard Mr. Soumitra G. Chaudhuri, learned counsel          D
for the appellants and Mr. Pradip Kumar Ghosh, learned senior counsel
with Mr. Chiraranjan Addey, learned counsel appearing for the
respondents.
        16. To appreciate the controversy, it is pertinent to extract the
communication dated March 18, 1992 sent by the RBI, Exchange Control         E
Department to the Chairman, State Bank of India, Bombay. The said
letter is as follows:-
      "Dear Sir,
      Purchase of Exim Scrips by designate branches of SBI.
                                                                             F
      This is with reference to our discussion with Shri. B.S.
      Pandya, General Manager (Domestic & Operations) on the
      captioned subject. It has been agreed that designated
      branches of the State Bank of India would commence
      purchasing 'Exim Scrips', from holders who wish to dispose ·
      of them, at a premium of 20 percent on the face value of               G
      the scrip & (unutilized face value) from 23'd March 1992,
      subject to the following terms and conditions:
      a) The holder of the scrips would be required to submit an
      application IL> the designated branch in the form prescribed
                                                                             H
718      SUPREME COURT REPORTS                            [2016] 5 S.C.R.


A     by the State Bank of India.
      b) State Bank of India would, incorporate, in consultation
      with their legal depaitment, a suitable indemnity clause in
      the application fonn to be submitted by the holder of the
      scrip.
B     c) As the scrip is transferred by a letter, State Bank of
      India would verify the letter in favour of the holder
      presenting the scrip and would then make payment on the
      basis of usual banking procedures adopted for identification
      of the person to whom payment is made.
c     d) The payment would be rounded off to the nearest rupee
      and would be made only by means of a Crossed Banker's
      Cheque.
      The term ·Exim Scrip' would also cover post paid REP
      licenses issued up to 291h February 1999 of export proceeds.
D
      e) State Bank oflndia, Bombay Main Branch, would airnnge
      to get daily details of scrips paid by their various designated
      branches and then seek rei1nbursement, on a consolidated
      basis, daily from Reserve Bank of India, Bombay on the
      basis of a ce11ificate indicating the total amount paid by
E     them.
      f) Designated Branches of SBI would maintain the
      particulars of scrips paid including the application forms for
      such period as may be considered necessary. Bombay main
      branch would maintain the particulars of payments made
 F    by their various designated offices on the strength of which
      reimbursement was claimed by them from RBI, Bombay.
      g) The paid scrips would be suitably cancelled and forwarded
      to the concerned office of J.C.C.I. & E. which had issued
      the scrips. In the case of scrips of face value up to Rs.5
G     lakhs, the concerned office of J.C.C.I. & E. should also be
      asked to conduct a check about genuineness of the scrips
      cancelled by SBI and report objections. if any, in regard to
      payments to the concerned designated office ofSBI.
      h) If in the case of any scrip of the face value up to Rs. 5
H
  COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                            719
               [DIPAK MISRA, J.]

      lakhs (which is paid without prior check by the office of            A
      J.C.C.I. & E.), it later turns out that the scrip was not genuine
      or not validly issued etc., the matter would have to be
      pursued by the office of the J.C.C.I. & E. SBI will, however,
      render whatever assistance is necessary to tract the party
      to whom payment has been made.
                                                                            B
      i) SBI would be acting on behalf of the Reserve Bank of
      India and would be paid commission at the rate at which
      commission is P.ayable to them for conducting Government
      business. They would also be paid out-of-pocket expenses
      including expenses incurred on advertisements notifying
      designated branches.                                                  c
      2. As desired by you, we have also advised the Chief
      Controller oflmports & Exp011s to instruct all his regional
      offices to render necessary assistance to designated
      branches ofSBI for a smooth implementation of the scheme.
      He has also been advised to instruct his regional offices in          D
      particular that they should promptly (say, within 48 hours)
      furnish authentication of scrips of face value above Rs. 5
      lakhs sent to them and their findings of the check done ·of
      scrips up to the face value of Rs. 5 lakhs paid without any
      prior authentication. He has also been requested to advise            E
      J.C.C.I. & E., Bombay, to assist you with a check list
      containing impo11ant features of the Exim Sc1'ip to check
      their genuineness."
                                                  [Emphasis added]
      17. The aforesaid, as is manifest, authorises the SBI to purchase     F
the Exim scrips as an agent of RBI and after payment of the preni.ium at
20% of the value to the holder, the scrip was to be cancelled. Certain
formalities were stipulated to be complied by the holder as well as by
SBI.
      18. Section 2(la) of the Act defines "'business'' as follows:-        G
      ·'business" includes-
      (i) any trade, commerce or manufacture or execution of
      work contract or any adventure or concern in the nature of
      trade, commerce or manufacture or execution of works
                                                                            H
720            SUPREME COURT REPORTS                            [2016) 5 S.C.R.



A           contract, whether or not such trade, commerce,
            manufacture, execution of works contract, adventure or
            concern is carried on with the motive to make profit and
            whether or not any profit accrues from such trade,
            commerce, manufacture, execution of works contract,
            adventure or concern; and
B
            (ii) any transaction in connection with, or ancillary or
            incidental to, such trade, commerce, manufacture, execution
            of works contract, adventure or concern;"
            19. The term ''dealer" has been defined under Section 2(iv)(c ),
C     which reads thus:-
            ""dealer" means any person who carries on the business
            of selling goods in West Bengal or of purchasing goods in
            West Bengal in specified circumstances or any person
            making a sale under Section 60 and includes -
D           the Central or a State Government, a local authority, a
            statutory body, a trust or other body corporate which, or a
            liquidator or receiver appointed by a Court in respect of a
            person defined as a dealer under this clause who, whether
            or not in the course of business sells, supplies or distributes
E           directly or otherwise, for cash or for deferred payment or
            for commission, remuneration or other valuable
            consideration.
            Explanation I. - A co-operative society or a club or any
            association which sells goods to its members is a dealer.
 F          Explanation 2. -A factor, a broker, a commission agent, a
            del credere agent, an auctioneer, an agent for handling or
            transporting of goods or handling of document of title to
            goods or any other mercantile agent, by whatever name
            called, and whether of the same description as herein before
            mentioned or not, who carries on the business of selling
G
            goods and who has. in the customary course of business,
            authority to sell goods belonging to principals is a dealer;"
            20. Section 2( d) of the Act defines ''goods" as follows:-
            ""goods" includes all kinds of movable property other than
H
  COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                              721
               rmPAK MISRA, J.l

      actionable claims, stocks, shares or securities"                       A
      21. Section 4 of the Act deals with incidence of taxation. Sub-
section (6) of Section 4 of the Act is as follows:-
      "( 6) Every dealer, who has become liable to pay tax under
      sub-section (I) or sub-section (2) or sub-section (4) of this
      section or sub-section (3) of section 8 and is registered               B
      underthis Act, shall, in addition to the tax referred to therein,
      be also liable to pay tax under this Act on all his purchases
      from-
      (i) a dealer who is not registered under this Act, of goods
      other than [gold, rice (Oryza sativa L.) and wheat (Triticcum           c
      Vulgare, T. compactum. T. sphaerococcum, T. durum, T.
      aestivum L., T. dicoccum)], intended for direct use in the
      manufacture in West Bengal of goods for sale, and of
      containers and other materials for the packing of goods so
      purchased or manufactured;                                              D
      (ii) a registered dealer, to whom a declaration referred to in
      the proviso to clause (bb) of sub-section (I) of section 5
      has been or will be furnished by him in respect of sales
      referred to in sub-clause (i) or sub-clause (ii) of the said
      clause, of goods purchased against such declaration, and                E
      used by him directly in the manufacture in West Bengal, of
      goods or in the packing of such goods, when such
      manufactured goods are transferred by him to a place
      outside West Bengal or disposed of by him. otherwise than
      by way of sale in West Bengal.
                                                                              F
      (iii) any person, whether a dealer or not. who is not
      registered under this Act, of goods other than gold, rice and
      wheat intended for a purpose, other than those specified in
      clause (i)."
      22. Section 6C stipulates the liability to payment of purchase tax
                                                                              G
and rate thereof.
      23. We have referred to the aforesaid statutory provisions as the
learned counsel for the revenue would stress upon the tenor of the said
provisions and submit that respondent Bank is a dealer and once it has
purchased something, which is goods, it is liable to pay the purchase tax.
                                                                              H
722            SUPREME COURT REPORTS                          [2016) 5 S.C.R.



A     In essence, the learned counsel for the State would defend the order
      passed by the tribunal in entirety and would contend that the High Cow1
      has wholly flawed in appreciation of the factual score and the provisions
      applicable to the transaction.
             24. In Vikas Sales Corporation (supra), the question arose
B     whether the transfer of an Import Licence called REP Licence/Exim
      Scrip by the holder thereof to another person constitutes a sale of goods
      within the meaning of and forthe purposes of the Sales Tax enactments
      ofTamil Nadu, Karnatakaand Kerala and ifit does, it is exigible to sales
      tax, otherwise not. In the said case, the High Cou11 had taken the view
      that REP Licences/Exim Scrips constitute goods and, therefore, on their
c     transfer, sales tax is leviable and the judgment of the High Court was
      founded on the decision of this Court in ll. A11rttj v. Govemmellt of
      Tamil Natlu 13 • It was contended before this Cow1 that the license/
      scrips are not goods and hence, they are not prope11y. It was further
      urged that they represent merely a permission to import goods which
D     permission can be revoked at any time by the licensing authority and,
      therefore, they are really in the nature of share and securities which
      have been expressly excluded from the definition of goods in the relevant
      enactments. Analysing various facets, the three-Judge Bench referred
      to Para 199 of"lmport and Export Policy 1990-93" which deals with
      Transferability of REP Licences. It reads as follows:-
 E
            "199. (I) The REP Licence will be issued in the name of
            the registered expo1teronly and will not be subjectto 'Actual
            User Conditions'. A licence-holder may transfer the licence
            to another person. The licence-holder or such transferee
            may import the goods permitted therein.
 F
            (2) The transfer of a REP Licence will not require any
            endorsement or permission from the licensing authority, i.e.,
            it will be governed by the ordinary law. Accordingly,
            clearance of the goods covered by a REP Licence issued
            under this policy will be allowed by the Customs authorities
G           on production by the transferee of only the document of
            transfer of the licence concerned in his name. Whenever a
            REP Licence is transferred the transferor should give a
            formal letter to the transferee, giving full particulars
            regarding number, date and address of the transferee, and
H     "(1986) 1sec414
   COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                              723
                [DIPAK MISRA, J.l

      complete description of the items of import for which the               A
      licence is transferred."
       25. The Court also observed that the relevant features of Exim
Scrips are identical to REP Licences. Thereafter, the Court proceeded
to state:-
      "They are bought and sold as such. The original licensee or             B
      the purchaser is not bound to import the goods permissible
      thereunder. He can simply sell it to another and that another
      to yet another person. In other words, these licences/Exim
      Scrips have an inherent value of their own and are traded
      as such. They are treated and dealt with in the commercial               c
      world as merchandise, as goods. A REP Licence/Exim Scrip
      is neither a .chose-in-action nor an actionable claim. It is
      also not in the nature of a title deed. It has a value of its
      own. It is by itself a property-and it is for this reason that
      it is freely bought and sold in the market. For all purposes
      and intents, it is goods. ,Unrelated to the goods which can             D
      be imported on its basis, it commands a value and is traded
      as such. This is because, it enables its holder to import goods
      which he cannot do otherwise".
Andagain:-
                                                                               E
      "Another contention raised in the written submissions of
      Shri K.V. Mohan is that even ifthe said licences/scrips are
      treated as goods, the tax must be levied at the first point of
      sale, viz., upon the authority issuing the licence. We cannot
      agree. The grant oflicence by the licensing authority to the
      registered exporter is not a sale. The sale is when the                  F
      registered exporter or the purchaser sells it to another person
      for consideration".
       26. The High Court has distinguished the aforesaid authority by
stating that this Court did not have the occasion to consider the effect of
purchase ofExim scrips made by SBI, for it was not a part of business          G
regularly carried on by it but was a transaction which was to be undertaken
on the direction of the RBI. Exim scrips were no longer available as
"goods" for the purpose of commercial transaction and were to be
reduced to mere papers having no commercial value whatsoever and
such a scenario changed the entire perspective. The High Court has
                                                                               H
724             SUPREME COURT REPORTS                            [2016] 5 S.C.R.



A     laid emphasis on immediate cancellation of Exim scrips and after
      cancellation to be sent to the original granting authority.
             27. The controversy involved in the case at hand, in our considered
      opinion, has to be analysed regard being had to the existing factual score.
      The observations made in Vikas Sales Corporation (supra), as the
B     aforequoted passages would show, the initial grant of license by the
      Government to the registered exporters was not a sale. The said finding
      is significant and it has potency. It is also seen that the said authority
      extensively relies on the earlier judgment in H. Anraj (supra) that dealt
      with the question whether lottery tickets are "goods" and accordingly
      whether sale thereof would invite sales tax. H. Anraj (supra) draws
c     distinction between lottery tickets and steamship tickets, railway tickets,
      cinema tickets, etc. Salmond's Jurisprudence, I 21h Edition at pages 338-
      339 under the heading "The Classes of Agreements" was quoted to
      draw distinction between three classes, namely, agreements which create
      rights, agreements which transfer or assign rights, and lastly agreements
D     which extinguish them. Agreements which create rights were divided
      into two sub-classes, namely, contracts and grants. A contract is an
      agreement, which creates an obligation or right in personam between
      the parties, whereas a grant creates a right of another description such
      as leases, assignments, patents, etc. An agreement, which transfers a
      right, may be termed generically as an assignment. However, when a
E     transaction extinguishes a right, it is called a release, discharge or
      surrender. The distinction between creation of a right by a grant and
      subsequent transfer or assignment was also highlighted in H. Anmj
      (supra) and noted by Sabyasachi Mukherjee, J. (as His Lordship then
      was) in his concurrent judgment with the following observations:-
F             "41. It was urged before us on behalf of the dealers that
             by the issue of lottery tickets, the right to participate in the
             draw is created for the first time in the buyers. In other
             words, it was urged that by the sale of lottery ticket, the
             right to participate is created for the first time; if it is
G            considered to be a "grant" and as such a sale of goods, it
             was contended that such right was not existing before the
             sale of the lottery ticket. This contention has caused me
             anxiety from the jurisprudential point of view.
             42. I agree with respect that "grant" is an agreement of
H            some sort which creates rights in the grantee and an
   COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                                725
                 [DIPAK MISRA, J.]

      agreement which transfers rights may be termed as                          A
      assignment. But the question, is, before the grant, was such
      a right, namely the right to participate in the draw, existing
      in the grantor? The point made is that there is no transfer
      of property involved in the issue of a lottery ticket and it is
      only after the issue of the lottery ticket that the grantee
                                                                                 B
      gets a right to participate. In other words, it was sought to
      be urged that in a lottery, the promoter sponsoring it does
      not have any right to participate nor to claim a prize in a
      draw and these come into existence for the first time by
      the purchase oflottery ticket when he purchases the ticket
      and therefore it cannot be said that any transfer of right is              c
      involved, but only creation of new right by the grantor in
      favour of the grantee."
       The observations made in the aforesaid paragraphs that there is
no transfer of property involved in a grant, for the rights come into
existence after purchase.                                                        D
        28. The decision in the case of H. Anraj (supra) was overruled
by the Constitution Bench in Sunrise Associates v. Govt. of NCT of
Delhi and others 14 on several grounds including that there was no
distinction between the chance to win and the right to participate in the
draw. Such a sub-division was not correct. There was no value in mere            E
right to participate in the draw. Therefore, lottery tickets were not "goods"
but were actionable claiins.        These were merely token of chances
purchased and even otherwise the right to participate in the draw was
not a moveable property and, therefore, there cannot be any transfer of
beneficial interest in a moveable property. The reason being, the right to
participate in a lottery draw was an actionable claim. More significant          F
for our purpose would be the observations of the Constitution Bench
relating to the word "goods" for imposition of sales tax which, it was
observed in the context, would carry its ordinary meaning of the subject
matter of ownership and not denote the nature of interest of goods. The
word "goods" was used to describe the thing itself. The relevant passages        G
of the Constitution Bench in Sunrise Associates (supra) on the said
aspect read as under:-
       "35. The word "goods" for the purposes of imposition of
       sales tax has been uniformly defined in the various sales
 " c2006 > 5 sec 603                                                             H
726           SUPREME COURT REPORTS                           [2016] 5 S.C.R.


A          tax laws as meaning all kinds of movable property. The
           word "property" may denote the nature of the interest in
           goods and when used in this sense means title or ownership
           in a thing. The word may also be used to describe the thing
           itself. The two concepts are distinct, a distinction which
           must be kept in mind when considering the use of the word
.B
           in connection with the sale of goods. In the Dictionary of
           Commercial Law by A.H. Hudson ( 1983 Edn.) the
           difference is clearly brought out. The definition reads thus:
              " 'Property'.-In commercial law this may carry its
              ordinary meaning of the subject-matter of ownership.
 c            But elsewhere, as in the sale of goods it may be used as
              a synonym for ownership and lesser rights in goods."
           Hence, when used in the definition of"goods" in the different
           sales tax statutes, the word "property" means the subject-
           matter of ownership. The same word in the context of a
D          "sale" means the transfer of the ownership in goods.
           36. We have noted earlier that all the statutory definitions
           of the word '.'goods" in the State sales tax laws have
           uniformly excluded, inter alia, actionable claims from the
           definition for the purposes of the Act. Were actionable
 E         claims, etc., not otherwise includible in the definition of
           "goods" there was no need for excluding them. In other
           words, actionable claims are "goods" but not for the
           purposes of the Sales Tax Acts and but for this statutory
           exclusion, an actionable claim would be "goods" or the
 F         subject-matter of ownership. Consequently, an actionable
           claim is movable property and "goods" in the wider sense
           of the term but a sale of an actionable claim would not be
           subject to the sales tax laws."
      And, again:-
 G         "51. We are therefore of the view that the decision in H.
           Anraj (supra) incorrectly held that a sale of a lottery ticket
           involved a sale of goods. There was no sale of goods within
           the meaning of Sales Tax Acts of the different States but at
           the highest a transfer of an actionable claim. The decision
           to the extent that it held otherwise is accordingly overruled
 H
   COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                                727
                 fDIPAK MISRA, J.l

      though prospectively with effect from the date of this                    A
      judgment."
       29. We may note with profit that Sunrise Associates (supra) did
not specifically deal with the question ofreplenishment licences, forthe
reference made to the Constitution Bench was limited to whether lottery
tickets were "goods". The Constitution Bench had specifically observed           B
that they were not called upon to decide the question whether the
replenishment licences were "goods." We may usefully refer to the
relevant passage:-
       "29 ... We have not been called upon to answer the question
     · whether REP licences (or the· DEPB which has replaced                     c
       the REP licences) are "goods". Although we have heard
       counsel at length on this, having regard to the limited nature
       of the reference, we do not decide the issue. The decision
       in Vikas Sales (supra) was referred to only because it
       approved the reasoning in H. Anraj (supra) and not
       because the referring court disagreed with the conclusion                 D
       in Vikas Sales (supra) that REP licences were goods for
       the purposes oflevy of sales tax. Indeed REP licences were
       not the subject-matter of the appeal before the referring
       court and could not have formed part of the reference. The
       only question we are called upon to answer is whether the                 E
       decision in H. Anraj (supra) that lottery tickets are goods
       for the purposes of Article 366(29-A)(a) of the Constitution
       and the State sales tax laws, was correct."
       30. Thus, the Constitution Bench did not overrule the decision of
the Court in Vikas Sales Corporation (supra) holding replenishment               F
licences were goods. The Constitution Bench, however, held that the
reliance placed in Vikas Sales Corporation (supra) on the observations
in H. Anraj (supra), which was agreed to and stood overruled, was to
this extent bad in law. To clarify, Vikas Sales Corporation (supra)
specifically dealt with the transfer of replenishment licences after they
had been issued. However, in Vtkas Sltles Corporlltio11 (supra) it was           G
opined that the grant of a 1icence by the 1icensing authority to a registered
exporter was not a sale. Sale will take place only when the registered
owner further sells it to another person for consideration. The relevant
paragraph of the judgment has beeQ earlier reproduced.
                                                                                 H
728            SUPREME COURT REPORTS                          [2016] 5 S.C.R.



A            31. A three-Judge Bench of the Court in Yas/1a Overseas v.
      Commissioner of Sales Tax and otliers 15 had examined the question
      whether the sale or transfer ofreplenishment licences and duty entitlement
      passbooks would attract sale tax. Reliance placed on Sunrise Associates
      (supra) to contend that the decision in Vikas Sales Corporation (supra)
      impliedly overruled. The three-Judge Bench did not accept the contention
B
      by stating thus:-
            "40. Thus, on a detailed examination, we are unable to see
            how the decision in Sunrise (supra) can be said to alter
            the position in regard to the sale of REP licences as held by
            the earlier decision in Vikas (supra). It is noted above that
c           the Constitution Bench in Sunrise (supra) firmly and
            expressly declined to go lnto the question whether REP
            licences (or DEPB which replaced REP licences) were
            "goods". It is indeed true that the Constitution Bench in
            Sunrise (supra) did not approve the decision in Vikas
D           (supra) insofar as it gave their free marketability as an
            additional reason to hold that REP licences were not
            actionable claim but "goods" properly so called. The
            Constitution Bench held that the assumption that actionable
            claims were not transferable for value was quite unfounded
            and the conclusion drawn on that basis was quite wrong. In
E           paras 39 and 40 of the decision, Sunrise (supra) decision
            gave illustrations of a number of actionable claims which
            are transferable.
            41. But to our mind that does not in any way change the
            position insofar as REP licences are concerned. While
F           examining the three-Judge Bench decision in Vikus (supra)
            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 licences had their own value; they were freely
G           bought and sold in the market for their intrinsic value and
            for that reason alone those were goods. (See para 29 of
            the decision in Vikas (supra) 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
       " (2008) 8 sec 681
H
   COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA                                  729
                fDIPAK MISRA, J.l

      made in Anraj (supra) relating to lottery tickets and that                  A
      too because the Karnataka and the Madras High Courts
      had heavily relied upon Anraj (supra) decision for holding
      that the sale of REP licences was exigible to sales tax. On
      a careful reading of the decision in Vikas (supra) it is
      apparent that it was the intrinsic value of REP licence that
                                                                                   B
      brought it within the definition of goods."
       32. After so stating, the Court specifically referred to the term
"goods" as interpreted in Sunrise Associates (supra) to mean the title
and ownership of a thing and not the nature of interest in the goods. The
question of free-marketability, it was held, was not primarily relevant as
per the decision in Sunrise Associates (supra), albeit co_uld be relied            c
upon as an additional reason, for replenishment licences fall within the
definition of "goods" quite independently. These licences could have
their own intrinsic value and could be freely brought and sold at their
market value. There was also a ready market fqr the sale and purchase
of replenishment licences.                                                         D
       33. Thus analysed, the replenishment licences or Exim scrips would,
therefore, be "goods", and when they are transferred or assigned by the
holder/owner to a third person for consideration, they would attract sale
tax. However, the position would be different when replenishment
licences or Exim scrips arc returned to the grantor or the sovereign               E
authority for cancellation or extinction. In this process, as and when the
goods are presented, the replenishment licence or Exim scrip is cancelled
and ceases to be a marketable instrument. It becomes a scrap of paper
without any innate market value. The SBI, when it took the said
instruments as an agent of the RBI did not hold or purchase any goods.
It was merely acting as per the directions of the RBI, as its agent and as         F
a participant in the process of cancellation, to ensure that the replenishment
licences or Exim scrips were no longer transferred. The intent and purpose
was not to purchase goods in the form of replenishment licences or
Exim scrips, but to nullify them. The said purpose and objective is the
admitted position. The object was to mop up and remove the replenishment           G
licences or Exim scrips from the market.
       34. Be it noted that the initial issue or grant of scrips is not treated
as transfer of title or ownership in the goods. Therefore, as a natural
corollary, it must follow when the RBI acquires and seeks the return of
replenishment licences or Exim scrips with the intention to cancel and             H
730             SUPREME COURT REPORTS                           [2016] 5 S.C.R.



A     destroy them, the replenishment licences or Exim scrips would not be
      treated as marketable commodity purchased by the grantor. Further,
      the SBI is an agent 6f the RBI, the principal. The Exim scrips or
      replenishment licences were not "goods" which were purchased by them.
      The intent and purpose was not to purchase the replenishment licences
      because the scheme was to extinguish the right granted by issue of
B
      replenishment licences. The "ownership" in the goods was never
      transferred or assigned to the SBI.
            35. In view of the preceding analysis, the other issues and questions,
      including the question whether the aforesaid exercise of procuring and
      cancelling replenishment licences or Exim scrips is "business" within
·c    the meaning of the Act, need not be decided. The facts of the case at
      hand has its distinctive features and, therefore, we unhesitatingly concur
      with the view of the High Court that the SBI was not liable to levy of
      purchase tax under the Act.
            36. Consequently, the appeal, being devoid of merit, stands
D     dismissed. There shall be no order as to costs.


      Devika Gujral                                              Appeal dismissed.