Holding

The Constitution Bench affirmed that Sunrise does not alter the taxability of REP licences; Vikas remains good law, and DEPB, like REP licences, qualifies as "goods" and is subject to sales tax.

Summary

The Supreme Court examined a batch of six appeals concerning the taxability of Replenishment Licences (REP licences) and the Duty Entitlement Passbook (DEPB) scheme under various State sales tax statutes. The appellants argued that the three‑judge decision in Vikas Sales Corporation v. Commissioner of Commercial Taxes, which held REP licences to be "goods" liable to sales tax, was implicitly overruled by the Constitution Bench judgment in Sunrise Associates v. Government of NCT of Delhi, which excluded lottery tickets (treated as actionable claims) from tax. The Court held that Sunrise dealt only with lottery tickets and did not disturb the earlier Vikas ruling on REP licences. It further found that DEPB possesses an intrinsic market value and free transferability, making it a market commodity and therefore "goods" within the meaning of the sales tax laws. Consequently, the sale of both REP licences and DEPB is exigible to sales tax. All the appeals were dismissed.

Issues considered

The three‑judge decision in Vikas Sales Corp. is impliedly overruled by the Constitution Bench decision in Sunrise Associates regarding the taxability of REP licences.
Whether the decision in Vikas Sales Corp. applies to the sale of Duty Entitlement Passbook (DEPB) scheme.
Whether REP licences and DEPB constitute "goods" liable to sales tax or are actionable claims excluded from tax.

Legislation cited

Bombay Sales Tax Act, 1959s. 2(13), s. 2(28)
Delhi Sales Tax Act, 1975s. 2(1), s. 2(g)
Foreign Trade (Development and Regulation) Act, 1992
Imports and Exports (Control) Act, 1947
Kerala General Sales Tax Act, 1963s. 2(xii), s. 2(xxi)
Transfer of Property Act, 1882s. 3

Subjects

sales taxREP licenceReplenishment LicenceDuty Entitlement PassbookDEPBactionable claimgoodsmarket commoditytaxabilityConstitution Benchtransferability

Judgment

[2008] 7 S.C.R. 919

M/S. YASHA OVERSEAS A
v.
COMMISSIONER OF SALES TAX & ORS.
(Civil Appeal No. 2155/2000)

MAY 6, 2008
B
....
[B.N. AGRAWAL, G.S. SINGHVI AND AFTAB ALAM, JJ.)

Import-Export:
Replenishment Licence - Sale of - Exigibility to sales
tax - Held: REP Licence is exigible to sales tax - Innate value c
of REP licence and its free transferability made it into a market
commodity - Constitution Bench decision in Sunrise
Associates's case does not alter the position in regard to levy
of tax on sale of REP licence - On the said issue \hkas Sales ·
Corporation's case is a good law D
)'

Duty Entitlement Passbook Scheme (Of.PB) - Sale of
DEPB - Exigibility to sales tax - Held: DEPB has its own
intrinsic value that makes it a market commodity- Thus, DEPB
credit is 'goods' within the meaning of sales tax laws - It is
E
same as REP licence - Hence, sale of OEPB is exigible to
tax.
The batch of six appeals were referred to the three-
judge Bench. One of the appeals relates to the sale of
Replenishment Licence and the other five relates to the F
sale of Duty Entitlement Passbook Scheme.
In H. Anraj v Govt. of Tamil Nadu (1986) 1 SCC 414,
with regard to the amenability to sales tax of sale of lottery
tickets, the two-judge Bench of this Court held th~t the
sale of lottery tickets are not actionable claims and that in G
every sale thereof a transfer of property in goods is
involved and as such the sale of lottery tickets could be
....
subjected to tax under T.N. General Sales Tax Act and
Bengal Finance (Sales Tax) Act. Ten years later, in Vikas
919 H
<
920 SUPREME COURT REPORTS [2008] 7 S.C.R

,.
A Sales Corporation v Commnr Of Commercial Taxes (1996)
4 S CC 433 the three-judge Bench of this Court, affirming
the decision in H. Anraj's case, held that the REP Licences/
Exims Scrips are not in the nature of actionable claims
and thus, was exigible to sales tax. Thereafter, the
B Constitution Bench decision in Sunrise Associates v Govt.
of NCT of Delhi (2006) 5 SCC 603 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 sale tax.
c The question which arose for consideration in the
batch of the ipstant six appeals was whether the three-
judge Bench decision of this Court in Vikas Sales
Corporation stands impliedly overruled by the Constitution
Bench decision in Sunrise Associates and the earlier
D decision in H. Anraj v Govt. of Tamil Nadu (1986) 1 SCC 414
holding 0therwise, did not lay down the correc~ law; and ...
that if the answer to this question is in the negative and
Vikas case is still good law, would it also apply to sale of
Duty Entitlement Passbook Scheme (DEPB).
E
Appellants contended that the decision in Vikas case
while upholding the taxability of REP licences, referred
approvingly to Anraj case which was expressly overruled
by Sunrise case; that the reasons given in Vikas case for
,.
holding that REP licences were goods were also
F disapproved by Sunrise case, thus it must be held that '"'
the decision in Vikas case too stands impliedly overruled;
that DEPB has materially different features and hence, the
decision in Vikas case will have no application to the case
of DEPB; that what was sought to be taxed was the
G transfer of "Credit" in Duty Entitlement Passbook; that
'credit' could never mean 'goods' under the sales tax laws;
that being in the nature of debt, DEPB credit plainly fell
within the first part of the definition of actionable claim;
that even if the credit is seen not as a debt but as movable
H property, sale of DEPB was a beneficial interest in the

,.
M/S. YASHA OVERSEAS v. COMMISSIONER OF 921
SALES TAX & ORS.

movable property, thus, credit would still fall within the A
second part of the definition of actionable claim; and that
saleability of DEPB would not make any difference
because many other actionable claims were equally
saleable.
Dismissing the appeals, the Court B

HELD: 1.1 The Constitution Bench decision in
Sunrise case does not alter the position in regard to levy
of tax on sale of REP licence and on that issue the three-
Judge Bench decision in Vikas case continues to hold c
the field. [Para 43] [953-C]
1.2 DEPB has an intrinsic value that makes it a market
commodity. Therefore, DEPB, like REP licence qualifies
as 'goods' within the meaning of the Sales Tax laws of
Delhi, Kerala and Mumbai and its sale is exigible to tax. D
[Para 43] [953-D]
2.1 It cannot be seen how the decision in Sunrise case
can be said to alter the position in regard to the sale of
REP licenses as held by the earlier decision in Vikas cas~.
The Constitution Bench in Sunrise case firmly and · E
expressly declined to go into the question whether REP
licences (or DEPB which replaced REP licences) were
'goods'. It is indeed true that the Constitution Bench in
Sunrise case did not approve the decision in Vikas case·
insofar as it gave their free marketability as an additional F
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. The G
Sunrise case gave illustrations of a number of actionable
claims which are transferable. [Para 27] [944-F-H; 945-A]
2.2 While examining the three-Judge Bench decision
in Vikas case earlier in this judgment it is seen that the H
922 SUPREME COURT REPORTS (2008] 7 S C.R.

A 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
B goods. It was only after coming to the conclusion that the
Court proceeded to examine the matter in the light of the
observations made in Anraj case relating to lottery tickets
and that too because the Karnataka and Madras High
Courts had heavily relied upon the Anraj case for holding ,..
c that the sale of REP licences was exigible to sales tax. On
a careful reading of the decision in Vikas case it is apparent
that it was the intrinsic value of REP licence that brought
it within the definition of goods. [Para 28] [945-B-D]
2.3 In regard to the observations made in Sunrise
D case, marketability is a feature of distinction between
·goods' proper and actiorable claims. What was said in
Vikas case, as understood, was that the innate value of
REP licence and its free transferability made it into a market
commodity. The illustrations given in the decision in
E Sunrise, namely, (i) a right on the fulfillment of certain
conditions to call for delivery of goods mentioned in a
contract, (ii) negotiable instruments, (iii) right to recover
insurance money, (iv) a partner's right to sue for an
account of a dissolved partnership, (v/ the right to claim
F the benefit of a contract not coupl~d with any liability, (vi)
a claim for arrears of rent and (vii) a right to the credit in a
provident fund account are all indeed transferable for
consideration but none of these is a market commodity.
The holder of any of the above rights or claims may or
G may not be able to find a ready buyer at a given time;
conversely a prospective buyer may not find any of the
above rights or claims available for purchase by going to
the market at any time. Contrary to this, REP licenses h~d
always a market. There were people willing to sell arid
H others willing to buy REP licences at all times. Its innate
MIS. YASHA OVERSEAS v. COMMISSIONER OF 923
SALES TAX & ORS.

value coupled with free transferability made REP licences A
into a market commodity and it was that aspect of the
matter that Vikas case referred to for holding that REP
licences could not be classified as actionabfo claims.
Those were goods properly so-called having innate value
and a ready market. The position becomes further clear B
by the completely contrasting findings in Sunrise case (in
regard to lottery tickets) and in Vikas case (in regard to
REP licences). There is no slightest doubt that the
decision in Sunrise case in no way affects the position
insofar as REP licences are concerned and the legal c
position in regard to their sale is concluded by the
decision in Vikas case. [Para 29] [945-E-H; 946-A-F]
3. A perusal of s. 2(g) and (I) of the Delhi Sales Tax
Act, 1975, s. 2(xii) and (xxi) of the Kerela General Sales
Tax Act, 1963 and s. 2(13) and 2(28) of the Bombay Sales D
Tax Act, 1959 would sht>w 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 case and Sunrise E
case in regard to the legal provisions fully applies to the
cases in hand. [Para 32] [949-B-C]
3.1 The Duty Entitlement Passbook Scheme (DEPB)
is exactly the same as REP licence. Like REP license it
has an innate value and for which it freely sells in the F
market. The submission that DEPB, unlike REP licence
was not a licence for import of goods 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 G
goods and very few items, placed under the negative
list, require a licence for import. It cannot be said that
DEPB is materially different from REP licence and its
transfer by way of sale would not be exigible to sales tax.
[Para 36] [951-B-C] H
924 SUPREME COURT REPORTS [2008] 7 S.C.R.

A 3.2 The DEPB cannot be seen either as a debt or as
a beneficial interest in movable property not in possession
of the claimant. The DEPB like REP licence has its own
intrinsic value and the purchaser, on payment of
consideration, buys something for its value. Thus, the
B DEPB credit is clearly 'goods' within the meaning of sales
tax laws and its sale clearly exigible to tax. [Para 40] [952-
D-E]
3.3 If DEPB (or for that matter REP license) has to be
compared with a lottery ticket, it can only be compared
c 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.
D 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 the ticket
cannot be described as anything else but 'goods'. [Para
41] (952-F-H]
E
3.4 The DEPB can be compared with prepaid meal
tickets or prepaid petrol coupons or accumulated flying
miles. A meal ticket, a petrol coupon or flying miles credit
has its own intrinsic value. If permitted free transferability
those would soon become market commodities and
F would be sold and bought for their value as 'goods'. [Para
42] [953-A-B]
Vikas Sales Corporation v Commnr. Of Commercial
Taxes (1996) 4 S CC 433 - affirmed and relied on.
G Sunrise Associates v Govt. of NCT of Delhi (2006) 5 SCC
603 - Explained .
H. Anraj v Govt. of Tamil Nadu (1986) 1 SCC 414 -
referred to.
H CIVIL APPELLATE JURISDCTION : Civil Appeal No.
MIS. YASHA OVERSEAS v. COMMISSIONER OF 925
SALES TAX & ORS. [AFTAB ALAM, J]

2155 of 2000. A
From the Judgment & Order dated 4.8.1999 of the High
Court of Delhi at New Delhi in WP No. 4437/1999.

WITH
Civil Appeal Nos. 6893/2003, 407512007, 3316/2008, . B
3318/2008 and 3320/2008

Shekhar Naphade, T.L.V. Iyer, Pradeep Misra, Jay Savla,
Reena Bagga, Akshit Gadhok, Randhir Chawla, Pradeep Tara,
Praveen Kumar, Reena Saigal, Rajiv Agnihotri, Prasanthi c
Prasad (NP), AK. Jain, Rajesh Jain, Rajesh Kumar, Rekha
Pandey, Veruna Bhandari Gugnani,Ashok Bhan, Neera Gupta,
A. Tarique, D.S. Mahra, Ravindra K. Adsure, Subhangi Tuli and
R. Sathish for the appearing parties.
The Judgment of the Court was delivered by D

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 r:;ommercia/ Taxes E
[(1996) 4 sec 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 F
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 G
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 REP
licences but on behalf of the appellants it was submitted that H
926 SUPREME COURT REPORTS [2008] 7 S.C.R.

'
A the decision in Vikas while upholding the taxability of REP
licences, referred approvingly to Anraj which was expressly
overruled by Sunrise. Further, the additional reasons given in
Vikas for holding that REP licences were 'goods' were also
disapproved by the Constitution Bench and, therefore, it must
B be held that the decision in Vikas too stood impliedly overruled.
"
4. REP licences were granted under the Import and Export
Policy for the period April 1988 to March 1991 issued under the
Imports and Exports (Control) Act, 1947. Those were replaced
by Duty Entitlement Passbook (DEPB) provided for in the Exim
c Policy 1997-02 under the Foreign Trade (Development and
Regulation) Act, 1992. Out of six cases before us only one relates
to the sale of REP licences; the other five arise from the sale of
DEPB. In those five cases it is contended on behalf of the
appellants that DEPB has materially different features than REP
D and in any event the decision in Vikas shall not apply to the
case of DEPB.
5. We are thus required to consider two questions; whether
the decision in Vikas can be said to be impliedly overruled by
the Constitution Bench decision in Sunrise? And, if the answer
E
to this question is in the negative and Vikas is still good law,
would it also apply to sale of DEPB?

6. It may also be mentioned here that out of the six cases
in the batch, four (including the one relating to REP) arose under
F the Delhi Sales Tax Act, one under the Kerela General Sales
Tax Act and one under the Bombay Sales Tax Act.
7. In order to consider the first question we propose to
examine the three decisions (Anraj, Vikas & Sunrise) in the
order in which those came to be delivered. In Anraj the issue
G before the court was whether the sale of lottery tickets could be
subjected to tax under the T. N. General Sales Tax Act and the
Bengal Finance (Sales Tax) Act. On behalf of the assesses, ...
dealers in lottery tickets and agents and stockists of various
lotteries organised by different states, including the State of West
H Bengal, it was contended that the sale of a lottery ticket is nothing
MIS. YASHA OVERSEAS v. COMMISSIONER OF 927
SALES TAX & ORS. [AFTAB ALAM, J.]

more than a sale of a chance to win a prize and no transaction A
of sale of moveable property takes place or is involved in the
sale of a lottery ticket, the ticket itself being merely a token of
the chance purchased. It was 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 B
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 conff?rs on the purchaser C
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
future' depending on a contingency. Lottery tickets, not as o
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 E
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 right to
participate and a right to receive the prize but the two
together constitute one single right. It is not possible to F
accept this contention for the simple reason that the two
entitlements which arise on the purchase of a lottery ticket
are of a different character, inasmuch as the right to
participate arises in praesenti, that is to say it is a choate
or perfected right in the purchaser on the strength of which
he can enforce the holding of the draw, while the other is G
inchoate right which is to materialize in future as and when
the draw takes place depending upon his being successful
in such draw. Moreover, on the date of the purchase of the
ticket, the entitlement to participate in the draw can be
said to have been delivered unto the possession of the H
928 SUPREME COURT REPORTS [2008) 7 S.C.R

A purchaser who would be enjoying it from the time he has
purchased the ticket and as such it would be a chose in
possession while the other would be an actionable claim
or a chose in action as has been held in Jones v. Carter
[8 QB 134 : 115 ER 825] and King v. Connare [61 CLR
B 596] on which counsel for the dealers relied."
On the basis of the above the court, in paragraph 33 of the
judgment concluded as follows:

"In the light of the aforesaid discussion my conclusions
c are that lottery tickets to the extent that they comprise the
entitlement to participate in the draw are "goods" properly
so called, squarely falling with the definition of that
expression as given in the Tamil Nadu Act, 1959 and the
Bengal Act, 1941, that to that extent they are not actionable
claims and that in every sale thereof a transfer of property
D
in the goods is involved."
Ten years later the question of taxability of REP license
under the sales tax enactments of Tamil Nadu, Kerala and
Karnataka came up for consideration before this court in Vikas.
E Before referring to the decision it will be useful to see what
exactly REP license is and how the matter came to this court.
8. The Imports and Exports (Control) Act, 194 7 (now
replaced by the Foreign (Development and Regulation) Act,
1992) empowered the Central Government to prohibit, restrict
F or otherwise control imports and exports. In exercise of the
powers conferred by this Act, the Imports (Control) Order, 1955
was issued. Schedule I to the Order contained the list of articles
of which imports were controlled. The import of the scheduled
items was prohibited except (i) under and in accordance with a
G 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 194 7 Act and the Control
H Order 1955, the Government of India issued the Import and
M/S. YASHA OVERSEAS v. COMMISSIONER OF 929
SALES TAX & ORS. [AFTAB ALAM, J.]

Export Policy for the period April, 1988 to March, 1991. The A
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 B
.4
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 c
products. Paragraph 165(1) provided that all exports subject to
certain specified exception would qualify for the grant of import
replenishment and paragraph 166(1 ), dealing with the extent of
replenishment read as follows :
''The extent of import replenishment permissible against D
each product e'lumerated in column 2 of Appendix 17
shall be that set out in column 3 thereof. These percentages
will apply in the case of exports made on or after 1.4.1988,
except for registered contracts, to which the relevant
provisions would apply." E
The two special features of REP licence were the flexibility
in its utilisation and its easy transferability (paragraphs 175 &
183(1) respectively of the policy document). Under the Import
and Export regime in existence at that time all imports against
licences or even under the Open General Licence were subject F
....
to 'actual user condition'. A REP licence allowed its holder to
import licensed goods, free from 'actual user condition' but a
REP licence was freely transferable and it did not require any
approval or endorsement by the Licensing Authority. The
registered importer to whom it was granted in the first instance G
could transfer it to anyone else and the transferee in turn could
further transfer it to others. It could be endorsed in favour of
__..
another party by the previous endorsee. Its transfer did not
require any approval or endorsement by the licensing authority
and it was simply govern_ed by the ordinary law of the land. It H
930 SUPREME COURT REPORTS [2008] 7 S.C.R.

A remained valid for a period of 18 months from the date of its
issue. In a nutshell during the previous licence-bound import and
export regime the REP licence was a kind of freely transferable,
pre-duty paid import licence not subject to 'actual user condition'.
It was thus a highly attractive and sought after instrument/means
B for importing goods. In Vikas this Court noted that a number of
registered exporters who obtained REP licences sold them to ...
others for profit. In fact those licences were being traded freely
in the market and stock exchanges.
9. The taxing autho;ities in some of the states (Karnataka,
c Tamil Nadu and Kerela) subjected the transfer of REP licences
to sales tax. The imposition of tax was challenged before the
respective High Court~ on the plea that REP licence was not
'goods' within the meaning of the sales tax laws and its transfer,
therefore, was not exigible to sales tax. The Karnataka High
D Court rejected the plea holding that REP licence did not merely
give its holder the right 0f undertaking 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
E 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
F participate in the lottery draw was 'goods' (as held by this court
in Anra1) 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.
G
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 Sa/es
Corporation and was decided by a Bench of three-Judges.

H 12. In V1kas it was noticed at the outset that the High Courts'
M/S. YASHA OVERSEAS v. COMMISSIONER OF 931
SALES TAX & ORS. [AFTAB ALAM, J.]

judgments were influenced mainly by the decision in Anraj A
(Paragraphs 2 & 6 of the decision reported in SCC) but then
this court went on to examine the matter on its own. It referred to
-r Entry 54 in List II of the Seventh Schedule to the Constitution to
which the Sales Tax Acts of the different States are referable
,.. and also Entry 92-A of List I that is the legislative head for the B
• Central Sales Tax Act (Paragraph 10). It then referred to the
definition of 'goods' as given in clause 12 of Article 366 of the
Constitution and the expanded definition of the expression 'tax
on the sale or purchase of goods' as contained in clause 29-A
of that Article after its amendment by the Forty-sixth Amendment c
Act, 1982 and observed that sub-clauses (c) & (d) of the
amended definition were relevant to the controversy before the
court. The two clauses are as follows:
"366 (29-A) - "tax on the sale or purchase of goods"
includes - D
(a) xxx xxx xxx xxx
(b) xxx xxx xxx xxx
(c) a tax on the delivery of goods on hire-purchase or any E
system of payment by installments;
(d) a tax on the transfer of the right to use any g.oods for
any purpose (whether or not for a specified period) for
cash, deferred payment or other valuable consideration.
(e) xxx xxx xxx xxx F
(f) xxx xxx )()()( xxx"
The court then examined the definition of 'goods' as given
in section 2(7) of the Sales of Goods Act and since it means,
subject to certain exceptions, every kind of movable property, G
and since that expression is not defined in any of the Sales Tax
enactments, it turned to the meanings of 'moveable property'
and 'immoveable property' under the General Clauses Act. It
further noticed that the General Clauses Acts of the three States
gave identical definition of the two expressions. H
932 SUPREME COURT REPORTS [2008) 7 S.C.R.

A 13. The Court then referred to the definition of 'goods' in
the Central Sales Tax Act, 1956 and the sales tax enactments
of the three States, Tamil Nadu, Karnataka and Kerala and found
that in all the three states 'goods' was defined to mean all kinds
of moveable property, subject to certain exceptions like
B newspapers, actionable claims, stocks, shares, securities etc. ...
14. In view of the definition of 'goods' it became vital to
correctly understand the nature and attributes of moveable
property. The Sales Tax Acts had no definition of the expression
and the meaning given in the General Clauses Acts of the three
C States was also found to be not of much help. The court,
therefore, proceeded to examine in detail the legal notions of
property and moveable property. It referred to Black's Law
Dictionary (6th_ Edn. 1990), Dictionary of Commercial Law by
A.H. Hudson (published by Butterworths, 1983) and Jowitt's
D Dictionary of English Law (Sweet and Maxwell Limited, 1977) ,
and noted that all the c0mmentaries 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,
E "The Law of Property" in Salmond's Jurisprudence (12th. 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
F 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:
G
"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 can simply
sell it to another and that another to yet another person. In
H
MIS. YASHA OVERSEAS v. COMMISSIONER OF 933
SALES TAX & ORS. [AFTAB ALAM, J.]

other words, these licences/Exim Scrips have an inherent A
value of their own and are traded as such. They are treated
and dealt with in the commercial 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 B
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 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 c
cannot do otherwise. (Wi~h effect from 1.3.1992, of course,
the very policy and system under which these licences/
scrips were being issued, has been discontinued."

Having thus arrived at its conclusion quite independently,
the court observed that the Karnataka and Madras High Courts D
in their respective judgments had pl?ced strong reliance upon
the earlier decision in Anraj. The court then briefly examined
Anraj and, in paragraph 32 of the judgment, expressed its
agreement with the view taken in the earlier decision as follows:
"We are of the opinion that the ratio of the said decision E
fully supports the contention of the States herein. As rightly
pointed out by the Karnataka High Court, the content of
REP Licence/Exim Scrip is far more substantial and real
than that of a lottery ticket. If lottery tickets are goods,
• there is no reason why these licences/scrips are not F
goods."
The court also rejected the submission that REP licence
was in the nature of an actionable claim and was, therefore,
expressly excluded from the definition of 'goods' in the Sales G
Tax Acts. In this regard, in paragraphs 34 and 35 of the judgment
the court observed and held as follows :
"We are also of the opinion that these licences/scrips
cannot be treated as actionable claims. "Actionable
claims" is defined in Section 3 of the Transfer of Property H
934 SUPREME COURT REPORTS [2008] 7 S.C.R.

A Act in the following words:
'"Actionable claims' means a claim to any debt, other
. than a debt secured by mortgage of immovable
property or by hypothecation or pledge of moveable
property, or to any beneficial interest in moveable
8 property not in the possession, either actual or
constructive, of the claimant, which the civil courts
recognise as affording grounds for relief, whether
such debt or beneficial interest be existent, accruing,
conditional or contingent."
c
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. lndeed,'in Anrajthe main contention
D
of the petitioners was that a lottery ticket was in the nature
of an actionable claim. The said a;gument 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
E
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
F 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
G observations relied upon since the material referred to by
us on the meaning of the expression "moveable property"
and the decision in Anraj is more to the point."
The court also rejected the various other ancillary
H submissions made on behalf of the assessees and finally upheld
M/S. YASHA OVERSEAS v. COMMISSIONER OF 935
SALES TAX & ORS. [AFTAB ALAM, J.]
..
the levy of tax on the transfer of REP licences under Karnataka A
and Tamil Nadu Sales Tax Acts.

16. This was Vikas.

17. Coming back to the lottery tickets, the decision of this
court in Anrajwas understood and applied differently by different B
High Courts. The Karnataka High Court, in Nirmal Agency v.
CTO held that according to Anraj a sale of lottery tickets
conferred on its purchaser two rights (a) a right to participate in
the draw and (b) a right to claim a prize depending upon his
being successful in the draw. Further, according to the decision c
it was the transfer of the first right alone that amounted to sale of
goods exigible to tax. The taxing authority would therefore be
obliged to determine how much of the consideration was
referable to the right to participate in the draw and how much to
the chance of wining, and thereafter assess the dealer on the
D
first part.·
18. The Delhi High Court, on the other hand, relying upon
the same decisions in Anraj and Vikas took the view that in the
sale of a lottery ticket the full consideration would be subject to
tax because the lottery ticket in itself was 'goods', properly so E
called.

19. The appeal from the decision of the Delhi High Court
in Sunrise Associates v. Govt. of NCT of Delhi came to this
court in which the need was felt for reconsideration of the
.._ decisions in Anraj and Vikas (insofar as it affirmed the decision F
in Anra1) and because the decision in Vikas was rendered by a
three-Judge Bench the appeal was referred to a Constitution
Bench. Here it is important to bear in mind that the decision in
Vikas dealing with the question of taxability of REP licences
was not the subject of reference and Vikas came under G
reference only to the extent it approved Anraj. The Constitution
Bench hearing the appeal, as we shall see presently, never lost
sight of this aspect of the matter.

20. The Constitution Bench hearing Sunrise began by
H
936 SUPREME COURT REPORTS [2008] 7 S.C.R

•
A making a survey of the provisions of the Constitution and the
other laws within the frame work of which the issue arose for
consideration. It referred to Entry 54 of List 11 of the Seventh
Schedule 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
B Article 366 of the Constitution, before its amen'dment, 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
c that in the absence of a definition in the Constitution the -.
expression must have the same meaning as given tc 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
D
all over the country and this led to the amendment of Article 366
by insertion of clause 29A, defining 'Sale of '3oods' 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
E
is as follows:

"29-A "tax on the sale or purchase of goods" includes-

(a) a tax on the transfer, otherwise than in pursuance of a
contract, of property in any goods for cash, deferred
F payment or other valuable consideration;

and such transfer, delivery or supply of any goods shall be
deemed to be a sale of those goods by the person making
the transfer, delivery or supply and a purchase of those
goods by the person to whom such transfer, delivery or
G
supply is made."
JI
The Court summed up the legal position emerging from
...
the insertion of clause 29A in Article 366 of the Constitution in
paragraph 7 of the judgment as follows
H
MIS. YASHA OVERSEAS v. COMMISSIONER OF 937
-' SALES TAX & ORS. [AFTAB ALAM, J)

'Therefore in order to constitute a de_emed sale within A
the meaning of Article 366(29-A) (a), there has to be
(1) goods (2) a transfer of property in the goods (3)
valuable consideration. The requirement of an
agreement for sale is not necessary for constituting
a sale under this sub-clause. The absence of any B
one of these elements would mean that the
transaction far from being a sale within Gannon
Dunkerley definition, would not even be a deemed
sale within the extended definition of sale under Article
366(29-A) (a)." c
The Court then went on to note that following the insertion
of clause 29-A in Article 366 of the Constitution, consequential
amendments were made in the States' Sales Tax laws to take
full benefit of the expanded meaning given to the expression
'( 'sale or purchase of goods' and observed that in all the States' D
Acts !lie expression "goods" was given the sarPe meaning as
in the Sale of Goods Act and more importantly, in all those
definitions 'actionable claim' was expressly excluded from the
definition of 'goods'. It further noted that 'actionable claim' was
defined in Section 3 of the Transfer of Property Act, 1882 as E
meaning

"a claim to any debt, other than a debt secured by
mortgage of immovable property or by hypothecation or
pledge of movable property, or to any beneficial interest
•, in movable property not in the possession, either actual or F
constructive, of the claimant, which the civil courts recognize
as affording grounds for relief, whether such debt or
beneficial interest be existent, accruing, conditional or
contingent."
G
... Having thus laid out the statutory framework the decision
in Sunrise examined the dealers' contention that a lottery ticket
,;
was only a slip of paper or memoranda evidencing the right of
the holder to share in the prize or the distributable funds and
was merely a convenient mode for ascertaining the identity of
H

-~
938 SUPREME COURT REPORTS [2008] 7 S.C.R

A 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 .An raj came to the conclusion that the
transfer of a lottery ticket upon consideration paid by the
B
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 "lo.ttery" 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
D claim a prize contingent upon the purchaser being
sucressful 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."

E The Sunrise decision then proceeded to note how the
decision in Anraj was interpreted by the Karnataka Court
(paragraph 19 of the judgment) and quite differently to it by the
Delhi High Court (paragraph 23 of the decision).

21. The Court then noted the plea of the appellants/dealers
F in the sale of lottery tickets that Anraj was wrong in drawing a
distinction between the right to participate in the draw and the
chance to win the prize; that such bifurcation was artificial as
both were part of the same transaction and further that even on
the "two rights" theory each of those rights would be choses-in-
G action. It also noted the criticism meted out to the decision in
Vikas Sales insofar as it cited the free transferability of REP
licence as an additional reason holding that it was' goods' within
the meaning of the sales tax laws.
22. Here. it is significant to note that in Sunrise an attempt
H was made to address the Court on the question whether the
M/S. YASHA OVERSEAS v. COMMISSIONER OF 939
SALES TAX & ORS. [AFTAB ALAM, J.]

sale of DEPB would attract sales tax under the Bombay Sales A
Tax Act, 1959. On behalf of the State of Maharashtra it was
submitted that considering the valuable right conferred by the
DEPB, it was an item of movable property and therefore "goods"
within the definition of the word in Section 2( 13) of the Act.
... However, the Court firmly refused to go into that controversy B
observing that the validity of the decision in Vikas was not an
issue before it for consideration. In paragraph 29 of the decision
in Sunrise it was clearly stated as follows:
"It is necessary at this stage to clarify that the order of
<C
I
reference in Sunrise v. NCT, Delhi is limited to the question c
whether lottery tickets are "goods". We have not been
called upon to answer the question whether REP licences
(or the DEPB which has replaced the REP licences) are
"goods". Although we have heard counsel at length on
this, having regard to the limited nature of the r.eference, D
we d0 not decide the issue. The decision in Vil{as Sales
was referred to only because it approved the reasoning in
H.Anraj and not because the referring court disagreed
with the conclusion in V.ikas Sales that REP liecenes were
goods for the purposes of levy of sales tax. Indeed REP E
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
it whether the decision in H.Anraj that lottery tickets are
.. goods for the purposes of Article 366(29-A) (a) of the F
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 G
-I
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 H
940 SUPREME COURT REPORTS [2008] 7 S C.R.

A 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
B 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 settled the precise ratio of the decision in
Anjar, the Court turned to the meaning of 'goods' for the purposes
C of imposition of sales tax and in paragraph 35 of the judgment
observed as follows:
"The word "goods" for the purposes of imposition of sales
tax has been uniformly defined in the various sales tax
laws as meaning all kinds of movable property. The word
D
"property" may denote the nature of the interest in goods
and whe;1 used in this sense means title or owner;:;hip 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
E
word 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
F meaning of the subject-matter of ownership. 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
G the subject-matter of ownership. The same word in the
context of a "sale" means the transfer of the ownership in
goods."
(Emphasis added)
H At this stage the decision in Vikas once again came under
MIS. YASHA OVERSEAS v. COMMISSIONER OF 941
SALES TAX & ORS. [AFTAB ALAM, J.)
;.

reference; it was pointed out (in paragraphs 38 to 40 of the A
decision in Sunrise) that in Vikas the Court observed that REP
licences were being bought and sold freely in the market as
goods and took their saleability as an additional ground to hold
that it would be idle to contend that those licences were in the
nature of actionable claim. In other words, saleability was a B
feature of distinction between goods and actionable claim
(which but for its express exclusion from the def)nition is also a
kind of goods). Goods were saleable but actionable claim was
not. The decision in Sunrise by giving many illustrations showed
that transferability for value was as much an attribute of c
actionable claim as any other kind of goods and transferability
was not the point of distinction between actionable claim and
other goods that could be sold. Hence, to say that an article or
right was goods and not actionable claim because it was
saleable was pointless. Commenting upon this aspect of the
D
decision in Vikas the Constitution Bench in paragraph 38 of 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 E
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 F
•,
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
G
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
H
942 SUPREME COURT REPORTS [2008] 7 S.C.R

A 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 ticket and the purchasers. Cases on
whether the terms specified on such tickets bind the
B purchaser are legion. It is sufficient for our purpose to note
that tickets are themselves, normally evidence of and in
some cases the contract between the buyer of the ticket
and its seller. Therefore a lottery ticket can be held to be
goods if at all only because it evidences the transfer of a
c right."
(Emphasis added)
It further pointed out that the purchaser of lottery ticket
simply acquires a claim to a conditional interest in the prize
money which was not in the purchaser's possession. It, therefore,
0
followed that the right would fall squarely within the definition of
actionable claim and would there:ore be excluded from the
definition of 'goods' under the Sale of Goods Act and the sales
tax statutes. Finally, in paragraph 45 of the decision Sunrise
found and held as follows:
E
"45. The further distinction sought to be drawn in H.Anraj
between the chance to win and the right to participate in
the draw was in our opinion unwarranted. A lottery having
been held to be in essence a chance for a prize, the sale
F of a lottery ticket can only be a sale of that chance. There
·'
is no other element. Every right can be sub-divided into
lesser rights. When these lesser rights culminate in a
legally recognizable right, it is the latter which defines the
right. The right to participate in the draw is a part of the
composite right of the chance to win and it does not feature
G
separately in the definition of the word "lottery". It is an
implicit part of the chance to win. It is not a different right.
The separation is specious since neither of the rights '
can stand without the other A draw without a chance to
win is meaningless and one cannot claim a prize without
H
MIS. YASHA OVERSEAS v. COMMISSIONER OF 943
SALES TAX & ORS. [AFTAB ALAM, J]

participating in the draw. In fact the transfer of the chance A
to win assumes participation in the draw."
(Emphasis added)

It further held that even ifthe right to participate in the draw
was held to be a separate right there would be no difference B
and in paragraph 48 of the decision observed as follows :

"Even if the right to participate is assumed to be a separate
right, there is no sale of goods within the meaning of sales
tax statutes when that right is transferred. When H.Anraj
said that the right to participate was a beneficial interest C
in movable property, it did not define what that movable
property was. The draw 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 D
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.
E
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 F
between interests in goods and a contract as highlighted in
parc;igraph 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 G
subject matter of ownership, that is to say, the thing itself. In the
definition of 'sale' the same word is used to mean the nature of
)
interests in goods, that is, title or ownership.
25. In paragraphs 42 and 43 of the decision, the court
examined the nature of a ticket and by giving illustrations of a H
944 SUPREME COURT REPORTS [2008] 7 S.C.R.

A railway ticket, a ticket to see a cinema or a pawnbroker's ticket
pointed out that the tickets were normally evidence of and in
some cases the contract between the buyer of the ticket and its
seller. Being a contract or evidence of a contract, naturally a
ticket can not be property either as a thing (of value) in itself or
B title or ownership to anything. It, therefore, followed that the sale ..
of lottery ticket did not involve transfer of 'property' either in the
sense of the thing itself (goods) or in the sense of title or
ownership (sale).

26. On purchasing a lottery ticket one merely gets a claim
c to a conditional interest in the prize money that is not in the
purchaser's possession and the right would, therefore, squarely
fall within the definition of actionable claim. The Constitution
Bench decision in Sunrise further held that Anraj wrongly split
up the right accruing to the purchaser of a lottery ticket. The
D right was one and indivisible. But even assuming the right to ,
participate in the draw to be a separate right there would still be
no sale of goods within the meaning of sales tax laws because
the draw itself could not be any movable property and the
participation in the draw was only with the object to win the prize.
E The transfer of the right would thus be of a conditional beneficial
interest in movable property that is not in possession, in other
words, once again an actionable claim.
27. Thus on a detailed examination, we are unable to see
how the decision in Sunrise can be said to alter the position in
F regard to the sale of REP licenses as held by the earlier decision
in Vikas. It is noted above that the Constitution Bench in Sunrise
firmly and expressly declined to go into the question whether
REP licences (or DEPB which replaced REP licences) were
'goods'. It is indeed true that the Constitution Bench in Sunrise
G did not approve the decision in Vikas 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
H the conclusion drawn on that basis was quite wrong. In
MIS. YASHA OVERSEAS v. COMMISSIONER OF 945
SALES TAX & ORS. [AFTAB ALAM, J]
~

paragraphs 39 and 40 of the decision, the Sunrise decision A
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 B
this judgment it is seen that the Court firsi 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 \.J
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 lighi of the
observations made in Anraj relating to lottery tickets and that
too because the Karnataka and Madras High Courts had heavily 0
I
relied upon the Anraj decision for holding that the sale of REP
licences was exigible to saies tax. On a careful reading of the
decision in Vikas it is apparent that it was the intrinsic value of
REP licence that brought it within the definition of goods.
E
29. At this stage we feel obliged to put in a caveat in regard
to the observations made in Sunrise about marketability being
a feature of distinction between 'goods' proper and actionable
claims. What was said in Vikas, as we understand it, was that
the innate value of REP licence and its free transferability made
.._ it into a market commodity. The illustrations given in F
paragraphs 39 and 40 of the decision in Sunrise, namely, (i) a
right on the fulfillment of certain conditions to call for delivery of
goods mentioned in a contract, (ii) negotiable instruments, (iii)
right to recover insurance money, (iv) a partner's right to sue for
an account of a dissolved partnership, (v) the-right to claim the G
benefit of a contract not coupled with any liability, (vi) a claim for
)
arrears of rent and (vii) a right to the credit in a provident fund
account are all indeed transferable for consideration but none
of these is a market commodity. The holder of any of the above
rights or claims may or may not be able to find a ready buyer at H
946 SUPREME COURT REPORTS [2008] 7 S.C.R.

A a given time; conversely a prospective buyer may not find any
of the above rights or claims available for purchase by going to
the market at any time. Contrary to this, REP licenses had always
a market, that is to say, there were people willing to sell and
others willing to buy REP licences at all times. Its innate value
B coupled with free transferability made REP licences into a
market commodity and it was that aspect of the matter that Vikas
referred to for holding that REP licences could not be classified
as actionable claims: Those were goods properly so-called
having innate value and :=i ready market. The position becomes
c further clear by the completely contrasting findings in Sunrise
(in regard to lottery tickets) and in Vikas (in regard to REP
licences). In Sunrise <ifter giving illustrations of transferable
actionable claims (paragraphs 39 and 40) paragraph 41 begins
as:
D "A lottery ticket has no value itself. It is a mere piece: of
paper."
On the contrary, in Vikas paragraph 29 begins as follows:
"The above provisions do establish that REP licences
E have their own value. They are bought and sold as such."
We thus have not the slightest doubt in our mind that the
decision in Sunrise in no way affects the position insofar as
REP licences are concerned and the legal position in regard to
their sale is concluded by the decision in Vikas.
F
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
G 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 DEP!3 and how far it
H is different from REP licence it will be useful to take a look at
MIS. YASHA OVERSEAS v. COMMISSIONER OF 947
SALES TAX & ORS. [AFTAB ALAM, J.)

the provisions of law under which the present cases arise and A
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
Kera la General Sales Tax Act, 1963 and the Bombay Sales Tax
Act, 1959. B
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 c
newspapers, actionable claims, stocks, shares, securities
or money."

The expression "sale" is defined in Section 2(1) as follows:
""sale" with its grammatical variations and cognate D
expressions, means any transfer of property in goods by
one person to another for cash or for deferred payment or
for any other valuable consideration, and includes --
*** *** *** ***

*** *** *** ***''
E

In the Kerala General Sales Tax Act "goods" is defined in
Section 2(xii) as follows:
""goods" means all kinds of movable property (other than
newspapers, actionable claims, electricity, stocks and F
shares and securities) and includes live stock, all
materials, commodities and articles (including those to
be used in the construction, fitting out, improvement or
repair of immovable property or used in the fitting out,
improvement or repair of movable property) and every G
kind of property (whether as goods or in some other form)
involved in the execution of a works contract, and all
}
growing crops, grass or things attached to, or forming
part of the land which are agreed to be severed before
sale or under the contract of sale." H
948 SUPREME COURT REPORTS [2008] 7 S.C.R.

A "Sale" is defined here in Section 2(xxi) as follows:

"'sale' with all its grammaiical variations and cognate
expressions means every transfer [whether in pursuance
of a contract or not) of the property in goods by one person

.. ·~"'
to another in the course of trade or business for cash or
B for deferred payment or other valuable consideration, but
does not include a mortgage, hypothecation charge or
pledge;
*** *** *** ***

c Explanation (38) - a transfer of right to use any goods for
any purpose (whether or not for a specified period) for
cash, deferred payment or other valuable consideration
shall be deemed to be a sale.
*** *** ***
D
In the Bombay Sales Tax Act "goods" is defined in Section
2(13) as follows:

""goods" means every kind of movable property (not being
newspapers or actionable claims or money, or stocks,
E
shares or securities), and includes growing crops, grass,
and trees and plants (including the produce thereof) and
all other things attached to or forming part of the land
which are agreed to be severed before sale or under the
contract of sale."
F
"Sale" is defined in Section 2(28) as follows:
""sale" means a sale of goods made within the State for
cash or deferred payment or other valuable consideration,
and includes any supply by a society or club or an
G association to its members on payment of a price or of
fees or 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."
H
M/S. YASHA OVERSEAS v. COMMISSIONER OF 949
SALES TAX & ORS. [AFTAB ALAM, J]

Schedule C of the Bombay Act contains a list of 'Goods, A
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
t· .. sales tax or purchase tax leviable at the rate of four per cent.
B
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. c
.. 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
D
the differences between DEPB and REP licences it needs to
be borne in mind that alter the regimen of licences and permits
was greatly relaxed it became possible to impc;irt goods free
) from licencing control apart from a few items which were under
the negative list, requiring a licence for import. In the changed
E
circumstances the 'licence' part of REP licence became useless
and REP licence was, therefore, replaced by DEPB broadly
retaining the other features of REP licence.
' 34. The 1997 export and import policy in Chapter 7 dealt
. with 'Duty Exemption Scheme'. Paragraph 7.1 under that F
.
~

chapter stated that the Duty Exemption Scheme would consist
of Duty Free Licence and Duty Entitlement Pass Book (DEPB).
Paragraphs 7.2 to 7.7 dealt with different kinds of duty free
licences. Paragraph 7.25 described Duty Entitlement Pass
Book as follows: G
)
"The objective of Duty Entitlement Passbook Scheme is
to neutralize the incidence of basic customs duty on the
import content of the export product. The neutralization
shall be provided by way of grant of duty credit against the
export product. The duty credit under the scheme shall be H
950 SUPREME COURT REPORTS [2008] 7 S.C.R

A calculated by taking into account the deemed import
content of the said export product as per Standard Input
Outp~t No~ms and determine basic custon:is duty payable
on such.deemed imports. The value addition achieved by
export of such product shall also be taken into account
while determining the rate of duty credit under the Scheme.
. 1
B
Under the Duty Entitlement Pass Book (DEPB) Scheme, Ii
an exporter shall be eligible to claim credit as a specified ;-·

percentage of job value of exports made in freely
convertible currency. The credit shall be available against
c such export products and at such rate as may be specified ;;,
by the Director General of Foreign Trade by a Public Notice
issued in this behalf.
.,...
Any item except those appearing in the Negative List of
Imports shall be allowed for import without payment of ,
D
basic customs duty, special duty of customs as well as
additional duty of customs, against the credit under a Duty
Entitlement Pass Book (DEPB). The holder of Duty t
;
Entitlement Pass Book (DEPB) shall have the option to

E
pay additional customs duty, if any, in cash as well." '
Paragraph 7.26 provided that third party exports would also
be admissible for grant of credit under DEPB. Paragraph 7.29
provided that DEPB might be issued on (a) Post export basis
and (b) Pre export basis.
,, ''"
F 35. Paragraph 7.32 dealt with transferability and provided
as follows: I
"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
G
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 "
,,.
;

'
H Paragraph 7 40 stated that pre-export DEPB would be
M/S. YASHA OVERSEAS v. COMMISSIONER OF 951
SALES TAX & ORS. [AFTAB ALAM, J.]

non-transferable and also subject to actual user condition but in A
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 8
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·1tery
large number of goods and very few items, placed under the C
negative list, require a licence for import. We are, therefore,
unable to accept the submission that DEPB is materially different
from REP licence and its transfer by way of sale would not be
exigible to sales tax.
D
37. Mr.Soli J. Sorabjee, learned senior advocate,
appearing in Civil Appeal Nu.6893 of 2003 led the arguments
on behalf of the appellants. Mr. Sorabjee referred to Entry 26(6)
in Schedule C of the Bombay Sales Tax and submitted that what
was sought to be taxed was the transfer of "Credit" in Duty
Entitlement Passbook. Learned counsel submitted that 'credit' E
could never mean 'goods' under the sales tax laws. Elaborating
the point he submitted that credit was earned on the basis of
export(s) made by the assessee and the credit lying with the
Government in favour of the assessee was in the nature of debt.
The credit represented an ascertained sum of money and it was F
clearly a debt even though it was not refundable or payable in
cash. A debt that could be di~charged by way of a set-off is
nonetheless a debt. In ·thrs case the credit represented a
conditional debt that could be discharged by way of a set-off
against the duty payable on a future import. Being in the nature G
) of debt, the DEPB credit plainiy·fell within the first part of the
definition of actionable claim. ·
38. Learned counsel alterna~iveJy submitted that ,l!ven if
a
the credit is seen not a~ debt but as movable property, the H
952 SUPREME COURT REPORTS [2008] 7 S.C.R.

A sale of DEPB only involved the transfer of the right to claim
credit. The credit not being in possession of the claimant, the
right to utilize it against duty payable on a future import was
certainly a beneficial interest in that movable property. Seen
thus the credit would still fall within the second part of the .
B definition of actionable claim.

39. In support of the submission, Mr. Sorabjee sought to
derive support from the Constitution Bench decision in Sunrise
which, according to him, laid down that in the sale of a lottery
ticket what is transferred is the conditional right to claim a
c beneficial interest in the prize money which was movable
property, not in possession of the purchaser. He also submitted
that the saleability of DEPB would not make any difference
because many other actionable claims were equally saleable.

40. We are afraid, we find the submission unacceptable.
D
We are unable to see DEPB either as a debt or as a beneficial
interest in movable property not tn possession of the claimant.
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'
E
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
F 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,
G 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'.
H
-
M/S. YASHA OVERSEAS v. COMMISSIONER OF 953
SALES TAX & ORS. [AFTAB ALAM, J]

, 42. If any more analogies are to be given one might A
compare DEPB with prepaid meal tickets or prepaid petrol
coupons or accumulated flying miles. A meal ticke~, a petrol
coupon or flying miles credit has its own intrinsic value. If
permitted free transferability those would soon become market
commodities and would be sold and bought for their value as B
'goods'.

43. In light of the discussions made above, the two
questions framed at the beginning of the judgment are to be
answered as follows :
c
The Constitution Bench decision in Sunrise does not alter
the position in regard to levy of tax on sale of REP licence and
on that issue the three-Judge Bench decision in Vikas continues
to hold the field. ·

DEPB has an intrinsic value that makes it a market D
commodit'.'· Therefore, DEPB, like REP licence q1•alifies as
'goods' within the meaning of the Sales Tax laws of Delhi, Kerala
and Mumbai and its sale is exigible to tax.
44. We thus find no merit in any of these appeals. All the
appeals are dismissed but with no order as to costs. E
N.J. Appeals dismissed.

1

·'