Delhi High Court
M/S Philco Expoprts vs Sales Tax Officer And Ors. on 24 July, 2001
Equivalent citations: 93(2001)DLT56, 2002(64)DRJ211
Author: Arijit Pasayat
Bench: Arijit Pasayat, D.K. Jain
ORDER Arijit Pasayat, C.J.
1. Challenge in the present petition is notifications No.F.10 (4)/2001-Fin(A/cs) 120-128 (Annexure A), F. 101 (48)/2001-Fin (A/cs) 147-15 (Annexure-B) and F. 10(48)/20001-Fin(A/cs) 156-164 (Annexure-C) all dated 31.3.20001, issued by the order of the Lt Governor of NCT of Delhi in exercise of powers conferred under the First Proviso to sub-section (1) of Section 4 and sub-section(2) of Section 7 of the Delhi Sales Tax Act, 1975 (43 of 19750 (in short, the Act), as amended by the Delhi Sales Tax (Amendment) Act, 1997 (Delhi Act No.1 of 1998) read with the Delhi Sales Tax (Second Amendment) Act, 2000 (Delhi Act No.2 of 2001) (in short, the second Amended Act). By the first notification dated 31.3.2001 in the Second Schedule, amendment was made and one entry No. 67 was inserted which reads as: "REP, DEPB and other tradable licenses". Similarly by the second amendment, in terms of newly inserted entry no. 83 turnover in respect of the aforesaid items was to be taxed at the first point. The said notification was issued in exercise of powers conferred under section 5 of the Act as amended by the 2nd Amendment Act.
So far as third notification is concerned, the same has been issued in exercise of powers conferred under Section 71 of the Act and the newly added entry No. 10 was made in the Schedule appended to sub-clause (1A) of Clause XXXIV of Rule 11 of the Delhi Sales Tax Rules, 1975 (in short, the Rules).
2. According to the petitioner, the levy of tax on transfer of credit lying in Duty Entitlement Passbook, (in short, DEPB) is illegal, as the same is not goods and there was no sale of goods and, in any event, even if it is conceded, for the sake of argument, that the same can be equated with goods they are part of excluded items either as actionable claim or money. In essence, it is submitted that transfer of the credit amount lying in DEPB does not come within the ambit of definition of goods and in any event transfer of the same does not amount to sale of goods.
Per contra, learned counsel for the respondent submitted that the matter is no longer res integra and decision of the Apex Court in Vikas Sales Corporation vs Commissioner of Commercial Taxes and another, [1996] 102 STC 106 is clearly applicable to the facts of the case.
In reply, learned counsel for petitioner submitted that the said decision does not relate to DEPB and related to import license called REP license and therefore, the decision has no application. It is elaborated that DEPB is not a license and therefore, the ratio has no application.
3. In order to appreciate rival submissions, it is necessary to take not of the definition of "goods" as appearing in the Act. The same reads as follows:
"Goods, includes all materials, articles, commodities and all other kinds of movable property, but does not include newspapers, actionable claims, stocks shares and securities."
The entry may be compared with the definition of goods as appearing in clause (j) of Section 2 of Tamil Nadu Sales Tax Act, which reads as under:
"goods" means all kinds of movable property (other than newspapers, actionable claims stocks and shares and securities) and includes all materials, commodities and articles including the goods(as goods or in some other form) involved in the execution of works, contract or those goods to be used in the fitting out, improvement or repair of movable property 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."
In Vikas Sales' case (supra), the Apex Court considered the entries relating to goods in Tamil Nadu Act and the Karnataka Sales Tax Act, 1957 (in short, the Karnataka Act) definition of goods reads as follows in the Karnataka Act:
"goods" means all kinds of movable property (other than newspapers, actionable claims stocks and shares and securities) and includes all materials, commodities and articles including the goods(as goods or in some other form) involved in the execution of works, contract or those goods to be used in the fitting out, improvement or repair of movable property 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."
The Appex Court also took note of the definition of "goods" in Kerala General Sales Tax Act, 1963 (in short, Kerala Act). The definition is as to follows:
"goods" means all kinds of movable property (other than newspapers, actionable claims stocks and shares and securities) and includes all materials, commodities and articles including the goods(as goods or in some other form) involved in the execution of works, contract or those goods to be used in the fitting out, improvement or repair of movable property 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."
4. The General Clauses Act, 1987 (in short, General Clauses Act) defines movable property as property of every kind except immovable property. The expression "immovable property" is defined to include land, benefits to arise out of land, and things attached to earth, or permanently fastened to anything attached to the earth. Definitions in Karnataka, Tamil Nadu and Kerala Acts, so far as goods are concerned are couched in almost identical words. Central Sales Tax Act, 1956 (in short Central Act) defines the goods under clause (d) of section 2 in the following terms:
"Goods includes all materials, articles, commodities and all other kinds of movable property but does not include newspapers, actionable claims, stocks shares and securities."
5. As the definition would go to show certain items, which but for such exclusion, may well have fallen with the ambit of the said definition as given in the Central Act. The Act does not define the expression 'immoveable property' which in General Clauses Act has to be adopted. In the absence of a definition of the property, meaning attributed in several legal dictionaries may be noted as was done in Vikas Sales case (supra) "In Black's Law dictionary (6th Edn, 1990) the expression "property" has been given the following meanings:-
"Property"- that which is peculiar or proper to any person; that which belongs exclusively to one. In the strict legal sense, an aggregate of rights which are guaranteed and protected by the Government. Fulton Light, and power Co v. State 65 Misc Rep. 263, 121 N.Y.S. 536. The term is said to extend species of valuable right and interest. More specifically, ownership, the unrestricted and exclusive right to a thing; the right to dispose of a thing in every legal way, to possess it, to use it, and to exclude every one else from interfering with it. That dominion or indefinite right of use or desposition which one may lawfully exercise over particular things or subjects. The exclusive right of possessing, enjoying, and disposing of a thing. The highest right a man can have to anything; being used to refer to that right which one has to lands or tenements, goods or chattels, which no way depends on another man's courtesy.
The word is also commonly used to denote everything which is the subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal; everything that has an exchangeable value or which goes to make up wealth or estate. It extends to every species of valuable right and interest, and includes real and personal property, easements, franchises, and incorporeal hereditament, and includes every invasion of one's property rights by actionable wrong. Labberton v. General Cas. Co. of America, 53 Wash, 2d 180, 232 P.. 2d, 250, 252, 254.
Property embraces everything which is or may be the subject of ownership whether a legal ownership, or whether beneficial, or a private ownership., Davis v Davis Tex, Civ., App., 495 S.W. 2d 607, 611. Term includes not only ownership and possession but also the right of use and enjoyment for lawful purposes. Hoffmann v. Kinealy, Mo., 3809 S.W. 2d 745, 752.
Property within constitutional protection, denotes group of rights inhering in citizen's relation to physical thing, as right to possess, use and dispose of it. Cereghino v. State by and through State High Way Commission, 230 Or., 439, 370 P. 2d 694, 697.
The dictionary further says "property is either: real or immovable; or personal or movable". It then proceeds to give the meaning of the expression "absolute property", common property,, intangible property, movable property, personal property, private property and public property among others. The above definition shows the wide meaning attached to the expression. It is said to extend to every species of valuable right and interest. It denotes everything which is the subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible real or personal. It includes "everything that has an extendable value. It extends to every species of valuable right and interest.
To the same effect is the definition in the Dictionary of Commercial Law by A.H. Hudson (published by Butterworths, 1983. It reads:) "Property" in commercial law may carry its ordinary meaning of the subject matter of ownership e.g. in bankruptcy referring to the property of the debtor divisible amongst creditors. but elsewhere as in sale of goods it may be used as a synonym for ownership and lesser rights in goods. The Sale of Goods Act 1979, S.2(2(1) makes transfer of property central to sale. Section 61(1) provides that 'property' means the general property in goods, and not merely a special property. General Property is tantamount to ownership; bailees who have possession and not ownership and others with limited interest are said to have a special property as their interest."
Jowtt's Dictionary of English Law (Sweet & Maxwell limited, 1977) Volume I also sets out the meaning of the expression "property" as well as the meaning of the expression "general property" and "special property". We may set them out:
"Property (Norm, Fr. Proprete; Lat. proprietas; one's own), the highest right a man can have to anything, being that right which one has to lands or tenements, goods or chattels, which does not depend on another's courtesy.
In its largest sense property signifies things and rights considered as having money value, especially with reference to transfer or succession, and to their capacity of being injured. Property includes not only ownership, estates and interests in corporeal things but also right such as trade marks, copyrights, patents and rights in personal capable of transfer or transmission such as debts.
Property is of two kinds, real property (q.v) and personal property (q.v) Property in reality is acquired by entry conveyance, or devise; and in personality, by many ways but most usually be gift, bequest,or sale. Under the law of Property Act, 1925, Section 205, property includes anything in action and any interest in real or personal property. There must be a definite interest; a mere expectancy as distinguished from a conditional interest is not a subject of property.
'Property" also signifies a beneficial right in or to a thing. Sometimes, the term is used as equivalent to ownership; as where we speak of the right of property as opposed to the right of possession (qv) or where we speak of the property in the goods of a deceased person being vested in his executor. The term was chiefly used in this sense with reference to chattels. (Finch, Law 176). Property in this sense is divided into general and special or qualified.
General property is that which every absolute owner has (Co. Litt. 145B). See ownership.
Special property has two meanings. First, it may mean that the subject matter is incapable of being in the absolute ownership of any person. Thus, a man may have a property in deer in a park hares or rabbits in a warren, fish in a pond, etc. but it is only a special or qualified property for if at any time they again their natural liberty his property instantly ceases, unless they have animus revertendi ( 2 B1, Commn, 391). See Animals Ferae Naturae..."
This definition also shows that the expression signifies "things and rights considered as having a money value". Even incorporeal rights like trade marks, copyrights, patents and rights in personam capable of transfer or transmission, such as debts, are also included in its ambit. The meaning given to "general property" and "special property" are self-explanatory and need to emphasis at our hands. It is worth recalling that movable property means" property of every description except immovable property"- the definition in all the General Classes Acts."
The term 'property' in Jurisprudence has a very wide connotation; it includes all property whether corporeal or incorporeal. As Salmond (Jurisprudence, Eleventh Edition, p. 156) says:
"Corporeal property is the right of ownership in material thing; incorporeal property is any other proprietary right in remit. Incorporeal property is itself of two kinds, namely (1) Jura in real iena and (2) Jura in repropria.
While dealing with the various types of property, Salmond further says (p. 461):
"The subject matter of a right of property is either a material or an immaterial thing. A material thing is a physical object, an, immaterial thing is anything else which may be the subject-matter of a right.". Paton in his Text Book of Jurisprudence (Second Edition, P. 408) States:
"The term" property has bewildering variety of uses. Firstly, it sometimes means ownership or title and sometimes the rest over which ownership may be exercised:"
Austin defined things, not being persons as are sensible or perceptible through the senses permanent objects in the sense that are perceptible repeatedly. In common usage of the word, a thing must have a certain element of permanence as emphasized by Austin- In order to distinguish a thing from a fact or an event, and secondly, it must have a certain element of physical unity. The legal use is even broader than that of popular speech. Pollock in his First Book of Jurisprudence, p. 130, says that A thing is, in law, some possible matter of rights and duties, conceived as a whole and apart from all others, just as, in the world of common experience, whatever can be separately perceived is a thing.
"Dealing with this topic, Paton gives a broad classification or things. He says (at p. 409-410):
"Unfortunately, however, legal usage is not consistent, and there are really many different elements of thought. A thing may mean (1) A thin g in the material sense which is corporeal and tangible and has an organic or physical unity e.g. a horse or a flock or marble. (2) A thing which is corporeal and tangible, but consists of a collection of specific things, e.g. of flock of sheep. (3) A thing which exists in the physical world is not material in the popular sense, eg. electricity. (4) A thing which is neither material, corporeal, nor tangible but is an element of wealth, e.g. a copyright or a patent..."(5) a thing which is not material and which is not directly an economic asset or element of wealth e.g. a reputation." On these authorities and Patons's clear statement, electricity must be held to be a thing and therefore, a "property"-Hards Municipality v H. Electric Supply Co .
In Stroud's Judicial Dictionary (Third edition). It is defined thus: "property" is the generic term for all that a person has dominion over. Its two leading divisions are (i) read and (2) personal. Property is the most comprehensive of all terms which can be used inasmuch as it is indicative and descriptive of every possible interest which the party can have.
There is also a short passage which throws considerable light on this issue in "The Constitutional law of the United States:
"What property may be taken by the power of eminent domain. In general it may be said that any and all property may be taken. Land, building, water, an easement as distinguished from general property, a contract, and a franchise may be taken."
Thus, the word "property" is a term of far-reaching conception. It is comprehensive enough to take in all types of proprietary rights.
In order to constitute a thing into a property there must be a definite interest in the same. According to Halsbury's Laws of English, 3rd Ed Vol 33, property means: "Property is that which belongs to a person exclusively or others, and can be the subject of bargain and sale. It includes goodwill, trade marks, licenses to use a patent, book, debts, options, to purchase, life policies and to the rights under a contract." According to our Constitution the word "property" in Article 19(1)(f) of the Constitution of India includes all those recognised types of interests which have the insignia or characteristic or proprietary rights, capable of being acquire, held and disposed off. (Fulena Singh and ors v. State of Bihar 1979 BLJ 34 at 37,38. Property is a term of the widest import, and subject to any limitation or qualification which the context might require, it signifies every possible interest which a person can acquire, hold and enjoy. Business would undoubtedly be property, unless there is something to the contrary to the enactment-JK Trust, Bombay v CIT Excess Profits Tax, Bombay .
In NK Trust v. CIT (1957) 32 ITR 535, 541 Mr Justice Venkatarama Iyer examined the question at some length and it was laid down in that case: "Now 'property' is a term of the widest import and subject to any limitation or qualification which the context might require, it signifies every possible interest which a person can acquire, hold or enjoy. Business would undoubtedly be property unless there is something to the contrary in the enactment."
6. The DEPB is a part of export and import policy for the relevant period. Chapter 7 of the policy is relevant. Same dealt with the duty exemption scheme. It is the stand of the petitioner that licenses have been separately dealt with while DEPB is not included as a part of the scheme relating to licenses. It is to be noted that under the scheme the following is the arrangement so far as DEPB is concerned.
Duty Entitlement Pass Book.
7.25 The objective of Duty Entitlement Pass Book Scheme is to neutralize the incidence of basic customs duty on the import content of the export product. The nautralisation shall be provided by way of grant of duty credit against he export product. The duty credit under the scheme shall be calculated by taking into account the deemed import content of the said export products as per Standard Input Output Norms and determine basic customs 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.
Under the Duty Entitlement Pass Book (DEPB) Scheme, 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 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..
7. DEPB only permits adjustment in payment of customs duty and if there is no adjustment, the amount in question lapses and is not permitted to be withdrawn/adjusted in any other manner. There is no bar to the amount being transferred to any person and on the transferee making a fresh transfer to another person and so on and so forth. It is essentially a right to claim back credit which is freely tradable. Though the transaction may not involve any profit as such but that is really not determinative of the question whether there is sale involved. The right to have a credit is enforceable to that extent and does not create any right for money. It was contended by the learned counsel for the petitioner that the exclusion indicated in the definition of goods is applicable as DEPB is actionable scheme. In Vikas Sales case (supra) the Apex Court dealt with the question as to what is actionable claim. Section 3 of the Transfer of the Property Act defines actionable claims. It reads as under:
"Actionable claim' means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or ledge of movable property, or to any beneficial interest in movable 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"
Present definition was substituted by the Transfer of Property Amendment Act 2 of 1990 for the following which stood under Section 100 before-"A claim which the civil Courts recognize as affording grounds of relief is actionable whether a suit for its enforcement is or is not actually pending or likely to become necessary". The present Section defines actionable claim to be-a claim (1) to any debt other than a debt (i) secured by mortgage of immovable property or (ii) by hypothecation or pledge, (2) or, to any beneficial interest in movables, not in possession (i) actual or (ii) constructive of the claimant, (3) which the civil courts recognize as affording grounds for relief, whether such debt or beneficial interest as existent, accruing conditional or contingent. The present amended Section excludes from its comprehension a debt secured by a mortgage of an immovable property or by a pledge of a movable property. The claim must be a claim to a debt as distinguished from damages, and further the debt should not be a secured debt. In order to ascertain whether a claim is an actionable claim, it must first be determined whether it is a debt. The term 'debt' includes a sum of money due by one person to another which is actually payable at the time as well as a sum of money, which is due though not actually payable then. The expression actionable claim', however, includes also conditional or contingent debts i.e. a debt which will be due only if a referring to "accruing dues" includes also debts which are to fall due in referring to "accruing dues" includes also debts which are to fall due in future. A debt is a sum of money which is now payable or will become payable in future by reason of a present obligation.
"Chooses in action" in English law means things of which the owner has no actual possession but has only right which can be realised by an action. The term includes (i) a debt,(ii) the benefit of a contract, (iii) and damages for wrong. But from the definition of actionable claim it is apparent that the term has not got such wide connotation, for it clearly excludes from its comprehension right of action for tort.
As was observed by the Apex Court in Vikas Sales' case (supra), when there is no restriction on the purchase and sale of DEPB freely and it has a value unrelated to the good there is no scope of their being treated as actionable claim. DEPB for all practical purposes represent merchandise and is treated and dealt with as such in the commercial world. DEPB is neither a chose in action nor an actionable claim. 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 the purpose and intents, it is goods. That being the position we find no substance in the plea taken by the petitioner that DEPB cannot be subject to levy of sales tax. The challenge to the notifications therefore fails. However, the grounds taken in the petition regarding the legality of recovery of tax on sale of old office car can be effectively adjudicated by the appellate forum in the appeal filed. Similar is the case with other factual disputes. Writ petition is not entertained and is dismissed.