Calcutta High Court
State Bank Of India (Overseas Branch) ... vs Commercial Tax Officer And Ors. on 16 December, 2002
Equivalent citations: [2003]132STC234(CAL)
Author: Altamas Kabir
Bench: Altamas Kabir
JUDGMENT Altamas Kabir, J.
1. The writ petitioner No. 1 is a branch of the writ petitioner No. 2, the State Bank of India which is a body corporate constituted under the State Bank of India Act, 1955, for the extension of banking facilities in the country and for other public purposes. The bank has to perform various functions as per the directions issued from time to time by the Reserve Bank of India in keeping with the economic and monetary policies of the Central Government. The writ petition is registered as a "dealer" under the Bengal Finance (Sales Tax) Act, 1941, hereinafter referred to as "the 1941 Act".
2. According to the writ petitioners, the policy notified by the Government of India under the Imports and Exports (Control) Act, 1947, as amended from time to time, and the Imports (Control) Order, 1955, regulate imports into and exports out of the country and contain different incentive schemes and subsidies to build up foreign exchange resources of the country. Prior to July 4, 1991 there was provision for issuance of Replenishment Licences which were referred to as "REP Licences". The objective behind the grant of such licences was to provide to registered exporters the facility of importing essential goods required for the manufacture of the products to be exported. Such licences were made freely transferable and such transfer did not require any endorsement or permission from the licensing authority. The only requirement was a letter from the transferor recording and evidencing the transfer. On that basis, the transferee became the lawful holder of the licence and was entitled to either import the goods for which the licence had been issued or sell the licence to someone else.
3. This policy remained in force till July 3, 1991, when it was substituted by a new policy. With effect from July 4, 1991, the nomenclature of the REP Licence was changed to "Exim scrip" (Export Import Licence). The provisions governing Exim Scrips were more or less the same as those governing REP licences with certain minor variations which are not relevant for the purpose of this case.
4. In March, 1992, as a matter of policy, the Reserve Bank of India decided that the unutilised Exim scrips in the hands of the holders who were willing to dispose of the same should be mopped up through specified branches of the State Bank of India. Pursuant to such decision, the Reserve Bank of India issued a circular, being No. 12/92 dated 27th March, 1992, which provides as follows :
"Reserve Bank of India had earlier notified that arrangements were being made to purchase Exim scrips at an appropriate premium from those holders of Exim Scrips who wish to dispose of them. The designated branches of State Bank of India would be purchasing these Exim scrips from March 23, 1992, up to the end of May 1992, at a premium of 20 per cent of the face value. The list of branches which would be purchasing these Exim scrips would be notified by the State Bank of India. The bona fide holder of the Exim scrips should submit an application to the designated branch of the State Bank of India, in the form prescribed by the State Bank of India. The scrips up to the face value of Rs. 5 lakhs will be straightaway purchased by the designated branch of State Bank of India and the premium amount would be paid to the holder of the scrips. Where the face value of the scrips exceeds Rs. 5 lakhs, the concerned branch would send it to the office of the JCCI, which had issued the scrip, for authentication and on receipt of the scrip duly authenticated would pay the amount of premium."
5. As indicated in the aforesaid circular the decision to mop up Exim scrips had earlier been taken by the Reserve Bank of India. On March 18, 1992, it had written a letter to the Chairman, State Bank of India, Bombay, authorising all designated branches of the said Bank to purchase Exim scrips from holders, who intended to dispose of the same at a premium of 20 per cent of the face value of the Exim scrips, from March 23, 1992, subject to certain terms and conditions. Pursuant to the said letter of the Reserve Bank of India dated March 18, 1992, the General Manager (Planning of the International Banking Department of the State Bank of India) wrote a letter to the Deputy Manager, State Bank of India, Overseas Branch, Calcutta, on March 21, 1992, forwarding the memorandum of procedure drawn up by the Central Officer of the State Bank of India for the purpose of purchasing the Exim scrips as directed by the Reserve Bank of India.
6. On the basis of the aforesaid decision and the circular published pursuant thereto, various holders of Exim Scrips sold and/or surrendered their Exim scrips to the writ petitioner No. 1 and received a premium of 20 per cent of the face value of the scrips in compliance with the direction contained in the letter of the Reserve Bank of India dated March 18, 1992.
7. In the course of assessment proceedings of the writ petitioner No. 1 under the 1941 Act for the four quarters ending on March 31, 1993, the Commercial Tax Officer, Park Street Charge informed the writ petitioner No. 1 that apart from payment of sales tax on the sale of gold and silver, it would also be liable to pay purchase tax in respect of purchase of Exim scrips from the holders thereof at a premium of 20 per cent of the face value. During the assessment proceedings it was contended on behalf of the writ petitioner No. 1 before the Commercial Tax Officer, Park Street Charge, that the Exim scrips had not actually been purchased by the writ petitioner No. 1 but the same had been surrendered by their holders to the writ petitioner No. 1 pursuant to the terms contained in the letter of the Reserve Bank of India dated March 18, 1992. It was contended that such surrender could not be treated as purchase for the purpose of levying tax under Section 4(6) of the 1941 Act. It was also contended that Exim scrips were not "goods" within the meaning of Section 2(d) of the aforesaid Act and hence no purchase tax could be levied under Section 4(6) of the said Act, on the surrender of the Exim scrips by its holders.
8. Apart from the above objections taken on behalf of the writ petitioner No. 1, a specific objection was taken that the writ petitioner No. 1 had not entered into any transaction on its own which could be regarded as purchase to attract the provisions of Section 4(6) of the 1941 Act since it had merely acted as an agent of the Reserve Bank of India in terms of the order contained in the above mentioned circular dated March 18, 1992.
9. Negating the submissions made on behalf of the writ petitioners, the Commercial Tax Officer, Park Street Charge, levied purchase tax on the writ petitioner No. 1 under Section 5(6a) of the 1941 Act, amounting to sum of Rs. 1,00,04,000 on the total taxable specified price of Rs. 25,00,00,000. In negating the submissions made on behalf of the writ petitioners, the Commercial Tax Officer, Park Street Charge, held that the scheme contained in the circular of the Reserve Bank of India dated March 18, 1992, provided for sale of Exim scrips by the holder and purchase by designated bankers and consequently such sale or purchase by the bankers could not by any stretch of imagination be treated as an act of surrender. It was also held that the purchase of the Exim scrips by the bankers from the holders thereof were as much sales as purchase by private importers who availed of the same for import of goods.
10. Challenging the said order of assessment of the Commercial Tax Officer, Park Street Charge, the writ petitioner No. 1 preferred an appeal before the Assistant Commissioner, Commercial Taxes, Calcutta (South) Circle, the respondent No. 2 herein, disputing its liability to pay purchase tax as determined by the Commercial Tax Officer, Park Street Charge. By an order dated September 19, 1996, the respondent No. 2, rejected the appeal and confirmed the order of assessment passed by the Commercial Tax Officer, Park Street Charge.
11. The writ petitioner herein then moved an application before the West Bengal Taxation Tribunal (Decision of the Taxation Tribunal reported in [1998] 111 STC 281 (WBTT) [State Bank of India (Overseas Branch) v. C.T.O.].) under Section 8 of the West Bengal Taxation Tribunal Act, 1987. On January 27, 1997, while admitting the said application the learned Tribunal passed an interim order directing the respondents not to give effect to the demand notice and the impugned orders of assessment and appeal for recovery of the amount calculated as "purchase tax" unconditionally for a period of two weeks and directed further that if within the said period of two weeks the writ petitioner No. 1 submitted an undertaking in writing that it would pay the demanded amount within a period of six weeks from the date of the final judgment, if the same went against the petitioner, the interim order would continue till the final disposal of the application and in case the petitioners failed to give such undertaking the interim order would stand vacated.
12. The writ petitioner's application came up for hearing before the learned Tribunal on 20th August, 1997, 21st August, 1997 and 22nd August, 1997. During the hearing it was contended on behalf of the writ petitioners that the writ petitioner No. 1 could not be considered to be a "dealer" and that the registration obtained by the petitioner No. 1 as such dealer did not automatically make the writ petitioner No. 1 a dealer. It was submitted that in order to attract the mischief of Section 4(6)(iii) of the 1941 Act, a dealer must be liable to pay tax under Section 4(1), 4(2), 4(4) or 8(3) of the aforesaid Act. It was submitted that since the writ petitioner No. 1 was not a dealer under the provisions of the aforesaid Act, it did not have any liability to pay tax under Section 4(6) of the said Act.
13. It was also submitted that the transactions involving recovery of Exim scrips from their holders could not be treated to be "purchases" for the purpose of Section 4(6) of the above Act, but that the same amounted to "surrender" by the holders which had been wrongly equated with "purchase" by the writ petitioner No. 1.
14. It was also submitted that for Section 4(6) to apply, the purchase must have been made with the intention of re-selling the Exim scrips and that the same would be apparent from proper reading of Clauses (i) and (iii) of Section 4(6) of the above Act. Pointing out that Clause (i) of Section 4(6) relates to purchase for direct use in manufacture, the purpose under Clause (iii) must be re-sale. It was urged that if such a construction was not adopted, Clause (iii) of Section 4(6) would be unconstitutional and violative of Article 14 of the Constitution. Various decisions were also cited in support of the contentions made on behalf of the writ petitioners.
15. The learned Tribunal by its judgment and order dated 11th February, 1998 [See : State Bank of India (Overseas Branch) v. C.T.O. [1998] 111 STC 281 (WBTT)], rejected all the contentions made on behalf of the writ petitioners and dismissed the application filed by them. The learned Tribunal also directed the writ petitioner No. 1 to pay the amount of tax demanded within a period of six weeks from the date of the judgment.
16. Appearing in support of the writ application, Mr. Pradip Ghosh, firstly contended that the writ petitioner-bank was not a "dealer" within the meaning of Section 2(c) of the Bengal Finance (Sales Tax) Act, 1941, in respect of the Exim Scrips since it does not and/or did not carry on the business of sale or purchase of such Exim scrips. Mr. Ghosh urged that having regard to the definition of the expression "business" in Section 2(1a) of the aforesaid Act, it could not also be contended that the Bank was carrying on business as a dealer in respect of such Exim scrips.
17. In support of his aforesaid contention, Mr. Ghosh referred to the decision of the honourable Supreme Court in (1) State of Gujarat v. Raipur Manufacturing Co. Ltd. reported in [1967] 19 STC 1 and (2) Board of Revenue v. A.M. Ansari, reported in [1976] 38 STC 577.
18. In the first of the said two cases the honourable Supreme Court while considering the expression "business" in relation to certain provisions of the Bombay Sales Tax Act, 1953, inter alia, observed as follows :
"Whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions and purchase or sale in a class of goods and the transactions must ordinarily be entered into with a profit-motive. By the use of expression 'profit-motive' does not intend that profit must in fact, be earned. Nor does the expression cover a mere desire to make some monetary gain out of a transaction or even a series of transactions. It predicates a motive which pervades the whole series of transactions effected by the persons in the course of his activity."
19. It was also observed that in order to infer from a course of transactions that it was intended thereby to carry on business, ordinarily the characteristic of volume, frequency, continuity and regularity indicating an intention to continue the activity of carrying on the transaction, must exist.
20. The same view was reiterated by the honourable Supreme Court in A.M. Ansari's case [1976] 38 STC 577, wherein in explaining the expression "business" virtually the same definition was retained.
21. Mr. Gosh urged that according to the ratio of the two aforesaid judgments the concept of business involves volume, frequency, continuity and regularity of the transaction of sale and/or purchase with the intention of making profit. However, in the instant case, it was only as a solitary case and that too for a brief period from March 23, 1992 to May 31, 1992, that the transaction in Exim scrips had taken place. Mr. Ghosh urged that neither before nor after the said period had any such transaction been entered into which could justify the finding of the learned Tribunal that the writ petitioner No. 1-Bank had an intention to carry on business in purchase of Exim scrips and that mere lack of regularity or frequency would not convert a business into non-business and would not make a dealer a non-dealer.
22. Mr. Ghosh submitted that there was no material before the learned Tribunal to come to the conclusion that it was clearly established that the writ petitioner No. 1 had the intention to carry on business in purchase of Exim scrips.
23. With reference to the provisions of Section 4(6)(iii) of the 1941 Act, Mr. Ghosh then urged that even if the writ petitioner No. 1-Bank is to be treated as a dealer, the provisions of Clause (iii) would have to be related to the business being carried on by the Bank, inasmuch as, the said provisions would otherwise suffer from vagueness and would expose it to attack on the ground of constitutional validity. Mr. Ghosh submitted that the said provisions were required to be read down in a manner which would save the vires thereof. Mr. Ghosh submitted that the learned Tribunal had itself indicated that the provisions of Clause (iii) would be for purposes "other than purely personal or domestic", which according to Mr. Ghosh indicated that the purpose should be related to the business. Mr. Ghosh repeated his earlier submission that if it is accepted that the Bank was not carrying on business of buying and selling Exim scrips, the purchase of such scrips by the Bank must be treated to be a surrender of such scrips which would not attract the provisions of Section 4(6)(iii) of the 1941 Act, since such purchase was not in connection with a purpose related to the business of the Bank.
24. In support of his aforesaid submissions Mr. Ghosh referred to the decision of the honourable Supreme Court in the case of Govind Saran Ganga Saran v. Commissioner of Sales Tax reported in [1985] 60 STC 1, wherein while considering the provisions of the 1941 Act, it was observed that if the components which entered into the concept of a tax are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law, and uncertainty or vagueness in the legislative scheme defining any of such components of the levy will be fatal to its validity.
25. Reference was also made to a decision of the Bombay High Court in Commissioner of Sales Tax, Maharashtra State, Bombay v. Billion Plastics Pvt. Ltd. reported in [1995] 98 STC 184, wherein Section 13 of the Bombay Sales Tax Act, 1959, which is similar to the provisions of Section 6(4)(iii) of the 1941 Act, was under consideration and it was held that keeping in view the scheme of the Act and the intent and purpose of Section 13, purchase tax could be levied on a dealer only if he carried on business of buying or selling the goods in question. In coming to the aforesaid conclusion, the Bombay High Court also referred to the decision in the Raipur Manufacturing Co. Ltd. case .
26. Expanding on his initial submission that the writ petitioner No. 1-Bank was not a dealer within the meaning of Section 2(c) of the 1941 Act, Mr. Ghosh urged that the court will have to consider whether a Bank which is covered by the provisions of the Banking (Regulation) Act, 1949, can at all be said to be a dealer for the purposes of the sales tax statute. Referring to the provisions of Section 8 of the aforesaid Act, Mr. Ghosh submitted that notwithstanding the provisions of Section 6 thereof, which dealt with the forms of business in which banking companies may engage, Section 8 prohibited a banking company from directly or indirectly dealing in the buying or selling or bartering of goods except in connection with the realisation of security given to or held by it, or engage in any trade, or buy or sell or barter goods for others, otherwise than in connection with bills of exchange received for collection or negotiation or with such part of its business as is referred to in Clause (i) of Sub-section (1) of Section 6 of the said Act.
27. Mr. Ghosh urged that in view of such prohibition, the writ petitioner-bank could not be said to have acted as a dealer for the purpose of purchase of the Exim scrips pursuant to the directions of the Reserve Bank of India.
28. Mr. Ghosh referred to and relied on a Bench decision of the Karnataka High Court in the case of Canara Bank v. Commercial Tax Officer, , wherein the aforesaid provisions of the Banking (Regulation) Act, 1949, fell for consideration along with the relevant provisions of the Karnataka Sales Tax Act, 1957. On consideration of the aforesaid provisions it was held that banking companies could not be treated as dealers under Section 2(1)(k) of the Karnataka Sales Tax Act while disposing of securities for realisation of loans advanced.
29. Mr. Ghosh urged that whatever may be the nature of the transaction, the writ petitioner Bank had only acted as an agent of the Reserve Bank of India in the transaction relating to Exim scrips and would not therefore, come within the definition of the expression "dealer" as defined in Section 2(c) of the 1941 Act.
30. Mr. Ghosh's next contention was that the transaction involving the acquisition of Exim scrips by the writ petitioner Bank could not be said to be a case of purchase but a case of surrender. Mr. Ghosh referred to Black's Law Dictionary (5th Edition) wherein the expression "surrender" has been, inter alia, defined as follows:
"Surrender to give back; yield ; render up ; restore ; and in law, the giving up of an estate to the person who has it in reversion or remainder, so as to merge it in the larger estate."
31. Mr. Ghosh then referred to Earl Jowitt's Dictionary of English Law and Aiyar's Law Lexicon (1997 Edition), wherein the expression "surrender" has been similarly defined.
32. Mr. Ghosh also referred to the provisions of Section III of the Transfer of Property Act which refers to determination of lease of immovable property, amongst other means by express surrender, that is to say, in case a lessee yields up its interest under the lease to the lessor by mutual agreement between them.
33. Mr. Ghosh urged that the Exim scrip was in substance a licence or a grant from the sovereign and there could not be any sale of such Exim scrips to the sovereign. Accordingly, when the holder of the Exim scrips gives up his right in favour of the granter it is an act of surrender. Mr. Ghosh urged that the State Bank of India had merely acted as an agent of the sovereign, namely, the department of the Central Government which had issued the Exim scrips, that is the Joint Chief Controller of Import and Export. Mr. Ghosh submitted that under the instruction of the Reserve Bank of India once the said Exim scrips were surrendered by the holders, the same were required to be cancelled and forwarded to the office of the Joint Chief Controller of Import and Exports who had originally issued the same.
34. Mr. Ghosh submitted that in effect the grant under the Exim scrips would upon cancellation by the Bank cease to exist, which state of affairs is consistent with the concept of surrender. Mr. Ghosh submitted that it was not intended that upon acquisition of the Exim Scrips from their holders, the same would be utilised by the writ petitioner Bank for the purpose of either selling the same or using the same for the purpose for which they had been intended.
35. Mr. Ghosh submitted that while it was no doubt true that in the case of P.S. Apparels v. Deputy Commercial Tax Officer, T. Nagar East Assessment Circle, Madras [1994] 94 STC 139 (Mad.), it had been held that the purchase of Exim scrips by the designated branch of the State Bank of India could not be said to be an act of surrender and that the same was as much sales as purchases by the private importers, and such stand had been affirmed by the honourable Supreme Court in the case of Vikas Sales Corporation v. Commissioner of Commercial Taxes [1996] 102 STC 106, such finding was in the backdrop of sale and purchase of Exim scrips by persons dealing with the same in the course of business. Mr. Ghosh also urged that in the Vikas Sales Corporation's case [1996] 102 STC 106, the Supreme Court was mainly concerned with the question as to whether Exim scrips were "goods" or not for the purpose of sales tax enactments of Tamil Nadu, Karnataka and Kerala.
36. Mr. Ghosh urged that the learned Tribunal had failed to appreciate the distinction and had erroneously dismissed the petitioner's application challenging the assessment made by the Commercial Tax Officer, Park Street Charge, on June 30, 1995.
37. Mr. Ghosh submitted that the impugned order being erroneous was liable to be set aside.
38. Appearing for the Revenue, Mr. S.N. Bose contended that the issues raised by Mr. Ghosh, both before the learned Tribunal as well as in the instant writ application, have been set at rest by the honourable Supreme Court in Vikas Sales Corporation's case [1996] 102 STC 106, referred to by Mr. Ghosh, wherein the view expressed by the Madras High Court in P.S. Apparels case [1994] 94 STC 139 had been affirmed.
39. Mr. Bose contended that in P.S. Apparels case [1994] 94 STC 139 (Mad.) the very same direction of the Reserve Bank of India for purchase of the Exim scrips from its holders between March 23, 1992 to May 30, 1992, at a premium of 20 per cent of the face value, was under consideration of the Madras High Court. The same question as to whether the said purchase amounted to "surrender" or "purchase" by the designated bank was decided by the Madras High Court by holding that by no stretch of imagination could such purchases be characterised as an act of surrender. On the other hand, it was categorically stated that the purchases by the Banks of such licences from the holders thereof were as much sales as purchase by the private importers who ultimately availed of them for import of goods.
40. Mr. Bose urged that the same question had also fallen for consideration by the honourable Supreme Court in the Vikas Sales Corporation's case [1996] 102 STC 106, and the view expressed by the Madras High Court had been duly affirmed therein. Mr. Bose contended that the Karnataka High Court in the case of Bharat Fritz Werner Ltd. v. Commissioner of Commercial Taxes [1992] 86 STC 175 also held that REP licences are goods within the meaning of Karnataka Sales Tax Act, 1957 and the premium or price received therefrom by the transfer thereof is liable to sales tax.
41. Mr. Bose then referred to the decision of the honourable Supreme Court in the case of H. Anraj v. Government of Tamil Nadu [1986] 61 STC 165 where amongst other provisions the provisions of the Bengal Finance (Sales Tax) Act, 1941, had fallen for consideration and in the context of lottery tickets it was held that sale of such lottery tickets would be a transfer of beneficial interest in immovable property and, therefore, amounted to transfer of goods. It was held that consequently for the purpose of levying sales tax, a lottery with the right to participate in a draw will have to be regarded as goods.
42. Mr. Bose urged that the writ petitioner-Bank had purchased the Exim scrips as a registered dealer under the 1941 Act, holding Registration Certificate No. BH/7029A and it could not, therefore, avoid its liability to pay tax on goods sold in keeping with the provisions of Section 4(6)(iii) of the said Act. Mr. Bose urged that Clause (iii) of Sub-section (6) of Section 4 of the above Act is neither vague nor unconstitutional as it clearly specifies that every dealer who becomes liable to pay tax under Sub-section (1) or Sub-section (2) or Sub-section (4) of Section 6 or Sub-section (3) of Section 8 and is registered under the Act, shall in addition to tax referred to therein be also liable to pay tax on all his purchases from any person, whether a dealer or not, who is not registered under the Act, in respect of goods other than gold, rice and wheat intended for a purpose other than those specified in Clause (i). Mr. Bose submitted that the learned Tribunal had rightly held that the transaction involving the purchase of Exim scrips by the writ petitioner-Bank amounted to sale which attracted the provisions of Section 6(4)(iii) of the 1941 Act and had rightly dismissed the application filed by the writ petitioner under Section 8 of the West Bengal Taxation Tribunal Act, 1987.
43. Mr. Bose urged that it was well-established that a statutory enactment must ordinarily be considered in keeping with the plain and natural meaning thereof, and no word should be added, altered or modified unless it became necessary to do so for the purpose of preventing a provision from becoming unintelligible, absurd, unreasonable, unworkable or totally irreconcilable with the rest of the statute.
44. In support of his aforesaid submission Mr. Bose firstly referred to and relied on a decision of the honourable Supreme Court in the case of Polestar Electronic (Pvt.) Ltd. v. Additional Commissioner, Sales Tax reported in [1978] 41 STC 409. Certain other decisions on the same lines were also referred to where the same principle has been explained.
45. Mr. Bose, however, reiterated that there was no inconsistency and or vagueness in the provisions of Section 6(4)(iii) of the 1941 Act and the intention of the Legislature was clear from a plain reading of the words used therein. Mr. Bose urged that, in any event, if strict grammatical interpretation gave rise to absurdity or inconsistency the same should be discarded and an interpretation which would give effect to the intention of the Legislature was required to be given to the language of the particular provision. Mr. Bose submitted that the judgment and order of the learned Tribunal did not warrant any interference and the instant writ application was liable to be dismissed.
46. In view of the decision of the honourable Supreme Court in the Vikas Sales Corporation's case [1992] 102 STC 106 and that of the Madras High Court in P.S. Apparels case [1994] 94 STC 139, as also the decision of the Karnataka High Court in the case of Bharat Fritz Werner Ltd. [1992] 86 STC 175 relied upon by Mr. Bose, which apparently supported his arguments, we have given our anxious consideration to the submissions made on behalf of the respective parties.
47. The ratio of the decision of honourable Supreme Court in Vikas Sales Corporation's case [1992] 102 STC 106, will at once be clear from the opening paragraph of the judgment which reads as follows :
"This batch of appeals and writ petitions raises the question whether the transfer of an import licence called REP licence/Exim scrip by the holder thereof to another person constitutes a sale of goods within the meaning of and for the purpose of the sales tax enactments of Tamil Nadu, Karnataka and Kerala. If it does, it is exigible to sale tax. Otherwise not."
48. The honourable Supreme Court observed that following the decision in the case of H. Anraj v. Government of Tamil Nadu [1986] 61 STC 165, both the Karnataka and Madras High Courts had taken the view the REP Licences/Exim scrips constitute goods and, therefore, on their transfer sales tax is leviable.
49. As will appear from the aforesaid decision, the honourable Supreme Court on a construction of the Export and Import Policy governing REP licences/Exim scrips came to a conclusion that such Licence/Exim scrips were treated as merchandise and/or goods in the commercial world and were freely bought and sold in the market. Treating the REP Licences/Exim scrips to be goods the honourable Supreme Court negated the contention of the appellants-petitioners that the said licence and Exim scrips were not goods and hence any transaction in respect thereof did not attract the sales tax enactments of Tamil Nadu, Karnataka and Kerala.
50. As has been pointed out by Mr. Ghosh appearing for the writ petitioner-Bank, the honourable Supreme Court did not have occasion in the aforesaid case to consider the effect of purchase of Exim scrips having been made by the writ petitioner-Bank, not as part of the business regularly carried on by it, but as a chance transaction on the direction of the Reserve Bank of India. The said decision is also distinguishable on the ground that the purpose of such purchase by the writ petitioner-Bank had not been considered. While it is no doubt true that REP licences/Exim scrips constitute "goods" for the purposes of commercial transactions, the purchases effected by the writ petitioner-Bank was not for commercial profit, nor was it the intention of the writ petitioner-Bank to utilise the Exim scrips for the purposes for which it had been issued.
51. Although, the circular issued by the Reserve Bank of India regarding purchase of Exim scrips by the designated branches of the State Bank of India had been referred to and analysed in P.S. Apparels case [1994] 94 STC 139 (Mad.), neither the Madras High Court nor the honourable Supreme Court appears to have taken note of the circular issued by the Reserve Bank of India on March 18, 1992, addressed to the Chairman, State Bank of India, Bombay, wherein Clause (g) of the terms and conditions on which such purchases would be made provides for cancellation of the Exim scrips after purchase by the designated branches of the State Bank of India. The same were no longer to be used as goods for the purpose of commercial transactions and were to be reduced to mere paper, having no commercial value whatsoever. In our view, this aspect of the matter clearly changes the entire perspective of the submissions made on behalf of the respective parties. Such a scenario was neither contemplated in the Vikas Sales Corporation's case nor was it contemplated in P.S. Apparels case [1994] 94 STC 139 (Mad.) or in the case of Bharat Fritz Werner Ltd. [1992] 86 STC 175 (Kar). All these decisions proceeded on the basis that REP licences/Exim scrips were goods and were treated as such in the commercial world on account of the fact that they were freely transferable and could be used by the transferee for the purpose for which they had been issued.
52. This is not so in the instant case, since in view of the direction of the Reserve Bank of India, the redeemed exim scrips were to be cancelled immediately upon purchase and sent to the original grantor, namely, the Joint Chief Controller of Imports and Exports. Such a transaction, in our view, supports Mr. Ghosh's contention that the purchases effected by the designated branches of the State Bank of India of such Exim scrips really amounted to surrender and did not, therefore, come within the scope and ambit of Section 6(4)(iii) of the 1941 Act.
53. We are inclined to agree with Mr. Ghosh that even if the Exim scrips purchased by the designated branches of the State Bank of India pursuant to the direction given by the Reserve Bank of India were "goods" in the commercial sense, they ceased to be so on such purchase, as their very commercial liquidity was destroyed by the cancellation thereof and subsequent return to the original grantor.
54. The purchases effected by the designated branches of the State Bank of India also supports Mr. Ghosh's submission that such purchases were not effected in the usual course of business of the Bank. Such purchases were an one-time affair, while the concept of business as explained by the honourable Supreme Court in the Raipur Manufacturing Co. Ltd. case [1967] 19 STC 1 and in A.M. Ansari's case [1976] 38 STC 577 referred to by Mr. Ghosh, explained that whether a person carries on business in a particular commodity must depend upon volume, frequency, continuity and regularity of transactions. It was also held that purchase or sale of a class of goods and the transactions must ordinarily be entered into with a profit-motive. Admittedly, the business of the writ petitioner-Bank was mainly confined to purchase and sale of gold and silver and not the buying and selling of Exim scrips. Such transactions were for a brief period from March 23, 1992 to May 31, 1992, and, as such, there was no continuity and/or regularity involved in such transactions so as to bring the same within the concept of business.
55. Although, it has been strenuously urged on behalf of the Revenue that the Bank was a registered dealer under the 1941 Act, it will have to be seen as to whether it was at all a "dealer" within the meaning of Section 2(c) of the 1941 Act, in respect of the purchases of the REP Licences/Exim scrips. As has been explained by the Bombay High Court in the Billion Plastics Pvt. Ltd. case [1995] 98 STC 184, purchase tax could be levied on a dealer only if he carried on business for buying and selling the goods in question. In coming to such a conclusion, the Bombay High Court referred to and relied on the decision of the honourable Supreme Court in Raipur Manufacturing Co. Ltd. case [1967] 19 STC 1, wherein it was indicated that in order that receipts from the sale of a commodity may be included in the taxable turnover, it must be established that the assessee was carrying on business in that particular commodity.
56. As we have indicated earlier, we are not inclined to accept the arguments advanced on behalf of the Revenue that purchasing of Exim scrips on the direction of the Reserve Bank of India for the purpose of destroying its very commercial nature, amounted to business being carried on by the writ petitioner-Bank in such Exim scrips. There was no question of selling the Exim scrips once they had been purchased by the Bank. The entire transaction appears to be in the nature of a mopping up operation for removing the Exim scrips from the market.
57. Having regard to the view taken by us that the purchase of Exim scrips by the writ petitioner-Bank did not attract the provisions of Section 4(6)(iii) of the 1941 Act, we do not think it necessary to go into the other submission of Mr. Ghosh that the aforesaid provisions were either vague or uncertain and thus unconstitutional. We are not, therefore, inclined to dilate further on such point.
58. In view of what we have indicated hereinabove, we are unable to sustain the judgment and order of the learned Tribunal and we, accordingly, set aside the same and we also quash the order of assessment dated June 30, 1995 passed by the Commercial Tax Officer, Park Street Charge, as also the order dated September 19, 1996, passed by the Assistant Commissioner, Commercial Taxes, Calcutta (South) Circle, in Appeal case No. A495/1995-96 under Section 20(1) of the Bengal Finance (Sales Tax) Act, 1941.
59. The writ petition accordingly succeeds. It is declared that the purchase of Exim scrips/REP licences by the writ petitioner-Bank in terms of the circular dated March 18, 1992, issued by the Reserve Bank of India does not bring it within the scope and ambit of Section 4(6)(iii) of the Bengal Finance (Sales Tax) Act, 1941. Consequently, there will be an injunction restraining the respondents and their servants and agents from giving any effect or further effect to the purported orders dated June 30, 1995, September 19, 1996 and February 11, 1998 passed by the respondent Nos. 1, 2 and 3 respectively for the period comprising four quarters ending on March 31, 1993 under the relevant provisions of the aforesaid Act. The writ petitioners are discharged from the undertaking given for the purpose of continuation of the interim order initially passed.
60. Having regard to the facts involved, there will be no order as to costs.
61. All parties to act on xerox signed copy of this judgment on the usual undertakings.