JUDGMENT
1. This petition seeks declaration of provisions of Section 61(2)(e) of the Haryana Value Added Tax Act, 2003 (for short, “the HVAT Act”), as amended by the Haryana Value Added Tax (Amendment) Act, 2004, to be ultra vires and for quashing of order of assessment dated November 8, 2004 passed by the Assessing Authority, Karnal (annexure P3).
2. The petitioner is a dealer registered under the provisions of the Haryana General Sales Tax Act, 1973 (for short, “the 1973 Act”) and the HVAT Act. The Assessing Authority made assessment for the year 2002-03 by including the turnover of sales of Duty Entitlement Pass Book (in short, “DEPB”) issued by the customs authorities under the DEPB Scheme.
3. The contention raised in the writ petition is that right to credit of duty, as is granted under the DEPB Scheme, is not “goods” and provisions under Section 61(2)(e) of the HVAT Act to the effect that tax is to be charged on sale or purchase thereof was beyond the legislative competence under entry 54, List II of the Seventh Schedule to the Constitution of India.
4. Impugned amendment is extracted below:
2. In the Explanation to Clause (d) of Sub-section (2) of Section 61 of the Haryana Value Added Tax Act, 2003,-
(i) for sign existing at the end, the sign shall be substituted ; and
(ii) after Clause (d), the following clauses shall be added at the end, namely:
(e) the tax chargeable under the Act of 1973 on the sale or purchase of duty entitlement pass book, effected on or before March 31, 2003, shall be calculated at the rate of four per cent of the turnover of sale or purchase of such goods, as the case may be, and shall be paid voluntarily without payment of interest on or before March 31, 2004, whereafter interest at the rate of eighteen per cent per annum on the amount of tax due for the period of delay shall be charged:
Provided that where a dealer has charged tax at a rate more than four per cent, the tax shall be calculated and payable at such rate ;
5. While defending the impugned amendment carried out in the HVAT Act, inter alia, it is contended by the respondents that Clause (e) in Section 61(2) of the Act was added, providing for rate of tax to be four per cent on the turnover of sale/purchase of DEPB effected on or before March 31, 2003. It was with a view to give incentive to the petitioner and other similarly situated dealers as prior to the amendment, on the sale/transfer of DEPB, the tax was leviable at the general rate of tax, i.e., 10 per cent, whereas, vide amendment, the same has been reduced to four per cent. This was done for better collection of tax of DEPB in public interest. It is further submitted that the amendment is in no way confiscatory, rather, is a beneficial legislation. It is further provided for in the amendment that as against normal interest at 18 per cent per annum provided for in the 1973 Act for delayed payment of tax, no interest was to be charged in case the amount of reduced tax was paid on or before March 31, 2004. Further, it is pleaded that DEPB is a tradable document, which is frequently brought and sold in the market. It is neither a chose-in-action nor an actionable claim. It is itself a property and cannot be termed to be a form of money not leviable to sales tax. Levy of tax on DEPB has already been upheld. Reliance has been placed on judgment of the Delhi High Court in Philco Exports v. Sales Tax Officer 2001 124 STC 503.
6. A perusal of order dated October 3, 2005, passed by this court shows that the petitioner was required to file, in tabulated form, the difference between the benefits available under REP licences under the exemption policy, which was considered by the honourable apex court in Vikas Sales Corporation v. Commissioner of Commercial Taxes 1996 102 STC 106 and the DEPB Scheme, but nothing has been placed on record by the petitioner in this regard.
7. In Vikas Sales Corporation’s case 1996 102 STC 106 (SC), while considering the question as to whether import licences called replenishment licences or exim scrips are goods leviable to tax on sales thereof, was considered by the honourable Supreme Court while analysing the law on the subject, it was held that these licences have their own value. They are freely transferable and bought and sold as such in the market. They are treated and dealt with in the commercial world as merchandise 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 is by itself a property. For all intents and purposes, REP licences/exim scrips are goods leviable to tax on the sale or purchase thereof. While deciding the matter, the honourable Supreme Court relied upon an earlier judgment in H. Anraj v. Government of Tamil Nadu 1986 61 STC 165 : 1985 Supp 3 SCR 812 (SC), which dealt with the issue as to whether lottery tickets are goods which could be subjected to tax under the sales tax laws.
8 In Philco Export’s case 2001 124 STC 503, a division Bench of the Delhi High Court, following the dictum of law laid down in Vikas Sales Corporation’s case , held that the Duty Entitlement Pass Book Scheme (DEPB), which is intended to neutralise the intents of basic customs duty on the import content of the export produce, which has its own value and freely transferable in the market, cannot be treated as an actionable claim and has to be held to be a merchandise for all intents and purposes. Accordingly, it can be subjected to tax under the sales tax rules.
9. In Sunrise Associates v. Government of NCT of Delhi , the correctness of earlier judgment of the honourable Supreme Court in H. Anraj’s case 1986 61 STC 165 : 1985 Supp 3 SCR 812 (SC) was doubted and as H. Anraj’s case 1986 61 STC 165 : 1985 Supp 3 SCR 812 (SC) had already been followed in Vikas Sales Corporation’s case 1996 102 STC 106 (SC) by a Bench consisting of three honourable Judges, the matter was required to be heard by a Constitution Bench. The Constitution Bench judgment of the honourable Supreme Court in Sunrise Associates’ case is reported as . The Constitution Bench in Sunrise Associates’ case , has overruled the judgment in H. Anraj’s case 1986 61 STC 165 : 1985 Supp 3 SCR 812 (SC). It is specifically mentioned therein that as the issue regarding taxability of REP licences or DEPB has not been referred to, no opinion is being expressed thereon. Further it is specifically held that the judgment in H. Anraj’s case 1986 61 STC 165 : 1985 Supp 3 SCR 812 (SC) is overruled prospectively with effect from the date of the judgment, i.e., April 28, 2006.
10. Relevant passages from the judgment of the Constitution Bench in Sunrise Associate’s case are extracted below:
22. Vikas Sales Corporation v. Commissioner of Commercial Taxes was a case where the issue before this court was whether REP licences or replenishment licences were goods so that sales tax could be levied on their transfer. The REP licences gave permission to an exporter to take credit for the exports made. Such credit could be adjusted against import duty if and when the exporter wished to import goods. The Import and Export Policy, 1993, which contained the relevant provisions relating to REP licences specifically permitted transferability of the licences. This court considered the definition of ‘goods’ in the Constitution, in the Sale of Goods Act, 1930, the Central Sales Tax Act, 1956, the Tamil Nadu General Sales Tax Act, 1959, the Kamataka Sales Tax Act, 1957, as well as the Kerala General Sales Tax Act, 1963, and said that all these definitions provided that goods mean, inter alia, all kinds of movable property. The definition of property in several authorities was thereafter considered and it was concluded that the material on record showed a uniform emphasis on the expansive manner in which the expression ‘property’ was understood. It was noted that debts, contracts and other chose-in-action were chattels no less than furniture or stock-in-trade. Similarly, patents, copyrights and other rights in rem were also included within the meaning of movable property. The court rejected the argument that REP licences were actionable claims within the meaning of Section 3 of the Transfer of Property Act and said:
When these licences/scrips are being bought and sold freely in the market as goods and when they have a value of their own unrelated to the goods which can be imported thereunder, it is idle to contend that they are in the nature of actionable claims. Indeed, in H. Anraj the main contention of the petitioners was that a lottery ticket was in the nature of an actionable claim. The said argument was rejected after an elaborate discussion of law on the subject. We agree with the said decision and on that basis hold that the REP licences/exim scrips are not in the nature of actionable claims.
26. Before us the appellants, who are dealers in the sale of lottery tickets, have submitted that H. Anraj 1986 61 STC 165 (SC) : 1986 1 SCC 414 wrongly drew a distinction between the right to participate in the draw and chance to win the prize. It was submitted that such bifurcation was artificial as both were part of the same transaction. It was submitted that even on the ‘two rights’ theory each of those rights would be chose-in-action. As far as the decision in Vikas Sales 1996 102 STC 106 (SC) : 1996 4 SCC 433 is concerned, it was submitted that the additional reason given, namely, free transferability for holding that a particular thing was goods, was erroneous. It was pointed out that even actionable claims such as negotiable instruments and debentures may be freely transferable. As far as the DEPB is concerned, according to the appellants, it was in the nature of a notional credit which an exporter acquires on export by way of an entry in a passbook. This credit was utilisable by the importer to be adjusted against the import duty payable on goods imported. The credit was freely transferable but it could not be said to be goods only by that reason. At best it was an actionable claim.
31. It is necessary at this stage to clarify that the order of reference in Sunrise Associates v. Government of NCT of Delhi is limited to the question 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 reference, we do not decide the issue. The decision in Vikas Sales was referred to only because it approved the reasoning in H. Anraj and not because the referring court disagreed with the conclusion in Vikas Sales that REP licences were goods for the purposes of levy of sales tax. Indeed REP licences were not the subject-matter of the appeal before the referring court and could not have formed part of the reference. The only question we are called upon to answer is whether the decision in H. Anraj that lottery tickets are goods for the purposes of Article 366(29A)(a) of the Constitution and the State sales tax laws, was correct.
37. 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 ‘property’ may denote the nature of the interest in goods and when used in this sense means title or ownership in a thing. The word may also be used to describe the thing itself. The two concepts are distinct, a distinction which must be kept in mind when considering the use of the word in connection with the sale of goods. In the Dictionary of Commercial Law by A. H. Hudson (1983 edition) the difference is clearly brought out. The definition reads thus:
“Property”.-In commercial law this may carry its ordinary meaning of the subject-matter of ownership. But elsewhere, as in the sale of goods it may be used as a synonym for ownership and lesser rights in goods.’ Hence, when used in the definition of “goods” in the different sales tax statutes, the word “property” means the subject-matter of ownership. The same word in the context of a “sale” means the transfer of the ownership in goods.
41. What then is the distinction between actionable claims and other goods on the sale of which sales tax may be levied ?
42. The court in Vikas Sales 1996 102 STC 106 (SC) : 1996 4 SCC 433 said ‘when these licenses/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’. It was assumed that actionable claims are not transferable for value and that that was the difference between ‘actionable claims’ and those other goods which are covered by the definition of ‘goods’ in the Sale of Goods Act, 1930, and the sales tax laws. The assumption was fallacious and the conclusion in so far as it was based on this erroneous perception, equally wrong.
56. We are, therefore, of the view that the decision in H. Anraj incorrectly held that a sale of a lottery ticket involved a sale of goods. There was no sale of goods within the meaning of the Sales Tax Acts of the different States but at the highest a transfer of an actionable claim. The decision to the extent that it held otherwise is accordingly overruled though prospectively with effect from the date of this judgment.
(emphasis supplied)
11. Learned Counsel for the petitioner, however, submitted that the amendment cannot have retrospective effect and in support of this submission, referred to following judgments:
Ranbir Singh Ram Gopal v. State of Haryana 2002 125 STC 326 (P & H), D. Cawasji & Co. v. State of Mysore , K. M. Mohamed Abdul Khader Firm v. State of Tamil Nadu , Krishnamurthi and Co. v. State of Madras , KMA Finished Leather (P) Ltd. v. State of Tamil Nadu , Sadhu Overseas v. State of Haryana 2004 23 PHT (Tr.), Maha Singh Ram Mehar Rice & General Mills v. State of Haryana 2004 23 P&HT 4 and Union of India v. Kamlakshi Finance Corporation Ltd. . The judgments relied upon by the learned Counsel for the petitioner would have relevance if we have to determine the question of retrospectivity.
12. Further in our view, the answer to the question is available on a reading of Constitution Bench judgment of the honourable Supreme Court in Sunrise Associates’ case .
13. Firstly, as is evident from para 311 of the Constitution Bench Judgment in Sunrise Associates’ case , the honourable Supreme Court did not go into the question of taxability of REP licences or DEPB, the issue having not been referred to the Bench. Meaning thereby that the judgment of the honourable Supreme Court in Vikas Sales’ case and of the Delhi High Court in Philco’ case 2001 124 STC 503 taking a view against the petitioner are available. Secondly, even if from discussions in other part of the judgment and the fact that H. Anraj , which had been relied upon in Vikas Sales Corporation’s case having been overruled, the judgment in Vikas Sales Corporation’s case should not be relied upon to negative the claim of the petitioner, we find that the contentions raised by the petitioner are liable to be rejected in view of observations in para 56 of the judgment, where judgment in Vikas Sales Corporation’s case has been overruled with prospective effect only. Meaning thereby that a binding precedent till the date of judgment, i.e., April 28, 2006.
14. In view of our above discussions, we hold the provisions of Section 61(2)(e) of the HVAT Act to be valid and also uphold the order of assessment passed by the Assessing Authority levying tax on these transactions.
15. Accordingly, the writ petition is dismissed.