whether the chain is complete or not would depend on the facts of each case emanating from the evidence and no universal yardstick should ever be attempted. That in judging the culpability of the accused, the circumstances adduced when collectively considered, must lead only to the irresistible conclusion that the accused alone is the perpetrator of the crime alleged.- They are thus entitled to the benefit of doubt.=2016 Dec.http://judis.nic.in/supremecourt/imgst.aspx?filename=44289 - NATHIYA Vs. STATE TR.INSP.OF POLICE,VELLORE DIPAK MISRA, AMITAVA ROY

                                                        REPORTABLE

                  IN THE SUPREME COURT OF INDIA
                 CRIMINAL APPELLATE JURISDICTION
                     CRIMINAL APPEAL NO. 1015 OF 2010

NATHIYA                                                 …APPELLANT
            VERSUS
STATE REP. BY INSPECTOR OF POLICE,
BAGAYAM POLICE STATION, VELLORE                      …RESPONDENT

                            WITH

                 CRIMINAL APPEAL NO. 1011 OF 2010

SURESH                                                  …APPELLANT
            VERSUS
STATE REP. BY INSPECTOR OF POLICE,
BAGAYAM POLICE STATION, VELLORE               …RESPONDENT

                       J U D G M E N T
      AMITAVA ROY, J.
            The appellants being aggrieved   by  the  affirmation  of  their
conviction  under Section 302 read with Section 34 IPC and the  sentence  of
life imprisonment and fine of Rs. 10000/-, in default R.I. for  further  six
months, by the High Court  by  its  verdict   dated  27.11.2008,  seek  this
Court's  panacean intervention for redress.
2.    We have heard Mr. Jayant Muthur Raja, learned counsel for

the appellant Nathiya,  in Criminal  Appeal  No.  1015  of  2010,  Mr.  P.R.
Kovilan, learned counsel for the appellant Suresh, in  Criminal  Appeal  No.
1011 of 2010 and Mr. M. Yogesh Kanna, learned counsel for the State.
3.    The prosecution  was set in motion by  the  First  Information  Report
lodged on 27.3.2006 at 2.30 a.m. by one Gunasekaran, the  cousin brother  of
the deceased Gurunathan, the husband of the appellant Nathiya  (accused  No.
1).  The appellant Suresh (accused No. 2 ) is  allegedly  the  paramour   of
accused No. 1.   It was averred in the FIR that  the  deceased  was  a  book
binder by occupation and owned  some  properties  located  in  his  village,
worth several lakhs.  He  also  had  his  own  house.    The  house  of  the
appellant Suresh was also situated nearby.  It had  been  alleged  that  the
appellant  Nathiya,  the  wife  of  the  deceased  had  developed    illicit
relationship with Suresh  which  was  not  only  to  the  knowledge  of  the
deceased but also of the informant.  The FIR discloses  that  this  depraved
liaison between the accused persons had also been brought to the  notice  of
the local panchayat and that though, it had advised the  appellants  against
the continuation of such alliance, they did  not  desist  therefrom.   Being
appalled, though the deceased at some  point  of  time,  had  shifted  to  a
rented house elsewhere  but had to return  under  financial  compulsions  to
his original place of abode.  This, according to the  FIR,  facilitated  the
continuance of the extra-marital  relationship of Nathiya with  Suresh.   It
was alleged in the FIR that in retaliation  to  the  persistent   endeavours
made by the deceased to make Nathiya mend her ways,  she  used  to   torture
him and threaten that she would eliminate him and would sell his  properties
and elope  with her paramour.  The informant claimed that  not  only  a  few
days prior to the incident, the deceased had confided him that his wife  had
tried to suffocate him to death  by  pressing  a  pillow  on  his  face,  on
26.3.2006, i.e.  on the eve of the incident as well,  he  had  disclosed  to
him about a  conspiracy between the two accused persons to  murder  him  and
grab his properties.
4.    The informant further mentioned  that  in  the  intervening  night  of
26.3.2006/27.3.2006, while he was asleep, Pushpa,  wife  of  Dinakaran,  his
neighbour informed him that the dead body of  the  deceased  had  been  seen
floating in a nearby well.   On  getting  this  information,  the  informant
rushed to the place of occurrence   and with the help  of   Pandurangam  and
Dinakaran, retrieved the body from the well.  On further enquries, he  could
come to learn that one Packiammal, at about 11 p.m., heard the  shrieks   of
the deceased followed by a loud thud from the well.  The informant  referred
 to the accused persons as the suspects.   It was incidentally mentioned  as
well that they were not available in their house  at  that  point  of  time.
This FIR was  registered  as   Bagayam  P.S.  Crime  No.  278  of  2006  and
investigation followed.
5.     Eventually  the  charge-sheet  was  submitted  against  the   accused
persons.  The case  was  committed   for  sessions  trial.   The  appellants
having denied the charge, were made  to  stand  trial  and  finally  by  the
judgment and order dated 13.11.2007 passed in  S.C.  No.  94  of  2007,  the
appellants were convicted under Section 302 read with  Section  34  IPC  and
sentenced as above. To reiterate, their conviction  and  sentence  has  been
upheld by the High Court by the judgment and order impugned herein.
6.    Before adverting to the rival submissions advanced, apt  it  would  be
to undertake  an  analysis   of  the  evidence  on  record   to  the  extent
indispensable.
            PW1 Gunasekaran, the informant while  substantially  reiterating
his version in the FIR stated on oath that the deceased  was  a    dwarf  in
structure  and  that  though  being   exasperated    with  the  incorrigible
conduct of his wife in indulging in  the  extra-marital   relationship  with
the Suresh, he had shifted his family to Idaiyamsathu Village,   because  of
his meager means, he  could  not  afford  to  stay  there  and  returned  to
Kollaimedu  within three  months.  The  witness  stated  that  the  deceased
inspite of his best efforts could not stop the  unwholly  alliance   between
the accused persons and  used to very often share  his  distress  with  him.
He stated that on receiving the information  about  the  dead  body  of  the
deceased in the well, he rushed to the  place  of  occurrence  and,  amongst
others,  saw that  chappals of the deceased  lying by the side of the  well.
 He owned the FIR lodged by him and  reiterated  the  suspicion   about  the
culpability of the two appellants.
            In cross-examination, he denied the defence suggestion that  the
the grand-father of the deceased had executed a will in  favour  of  him  as
well as the deceased.  He  admitted  that  the  appellant  Nathiya  and  her
daughter  were  the  only  legal  heirs  of  the  deceased   and  that    no
incriminating material was recovered   by  the  police  from  the  house  of
Nathiya.   He  admitted   as  well  to  have  not  disclosed   the   illicit
relationship between the appellants to the police.  He  admitted  too   that
the well  was  located  at  a  distance  of  2.5  feet  from  the  house  of
Packiammal and that there were other houses situated within 200  feets  from
there.
            PW2 Rajan, who was also  a  resident  of  Idaiyamsathu  Village,
deposed that the appellant Nathiya did not  respect  the  deceased   as  her
husband,  who did not know   swimming   and  cycling.   He  stated  that  on
26/27.3.2006, while  he was sleeping, he heard that the deceased had  fallen
in the well and on reaching the spot, found his dead body  floating  in  the
well  with  his  face  downwards.  He  mentioned  too  about   the   illicit
relationship between the two  appellants  for  which  time  and  again,  the
deceased  had warned his wife Nathiya.  He also claimed  that  the  deceased
had disclosed to him about the immoral character of his wife  for  which  he
used to console him.   He  stated  as  well  that  few  days  prior  to  the
incident, the deceased had disclosed  to  him  that  Nathiya  had  tried  to
murder him by covering his face with a pillow.
            In cross-examination, however  he  conceded   that  he  had  not
disclosed to the police about the incident of  the  attempt  to  murder  the
deceased by his wife.  The witness admitted that PW1 and  the  deceased  had
equal shares in the well. He also admitted of not having  disclosed  to  the
police about the immoral relationship between the appellants.
            PW3 Packiammal stated on oath to have heard  in the  intervening
night of 26/27.3.2006, cries of someone  and then  a sound  from  the  well.
She thereafter raised alarm apprehending that some body  might  have  fallen
in the well and that  in the next morning, she  heard  that  Gurunathan  had
died.  She stated that the house of the deceased  and  that  of  the  Suresh
were near that of hers.
            PW4 Dinakaran testified that in the  night  of  the  occurrence,
Packiammal (PW3) had  raised  alarm  whereupon  he  went  to  the  place  of
occurrence and found that the deceased had fallen into the  well  whereafter
his body was taken out therefrom.   According  to  him,  though  the  police
reached  the  place  of  occurrence  some  time  thereafter,   he  was   not
interrogated.   He,  however  mentioned  about  the  presence  of  both  the
appellants  at the time when the dead body was  retrieved from the  well  at
about 11 p.m.  He stated as well that the  appellant  Nathiya  was  weeping,
sitting near the dead body.
            PW5 Dr. Anbalagan, who  performed  the  post-mortem  examination
of the dead body  on 27.3.2006 at about 6.30 p.m.   detected  the  following
extrenal injuries:
1.    Lacerated wound 2 cm x  1 cm x ½ cm. deep on the right side and back.
2.    One cut injury measuring 2 cm x 1 cm x ½ cm. deep on the rear part  of
the head.

PW5 mentioned that the occipital bone was broken measuring 3  c.m.  on  rear
part of the head and that  blood clot was also found  on  the  broken  bone.
Amongst  the  internal  injuries  detected,  he  mentioned  about   traverse
fracture of the occipital bone.  He opined  that the deceased had  died  due
to grievous head injuries, suffocation and heart failure. According to  him,
the deceased appeared  to have died because of drowning  in  the  water.  He
admitted  that if a person becomes  unconscious out of suffocation  and   is
thrown into a well, he is  likely to die of the above injuries.
              In cross-examination, he however opined  as  well  that  if  a
person falls from a very high height, he is likely to  sustain  injuries  on
the rear part of the head.
             PW9  Kamalakannan,  Village  Administrative  Officer,  at   the
relevant  time,  testified  that  on  27.3.2006,  both  the  appellants  had
appeared  at  his  office  and  had  voluntarily  confessed  that  they  had
smothered  the deceased and that thereafter  had  pushed  him  down  in  the
well.   This  witness  stated  that  the  confessional  statements  of   the
appellants  were  recorded  by  him  in  the  presence  of   Kothandan,  his
assistant  and  Palavansathukuppam   Gunasekaran,   Village   Administrative
Officer, Virupatchipuram Village  and that  thereafter he  had  handed  over
the accused persons  with the confessional statements  to  the  police.   He
denied the suggestion that the accused persons had not appeared  before  him
at his office or had not made any  confessional statement.
            PW10 Kothandan, who  at  the  relevant  time,  was  the  Village
Assistant at Palavansathu Village, deposed  that  on  27.3.2006,  while  he,
Kamalakannan,  Village   Administrative   Officer   and   Palavansathukuppam
Gunasekaran, Village Administrative Officer, Virupatchipuram   were  present
in their office, the appellants appeared there and  voluntarily  gave  their
confessional statements admitting to have killed  the  deceased  and  thrown
him in the well.  The witness affirmed  as well that their  statements  were
recorded by PW9 Kamalakannan, whereafter they had  taken the  appellants  to
the police station  following which they were arrested. He also stated  that
the confessional statements were handed over to the  police.   According  to
this witness,  appellant Nathiya also produced the saree gifted  to  her  by
Suresh and the  witness  identified  the  said  article  as  MO1.   He  also
referred to a photograph of the appellants produced  by  Suresh  before  the
police and exhibited the same as MO2.
             In cross-examination, this witness admitted to have signed  the
voluntary statement along with PW9 Kamalakannan. He  however  admitted  that
he did not disclose about the confessional statements to anybody. He  denied
the suggestion that neither the appellants had appeared  at  the  office  of
the Village Administrative Officer nor had made any confessional statement.
            PW11 Kumar Devikan, the Investigating Officer,  amongst  others,
admitted that on 27.3.2006 at about 2 p.m.,  the  appellants  were  produced
before him at the police station by the Village  Administrative  Officer  of
Palavansathu and Virupatchipuram along with their  confessional  statements.

7.    The learned  counsel   for  the  appellants  have  argued   that   the
circumstantial evidence adduced by the prosecution, in absence  of  any  eye
witness to the incident, is extremely shaky, incomplete  and  incoherent  so
as to warrant conviction of the appellants and  they are  thus  entitled  in
law to be exonerated from  the  charge  of  murder  levelled  against  them.
While  repudiating the  alleged  disclosures   by  the  deceased  about  the
infidel  character of his wife to PW1 and PW2, as  reproduced  by  them,  to
be hearsay evidence  and thus of no significance, it  has  been  urged  that
the  prosecution  case  stands  discredited  as  well  on  the   ground   of
suppression of   the  alleged  confessional  statement   of  the  appellants
recorded  by the Village Administrative Officer.  Apart from the  fact  that
the deceased was not seen in the  company  of  the  appellants   immediately
prior to the  incident   and  that  thus  the  “last  seen  theory”  is  not
applicable to the facts of the case,  they  have  urged  that   the  medical
evidence as well  does not conclusively   prove   that   the  death  of  the
deceased was  homicidal and not suicidal.  Dismissing the recovery of  saree
 and the photograph of the appellants to be wholly inconsequential   in  the
face of  want of any  credible evidence to establish the complicity  of  the
appellants with the  crime,  it  has  been  insistently  argued   that   the
possibility of PW1, the  cousin  brother  of  the  deceased,  who  had  been
interested in this property, falsely  implicating the appellant  Nathiya  in
particular for illegal gain,  cannot be  wholly  ruled  out.    The  learned
counsel  have maintained in unison that even assuming  that  the  imputation
of illicit relationship between the appellants  had been  proved,  the  same
per se,  even if  at  the  best  is  a  suspicious  circumstance,  does  not
establish beyond reasonable doubt  the culpability of the  appellants.    In
the prevalent facts and circumstances,  the  possibility  of   the  deceased
committing suicide  cannot be excluded and that on that count as  well,  the
appellants are entitled to the benefit of doubt .
            As against this, the learned  counsel  for  the  respondent  has
argued  that  the   evidence  adduced  on  behalf  of  the  prosecution   is
adequately cogent, persuasive and  clinching   and  thus   in  the  face  of
concurrent findings of the guilt of the appellants, this  Court   would  not
upturn the same.  According to him,   the   factum  of   sustained   illicit
relationship between the appellants has been proved  beyond  doubt  and   in
the face of the revelation made by the deceased about the previous  attempts
to eliminate him,  the charge  against the appellants  stands proved on  the
basis of the materials on record.   Referring to the medical  evidence,  the
learned counsel  has  argued  that  it  is  apparent  therefrom   that   the
deceased was  first smothered and then thrown into a well in an  unconscious
state whereupon he died due to the head injuries  sustained.   According  to
the learned counsel, the omission on the part of the prosecution to  produce
the  recorded  confessional  statements  of  the  appellants    is    wholly
insignificant in the face of  the sworn testimony of  PW9  and PW10 to  that
effect.
8.      The competing arguments and the materials on  record  have  received
our due scrutiny.  It is  patent  in the present factual setting that  there
is no eye witness to the occurrence and that the prosecution case  is  based
wholly on circumstantial evidence.  The genesis  of  the  suspicion  against
the appellants, being their amorous association to the anguish disliking  of
the deceased, he being  almost reduced to a helpless entity,  having  failed
to prevent such liaison  inspite of his best endeavours.   There  is  indeed
some evidence suggestive of such an alliance between the appellants  at  the
relevant point of time.   This,  per  se,  in  our  comprehension,  however,
cannot be accepted as a  decisive  incriminating  factor  to  deduce   their
culpability qua the charge of murder of the deceased Gurunathan.
      9.    The place of  occurrence is a well, away from the  residence  of
the  deceased  for  which  any   definitive  presumption  against  his  wife
Nathiya, as a conspirator of the crime,  cannot be drawn  without  the  risk
of  going wrong to cast  a burden on her, as  contemplated    under  Section
106 of the Evidence Act.
             The    closest  circumstance  bearing   on  the  incident   is,
discernible from  the testimony of PW3 Packiammal who stated to  have  heard
the shrieks  of the deceased, followed by a loud sound of    a  fall  inside
the well.  There is no evidence that immediately thereafter, the  appellants
were seen in the vicinity of the  well.  Noticeably,  the  chappals  of  the
deceased were  found  by  the  side  of  the  well.   The  evidence  of  PW4
Dinakaran is,  however,  to  the  effect  that   when  the  dead  body   was
recovered  thereafter from the well, both the appellants  were  present  and
Nathiya, the wife of the deceased, was seen weeping by his side.
            The medical evidence  does not  refer  to  any  external  injury
indicative of  use of any external force on the deceased, resulting  in  his
ante-mortem  suffocation  and  loss  of  consciousness,  to  be   thereafter
dispatched into the well. The possibility  that  the  cause  of  death  i.e.
grievous  head  injury,  suffocation  and  heart  failure  were  post   fall
manifestations, also cannot be ruled out as the medical evidence admits   of
such an eventuality as well.
             The inexplicable omission on the part  of  the  prosecution  to
produce  and  prove  the  alleged  confessional  statements  made   by   the
appellants  and  reduced  into  writing  by  PW9  and  witnessed   by   PW10
substantially denudes  its case  of necessary credence to incriminate  them.
 The oral testimony of these witnesses to the effect that such  confessional
statements had been recorded, ipso facto is of  no  consequence.   Not  only
the contention that the  supposed disclosure by the deceased to PWs 1 and  2
about the immoral conduct of the appellants is discardable being hearsay  in
nature, deserves  some reflection, it is noticeable  that PW2, in his cross-
examination, did admit that he had  not  divulged  the  above  fact  to  the
police. PW10, as well, did concede  that he  had  not  revealed  to  anybody
about  the  confessional  statements  made  by  the  accused  persons.   The
recovery of a saree  produced by Nathiya said to have been  gifted   to  her
by  Suresh  and  their  joint   photograph,  in  the  attendant  facts   and
circumstances and in the face of the other evidence  on  record,   does  not
clinch the issue in favour of the prosecution.
10.   The defence proposition that PW1  being  the  cousin  brother  of  the
deceased  had  framed the  appellants  so  as  to  wrest   his  property  in
absence of his legal heirs in the above  factual  premise,  also  cannot  be
lost sight of.  The  imputation  of  sustained  unchaste   conduct  and  the
activities of the wife, if true, the possibility of the deceased  committing
 suicide as an extreme step in  a unbearable  anguished state of  mind  also
cannot be wholly excluded.
11.   On an  analysis   of  the  overall  fact  situation,  we  are  of  the
considered opinion  that the  chain of circumstantial  evidence relied  upon
by the prosecution to prove the charge is visibly incomplete and  incoherent
to permit  conviction of the appellants on the  basis  thereof  without  any
trace of doubt.  Though the  materials  on  record  do  raise  a  needle  of
suspicion towards them, the prosecution has failed  to   elevate   its  case
from the realm  of “may be true” to  the plane of  “must  be  true”  as   is
indispensably required in law for conviction on a criminal  charge.   It  is
trite  to state that  in  a  criminal  trial,  suspicion,  howsoever  grave,
cannot substitute proof.
12.   The  classic enunciation  of  the  law  pertaining  to  circumstantial
evidence, its relevance  and  decisiveness,  as  a  proof  of  charge  of  a
criminal offence, is amongst others  traceable  to  the   decision  of  this
Court in Sharad Birdhichand Sarda vs. State  of  Maharashtra  (1984)  4  SCC
116.   The  relevant   excerpts   from
paragraph 153 of the decision  is assuredly apposite:
“153.(2) The facts  so established   should  be  consistent  only  with  the
hypothesis of the guilt  of the accused...they  should  not  be  explainable
on any other hypothesis except that the accused is guilty.

(3) the circumstances should be of a conclusive nature and tendency.

            *                  *                    *
(5) there  must be a chain of evidence  so complete  as  not  to  leave  any
reasonable ground for  the conclusion  consistent with the innocence of  the
accused and must show that in all human probability the act must  have  been
done by the accused.”

            As recently as in Sujit Biswas vs. State of Assam (2013) 12  SCC
406 and Raja @ Rajendra vs. State of Haryaya (2015) 11 SCC 43, it  has  been
propounded that in scrutinizing  the circumstantial  evidence,  a  court  is
required  to evaluate it  to ensure that the chain of events is  established
clearly and completely to rule out any  reasonable likelihood  of  innocence
of the accused.  It was underlined that  whether the chain  is  complete  or
not  would depend on the facts of each case emanating from the evidence  and
no universal yardstick  should  ever  be  attempted.  That  in  judging  the
culpability of the accused,  the  circumstances  adduced  when  collectively
considered, must lead only to the irresistible conclusion that  the  accused
alone is  the perpetrator of  the  crime  alleged.  That  the  circumstances
established must be  of   a  conclusive  nature  consistent  only  with  the
hypothesis  of the guilt of the accused, was emphatically propounded.
13.   Tested  on the touchstone of the above judicially    laid  parameters,
defining   the  quality   and  content  of  the   circumstantial   evidence,
essential to bring home the  guilt  of  an  accused  person  on  a  criminal
charge, we are of the unhesitant  opinion that the prosecution, in the  case
in hand, has failed to meet  the same. The  materials  on  record  admit  of
substantial doubt vis-a-vis  the  complicity   of  the   appellants  in  the
crime.
14.   Having regard to the  evidence adduced, it would be wholly  unsafe  to
sustain their conviction.  They are thus entitled to the benefit  of  doubt.
The appeals thus succeed  and are  allowed.  The  bail  bonds  of  appellant
Nathiya, who is on bail, stands discharged.  Appellant  Suresh  be  released
from the jail immediately, if not required in any other case.


               …...........................................J.
                                   (DIPAK MISRA)



                       …...........................................J.
                                  (AMITAVA ROY)
NEW DELHI;
NOVEMBER 8, 2016.

whether the State Bank of India (SBI) and its branches, which are registered dealers under the Bengal Finance (Sales Tax) Act, 1941 (for brevity, ‘the Act’) would be liable to levy of purchase tax under Section 5(6a) of the Act for accepting the Exim Scrips (Export Import Licence) on payment of premium of 20 per cent of the face value of the scrips in compliance with the direction contained in the letter of Reserve Bank of India (RBI) dated 18th March, 1992. The authorities of the revenue as well as the Taxation Tribunal (for short, ‘the tribunal’) had held against the SBI but the Division Bench of the High Court of Calcutta in a writ petition has dislodged the said conclusion holding, inter alia, that the purchase of Exim scrips by the Bank did not attract the provisions of Section 4(6) (iii) of the Act and resultantly quashed the orders of fora below and issued consequential directions.=The Exim scrips or replenishment licences were not “goods” which were purchased by them. The intent and purpose was not to purchase the replenishment licences because the scheme was to extinguish the right granted by issue of replenishment licences. The “ownership” in the goods was never transferred or assigned to the SBI.- SBI was not liable to levy of purchase tax under the Act.=2016 Dec.http://judis.nic.in/supremecourt/imgst.aspx?filename=44288 -COMMERCIAL TAX OFFICER & ORS. Vs. STATE BANK OF INDIA & ANR. DIPAK MISRA, SHIVA KIRTI SINGH

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 1798 OF 2005



Commercial Tax Officer & Ors.                ... Appellant(s)

                                          Versus

State Bank of India & Anr.                ...Respondent(s)




                               J U D G M E N T

Dipak Misra, J.
      The seminal question that emerges for consideration in this appeal  is
whether  the  State  Bank  of  India  (SBI)  and  its  branches,  which  are
registered dealers under the Bengal  Finance  (Sales  Tax)  Act,  1941  (for
brevity, ‘the Act’) would be liable to levy of purchase  tax  under  Section
5(6a) of the Act for accepting the Exim Scrips (Export  Import  Licence)  on
payment of premium of 20 per cent  of  the  face  value  of  the  scrips  in
compliance with the direction contained in the letter  of  Reserve  Bank  of
India (RBI) dated 18th March, 1992.  The authorities of the revenue as  well
as the Taxation Tribunal (for short, ‘the tribunal’) had  held  against  the
SBI but the Division Bench of the High Court of Calcutta in a writ  petition
has dislodged the said conclusion holding, inter alia, that the purchase  of
Exim scrips by the Bank did not  attract  the  provisions  of  Section  4(6)
(iii) of the Act and resultantly  quashed  the  orders  of  fora  below  and
issued consequential directions.

2.    It is necessary to  state  the  facts  in  detail  to  appreciate  the
controversy at hand. The SBI is  a  body  corporate  constituted  under  the
State Bank of India Act, 1955 for the extension  of  banking  facilities  in
the country and for other public purposes. The bank has to  perform  various
functions as per the directions issued from time  to  time  by  the  RBI  in
keeping with the economic and monetary policies of the Central Government.
3.    Policies are notified by the Government of  India  under  the  Imports
and Exports (Control) Act, 1947, as amended  from  time  to  time,  and  the
Imports (Control) Order, 1955, to regulate imports into and exports  out  of
the country and contain different incentive schemes and subsidies  to  build
up foreign exchange resources of the country.  As  the  facts  would  reveal
before July 4, 1991  there  was  provision  for  issuance  of  Replenishment
Licences which were referred to as "REP Licences". The objective behind  the
grant of such licences was to provide the 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 and only a letter from the transferor the  transferee  became  the
lawful holder of the licence and was entitled to  either  import  the  goods
for which the licence had been issued or sell the licence to someone else.
4.    The aforesaid policy remained in vogue till July 3, 1991, when it  was
substituted by  a  new  policy  with  effect  from  July  4,  1991  and  the
nomenclature of the REP Licence was changed to "Exim Scrip"  (Export  Import
Licence). The provisions governing Exim scrips were more or  less  the  same
as those governing REP licences with  certain  minor  variations  which  are
really not pertinent for the purpose of adjudication of the controversy.
5.    In March, 1992, the RBI took a policy decision to the effect that  the
unutilised Exim scrips in the hands of  the  holders  who  were  willing  to
dispose of the same should be mopped up through specified  branches  of  the
SBI. In pursuance to such a decision, the RBI issued a circular,  being  No.
12/92 on 27th March, 1992. The said circular is as follows:-
"Reserve Bank of India had earlier notified  that  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."

6.    The RBI, pursuant to the circular sent a letter on March 18,  1992  to
the Chairman, State  Bank  of  India,  Bombay,  authorising  all  designated
branches of the  said  Bank  to  purchase  Exim  scrips  from  holders,  who
intended to dispose of the same at a premium of 20  per  cent  of  the  face
value of the Exim scrips, from March 23, 1992, subject to certain terms  and
conditions.  Thereafter, the General Manager (Planning of the  International
Banking Department of the State Bank of India) communicated  to  the  Deputy
Manager, State Bank of India,  Overseas  Branch,  Calcutta,  the  respondent
no.1 herein, on March 21,  1992,  forwarding  the  memorandum  of  procedure
drawn up by the Central Officer of the SBI for  the  purpose  of  purchasing
the Exim scrips as directed by the RBI.  In due course, various  holders  of
Exim scrips sold and/or surrendered  their  Exim  scrips  to  the  Bank  and
received a premium of 20 per cent  of  the  face  value  of  the  scrips  in
compliance with the direction contained in  the  letter  of  the  RBI  dated
March 18, 1992.
7.    In the course of assessment proceedings under the  Act  for  the  four
quarters ending on March 31, 1993, the Commercial Tax Officer,  Park  Street
Charge informed the assessee that apart from payment of  sales  tax  on  the
sale of gold and silver, it would also be liable to pay  “purchase  tax”  in
respect of purchase of Exim scrips from the holders thereof at a premium  of
20 per cent of the face value.   Before  the  assessing  authority,  it  was
contended by the SBI that the Exim scrips had not  actually  been  purchased
but the same had been surrendered by their holders  pursuant  to  the  terms
contained in the letter of the RBI dated March 18, 1992.  It  was  also  put
forth that such surrender could not be treated as purchase for  the  purpose
of levying tax under Section 4(6) of the Act. It was also averred that  Exim
scrips were not "goods" within the meaning of Section 2(d) of  the  Act  and
hence, no purchase tax could be levied under Section 4(6) of  the  said  Act
on the surrender of the Exim scrips by its  holders.   In  addition  to  the
above, a specific objection was taken that the Bank  had  not  entered  into
any transaction on its own which could be regarded as  purchase  to  attract
the provisions of Section 4(6) of the Act but had merely acted as  an  agent
of the RBI in terms of the order contained in the above  mentioned  circular
dated March 18, 1992.
8.    The assessing officer did not accept the said stand of  the  Bank  and
levied purchase tax under Section 5(6a) of the Act, amounting to sum of  Rs.
1,00,04,000/- on the total taxable specified price  of  Rs.  25,00,00,000/-.
In the order of assessment, the assessing authority  held  that  the  scheme
contained in the circular of the RBI dated  March  18,  1992,  provided  for
sale of Exim scrips by the holder and purchase  by  designated  bankers  and
consequently such sale or purchase by the bankers could not by  any  stretch
of imagination be treated as an act of surrender. It was also held that  the
purchase of the Exim scrips by the bankers from the holders thereof were  as
much sales as purchase by private importers who  availed  of  the  same  for
import of goods.
9.    The aforesaid order of assessment was assailed  in  an  appeal  before
the Assistant Commissioner, Commercial Taxes, Calcutta (South)  Circle,  who
vide order dated September 19, 1996, rejected the appeal and  confirmed  the
order of assessment.  The Bank Manager  of  the  concerned  Branch  and  the
Chairman of SBI approached the West Bengal  Taxation  Tribunal  (for  short,
‘the tribunal’).  During the hearing of  the  appeal  it  was  contended  on
behalf of the  SBI  that  in  order  to  attract  the  mischief  of  Section
4(6)(iii) of the Act, a dealer must be  liable  to  pay  tax  under  Section
4(1), 4(2), 4(4) or 8(3) of the aforesaid Act and since the  said  Bank  was
not a dealer under the provisions of the aforesaid Act, it did not have  any
liability to pay tax under Section 4(6)  of  the  said  Act.   It  was  also
submitted that the transactions  involving  recovery  of  Exim  scrips  from
their holders could not be treated to be  "purchases"  for  the  purpose  of
Section 4(6) of the above Act, but amounted to "surrender"  by  the  holders
which had been wrongly equated with  "purchase"  at  the  Branch  level.   A
further stand was taken that for Section 4(6) to apply,  the  purchase  must
have been made with the intention 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.  It was argued that if  such  a  construction
was not adopted, Clause (iii) of Section 4(6) would be unconstitutional  and
violative of Article 14 of the Constitution.
10.   The tribunal by its order dated 11th February, 1998 rejected  all  the
contentions made on behalf  of  the  appellants  and  dismissed  the  appeal
preferred by them.     As has been stated earlier, the SBI  had  not  levied
purchase tax. When the matter travelled to the tribunal, the question  arose
whether the Bank by payment at a premium of twenty  per  cent  on  the  face
value or unutilised face value thereof was exigible to  purchase  tax  under
Section 4(6)(iii) read with Section 5(6) of the Act.  The tribunal  narrated
 the facts  and noted the stand and the  stance  of  the  assessee  and  the
Revenue and came to hold  that  the  Bank  had  acted  in  relation  to  the
impugned transactions as agent of RBI, which is an  instrumentality  of  the
Government of India, to accept Exim scrips on payment of a  premium  to  the
holders thereof and the activity is thus  covered  by  Section  6(1)(a)  and
(b);  that under Section 6(1)(n) such activity  was  certainly  “incidental”
or “conclusive” to the promotion or  advancement  of  the  business  of  the
Company, because admittedly  the  assessee  received  commission  for  these
transactions; that the stand that the Bank was not a dealer in view  of  the
Banking Regulation Act, 1949 was unacceptable, for when  Section  8  of  the
Act is correctly construed, it  would be clear that purchase of Exim  scrips
was not prohibited by it; that the  Exim  scrips  were  goods  as  has  been
conclusively settled in Vikas Sales Corporation and another v.  Commissioner
of Commercial Taxes and another[1]; that the submission to the  effect  that
the purchase is made not for resale and hence, the bank would not be  liable
for tax does not commend acceptation, for legislature does  not  contemplate
or lay down that Section 4(6)(iii) would apply to purchase for  the  purpose
of only resale but has left  the  expression  unspecified  and  unqualified;
that there  is  no  rationale  to  restrict  it  to  resale  and  limit  the
expression; that Section 4(6)(iii) uses the word “purpose”, a  purchase  for
any purpose other than those specified in clauses (i) and  (ii)  of  Section
4(6) would be enough to attract the clause and in the case  at  hand,  RBI’s
letter dated March 18, 1992 the purpose was to forward the “scrips”  to  the
Joint Chief Controller of Imports and Exports, Government  of  India,  after
suitably cancelling them; that  use  of  the  purchased  scrips  by  way  of
cancellation and onward transmission  to  the  Joint  Chief  Controller  was
clearly subsequent to completion of the transactions  and  such  use  cannot
keep the transactions out of the mischief and purview of Section  4(6)(iii);
that the transactions  were  really  “surrenders”  and  not  “purchases”  is
untenable because surrender is  also  envisaged  by  operation  of  law  and
hence, the concept of “surrender” is inapplicable in the instant  case;  and
that there was enough indication of “sale” and “purchase”  and  transfer  of
property in the scrips as is evident  from  documents  that  the  holder  of
script was “encashing”  them  by  completely  foregoing  his  “entitlements”
under it.   After so  holding,  the  tribunal  dealt  with  the  concept  of
business as has been defined under Section 2(1)  of  the  Act,  referred  to
various decisions including Commissioner of Sales Tax  v.  Billion  Plastics
Pvt. Ltd.[2],  State of Tamil Nadu v.  Burma  Shell  Co.  Ltd.[3],  District
Controller of Stores v. A.C. Taxation Officer[4] and State of Tamil Nadu  v.
Binny Ltd., Madras[5], Board of Revenue  v.  A.M.  Ansari[6]  and  State  of
Gujarat v. Raipur Manufacturing Co. Ltd.[7] and after deliberating on  them,
posed the question whether  mere  lack  of  the  element  of  regularity  or
frequency, when the other elements are present would  it  be  sufficient  to
keep take the transactions out of the compass of “business” and opined  that
where an intention to carry on business was clearly established,  mere  lack
of the element  of  regularity  or  frequency  would  not  convert  business
transactions into non-business transactions and would not make a “dealer”  a
“non dealer”.  To arrive at the said conclusion, the  tribunal  referred  to
the definition of “dealer” under Section 2(c) of the Act and  definition  of
“business” and other provisions and in that context, referred  to  State  of
Andhra Pradesh v. H. Abdul Bakhi and Bros.[8] and  Hindustan  Steel  Ltd  v.
State of Orissa[9]  and came to hold that profit motive is  not  imperative,
because as per law “business” connects some activity actually in the  nature
of trade or commerce or manufacture which is done not for sport or  pleasure
or for charity.  Thus, there is little difference  between  the  primary  or
main part of the definition of  “business”  and  its  inclusive  part  which
basically means, as in  the  present  context,  any  trade  or  commerce  or
similar activity and any transaction in connection  with,  or  ancillary  or
incidental to, such trade or commerce. Process of exchange can be  completed
by the exchange of goods and services for money.  The tribunal has  observed
that in the instant case the purchase of exim scrips was by way of  exchange
of the scrips, which are financial instruments, for money.  Thereafter,  the
tribunal referred to the meaning of the terms trade and commerce and  stated
in Black’s Law Dictionary and certain other dictionaries  including  Aiyer’s
Judicial Dictionary and eventually came to hold as follows:-
“Thus, purchase of exim scrips for money,  comprising  a  large  volume  (at
least Rs. 25 crores) is in every sense a “business” within  the  meaning  of
Section 2(1a).  That being so, having  carried  on  such  a  “business”  the
applicant bank became a “dealer” under section 2(c),  even  apart  from  the
fact that it was already a registered dealer for sale of  gold.  Since  sale
of gold  has  no  connection  with  purchase  of  exim  scrips,  the  latter
transactions cannot be said to be either in connection with or ancillary  or
incidental to sale of gold. In our view, the purchase of exim scrips  was  a
separate “business” of the applicant bank. A point was argued on  behalf  of
the bank that it had to undertake this activity under instructions from  the
Reserve Bank of India.  The fact that it  was  so,  indicates  that  it  was
carried on as a business and  with  the  intention  to  carry  it  on  as  a
business”.


11.   Thereafter, it opined that the SBI is not an  ordinary    businessman,
but it is a body created by an Act.  Analysing the statutory scheme and  the
obligation, it proceeded to state thus:
“We have to keep this distinction in mind when we consider whether  purchase
of exim scrips was done by the bank as a business with the intention  to  do
a business.  It is  undisputed  that  not  only  the  bank  paid  money  for
purchasing exim scrips but also it made some gain  by  receiving  commission
out of the transactions.  Even without any commission the  activity  clearly
constitutes a “business”.  Another question  is  :  when  the  activity  was
carried on under the instructions of the Reserve Bank of India,  can  it  be
said to be  a  “business”?   In  the  facts  of  the  case,  the  apparently
compulsory nature of purchase of exim scrips was not such as to take it  out
of the ambit of “business”.  The bank could not compel any  holder  of  exim
scrips to sell the same to it. It was wholly voluntary  on  the  part  of  a
holder to sell scrips to the bank.   As  soon  as  a  holder  exercises  his
opinion to sell and gives a scrip to the bank,  the  bank  purchases  it  on
payment of money. As already said, the compulsory nature of  performance  of
the duty of purchase of exim scrips emanates from Act of 1955 which  created
the bank.  Unlike any other dealer, the applicant bank could  not  think  of
acting beyond the provisions of Act of 1955.  That being so, in the  special
circumstances of the  case,  the  element  of  compulsion  involved  in  the
instruction of the Reserve Bank of India is  irrelevant.   Apart  from  that
aspect, we may refer  to  the  case  of  Coffee  Board  v.  Commissioner  of
Commercial Taxes (1988) 70 S.T.C. 162 (S.C.)  in  which  it  was  held  that
there was a sale, where the  growers  of  coffee  delivered  coffee  to  the
Board, though the growers did not  actually  sell  it.  It  was  a  sale  by
operation of law. The imposition of sales tax on such  sale  of  coffee  was
upheld.  From the above points of view we hold that  the  purchase  of  exim
scrips by the applicant bank were rightly  brought  to  purchase  tax  under
1941 Act.”

12.   The said order was challenged before the High Court of Calcutta  in  a
writ petition wherein it was contended that the  Bank  was  not  a  "dealer"
within the meaning of Section 2(c) of the Act in respect of the Exim  scrips
since it does not and/or did not carry on the business of sale  or  purchase
of such Exim scrips; that in the case at hand it was only  a  solitary  case
and that too for a brief period from March 23, 1992  to  May  31,  1992  but
neither before nor after the said  period  had  any  such  transaction  been
entered into which could justify  the  finding  of  the  tribunal  that  the
assessee-Bank had an intention to carry on  business  in  purchase  of  Exim
scrips and that mere lack of regularity or frequency  would  not  convert  a
business into non-business and would not make a dealer  a  non-dealer;  that
there was no material on record to arrive at  the  conclusion  that  it  was
clearly established that the writ petitioner No. 1, i.e., the SBI,  had  the
intention to carry on business in purchase of Exim scrips; that even if  the
Bank was to be treated as a dealer,  the  provisions  of  Section  4(6)(iii)
would have to be related to the  business  being  carried  on  by  the  Bank
inasmuch as the said provisions would otherwise suffer  from  vagueness  and
would expose it to attack on the ground  of  constitutional  validity;  that
keeping in view the scheme  of  the  Act  and  the  intent  and  purpose  of
relevant provision, purchase tax could be levied on  a  dealer  only  if  he
carried on business of  buying  or  selling  the  goods  in  question;  that
whatever may be the nature of the transaction, the Bank had  only  acted  as
an agent of the RBI in the transaction relating to  Exim  scrips  and  would
not, therefore, come within the definition of  the  expression  "dealer"  as
defined in Section 2(c) of the 1941 Act; that the transaction involving  the
acquisition of Exim scrips by the Bank could not be said to  be  a  case  of
purchase but a case of surrender; that the Exim scrip  was  in  substance  a
licence or a grant from the Sovereign and there could not  be  any  sale  of
such Exim scrips to the Sovereign and accordingly, when the  holder  of  the
Exim scrips gives up his right in favour of the granter  it  is  an  act  of
surrender and nothing else; that SBI had merely acted as  an  agent  of  the
Sovereign, namely, the  department  of  the  Central  Government  which  had
issued the Exim scrips, that is, the Joint Chief Controller  of  Import  and
Export and under the instruction of the RBI and once the  said  Exim  scrips
were surrendered by the holders, the same were required to be cancelled  and
forwarded to the office of the Joint Chief Controller of Import and  Exports
who had originally issued the same and in effect the grant  under  the  Exim
scrips would, upon cancellation by the Bank, cease to exist, which state  of
affairs is consistent with the concept of surrender and it was not  intended
that upon acquisition of the Exim scrips from their holders, the same  would
be utilised by the Bank for the purpose of either selling the same or  using
the same for the purpose for which they had  been  intended.   Be  it  noted
learned counsel for the Bank placed reliance  on  the  decisions  in  Raipur
Manufacturing Co. Ltd. (supra), Board of  Revenue  v.  A.M.  Ansari[10]  and
Billion Plastics Pvt. Ltd. (supra).
13.    Learned  counsel  for  the  Commercial  Tax  Officer,  resisting  the
submissions  of  the  learned  counsel  for  the  Bank  contended  that  the
controversy raised by the bank having set at rest by the  three-Judge  Bench
in Vikas Sales Corporation (supra), wherein  the  Supreme  Court  had  given
stamp of approval to the decision in P.S. Apparels v. Deputy Commercial  Tax
Officer, Madras[11].  It was urged by  the  revenue  that  REP  Licence  are
goods and the premium or price received therefrom by  transfer  thereof  was
liable to sales tax within the ambit and sweep of Section 4(6)(iii)  of  the
Act  and,  therefore,  the  finding  recorded  by  the  tribunal  that   the
transaction involving the purchase of  Exim  scrips  by  the  assessee  bank
amounted to sale could not be found fault with.  It was also canvassed  that
the intention of the legislature was clear and  in  view  of  the  authority
rendered in Vikas Sales Corporation (supra), P.S. Apparels (supra)  and  the
decision  in  Bharat  Fritz  Werner  Ltd.  v.  Commissioner  of   Commercial
Taxes[12] nothing really remain to be adjudicated.
14.   The High Court analysed the principles in all  the  authorities  cited
before  it  and  came  to  hold  that  this  Court  has  opined   that   REP
licences/Exim scrips were merchandise and/or goods in the  commercial  world
and were freely bought and sold in the market and hence, no  argument  could
be urged that they do not constitute goods for the  purposes  of  commercial
transactions.  The High Court referred  to  the  circular  dated  March  18,
1992, issued by the RBI regarding purchase of Exim scrips by the  designated
branches of the SBI and opined that the said Exim scrips  were  handed  over
to the Bank solely for the purpose of cancellation and not be used as  goods
for the purpose of commercial transactions.  According to  the  High  Court,
they were reduced to mere paper having no commercial  value.   The  Division
Bench distinguished the judgments rendered by this Court as well as  by  the
High Courts of Madras and Karnataka.  It further  proceeded  to  opine  that
the purchases by the SBI were not effected in the usual course  of  business
of the Bank, for it was a one-time affair and there  was  no  continuity  or
regularity involved in such transactions so as to bring the same within  the
concept of business.  The High Court took note of the  fact  that  the  Bank
was mainly confined to purchase and sale of gold and silver.  On  behalf  of
the revenue, it was contended that the bank was a  registered  dealer  under
the Act, but the said submission did not weigh with the High  Court  because
as the impugned order would show, it has  been  persuaded  by  the  decision
rendered by the Bombay High Court in Billion  Plastics  Pvt.  Ltd.  (supra).
Thereafter, the High Court came to the following conclusion:-
“56. ….we are not inclined to accept the arguments  advanced  on  behalf  of
the Revenue that purchasing of Exim scrips on the direction of  the  Reserve
Bank 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”.

       The  aforesaid  conclusion  entailed  allowing  the   writ   petition
preferred before the High Court and resultantly the assessee was  discharged
from the undertaking given for the purpose of continuation  of  the  interim
order initially passed.
15.   We have heard Mr. Soumitra  G.  Chaudhuri,  learned  counsel  for  the
appellants and Mr. Pradip Kumar  Ghosh,  learned  senior  counsel  with  Mr.
Chiraranjan Addey, learned counsel appearing for the respondents.
16.   To  appreciate  the  controversy,  it  is  pertinent  to  extract  the
communication dated March  18,  1992  sent  by  the  RBI,  Exchange  Control
Department to the Chairman, State Bank of India, Bombay. The said letter  is
as follows:-
“Dear Sir,

Purchase of Exim Scrips by designate branches of SBI.

This is with reference to our discussion with  Shri.  B.S.  Pandya,  General
Manager (Domestic & Operations) on  the  captioned  subject.   It  has  been
agreed that designated branches of the State Bank of  India  would  commence
purchasing ‘Exim Scrips’, from holders who wish to dispose  of  them,  at  a
premium of 20 percent on the face value of  the  scrip  &  (unutilized  face
value) from 23rd March 1992, subject to the following terms and conditions:

a) The holder of the scrips would be required to submit  an  application  to
the designated branch in the form prescribed by the State Bank of India.

b) State Bank of India would, incorporate, in consultation with their  legal
department, a suitable indemnity  clause  in  the  application  form  to  be
submitted by the holder of the scrip.

c) As the scrip is transferred by  a  letter,  State  Bank  of  India  would
verify the letter in favour of the holder presenting  the  scrip  and  would
then make payment on the basis  of  usual  banking  procedures  adopted  for
identification of the person to whom payment is made.

d) The payment would be rounded off to the nearest rupee and would  be  made
only by means of a Crossed Banker’s Cheque.

The term ‘Exim Scrip’ would also cover post paid REP licenses issued  up  to
29th February 1999 of export proceeds.

e) State Bank of India, Bombay Main  Branch,  would  arrange  to  get  daily
details of scrips paid by their various designated branches  and  then  seek
reimbursement, on a consolidated basis, daily from Reserve  Bank  of  India,
Bombay on the basis of a certificate indicating the  total  amount  paid  by
them.

f) Designated Branches of SBI would maintain the particulars of scrips  paid
including the application  forms  for  such  period  as  may  be  considered
necessary.  Bombay main branch would maintain the  particulars  of  payments
made  by  their  various  designated  offices  on  the  strength  of   which
reimbursement was claimed by them from RBI, Bombay.

g) The paid  scrips  would  be  suitably  cancelled  and  forwarded  to  the
concerned office of J.C.C.I. & E. which had issued the scrips.  In the  case
of scrips of face value up to Rs.5 lakhs, the concerned office  of  J.C.C.I.
& E. should also be asked to  conduct  a  check  about  genuineness  of  the
scrips cancelled by  SBI  and  report  objections,  if  any,  in  regard  to
payments to the concerned designated office of SBI.

h) If in the case of any scrip of the face value up to Rs.  5  lakhs  (which
is paid without prior check by the office of J.C.C.I. & E.), it later  turns
out that the scrip was not genuine or not validly issued  etc.,  the  matter
would have to be pursued by the office  of  the  J.C.C.I.  &  E.  SBI  will,
however, render whatever assistance is necessary to tract the party to  whom
payment has been made.

i) SBI would be acting on behalf of the Reserve Bank of India and  would  be
paid commission at the rate at which  commission  is  payable  to  them  for
conducting Government  business.  They  would  also  be  paid  out-of-pocket
expenses including expenses incurred on advertisements notifying  designated
branches.

2. As desired by you, we have also advised the Chief Controller  of  Imports
&  Exports  to  instruct  all  his  regional  offices  to  render  necessary
assistance to designated branches of SBI for a smooth implementation of  the
scheme. He has also  been  advised  to  instruct  his  regional  offices  in
particular  that  they  should  promptly  (say,  within  48  hours)  furnish
authentication of scrips of face value above Rs. 5 lakhs sent  to  them  and
their findings of the check done of scrips up to the face  value  of  Rs.  5
lakhs paid without any prior authentication.  He has also been requested  to
advise J.C.C.I. & E., Bombay, to assist you with  a  check  list  containing
important features of the Exim Scrip to check their genuineness.”
                                                            [Emphasis added]

17.   The aforesaid, as is manifest, authorises  the  SBI  to  purchase  the
Exim scrips as an agent of RBI and after payment of the premium  at  20%  of
the  value  to  the  holder,  the  scrip  was  to  be  cancelled.    Certain
formalities were stipulated to be complied by the holder as well as by SBI.
18.   Section 2(1a) of the Act defines “business” as follows:-

“business” includes –
(i) any trade, commerce or manufacture or execution of work contract or  any
adventure or concern in the nature of  trade,  commerce  or  manufacture  or
execution  of  works  contract,  whether  or  not  such   trade,   commerce,
manufacture, execution of works contract, adventure or  concern  is  carried
on with the motive to make profit and whether  or  not  any  profit  accrues
from  such  trade,  commerce,  manufacture,  execution  of  works  contract,
adventure or concern; and

(ii) any transaction in connection with,  or  ancillary  or  incidental  to,
such trade, commerce, manufacture, execution of  works  contract,  adventure
or concern;”


19.   The term “dealer” has  been  defined  under  Section  2(iv)(c),  which
reads thus:-

“”dealer” means any person who carries on the business of selling  goods  in
West  Bengal  or  of  purchasing  goods  in   West   Bengal   in   specified
circumstances or any person making a sale under Section 6D and includes –

the Central or a State Government, a local authority, a  statutory  body,  a
trust or other body corporate which, or a liquidator or  receiver  appointed
by a Court in respect of a person defined as  a  dealer  under  this  clause
who,  whether  or  not  in  the  course  of  business  sells,  supplies   or
distributes directly or otherwise, for cash or for deferred payment  or  for
commission, remuneration or other valuable consideration.

Explanation 1. – A co-operative society or a club or any  association  which
sells goods to its members is a dealer.

Explanation 2. – A factor, a broker,  a  commission  agent,  a  del  credere
agent, an auctioneer, an agent for handling  or  transporting  of  goods  or
handling of document of title to goods or any  other  mercantile  agent,  by
whatever name called, and whether of the same  description  as  hereinbefore
mentioned or not, who carries on the business of selling goods and who  has,
in the customary course of business, authority to sell  goods  belonging  to
principals is a dealer;”

20.   Section 2(d) of the Act defines “goods” as follows:-

““goods” includes all  kinds  of  movable  property  other  than  actionable
claims, stocks, shares or securities”
21.   Section 4 of the Act deals with incidence  of  taxation.   Sub-Section
(6) of Section 4 of the Act is as follows:-

“(6) Every dealer, who has become liable to pay tax  under  sub-section  (1)
or sub-section (2) or sub-section (4) of this section or sub-section (3)  of
section 8 and is registered under this Act, shall, in addition  to  the  tax
referred to therein, be also liable to pay tax under this  Act  on  all  his
purchases from –

(i) a dealer who is not registered under  this  Act,  of  goods  other  than
[gold, rice (Oryza sativa L.) and wheat (Triticcum  Vulgare,  T.  compactum,
T. sphaerococcum, T. durum, T. aestivum  L.,  T.  dicoccum)],  intended  for
direct use in the manufacture in West Bengal  of  goods  for  sale,  and  of
containers and other materials for the packing  of  goods  so  purchased  or
manufactured;

(ii) a registered dealer, to whom a declaration referred to in  the  proviso
to clause (bb) of  sub-section  (1)  of  section  5  has  been  or  will  be
furnished by him in respect of sales referred to in sub-clause (i)  or  sub-
clause  (ii)  of  the  said  clause,  of  goods   purchased   against   such
declaration, and used by him directly in the manufacture in West Bengal,  of
goods or in the packing of such goods,  when  such  manufactured  goods  are
transferred by him to a place outside West Bengal or  disposed  of  by  him,
otherwise than by way of sale in West Bengal.

(iii) any person, whether a dealer or not, who is not registered under  this
Act, of goods other than gold, rice and wheat intended for a purpose,  other
than those specified in clause (i).”




22.   Section 6C stipulates the liability to payment  of  purchase  tax  and
rate thereof.

23.   We have referred to the aforesaid statutory provisions as the  learned
counsel for the revenue would stress upon the tenor of the  said  provisions
and submit that respondent Bank is  a  dealer  and  once  it  has  purchased
something, which is goods, it  is  liable  to  pay  the  purchase  tax.   In
essence, the learned counsel for the State would defend the order passed  by
the tribunal in entirety and would contend that the High  Court  has  wholly
flawed in appreciation of the factual score and  the  provisions  applicable
to the transaction.

24.   In Vikas Sales Corporation (supra), the  question  arose  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 purposes of the Sales Tax enactments of  Tamil  Nadu,  Karnataka
and Kerala and if it does, it is exigible to sales tax,  otherwise  not.  In
the said case, the High Court had taken  the  view  that  REP  Licences/Exim
Scrips constitute goods and, therefore, on  their  transfer,  sales  tax  is
leviable and the judgment of the High Court was founded on the  decision  of
this Court in H. Anraj v. Government of Tamil Nadu[13].   It  was  contended
before this Court that the license/scrips are not goods and hence, they  are
not property. It was further urged that they represent merely  a  permission
to import goods  which  permission  can  be  revoked  at  any  time  by  the
licensing authority and, therefore, they are really in the nature  of  share
and securities which have been expressly excluded  from  the  definition  of
goods in the relevant enactments. Analysing various facets, the  three-Judge
Bench referred to Para 199 of  “Import  and  Export  Policy  1990-93”  which
deals with Transferability of REP Licences.  It reads as follows:-
“199. (1) The REP Licence will be issued  in  the  name  of  the  registered
exporter only and will  not  be  subject  to  ‘Actual  User  Conditions’.  A
licence-holder may transfer the licence  to  another  person.  The  licence-
holder or such transferee may import the goods permitted therein.

(2) The transfer of a REP  Licence  will  not  require  any  endorsement  or
permission from the licensing authority, i.e., it will be  governed  by  the
ordinary law. Accordingly, clearance of the goods covered by a  REP  Licence
issued under this policy will be  allowed  by  the  Customs  authorities  on
production by the transferee  of  only  the  document  of  transfer  of  the
licence concerned in his name. Whenever a REP  Licence  is  transferred  the
transferor should give a  formal  letter  to  the  transferee,  giving  full
particulars regarding number,  date  and  address  of  the  transferee,  and
complete description of the  items  of  import  for  which  the  licence  is
transferred.”

25.   The Court also observed that the relevant features of Exim Scrips  are
identical to REP Licences.  Thereafter, the Court proceeded to state:-
“They are bought and sold as such. The original licensee  or  the  purchaser
is not bound to import the goods permissible thereunder. He can simply  sell
it to another and that another to yet another person. In other words,  these
licences/Exim Scrips have an inherent value of their own and are  traded  as
such.  They  are  treated  and  dealt  with  in  the  commercial  world   as
merchandise, as goods. A REP  Licence/Exim  Scrip  is  neither  a  chose-in-
action nor an actionable claim. It is also not in  the  nature  of  a  title
deed. It has a value of its own. It is by itself a property — and it is  for
this reason that it is freely  bought  and  sold  in  the  market.  For  all
purposes and intents, it is goods. Unrelated  to  the  goods  which  can  be
imported on its basis, it commands a value and is traded as  such.  This  is
because,  it  enables  its  holder  to  import  goods  which  he  cannot  do
otherwise”.

And again:-
“Another contention raised in the written submissions of Shri K.V. Mohan  is
that even if the said licences/scrips are treated as goods, the tax must  be
levied at the first point of sale, viz.,  upon  the  authority  issuing  the
licence. We cannot agree. The grant of licence by  the  licensing  authority
to the registered exporter is not a sale. The sale is  when  the  registered
exporter or the purchaser sells it to another person for consideration”.

26.   The High Court has distinguished the aforesaid  authority  by  stating
that this Court did  not  have  the  occasion  to  consider  the  effect  of
purchase of Exim scrips made by SBI, for it  was  not  a  part  of  business
regularly carried on by it but was a transaction which was to be  undertaken
on the direction of the RBI.   Exim  scrips  were  no  longer  available  as
“goods” for the purpose of commercial transaction and were to be reduced  to
mere papers having no  commercial  value  whatsoever  and  such  a  scenario
changed the entire  perspective.   The  High  Court  has  laid  emphasis  on
immediate cancellation of Exim scrips and after cancellation to be  sent  to
the original granting authority.
27.   The controversy involved in  the  case  at  hand,  in  our  considered
opinion, has to be analysed regard being had to the existing factual  score.
  The  observations  made  in  Vikas  Sales  Corporation  (supra),  as   the
aforequoted passages would  show,  the  initial  grant  of  license  by  the
Government to the registered exporters was not a sale. The said  finding  is
significant and it has potency.  It is also seen  that  the  said  authority
extensively relies on the earlier judgment in H. Anraj  (supra)  that  dealt
with the question  whether  lottery  tickets  are  “goods”  and  accordingly
whether sale thereof would  invite  sales  tax.    H.  Anraj  (supra)  draws
distinction between lottery tickets and steamship tickets, railway  tickets,
cinema tickets, etc. Salmond’s Jurisprudence, 12th Edition at pages  338-339
under  the  heading  “The  Classes  of  Agreements”  was  quoted   to   draw
distinction between three classes, namely, agreements which  create  rights,
agreements which transfer or assign  rights,  and  lastly  agreements  which
extinguish them.   Agreements which create rights were divided into two sub-
classes, namely, contracts and grants.  A contract is  an  agreement,  which
creates an obligation or right in personam between the  parties,  whereas  a
grant creates a right of another description such  as  leases,  assignments,
patents, etc.   An  agreement,  which  transfers  a  right,  may  be  termed
generically as an assignment.   However, when a transaction  extinguishes  a
right, it is called a release,  discharge  or  surrender.   The  distinction
between  creation  of  a  right  by  a  grant  and  subsequent  transfer  or
assignment was also highlighted in H. Anraj (supra) and noted by  Sabyasachi
Mukherjee, J. (as His Lordship then was) in  his  concurrent  judgment  with
the following observations:-

“41. It was urged before us on behalf of the dealers that by  the  issue  of
lottery tickets, the right to participate in the draw  is  created  for  the
first time in the buyers. In other words, it was urged that by the  sale  of
lottery ticket, the right to participate is created for the first  time;  if
it is considered to be a “grant” and  as  such  a  sale  of  goods,  it  was
contended that such right was not existing before the sale  of  the  lottery
ticket. This contention has  caused  me  anxiety  from  the  jurisprudential
point of view.
42. I agree with respect that “grant” is an agreement  of  some  sort  which
creates rights in the grantee and an agreement which  transfers  rights  may
be termed as assignment. But the question, is, before the grant, was such  a
right, namely the  right  to  participate  in  the  draw,  existing  in  the
grantor? The point made is that there is no transfer  of  property  involved
in the issue of a lottery ticket and it is  only  after  the  issue  of  the
lottery ticket that the grantee  gets  a  right  to  participate.  In  other
words, it was sought to be urged that in a lottery, the promoter  sponsoring
it does not have any right to participate nor to claim a  prize  in  a  draw
and these come into existence for the first time by the purchase of  lottery
ticket when he purchases the ticket and therefore it  cannot  be  said  that
any transfer of right is involved, but only creation of  new  right  by  the
grantor in favour of the grantee.”


      The observations made in the aforesaid paragraphs  that  there  is  no
transfer of  property  involved  in  a  grant,  for  the  rights  come  into
existence after purchase.

28.   The decision in the case of H. Anraj  (supra)  was  overruled  by  the
Constitution Bench in Sunrise Associates  v.  Govt.  of  NCT  of  Delhi  and
others[14] on several  grounds  including  that  there  was  no  distinction
between the chance to win and the right to participate in the draw.  Such  a
sub-division was  not  correct.   There  was  no  value  in  mere  right  to
participate in the draw.  Therefore, lottery tickets were  not  “goods”  but
were actionable claims.    These were merely token of chances purchased  and
even otherwise the right to participate in  the  draw  was  not  a  moveable
property  and,  therefore,  there  cannot  be  any  transfer  of  beneficial
interest  in  a  moveable  property.   The  reason  being,  the   right   to
participate in a lottery draw was an  actionable  claim.   More  significant
for our  purpose  would  be  the  observations  of  the  Constitution  Bench
relating to the word “goods” for imposition  of  sales  tax  which,  it  was
observed in the context, would carry its ordinary  meaning  of  the  subject
matter of ownership and not denote the nature of  interest  of  goods.   The
word “goods” was used to describe the thing itself.  The  relevant  passages
of the Constitution Bench in Sunrise Associates (supra) on the  said  aspect
read as under:-

“35. The word “goods” for the purposes of imposition of sales tax  has  been
uniformly defined in the various sales 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 Edn.) the difference is clearly  brought
out. The definition reads thus:
“ ‘Property’.—In commercial law this may carry its ordinary meaning  of  the
subject-matter of ownership. 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.

36. We have noted earlier that all the statutory  definitions  of  the  word
“goods” in the State sales tax laws have  uniformly  excluded,  inter  alia,
actionable claims from the definition for the  purposes  of  the  Act.  Were
actionable claims, etc., not  otherwise  includible  in  the  definition  of
“goods” there was no need for excluding them.  In  other  words,  actionable
claims are “goods” but not for the purposes of the Sales Tax  Acts  and  but
for this statutory exclusion, an actionable claim would be  “goods”  or  the
subject-matter of ownership. Consequently, an actionable  claim  is  movable
property and “goods” in the wider sense  of  the  term  but  a  sale  of  an
actionable claim would not be subject to the sales tax laws.”


And, again:-

“51. We are therefore of the view that the  decision  in  H.  Anraj  (supra)
incorrectly held that a sale of a lottery ticket involved a sale  of  goods.
There was no sale of goods within the meaning  of  Sales  Tax  Acts  of  the
different States but at the highest a transfer of an actionable  claim.  The
decision to the extent that  it  held  otherwise  is  accordingly  overruled
though prospectively with effect from the date of this judgment.”


29.   We may note with  profit  that  Sunrise  Associates  (supra)  did  not
specifically deal with the  question  of  replenishment  licences,  for  the
reference made to the Constitution Bench  was  limited  to  whether  lottery
tickets were “goods”.  The  Constitution  Bench  had  specifically  observed
that  they  were  not  called  upon  to  decide  the  question  whether  the
replenishment licences were “goods.”  We may usefully refer to the  relevant
passage:-

“29. ..  We have not been called upon to answer  the  question  whether  REP
licences (or the DEPB which has replaced  the  REP  licences)  are  “goods”.
Although we have heard counsel at length  on  this,  having  regard  to  the
limited nature of the reference, we do not decide the  issue.  The  decision
in Vikas Sales  (supra)  was  referred  to  only  because  it  approved  the
reasoning in H. Anraj (supra) and not because the referring court  disagreed
with the conclusion in Vikas Sales (supra) 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 (supra) that lottery tickets are goods  for
the purposes of Article 366(29-A)(a)  of  the  Constitution  and  the  State
sales tax laws, was correct.”

30.   Thus, the Constitution Bench did not  overrule  the  decision  of  the
Court in Vikas Sales  Corporation  (supra)  holding  replenishment  licences
were goods.  The Constitution Bench, however, held that the reliance  placed
in Vikas Sales Corporation (supra) on the observations in H. Anraj  (supra),
which was agreed to and stood overruled, was to this extent bad in law.   To
clarify,  Vikas  Sales  Corporation  (supra)  specifically  dealt  with  the
transfer of replenishment licences after they had been issued.  However,  in
Vikas Sales Corporation (supra) it was opined that the grant  of  a  licence
by the licensing authority to a registered exporter was  not  a  sale.  Sale
will take place only when the registered owner further sells it  to  another
person for consideration.  The relevant paragraph of the judgment  has  been
earlier reproduced.

31.   A three-Judge Bench of the Court in Yasha Overseas v. Commissioner  of
Sales Tax and others[15] had examined  the  question  whether  the  sale  or
transfer of replenishment licences  and  duty  entitlement  passbooks  would
attract sale tax.  Reliance placed on Sunrise Associates (supra) to  contend
that the decision in Vikas Sales Corporation (supra)   impliedly  overruled.
The three-Judge Bench did not accept the contention by stating thus:-

“40. Thus, on a detailed examination, we are unable to see how the  decision
in Sunrise (supra) can be said to alter the position in regard to  the  sale
of REP licences as held by the earlier decision  in  Vikas  (supra).  It  is
noted above that the  Constitution  Bench  in  Sunrise  (supra)  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 (supra) did not approve the decision in  Vikas
(supra)  insofar as it  gave  their  free  marketability  as  an  additional
reason to hold that REP licences  were  not  actionable  claim  but  “goods”
properly so called. The Constitution Bench held  that  the  assumption  that
actionable claims were not transferable for value was  quite  unfounded  and
the conclusion drawn on that basis was quite wrong. In paras 39  and  40  of
the decision, Sunrise (supra) decision gave illustrations  of  a  number  of
actionable claims which are transferable.

41. But to our mind that does not in any way change the position insofar  as
REP licences are concerned. While examining the three-Judge  Bench  decision
in Vikas (supra) earlier in this judgment it is seen that  the  Court  first
came to hold that REP licence/Exim  scrip  fell  within  the  definition  of
goods quite independently. The Court found and held that  REP  licences  had
their own value; they were freely bought and sold in the  market  for  their
intrinsic value and for that reason alone those were goods. (See para 29  of
the decision in Vikas (supra) that is reproduced above.) It was  only  after
coming to the conclusion that the Court proceeded to examine the  matter  in
light of the observations made in Anraj (supra) relating to lottery  tickets
and that too because the Karnataka and the Madras High  Courts  had  heavily
relied upon Anraj  (supra)  decision  for  holding  that  the  sale  of  REP
licences was exigible to sales tax. On a careful reading of the decision  in
Vikas (supra) it is apparent that it was the intrinsic value of REP  licence
that brought it within the definition of goods.”


32.   After so stating, the Court specifically referred to the term  “goods”
as  interpreted  in  Sunrise  Associates  (supra)  to  mean  the  title  and
ownership of a thing and not the nature  of  interest  in  the  goods.   The
question of free-marketability, it was held, was not primarily  relevant  as
per the decision in Sunrise Associates (supra), albeit could be relied  upon
as  an  additional  reason,  for  replenishment  licences  fall  within  the
definition of “goods” quite independently. These licences could  have  their
own intrinsic value and could be freely brought and  sold  at  their  market
value.   There was also  a  ready  market  for  the  sale  and  purchase  of
replenishment licences.

33.   Thus analysed,  the  replenishment  licences  or  Exim  scrips  would,
therefore, be “goods”, and when they are  transferred  or  assigned  by  the
holder/owner to a third person for consideration, they  would  attract  sale
tax.  However, the position would be different when  replenishment  licences
or Exim scrips are returned to the grantor or the  sovereign  authority  for
cancellation or extinction.  In this process, as  and  when  the  goods  are
presented, the replenishment licence or Exim scrip is cancelled  and  ceases
to be a marketable instrument. It becomes  a  scrap  of  paper  without  any
innate market value.  The SBI, when it  took  the  said  instruments  as  an
agent of the RBI did not hold or purchase any goods.   It was merely  acting
as per the directions of the RBI, as its agent and as a participant  in  the
process of cancellation, to ensure that the replenishment licences  or  Exim
scrips were no longer  transferred.  The  intent  and  purpose  was  not  to
purchase goods in the form of replenishment licences or Exim scrips, but  to
nullify them. The said purpose and objective is the admitted position.   The
object was to mop up and remove the replenishment licences  or  Exim  scrips
from the market.

34.   Be it noted that the initial issue or grant of scrips is  not  treated
as transfer of title or ownership in the  goods.  Therefore,  as  a  natural
corollary, it must follow when the RBI acquires  and  seeks  the  return  of
replenishment licences or Exim scrips  with  the  intention  to  cancel  and
destroy them, the  replenishment  licences  or  Exim  scrips  would  not  be
treated as marketable commodity purchased by  the  grantor.    Further,  the
SBI is an agent of the RBI, the principal. The Exim scrips or  replenishment
licences were not “goods” which were purchased  by  them.   The  intent  and
purpose was not to purchase the replenishment licences  because  the  scheme
was to extinguish the right granted by issue of replenishment licences.  The
“ownership” in the goods was never transferred or assigned to the SBI.

35.   In view of the preceding analysis, the  other  issues  and  questions,
including the question whether  the  aforesaid  exercise  of  procuring  and
cancelling replenishment licences or Exim scrips is  “business”  within  the
meaning of the Act, need not be decided. The facts of the case at hand   has
its distinctive features and, therefore, we unhesitatingly concur  with  the
view of the High Court that the SBI was not liable to levy of  purchase  tax
under the Act.

36.   Consequently, the appeal, being devoid  of  merit,  stands  dismissed.
There shall be no order as to costs.




                       .............................J.
                                                        [Dipak Misra]




                       .............................J.
New Delhi;                                          [Shiva Kirti Singh]
November 8, 2016
-----------------------
[1]     (1996) 4 SCC 433
[2]    [1995] 98 STC 184
[3]    31 S.T.C. 426 (S.C.)
[4]    37 S.T.C. 423 (S.C.)
[5]    49 S.T.C. 17 (S.C.)
[6]    38 S.T.C. 577 (S.C.)
[7]     AIR 1967 SC 1066
[8]    AIR 1965 SC 531
[9]    AIR 1970 SC 253
[10]    (1976) 3 SCC 512
[11]    [1994] 94 STC 139
[12]    [1991] 86 STC 175
[13]    (1986) 1 SCC 414
[14]   (2006) 5 SCC 603
[15]   (2008) 8 SCC 681