TMI Blog1996 (5) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... ther. - AHMADI A.M., JEEVAN REDDY B.P. AND SUHAS CHANDRA SEN JJ. Civil Appeal No. 7771-7780, Civil Appeal No. 7905, Civil Appeal No. 7906, Civil Appeal No. 7907, Civil Appeal No. 7908, Civil Appeal No. 7909, Civil Appeal No. 7910, Civil Appeal No. 7911, Civil Appeal No. 7912, Civil Appeal No. 7913, Civil Appeal No. 7914, Civil Appeal No. 7915, Civil Appeal No. 7916, Civil Appeal No. 7917, Civil Appeal No. 7918, Civil Appeal No. 7919, Civil Appeal No. 8281, Civil Appeal No. 8316, Civil Appeal No. 8317, Civil Appeal No. 8318, Civil Appeal No. 8319, Civil Appeal No. 8320, Civil Appeal No. 8321, Civil Appeal No. 8322, Civil Appeal No. 8323, Civil Appeal No. 8324, Civil Appeal No. 8325, Civil Appeal No. 8326, Civil Appeal No. 8327, Civil Appeal No. 8328, Civil Appeal No. 8329, Civil Appeal No. 8330, Civil Appeal No. 8331, Civil Appeal No. 8332, Civil Appeal No. 8333, Civil Appeal No. 8334, Civil Appeal No. 8335, Civil Appeal No. 8336, Civil Appeal No. 8337, Civil Appeal No. 8338, Civil Appeal No. 8339, Civil Appeal No. 8340, Civil Appeal No. 8341, Civil Appeal No. 8342, Civil Appeal No. 8343, Civil Appeal No. 8344, Civil Appeal No. 8345, Civil Appeal No. 8346, Civil Appeal No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vil Appeal No. 8486, Civil Appeal No. 8487, Civil Appeal No. 8488, Civil Appeal No. 8489, Civil Appeal No. 8490, Civil Appeal No. 8491, Civil Appeal No. 8492, Civil Appeal No. 8493, Civil Appeal No. 8494, Civil Appeal No. 8495, Civil Appeal No. 8496, Civil Appeal No. 8497, Civil Appeal No. 8498, Civil Appeal No. 8499, Civil Appeal No. 8500, Civil Appeal No. 8501, Civil Appeal No. 8502, Civil Appeal No. 8503, Civil Appeal No. 8504, Civil Appeal No. 8505, Civil Appeal No. 8506, Civil Appeal No. 8507, Civil Appeal No. 8508, Civil Appeal No. 8509, Civil Appeal No. 8510, Civil Appeal No. 8511, Civil Appeal No. 8512, Civil Appeal No. 8513, Civil Appeal No. 8514, Civil Appeal No. 8515, Civil Appeal No. 8516, Civil Appeal No. 8517, Civil Appeal No. 8518, Civil Appeal No. 8519, Civil Appeal No. 8520, Civil Appeal No. 8521, Civil Appeal No. 8522, Civil Appeal No. 8523, Civil Appeal No. 8524, Civil Appeal No. 8525, Civil Appeal No. 8526, Civil Appeal No. 8527, Civil Appeal No. 8528, Civil Appeal No. 8529, Civil Appeal No. 8530, Civil Appeal No. 8531, Civil Appeal No. 8532, Civil Appeal No. 8533, Civil Appeal No. 8534, Civil Appeal No. 8535, Civil Appeal No. 8536, Civil Appeal No. 8537, Civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 8746, Civil Appeal No. 8747, Civil Appeal No. 8748, Civil Appeal No. 8696 of 1996, Writ Petition No. 334, Writ Petition No. 379, Writ Petition No. 408, Writ Petition No. 459, Writ Petition No. 460, Writ Petition No. 523, Writ Petition No. 526, Writ Petition No. 543, Writ Petition No. 544, Writ Petition No. 554, Writ Petition No. 563, Writ Petition No. 626, Writ Petition No. 627, Writ Petition No. 709, Writ Petition No. 710, Writ Petition No. 723, Writ Petition No. 748, Writ Petition No. 749, Writ Petition No. 797, Writ Petition No. 798, Writ Petition No. 804 of 1994, Writ Petition No. 14, Writ Petition No. 15, Writ Petition No. 16, Writ Petition No. 17, Writ Petition No. 18, Writ Petition No. 19, Writ Petition No. 20, Writ Petition No. 31, Writ Petition No. 32, Writ Petition No. 33, Writ Petition No. 91, Writ Petition No. 93, Writ Petition No. 106, Writ Petition No. 118, Writ Petition No. 139, Writ Petition No. 194, Writ Petition No. 195, Writ Petition No. 267, Writ Petition No. 268, Writ Petition No. 279, Writ Petition No. 309, Writ Petition No. 360, Writ Petition No. 449, Writ Petition No. 465, Writ Petition No. 466, Writ Petition No. 469, Writ Petition No. 478, Writ Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 4(a) of the said Act, the Central Government issued the Imports (Control) Order, 1955. Clause (3)(1) of the Order provides that save as otherwise provided in this Order, no person shall import any goods of the description specified in Schedule I except under and in accordance with a licence or a customs clearance permit granted by the Central Government or by any officer specified in Schedule II . The Order contains elaborate provisions governing the grant and cancellation of licences and conditions subject to which the licences have to be operated. The Central Government has been issuing, from time to time, what is called the Import and Export Policy, published in the form of a brochure. The Import Policy in vogue during the years concerned herein provided for issuance of what is called replenishment licences (for short, REP licences ). The objective behind the licences was to provide to the registered exporters the facility of importing the essential inputs required for the manufacture of the products exported. The essential idea was to encourage exports and for that purpose import licences called REP licences were issued equal to the prescribed percentage of the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in a business of importing goods but it also excludes competition. Therefore, it cannot be said that it is only a beneficial interest in respect of a movable property not in possession of the person but is itself a valuable right which, according to the petitioners themselves, is freely transferable. The import licence therefore must be treated as merchandise for the purposes of the Act and clearly falls within the definition of goods . The learned Judge further held that the right under this licence is, in fact, more concrete and substantial than the right under a lottery ticket considered in Anraj [1986] 61 STC 165 (SC). On appeal, a Division Bench See [1992] 86 STC 175., of the Karnataka High Court affirmed the judgment of the learned single Judge. The Division Bench too relied upon the ratio of Anraj [1986] 61 STC 165 (SC) and dismissed the appeal in the following words: In the instant case, the transfer of REP licences confers upon the transferee the immediate right to clear goods covered by the licences at the customs barrier. This is not an inchoate or incomplete right. It cannot be held to materialise in future because its exercise is dependent upon the transferee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Additional Solicitor-General, supported the reasoning and conclusion arrived at by Karnataka and Madras High Courts and commended it for our acceptance. Entry 54 in List II of the Seventh Schedule to the Constitution of India empowers the State Legislatures to make laws with respect to taxes on the sale or purchase of goods other than newspapers subject to the provisions of entry 92-A of List I . Entry 92-A of List I speaks of taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce . The Karnataka, Tamil Nadu and Kerala Sales Tax Acts are referable to entry 54, while Central Sales Tax Act, 1956, is referable to entry 92-A. These entries empower the State Legislatures and the Parliament respectively to levy sales tax on sale or purchase of goods with the difference that if it is an intra-State sale, it is the State Legislature which is competent to levy the tax, whereas in the case of inter-State sale, it is the Parliament alone that can levy tax. Entry 54 in List II, which is the one we are immediately concerned with in these matters, is a legislative head, a head of legislation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in clause (29A) was inserted by the Forty-sixth Amendment Act with a view to give an expansive meaning to the words tax on the sale or purchase of goods . Clauses (c) and (d) in this definition are relevant to the present controversy. Clause (d) provides that even where a right to use any goods is transferable for cash, deferred payment or other valuable consideration, it will be a sale or purchase of goods for the purpose of the Constitution. Clause (7) in section 2 of the Sale of Goods Act, 1930, defines the expression goods thus: 'goods' means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale (emphasis* added). Since the said definition defines goods to mean, every kind of movable property other than actionable claims and money , it would be appropriate to notice the definition of property in clause (11). It reads: 'property' means the general property in goods, and not merely a special property . It is noteworthy that both these definitions seek t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definition in the General Clauses Act has to be adopted for the purposes of the Tamil Nadu General Sales Tax Act. The definition of goods in the Karnataka Sales Tax Act, 1957, is no different. It reads: 'goods' means all kinds of movable property (other than newspapers, actionable claims, stocks and shares and securities), and includes live-stock, all materials, commodities articles including the goods as goods or in some other form involved in the execution of a works contract or those goods to be used in the fitting out, improvement or a repair of a movable property and all growing crops, grass or things attached to, or forming part of the land which are agreed to be severed before sale or under the contract of sale. This Act too does not define the expression movable property . The definition of goods in the Kerala General Sales Tax Act may now be set out: 'goods' means all kinds of movable property (other than newspapers, actionable claims, electricity, stocks and shares and securities) and includes live- stock, all materials, and articles (including those to be used in the construction, fitting out, improvement or repair of immovable p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncludes every invasion of one's property rights by actionable wrong. Labberton v. Cas. Co. of America, 53 Wash. 2d 180, 332 P. 2d. 250, 252, 254. Property embraces everything which is or may be the subject of ownership, whether a legal ownership, or whether beneficial, or a private ownership. Davis v. Davis. Tex. Civ. App., 495 S.W. 2d 607, 611. Term includes not only ownership and possession but also the right of use and enjoyment of lawful purposes. Hoffmann v. Kinealy, Mo., 389 S.W. 2d. 745, 752. Property, within constitutional protection, denotes group of rights inhering in citizen's relation to physical thing, as right to possess, use and dispose of it. Cereghino v. State by and through State Highway Commission, 230 Or., 439, 370 P. 2d 694, 697. Goodwill is property, Howell v. Bowden, Tex Civ. App., 368 S.W. 2d 842, 848; as is an insurance policy and rights incident thereto, including a right to the proceeds, Harris v. Harris, 83 N.M. 441, 493 P. 2d 407, 408. The dictionary further says property is either: real or immovable; or, personal or movable . It then proceeds to give the meaning of the expression absolute property , common property , intangible pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... many ways, but most usually by gift, bequest, or sale. Under the Law of Property Act, 1925, s. 205, 'property' includes anything in action and any interest in real or personal property. There must be a definite interest; a mere expectancy as distinguished from a conditional interest is not a subject of property. 'Property' also signifies a beneficial right in or to a thing. Sometimes the term is used as equivalent to ownership; as where we speak of the right of property as opposed to the right of possession (q.v.), or where we speak of the property in the goods of a deceased person being vested in his executor. The term was chiefly used in this sense with reference to chattels (Finch, Law 176). Property in this sense is divided into general and special or qualified. General property is that which every absolute owner has (Co. Litt. 145b.). See Ownership. Special property has two meanings. First, it may mean that the subject- matter is incapable of being in the absolute ownership of any person. Thus a man may have a property in deer in a park, hares or rabbits in a warren, fish in a pond, etc., but it is only a special or qualified property, for if at any t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te one depending upon the context. We do not think it necessary to refer to the material cited by the learned counsel for the reason that the character, nature and content of the licences in question should be ascertained with reference to the law governing them and not with reference to the general meaning of the expression licence . We have already referred to the provisions of the Export and Import Policy governing these licences. We may now refer to a few more paragraphs from the Import and Export Policy 1990-93, relevant to the REP licences/Exim scrips. Paragraph 184(1), which deals with Extent of Import Replenishment , says, the extent of replenishment permissible against export products (other than gem and jewellery) enumerated in Column 2 of Appendix 17, Part I of this book shall be that set out in Column 3. Paragraph 185(1), which deals with items permissible for import , says, REP Licences issued against export of products listed in Column 2 of Appendix 17, Part I and as per paragraph 184(4) of this book, will be valid for import of those relevant items of raw materials, components, consumables and packing materials, as are listed in Appendices 3 and 5, Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1992, of course, the very policy and system under which these licences/scrips were being issued, has been discontinued.] Since Karnataka and Madras High Courts have placed strong reliance upon the decision of this Court in Anraj [1986] 61 STC 165, it would be appropriate to refer to the relevant facts and the ratio of the said decision. The question in that case was whether lottery tickets are goods within the meaning of and as defined in the Tamil Nadu General Sales Tax Act, 1959 and Bengal Finance (Sales Tax) Act, 1941. The contention of the State was that they were goods and, therefore, attract the sales tax on their sale. According to assessees, the lottery tickets were in the nature of actionable claims but not goods. They questioned the legislative competence of the State Legislatures to levy sales tax on their sale. They contended that the expression sale of goods has to be construed in the sense in which it is used in the Sale of Goods Act, as has been held by this Court in Gannon Dunkerley [1958] 9 STC 353; [1959] 3 SCR 379. They submitted that the definition of goods in Sale of Goods Act excludes from its purview actionable claims and that the essence of the lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ysical articles but as slips of paper or memoranda evidencing the right to participate in the draw must in a sense be regarded as the dealer's merchandise and, therefore, goods, capable of being bought or sold in the market. They can also change from hand to hand as goods. We are of the opinion that the ratio of the said decision fully supports the contention of the States herein. As rightly pointed out by the Karnataka High Court, the content of REP licence/Exim scrip is far more substantial and real than that of a lottery ticket. If lottery tickets are goods, there is no reason why these licences/scrips are not goods. We see no substance in the argument based upon the decision in Gannon Dunkerley [1958] 9 STC 353; [1959] 3 SCR 379. On the basis of this decision, it is contended that the expression goods and sale of goods must be understood in the sense they are used in the Sale of Goods Act. We need not quarrel with this proposition. We have not only referred hereinbefore the definition of goods and property in the Sale of Goods Act but have also pointed out that in material particulars it is similar to the definition of goods in Tamil Nadu, Karnataka and Ker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the licence has no value of its own is equally unacceptable. We have already pointed out how the commercial world treats these licences and trades in them. They represent merchandise for all practical purposes. Learned counsel for petitioners have brought to our notice certain decisions, to which a brief reference would be in order: The decision on which strong reliance is placed by Sri K.K. Venugopal is in State of Orissa v. Titaghur Paper Mills Co. Ltd. [1985] 60 STC 213 (SC); (1985) Suppl SCC 280. It was a case arising under the Orissa Sales Tax Act. Under section 3-B of the Orissa Act, the State Government was empowered to declare from time to time by notification any goods or class of goods to be liable to tax on turnover of purchases. Notifications were issued under this provision from time to time declaring that standing trees and bamboos agreed to be severed shall be liable to tax on turnover of purchases at the rate prescribed. The contention of the assessee was that the said levy was not a tax on sale or purchase of goods within the meaning of entry 54 in List II and, therefore, beyond the legislative competence of the State Legislature. Construing the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government of India would not confer a legal right upon an exporter for the division of the quota rights of a dissolved firm . Firstly, the majority opinion (Gajendragadkar, C.J., Wanchoo, Shah and Sikri, JJ.), is to the contrary. Secondly, quota rights considered therein were not freely transferable like the licences/scrips concerned herein. The last mentioned comment holds good for the other decision relied upon S. Chandrasekharan v. Government of Tamil Nadu (1974) 2 SCC 196. This decision deals with the transferability of a licence/ authorisation in respect of a ration shop. Sri K.K. Venugopal placed strong reliance upon the decision of the Court of Appeal in Frank Warr Co. v. London County Council [1904] 1 KB 713. In particular, the learned counsel relied upon the observations of Romer L.J. at pages 720 to 722. It was a case where a contract was entered into between lessees of a theatre and the plaintiffs. Under this contract, the plaintiffs were given the exclusive right for a particular period to supply refreshments in the theatre. For that purpose, the plaintiffs were entitled to use the refreshment rooms, bars and wine cellars in the theatre and were also g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the State Legislature has no power to levy sales tax upon their sale/purchase. We are unable to see any substance in this submission either. Applying the rule of pith and substance, it must be held that the enactments in question are referable to entry 54 in List II and not to entry 41 in List I. By no stretch of imagination can they be related to entry 41 in List I. The State Legislatures are not seeking to make a law with respect to customs duties. They are seeking only to levy tax upon the sale of goods. The test to be applied in this behalf has been authoritatively stated by the Constitution Bench of this Court in A.S. Krishna v. State of Madras [1957] SCR 399. Another contention raised in the written submissions of Sri 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. The last submission urged by Sri Vaidyanathan is that these licences/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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