TMI BlogLevy of Tax on Certified Emission Reductions (CERs) commonly known as carbon creditsX X X X Extracts X X X X X X X X Extracts X X X X ..... ature of transactions of carbon trading and its historical aspects, the applicant in the application dated 28-10-2009 has stated that carbon trading is an activity which has come into existence in the wake of global warming and concerted efforts being made by international community to contain and progressively reduce emission of Greenhouse Gases by industrial units, vehicles and other fossil fuel consuming machines etc. Carbon trading is a transaction of sale of carbon credits by an entity/unit which has earned/obtained Certified Emission Reductions (CERs) to an entity which is committed to reduction for emission greenhouse gases, but is not able to achieve the prescribed reduction in emission of greenhouse gases on its own. The CERs is certified by appropriate authority (Executive Board of CDM). The CERs, in essence, is a certificate having market value and is a tradable item/commodity. Carbon credits basically seek to encourage countries to reduce their green house gas (GHG) emissions, as it rewards those countries that meet their targets and provides financial incentives to others to do so as quickly as possible. Reduction in emission of GHG emission is achieved by developm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate change impacts. The operational mechanism of CDMs involves an investment by a legal entity from a developed country in a project in developing country, which results in emission reductions. The investment decision would include an agreement between the two parties and their respective counties on the dispensation and transfer of the emission reductions resulting from the project. These emission reductions have to be certified by an appropriate authority (the CDM Executive Board, provided for under the protocol) and then these certified Emission reductions (CERs) commonly known as carbon credits can be used to meet commitments under Kyoto Protocol. 6. The manner of transfer of CERs will depend on the nature of agreement between the contracting parties. Some of the preferred modes adopted by interested parties include : (a) Investment by an entity from a developed country directly in a project, in a developing country in lieu of the CERs that are expected to accrue therefrom. (b) The entity in a developed country enters into agreement to purchase CERs from a developing country entity or access the open market, as and when they are required to meet certain commitments. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of moveable property (other than newspaper actionable claims, stocks, shares and securities and includes — (i) livestock, all material, commodities, grass or things attached to or forming part of the earth which are agreed to be served before sale or under a contract of sale; and (ii) property in goods (whether as goods or in some other form) involved in the execution of a works contract, lease or hire purchase or those to he used in the fitting out, improvement or repair of movable property". 9. It is also relevant to refer to the (term "dealer" as contained in clause (j) of sub-section (1) of Section (2) which lays down that:- "dealer" means any person who, for the purposes of or consequential to his engagement in are in connection with or incidental to or in the course of his business, buys or sells goods in Delhi directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration and includes— (i) a factor, commission agent, broker, del credere agent or any other mercantile agent by whatever name called, for the purposes of or consequential to his engagement in or in connection with or incidental to or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the products mentioned in the said entry. Thus, the item CER is covered by the aforesaid entry. 13. Reliance is also placed on the judgement of Hon'ble Supreme Court in the case of Yash Overseas Vs. Commissioner of Sales Tax and Others (Civil Appeal No. 2155 of 2000) wherein it was, inter alia, held that: "REP licences had always a market. There were people willing to sell and others willing to buy REP licences at all times. Their innate value coupled with free transferability made REP licences into a marketable commodity. They were "goods" properly so called, having innate value and a ready market. Under the Duty Entitlement Passbook (DEPB) Scheme, an exporter is eligible to claim credit as a specified percentage of the job value of exports made in freely convertible currency. The credit is available against such export products and at such rates as may he specified by the Director General of Foreign Trade by a public notice issued in this behalf. The DEPB is exactly the same as REP licence. Like the REP, it has an innate value which makes it a marketable. The DEPB credit is also clearly "goods" within the meaning of the sales tax laws'' 14. It is also worthwhile t ..... 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