By TIOL News Service

ERNAKULAM , JULY 29, 2014: THE issue before the HC is - Whether Form C under CST is required to be issued for the transfer of credit in the passbook issued under DEPB Scheme. And the answer is YES.

Facts of the case

The assessee is a trader, who had purchased Import Licences, such as DEPB, VKUJL and FPS and had effected inter-State sales of the same. The Assessee had challenged the re-opening of the assessments made on the purported declaration made by a Division Bench of this Court in S.T.Rev.No.24 of 2011 where the Division Bench dismissed the revision, upholding the fact finding of the Tribunal. However, while dismissing the same, the Division Bench made an observation as to how 'C' Form would be applicable for transfer of credit in the Pass Book issued under DEPB Scheme.

Before the HC the Assessee's Counsel submitted that it was only on the basis of the judgment, that the re-opening was made. The Counsel further submitted that what was sought to be taxed was the transfer of credit in DEPB and that credit could never be "goods" under the sales tax laws .The Revenue's Counsel also did not point out any other judgment, wherein such declaration had been made.

Having heard the parties, the HC held that,

++ even with respect to the specific apprehension expressed by the Division Bench, the answer lies in Yasha Overseas v. CST 2008-TIOL-97-SC-CT. A slight overview of the issue has to be taken note of, at this juncture. Vikas Sales Corporation v. Commissioner of Commercial Taxes 2002-TIOL-608-SC-CT-LB dealt with the issue whether transfer of Import Licence [Replenishment (REP) Licenses], by its holder, to another person constitutes a sale of goods or not. While rendering the judgment, copious reference was made to the decision in H.Anraj v. State of T.N. 2002-TIOL-722-SC-CT. The said decision of the Supreme Court was prospectively overruled in Sunrise Associates v. Govt. of NCT of Delhi 2006-TIOL-4O-SC-CT-LB. Hence, the sustainability of the dictum in Vikas Sales Corporation came up for consideration again before a three Judge Bench in Yasha Overseas. The Supreme Court found that despite the fact that H.Anraj was overruled; in Vikas Sales Corporation, the Judges had come to the conclusion that sale of REP licences had their own value and involves sale of goods; quite independently;

++ in Yasha Overseas, there was one another question, as to, whether DEPB would also come within the same footing of REP licence. That question was answered in the affirmative. In fact, the fleeting apprehension raised by the Division Bench is seen to have been squarely answered by the Supreme Court in Yasha Overseas. The Senior Advocate appearing for the appellants therein had raised a contention that what was sought to be taxed was the transfer of credit in DEPB and that credit could never be "goods" under the sales tax laws. But the contentions were answered against the assessee;

++ the re-opening effected under the various notices and also the order passed in one of the cases are to be set aside for reason of the same being illegal and directly conflicting with the decision of the Supreme Court. If DEPB involves sale of goods, necessarily inter-State sale could be effected on the strength of 'C' Forms, if the purchasing dealer intends it inter alia for sale or for purposes of manufacture. Even if resale of DEPB entitlements are not effected and the purchasing dealer imports goods for purposes of manufacture, then again the very same principle would apply. In any event, any defalcation or violation of the declaration, at the hands of the purchasing dealer, who issued the 'C' Form; would be liable to be proceeded against only against that purchasing dealer and not against the selling dealer; in the absence of any collusion being found against the selling dealer within the State. The notices issued are declared as issued without sanction of law.

(See 2014-TIOL-1234-HC-KERALA-CT)