By C. B. Thakar Advocate G. G. Goyal
Janak Vaghani Chartered Accountants
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Sales Tax- Surrender of Exim Scrip- Not a Sale – Not Liable to Tax, section 2(1)(n) of The Andhra Pradesh Sales Tax Act,1957.
Facts
The appellants had REP licences/ exim scrips which they surrendered to the Government and received 20 per cent premium as provided in circular No. 11/93 dated May 5, 1993. The assessing authorities took the view that the amounts received by them towards the premium/price on the surrender of the REP licences/exim scrips is liable to tax as they are “goods” within the meaning of section 2(h) of the Andhra Pradesh General Sales Tax Act,1957. The appellants however contended that they surrendered the REP licences/ exim scrips and received premium as incentive and therefore the surrender value of the scrips cannot be subjected to tax. The appellants filed petition before the AP High Court against the judgment of tribunal holding it as sale liable to tax.
Held
Admittedly, the policy and system under which REP licences/ exim scrips were issued was discontinued with effect from March 1, 1992 and the Director-General of Foreign Trade issued the circular No. 11/93 dated May 5, 1993 announcing that unutilised exim scrips could be surrendered and authorised the Joint Director-General of Foreign Trade to pay 20 per cent premium to the exporters through State Bank of India and its subsidiaries. After the expiry of the period of validity, these REP licences/ exim scrips became valueless and holders of such REP licences/ exim scrips could neither import goods duty-free nor sell them for value. Thus, they ceased to be items which could be freely traded in the open market and on their surrender to the Government of India, even the Government of India cannot use them for trading in the open market and they would stand cancelled and were valueless. By no stretch of imagination can it be said that such surrender by an exporter of REP licences/ exim scrips is in the course of trade or business. The premium paid by the Government to the exporters on the surrender of the REP licences/ exim scrips is only a solatium for the inability of the exporters to avail of the benefit of the incentives and cannot be treated as price or valuable consideration.
Therefore, the transaction of surrender of REP licences/ exim scrips is not a “sale” within the meaning of section 2(1)(n) of the Act and also would not constitute “turnover” within the meaning of section 2(1)(s) of the Act. Accordingly, the High Court allowed the petition filed by the appellants.
