9. Commercial Tax Officer & Ors. vs. State Bank of India & Anr., Civil Appeal No. 1798 of 2005, dated 8th November, 2016 (SC).

Facts

The State Bank of India, 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. 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. 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 % of the face value of the Exim scrips, from March 23, 1992, subject to certain terms and conditions. Thereafter, SBI purchased Exim scrips as directed by the RBI from various holders of Exim scrips. The department treated these as purchase of goods and levied purchase tax on 20 % premium paid to the holder of scrips who surrendered it to the Bank. The Calcutta High Court in writ petition filed by the Bank against the order of the Tribunal deleted the levy of purchase tax and hold surrender of Exim Scrips is not a purchase. The department filed appeal before the SC against the judgment of High Court.

Held

The replenishment licences or Exim scrips would be goods, 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. 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. Therefore, the SBI was not liable to levy of purchase tax under the Act. The appeal preferred by the Revenue was dismissed by the SC.