# 5 S.C.R. 704 COMMERCIAL TAX OFFICER & ORS v. STATE BANK OF INDIA & ANR - **Citation:** [2016] 5 S.C.R. 704 - **Court:** Supreme Court of India - **Decided:** 2016-11-08 - **Case number:** Civil Appeal No. 1798 of2005 - **Bench:** Dipak Misra, Shiva Kjrti Singh - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/5-s-c-r-704-commercial-tax-officer-ors-v-state-bank-of-india-anr-31483 - **Pages:** 27 ## Headnote Bengal Finance (Sales Tax) Act, 1941 - ss. 4(6) (iii), 5(6a) - Purchase tax - Levy of- Acceptance of Exim Scrips (Export Import Licence) by State Bank of India (SB!) and its branches, on payment of premium of 20% of the face value of the scrips in compliance with the direction of RBI - Levy of purchase tax - Held: SB! not liable to levy of purchase tax for replenishment licences or Exim scrips taken as a participant in the process of cancellation - Replenishmell/ licences or Exim scrips are goods and when they are transferred or assigned by the holder/owner to a third person for consideration, they would attract sale tax - When SB! took the said instruments as an agent of the RBI, it did not hold or purchase any goods - It merely acted as per the directions of the RBI. as its agent and as a participant in the process, to ensure that the replenishment licences or Exim scrips ll'ere 110 longer transferred - Intent and purpose was not to purchase good~ in the f<1r111 of replenishment licences or Exim scrips, but to nullify them. Dismissing the appeal, the Court HELD: 1.1 The facts of the case at hand has its distinctive features and, therefore, the view of the High Court that the SBI was not liable to levy of purchase tax under the Act, is concurred with. [Para 35J(730-C) t.2 The replenishment licences or Exim scrips would be "goods" and when they arc 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 704 COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA 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. (Para 33)[729-D-G] 1.3 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 b 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 SBl.[Para 34)[729-G-H; 730-A-B] Sunrise Associates v. Govt. of NCT of Delhi and others (2006) 5 SCC 603 : 2006 (1) Suppl. SCR 421 - relied on. Vikas Sales C01poration and another v. Commissioner of Commercial Taxes and another (1996) 4 SCC 433 : 1996 (2) Suppl. SCR 204;Co111111issioner of Sales Tax v. Billion Plastics Pvt. Ltd. (1995) 98 STC 184; State of Tamil Nadu" Burma Shell Co. Ltd. 31 S.T.C. 426 (S.C.); District Controller of Stores v. A.C. Taxation Officer 37 S.T.C. 423 (S.C.); State of Ta111il Nadu v. Binny Ltd., Madras 49 S.T.C. 17 (S.C.); Board of Revenue v. A.M Ansari 38 S.T.C. 577 (S.C.); State of G11jara1 v. Raipur Manufacturing Co. Ltd. AIR 1967 SC 1066:1967 SCR 618; Stale of Andhra Prad ## Text _Characters 0–39,961 of 60,548. This is a partial read: ask again with offset=39961 for what follows._ A B c D E F G H [2016) 5 S.C.R. 704 COMMERCIAL TAX OFFICER & ORS. v. STATE BANK OF INDIA & ANR. (Civil Appeal No. 1798 of2005) NOVEMBER 08, 2016 [DIPAK MISRA AND SHIVA KJRTI SINGH, JJ.) Bengal Finance (Sales Tax) Act, 1941 - ss. 4(6) (iii), 5(6a) - Purchase tax - Levy of- Acceptance of Exim Scrips (Export Import Licence) by State Bank of India (SB!) and its branches, on payment of premium of 20% of the face value of the scrips in compliance with the direction of RBI - Levy of purchase tax - Held: SB! not liable to levy of purchase tax for replenishment licences or Exim scrips taken as a participant in the process of cancellation - Replenishmell/ licences or Exim scrips are goods and when they are transferred or assigned by the holder/owner to a third person for consideration, they would attract sale tax - When SB! took the said instruments as an agent of the RBI, it did not hold or purchase any goods - It merely acted as per the directions of the RBI. as its agent and as a participant in the process, to ensure that the replenishment licences or Exim scrips ll'ere 110 longer transferred - Intent and purpose was not to purchase good~ in the f<1r111 of replenishment licences or Exim scrips, but to nullify them. Dismissing the appeal, the Court HELD: 1.1 The facts of the case at hand has its distinctive features and, therefore, the view of the High Court that the SBI was not liable to levy of purchase tax under the Act, is concurred with. [Para 35J(730-C) t.2 The replenishment licences or Exim scrips would be "goods" and when they arc 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 704 COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA 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. (Para 33)[729-D-G] 1.3 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 b 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 SBl.[Para 34)[729-G-H; 730-A-B] Sunrise Associates v. Govt. of NCT of Delhi and others (2006) 5 SCC 603 : 2006 (1) Suppl. SCR 421 - relied on. Vikas Sales C01poration and another v. Commissioner of Commercial Taxes and another (1996) 4 SCC 433 : 1996 (2) Suppl. SCR 204;Co111111issioner of Sales Tax v. Billion Plastics Pvt. Ltd. (1995) 98 STC 184; State of Tamil Nadu" Burma Shell Co. Ltd. 31 S.T.C. 426 (S.C.); District Controller of Stores v. A.C. Taxation Officer 37 S.T.C. 423 (S.C.); State of Ta111il Nadu v. Binny Ltd., Madras 49 S.T.C. 17 (S.C.); Board of Revenue v. A.M Ansari 38 S.T.C. 577 (S.C.); State of G11jara1 v. Raipur Manufacturing Co. Ltd. AIR 1967 SC 1066:1967 SCR 618; Stale of Andhra Pradesh v. H Abdul Bakhi and 705 A B c D E F G H 706 SUPREME COURT REPORTS [2016] 5 S.C.R. A Bros. AIR 1965 SC 531 : 1964 SCR 664; Hindustan Steel Ltd v. State of Orissa AIR 1970 SC 253 : 1970 (1) SCR 753; Board of Revenue v. A.M Ansari (1976) 3 SCC 512 : 1976 (3) SCR 661; P.S. Apparels v. Deputy Commercial Tax Officer, Madras [1994) 94 STC 139; B Bharat Fritz Werner Ltd. v. Commissioner of Commercial Taxes [1991) 86 STC 175; H. Anraj v. Government of Tamil Nadu (1986) 1 SCC 414 : 1985 (3) Suppl. SCR 342; Yasha Overseas v. Commissioner of Sales Tax and others (2008) 8 sec 681 - referred to. c Black's Law Dictionary; Aiyer~· Judicial Dictionary - referred to. Case Law Reference 1996 (2) Suppl. SCR 204 referred to Paras 10,24, 27,30,31 D [1995) 98 STC 184 referred to Para 10 31 S.T.C. 426 (S.C.) referred to Para 10 37 S.T.C. 423 (S.C.) referred to Para 10 49 S.T.C. 17 (S.C.) referred to Para 10 E 38 S.T.C. 577 (S.C.) referred to Para 10 1967 SCR 618 referred to Para 10 1964 SCR 664 referred to Para 10 1970 (1) SCR 753 referred to Para 10 F 1976 (3) SCR 661 referred to Para 12 [1994) 94 STC 139 referred to Para 13 [1991) 86 STC 175 referred to Para 13 1985 (3) Suppl. SCR 342 referred to Paras 24,27, G 28,30 (2008) 8 sec 681 referred to Para 31 2006 (1) Suppl. SCR 421 relied on Para32 CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1798 of2005. H COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA · 707 From the .I udgment and Order dated 16. 12.2002 of the Division Bench of the Calcutta High Court in W. P. T. T. No. 03 of 1998. Soumitra G. Chaudhuri, Parijat Sinha, Advs. for the Appellants. Pradip Kumar Ghosh, Sr. Adv., Pinaki Addy, Ch iraranjan Addey, Advs. for the Respondents. The Judgment of the Court was delivered by DIPAK MISRA, J. I. The seminal question that emerges for consideration in this appeal is whether the State Bank oflndia (SBI) and its branches, which are registered dealers under the Bengal Finance (Sales Tax) Act, 1941 (for brevity, 'the Act') would be liable to levy of purchase tax under Section 5(6a) of the Act for accepting the Exim Scrips (Export Import Licence) on payment of premium of20 per cent of the face value of the scrips in compliance with the direction contained in the letter of Reserve Bank of India (RBI) dated J 81h March, 1992. The authorities of the revenue as well as the Taxation Tribunal (for short, 'the tribunal') had held against the SBI but the Division Bench of the High Court of Calcutta in a writ petition has dislodged the said conclusion holding, inter alia, that the purchase of Exim scr 1ps by the Bank did not attract the provisions of Section 4(6) (iii) of the Act and resultantly quashed the orders of fora below and issued consequential directions. 2. It is necessary to state the facts in detail to appreciate the controversy at hand. The SBI is a body corporate constituted under the State Bank of India Act, 1955 for the extension of banking facilities in the country and for other pub I ic purposes. The bank has to perform various functions as per the directions issued from time to time by the RBI in keeping with the economic and monetary policies of the Central Government. 3. Policies are notified by the Government of India under the Imports and Exports (Control) Act, 1947, as amended from time to time, and the Imports (Control) Order, 1955, to regulate imports into and exports out of the country and contain different incentive schemes and subsidies to build up foreign exchange resources of the country. As the facts would reveal before July 4, 1991 there was provision for issuance of Replenishment Licences which were referred to as "REP Licences". The objective behind the grant of such licences was to provide the A B. c D E F G H 708 A B c D E F G H SUPREME COURT REPORTS [2016] 5 S.C.R. registered exporters the facility ofimporting essential goods required for the manufacture of the products to be exported. Such licences were made freely transferable and such transfer did not require any endorsement or permission from the licensing authority and only a letter from the transferor the transferee became the lawful holder of the licence and was entitled to either import the goods for which the licence had been issued or sell the licence to someone else. 4. The aforesaid policy remained in vogue till July 3, 1991, when it was substituted by a new policy with effect from July 4, 1991 and the nomenclature of the REP Licence was changed to "Exim Scrip" (Export Import Licence). The provisions governing Exim scrips were more or less the same as those governing REP licences with certain minor variations which are really not pertinent for the purpose of adjudication of the controversy. 5. 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. In pursuance to such a decision, the RBI issued a circular, being No. 12/92 on 27th March, 1992. The said circular is as follows:- " Reserve Bank of India had earlier notified that arrangements were being made to purchase Exim scrips at an appropriate premium from those holders of Exim Scrips who wish to dispose of them. The designated branches of State Bank oflndia would be purchasing these Exim scrips from March 23, 1992, up to the end of May 1992. at a premium of 20 per cent of the face value. The I ist of branches which would be purchasing these Exim scrips would be notified by the State Bank oflndia. The bona fide holder of the Exim scrips should submit an application to the designated branch of the State Bank of India, in the form prescribed by the State Bank of India. The scrips up to the face value of Rs. 5 lakhs will be straightaway purchased by the designated branch of State Bank oflndia and the premium amount would be paid to the holder of the scrips. Where the face value of the scrips exceeds Rs. 5 lakhs, the concerned branch would send it to the office of the JCCI, which had issued the scrip, for authentication COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA 709 rDIPAK MISRA, J.l and on receipt of the scrip duly authenticated would pay A the.amount of premium." 6. 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 per cent of the face value of the Exim scrips, from March 23, 1992, subject to certain terms and conditions. Thereafter, the General Manager (Planning of the International Banking Department of the State Bank of India) communicated to the Deputy Manager, State Bank of India, Overseas Branch, Calcutta, the respondent no. I herein, on March 21, 1992, forwarding the memorandum of procedure drawn up by the Central Officer of the SB! for the purpose of purchasing the Exim scrips as directed by the RBI. In due course, various holders of Exim scrips sold and/or surrendered their Exim scrips to the Bank and received a premium of 20 per cent of the face value of the scrips in compliance with the direction contained in the letter of the RBI dated March 18, 1992. 7. In the course of assessment proceedings under the Act for the four quarters ending on March 31, 1993, the Commercial Tax Officer, Park Street Charge informed the assessee that apart from payment of sales tax on the sale of gold and silver, it would also be liable to pay "purchase tax" in respect of purchase of Exim scrips from the holders thereof at a premium of 20 per cent of the face value. Before the assessing authority, it was contended by the SB! that the Exim scrips had not actually been purchased but the same had been surrendered by their holders pursuant to the terms contained in the letter of the RBI dated March 18, 1992. It was also put forth that such surrender could not be treated as purchase for the purpose of levying tax under Section 4( 6) of the Act. It was also averred that Exim scrips were not "goods" within the meaning of Section 2(d) of the Act and hence, no purchase tax could be levied under Section 4(6) of the said Act on the surrender of the Exim scrips by its holders. In addition to the above, a specific objection was taken that the Bank had not entered into any transaction on its own which could be regarded as purchase to attract the provisions of Section 4(6) of the Act but had merely acted as an agent of the RBI in terms of the order contained in the above mentioned circular dated March 18, 1992. 8. The assessing officer did not accept the said stand of the Bank B c D E F G H ' . 710 A B c D SUPREME COURT REPORTS [2016] 5 S.C.R. and levied purchase tax under Section 5(6a) of the Act, amounting to sum of Rs. 1,00,04,000/- on the total taxable specified price of Rs. 25,00.00,000/-. In the order of assessment. the assessing authority held that the scheme contained in the circular of the RBI dated March 18, 1992, provided for sale of Exim scrips by the holder and purchase by designated bankers and consequently such sale or purchase by the bankers could not by any stretch of imagination be treated as an act of surrender. It was also held that the purchase of the Exim scrips by the bankers from the holders thereof were as much sales as purchase by private importers who availed of the same for import of goods. 9. The aforesaid order of assessment was assailed in an appeal before the Assistant Commissioner, Commercial Taxes, Calcutta (South) Circle, who vide order dated September 19, 1996, rejected the appeal and confirmed the order of assessment. The Bank Manager of the coitcerned Branch and the Chairman ofSBI npproached the West Bengal Taxation Tribunal (for short, 'the tribunal'). During the hearing of the appeal it was conte1idcd on behalf of the Sl31 that in order to attract the mischiefofSection 4(6)(iii) of the Act, n dealer must be liable to pay tax under Section 4( I), 4(2), 4(4) or 8(3) of the aforesaid Act and since the said Bank was not a dealer under the provisions of the aforesaid Act, it did not have any liability to pay tax under Section 4(6) of the said Act. It ·was also submitted that the transactions involving recovery of Exim scrips E from their holders could not be treated to be ''purchases" for the purpose of Section 4(6) of the above Act, but amounted to "surrender" by the holders which had been wrongly equated with "purchase" at the Branch level. A further stand was taken that for Section 4(6) to apply, the F purchase must have been made with the intention ofre-selling the Exim scrips and that the same would be apparent from proper reading of Clauses (i) and (iii) of Section 4(6) of the above Act. It was argued that if such a construction was not adopted, Clause (iii) of Section 4(6) would be unconstitutional and violative of Article 14 of the Constitution. 10. The tribunal by its order dated I J 1h February, 1998 rejected al I G the contentions made on behalfofthc appellants and dismissed the appeal preferred by them. As has been stated earlier. the SBI had not levied purchase tax. When the matter travelled to the tribunal. the question arose whether the Bank by payment at a premium of twenty per cent on the face value or unutilised face value thereof was exigible to purchase tax under Section 4(6)(iii) read with Section 5(6) of the Act. The tribunal H COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA 711 [DIPAK MISRA, J.l narrated the facts and noted the stand and the stance of the assessee A and the Revenue and came to hold that the Bank had acted in relation to the impugned transactions as agent of RBI, which is an instrumentality of the Government of India, to accept Exim scrips on payment of a premium to the holders thereof and the activity is thus covered by Section 6(1)(a) and (b); that under Section 6(l)(n) such activity was certainly "incidental" or "conclusive" to the promotion or advancement of the business of the Company, because admittedly the assessee received commission for these transactions; that the stand that the Bank was not a dealer in view of the Banking Regulation Act, 1949 was unacceptable, for when Section 8 of the Act is correctly construed, it would be clear that purchase of Exim scrips was not prohibited by it; that the Exim scrips were goods as has been conclusively settled in Vikas Sales Corporation anti anotlter v. Co111111issio11er of Commercial Tuxes and anotlter 1 ; that the submission to the effect that the purchase is made not for resale and hence, the bank would not be liable for tax does not commend acceptation, for legislature does not contemplate or lay down that Section 4(6)(iii) would apply to purchase for the purpose of only resale but has left the expression unspecified and unqualified; that there is no rationale to restrict it to resale and limit the expression; that Section 4(6)(iii) uses the word "purpose", a purchase for any purpose other than those specified in clauses (i) and (ii) of Section 4(6) would be enough to attract the clause and in the case at hand, RBl's letter dated March 18, 1992 the purpose was to forward the "scrips" to the Joint Chief Controller of Imports and Exports, Government of India, after suitably cancelling them; that use of the purchased scrips by way of cancellation and onward transmission to the Joint Chief Controller was clearly subsequent to completion of the transactions and such use cannot keep the transactions out of the mischief and purview of Section 4(6Xiii); that the transactions were really "surrenders" and not ''.purchases" is untenable because surrend.er is also envisaged by operation of law and hence, the concept of"surrender" is inapplicable in the instant case; and that there was enough indication.of "sale" and "purchase" and transfer of property in the scrips as is evident from documents that the holder of script was "encashing" them by completely foregoing his "entitlements" under it. After so holding, the tribunal dealt with the concept of business as has been defined under Section 2( 1) of the Act, referred to various decisions including Co111111issio11er of S"/es T"x v. Billion Pl"stics Pvt. 1 (1996) 4 sec 433 B c D E F G H 712 A B c D E F G H SUPREME COURT REPORTS [2016] 5 S.C.R. Ltd.=, State of Tamil Nadu v. Burma Size/I Co. Ltd.-', District Controller of Stores v. A.C. Taxation O.fficer' and State of Tamil Nadu v. Binny Ltd., Madras.<, Board of Revenue v. A.M. Ansari• and State of Gujarat v. Raipur Manufacturing Co. Ltd.' and after deliberating on them, posed the question whether mere lack of the element of regularity or frequency, when the other elements are present would it be sufficient to keep take the transactions out of the compass of "business" and opined that where an intention to carry on business was clearly established, mere lack of the element of regularity or frequency would not convert business transactions into non-business transactions and would not make a "dealer" a "non dealer". To arrive at the said conclusion, the tribunal referred to the definition of" dealer'' under Section 2(c) of the Act and definition of"business" and other provisions and in that context, referred to State of Andlira .Pradesh v. H. Abdul Bak/ii and Bros. 8 and Hindustan Steel Ltd v. State of Orissa9 and came to hold that profit motive is not imperative, because as per law "business" connects some activity actually in the nature of trade or commerce or manufacture which is done not for sport or pleasure or for charity. Thus, there is little difference between the primary or main part of the definition of "business" and its inclusive part which basically means, as in the present context, any trade or commerce or similar activity and any transaction in connection with, or ancillary or incidental to, such trade or commerce. Process of exchange can be completed by the exchange of goods and services for money. The tribunal has observed-that in the instant case the purchase of exim scrips was by way of exchange of the scrips, which are financial instruments, for· money. Thereafter, the tribunal referred to the meaning of the terms trade and commerce and stated in Black's Law Dictionary and certain other dictionaries includingAiyer's Judicial Dictionary and eventually came to hold as follows:- "Thus, purchase of exim scrips for money, comprising a large volume (at least Rs. 25 crores) is in every sense a "business" within the meaning of Section 2(1 a). That being ' [1995) 98 STC 184 3 31 !i.T.C, 426 (S.C.) ' 37 !i.T.C, 423 (S.C.) ' 49 S.T.C .. 17 (S.C.)' '38 !i.T.C. 577 (S.C.) 7 AIR 1967 SC 1066 'AIR 1965 SC 531 9 AIR 1970 SC 253 COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA fDIPAK MISRA, J.l so, having carried on such a "business" the applicant bank became a "dealer" under section 2( c ), even apart from the fact that it was already a registered dealer for sale of gold. Since sale of gold has no connection with purchase of exim scrips, the latter transactions cannot be said to be either in connection with or ancillary or incidental to sale of gold. In our view, the purchase of exim scrips was a separate "business" of the applicant bank. A point was argued on behalfofthe bank that it had to undertake this activity under instructions from the Reserve Bank oflndia. The fact that it was so, indicates that it was carried on as a business and with the intention to carry it on as a business". 11. Thereafter, it opined that the SBI is not an ordinary businessman, but it is a body created by an Act. Analysing the statutory scheme and the obligation, it proceeded to state thus: "We have to keep this distinction in mind when we consider whether purchase of exim scrips was done by the bank as a business with the intention to do a business. It is undisputed that not only the bank paid money for purchasing exim scrips but also it made some gain by receiving commission out of the transactions. Even without any commission the activity clearly constitutes a "business". Another question is: when the activity was carried on under the instructions of the Reserve Bank oflndia, can it be said to be a "business"? In the facts of the case, the apparently compulsory nature of purchase of exim scrips was not such as to take it out of the ambit of"business". The bank could not compel any holder of exim scrips to sell the same to it. It was wholly voluntary on the part of a holder to sell scrips to the bank. As soon as a holder exercises his opinion to sell and gives a scrip to the bank, the bank purchases it on payment of money. As already said, the compulsory nature of performance of the duty of purchase of exim scrips emanates from Act of 1955 which created the bank. Unlike any other dealer, the applicant bank could not think of acting beyond the provisions of Act of 1955. That being so, in the special circumstances of the case, the element of compulsion involved in the instruction of the Reserve Bank oflndia is 713 A B c D E F G H 714 A B c D E F G H SUPREME COURT REPORTS [2016] 5 S.C.R. irrelevant. Apart from that aspect, we may refer to the case of Coffee Board v. Commissioner of Commercial Taxes (1988) 70 S.T.C. 162 (S.C.) in which it was held that there was a sale, where the growers of coffee delivered coffee to the Board, though the growers did not actually sell it. It was a sale by operation of law. The imposition of sales tax on such sale of coffee was upheld. From the above points of view we hold that the purchase of exim ·- scrips by the applicant bank were rightly brought to purchase tax under 1941 Act." 12. The said order was challenged before the High Court of Calcutta in a writ petition wherein it was contended that the Bank was not a "dealer" within the meaning of Section 2(c) of the Act in respect of the Exim scrips since it does not and/or did not carry on the business of sale or purchase of such Exim scrips; that in the case at hand it was only a solitary case and that too for a brief period from March 23, 1992 to May 31, 1992 but neither before nor after the said period had any such transaction been entered into which could justify the finding of the tribunal that the assessee-Bank had an intention to carry on business in purchase of Exim scrips and that mere lack of regularity or frequency would not convert a business into non-business and would not make a dealer a non-dealer; that there was 110 material on record to arrive at the conclusion that it was clearly established that the writ petitioner No. I, i.e., the SB!, had the intention to carry on business in purchase ofExim scrips; that even ifthe Bank was to be treated as a dealer, the provisions of Section 4(6)(iii) would have to be related to the business being carried on by the Bank inasmuch as the said provisions would otherwise suffer from vagueness and would expose it to attack on the ground of constitutional validity; that keeping in view the scheme of the Act and the intent and purpose ofrelevant provision, purchase tax could be levied on a dealer only if he carried on business of buying or selling the goods in question; that whatever may be the nature of the transaction, the Bank had only acted as an agent of the RBI in the transaction relating to Exim scrips and would not, therefore, come within the definition of the expression "dealer" as defined in Section 2( c) of the 1941 Act; that the transaction involving the acquisition of Exim scrips by the Bank could not be said to be a case of purchase but a case of surrender; that the Exim scrip was in substance a licence or a grant from the Sovereign and COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA fDIPAK MISRA, J.l there could not be any sale of such Exim scrips to the Sovereign and accordingly, when the holder of the Exim scrips gives up his right in favour of the granter it is an act of surrender and nothing else; that SBI had merely acted as an agent of the Sovereign, namely, the department of the Central Government which had issued the Exim scrips, that is, the Joint Chief Controller oflmport and Export and under the instruction of the RBI and once the said Exim scrips were surrendered by the holders, the same were required to be cancelled and forwarded to the office of the Joint Chief Controller oflmport and Exp01ts who had originally issued the same and in effect the grant under the Exim scrips would, upon cancellation by the Bank, cease to exist, which state of affairs is consistent with the concept of surrender and it was not intended that upon acquisition of the Exim scrips from their holders, the same would be utilised by the Bank for the purpose of either selling the same or using the same for the purpose for which they had been intended. Be it noted learned counsel for the Bank placed reliance on the decisions in Raipur Mm11ift1cturillg Co. Ltd. (supra), Board of ~eve1111e v. A.M.A11sari1° and Bi//io11 Plastics Pvt. Ltd. (supra). 13. Learned counsel for the Commercial Tax Officer, resisting the submissions of the learned counsel for the Bank contended that the controversy raised by the bank having set at rest by the three-Judge Bench in Vik as Sales Corporatio11 (supra), wherein the Supreme Court had given stamp of approval to the decision in P.S. Apparels v. Deputy Commercial T the designated branch in the form prescribed 717 A· B c D E F G H 718 SUPREME COURT REPORTS [2016] 5 S.C.R. A by the State Bank of India. B c D E F G H b) State Bank of India would, incorporate, in consultation with their legal depaitment, a suitable indemnity clause in the application fonn to be submitted by the holder of the scrip. c) As the scrip is transferred by a letter, State Bank of India would verify the letter in favour of the holder presenting the scrip and would then make payment on the basis of usual banking procedures adopted for identification of the person to whom payment is made. d) The payment would be rounded off to the nearest rupee and would be made only by means of a Crossed Banker's Cheque. The term ·Exim Scrip' would also cover post paid REP licenses issued up to 291h February 1999 of export proceeds. e) State Bank oflndia, Bombay Main Branch, would airnnge to get daily details of scrips paid by their various designated branches and then seek rei1nbursement, on a consolidated basis, daily from Reserve Bank of India, Bombay on the basis of a ce11ificate indicating the total amount paid by them. f) Designated Branches of SBI would maintain the particulars of scrips paid including the application forms for such period as may be considered necessary. Bombay main branch would maintain the particulars of payments made by their various designated offices on the strength of which reimbursement was claimed by them from RBI, Bombay. g) The paid scrips would be suitably cancelled and forwarded to the concerned office of J.C.C.I. & E. which had issued the scrips. In the case of scrips of face value up to Rs.5 lakhs, the concerned office of J.C.C.I. & E. should also be asked to conduct a check about genuineness of the scrips cancelled by SBI and report objections. if any, in regard to payments to the concerned designated office ofSBI. h) If in the case of any scrip of the face value up to Rs. 5 COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA [DIPAK MISRA, J.] lakhs (which is paid without prior check by the office of J.C.C.I. & E.), it later turns out that the scrip was not genuine or not validly issued etc., the matter would have to be pursued by the office of the J.C.C.I. & E. SBI will, however, render whatever assistance is necessary to tract the party to whom payment has been made. i) SBI would be acting on behalf of the Reserve Bank of India and would be paid commission at the rate at which commission is P.ayable to them for conducting Government business. They would also be paid out-of-pocket expenses including expenses incurred on advertisements notifying designated branches. 2. As desired by you, we have also advised the Chief Controller oflmports & Exp011s to instruct all his regional offices to render necessary assistance to designated branches ofSBI for a smooth implementation of the scheme. He has also been advised to instruct his regional offices in particular that they should promptly (say, within 48 hours) furnish authentication of scrips of face value above Rs. 5 lakhs sent to them and their findings of the check done ·of scrips up to the face value of Rs. 5 lakhs paid without any prior authentication. He has also been requested to advise J.C.C.I. & E., Bombay, to assist you with a check list containing impo11ant features of the Exim Sc1'ip to check their genuineness." [Emphasis added] 719 A B c D E 17. The aforesaid, as is manifest, authorises the SBI to purchase F the Exim scrips as an agent of RBI and after payment of the preni.ium at 20% of the value to the holder, the scrip was to be cancelled. Certain formalities were stipulated to be complied by the holder as well as by SBI. 18. Section 2(la) of the Act defines "'business'' as follows:- G ·'business" includes- (i) any trade, commerce or manufacture or execution of work contract or any adventure or concern in the nature of trade, commerce or manufacture or execution of works H 720 A B SUPREME COURT REPORTS [2016) 5 S.C.R. contract, whether or not such trade, commerce, manufacture, execution of works contract, adventure or concern is carried on with the motive to make profit and whether or not any profit accrues from such trade, commerce, manufacture, execution of works contract, adventure or concern; and (ii) any transaction in connection with, or ancillary or incidental to, such trade, commerce, manufacture, execution of works contract, adventure or concern;" 19. The term ''dealer" has been defined under Section 2(iv)(c ), C which reads thus:- ""dealer" means any person who carries on the business of selling goods in West Bengal or of purchasing goods in West Bengal in specified circumstances or any person making a sale under Section 60 and includes - D the Central or a State Government, a local authority, a statutory body, a trust or other body corporate which, or a liquidator or receiver appointed by a Court in respect of a person defined as a dealer under this clause who, whether or not in the course of business sells, supplies or distributes E directly or otherwise, for cash or for deferred payment or for commission, remuneration or other valuable consideration. F G H Explanation I. - A co-operative society or a club or any association which sells goods to its members is a dealer. Explanation 2. -A factor, a broker, a commission agent, a del credere agent, an auctioneer, an agent for handling or transporting of goods or handling of document of title to goods or any other mercantile agent, by whatever name called, and whether of the same description as herein before mentioned or not, who carries on the business of selling goods and who has. in the customary course of business, authority to sell goods belonging to principals is a dealer;" 20. Section 2( d) of the Act defines ''goods" as follows:- ""goods" includes all kinds of movable property other than COMMERCIAL TAX OFFICER v. STATE BANK OF INDIA 721 rmPAK MISRA, J.l actionable claims, stocks, shares or securities" A 21. Section 4 of the Act deals with incidence of taxation. Subsection ( 6) of Section 4 of the Act is as follows:- "( 6) Every dealer, who has become liable to pay tax under sub-section (I) or sub-section (2) or sub-section ( 4) of this section or sub-section (3) of section 8 and is registered underthis Act, shall, in addition to the tax referred to therein, be also liable to pay tax under this Act on all his purchases from- (i) a dealer who is not registered under this Act, of goods other than [gold, rice (Oryza sativa L.) and wheat (Triticcum Vulgare, T. compactum. T. sphaerococcum, T. durum, T. aestivum L., T. dicoccum)], intended for direct use in the manufacture in West Bengal of goods for sale, and of containers and other materials for the packing of goods so purchased or manufactured; (ii) a registered dealer, to whom a declaration referred to in the proviso to clause (bb) of sub-section (I) of section 5 has been or will be furnished by him in respect of sales referred to in sub-clause (i) or sub-clause (ii) of the said clause, of goods purchased against such declaration, and used by him directly in the manufacture in West Bengal, of goods or in the packing of such goods, when such manufactured goods are transferred by him to a place outside West Bengal or disposed of by him.