# VIKAS SALES CORPORATION AND ANR. ETC. ETC v. COMMISSIONER OF COMMERCIAL TAXES AND ANR. ETC. ETC

- **Citation:** [1996] Supp. 2 S.C.R. 204
- **Court:** Supreme Court of India
- **Decided:** 1996-05-01
- **Bench:** Am. Ahmadi C.J, B.P. Jeevan Reddy, Suhas C. Sen Jj
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/vikas-sales-corporation-and-anr-etc-etc-v-commissioner-of-commercial-taxes-and-14270
- **Pages:** 26

## Headnote

Impon and Exports (Control) Act, 1947, Jmpons (Control) Order
C
1955-lssuance of "replenishment licences" (R.E.P. Licences}, Exim Scrips
for impo1t of goods-Licences made freely transferabl,,_Sold for profits by
holders-Sale subject to sales tax.
Kamataka Sales Tax Act, 1957-Section 5( 1), 2(m)-Sales tax imposed
on sale of R.E.P. Licences/Exim Scrips-Unclassified goods-Validiry of taxD Held, valid.
Definition of 'goods'-Nature and character of R.E.P. Licences--
Whether fall within definition-Held, yes.
Constitution of India-Entry 54 List JI, and Entry 92-A List I-Seventh
E Schedul,,_Scope of the two entries-lnterpretatiolt-Meaning of goods--
Whether competing entries-Held no.
Anicle 366 clause ( 12), clause (29 A)--Definition of 'goods' -Tax on
the sale or purchase of goods--Expansive meaning to be given.
F
Doctrine of pith and substanc,,_Applicability of
Sale of Goods Act, 193()-Section 2 clause (7), clause (11)--Definition
of goods-Moveable property-Wide interpretation-Giving of-Actionable
claims and money discussed.
G
The General Clauses Act, 1897--Definition of "moveable properly"
discussed.
The Central Sales Tax Act, 1956-Section 2(d)--Definition of goods
discussed.
H
The Tamil Nadu Sales Tax Act, 195'}-Section 2(j)-Definition of
204
VIKAS SALES CORPN. v. COMMR. OF COMMERCIAL TAXES
205
goods discussed-Securities Contracts (Regulation) Act, 1956-Section
2(h )-Definition of "securities" in the context of whether it covers R.E.P.
Licences/Scrips-Discussed.
Words and Phrases1'goods" and prope1tyH nzeaning of-In the context
of the question whether R.E.P. Licences fall within the definition of goods
under the va1ious sales tax legislations.
Under the imports (Control)Order, 1955, the Central Government issued "replenishment licences" (R.E.P. Licences)/Exim Scrips for import of
essential inputs required for manufacture of the products exported. These
licences were made freely transferable without requiring any endorsement or
permission from the licensing authority. A letter from the transferor recording
and evidencing the transfer, entitled the transferee to become the la,,ful holder
of the licence and to import goods. These licences were being sold to others for
profit and were being traded freely in the market and on stock exchanges.
A
B
c
The sales tax authorities of certain States proceeded to subject such D
sales to sales tax under their respective enactments. The assessees challenged the imposition of tax contending that the R.E.P. licences did not
constitute "goods" within the meaning of the relevant sales tax enactments
and therefore their sale could not be taxed. The Karnataka High Court
held that the import licence falls within the definition of "goods" under the
Sales Tax Act and the price received by the transferor is liable to sales tax. E
The Madras High Court took the same view. A number of appeals were
preferred against the decisions. Also writ petitions were directly filed by
some assessees before this Court.
The main contention before this Court was that the import licences
are not goods or property; and that they represent merely a permission to
import goods which can be revoked at any time by the licensing authority
and were therefore, in the nature of shares and securities which have been
specifically exclude.d from the definition of "goods" in the relevant enactments.
Dismissing the appeals and writ petitions, this Court
HELD : 1. The definition of goods in the sales tax enactments does
exclude securities, but the R.E.P. Licences/Scrips are not securities. The
contention that the licences/scrips constitute securities within the meaning
F
G.
of Clause (h) of Section 2 of the securities Contracts (Regulation) Act, H
206
SUPREME COURT REPORTS [ 1996) SUPP. 2 S.C.R.
A
1956 and therefore stand excluded from the definition of "goods" contained
in Tamil Nadu, Kerala and Karnataka Sales Tax Acts as well as Central
Sales Tax Act is misconceived. The definition of "goods" in these Sales Tax
enactments does exclude s

## Text

_Characters 0–39,941 of 60,806. This is a partial read: ask again with offset=39941 for what follows._

A
VIKAS SALES CORPORATION AND ANR. ETC. ETC.
B
v.
COMMISSIONER OF COMMERCIAL TAXES
AND ANR. ETC. ETC.
MAY 1, 1996
(AM. AHMADI C.J., B.P. JEEVAN REDDY
AND SUHAS C. SEN JJ.J
Impon and Exports (Control) Act, 1947, Jmpons (Control) Order
C
1955-lssuance of "replenishment licences" (R.E.P. Licences}, Exim Scrips
for impo1t of goods-Licences made freely transferabl,,_Sold for profits by
holders-Sale subject to sales tax.
Kamataka Sales Tax Act, 1957-Section 5( 1), 2(m)-Sales tax imposed
on sale of R.E.P. Licences/Exim Scrips-Unclassified goods-Validiry of taxD Held, valid.
Definition of 'goods'-Nature and character of R.E.P. Licences--
Whether fall within definition-Held, yes.
Constitution of India-Entry 54 List JI, and Entry 92-A List I-Seventh
E Schedul,,_Scope of the two entries-lnterpretatiolt-Meaning of goods--
Whether competing entries-Held no.
Anicle 366 clause ( 12), clause (29 A)--Definition of 'goods' -Tax on
the sale or purchase of goods--Expansive meaning to be given.
F
Doctrine of pith and substanc,,_Applicability of
Sale of Goods Act, 193()-Section 2 clause (7), clause (11)--Definition
of goods-Moveable property-Wide interpretation-Giving of-Actionable
claims and money discussed.
G
The General Clauses Act, 1897--Definition of "moveable properly"
discussed.
The Central Sales Tax Act, 1956-Section 2(d)--Definition of goods
discussed.
H
The Tamil Nadu Sales Tax Act, 195'}-Section 2(j)-Definition of
204
VIKAS SALES CORPN. v. COMMR. OF COMMERCIAL TAXES
205
goods discussed-Securities Contracts (Regulation) Act, 1956-Section
2(h )-Definition of "securities" in the context of whether it covers R.E.P.
Licences/Scrips-Discussed.
Words and Phrases1'goods" and prope1tyH nzeaning of-In the context
of the question whether R.E.P. Licences fall within the definition of goods
under the va1ious sales tax legislations.
Under the imports (Control)Order, 1955, the Central Government issued "replenishment licences" (R.E.P. Licences)/Exim Scrips for import of
essential inputs required for manufacture of the products exported. These
licences were made freely transferable without requiring any endorsement or
permission from the licensing authority. A letter from the transferor recording
and evidencing the transfer, entitled the transferee to become the la,,ful holder
of the licence and to import goods. These licences were being sold to others for
profit and were being traded freely in the market and on stock exchanges.
A
B
c
The sales tax authorities of certain States proceeded to subject such D
sales to sales tax under their respective enactments. The assessees challenged the imposition of tax contending that the R.E.P. licences did not
constitute "goods" within the meaning of the relevant sales tax enactments
and therefore their sale could not be taxed. The Karnataka High Court
held that the import licence falls within the definition of "goods" under the
Sales Tax Act and the price received by the transferor is liable to sales tax. E
The Madras High Court took the same view. A number of appeals were
preferred against the decisions. Also writ petitions were directly filed by
some assessees before this Court.
The main contention before this Court was that the import licences
are not goods or property; and that they represent merely a permission to
import goods which can be revoked at any time by the licensing authority
and were therefore, in the nature of shares and securities which have been
specifically exclude.d from the definition of "goods" in the relevant enactments.
Dismissing the appeals and writ petitions, this Court
HELD : 1. The definition of goods in the sales tax enactments does
exclude securities, but the R.E.P. Licences/Scrips are not securities. The
contention that the licences/scrips constitute securities within the meaning
F
G.
of Clause (h) of Section 2 of the securities Contracts (Regulation) Act, H
206
SUPREME COURT REPORTS [ 1996) SUPP. 2 S.C.R.
A
1956 and therefore stand excluded from the definition of "goods" contained
in Tamil Nadu, Kerala and Karnataka Sales Tax Acts as well as Central
Sales Tax Act is misconceived. The definition of "goods" in these Sales Tax
enactments does exclude securities but these licences/scrips do not fall
within the definition of securities under the Securities Contracts (RegulaB
c
tion) Act, 1956 for the relevant period which includes shares, scrips,
stocks, bonds, debenture stock or other marketable securities in or of any
incorporated company or other body corporate, Government securities
and rights or interests in securities and are not securities. [228-D-F]
2. The state sales tax acts had been enacted under entry 54 in List
II of the Seventh Schedule of the Constitution which is a legislative head
and is to be construed liberally. Giving full effect to entry 54 does not in
any way curtail entry 92-A in List I covering inter-state trade or commerce.
Entry 54 in List-II of the Seventh Schedule to the Constitution of India
empowers the State Legislatures to make laws with respect to "taxes on the
D sale or purchase of goods other than newspapers subject to the provisions
of Entry 92-A of List-I". Entry 92-A of List-I speaks of "taxes on the sale
or purchase of goods other than news papers, where such sale or purchase
takes place in the course of inter-State trade or commerce". The Karnataka, Tamil Nadu and Kerala Sales Tax Acts are referable to Entry 54,
E
F
while Central Sales Tax Act, 1956 is referable to Entry 92-A. These entries
empower the State Legislatures and the Parliament respectively to levy
sales tax on sale or purchase of goods with the differnce that if it is
intra-State sale, it is the State Legislature which is competent to levy tax,
whereas in the case of inter-State sale, it is the Parliament alone that can
levy tax. Entry 54 in List-II with which this Court is immediately concerned in these matters, is a legislative head. Being a legislative head, it
must be construed liberally and not narrowly. [212-H, 213-A-B]
3.1. The definition of "goods" in Article 366 clauses (12) and (29A)
of the Constitution, Clause (7) in Section 2 of the Sale of Goods Act, 1930,
Section 2(d) of the Central Sales Tax Act, 1956, Clause (j) of Section 2 of
G the Tamil Nadu Sales Tax Act, 1959. The Karnataka Sales Tax Act, 1957
and the Kerala General Sales Tax Act are quite wife and include all kinds
of moveable property. [222-H, 223-A]
3.2. Clause (d) of clause (29 A) of Article 366 of the Constitution
H
provides that even where a right to use any goods is transferable for cash,
VJKAS SALES CORPN. v. COMMR. OF COMMERCIAL TAXES
207
deferred payment or other valuable consideration, it \\ill be a sale or A
purchase of goods for the purpose of the Constitution. Clause (7) in
Section 2 of the Sale of Goods Act, 1930 delines the expression "goods" thus
"goods" means every kind of movable property other than actionable claims
and money and includes stock and shares, growing crops, grass, and things
attached to or forming part of the land which are agreed to be severed
before sale or under the contract of sale." [214-E-FJ
4. The meaning of property and moveable property in various legal
dictionaries shows the expansive manner in 'vhich the expression property
B
is understood and includes things and rights considered as having a
n1oney value. Incorporeal things rights like trade niarks, cop)Tights, C
patents and rights in personal capable of transfer or trans1nission, such
as debts, are also included in its ambit. [220-C, A]
Black's law Dictionmy, (6th Edition, 1990); Dictionary of Commercial
Law, by A.H. Hudson (published by Butterworths, 1983) and Jowitt's
Dictionwy of English Law, (Sweet & Maxwell Limited, 1977) Volume 1, D
referred to.
5. The provisions of the Import-Export Policy' under which the R.E.P.
Licences/Exim Scrips have been granted, establish that the licences have
their omt value. They are bought _and sold as such. The original licensee or E
purchaser is not bound to import the goods permissible thereunder. He can
simply sell it to another and that another to yet another person. In other
\Vords, these licences/Exim Scrip have an inherent value of their. own and
are traded as such. They are treated and dealt with in the commercial world
as n1erchandise, as goods. A
.. R.E.P. Licence/Exim Scrip is neither a chosein-action nor an actionable claim. It is also not in the nature of a title deed.
F
It has a value of its own. It is by itself a property· and it is for this reason
that it is freely bought and sold in the ~1arket. For all purposes and intents,
it is goods. Unr..:lated to the goods which can be imported on its basis, it
com1nands a value and is traded as such. [222-A.-C]
6.1. The content or R.E.P. Licenses/Exim Scrips is far more substantial and real than that of a lottery ticket. If lottery tickets are goods, there
G
is no reason \vhy these licences/scrips are not goods. When these licences/scrips are being bought and sold freely in the market as go<>Js and
\\'hen they have a value of their o\m unrelated to the goods which can be
imported thereunder, it is idle to contend that they are in the nature of H
208
SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.
A
actionable claims. [223-H; 224-A; F]
B
6.2.The fact that the licensing authority can cancel a licence has no
relevance and does not affect the inherent value of the licences. The
licences have a value of their O\Vll and the contention that the question of
tax wiII only arise at the time of transfer of actual goods imported on the
licence and not at the time of transfer of documents \\ill have to be rejected.
H. Anraj Etc. v. Govemmcnt of Tamil Nadu Etc., [1985] Suppl. 3
S.C.R. 342, relied on.
C
State of Olissa & Ors. v. Titaghur Paper Mills Company Limited & Anr.,
(1985] Suppl. SCC 280; Juint Chief Controller of lmpmts and Etpmts v.
Aminchand Mutha, [1966] I S.C.R. 262 and 5. Chandra Sekharan & Ors. v.
<iDl'l.!171111ent of Tamil Nadu & 01:1·., [1974] 2 sec 196, held inapplicable.
Slate of Madras v. Gannon Dunkerley & Co. (Madras) ltd., [1959]
D S.C.R. 379, referred to.
Frank Wmr & Co. v. London Coun(V Council, [1904] 1 K.B. 713,
referred to.
E
7. Enactments levying sales tax on sale/purchase of REP Licences are
in pith and substance referable to entry 54 - List II and not entry 41 · List I
of the Seventh Schedule to the Constitution dealing mth customs duties. TI1e
contention that R.E.P. Licences/Exim Scrips are incentives granted by the
L1nion of India as concessions from customs and that this is a matter \rhich
comes Hithin the exclusive competence of the Union Legislature under Entry
F
41 in List-I of the Seventh Schedule to the Constitution of India and that,
therefore, the State Legislature has no poll'er to levy sales tax upon their
sale/tJL•rchase is without any substance. Applying the rule of pith and substance, it 1nust be held that the enactn1ents in question are referable to Entry
54 ' List-II and not to Entry 41 in List-I. The State Legislatures are not
G seeking to make a law \vith respect to custon1 duties. They are seeking only
to levy taxes upon the sale of goods. [227-G-H; 228-A-B]
A.S. 10ishnan v. State of Madras, [1957] S.C.R. 399, referred to.
CIVIL APPELLATE/ORIGINAL JURISDICTION : Civil Appeal
H Nos. 7771-75 of t996 Etc. Etc.
VIKAS SALES CORPN. '· COMMR. OF COMMERCIAL TAXES [JEEV AN REDDY, J.] 209
From the Judgment and Order dated 26.6.92 of the Karnataka High A
Court in W.A. Nos. 269 to 273 of 1992.
M. Chandrashekharan, Solicitor General, Joseph Vellapally, C.S.
Vaidyanathan, K.K. Venugopal, A.K. Ganguly, R. Mohan, Sr. Advs., R.V.
Prasad, Vineet Kumar, Ms. Meenakashi Sakhardande, N.M. Sakhardande,
Vineet Kumar, K.M. Vijayan, Shiv Ram, K.V. Mohan, Ms. Neeta Agarwal,
L.K. Pandey, S. Nandan Kumar, V.N. Raghupathy, (D.N. Mishra) Adv. for
JBD & Co., Ms. Manjula Kulkarni, Kh. Nobin Singh, M. Veerappa, Mrs.
Aruna Mathur, A Mariarputham for Arputham Aruna & Co., S.C. Birla,
Ms. Sheil Sethi, R.L. Ramani, R.J. Chandran, K.K. Mani, A.T.M. Sampath,
V. Balaji, P.N. Ramalingam, V.G. Pragasam, R. Nedumaran, T. Harish
Kumar, T. Pramod Chepda, V. Krishnamurthy, K. J. Johan, P. Venugopal,
K. V. Vijayakumar, K. Swami, S. Muralidhar, P. Mahale and Rajeev Kumar
·Singh for the appearing parties.
The Judgment of the Court was delivered by
B.P. JEEV AN REDDY, J. Leave granted in Special Leave Petitions.
This batch of appeals and writ petitions raise the question - whether
the tranfer of an lmport Licence called R.E.P. Licence/Exim Scrip by the
holder thereof to another person constitutes a sale of goods within the
meaning of and for the purposes of the Sales Tax enactments of Tamil
Nadu, Karnataka and Kerala. If it does, it is exigible to sales tax. Otherwise
not. The Karnataka and Madras High Courts have taken the view that
R.E.P. Licences/Exim Scrips constitute goods and, therefore, on their
transfer, sales tax is leviable. Their judgment appears to be influenced
mainly by the decision of this Court in H. Anraj Etc. v. Government of Tamil
Nadu Etc., [1985] Suppl. (3) S.C.R. 342.
B
c
D
E
F
2. With a view to conserve precious foreign exchange and to channelise the nation's economy on desired lines, the Central Legislature
enacted the Imports and Exports (Control) Act in 1947. Section 3 empowers the Central Government to make provisions by order published in G
the official gazette for prohibiting, restricting or otherwise controlling the
import into and export of the goods from the country. The expression
1'licence'
1 is defined in clause (i) of Section 2 to mean, a licence granted,
including a customs clearance permit issued, under any control order.
Pursuant to Section 3 and Section 4(a) of the said Act, the Central H
A
B
c
D
E
F
210
SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.
Government issued the Imports (Control) Order, 1955. Clause (3)(i) of the
Order provides that "save as otherwise provided in this Order, no person
shall import any goods of the description specified in Schedule I except
under and in accordance with a licence of a customs clearance permit
granted by the Central Government or by any Officer specified in Schedule
1
II". The Order contains elaborate provisions governing the grant and
cancellation of licences and conditions subject to which the licences have
to be operated.
3. The Central Government has been issuing, from time to time, what
is called the Import and Export Policy, published in the form of a brochure.
The Import Policy in vogue during the years concerned herein provided
for issuance of what is called "replenishment licences" (for short "R.E.P.
Licences"). The objective behind the licences was to provide to the
registered exporters the facility of importing the essential inputs required
for the manufacture of the products exported. The essential idea was to
encourage exports and for that purpose import licences called R.E.P.
Licences wore issued equal to the prescribed percentage of the value of
exports. These licences were made freely transferable. It was provided that
the transfer such licences did not require any endorsement or permission
from the licencing authority. It was clarified that such would be "governed
by the ordinary law". It only required a letter from the transferor recording
and evidencing the transfer. On that basis, the transferee became the due
and lawful holder of the licence and could either import the goods permitted thereunder or sell it to another in turn.
4. With effect from July 3, 1991, the name of the licence was changed
to Exim Scrip (Export-Import Licence). The provisions governing the Exim
Scrip were broadly the same as those governing the R.E.P. Licence with
certain minor variations, which are not relevant for our purposes.
5. Several registered exporters who obtained R.E.P. licences/Exim
Scrips sold them to others for profit. In fact, these licences/Exim Scrips
G were being traded freely in the market and on stock exchanges. The sales
tax authorities of certain States proceeded to subject such sales to sales tax
under their respective enactments. The assessees immediately protested
contending that these licenccs/Exim Scrips do not constitute ;•goods'' within
the meaning of the relevant sales tax enactments and, therefore, not
H
exigible to tax. The matter came up for consideration in the first instance
VIKASSALES CORPN. '· COMMR. OF COMMERCIAL TAXES (JEEVAN REDDY, J.l 211
before a learned Single Judge of the Karnataka High Court in Bharat Fritz A
Wemer Ltd. v. Commissioner of Commercial Taxes, (1992) 86 S.T.C. 170. It
was a writ petition challenging the validity of a circular issued by the
Commissioner of Commercial Taxes, Karnataka, stating that whenever an
Import Licence is transferred, it attracts tax under Section 5(1) of the
Karnataka Sales Tax Act, 1957 as unclassified goods at the rate of seven
percent and directing the assessing authorities and other concerned
authorities to levy tax accordingly. The learned Judge considered the
definition of "goods" in Section 2(m) of the Karnataka Act and held
following Anraj that having regard to the nature and character of the said
licences and their free transferability, they constitute goods, the sale
whereof is subject to sales tax. The learned Judge rejected the argument
that the said licences are in the nature of actionable claims. He held: "the
B
c
import licence not merely enables a person the right of indulging in a
business of importing goods but it also excludes competition. Therefore, it
cannot be said that it is only a beneficial interest in respect of a movable
property not in possession of the person but is itself a valuable right which, D
according to the petitioners themselves, is freely transferable. The import
licence therefore must be treated as merchandise for the purposes of the
Act and clearly falls within the definition of 'goods'". The learned Judge
further held that the right under this licence is, infact, more concrete and
substantial than the right under a lottery ticket considered in Anraj. On
appeal, a Division Bench of the Karnataka High Court affirmed the judgE
ment of the learned Single Judge. The Division Bench too relied upon the
ratio of Anraj and dismissed the appeal in the following words :
"In the instant case, the transfer of R.E.P. Licences confer upon
the transferee the immediate right to clear goods covered by the
1icences at the Customs barrier. This is not an inchoate or incomplete right. It cannot be held to materialise in future because its
exercise is dependent upon the transferee buying goods covered
by the licence and bringing them to Indian shores. Nor can R.E.P.
licences be held to be actionable claims because the Customs
authorities might not clear the goods and the transferee would have
to commence an action against them in a Court of La\V. In our
view, the transfer of an R.E.P. licence confers upon the transferee
a right which is choate and perfected and exercisable immediately
he presents to the Customs barrier goods of the nature covered
F
G
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H
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212
SUPREME COURT REPORTS (1996) SUPP. 2 S.C.R.
It must, therefore, follow that R.E.P. licences are goods within the
meaning of the said Act and the premium or price received by the
transferor thereof is liable to sales tax thereunder."
7. A Division Bench of the Madras High Court has also taken the
same view in P.S. Apparels v. Deputy Commercial Tax Officer, T. Nagar,
disposed of on April 4, 1994. Under the said judgment, a large number of
writ petitions were disposed of.
8. Number of appeals have been preferred by the assessees against
the decisions of Karnataka and Madras High Courts, while a number of
other assessees have approached directly by way of petitions under Article
32 of the Constitution of India, raising identical questions.
9. The main contention of the learned counsel for appellants/petitioners, S/Sri K.K. Venugopal, Joseph Vellapally, Vaidyananthan
and K.V. "1.ohan, is that these licences/scrips are not goods; they are not
D property; they represent merely a permission to import goods, which
permission can be revoked at any time by the licencing authority; they are
really in the nature of shares securities which have been expressly excluded
from the definition of "goods" in the relevant enactments. The expression
"goods" has been understood by this Court in State of Madras v. Gannon
E
Dunkerley & Co. (Madras) Ltd., [1959] S.C.R. 379 in the sense it is defined
in the sale of Goods Act and the said definition cannot and does not
comprehend the licences of the nature concerned here.in. The meanings
assigned to the expression '
1licence
11 and
11goodsn in various law dictionaries
have been brought to our notice, besides several decisions, Indian and
English, by the learned counsel. On the basis of the said material, it is
F
argued that property is a bundle of rights but every strand in that bundle
does not by itself constitute property. On the other hand, Sri A.K. Ganguly
and Sri Chandrasekharan, learned Additional Solicitor General, supported
the reasoning and conclusion arrived at by Karnataka and Madras High
G
Courts and commended it for our acceptance.
11. Entry 54 in List-II of the Seventh Schedule to the Constitution of
India empowers the Stale Legislatures to make laws with respect to "taxes
on the sale or purchase of goods other than newspapers subject to the
provisions of Entry 92- A of List-I". Entry 92-A of List-I speaks of "taxes
on the sale or purchase of goods other than newspapers, where such sale
H
or purchase takes place in the course of inter·State trade or commcrce
1
'.
-
VIKAS SALES CORPN. v. COJ\1~1R. OF COM]\lERCIAL TAXES [JEE.VAN REDDY. J.] 213
The Karnataka, Tamil Nadu and Kerala Sales Tax Acts are referrable to A
Entry 54, while Central Sales Tax Act, 1956 is referrable to Entry 92-A.
These entries empower the State Legislatures and the Parliament respectively to levy sales tax on sale or ,purchase of goods with the difference that
if it is a intra-State sale, it is the State Legislature which is competent to
levy the tax, whereas in the case of inter-State sale, it is the Parliament
alone that can levy tax. Entry 54 in List-II, which is the one we are
immediately concerned with in these matters, is a legislative head, a head
of legislation. Being a legislative head, it must be construed liberally and
not narrowly. There appears no reason why Entry 54 should not be given
its full and due meaning and content. By giving full effect to Entry 54 in
List-II, the field and content of Entry 92-A in List 1 is in no way affected
or curtailed. So far as the n1caning of the expression
11goods'
1 is concerned,
these two entries cannot be called co1npeting entries. There is no overlapping between them. The meaning given lo the said expression in Entry 54
B
c
in List-II can equally be attributed to the said e'']lression in Entry 92A in
List-I. This is a consideration which must certainly weigh with the Court D
in approaching the question at issue herein.
12. Clause (12) in Article 366 of the Constitution defines the expression
11goods" in the following words:
1ugoods' includes all materials, commodities and articles". Clause (29A) in Article 366, as amended by the forty
sixth Amend1nent Act, defines the expression
11tax on the sale or purchase E
of goods" in the following words:
(29A). ''Tax on the sale or purchase of goods" includes -
(a) a ta"( on the transfer, otherwise than in pursuance of a contract,
of property in any goods for cash, deferred payment or other
F
valuable consideration;
(b) a tax on the transfer of property in goods (whether as goods
or in some other form) involved in the execution of a works
contract;
( c) a tax on the delivery of goods on hire-purchase or any system
of payment by instalments;
G
( d) a tax on the transfer of the right to use any goods for any
purpose (whether or not for a specified period) for cash, deferred H
A
B
c
D
E
F
G
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SUPREME COURT REPORTS [1996] SUPP. 2S.C.R.
payment or other valuable consideration;
( e) a tax on the supply of goods by any unincorporated association
or body of persons to a member thereof for cash, deferred payment
or other valuable consideration;
(l) a tax on the supply, by way of or as part of any service or in
any other manner whatsoever of goods, being food or any other
article for human consumption or any drink (whether or not
intoxicating), where such supply or service, is for cash, deferred
payment or nther valuable consideration;
and such transfer, delivery or supply of any goods shall be deemed
to be a sale of those goods by the person making the transfer,
delivery or supply and a purchase of those goods by the person to
\Vho111 such transfer, delivery or supply is made.''
The definition in clause (29A) was inserted by the forty sixth Amendment
Act \Vith a vic\V to give an expansive meaning to the \Vords "tax on the sale
or purchase of goods". Clauses (c) and (d) in this definition arc relevant
to the present controversy. Clause ( d) provides that even where a right to
use any goods is transferable for cash, deferred payment or other valuable
consideration, it will be a sale or purchase of goods for the purpose of the
Constitution.
13. Clause (7) in Section 2 of the Sale of Goods Act, 1930 defines
the expression "goods" thus: "'goods' means eve1y kind of nzvvable prope1ty
other than actionable claims and money; and includes stock and shares,
grov,ring crops, grass, and things attached to or forn1ing part of the land
\vhich arc agreed to be severed before sale or under the contract of sale
11
(Emphasis added). Since the said definition defines the "goods" to mean,
'
1every kind of movable property other than actionable claims and monci\
it would be appropriate to notice the definition of "property" in Clause (11).
It reads : "'property' means the general property in goods, and not merely
a special property". It is noteworthy that both these definitions seek to
spread the net as wide as possible. While the definition of goods includes
every kind of movable properly within its ambit, the definition of property
says that it inclndcs not merely special property, but general property in
H
guuds as wdl.
VIKAS SALES CORPN. "· COMMR OF COMMERCIAL TAXES [JEEVAN REDDY,J.J 215
The General Clauses Act, 1897 defines "movable property" to mean
"property of every description except immovable property". The expression
"immovable property" is defined to "include land, benefits to arise out of
land and things attached to the earth or permanently fastened to anything
attached to the earth". The definitions in Karnataka, Tamil Nadu and
Kerala General Clauses Acts are identically worded. Jn the absence of
de.finition of the expression in the Sales Tax enactn1ents, the definitions in
the respective General Clauses Acts become applicable. None of these Act,
it may be mentioned) defines the expression
11property
11
•
14. The Central Sales Tax Act, 1956 defines the expression "goods"
A
B
in Clause ( d) of Section 2 in the following words:
C
TT'Goods' includes all niaterials, a1ticles, conimodities and all other
kinds of movable prope1ty, but does not include newspapers, actionable claims, stocks, shares and securities."
What is relevant to note in that this definition is not only inclusive in nature, D
but takes in all kinds of movable property. It excludes from its ambit certain
items, which but for such exclusion, may well have fallen within the ambit
of the said definition.
15. The Tamil Nadu Sales Tax Act, 1959 defines the expression E
"goods" in Clause G) of Section 2 in the following terms :
'"goods' means all kinds of movable property (other than
newspapers, actionable claims, stocks and shares and securities)
and includes all materials, commodities, and articles including the
goods (as goods or in some other form) involved in the execution F
of a works contract or those goods to be used in the fitting out,
improvement or repair of movable property and all growing crops,
grass or things attached to or forming part of the land which are
agreed to the severed before sale or under the contract of sale."
This definition too includes all kinds of movable property within the G
definition of goods while excluding certain specified items, viz.,
newspapers, actionable claims, stocks, shares and securities. Tbe Act does
not define the expression "movable property" which means that the definition in the General Clauses Act has to be adopted for the purposes of the
Tamil Nadu General Sales Tax Act.
H
216
SUPREME COURT REPORTS (1996] SUPP. 2 S.C.R.
A
16. The definition of "goods" in the Karnataka Sales Tax Act, 1957 is
B
c
D
E
no different. It reads :
'"goods' means all kinds of movable property (other than
newspapers, actionable claims, stocks and shares and securities)
and includes live stock, all materials, commodities. and articles
including goods, as goods or in some other form involved in the
execution of a works contract or, those goods to be used in the
fitting out improvement or repair of movable property and all
growing crops, grass or things attached to, or forming part of, the
land which are agreed to be severed before sale or under the
contract or sale."
This Act too does not define the expression "movable property".
17. The definition of "goods" in the Kerala General Sales Tax Act
may now be set out :
'"goods' means all kinds of movable property (other than
newspapers, actionable claims, electricity, stocks and shares and
securities) and includes live-stock, all materials, commodities and
articles (including those to be used in the construction, fitting out,
improvement or repair of immovable property or used in the fitting
out improvement or repair of movable property) and all growing
crops, grass or things attached to, or forming part of the land which
are agreed to be severed before sale or under the contract of sale."
18. Inasmuch as all the aforesaid definitions of the expression "goods"
F
say that it includes all kinds of movable property, it becomes necessary to
notice the meaning of the expression "movable property". Inasmuch as the
Sales Tax enactments do not define the said expression, we have to adopt
the definition in the respective State' General Clauses Act. But these
definitions in the General Clauses Act too are not very helpful. All that
G they say is that movable property means property of every kind except
immovable property. The counsel have accordingly brought to our notice
the several meanings or property and movable property in various legal
dictionaries.
19. In Black's Law Dictionary (6th Edition, 1990), the expression
H
"property" has been given the following meanings :
•
VIKAS SALES CORPN. "· COMMR. OF COMMERCIAL TAXES (JEEVAN REDDY.J.J 217
•
"Property : That which is peculiar or proper to any person; that A
which belongs exclusively to one. In the strict legal sense, an
aggregate of rights which are guaranteed and protected by the
government. Fulton Light, Heat & Power Co. v. State, 65 Misc. Rep.
B
263, 121 N.Y.S. 536. The term is said to extend to every species of
valuable right and interest. More specifically, ownership; the unrestricted and exclusive right to a thing; the right to dispose of a
thing in every legal way, to possess it, to use it, and to exclude
every one else from interfering with it. That dominion or indefmite
right of use or disposition which one may lawfully exercise over
particular things or subjects. The exclusive right of possessing,
enjoying, and disposing of a thing. The highest right of man can
C
have to anything; being used to refer to that right which one has
to lands or tenements, goods or chattels, which no way depends
On another man's courtesy .
The word is also commonly used to denote everything which is
the subject of ownership, corporeal or incorporeal, tangible or D
intangible, visible or invisible, real or personal; everything that has
an exchangeable value or which goes to make up wealth or estate. ·
It extends to every species of valuable right and interest, and
includes real and personal property, easements, franchises, and
incorporeal hereditaments, and includes every invasion of one's
E
property rights by actionable wrong. Labberton v. General Cas. Co.
of America, 53 Wash. 2d 180, 332 p.2d. 250, 252, 254.
Property embraces everything which is or may be the subject
of ownership, whether a legal ownership, or whether beneficial, or
a private ownership. Davis v. Davis. Tax Civ. App., 495 S.W. 2d
607, 611. Term includes not only ownership and possession but
also the right of use and enjoyment of lawful purposes. Hoffmann
v. Kinealy, Mo., 389S.W. 2d. 745, 752.
F
Property, within constitutional protection, denotes group of G
rights inhering in citizen's relation to physical thing, as right to
possess, use and dispose of it. Cereghino v. State By and 17irough
State Highway Commission, 230 Or., 439 370 P.2d 694.697.
Goodwill is property, Howell v. Bowden, Tex Civ App., 368 S. W.
2d 842, 848; as is an insurance policy and rights incident thereto, H
218
SUPREME COURT REPORTS [1996) SUPP. 2 S.C.R.
•
A
including a right to the proceeds, Hanis v. Hanis, 83 N.M. 441,493
P. 2d 407, 408."
B
c
D
E
F
G
H
The Dictionary further says "property is either : real or immovable;
or personal or movable''. It then proce~ds to give the meaning of the
expression ,'absolute property
11
,
11common property\
11intangible property
11 ,
·movable property", "personal property" "private property" and "public
property" among others. The above definition shows the wide meaning·
attached to the expression. It is said to extend to every species of valuable
right and interest. It denotes every thing which is the subject of ownership,
corporeal or incorporeal, tangible or intangible, visible or invisible, real or
personal. It includes "everything that has an extendable value". It extends
to every species of valuable right and interest.
To the same effect is the definition in the Dictionary of Commercial
Law by A.H. Hudson (published by Butterworths, 1983). It reads :
"Property. In commercial law this may carry its ordinary meaning of
the subject matter of ownership, e.g. in bankruptcy referring to the
property of the debtor divisible amongst creditors. But elsewhere as
in sale of goods it may be used as a synonym for ownership and lesser
rights in goods. The Sale of Goods Act, 1979, s.2 (1) makes transfer
of property central to sale. Section 61(1) provides that 'property'
means the general property in goods, and not merely a special
property. 'General Property' is tantamount to ownership bailees
who have possession and not ownership and others with limited
interests are said to have a 'special property' as their interest."
20. Jowitt's Dictionary of English Law (Sweet & Maxwell Limited,
1977) Volume-I also sets out the meaning of the expression "property" as
well as the meaning of the expression "general property" and "special
property". We may set them out :
"Property (Norm. Fr. Proprete; Lat. Proprietas; proprius, one's
own), the highest right a man can have to anything, being that right
which one has to lands or tenements, goods or chattels which does
not depend on another's courtesy.
In its largest sense property signifies things and right considered as having a money value, especially with reference to
•
VJKAS SALES CORPN. "· COMMR OF COMMERCIAL TAXES [JEE YAN REDDY, J.] 219
transfer or succession, and to their capacity of being injured. A
Property includes not only ownership, estates, and interests in
corporeal things, but also rights such as trade marks, copyrights,
patents, and rights in personam capable of transfer or transmission,
such as debts.
Property is of two kinds, real property (q.v.) and personal B
property ( q.v.).
Property in reality is acquired by entry, conveyance, or devise;
and in personality, by many ways, but most usually by gift, bequest,
or sale. Under the Law of Property Act, 1925, S. 205, 'property" C
includes any thing in action and any interest in real or personal
property. There must be a definite interest; a mere expectancy as
distinguished from a conditional interest is not a subject of property.
'Property' also signifies a beneficial right in or to a thing. D
Sometimes the term is used as equivalent to ownership; as where
we speak of the right of property as opposed to the right of
possession ( q.v.), or where we speak of the property in the goods
of a deceased person being vested in his executor. The terms was
chiefly used in this sense with reference to chattels (Finch, Law E
176).
Property in this sense is divided into general and special or
qualified.
General property is that which every absolute owner has (Co. F
Liit. 145b.). See OWNERSHIP,
Special property has two meanings. First, it may mean that the
subject-matter is incapable of being in the absolute ownership of any
person. Thus a man may have a property in deer in a park, hares or
I"dbbits in a warren, fish in a pond, etc.; but it is only a special or G
qualified property, for if at any time they regain their natural liberty
his property instantly ceases, unless they have animus revertendi (2
BL Comm. 391). See ANIMALs FERAE NATURAE .... '
This definition also shows that the expression signifies 'things and rights
considered as having a money value'. Even incorporeal rights like trade H
•. .
A
B
220
SUPREME COURT REPORTS (1996] SUPP. 2 S.C.R.
marh, copyrights, patents and rights in personam capable of transfer or
lnillsmision, such as debts, are also included in its ambit. The meanir:g
given to "general property" and "special property" are self-explanatory and
need no emphasis at our hands. It is worth recalling that movable property
means "property of every description except immovable property" - the
definition in all the General Clauses Acts.
21. The above material uniformly emphasises the expansive manner
in which the expression "property" is understood. Learned counsel for the
petitioners brought to our notice the meanings of the term "property" set
out in Chapter-13, ''The Law of Property", in Salmond's Jurisprudence
C (12th Edition, 1966). In this chapter, several meanings attributed to
"property'' are discussed in extenso, to all of which it may not be necessary
to refer. Suffice to say that property is defined to include material things
and immaterial things (Jura in re prop1ia) and leases, servitudes and
securities etc. (jura in re aliena). The material things are said to comprise
D land and chattels while immaterial things include patents, copyrights and
trade marks, \Vhich along with leases, servitudes and securities are
described as incorporeal property. The expression "movable property" is
stated to include (Page 421) corporeal as well as incorporeal property.
Debts, contracts and other choses-in-action are said to be chattels, no less
than furniture or stock-in-trade. Similarly, patents, copyrights and other
E rights in rem which arc not rights over land are also included within the
meaning of movable property. We are unable to see anything in the said
l'haptcr-13, which militates against the meanings ascribed to the said '
expression in the judicial dictionaries referred to above. Indeed, they are
consistent with each other.
F
22. Learned counsel for the petitioners have brought to our notice
the several meanings of the t:A11re~sion
11licence
1
' in various law dictionaries.
But, as those very dictionaries make it clear, the expression has several
ineanings - an<l one has to chuos.c thi;:; appropriate one depending upon the
context. We do not think it necessary to refer to the material cited by the
G learned counsel for the reason that the character, nature and content of
the licences in question should be ascertained with reference to the law
governing them and not with reference to the general meaning of the
expression "licence". We have already referred to the provisions of the
''Export and Import Policy" governing these licences. We may now refer to
H a few more paragraphs from the "Import and Export Policy" 1990-93,
VIKAS SALES CORPN.