SBI, being an agent of RBI, is not liable to purchase tax for replenishment licences or Exim scrips taken as a participant in the process of cancellation

Supreme Court: Deciding the question as to whether the State Bank of India (SBI) and its branches, which are registered dealers under the Bengal Finance (Sales Tax) Act, 1941 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 of 20 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 18th March, 1992, the bench of Dipak Misra and Shiva Kirti Singh, JJ held the SBI was not liable to levy of purchase tax under the Act.

The Court said that the replenishment 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.However, it was held that the SBI is an agent of the RBI, the principal. 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 “ownership” in the goods was never transferred or assigned to the SBI.

The Court further said 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. [Commercial Tax Officer v. State Bank of India, 2016 SCC OnLine SC 1245 , decided on 08.11.2016]

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