A.S. Venkatachalamoorthy, J.
1. The Textile Commissioner in reference CER/(23) 90-CLB, passed an order dated 29.3.1990, that every mill which produces yarn should produce compulsorily hank yarn to the extent of 50% of the total production for sale in India during each half year. According to the said order, if there is any shortfall, it should be made good before the month succeeding the six months period and that failure to comply with the above order will result in penal action being taken. The said order was in force from 1.4.1990 to 31.3.1995. The order further stipulated that out of 50% of the hank yarn not less than 80% of it shall be counts of 40s and below. Subsequently, the Textile Commissioner issued another notification dated 11.5.1990, according to which, the hank yarn production statement should be submitted for every quarter instead of half year period indicated originally. In this notification, in respect of the producer of yarn, who does not have the reeling capacity to fulfill the obligation, till such time the same is installed by him and becomes operational, the obligation may be fulfilled in either of the following ways, (a) the producer of yarn with written permission of the authority mentioned in the said notification may get the reeling done by another producer having reeling facilities and produce a certificate in the prescribed form to the Textile Commissioner along with the quarterly statement of the period, or (b) the shortfall in respect of one producer of yarn for a particular quarter may be met by another producer after fulfilling his own hank yarn obligations to the satisfaction of the concerned Textile Commissioner and for which a format was prescribed, which has to be signed both by the transferee mill and transferor mill.
2. Coming to the present case, according to the petitioners, the petitioners, after having produced 50% of the hank yarn, transferred the excess quantity in favour of another mill, so that, they can discharge the obligation of the other mills. This mutual agreement was to avoid penal action to be taken by the Textile Commissioner against the transferor mill (buyer) which either did not produce low count hank yarn or produced less than 50% as stipulated in the order of the Textile Commissioner. Thus, there was only a transfer of obligation and there was no sale of hank yarn as such to the obligor mill. When the petitioners/assessees produced more than 50% of the production in the form of hank yarn for sale in India, in order to discharge the obligation by the obligor mill, a joint application signed was submitted before the Textile Commissioner in the context of excess production. The amount/premium received per Kg of the obligation discharged for the obligor mill is merely to extinguish an obligation of the obligor mill and not for any transfer of property either tangible or intangible. According to the petitioners, no contract of sale is involved for transfer of property to the obligor mill and that the premium received cannot be equated with the premium of transfer of right pertaining to REP Licence or exim scrips considered by the Supreme Court in Vikas Sales Corporation v. Commissioner of Commercial Tax 102 STC 106. In fine, the learned counsel submitted that in the absence of transfer of property in goods for the amount received as premium, there is absolutely no case to levy tax on hank yarn obligation transferred to a third party to discharge statutory obligations.
3. On behalf of the Department, it is contended that the authorisation given in paper for transfer of hank yarn obligation becomes a scrip and is freely tradable and the mills which do not produce hank yarn to the extent of the quota, naturally pay the premium, and hence, the transaction should be equated to the premium received on REP Licence/Exim scrip. According to the learned counsel, the premium received can certainly be equated with the premium of transfer of right pertaining to REP Licence or Exim scrip considered by the Supreme Court in 102 STC 106 (referred supra).
4. The Commercial Tax Officer, however, did not accept the claim of the petitioner in W.P. No.33508 of 2002 and levied a tax at 8% on the premium received in the context of hank yarn obligations. This prompted the petitioner to file an appeal before the Appellate Assistant Commissioner, who took the view that the premium received for hank yarn obligation was in the context of producing lowest count yarns in excess and transferring the excess quantity obligation only to the mills which produced no low count yarn or less than the quantity prescribed by the Textile Commissioner so as to fulfill their obligations and therefore, the premium received in this regard from the transferee mill (seller) is neither for transfer of property nor for transfer of right and therefore, such amount received cannot be treated as assessable turnover and the principle adopted in regard to premium for transfer of REP Licence or Exim Scrip would not apply to these cases, and upheld the claim of the assessee.
5. The Joint Commissioner of Commercial Taxes resorted to Suo Motu Revision, who held that the consideration received for hank yarn obligation was for production over and above the quota prescribed by the Textile Commissioner and the transfer of the right to the other mills for premium is liable to tax. The aggrieved assessee then moved the Tamil Nadu Taxation Special Tribunal, which held that the transfer of hank yarn obligation occurs by authorising the transferor (buyer) to use the excess capacity of hank yarn manufactured by the transferee (seller) so as to fulfil the obligations of the transferor (buyer) to the Textile Commissioner and that the transfer effected by signing the statement, as required by law, clearly envisages the transfer of right and such transfer takes place for consideration freely between two competent parties and consequently, such transactions have been treated as sale of goods assessable to tax.
The assessee, who failed before the Tamil Nadu Taxation Special Tribunal, has preferred Writ Petition No.33508 of 2002.
5-A. So far as the petitioner in W.P. Nos.25561 and 25562 of 2003 are concerned, the petitioner/assessee did not file any appeal against the assessment order. Subsequently, the first respondent initiated proceedings by issuing a notice dated 15.4.2002, invoking Section 55 of the Tamil Nadu General Sales Tax Act, 1959, and proposing to revise the assessment by levying the Additional Sales Tax at the rate of 2% on the turnover by including the taxable turnover relating to hank yarn obligation. However, this was opposed by the petitioner. But, the first respondent herein confirmed his proposal by not deleting the taxable turnover in so far as it relates to the receipts under hank yarn obligation. The original assessment order as well as the revised assessment order were challenged by the petitioner by filing O.P. Nos.4 and 5 of 2003, which were dismissed by the Tamil Nadu Taxation Special Tribunal, by order dated 11th February, 2003. These two writ petitions viz., W.P. Nos. 25561 and 25562 of 2003, are directed against the said order.
6. Learned counsel, appearing for the respective parties, reiterated their stand taken before the authorities below.
All the writ petitions can be disposed of by a common order since the point involved is one and the same.
In the discussion here-under, the mill, which has produced more hank yarn, is described as Transferee mill/seller and the mill which has produced less than the required quantity is described as Transferor mill/buyer. This is on the basis of the format meant to be used by both the mills while making an application to the Textile Commissioner or the authority concerned, seeking approval for transfer of hank yarn obligations.
7. The Textile Commissioner, in his order, stipulated the minimum production of hank yarn out of total production by a mill on a quarterly basis and out of the hank yarn produced, 80% of the yarn should be of 40s. Failure to adhere to the production as stipulated above, the respective mill has to face penal action. The order of the Textile Commissioner also gave a chance to the mills, which fail to produce sufficient quantity of hank yarn as stipulated in the order, in and by which, another producer having more hank yarn production could transfer the hank yarn obligation to the mill which has failed to reach the target as per the order. The transfer of obligation has to be done by making necessary application before the Textile Commissioner in the prescribed format signed by both the mills and duly certified by the chartered accountants.
7-A. The question is as to how the term 'goods' is understood in the legal parlance.
8. Section 2(q) of the Tamil Nadu General Sales Tax Act explains the term 'total turnover' and Section 2(p) the terms 'taxable turnover'. A dealer is liable to pay tax as per the provisions of the Act. The term 'sale' is described as every transfer of the property in goods by one person to another in the course of business including a right to use any goods for any purpose.
9. The term 'goods' has been explained in Section 2(j) of the Tamil Nadu General Sales Tax Act as under:-
' '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 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 of sale.'
10. Coming to the Central Sales Tax Act, we find the term 'goods' is defined as,
' 'goods' includes all materials, articles, commodities and all other kinds of movable property, but does not include newspapers, actionable claims, stocks, shares and securities. '
11. While the word 'property' has not been defined in the Tamil Nadu General Clauses Act, 1891, and in the General Clauses Act, 1897, the terms 'movable property' and 'immovable property' are defined. 'Movable property' is defined as to mean property of every description except immovable property. The term 'immovable property' is defined as to include land, benefits to arise out of land and things attached to earth or permanently fastened to anything attached to earth.
12. Now, let us refer to the legal dictionaries in search of the meaning for the term 'property'.
' In Black's Law Dictionary (6th Edition, 1990), the expression 'property' has been given the following meanings:-
'Property.--That which is peculiar or proper to any person ; that 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.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 indefinite right of use or disposition which one may lawfully exercise over particular things or subjects. The exclusive right of possession, enjoying and disposing of a thing. The highest right of man can 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 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 property rights by actionable wrong. Labberton v. General Cas. Co. of America, 53 Wash. 2d 180.
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. Tex. Civ. App., 495 S.W. 2d 607,Term includes not only ownership and possession but also the right of use and enjoyment of lawful purposes. Hoffmann v. Kinealy, Mo., 389 S.W. 2d. 745,
Property, within constitutional protection, denotes group of rights inhering in citizen's relation to physical thing, as right to possess, use and dispose of it. Cereghino v. State by and through State Highway Commission, 230 Or., 439
Goodwill is property, Howell v. Bowden, Tex Civ. App., 368 S.W. 2d 842, 848 ; as is an insurance policy and rights incident thereto, including a right to the proceeds, Harris v. Harris 83 N.M. 441,.'
The dictionary further says 'property is either : real or immovable ; or, personal or movable'. It then proceeds to give the meaning of the expression 'absolute property', 'common property', 'intangible property', '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.'
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 mean 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 rights considered as having a money value, especially with reference to transfer or succession, and to their capacity of being injured. 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.'
13. In Ahmed G.H. Ariff and others v. Commissioner of Wealth-tax, Calcutta, : 76ITR471(SC) , the Supreme Court while considering the question whether in the facts of that case the right of the assessee to receive a specified share of the net income from the Wakf estate is an asset, the capitalised value of which is assessable to wealth tax, observed as follows,
' 'property' is a term of the widest import and, subject to any limitation which the context may require, it signifies every possible interest which a person can clearly hold or enjoy. ...'
The Court also pointed out that in Commissioner, Hindu Religious Endowments v. Shri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt : 1SCR1005 it was held that there was no reason why that word should not be given a liberal and wide connotation and should not be extended to those well-recognised types of interests which had the insignia or characteristic of proprietary right.
14. A Constitution Bench of the Supreme Court in : 3SCR530 (Rustom Cavasjee Cooper v. Union of India) in paragraph 40 of the Judgment held thus,
'... In its normal connotation 'property' means 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: it includes ownership, estates and interests in corporeal things, and also rights such as trade-marks, copy-rights, patents and even rights in personam capable of transfer of transmission, such as debts; and signifies a beneficial right to or a thing considered as having a money value, especially with reference to transfer or succession, and to their capacity of being injured'. The expression 'undertaking' in Section 4 of Act 22 of 1969 clearly means a going concern with all its rights, liabilities and assets - as distinct from the various rights and assets which compose it. In Halsbury's Laws of England, 3rd Edn., Vol.6, Article 75 at p.43, it is stated that 'Although various ingredients go to make up an undertaking the term describes not the ingredients but the completed work from which the earnings arise.'
15. In Kumbakonam Electric Supply Corporation Limited v. Joint Commercial Tax Officer, 14 STC 600, this Court has held that electricity is 'goods' and this view was approved by the Supreme Court in Commissioner of Sales Tax, Madhya Pradesh Indore v. Madhya Pradesh Electricity Board 25 STC 188. In M/s. Associated Cement Companies Limited v. Commissioner of Customs : 2001(128)ELT21(SC) , the Supreme Court has ruled that the import of drawing, plans, manuals, computer disks and cassettes containing information technology or ideas of construction of hotels and resorts would be 'goods' for levy of customs duty. In that case, the Supreme Court observed as follows:-
' ... But the moment the information or advice is put on a media, whether paper or diskettes or any other thing, that what is supplied becomes chattel. .... The drawings, designs, manuals etc. so received are goods on which customs duty could be levied. '
16. In M/s. S.P.S. Jayam and Co. v. The Registrar, Tamil Nadu Taxation Special Tribunal and two others (W.P. No.6870 of 2001, judgment dated 01.04.2004), this Court ruled that permitting to use the trademark of the assessee and for which the assessee charged Royalty at the rate specified in the agreement involves transfer of a right (to use its trademark) and that sales tax is leviable on the said Royalty. A similar view was taken by a Division Bench of the Bombay High Court in the decision reported in 112 STC 370 (Commissioner of Sales Tax v. Duke & Sons Pvt. Ltd.)
17. In the ruling reported in 130 STC 1 (State of Uttar Pradesh and another v. Union of India and another), the Supreme Court Court held that the Department of Telecommunications is a 'dealer' as defined in) and it collects rentals for the supply of transfer of use of telephone connection, which is compendiously called 'service' and that the supply of telephone satisfies the requirements of a transfer of the right to use the goods within the meaning of 'sale', it also receives consideration. The requirements of charging sections are satisfied even if the subscriber uses his own telephone.
18. The next ruling that to be referred to is the one reported in 102 STC 106 (Vikas Sales Corporation and another v. Commissioner of Commercial Taxes and another).
In that case, the registered exporters were given the facility of importing the essential inputs required for the manufacture of the products exported with a view to encourage exports and for that purpose, import licences called REP licences were issued equal to the prescribed percentage of the value of exports. These licences were made freely transferable and to transfer such licences, no endorsement or permission from the licensing authority was necessary. 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. Several registered exporters who obtained REP licences/Exim scrips sold them to others for profit. In fact, those licences were being traded freely in the market and on stock exchanges. The sales tax authorities proceeded to subject such sales to sales tax. The assessees protested contending that those licenses do not constitute 'goods' within the meaning of relevant sales tax enactments and not, therefore, eligible to tax. The Supreme Court, in this ruling, pointed out that the original licensee is not bound to import the goods permissible thereunder and that these licenses have an inherent value of their own and are traded as such and that they are treated and dealt with in the commercial world as merchandise, as goods and that an REP licence is neither a chose-in-action nor an actionable claim. This REP licence is, itself, a property and it is freely bought and sold in the market. The Supreme Court further ruled that for all purposes and intents, it is 'goods' and hence, the sale of the said licences can be subjected to sales tax.
19. In M/s. M.M. Exports v. The Deputy Commercial Tax Officer and another (W.P. Nos.15015 & 15016 of 2001, Judgment dated 19.12.2003), a Division Bench of this Court was considering the case of an assessee, who is an exporter. Sales tax was imposed on the proceeds of the sale effected by it of the credit in its favour on the Duty Entitlement Pass Book, which the assessee had obtained in respect of the export effected by it. Against the credit so given, the assessee is entitled to utilise the credit can import, without payment of the basic customs duty and surcharge thereon as also additional duty of customs, any of the items which are not restricted items under the classification of export and import items. The credit is also valid for a period of 12 months from the date on which the credit is received. Such credit can be obtained not only by the manufacturer of the exported products when he exports the products, but also by a merchant exporter. As per the policies spelled out, the DEPB on post export basis and/or the items imported against it are freely transferable. The only limitation is with regard to the place at which the credit can be used. It is to be used at the ports specified in the DEPB which shall be the Port from which the exports had been made. The Division Bench pointed out that in order to enjoy the credit it is not necessary that the exporter should himself import the goods and that the benefits of the credit is transferable and, in fact, such transfer does not require the prior permission or approval of any authority and further, there are no restrictions as to the mode by which the transfer effected. The Division Bench, considering the legal position and for the reasons stated, held that the Duty Entitlement Pass Book does not fall within the scope of the definition of the term 'goods' in the TNGST Act, 1959, and when those goods were sold, what occurred was a taxable sale on which the seller became liable to pay tax.
20. Learned counsel appearing for the petitioners/assessee contended that the case on hand is entirely different when compared to those two rulings viz., 102 STC 106 (cited supra) and W.P. No.15015 of 2001. Elaborating his submission, the learned counsel pointed out the distinguishing features in this case (when compared to those two cases) as under:-
(a) In the case of replenishment licences (in short REP licences) and in the case of Duty Entitlement Pass Book (DEPB), the original holder himself will be able to exploit. But, as far as the present case is concerned, the mill which produced hank yarn beyond the stipulated quantity, cannot, by itself, make use of.
(b) Secondly, in the case of REP Licences and DEPB the licensee can sell it to another and that another to yet another person and that those licences have an inherent value of their own and they were treated in the commercial world as merchandise, as goods. The transfer does not require prior permission or approval of any authority and there are no restrictions as to the mode by which the transfer effected.
Coming to the present case, the transferee mill/seller (the mill which has excess production of the hank yarn) can sell it to the transferor mill/buyer (the mill which was not able to reach the target) only with the permission of the concerned authority and it cannot be again transferred to some other mill as in the other cases.
21. Even though what has been pointed out by the learned counsel for the petitioner is correct, what would clinch the issue is the following aspects/characteristics:-
(a) Both REP licences and the excess hank yarn production, if not exploited by the original holder/the mill which produces the excess hank yarn, will be of no use.
(b) The mill, which produces hank yarn in excess of the required quantity, has got a wide choice viz., to choose the purchaser (transferor mill), that is, the mill which has produced lesser than the required quantity and get the maximum price.
(c) Thirdly, the permission to be obtained by submitting a joint application in the prescribed format by both the mills from the concerned authority is not subject to any restriction in the sense that once complete details are furnished and duly signed by all those required therein, such authority would grant permission automatically. No further conditions needs to be satisfied. Of course, as in the other two cases viz., in the case of REP Licence and DEPB, it cannot be transferred again and again. But, that would not, in any way, take away the character of the transaction being one of sale of goods. Till such time the hank yarn obligations created by excess production are utilised by transferring it to another mill for a premium, it remains only a statistics/data in the records of the mill making excess production. Thereafter, it takes the character of goods and the transfer of excess production attracts sales tax.
22. In this view of the matter, the Writ Petitions are dismissed. Connected Miscellaneous Petition is closed.