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2015 (5) TMI 777 - BOMBAY HIGH COURT

2015 (5) TMI 777 - BOMBAY HIGH COURT - [2016] 87 VST 516 (Bom) - Taxability of Sodexo Meal Vouchers - whether in the nature of goods - consumability within the municipal limit is relevant or not - levy of entry tax / octroi duty / Local body tax (LBT) - Paper based vouchers - affiliates are bound to honour vouchers - On receipt of the vouchers, the Petitioner reimburses the affiliates after deducting service charges - Maharashtra Municipal Corporations Act, 1949 - Held that:- As far as the use o .....

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Municipal limits, there must be proof of the fact that the goods got consumed completely within the Municipal limits or were used for an indefinite period in such a way that they come to rest finally and permanently within the Municipal limits or sold within the said limits.

The said vouchers are capable of being sold by the Petitioner after they are brought into the limits of the City. In fact, going by the scheme narrated above, the said vouchers are sold by the Petitioner to its .....

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e of Bharat Sanchar Nigam Limited [2006 (3) TMI 1 - Supreme court] distinguished wherein the issue was considered in respect of of the nature of transaction by which mobile phone calls / electromagnetic waves.

The said vouchers which are printed on paper are the goods within the meaning of the said Municipal Corporations Act. After the vouchers are brought within the limits of the Municipal Corporations Act, the same are capable of being sold. The said vouchers which are capable of be .....

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V. Tulzapurkar, Senior Advocate along with Shri Prakash Shah, Shri Prasad Paranjape and Shri Arun Jain i/by PDS Legal, Shri V.S. Gokhale, AGP For the Respondent : Shri Abhijit Kulkarni along with Shri Manoj Badgujar JUDGMENT ( Per A. S. Oka, J ) As per the directions of the Apex Court in Special Leave Petition Nos.3746 of 2014 and 3747 of 2014 passed on 19th September 2014, priority is given to the final hearing of these two Petitions. The following questions are involved in both the Petitions. .....

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s (For short the said Vouchers ). The case made out in the Petitions is that the Petitioner Company enters into a contract with its customers for issuing the said vouchers. The customers of the Petitioner in turn distribute the said vouchers to their employees who are the actual users of the said vouchers. It is stated that the Petitioner Company has contracts with various affiliates such as restaurants, departmental stores, shops, etc. Under the affiliate contracts, the affiliates are required .....

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ection 7 of the Payment and Settlement Systems Act, 2007 (for short the said Act of 2007 ) to operate a payment system for issue of meal and gift vouchers in the form of 'paper based vouchers' and 'smart meal cards' with effect from 25th June 2009. In these two Petitions, we are concerned with the paper based vouchers. 4. The learned senior counsel appearing for the Petitioner has made extensive submissions. He invited our attention to the provisions of Pune Municipal Corporation .....

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t under both the Octroi Rules and the LBT Rules, the taxes can be collected on the goods. Though the definition of the goods under the Municipal Corporations Act does not throw any light, he invited our attention to the definition of the goods under the other enactments. He pointed out that the Octroi or LBT can be levied on the consumption, use or sale of goods within the limits of Municipal Corporations. He urged that the said vouchers are a medium to acquire any article for consumption, use o .....

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in the case of R.D.Saxena v. Balram Prasad Sharma (2000)7 SCC 264. He urged that the said vouchers can be equated with the papers and files in possession of a legal practitioner which were held not to be goods. He placed reliance on a decision of the Apex Court in the case of Bharat Sanchar Nigam Ltd. and Another v. Union of India and Others (2006)3 SCC 1. He pointed out a decision of this Court in the case of State Bank of India v. Neela Ashok Naik and Another AIR 2000 Bom. 151 which holds that .....

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the LBT nor the Octroi is payable on the said vouchers. 5. The learned counsel appearing for the Pune Municipal Corporation submitted that as far as the Octroi is concerned, an efficacious remedy under Section 406 of the Municipal Corporations Act is available. He relied upon a decision of the Division Bench in the case of Maharashtra Chamber of Commerce Industries & Agriculture & Others v. State of Maharashtra, through its Secretary & Others 2004(1) Bom.C.R. 137 and Small Scale Int .....

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Octroi means a cess on the entry of goods into the limits of a city for consumption, use or sale therein; but does not include a cess as defined in clause 6A or Local Body Tax, as defined in clause (31A). 7. The Local Body Tax has been defined in Clause 33A of Section 2 of the Municipal Corporations Act which reads thus: 2(33A). Local Body Tax means a tax on the entry of goods into the limits of the City, for consumption, use or sale therein, levied in accordance with the provisions of Chapter .....

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of the City for consumption, use or sale. Thus, the issue which arises in these Petitions is whether the said vouchers are the goods within the meaning of the Municipal Corporations Act which are capable of being consumed, used or sold. 10. As pointed out earlier, the Petitioner has obtained an authorization under Section 7 of the said Act of 2007. The authorization is to operate a payment system for issue of meal and gift vouchers in the form of paper based vouchers. The Petitioner has annexed .....

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r issues vouchers and the user is defined to mean an employee of the customer who is in possession of the valid vouchers. The terms and conditions provide that the affiliate establishment shall deliver to a user against the value of the vouchers, ready to eat food and beverages. It is stated that the affiliate establishment has agreed to accept the said vouchers at any time whenever presented by the user as a payment of the price of only ready to eat food and beverages to be served to the user a .....

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e restaurants or eating places or outlets, the ready to eat food items and beverages of the face value printed on the said vouchers is delivered to the users. Thus, the said vouchers are used to pay the price of the food items and beverages delivered to the users. On presentation of the said vouchers, the users can acquire the food items and beverages of the face value of the said vouchers. 11. As far as the use or consumption of goods for the purposes of charging Octroi is concerned, the law is .....

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er octroi was leviable on the goods brought within the limits of Belgaum for consumption by Burmah Shell, for re-export and for sale. While interpreting the words found in Entry No. 52 of the State list in the Constitution dealing with taxes on the entry of goods into a local area for consumption, use or sale therein, this Court observed that the two expressions, "use" and "consumption" together connote the bringing in of goods and animals with a view to their retention eithe .....

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thin the Municipal limits so that it ultimately rests within the Municipal limits and does not go out subsequently, or the commodity concerned must be shown to have been brought within the Municipal limits for the purpose of sale within the said limits. 14. Referring to Burmah Shell's case, this Court held that though the use of the bottles may not amount to its destruction or total using up, but to attract octroi, the bottles must have finally rested within the Municipal limits and not take .....

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City. In fact, going by the scheme narrated above, the said vouchers are sold by the Petitioner to its customers for value. The customers give the said vouchers to its employees called as users. On presentation of the said vouchers, the users get foods and beverages from the affiliated establishments and the affiliated establishments on presentation of the said vouchers to the Petitioner get the face value of the said vouchers after deducting the service charges. Thus, the said vouchers are capa .....

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the case of TATA Consultancy Services. In Paragraph 81 of the said decision, the Apex Court held thus: 81. It is not in dispute that when a programme is created it is necessary to encode it, upload the same and thereafter unloaded. Indian law, as noticed by my learned Brother, Variava, J., does not make any distinction between tangible property and intangible property. A 'goods' may be a tangible property or an intangible one. It would become goods provided it has the attributes thereof .....

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uchers have its utility, the same are capable of being bought or sold and the same are capable of being delivered, stored and possessed. He relied upon a decision of the Apex Court in the case of Associated Cement Companies Ltd. v. Commissioner of Customs (2001)4 SCC 593. The said decision deals with the definition of the word goods under the Customs Act, 1962. Paragraph 27 of the said decision reads thus: 27. According to Section 12 of the Customs Act, duty is payable on goods imported into Ind .....

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be regarded as coming under Section 2(22)(e). Even though the definition of the goods purports to be an exclusive one, in effect it is so worded that all tangible movable articles will be the goods for the purposes of the Act by residuary clause 2(22)(e). Whether movable article comes as a part of a baggage, or is imported into the country by any other manner, for the purpose of the Customs Act, the provision of Section 12 would be attracted. Any media whether in the form of books or computer di .....

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Court observed that the word goods for the purposes of sales tax has been uniformly defined meaning thereby all types of movable property. The learned counsel relied upon what is held in Paragraphs 43, 45, 47 and 48 of the said decision which read thus: 43. The sale of a ticket does not necessarily involve the sale of goods. For example the purchase of a railway ticket gives the right to a person to travel by railway. It is nothing other than a contract of carriage. The actual ticket is merely .....

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e themselves, normally evidence of and in some cases the contract between the buyer of the ticket and its seller. Therefore a lottery ticket can be held to be goods if at all only because it evidences the transfer of a right. 45. The further distinction sought to be drawn in H. Anraj between the chance to win and the right to participate in the draw was in our opinion unwarranted. A lottery having been held to be in essence a chance for a prize, the sale of a lottery ticket can only be a sale of .....

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rights can stand without the other. A draw without a chance to win is meaningless and one cannot claim a prize without participating in the draw. In fact the transfer of the chance to win assumes participation in the draw. The Supreme Court of Appeals of West Virginia, in West Virginia in State of West Virginia v. John Wassick , , held that "free plays" which could be won predominantly by chance for consideration by operating multiple coin pinball machines for cash payoffs was a prize .....

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r as a right 'in future' and the latter as "in praesenti". Both the rights are in fact 'in future'. In any event the distinction is immaterial to the question as to whether the subject matter of the transfer is an actionable claim, since an actionable claim may be existent, accruing, conditional or contingent. 48. Even if the right to participate is assumed to be a separate right, there is no sale of goods within the meaning of sales tax statutes when that right is tran .....

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urt observed that the possession of lottery tickets gives a right to participate in the draw. It was observed that it is merely a chance that a person holding a ticket gets a price. Therefore, it was held that the lottery tickets were not the goods but merely an actionable claim. This Court in the case of State Bank of India v. Neela Ashok Naik held that the fixed deposit receipts of the bank are the goods which can be pledged as a collateral security. However, the said vouchers have guaranteed .....

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; had a very wide and comprehensive meaning and assuming delivery is necessary would include the entire telephone system as well as telephone appliances, instruments, materials, towers, exchanges, etc. The means, namely the electrical or electromagnetic means of energy will also form parts of the goods. It is further submitted that whether in any particular case the telephone system included machines or apparatus fixed to the ground was a question of fact to be decided in an individual case duri .....

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ing isolated as an independent taxable event from the aspect of service, ultimately the question whether there was any splitting up of a composite transaction was also to be determined during assessment proceedings. 18. Ultimately, in Paragraph 63, the Apex Court held thus: 63. It is clear, electromagnetic waves are neither abstracted nor are they consumed in the sense that they are not extinguished by their user. They are not delivered, stored or possessed. Nor are they marketable. They are mer .....

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extinguished by the user as the same cannot be delivered, stored or possessed. It was held that the same are not marketable. It was held that the electromagnetic wave is the medium of communication. 20. In this case, we are dealing with the printed paper vouchers. As pointed out earlier, the printed vouchers are sold to the customers for the value which is printed on the said vouchers. In turn, the customers hand over them to a user who uses the same for acquiring food and beverages. Even going .....

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