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Sodexo SVC India Private Limited. Versus The State of Maharashtra And Others

2015 (5) TMI 777 - BOMBAY HIGH COURT

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 or consumption of goods for the purposes of charging Octroi is con .....

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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 customers for value. The customers give the said vouchers to its .....

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] 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 being sold, delivered and possessed have its own utility. The same .....

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i 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. (i) Whether the Sodexo Meal Vouchers are goods for the purposes o .....

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ons 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 to provide food and other items on presentation of the said vouch .....

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rt 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 Octroi Rules, 2008 ( for short the Octroi Rules ). He also invit .....

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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 or sale and the said vouchers are not capable of consumption, use .....

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. 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 the fixed deposit receipts are the goods. He submitted that the .....

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earned 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 Interpreneurs Association and Others v. State of Maharashtra and Oth .....

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ity 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 XIB, but does not include cess as defined in clause (6A) and octr .....

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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 the application form for the said vouchers. On the reverse side .....

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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 and for no other purposes. The terms and conditions provide that t .....

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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 laid down by the Apex Court in the case of Hindustan CocaCola Be .....

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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 either for use without using them up or for consumption in a manner wh .....

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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 taken out. This Court concluded that to attract the levy of octroi on .....

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ers 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 capable of being used or sold within the limits of a City. 13. Now co .....

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d 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 having regard to (a) its utility; (b) capable of being bought and .....

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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 India. The word "goods" has been defined in Section 2(22) .....

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inition 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 disks or cassettes which contain information technology or ideas wo .....

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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 evidence of the right to travel. A contract is not property, but .....

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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 that chance. There is no other element. Every right can be. subd .....

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in 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 and the pinball machine constituted the lottery. This indicates .....

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enti". 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 transferred. When H. Anraj said that the right to participate was a b .....

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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 utility and value which are capable of being sold. 17. It will be .....

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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 during the assessment proceedings. Countering the submission that the .....

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ervice, 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 merely the medium of communication. What is transmitted is not an el .....

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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 by the scheme of the Petitioner, the said vouchers are sold by t .....

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