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TMI Blog2008 (2) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... principle question involved in all these writ petitions is common, therefore, as requested and agreed by learned counsel for parties, all these writ petitions have been heard together at this stage under the Rules of the Court and are being decided finally by this common judgment. 3. The writ petition no. 840 of 2005, for the purpose of referring to the documents and pleadings is taken as the leading case. 4. The petitioner, M/s Oriental Bank of Commerce after execution of agreements with its customers, provide facility of using Lockers installed in the Bank on rent to the said customers. It is not disputed that Lockers are installed inside the strong room of the bank, permanently attached to the earth and inseverable by the customers. It is said that the relationship of the Bank and the customers is that of landlord and tenant and not that of bailor and bailee. The Lockers can be operated with two keys, one key remains in possession of the customer and another in the possession of the bank and can be operated when both the keys are simultaneously inserted in the key hole of the Locker. Entry in strong room for operating Locker is restricted as per the rules of the Bank. A letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . State of Andhra Pradesh - 1988 (70) S.T.S.C. 215 (A.P.) 2. 20th Century Finance Corporation Ltd. & another Vs. State of Maharashtra - 2000 N.T.N. (Vol. 16) 425 3. Bank of India Vs. Commercial Tax Officer Central Section Calcutta - 1987 (67) S.T.C. 199. 4. Sanda Tent House Association Vs. State of U.P. & others - 2004 U.P.T.C. 133 6. A supplementary counter affidavit has also been filed wherein it is said that the petitioners-Banks are engaged in business of transfer of right to use bank Lockers and other commercial activities and, thus, they are "dealer" within the meaning of Section 2(c)(vii) of the Act, the transaction of renting out Lockers amounts to "sale" within in the meaning of Section 2(h)(iv) and activities of the petitioner is "business" within the meaning of Section 2(aa) of the Act. It is also said that the Bank Lockers are "goods" within the meaning of Section 2(d) of the Act. Reference is also made to the Article 366 (29-A)(d) of the Constitution of India, which defines "tax on sale or purchases of goods" and it is said that the present dispute is covered by the said definition. It is also averred that Bank Lockers are made of iron and are really in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those goods by the person to whom such transfer, delivery or supply is made." 10. Section 2 (aa) of the Act defines "business" and the relevant part, which been pressed in service in the present case, reads as under : "2. Definitions.-................... (aa) 'business', in relations to business of buying or selling goods, includes- (i) ................... (ii) the execution of any works contract or the transfer of the right to use any goods for any purpose (whether or not for a specified period);..." Similarly, the term "dealer" is defined under Section 2(c) of the Act and according to the respondents, the present transaction is covered by provisions of Section 2 (C) (vii) (viii), which are reproduced as under: "2. (c) "Dealer" means any person who carries on in Uttar Pradesh (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods directly or indirectly, for cash or deferred payment or for commission, remuneration or other valuable consideration and includes- (vii) every person who carries on the business of transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buying, selling, supplying or distributing directly or indirectly, for cash or deferred payment or for commission, remuneration etc. Therefore, the first question would be whether Lockers of the Bank can be said to satisfy the definition of "goods" under the Act. The reply of the respondents is that Locker is nothing but a vault fixed in a big cabinet, which is movable item when it is purchased by the Bank, though it is affixed for the purpose of security and safety, but that would not detract from the fact that it is a movable property which the contention of the petitioners is otherwise. 12. We have to examine the correctness of the rival submissions to find out whether a Locker can be said to be "goods" i.e. a "movable property" in the light of the provisions in the Constitution, Act and the admitted facts borne out from the pleadings. 13. It would be appropriate, first to consider as to what is taxable under the Act. Entry 54 List II Schedule-VII of the Constitution confers legislative competence upon the State legislature to make law on taxes on the sale or purchase of "goods" other than newspapers, subject to the provisions of entry 92-A of List I. Prior to 46th Amendment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing contracts are deemed to be "sale or purchase of goods" and subjected to sale tax under the relevant State legislation under Entry 54 List II Schedule VII. This development has been noticed by the Apex Court in Bharat Sanchar Nigam Ltd. & another Vs. Union of India & others 2006 (2) S.T.R. 161 (S.C.) = 2006 (3) SCC 1, but the Apex Court observed that though to some extent the principle enunciated in Gannon Dunkerley stood modified by 46th Amendment yet it has survived in two respects. In para 43 of the judgment the Court has said that with respect to definition of "sale", for the purpose of Constitution in general and for the purpose of Entry 54 of List II in particular, except to the extent that the clause in Article 366 (29-A) operate otherwise, the position continue to be the same. Even in separate categories of "deemed sale", the composite elements of a sale such as intention of the parties, goods, delivery, etc. would continue to be defined according to known legal connotations. It is said that 46th Amendment has not given a licence to assume that a transaction is a sale and then to look around for what could be the "goods". Words "goods" has not been altered by the 46th Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of a service contract, the Court must have in mind a distinction between an indivisible contract and a composite contract. If in a contract, an element to provide service is contained, the purport and object for which the Constitution had to be amended and clause 29A had to be inserted in Article 366, must be kept in mind. It further held that a legal fiction is created by the said provision and such a legal fiction should be applied only to the extent for which it was enacted. Though it must be given its full effect, but the same would not mean that it should be applied beyond a point which was not contemplated by the legislature or which would lead to an anomaly or absurdity. 16. Since the above law has been enunciated after considering the amendment in the Constitution as well as in the Act, and the effect thereof, hence, we have to apply the same to the facts and circumstances of the present case to find out the answer to the question which has been raised in this bunch of writ petitions. The first indicia for attracting liability of tax under the Act is that there must be a "goods" in respect whereto a transaction of sale or purchase has taken place. The "goods" as obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty;" The term "immovable property" is also defined under Section 3 of the Transfer of Property Act, 1882, which reads as under: "immoveable property" does not include standing timber, growing crops or grass:" 18. The definition of "goods" under the Act referring to every kind of movable property and including 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 takes away some items which would otherwise be immovable property under the General Clauses Act, 1897 inasmuch certain items which are attached to the earth or permanently fastened to anything permanently attached to the earth, but if are agreed to be severed before sale or under the Contract of sale are treated to be a kind of "movable property" constituting "goods" under the Act, though under the General Clauses Act, it may not be. To that extent, the definition of "goods" under the Act is wider but in all other respects, there is not much difference inasmuch if any other thing, if permanently attached to earth or fastened to anything attached to earth, which is not agreed to be severed before sale or under the contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amine what actually is the contract between the Bank and its customers with respect to user of Bank Lockers and the kind of transaction involved therein. In para 22 of the writ petition, it is averred that the Bank is not selling Lockers to its customers for rent. Locker is a part of big vault attached and embedded to earth. The whole extent of the vault is embedded to the strong room which has been specifically designed to ensure proper security and safety to the valuables of its customers. In order to provide security, the Bank has to construct strong room with prescribed specifications necessary for attaining highest security and safety and it is attached to earth. The specifications necessary for security are as per the norms and standards of global standard security. The Bank further installs security alarm surveillance device and ensure constant electric supply for the working of security alarm surveillance device. A regular security guard is employed for round the clock for guarding of Lockers. The customers have limited right to access during specific hours and specific days. The Locker is operable with the use of a key which is in possession of the customer and a master ke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e they lack a Locker at their residence, but because of the safety and security, which is maintained by the Bank and which is not available at the individual residence. Judicial cognizance can be taken of the fact that normally steel almirah is fitted with a Safe Deposit Locker of high thickness and couched safety. The class of customers, who go to Bank for depositing their valuables in Lockers must have the capacity to possess such almirahs in their house and even otherwise can afford to purchase a steel almirah fitted with such Safe Deposit Locker, but instead of making this arrangement at their residence, people prefer to go to a Bank to hire a Locker thereat in order to keep their valuables in such Lockers. One would not like to keep his valuables at a place which is not in his control or possession instead of keeping it in his house under constant watch unless the reasons for such are so compelling. The foremost compelling reason which can easily be conceived in this case is safety and security available to the Bank Lockers. The Safe Deposit Lockers of Banks are located in impregnable strong rooms and a stranger cannot get access into these strong rooms of the Bank. The high s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the security and safety of valuable which is kept by the customers in the Locker of the Bank instead of keeping it at their residence. These services are admittedly not taxable under the Act. The services rendered by the Bank and the charges levied therefor from its customer would not amount to valuable consideration in order to cover transaction in question within the purview of Section 2(c) of the Act read with Article 266 (29-A) of the Constitution. 20. There is another aspect of the matter. As we have already discussed, rental charges includes various other aspects which are in the nature of service rendered by the Bank to its customers. The State is not entitled to entrench upon the Union List and 'tax services' by including the cost of such service in the value of the goods. Even if we assume that the transaction answers the description of "goods", it is not disputed that Banks are in List I and it is the Parliament, which is competent to make law with respect to banking services. Where the charges are inseparable, the value of goods involved in the execution of whole transaction cannot be assessed to sale tax for the reason that the charges pertaining to service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at letting out of a Locker by the Bank to its customer amounts to "works contract" under Section 2 (m) but on being required to show as to how it would amount to works contract, he could not explain at all as to in what manner, the said transaction can be termed as "works contract" as defined under Section 2 (m) of the Act. The "works contract" under Section 2 (m) is an exclusive definition and covers an agreement for carrying out for cash, deferred payment or other valuable consideration, the building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of any movable or immovable property. The learned Standing Counsel could not at all show us as to in what category, namely manufacture, processing, erection, fabrication etc. letting out of Locker by the Bank to its customer would fall so as to be covered by the definition of "works contract" under Section 2 (m) of the Act. Therefore, we have no hesitation in rejecting the said contention. 23. Now we proceed to consider whether right to use Locker of a Bank can be said to be "transfer of right to use goods". In support of the submission that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the identity of the goods; (c) the transferee should have a legal right to use the goods-consequently all legal consequences of such use including any permissions or licences required therefor should be available to the transferee; (d) for the period during which the transferee has such legal right , it has to be the exclusion to the transferor-this is the necessary concomitant of the plain language of the statute viz. A "transfer of the right to use" and not merely a licence to use the goods: (e) having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same rights to others." 24. Applying the aforesaid to the facts involved and as discussed above, in letting out Bank Lockers to the customers, we are clearly of the view, that there is no transfer of right to use Lockers but only a licence to use and does not answer the requirement of "sale" to attract tax liability under the Act. There is no "sale" element involved in the matter and in effect, it is only a service rendered by the Bank by providing the facility to the customers to keep his valuables in a safe and secured place at the Bank and Locker i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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