1988 (3) TMI 422 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Conferment of Power to Levy Tax
2. Definition and Classification of Lockers as "Goods"
3. Composite Charge for Locker Services
4. Nature of Contract for Hiring Lockers
5. Precedent from Calcutta High Court

Summary:

1. Conferment of Power to Levy Tax:
The primary issue was whether the State Government had the authority to levy tax on charges realized from customers by banks for providing safety-lockers. The Constitution (Forty-sixth Amendment) Act, 1982, inserted clause (29-A) in article 366, which expanded the definition of 'tax on the sale or purchase of goods' to include various forms of transfer of property, including the right to use any goods. The Andhra Pradesh General Sales Tax Act was amended accordingly, adding explanation IV to section 2(n) and section 5-E, effective from 1st July, 1985. However, the court found that no tax could be levied until the notification G.O. Ms. No. 794 dated 19th August, 1987, rescinding the earlier exemption for banks, was published. Thus, the notices issued by the authorities for periods prior to this date were quashed.

2. Definition and Classification of Lockers as "Goods":
The court examined whether safe deposit lockers could be considered "goods" u/s 2(h) of the Act. The petitioners argued that lockers, being fixed in the strong rooms, are immovable property and do not qualify as "goods". The court agreed, stating that lockers imbedded in the earth do not constitute "goods" for the purpose of the Sales Tax Act. If lockers are mobile, further considerations for tax levy may arise.

3. Composite Charge for Locker Services:
The petitioners contended that the hire charges for lockers are not solely for the use of lockers but include various associated services like security and maintenance of strong rooms. The court found merit in this argument, noting that the hire charge is a composite amount for a variety of services, making it impossible to segregate the charge for the use of lockers alone. Consequently, the proposal to levy tax on such composite charges was deemed unfeasible.

4. Nature of Contract for Hiring Lockers:
The court analyzed the agreement between banks and customers, concluding that it is in the nature of a bailment u/s 148 of the Indian Contract Act, which requires delivery of goods. The court observed that no delivery of lockers takes place; the bank retains exclusive possession, and the customer merely has access. Thus, the transaction does not constitute a transfer of the right to use goods as envisaged by clause (29-A) of article 366.

5. Precedent from Calcutta High Court:
The court referred to a similar case decided by the Calcutta High Court in Bank of India v. Commercial Tax Officer, Calcutta [1987] 67 STC 199, where it was held that tax is not leviable on locker hire charges. The court concurred with this judgment, reinforcing its decision.

Conclusion:
The court declared that no power is conferred on the sales tax authorities to levy tax on hire charges collected by banks for providing safe deposit lockers u/s 5-E of the Act. Additionally, even if a contrary view is possible, no tax is payable until the date of publication of G.O. Ms. No. 794 dated 19th August, 1987. All writ petitions were allowed without costs.