2015 (5) TMI 777 - HC - Indian Laws

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 concerned, the law is laid down by the Apex Court in the case of Hindustan CocaCola Beverage Pvt. Ltd. 2011 (7) TMI 1100 - SUPREME COURT . Apex 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 the goods brought within the 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 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. The decision of Apex Court in the case 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 being sold, delivered and possessed have its own utility. The same cannot be equated with a lottery ticket which merely an actionable claim. The said vouchers cannot be equated with electromagnetic waves - the said vouchers will fall in the category of printed material which attracts Octroi in terms of the Octroi Rules - Decided against the appellant.

Summary

Issues Involved:

1. Whether the Sodexo Meal Vouchers are goods for the purposes of levy of Octroi and LBT.
2. Whether a Municipal Corporation constituted under the Maharashtra Municipal Corporations Act, 1949 is entitled to levy and/or collect Octroi or Local Body Tax (LBT) on Sodexo Meal Vouchers in accordance with the provisions of the Maharashtra Municipal Corporations Act, 1949 and the Rules framed thereunder.

Detailed Analysis:

Issue 1: Whether the Sodexo Meal Vouchers are goods for the purposes of levy of Octroi and LBT.

The Petitioner Company issues preprinted Sodexo Meal Vouchers to its customers, who then distribute them to their employees. These vouchers can be used at affiliated establishments to acquire food and beverages. The Petitioner argued that these vouchers are merely a medium of payment and not goods themselves, citing various legal precedents, including the Apex Court's decision in *Sunrise Associates v. NCT of Delhi* and *R.D. Saxena v. Balram Prasad Sharma*. The Petitioner contended that the vouchers are not capable of consumption, use, or sale by themselves, and therefore should not be subject to Octroi or LBT.

The Court, however, examined the definitions and legal interpretations of "goods" under various statutes and precedents. It referred to the definition of Octroi and Local Body Tax under the Maharashtra Municipal Corporations Act, 1949. The Court noted that for Octroi to be levied, the goods must be brought into the city for consumption, use, or sale. The Court also referred to the Apex Court's decision in *Hindustan CocaCola Beverage Pvt. Ltd. vs. Sangli Miraj and Kupwad Municipal Corporation and Ors*, which clarified that goods must be consumed, used indefinitely, or sold within municipal limits to attract Octroi.

The Court concluded that Sodexo Meal Vouchers are indeed goods because they are sold by the Petitioner to its customers, who then distribute them to employees. These vouchers are used to acquire food and beverages from affiliated establishments, and thus, they are capable of being used, consumed, or sold within the municipal limits.

Issue 2: Whether a Municipal Corporation constituted under the Maharashtra Municipal Corporations Act, 1949 is entitled to levy and/or collect Octroi or Local Body Tax (LBT) on Sodexo Meal Vouchers in accordance with the provisions of the Maharashtra Municipal Corporations Act, 1949 and the Rules framed thereunder.

The Court examined the provisions of the Maharashtra Municipal Corporations Act, 1949, and the relevant rules. The Petitioner argued that the vouchers are not goods and thus should not be subject to Octroi or LBT. However, the Court found that the vouchers meet the criteria for being classified as goods under the Act. The Court referred to the Apex Court's decision in *TATA Consultancy Services v. State of Andhra Pradesh*, which laid down the test for determining whether an item is goods: it must have utility, be capable of being bought and sold, and be capable of being delivered, stored, and possessed.

The Court found that Sodexo Meal Vouchers meet these criteria. They have utility, are sold to customers, and are used to acquire food and beverages. Therefore, they are goods within the meaning of the Municipal Corporations Act and are subject to Octroi and LBT.

The Court also referred to the decision in *Bharat Sanchar Nigam Limited*, which discussed the nature of goods and services. The Court distinguished Sodexo Meal Vouchers from intangible items like electromagnetic waves, which are not marketable. The vouchers, being printed on paper and having a guaranteed utility and value, are tangible goods.

Conclusion:

The Court held that Sodexo Meal Vouchers are goods for the purposes of levy of Octroi and LBT. Consequently, the Municipal Corporation is entitled to levy and collect these taxes on the vouchers in accordance with the provisions of the Maharashtra Municipal Corporations Act, 1949, and the Rules framed thereunder. The writ petitions challenging the levy of Octroi and LBT on Sodexo Meal Vouchers were rejected, and the interim relief was extended for two months, subject to the Petitioner keeping the bank guarantee alive for three months.