2015 (12) TMI 1041 - SC - VAT and Sales Tax

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 - Sodexo Meal Vouchers cannot be treated as 'goods' for the purpose of levy of Octroi or LBT. - when these vouchers are given by the customers to its employees and the employees present the same to various affiliates with whom the appellant had made the arrangements and those affiliates supply the goods against those vouchers, while reimbursing the cost of these vouchers to the said affiliates, the appellant again takes service charges from these affiliates, which is again a sum of 2. Thus, insofar as the appellant ₹ is concerned, it has made the arrangements with the affiliates for supply of goods against those vouchers. This arrangement is made to help the customers by simply facilitating the provision for making available food items, etc. of a particular amount, represented by vouchers, to the employees of these customers. No doubt, vouchers bear a particular value and for such value, goods are provided to the employees. However, these goods are not provided by the appellant, but by the affiliates. The appellant is only a facilitator and a medium between the affiliates and customers and is providing these services. The intrinsic and essential character of the entire transaction is to provide services by the appellant and this is achieved through the means of said vouchers. Goods belong to the affiliates which are sold by them to the customers' employees on the basis of vouchers given by the customers to its employees. High Court has also wrongly observed that vouchers are capable of being sold by the appellant after they are brought into the limits of the city. These vouchers are printed for a particular customer, which are used by the said customer for distribution to its employees and these vouchers are not transferrable at all. Without the sanction/ authorisation of the RBI to operate such a payment system under the Payment and Settlement Systems Act, 2007, nobody can operate such a system, as the purpose of the said Act is to regulate the payment and settlement thereof by means of 'Paper Based Vouchers'. An insight into the Policy Guidelines dated March 28, 2014 issued by the RBI to regulate such transactions would also clinchingly bears out that the real nature of the transaction is to provide service and by no stretch of imagination these vouchers can be termed as 'goods'. - Amount thus collected has to be kept in the escrow account and the persons, like the appellant herein, are under obligation to use this amount only for making payments to the participating merchant establishments and other permitted payments. - appropriate test would be as to whether such vouchers can be traded and sold separately. The answer is in the negative. Therefore, this test of ascertaining the same to be 'goods' is not satisfied. Value of such free food and non-alcoholic beverage provided by an employer to an employee is treated as expenditure incurred by the employer and amenity in the hands of the employee. It is this perquisite given by the customer to its employees by adopting the methodology of vouchers and for its proper implementation, services of the appellant are utilised. - judgment of the High Court has not discussed and decided the issue correctly and warrants interference. We, thus, allow these appeals and set aside the judgment of the High Court 2015 (5) TMI 777 - BOMBAY HIGH COURT by holding that Sodexo Meal Vouchers are not 'goods' within the meaning of Section 2(25) of the Act and, therefore, not liable for either Octroi or LBT. - Decided in favour of Assessee.

Summary

Issues Involved:
1. Whether Sodexo Meal Vouchers can be treated as 'goods' for the purpose of levy of Octroi or Local Body Tax (LBT).
2. The nature of the transaction involving Sodexo Meal Vouchers and its regulation by the Reserve Bank of India (RBI).
3. Interpretation of relevant provisions of the Maharashtra Municipal Corporation Act regarding the definition of 'goods', 'Octroi', and 'Local Body Tax'.

Issue-wise Detailed Analysis:

1. Whether Sodexo Meal Vouchers can be treated as 'goods' for the purpose of levy of Octroi or Local Body Tax (LBT):

The Supreme Court examined whether Sodexo Meal Vouchers qualify as 'goods' under Section 2(25) of the Maharashtra Municipal Corporation Act. The High Court had previously ruled that these vouchers are goods because they are printed and sold to customers, who then distribute them to employees for purchasing food and beverages. However, the Supreme Court disagreed, emphasizing that the vouchers are not commodities sold by the appellant. Instead, they are part of a service provided, where the appellant charges service fees to both customers and affiliates. The Court concluded that the vouchers are not 'goods' as they are not transferrable, sold, or capable of being traded separately.

2. The nature of the transaction involving Sodexo Meal Vouchers and its regulation by the Reserve Bank of India (RBI):

The Court highlighted that the appellant's business is regulated by the Payment and Settlement Systems Act, 2007, and the RBI's guidelines. The appellant operates a payment system involving pre-paid payment instruments (vouchers) and must adhere to specific conditions set by the RBI. The vouchers facilitate the purchase of goods and services but do not represent goods themselves. The amount collected from customers is kept in an escrow account and used strictly for settling vouchers. The Court referred to various RBI guidelines and previous judgments to support the view that the transaction is a service, not a sale of goods.

3. Interpretation of relevant provisions of the Maharashtra Municipal Corporation Act regarding the definition of 'goods', 'Octroi', and 'Local Body Tax':

The Court analyzed the definitions of 'goods' (Section 2(25)), 'Local Body Tax' (Section 2(31A)), and 'Octroi' (Section 2(42)) under the Act. It noted that both LBT and Octroi are taxes on the entry of goods into a city for consumption, use, or sale. The Court found that Sodexo Meal Vouchers do not fit the definition of 'goods' because they are not sold or traded as commodities. Instead, they are part of a service provided by the appellant, who acts as a facilitator between customers and affiliates.

Conclusion:

The Supreme Court concluded that Sodexo Meal Vouchers are not 'goods' within the meaning of Section 2(25) of the Maharashtra Municipal Corporation Act. Therefore, they are not liable for Octroi or LBT. The Court set aside the High Court's judgment and emphasized that the appellant's business is a service, not a sale of goods. The judgment underscores the importance of understanding the true nature of transactions and the regulatory framework governing them.