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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 ..... enting Lockers to their customers. The incidental question is whether Lockers are goods and right to use Locker can be said to be transfer of right to use any goods attracting liability of tax under the Act. 2. In some of these cases, assessment orders have been passed, and in some cases, notices for assessment have been issued. Since, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in State of U.P. another Vs. Union of India another 2003 NTN (Vol. 22) 175, renting out Lockers to their customers is taxable under Section 3-F of the Act and, therefore, the assessments made or proposed against the petitioners are absolutely valid and in accordance with law. Reliance is also placed on the following authorities : 1. State Bank of India Vs. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes- (a)....... (b)....... (c)....... (d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (e)....... (f)....... and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of 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 me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in some other form) involved in the execution of a works contract. at such rate not exceeding twenty percent as the State Government may, by notification, declare and different rates may be declared for different goods or different classes of dealers. 11. Thus, from a combined reading of all the aforesaid provisions, the very first indicia to attract the Act is that there has to be goods in existence with which a person is carrying on the business of 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 mov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resulted in evasion of tax in various ways, the matter was considered by the Law Commission, who submitted its report in 1974 and, thereafter, Article 366 was amended inserting Clause 29-A, i.e., the definition of tax on the sale or purchase of goods . The effect of the said amendment is that certain transactions, which were not sale or purchase of goods earlier are now included therein. By legal fiction, the composite contracts like work contracts, hire purchase contracts and catering 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect to an Advertising Agency, the applicability of Karnataka Value Added Tax Act, 2003 in view of the fact that it was already subject to payment of service tax under Finance Tax Act, 1994 came up for consideration in Imagic Creative Pvt. Ltd. Vs. Commissioner of Commercial Taxes others - 2008 (9) S.T.R. 337 = JT 2008 (1) SC 496. Relying on Tata Consultancy (supra) [2004] (178) E.L.T. 22 (S.C.) and Bharat Sanchar Nigam Ltd. (supra), the Apex Court held that where it is the question of changeability 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 absur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acting liability of tax under the Act. The term movable property has not been defined in the Act. The General Clauses Act, 1987, however, defined immovable property and movable property vide Section 3 (26) and 3(36), which read as under : 3. definitions.-.............. (26) immovable property shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth; (36) movable property shall mean property of every description, except immovable property; 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services (supra) and Bharat Sanchar Nigam Ltd. (supra). The issue can also be examined from another angle. The transfer of right to use any goods for any purpose must be for cash, deferred payment or other valuable consideration. Can it be said that the rent charged by the Bank for entering into an agreement with the customers assigning right to use Locker of the Bank amounts to such consideration. This would require us to examine as to what is the principle object of the customer in hiring the Locker of the Bank. In other words, we have to examine 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 safe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall be that of a landlord and a tenant and not that of bailor and bailee. The Bank has no responsibility of liability of any kind whatsoever in respect of the contents of the Locker and shall not be responsible for any loss or damage etc. 19. The facts as above are not disputed in the counter affidavit. From the pleadings of the parties as well as arguments advanced on both the sides, three things are evident. Firstly, that Lockers are part of a Safe Deposit Vault embedded to earth. Secondly, that the public go to Bank for hiring Lockers not because 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Neither the strong room nor the steel cabinet in which the Lockers are fitted is rent out to any particular person. Even the Locker cannot be opened by the customer on his own unless it is first unlocked by the Bank with master key kept by it. The arrangement, therefore, made by the customer with the Bank with respect to Locker cannot be equated with that of hiring of an Almirah or drawer of an Almirah, and, rental for the Locker cannot be said to be consideration for only use of storage space in the cabinet. The dominant aspect involved in the transaction 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 B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting different nature of levy. It is, therefore, difficult to hold that in a case of this nature, sales tax would be payable on the value of the entire contract; irrespective of the element of service provided. Applying the aforesaid dictum also in the nature of the transaction involved in the present case, we are clearly of the view that the rent paid by the customers to Bank for hiring a Locker amounts to the charges paid for an indivisible contract and, therefore, is not at all taxable under the Act. 22. The learned standing counsel at this stage sought to contend that 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, modific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contractor was that of the respondent Company; the contractor was not free to make use of the machinery for the works other than the project work of the respondent or ..... The Apex Court in BSNL's Case in para 97 of the judgment has crystalised the following attributes in order to constitute a transaction as transfer of the right to use the goods , which reads as under: 97. To constitute a transaction for the transfer of the right to use the goods, the transaction must have the following attributes: (a) there must be goods available for delivery; (b) there must be a consensus ad idem as to 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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