The Supreme Court on Wednesday ruled that meal vouchers are not ‘goods’ for the purpose of levy of Octroi or Local Body Tax (LBT) and that the company issuing such vouchers is only rendering services to be utlised by various firms for their employees.
“The 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,” held a bench of Justices A K Sikri and Rohinton F Nariman. Allowing an appeal by Sodexo SVC India Pvt Ltd, the bench underlined that LBT or Octroi is a tax ‘on the entry of goods into the limits of the city’, which goods are meant for ‘consumption, use or sale therein’.
But the Sodexo vouchers, the court said, are not the commodity that are sold and is rather an arrangement by the company with affiliates and other firms, which use these vouchers for a particular value.
“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,” it clarified.
Interpreting the law in this regard, the court said that 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. It is these affiliates who are getting the money for those goods and not the appellant, who only gets service charges for the services rendered, both to the customers as well as the affiliates,” it held.
Setting aside the Bombay High Court order that had held vouchers as ‘goods’, the apex court said that the High Court was wrong in holding that these vouchers are capable of being sold since they had a specific monetary value with which food items and other commodities could be purchased.
“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,” noted the bench. It also cited a RBI norm issued last year to regulate ‘paper based vouchers’, and said that the real nature of the transaction is to provide service and by no stretch of imagination these vouchers can be termed as ‘goods’.