Chose in claims or actionable claims are excluded to be goods as per definitions given in S. 2(7) of The Sale of Goods Act, 1930 and S.2 (d) of the Central Sales Tax, 1956. However, in one of the recent judgments, the honourable Bombay High Court examined the definition of goods vis- a’- vis “meal vouchers” by holding that meal vouchers would qualify as goods and not as actionable claims, and therefore the local state taxes are leviable on them, but this has raised many unsettled questions. The article attempts at analyzing the ruling in M/s Sodexo SVC India Private Limited v the State of Maharashtra & others by bringing forth an alternative possible view and additionally, sets out a few ramifications of the verdict.
There was a dearth of judicial pronouncements in the aforementioned question of law, as such a lot of scope and immense possibility of interpretation and judicial scrutiny existed. The matter in hand was decided on 20th March, 2015 wherein the core issue required to be addressed by the honourable division bench was as follows:
Whether the Sodexo meal vouchers are goods for the purpose of levy of Octroi and Local Body Taxes (LBT) and hence, if the aforementioned taxes could be levied and collected from Sodexo under the provisions of the Maharashtra Municipal Corporations Act, 1949 and the rules framed thereunder?
M/s Sodexo SVC India Private Limited (‘Petitioner’) is engaged in conducting a business of providing preprinted Sodexo Meal Vouchers (“Vouchers”). Sodexo enters into a contract with its customers for issuing the said vouchers. The customers in turn distribute the said vouchers to their employees who are the actual users of the said vouchers. It is stated that Sodexo has contracts with various affiliates such as restaurants, departmental stores, shops, etc. Under the affiliate contracts, the affiliates are required to provide food and other items on presentation of the said vouchers by the users. The affiliates are bound to honour vouchers once presented by the users. The affiliates after receiving the said vouchers, present the same to Sodexo. On receipt of the vouchers, Sodexo reimburses the affiliates after deducting service charges.
The Local Body Tax has been defined in Clause 33A of Section 2 of the Municipal Corporations Act which reads thus:
“2(33A). “Local Body Tax” means a tax on the entry of goods into the limits of the City, for consumption, use or sale therein, levied in accordance with the provisions of Chapter XIB, but does not include Cess as defined in clause (6A) and Octroi as defined in clause (42).”
Since neither the Octroi rules nor the LBT provisions define goods, other Acts were referred to construct a definition of goods as applicable in the present context.
View taken by Bombay High Court
The honourable bench laid down that
- The said vouchers are capable of being sold by the Petitioner after they are brought into the limits of the city. As a matter of fact, going by the scheme narrated in the facts, the said vouchers are sold by the petitioner to its customers for value.
- Placing reliance on Tata Consultancy Services v. State of Andhra Pradesh, the court explained in Para 81 that
‘Goods’ may be a tangible property or an intangible one. It would become goods provided it has the attributes thereof having regard to (a) its utility; (b) capable of being bought and sold; and (c) capable of transmitted, transferred, delivered, stored and possessed.
Going by the test laid down the said decision of the Supreme Court in the case of Tata Consultancy Services, the said vouchers have its utility, the same are capable of being bought or sold and the same are capable of being delivered, stored and possessed. Hence said vouchers are in the nature of ‘goods’.
- Citing the examples of several instances viz. lottery tickets, Fixed deposit receipts and electromagnetic waves, the bench held that such printed paper vouchers are in the nature of ‘goods’ and are not in the nature of actionable claim. The said voucher cannot be equated with lottery ticket or electromagnetic waves.
The apparent flaw in the line of reasoning here is that
- The combination of three words of sale, use and consumption is purported to have an effect on the goods itself so that either the thing changes hands or ceases to exist in its original form.
- As for the argument that the vouchers are not actionable claims, it can be assailed on the ground that the vouchers entitled the employees to claim an action i.e. to purchase food. The common idea is that printing of the vouchers and marking prices that they represent are two separate things, and the marked prices do not connote the price of vouchers themselves. The vouchers are not goods themselves, they act as a medium or an interface to buy the goods.
- It is to be noted that the paid meal vouchers are usable only in eating joints and are non-transferable to that extent. The vouchers can be touted to represent money as they are mere payment instructions. Further, they can be termed as a consideration for money. But in no stretch of imagination, can be regarded as goods.
The above ruling has the propensity of leading to the auxilliary implications of double taxation in the domain. The judgment was limited only to determine the applicability of LBT and Octroi in respect of sale of Sodexo Meal Vouchers within the local municipality. On the cusp, such a judgment also leaves open the issue of whether such meal vouchers would qualify as ‘goods’ for other Acts as well. There can also be an analogy drawn from the judgment, in case of redemption of vouchers, which amounts to a barter transaction.
Position of law needs to be clarified on this particular issue by the honourable apex court as this judgment is likely to have wide implications on coupons, gift cards and gift vouchers. Even the Groupon coupons used in E-Commerce these days can be dragged in this arena of loose interpretation subsequently. Likewise, paper based voucher is similar to instances of cash cards used by several malls and retail outlets which create virtual currency or quasi currency on the card against which items can be purchased from retail outlets. The author ventures to think if such a currency tantamount to qualify as goods as well. The judgment requires due consideration in light of the issue raised because the present stance has uncovered myriad complications in the legal sphere. The present case’s ratio if tested against the taxability of advance payments (if they held to be goods) will reveal a new grey area. Thus, the analogy further extended will be absurd and unconvincing.
Conclusion- possible view
The conclusion reached by the honorable court is highly untenable as the said vouchers are actionable claims and hence, have an exception as goods under the definition of goods as mentioned above. These just give a claim to an action to buy foods and do not per se constitute goods.
Since ‘goods’ are defined to exclude actionable claims it will be useful to refer to the definition of ‘actionable claim’ as given in Section 3 of the Transfer of Property Act, which reads thus:
‘’Actionable claim’ means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognize a affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.”
This definition is analyzed in Mulla’s Transfer of Property Act, 1872, it comprises two types of claims – (a) a claim to unsecured debts and (b) a claim to beneficial interest in movable property which is not in possession, actual or constructive – whether present or future, conditional or contingent. We are concerned not with (a) but with (b) in this case.
The principles enunciated above can be made squarely applicable to this particular matter as the vouchers partake in the characteristics of actionable claims to the beneficial interest in the services provided by the affiliates, viz. restaurants and other eateries. All this takes the vouchers outside the purview of the state taxes of LBT and Octroi. However, the matter is sub judice the apex court presently and it is hoped that the question of law will be meticulously dealt with and resolved thereafter.
 As termed in India
 reported in 2015-TIOL-746-HC-MUM-MISC
 verbatim from the judgment
 (2005)1 SCC 308
 At page 805 of the 6th Edition