Holding

Sodexo meal vouchers are not "goods" within the meaning of Section 2(25) of the Maharashtra Municipal Corporation Act, 1949, and consequently are not liable to Octroi or Local Body Tax.

Summary

Sodexo Service India Private Ltd issues paper‑based meal vouchers to corporate customers, who distribute them to their employees for redemption at affiliated restaurants. The vouchers are redeemed for food, with Sodexo receiving a service fee and reimbursing affiliates for the face value. The issue before the Supreme Court was whether these vouchers constitute "goods" under Section 2(25) of the Maharashtra Municipal Corporation Act, 1949, thereby attracting octroi or Local Body Tax (LBT). The Court held that the vouchers are not sold, are non‑transferable, and function as a prepaid payment instrument regulated by the RBI under the Payment and Settlement Systems Act, 2007, making the transaction a service rather than a sale of goods. Applying the test of tradeability and analogies with SIM cards, the Court concluded that the vouchers are not "goods" and therefore not liable to octroi or LBT. The appeals were allowed, setting aside the High Court's decision.

Issues considered

Whether Sodexo meal vouchers are "goods" within the meaning of Section 2(25) of the Maharashtra Municipal Corporation Act, 1949.
Whether the levy of Octroi or Local Body Tax can be imposed on such vouchers.

Legislation cited

Income Tax Act, 1961s. 17
Maharashtra Municipal Corporation Act, 1949s. 127, s. 149, s. 152P, s. 2(25), s. 2(31A), s. 2(42)
Payment and Settlement Systems Act, 2007s. 2(1)(i), s. 7

Subjects

OctroiLocal Body TaxGoods definitionMeal vouchersService taxPayment and Settlement Systems ActRBI guidelinesPrepaid payment instrumentsService vs goods

Judgment

[2015] 13 S.C.R.1232

A SODEXO SVC INDIAPRIVATE LIMITED
v.
STATE OF MAHARASHTRA& ORS.
(Civil Appeal Nos. 4385-4386 of 2015)
B
DECEMBER 09, 2015
[A. K. SIKRI AND R. F. NARIMAN, JJ.]

Maharashtra Municipal Corporation Act, 1949: ss.2(25),
c 2(31A), 2(42) - Octroi or Local Body Tax- Imposition of, on
Meal Vouchers- In the instant case, paper based vouchers
printed by appellant and sold to its customers, who in turn
provide these vouchers to their employees for utilizing in the
restaurants or different places or outlets to get ready-to-eat
D items and beverages of the face value printed on these
vouchers - Whether these vouchers can be treated as goods
for the purpose of levy of Octroi or Local Body Tax or the
said activity only amounts to rendering service by the
appellant- Held: In this case, the arrangement is made by
E the appellant with the affiliates for supply of goods against
the vouchers - This arrangement is made to help the
customers by simply facilitating the provision for making
available food items etc of particular amount represented by
vouchers to the employees of these customers - Thus,
F appellant is only a facilitator and a medium between the
affiliates and customers and is providing these services -
These Meal Vouchers cannot be treated as 'goods' for the
purpose of levy of Octroi or LBT - Payment and Settlement
Systems Act, 2007 - Tax/Taxation - Local Body Tax.
G
Allowing the appeals, the Court

HELD : 1. These vouchers are not the commodity
which are sold. If the face value of the said vouchers is
H ~50, by giving these vouchers to its customers, the
1232
SODEXO SVC INDIA PRIVATE LIMITED v. STATE OF 1233
MAHARASHTRA & ORS.

appellant only takes specified service charges from its A
customers, which is normally ~ 2 for ~ 50 voucher.
Likewise, 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 B
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, if1sofar as
the appellant is concerned, it has made the arrangements C
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
D
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 E
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 F
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, G
both to the customers as well as the affiliates. [Para 16]
[1244-H; 1245-A-F]

2. The vouchers are not 'sold' by the appellant to ·
its customers, as wrongly perceived by the High Court, H
1234 SUPREME COURT REPORTS (2015] 13 S.C.R.

A and this fundamental mistake in understanding the whole
scheme of arrangement has led to wrong conclusion by
the High Court. The 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.
B These vouchers are printed for a particular customer,
which are used by the said cµstomer for distribution to
its employees and these vouchers are not transferrable
at all. [Para 17) [1245-G-H; 1246-A]

C 3. 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
D Based Vouchers'. An insight into the Policy Guidelines
dated March 28, 2014 issued by the RBI to regulate such
transactio.ns would also clinchingly bear out that the real
nature of the transaction is to provide service and by no
stretch of imagination these vouchers can be termed as
E 'goods'. 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.
F [Paras 18, 24) [1246-C-D; 1251 ·E·F]

4. Section 17 of the Income Tax Act, 1961, defines
'salary' in the hands of the employees which becomes
taxable under the Income Tax Act. Various components
of salary are enumerated therein. Clause (viii) of sub-
G section (1) of Section 17 includes 'the value of any other
fringe benefit or amenity as may be prescribed' as part of
salary. Rule 3 of the Income Tax Rules prescribes the
method of 'valuation of perquisites'. Rule 3(7)(iii) deals

H
SODEXO SVC INDIA PRIVATE LIMITED v. STATE OF 1235
MAHARASHTRA & ORS.

with the value of free food, etc. The value of such free A
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 B
vouchers and for its proper implementation, services of
the appellant are utilised. [Paras 25, 26] [1251-G; 1252-
A-B; 1252-F-G]

Tata Consultancy Services v. State of Andhra c
Pradesh 2004 (5) Suppl. SCR 1040 : (2005) 1
SCC 308; Bharat Sanchar Nigam Ltd. & Anr. v.
Union of India & Ors. 2006 (2) SCR 823 : (2006)
3 SCC 1; Idea Mobile Communication Limited.
v. Commissioner of Central Excise and Customs, D
Cochin 2011 (9) SCR 789: (2011) 12 SCC 608;
Sunrise Associates v. Govt. of NCT of Delhi & Ors.
2006 (1) Suppl. scR 421 : (2006) 5 sec 603;
H. Anraj v. Government of Tamil Nadu 1985 (3)
Suppl. SCR 342: (1986) 1 sec 414; Yasha E
Overseas v. Commissioner of Sales Tax & Ors.
(2008) 8 sec 681 - referred to.

Case Law Reference
F
2004 (5) Suppl. SCR 1040 referred to Para 13
2006 (2) SCR 823 referred to Para 21
2011 (9) SCR 789 referred to Para 22
2006 (1) Suppl. SCR 421 referred to Para 23 G
1985 (3) Suppl. SCR 342 referred to Para 23
(2008) 8 sec 681 referred to Para 23

H
1236 SUPREME COURT REPORTS [2015] 13 S.C.R.

A CIVILAPPELLATE JURISDICTION: Civil Appeal Nos.
4385-4386 of 2015.
From the Judgment and Order dated 20.03.2015 of the
High Court of Bombay in Writ Petition No. 5653 of 2010 and
B Writ Petition No. 7503 of 2013.
N. Venkataraman, Sr. Adv., Jay Savla, Prasad P.,
Ms. Renuka Sahu, Ms.Amoha Sharma,Advs., for the Appellant.
R. P. Bhatt, Sr. Adv., Chinmoy Khaladkar, Nishant
Ramakantrao Katneshwarkar, Ashish Wad, Ms. Jayashree
C Wad, Ms. Kanika Baweja, Sangram Singh Bhonsle,
Ms. Paromita Majumdar, M/s. J. S. Wad & Co., ,Advs., forthe
Respondents.
The Judgment of the Court was delivered by
D
A. K. SIKRI, J. 1. The appellant company is conducting
the business of providing pre-printed meal vouchers which are
given the nomenclature of 'Sodexo Meal Vouchers'. As per
the appellant, it enters into contracts with its customers for
E issuing the said vouchers. These customers are
establishments/companies having number of employees on
their rolls. They provide food/ meals and other items to their
employees up to a certain amount. It is for this purpose that
the agreement is entered into by such establishments/
F companies with the appellant for issuing the said vouchers.
After receiving these vouchers for a particular denomination,
some are distributed by the companies to its employees. For
utilisation of these vouchers by such employees, the appellant
has made arrangements with various restaurants, departmental
G stores, shops, etc. (hereinafter referred to as 'affiliates'). From
these affiliates, the employees who are issued the vouchers
can procure the food and other items on presentation of the
said vouchers. The affiliates, after receiving the said vouchers,
present the same to the appellant and get reimbursement of
H
SODEXO SVC INDIA PRIVATE LIMITED v. STATE OF 1237
MAHARASHTRA & ORS. [A. K. SIKRI, J.]

the face value of those vouchers after deduction of service A
charge payable by the affiliates to the appellant as per their
mutual arrangement. In this manner, the appellant, by issuing
these vouchers to its customers, gets its service charge from
the said companies. Likewise, the appellant also takes
specified service charges from its affiliates. A diagramatic B
representation of the business model of the appellant is as under:

• ~[; SPDEXO )~-= C
r

[,........,_.::-~-ST---QM-~~.,.-,
-- •of

..........
..,--,.....,I .
-
*"'•
~

...
~t'al'
IP..,IMn\

[ . A~FiLl.41-:~: ..;., l

;.,u•~
Sod91CO
woueh11nito
I ·u•~-~·
vaudw.ntoc
~ysnmd:u• ~
D
illnf'IDv-• ....... to food/
• MOMV' &'lftl. ~ .

. . ('.. ~~~··)
2. On the basis of the aforesaid arrangement made by E
the appellant with its customers as well as its affiliates, the
question that has arisen for consideration is as to whether these
vouchers can be treated as 'goods' for the purpose of levy of
Octroi or Local Body Tax (LBT) or the aforesaid activity only
amounts to rendering service by the appellant. The issue has F
to be examined as per the relevant provisions of the
Maharashtra Municipal Corporation Act [Act No. LIX of 1949]
under which the Municipal Corporation is entitled to levy and
collect Octroi or LBT.
G
3. Before we advert to the relevant provisions of the Act,
it would be worthwhile to mention that in order to carry on the
aforesaid business, the appellant is compulsorily required to
obtain necessary approval/ authorisation from the Reserve
H
1238 SUPREME COURT REPORTS [2015] 13 S.C.R.

A Bank of India (RBI), which requirement is spelt out from Section
7 of t_he Payment and Settlement Systems Act, 2007. The
appellant has been granted a Certificate of Authorisation by
the RBI to operate a payment system for the issuance of
Sodexo Meal Vouchers in the form of 'Paper Based Vouchers'
.B under the aforesaid provision.

4. The Payment and Settlement Systems Act, 2007 .
provides for the regulation and supervision of payment systems
in India and designates RBI as the authority for that purpose
C and all related matters. Under Section 2(1 )(i) of the Payment
and Settlement Systems Act, 2007, a 'payment system' is
defined as a system that enables payment to be effected
between a payer and a beneficiary, involving clearing, payment
or settlement service or all of them but does not include a stock
D exchange. The appellant is also required to adhere to the Pre-·
paid Issuance and Operation of the Payments Instruments in
India (Reserve Bank) Directions, 2009 issued under the
Payment and Settlement Systems Ad, 2007 and Revised
Consolidated Guidelines, 2014. Thereunder, 'pre-paid
E payment instruments' are defined as payment instruments that
facilitate purchase of goods and services against the value
stored on such installments. The value stored on such
instruments represents the value paid for by the holders by
F ash, by debit to a bank account, or by credit card. The amount
so paid by the customers is always kept in escrow account
and is used strictly only for settlement of vouchers and never
accounted for or used as income in the hands of the appellant.
Accordingly, the Certificate issued to the appellant contains
G the following terms and conditions:

"The Payment System Provider shall adhere to the
provisions of the Payment and Settlement Systems Act,
2007, regulations issued thereunder and the directions/
guidelines issued by the Reserve Bank of India.
H
SODEXO SVC INDIA PRIVATE LIMITED v. STATE OF 1239
MAHARASHTRA & ORS. [A. K. SIKRI, J.]

The authorization is only for issue of mealvouchers and A
gift vouchers in the form of 'Paper based vouchers' and
'Smartcard' or 'Smart Meal Card' and subject to
adherence of the 'Policy Guidelines for issuance and
operation of Pre-paid Payment Instruments in India'
(unless specific relaxation has been permitted by the B
RBI)

Sodexo shall adhere to the provisions of the prevention
of Money Laundering Act and ruled framed thereunder.
Further, the guidelines on Know Your Customer/Anti- C
Money Laundering/ Combating Financing of Terrorism
issued by the RBI to Banks, from time to time shall apply
mutatis mutandis to the entity."

5. Thus, as per the aforesaid authorisation by the RBI, D
the business operation that is carried out by the appellant, has
the following essential features:

(i) the payment system operated by the appellant
involves issuance of vouchers having a face value (meal E
and gift vouchers) to the customers;

(ii) customers grant said vouchers to their employees
(beneficiaries);

(iii) the employees use the vouchers to obtain/pay for F
food, meal or goods;

(iv) vouchers can only be used in an affiliated network
of restaurants and shops (affiliates/redeemers);
G
(v) the affiliated restaurant/shop having delivered the
food/meal/ good, receives the voucher and turns it to
the appellant who issued it for reimbursement of the face
value (redemption); and
H
1240 SUPREME COURT REPORTS (2015] 13 S.C.R.

A (vi) when the vouchers are redeemed, the appellant
reimburses to the affiliate/redeemer the face value of
the voucher and retains a service fee in order to
compensate for the attractiveness of the system which
has benefited to the affiliate's business. The appellant
B pays service tax on such service fee charged.

6. Having taken note of the nature of business operation
of the appellant herein and the manner the same is statutorily
regulated by the Payments and Settlement Systems Act, 2007
C and the Rules framed thereunder, we revert to the issue that
has to be answered in the present case, namely, whether these
Sodexo Meal Vouchers are goods within the meaning of
Section 2(25) of the Act. For this purpose, it would be
imperative to take note of the definition of goods appearing in
D the aforesaid provision as well as some other relevant
provisions of this Act.

7. Section 2(25) of the Act provides the definition of
.,goods', Section 2(31A) defines 'Local Body Tax'(LBT), and
E Section 2(42) contains the definition of 'Octroi'. These two
provisions read as under:
"2. Definitions. ·
In this Act, unless there be something repugnant in the
F subject or context, -
xx xx xx
(25) "goods" includes animals;
xx xx xx
G
(31A) "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
H clause (6A) and octroi as defined in clause (42);
SODEXO SVC INDIA PRIVATE LIMITED v. STATE OF 1241
MAHARASHTRA & ORS. [A. K. SIKRI, J.]

xx xx xx A
(42) "octroi" means a cess on the entry of goods into
the limits of a city for consumption, use or sale therein;
but does not include a cess as defined in clause 6A or
Local Body Tax, as defined in clause (31A)."
B
8. As is clear from the reading of Section 2(31 A), LBT
is the tax on the entry of goods into the limits of the city, when
these goods are for consumption, use or sale. The tax is to be
levied in accordance with the provisions of Chapter XIB. It,
however, specifically excludes Octroi, as defined in Section C
2(42. It also becomes clear that Octroi is a cess on the entry
of goods into the limits of a city for consumption, use or sale
therein, but it does not include a cess as defined in clause
(6A) or LBT. Both these levies are on the goods that enter into
the limits of a city for consumption, use or sale therein. D

9. The charging section, for imposition of tax under the
Act, is Section 127. This provision enumerates various types
of taxes. Sub-section ( 1) thereof empowers the Corporation
to impose two kinds of taxes, namely, property tax and a tax E
on vehicles, boats and animals. Sub-section (2) also
authorises the Corporation to impose certain other kinds of
taxes which, inter alia, include Octroi and a cess on entry of
goods in lieu of Octroi. Clause (aaa) was inserted in sub-
section (2) by way of amendment carried out vide Mah.27 of F
2009, with effect from August 31, 2009, whereby LBTwas also
included as another form of tax which could be levied and this
clause reads as under:

"(aaa) Local Body Tax on the entry of the goods into the G
limits of the City for consumption, use or sale therein, in
lieu of octroi or cess, if so directed by the State
Government by Notification in the Official Gazette;"

H
1242 SUPREME COURT REPORTS [2015] 13 S.C.R.

A 10. Procedure for levying such a tax is contained in
Section 149 and we would like to reproduce sub-section ( 1)
thereof, which is as under:
"149. Procedure to be followed in levying other
taxes.
B
(1) In the event of the Corporation deciding to levy any
of the taxes specified in sub-section (2) of section 127,
it shall make detailed provision in so far as such
provision is not made by this Act, in the form of rules,
c modifying, amplifying or adding to the rules at the time
in force for the following matters, namely:
(a) the nature of the tax, the rates thereof, the class of
classes of persons, articles or properties liable thereto
and the exemptions therefrom, if any, to be granted;
D (b) the system of assessment and method of recovery
and the powers exercisable by the Commissioner or
other officers in the collection of the tax;
(c) the information required to be given of liability to the
E tax;
(d) the penalties to which persons evading liability or
furnishing incorrect or misleading information or failing
to furnish information may be subjected;
(e) such other matters, not inconsistent with the
F provisions of this Act, as may be deemed expedient by
the Corporation:
Provided that no rules shall be made by the Corporation
in respect of any tax coming under clause (f) of sub-
G section (2) of section 127 unless the State Government
shall have first given provisional approval to the selection
of the tax by the Corporation."
11. In order to have the stock of all the relevant provisions
of this Act, another provision which needs to be noticed is
H
SODEXO SVC INDIA PRIVATE LIMITED v. STATE OF 1243
MAHARASHTRA & ORS. [A. K. SIKRI, J.]

Section 152P, which relates to the provisions relating to LBT. A
It is to the following effect:

"152P. Levy of Local Body Tax.
Subject to the provisions of this Chapter and the rules,
the Corporation, to which the provisions of clause (aaa) B
of sub-section (2) of section 127 apply, may, for the
purposes of this Act, levy and collect Local Body Tax on
the entry of goods specified by the State Government
by notification in the Official Gazette, into the limits of
the City, for consumption, use or sale therein, at the rates C
specified in such notification."

12. What follows from the conjoint reading of the
aforesaid provisions is that LBT or Octroi is a tax 'on the entry
of goods into the limits of the city', which goods are meant for D
'consumption, use or sale therein'. In this backdrop, we have
to find out the true nature of the Sodexo Meal Vouchers and
to ascertain whether they are 'goods'.

13. The appellant had resisted the imposition of LBT E
primarily on the ground that it was providing services to the
establishments with whom it had entered into contracts and,
therefore, such agreements were for service and not for sale
of any goods. The High Court has negated the contention
primarily on the ground, which, in fact, is the sole ground, that F
the scheme postulates printing of the paper vouchers by the
appellant which are sold to its customers. The said customers,
in turn, provide the vouchers to their employees who use these
vouchers in the restaurants or different places or outlets to get
ready-to-eat items and beverages of the face value printed on G
the said vouchers. Therefore, the vouchers are used to pay
the price for food items and beverages distributed to users.
The High Court, in the passing, has also remarked that these
vouchers are capable of being sold by the appellant after they
H
1244 SUPREME COURT REPORTS [2015] 13 S.C.R.

A are brought into the limits of the city. Therefore, the said
vouchers have its utility and the same are capable of being
paid or sold and same are capable of being delivered, stored
and possessed. Thus, according to the High Court, the test
laid down by this Court in Tata Consultancy Services v. State
B of Andhra Pradesh 1 has been satisfied.

14. We may mention at this stage itself that the learned
counsel for the respondent hammered the aforesaid reasons
given by the High Court by adopting these reasons as his
C arguments. Learned counsel for the appellant, on the other
hand, referred to the intrinsic nature of the transaction with the
aid of RBI Policy on the subject and certain judgments of this
Court, on the basis of which he was vociferous in his submission
that in reality it was only a service which was provided by the
D appellant with no element of 'goods' involved in the transaction.

15. We have already taken note of the nature of the
transaction. After going through the relevant provisions and
the principle laid down in various judgments explaining the
E features of 'services' and 'goods', we are of the opinion that
the Sodexo Meal Vouchers cannot be treated as 'goods' for
the purpose of levy of Octroi or LBT. There are at least three
fundamental and principal reasons for coming to this
conclusion, which we would like to discuss in detail hereinafter.
F
(I) Exact Nature of Meal Vouchers:

16. The basic mistake which has been committed by
the High Court is to proceed on the basis that after printing of
G the paper vouchers, these are sold by the appellant to its
customers. A diagramatic representation of the business
model of the appellant, already depicted above, would make
it manifest that the vouchers are not the commodity which are
sold. If the face value of the said vouchers is rps~ 50, by
H '(2005) 1 sec 308
SODEXO SVC INDIA PRIVATE LIMITED v. STATE OF 1245
MAHARASHTRA & ORS. [A. K. SIKRI, J.]

giving these vouchers to its customers, the appellant only takes A
specified service charges from its customers, which is normally
~2 for~50 voucher. Likewise, 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 B
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. C
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 D
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 E
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 F
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.

17. It is to be borne in mind that the vouchers are not G
'sold' by the appellant to its customers, as wrongly perceived
by the High Court, and this fundamental mistake in
understanding the whole scheme of arrangement has led to
wrong conclusion by the High Court. The High Court has also
wrongly observed that vouchers are capable of being sold by H
1246 SUPREME COURT REPORTS (2015] 13 S.C.R.

A 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.

B (II) Transaction Regulated By RBI Guidelines:

18. As already pointed out above, without the sanction/
authorisation of the RBI to operate such a payment system
under the Payment and Settlement SystemsAct, 2007, nobody
C 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
D of the transaction is to provide service and by no stretch of
imagination these vouchers can be termed as 'goods'. The
very first para, viz. Para A, stipulates the purpose of these
Guidelines and Rules as follows:

"A. Purpose
E
To provide a framework for the regulation and
supervision of persons operating payment systems
involved in the issuance of Pre-paid Payment
Instruments (PPls) in the country and to ensure
F development of this segment of the payment and
settlement systems in a prudent and customer friendly
manner. For the purpose of these guidelines, the term
'persons' refers to 'entities' authorized to issue prepaid
payment instruments and 'entities' proposing to issue
G pre-paid payment instruments."
19. Introduction to these Guidelines mentions that the
same are passed after a comprehensive review of the extant
Guidelines and Instructions for the purpose of laying down the
H basic eligibility criteria and the conditions for operations of
SODEXO SVC INDIA PRIVATE LIMITED v. STATE OF 124 7
MAHARASHTRA & ORS. [A. K. SIKRI, J.]

such payment systems in the country. Some of the definitions A
given in para 2 are reproduced below for better understanding
of the system:

"2. Definitions
B .
2.1 Issuer: Persons operating the payment systems
issuing pre-paid payment instruments to individuals/
organizations. The money so collected is used by these
persons to make payment to the merchants who are
part of the acceptance arrangement directly, or through C
a settlement arrangement.

2.2 Holder: Individuals/Organizations who acquire pre-
paid payment instruments for purchase of goods and
services, including financial services.
D
2.3 Pre-paid Payment Instruments: Pre-paid
payment instruments are payment instruments that
facilitate purchase of goods and services, including
funds transfer, against the value stored on such
instruments. The value stored on such instruments E
represents the value paid for by the holders by cash, by
debit to a bank account, or by credit card. The pre-
paid instruments can be issued as smart cards,
magnetic stripe cards, internet accounts, internet
wallets, mobile accounts, mobile wallets, paper F
vouchers and any such instrument which can be used
to access the pre-paid amount (collectively called
Prepaid Payment Instruments hereafter). The pre-paid
payment instruments that can be issued in the country G
are classified under three categories viz. (i) Closed
system payment instruments (ii) Semi-closed system
payment instruments and (iii) Open system payment
instruments.
H
1248 SUPREME COURT REPORTS [2015] 13 S.C.R.

A 2.4 Closed System Payment Instruments: These
are payment instruments issued by a person for
facilitating the purchase of goods and services from him/
it. These instruments do not permit cash withdrawal or
redemption. As these instruments do not facilitate
·B payments and settlement for third party services, issue
and operation of such instruments are not classified as
payment systems.

2.5 Semi-Closed System Payment Instruments:
C These are payment instruments which can be used for
purchase of goods and services, including financial
services at a group of clearly identified merchant
locations/establishments which have a specific contract
with the issuer to accept the payment instruments.
D These instruments do not permit cash withdrawal or
redemption by the holder.

2.6 Open System Payment Instruments: These are
payment instruments which can be used for purchase
E of goods and services, including financial services like
funds transfer at any card accepting merchant locations
(point of sale terminals) and also permit cash withdrawal
atATMs/Bcs.

F xx xx xx

2.8 Merchants: The establishments who accept the
PPls issued by PPI issuer against the sale of goods
and services."

G 20. In order to ensure that payment received from the
customer is paid to the affiliates against those vouchers, Para
8 provides for the deployment of money collected. As per this,
the amount thus collected has to be kept in the escrow account
and the persons, like the appellant herein, are under obligation
H
SODEXO SVC INDIA PRIVATE LIMITED v. STATE OF 1249
MAHARASHTRA & ORS. [A. K. SIKRI, J.]

to use this amount only for making payments to the participating A
merchant establishments and other permitted payments.

21. Read in the aforesaid context, insofar as the
appellant is concerned, it is only a service provider on the
touchstone of the test laid down in Bharat Sanchar Nigam B
Ltd. & Anr. v. Union of India & Ors. 2 Paragrah 87 of this
judgment, enumerating this test, is reproduced below:

"87. It is not possible for this Court to opine finally on
the issue. What a SIM card represents is ultimately a C
question of fact, as has been correctly submitted by the
States. In determining the issue, however the assessing
authorities will have to keep in mind the following
principles: if the SIM card is not sold by the assessee
to the subscribers but is merely part of the services D
rendered by the service providers, then a SIM card
cannot be charged separately to sales tax. It would
depend ultimately upon the intention of the parties. If
the parties intended that the SIM card would be a
separate object of sale, it would be open to the Sales E
Tax Authorities to levy sales tax thereon. There is
insufficient material on the basis of which we can reach
a decision. However we emphasise that if the sale of a
SIM card is merely incidental to the service being
provided and only facilitates the identification of the F
subscribers, their credit and other details, it would not
be assessable to sales tax. In our opinion the High Court
ought not to have finally determined the issue. In any
event, the High Court erred in including the cost of the
service in the value of the SIM card by relying on the G
"aspects" doctrine. That doctrine merely deals with
legislative competence. As has been succinctly stated
in Federation of Hotel & Restaurant Assn. Of India v.
2
(2006) 3 sec 1 H
1250 SUPREME COURT REPORTS [2015] 13 S.C.R.

A Union of India, (2005) 4 SCC 214: (SCC pp.652-53,
paras 30-31)

" ' ... subjects which in one aspect and for one purpose
fall within the power of a particular legislature may in
B another aspect and for another purpose fall within
another legislative power':

xx xx xx
Th~re might be overlapping; but the overlapping must
c be in law. The same transaction may involve two or
more taxable events in its different aspects. But the
fact that there is overlapping does not detract from the
distinctiveness of the aspects."

D 22. Further, para 20 of the judgment of this Court in Idea
Mobile Communication Limited. v. Commissioner of
Central Excise and Customs, Cochin 3 , shall be applicable
here as well making it a case of service and not sale of goods.
This para is as under:
E
"20. The charges paid by the subscribers for procuring
a SIM card are generally processing charges for
activating the cellular phone and consequently the same
would necessarily be included in the value of the SIM
F card. There cannot be any dispute to the aforesaid
position as the appellant itself subsequently has been
paying service tax for the entire collection as processing
charges for activating cellular phones and paying the
service tax on the activation.· The appellant also accepts
G the position that activation is a taxable service. The
position in law is therefore clear that the amount received
by the cellular telephone company from its subscribers
towards the SIM cards will form part of the taxable value
1-:1 ' (2011 ) 12 sec 608
SODEXO SVC INDIAPRIVATE LIMITED v. STATE OF 1251
MAHARASHTRA & ORS. [A. K. SIKRI, J.]

for levy of service tax, for the SIM cards are never sold A
as goods independent from services provided. They
are considered part and parcel of the services provided
and the dominant position of the transaction is to provide
services and not to sell the material i.e. SIM card which
on its own but without the service would hardly have any B
value at all."

23. We may also take note of the judgment of this Court
in Sunrise Associates v. Govt. of NCT of Delhi & Ors. 4 ,
where this Court considered as to whether lottery tickets can C
be treated as goods and after discussing the earlier judgment
in H. Anrajv. Government of Tamil Nadu 5 , pointed out that
the primary test would be as to whether such lottery tickets
would constitute a stock in trade of every dealer and, therefore,
is a merchandise which can be bought and sold in the market, D
This was followed in another judgment in Yasha Overseas v.
Commissioner of Sales Tax & Ors. 6 , wherein again the test
of 'flexibility in its utilisation and its transferability were
discussed and applied in the context of REP licences' to
determine whether such licences were goods or not E

24. We may mention here thatthe 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. F

(Ill) Real Character Of The Transaction Is The Facility
By The Customers As Employers To Their Employees:·

25. Section 17 of the Income Tax Act, 1961, defines G
'salaty'in the hands of the employees which becomes taxable
under the Income Tax Act. Various components of salary are

' (2006) s sec 603
s (1986) 1 sec 414
' (2008) 8 sec 681 H
1252 SUPREME COURT REPORTS [2015] 13 S.C.R.

A enumerated therein. Clause (viii) of sub-section (1) of Section
17 includes 'the value of any other fringe benefit or amenity
as may be prescribed' as part of salary. Rule 3 of the Income
Tax Rules prescribes the method of 'valuation of perquisites'.
We are concerned with Rule 3(7)(iii), which deals with the value
B of free food, etc. and reads as under:

"(iii) The value of free food and non-alcoholic beverages
provided by the employer to an employee shall be the
amount of expenditure incurred by such employer. The
C amount so determined shall be reduced by the amount,
if any, paid or recovered from the employee for such
benefit or amenity:

Provided that nothing contained in this clause shall
o apply to free food and non-alcoholic beverages provided
by such employer during working hours at office or
business premises or through paid vouchers which are
not transferable and usable only at eating joints, to the
extent the value thereof in either case does not exceed
E . fifty rupees per meal or to tea or snacks provided during
working hours or to free food· and non-alcoholic
beverages during working hours provided in a remote
area or an off-shore installation."

F 26. Thus, the 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
G vouchers and for its proper implementatiori, services of the
appellant are utilised.

27. For all the aforesaid reasons, we are of the opinion
that the judgment of the High Court has not discussed and
H decided the issue correctly and warrants interference. We,
SODEXO SVC INDIA PRIVATE LIMITED v. STATE OF 1253
MAHARASHTRA & ORS. [A. K. SIKRI, J.]

thus, allow these appeals and set aside the judgment of the A
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.

There shall, however, be no order as to costs. B
Devika Gujral Appeals allowed.